2% Recovery Likely For Victims of $220 Million Ponzi Scheme

In a sobering reminder that Ponzi scheme victims rarely recover more than 5% of their losses, victims of a $220 million Ponzi scheme carried out by an Indiana couple learned that they can expect to recover less than 2% of their losses.  A court-appointed trustee overseeing the bankruptcy of Gary Wilder and his wife, Toni Jo Wilder, estimated that $5.2 million would be available for distribution to victims holding nearly $220 million in approved claims.  Both Gary and Toni Jo Wilder pled guilty to fraud and money laundering charges, and are currently serving prison sentences of 15 years and 7 years, respectively.  

The Wilders owned Wildwood Industries ("Wildwood"), which was based in Bloomington, Indiana, and once operated a thriving leaf and vacuum-bag manufacturing business.  Wildwood solicited investors to 'lend' funds that would be used to buy machinery, and in turn promised a healthy guaranteed annual return.  The company represented that it had healthy demand for its machines, obtaining numerous loans from creditors based on purported invoices.  In total, approximately 85 lenders loaned the company nearly $215 million.  

However, rather than manufacture leaf- and vacuum-bags, the Wilders masterminded an elaborate Ponzi scheme that caused devastating losses.  The severity of the scheme was aided by several Wildwood employees who admitted to playing a role in continuing the scheme, including one who altered serial numbers on existing machines to make it appear that new ones were being manufactured and another who approved invoices and documents that led to false financial statements.  In total, six people were convicted of various crimes related to their role in the fraud.  

Along with the lenders, also included in the victims were the nearly 700 employees who lost their jobs when Wildwood went out of business after news of the fraud broke.  Besides failing to make machines as promised, Wildwood also failed to contribute to employee 401(k) plans and various benefit plans including medical, dental and disability.  Following news of the fraud, Wildwood was placed into bankruptcy by its creditors, and was later sold for $2 million.

Gary Wilder pled guilty in July 2010 to one count of bank fraud and one count of money laundering, while his wife pled guilty to one count of conspiracy to commit money laundering.  

While creditors filed nearly $600 million in claims with the bankruptcy trustee overseeing the Wilders' personal bankruptcy, approximately $217 million in claims were approved.  A trustee is also overseeing the bankruptcy estate of Wildwood Industries, where asset recovery efforts remain ongoing nearly four years later.

New Jersey Man Receives 12-Year Sentence for $7.5 Million Mortgage Fraud Ponzi Scheme

A New Jersey man was sentenced to a 12-year term in state prison for a mortgage refinance Ponzi scheme that duped more than 40 victims out of more than $7 million.  Frederick Tropeano, 47, received the sentence from Monmouth County Superior Court Judge Ronald L. Reisner, who also ordered that Tropeano would be ineligible for parole until mid-2019.  Tropeano previously pled guilty in January to the equivalent of money laundering, which carries a maximum prison sentence of twenty years. In handing down the sentence, Judge Reisner made a downward departure from the 14-year sentence recommended by prosecutors as part of Tropeano's plea agreement.  

Tropeano, through his company Hawthorn Capital Corporation, solicited homeowners to refinance their existing mortgage at a much lower rate, with the understanding that proceeds from the new mortgage would be used to satisfy the original mortgage.  In total, Tropeano raised over $7 million from more than 40 homeowners who thought they were taking steps to reduce their mortgage payments.

However, according to authorities, Tropeano and his conspirators failed to use proceeds from the new mortgages to satisfy the homeowners' existing mortgages.  Instead, they operated the classic Ponzi scheme, using investor funds for unauthorized purposes that included paying personal expenses to support a lavish lifestyle.  Many homeowners were shocked to discovery that their existing mortgage had never been satisfied, often resulting in negative implications on their credit scores.  Additionally, several homeowners had their identity stolen by Tropeano and his associates, who in turn secured additional refinancings unbeknownst to the homeowners.  

Three of Tropeano's co-conspirators previously pled guilty to third-degree conspiracy charges, and are awaiting sentencing.  Tropeano was also ordered to pay nearly $7 million in restitution to his victims.

Indiana Man Receives 5-Year Prison Sentence For Role in $9 Million Ponzi Scheme

An Indiana man was sentenced to serve over five years in federal prison for his role in a Ponzi scheme that duped victims out of nearly $9 million.  Jerry Smith, 50, was sentenced to serve 65 months in federal prison after previously pleading guilty to one count of conspiracy to commit mail and wire fraud, one count of obstruction of justice, and one count of income tax evasion. The sentence comes after Smith's co-conspirator, Jason Snelling, was sentenced in late-2012 to a nearly-11 year prison term.

Snelling and Smith operated Dunhill Investment Advisers ("Dunhill") and CityFund Advisory ("CityFund") in downtown Cincinnati, where they guaranteed high rates of returns to clients under the guise that the firms were successfully engaging in day-trading.  Investors were promised annual rates of return ranging from ten to fifteen percent, with some investors receiving promises of even higher rates.  Investors were assured that their position would be liquidated to cash at the end of each trading day.  In total, the scheme raised nearly $9 million from seventy-two investors.  

