In a case that demonstrates the risks of rejecting a plea agreement and standing trial, a federal judge sentenced a Sarasota man to ten years in prison for his role in operating a Ponzi scheme that took in nearly $30 million from investors, while his wife, who was convicted by a jury for her role in the scheme, likely faces a much longer sentence.
John S. Morgan, 53, accepted a plea deal from prosecutors in June in which he pled guilty to one charge of conspiracy and one charge of money laundering, and faced a combined maximum sentence of fifteen years in federal prison. However, his wife, Marian Morgan, refused to plead guilty, and instead took her chances and fought the charges at trial. The strategy backfired, however, when jurors refused to believe her claims of innocence and convicted her of all twenty-two charges. She is scheduled to be sentenced on December 20, and likely faces a prison sentence exceeding twenty years.
From 2005 to 2009, the Morgans owned and operated Morgan European Holdings, which promised potential investors triple-digit returns in 90 days from foreign arbitrage deals also known as prime bank instrument trading programs. In total, approximately 87 investors entrusted $28 million to the Morgans. However, rather than engage in complex arbitrage trading, the Morgans instead operated a classic Ponzi scheme in which funds from new investors were used to pay principal and interest payments to existing investors in order to create the appearance of a successful business. Of the $28 million, the Morgans used over $10 million to support a lavish lifestyle, buying expensive mansions in Sarasota and luxury automobiles. A portion of the remainder was used to make fictitious payments to existing investors.
The Morgans achieved notoriety when they failed to appear at a contempt of court hearing and were later discovered to have fled to Sri Lanka. Sri Lanka later ordered their expulsion, and they have remained in U.S. custody since their extradition in December 2009.
In addition to their prison sentences, the Morgans must also pay over $10 million in restitution to their victims. A Tampa defense attorney conceded that was unlikely, stating
"Whatever the scheme of the day happens to be, most of the time the investors receive pennies on the dollar, if anything. That is the reality of it."