A Los Angeles man was sentenced to nine years in federal prison for operating a Ponzi scheme that targeted retired transit workers and was estimated to have taken in nearly $15 million in investments. Thomas L. Mitchell, 64, of Los Angeles, California, had pled guilty in April to a single count of mail fraud, for which he faced a maximum prison sentence of twenty years. Consistent with a plea agreement between Mitchell and prosecutors, United States District Judge Gary A. Feess also ordered Mitchell to pay $7 million in restitution to defrauded investors.
From 1995 to 2010, Mitchell and his fiirm Mitchell, Porter & Williams, Inc. ("MPW") solicited investors to purchase promissory notes from two other companies he operated: Adivanala AA Investment Trust and AB3, Inc. Investors were enticed with the prospect of fixed annual returns of ten to fifteen percent for three or six-year terms. Many of these investors were former employees of the Los Angeles County Metropolitan Transit Authority, where word of mouth had circulated regarding the returns offered by Mitchell. In representations to investors, Mitchell attributed the ability to achieve high rates of return from the use of "leverage to invest in certain government backed bond funds." In total, approximately 82 investors entrusted $14.7 million with Mitchell. Yet, instead of investing these funds, Mitchell used money from new investors to make interest payments to existing investors. Additionally, Mitchell used millions of dollars to fund an extravagant lifestyle.
The Securities and Exchange Commission ("SEC") also instituted an action against Mitchell and MPW, issuing an order in May that enjoined Mitchell from future association with entities in the financial industry and revoked the registration of MPW as an investment advisor.
A copy of the SEC Complaint is here.
A copy of the SEC Order is here.