Mastermind of Largest Ponzi Scheme in New Mexico History Pleads Guilty

A New Mexico real estate broker admitted to operating a $75 million Ponzi scheme in what New Mexico authorities estimated as the largest in state history.  Douglas F. Vaughn, 64, pled guilty to one count of wire fraud and one count of mail fraud in a Santa Fe federal courtroom.  Both charges carry a maximum sentence of twenty years in federal prison along with up to $1,000,000 in criminal monetary penalties.  While Vaughn faces a potential maximum sentence of forty years under the plea agreement, prosecutors agreed to recommend a sentence of 10 to 12 years.  Vaughn will also likely be ordered to pay restitution to defrauded investors.

Vaughn operated Vaughn Company Realtors ("VCR"), which was one the largest independent residential brokerage firm in New Mexico. Started in 1983,VCR, through Vaughn, solicited investments in the form of promissory notes, promising potential investors annual returns averaging 17.5%.  In return, Vaughn represented that investor funds would be used for real estate investments.  In total, VCR collected more than $86 million from investors.  However, rather than use the funds for real estate investments, Vaughn used monies from investors to pay returns to older investors under the guise of profits from his investments.  Authorities estimate that approximately 600 investors from eight different states suffered losses.

Vaughn was charged in early 2011 in a 30-count indictment that could have resulted in a guaranteed life sentence had Vaughn been convicted of all charges.  While he maintained his innocence until recently, the recent disclosure that his former assistant planned to testify against him may have spurred his change of heart.  Vaughn is due to be sentenced in several months.

A copy of the indictment is here.