A Boston man was sentenced to 102 months in prison for orchestrating a Ponzi scheme that spanned over two decades and took in over $28 million from approximately 200 investors. Richard Elkinson, 78, received the sentence after previously pleading guilty in April 2010 to 18 counts of mail fraud. Elkinson faced as much as 360 years in prison if sentenced to the maximum under each count. Along with the sentence, Elkinson was ordered to pay $17 million in restitution to his victims.
According to authorities, Elkinson told potential investors that he was in the business of brokering business deals on behalf of a Japanese firm that manufactured uniforms to be sold to various governments throughout the world. Investors were told that their funds would be used to finance these uniform contracts, and were promised an annual return ranging from 9% to 13%. Investors were provided with promissory notes signed by Elkinson, which promised payment of principal and accrued interest within one year. Upon maturation, investors were also given the opportunity to roll over the balance into a new contract.
Adding to the aura of legitimacy, Elkinson obtained the assistance of a broker-dealer named RossFialkow Capital Partners, LLP ("RFCP") in 2005 which actively recruited investors. Elkinson provided RFCP and its principals with purported copies of letters from his Japanese customers and various state governments, which were all later discovered to be fictitious. In total, over $28 million was raised from approximately 200 investors. However, there were no contracts with Japanese manufacturers or contracts with state governments. Instead, Elkinson misappropriated investor funds in typical Ponzi scheme fashion, using new investor funds to pay principal and interest payments to existing investors. The remainder of the funds were used for numerous personal expenses of Elkinson, including numerous gambling excursions to Las Vegas. Perhaps fittingly, Elkinson was arrested in January 2010 at a Biloxi, Mississippi casino after returning from a Las Vegas trip.
Along with the criminal action, the Securities and Exchange commission also filed a parallel civil action against Elkinson, seeking injunctive relief and disgorgement of ill-gotten gains. Elkinson did not fight the charges, and the SEC obtained a default judgment on June 9, 2010. He was ordered to pay over $29 million in disgorgement, pre-judgment interest, and civil monetary penalties.
A copy of the criminal complaint is here.
A copy of the SEC Complaint is here.
A copy of a class-action lawsuit filed against a facilitating broker-dealer is here.