The Department of Justice charged a Washington woman with orchestrating a Ponzi scheme that took in more than $126 million from investors worldwide. Prosecutors filed a 110-count indictment against Doris "Dee" Nelson, accusing her of operating the scheme to support a payday lender known as Little Loan Shoppe. Nelson faces 71 counts of wire fraud, 22 counts of mail fraud and 17 counts of international money laundering, which could result in a prison sentence of hundreds, if not thousands, of years if she is convicted of the charges. The charges come several months after the SEC instituted civil proceedings against Nelson.
According to the indictment, Nelson used numerous different business entities to operate a payday/short-term lending business called the Little Loan Shoppe ("LLS"). Originally centered in British Colombia, LLS moved its operations to Spokane in or around 2001. Shortly after in 2003, LLS closed all physical operations and and began conducting the business over the internet. According to the indictment, the scheme began in or around May 2000, when Nelson began soliciting investors by promising high yields on investor funds which Nelson claimed would be paid from the profits of the short-term operations of LLS. These purported returns ranged from forty to sixty percent annually, and were often paid to investors via post-dated interest checks mailed to the investor at the time of their investment. When the operation began to encounter financial difficulties in October 2008, investors were offered reduced interest rate payments of ten percent. However, the financial difficulties continued, and by March 2009, Nelson had ceased making any payments.
While Nelson represented to investors that LLS generated huge profits that were used to pay the exorbitant returns, in reality the entire operation was a massive Ponzi scheme, with nearly all investor funds being used to pay interest to existing investors and to sustain Nelson's lavish lifestyle. Nelson alone received over $3 million in funds diverted from investor funds, which were used to purchase, among other things, a motor home, a Chevrolet Corvette, and a Mercedes Benz S550. Additionally, Nelson used investor funds to gamble at Las Vegas casinos, losing nearly $500,000 between 2005 and 2008. Nelson also paid commissions to several investors in return for directing further investment to Nelson's operation.
Little Loan Shoppe filed for bankruptcy in 2009, and the trustee appointed to oversee the liquidation process has filed clawback lawsuits against LLS investors who received interest payments in excess of their original investment.
A copy of the Indictment is here.