A California man has been arrested for what authorities called a massive Ponzi scheme that may have defrauded investors and lenders out of more than $20 million. Lawrence "Lee" Loomis, 54, along with six other associates, was named in a 50-count indictment charging him with mail fraud and wire fraud. According to the indictment, Loomis is accused of perpetrating multiple fraudulent schemes through his company, Loomis Wealth Solutions ("LWS"), at least one of which with the assistance of his father-in-law, John Hagener. Each count of mail fraud and wire fraud carries a maximum sentence of twenty years in prison as well as a fine of up to $250,000.
According to the Federal Bureau of Investigation, which conducted the investigation along with assistance from the Internal Revenue Service, Loomis pitched investors on the possibility of acquiring real estate at no cost through an investment in LWS. Specifically, investors were told to (1) purchase whole life insurance, (2) "harvest" home equity and retirement accounts to buy shares in the Naras Funds, and (3) to serve as "nominees" in the purchase of residential real estate controlled by Loomis. For each house an investor agreed to serve as "nominee" for, Loomis promised a monthly payment of $300 that could be applied to the life insurance premiums. According to Loomis, this investment plan was
"simply the best financial plan ever created."
As part of the plan, investors purchased shares in the Naras Funds, which offered guaranteed annual returns of 12%. According to Loomis, these above-average returns were the result of investments in junior mortgages paying 14% annual returns. To assure investors that their contributions would be safe, Loomis represented that the Funds were guaranteed by secured deeds of trust and the backing of a third-party company. Loomis is also accused of participating in several other schemes designed to artificially inflate home values through property-flipping.
Loomis held numerous hotel seminars in California, Washington, and Illinois in which he solicited potential investors. Investors were provided with literature extolling the benefits of Loomis' investments. According to a California news-station, Loomis told investors that
"It's not get rich quick. But the reality of it is it's get rich for sure."
All told, it is estimated that nearly 200 investors entrusted at least $20 million with Loomis and his various schemes. However, according to authorities, Loomis used the constant infusion of investor funds to operate a massive Ponzi scheme and sustain his lavish lifestyle. Investors were provided with false account statements showing investment growth when, in reality, Loomis was simply using new investor funds to pay Ponzi-style returns to existing investors. The Sacramento Bee quotes unnamed federal authorities in estimating that losses could potentially top $100 million.
Hagener was released on $1 million bond, while Loomis was ordered to remain in federal custody over fears that he posed a flight risk due to the severity of the charges.