A Texas man was convicted by a federal jury for operating a Ponzi scheme that duped investors out of $6 million. It took a Houston jury four hours to convict Richard M. Plato, 64, of one count of conspiracy to commit mail fraud and five counts of mail fraud. Plato, who has previously been convicted of fraud on three other occasions in Taxas, Florida, and Louisiana, could face up to 120 years in federal prison for the charges, although federal sentencing guidelines are likely to produce a much lower recommendation.
Plato, a former attorney before being disbarred, was indicted in October 2011, along with his business partner and long-time mistress. Authorities charged that Momentum Production Corp ("MPC"), owned and operated by Plato, held itself out as an owner and servicer of oil-producing wells. Plato and his business partner allegedly promised potential investors high rates of return in exchange for an investment in one of several MPC funds. Investors were assured that each of the funds was secured by MPC's interests in various oil and gas wells. Between June 2005 and December 2006, nearly forty investors entrusted over $6 million to MPC. None of these investments were registered with federal or state regulatory authorities.
However, investors were not informed of Plato's checkered past, which included his criminal history and outstanding restitution orders totaling nearly $30 million for previous frauds. Instead, Plato used investor funds to make interest payments on various promissory notes issued to investors - a classic hallmark of a Ponzi scheme. Of the approximately $6.2 million raised from investors, Plato was alleged to have misappropriated nearly $2 million for his personal use. When the scheme collapsed, investors were told that a downtown in the oil and gas markets, along with operational difficulties at various wells, were to blame.
Plato's trial lasted ten days, after which a federal jury needed only four hours to deliver a guilty verdict. Many damning internal emails , featured prominently in Plato's indictment, may have played a role, as Plato made no secret of his misuse of investor funds. Indeed, one email from Plato stated that
"My thoughts are after paying off your car at the bank and paying several past due vendors and the Am Ex cards, we should have about $100,000 left to put towards our needs..."
Plato will remain in custody until his sentencing hearing, which does not yet appear to have been scheduled.
A copy of the indictment is here.