However, the purported day-trading operation was nothing more than a Ponzi scheme in which Snelling and Smith misappropriated investor funds for a variety of unauthorized purposes.  This included making so-called interest payments to investors and supporting a lavish lifestyle that included the purchase of boats, jet skis, plastic surgery, and private school tuition. 

After authorities began looking into Dunhill and CityFund, Smith admitted to fabricating trading statements in an attempt to thwart the investigation.  Smith was also accused of tax evasion for failing to declare the stolen investor funds as income.

Along with his sentence, Smith was ordered to pay $5.4 million in restitution to victims, as well as over $72,000 in restitution to the IRS.  

Former Exorcist/Attorney/Bishop Sentenced to 11-Year Term for Role in $6 Million Ponzi Scheme

A former New York attorney who also claimed to be a trained exorcist and bishop was sentenced to 11 years for his role in a Ponzi scheme that duped investors out of over $6 million.  James Lagona received the sentence from United States District Judge William M. Skretny, who dismissed Lagona's claims that he was unaware of the fraud being perpetrated by the purported scheme mastermind, Guy Gane.  Lagona also made headlines late last year after he offered a "quid pro quo" bargain to prosecutor Wiliam J. Hochul's wife, who was then a candidate for Congress, offering to throw his support behind her in exchange for favorable treatment by her husband at his upcoming sentencing.  Hochul contacted the FBI, and Lagona was subsequently arrested.

Lagona was an employee at Gane's company, Watermark M-One Financial Services ("Watermark").  Potential investors were promised 10% annual returns from waterfront real estate investments, and were provided with 'debentures' evidencing their investment as proof.  However, Gane made no such investments, and instead used investor funds for a variety of unauthorized uses that included Ponzi-style payments to existing investors, personal and business expenses, and cash advances to his children.  

While Gane cut a deal with prosecutors, Lagona maintained his innocence and chose to stand trial with another co-defendant, Ian Gent.  The decision backfired, as Gane testified against the two and a federal jury convicted the men on conspiracy and money laundering charges in February 2011.  Gane was subsequently sentenced to a thirteen-year term in September 2011, and Gent received an eight-year sentence in late 2012. 

A bizarre interview featuring "Bishop" Lagona offering fortune-telling to live callers is available here. According to the bio provided by the site,

Bishop Lagona, an accomplished medium, healer and medical intuitive, has had psychic-mediumistic experiences since his early childhood. He is a Reiki Master/Teacher, and has studied psychism and mediumship, various healing modalities and energy work, crystals, dowsing, and tarot. Bishop Lagona consults with and advises various businesses and corporations on internal policies and concerns, hiring and personnel matters, stock market, Dow Jones Average and foreign currency exchange rate forecasts and predictions. He is available for your private and business consultations.

Not surprisingly, the emphasized claims were removed from 'Bishop' Lagona's bio on his personal website.

Former Sheriff Pleads Guilty to $1.2 Million Ponzi Scheme That Duped Fellow Cops

“If it sounds too good to be true it probably is. People should diligently check out claims of unusually high rates of return before investing. Don’t become a victim of an investment scam,”

- Stephen Boyd, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office.

A former Denver sheriff's deputy agreed to plead guilty to charges that he operated a Ponzi scheme promising 100% annual returns to fellow law enforcement officers and their families.  David Hawkins, a former El Paso County deputy sheriff, entered into a plea agreement with prosecutors in which he pled guilty to one count of wire fraud and one count of money laundering.  Wire fraud carries a maximum sentence of twenty years in prison, while money laundering carries a maximum ten-year term. Hawkins could also face criminal fines, and will likely be required to pay restitution to his victims.

Hawkins was hired by the El Paso Sheriff's Office in 2001, and soon thereafter was sworn in as a sheriff's deputy.  In or around 2006, Hawkins began attending training courses on how to trade foreign currencies ("forex") in 2006.  Using this knowledge, he began to hold himself out as a sophisticated currency trader, telling colleagues, family, and friends that he had several years of experience in achieving consistent gains - sometimes as high as 62% - from forex trading.  Unbeknownst to his employer, Hawkins told potential investors that an investment in his PD Hawk Investment Fund would yield consistent 10% monthly returns - an annual return of over 100%.  Based on these representations, Hawkins raised more than $1 million from over 70 investors.

However, according to the FBI, "at no time were [Hawkins'] investments ever profitable."  Instead, Hawkins ran the classic Ponzi scheme, using investor funds to repay earlier investors and to make purported interest payments.  Hawkins used investor funds as his personal piggy bank, purchasing multiple automobiles, paying personal expenses, and even buying two semi-professional indoor football franchises in Illinois and Texas.  These teams never became operational, and authorities began investigating after Hawkins abruptly cancelled the 2012 season.  Authorities estimate that total losses to investors exceeded $200,000.  

Hawkins is scheduled to be sentenced on June 7, 2013, at 11:00 a.m.