A Florida pastor could face up to twenty years in prison after pleading guilty to orchestrating a Ponzi scheme that offered annual returns of up to 1,000% and took in more than $5 million from fellow pastors and congregants. Charles L. Kennedy, Jr., of Tampa, Florida, agreed to plead guilty to a single count of wire fraud before a Denver federal court judge. While wire fraud carries a potential maximum term of twenty years in prison, Kennedy will likely receive a lesser sentence under federal sentencing guidelines.
According to authorities, Kennedy owned and operated a Florida company known as Keys to Life Corp. ("Keys to Life"). Sometime on or before April 2005, Keys to Life partnered with Trinity International Enterprises, Inc. ("Trinity"), a Colorado company. Through Keys to Life, Trinity, and another company, CFO-5, LLC, Kennedy and several other co-conspirators solicited potential investors by telling them that their funds would be used to trade in investment-grade European bank notes that carried potential annual returns ranging from 200% to 1,000%. Kennedy also solicited fellow pastors and members of their congregations, telling them that for every $1,000 invested, the minimum return would be $1,000,000 which would be payable in 90 days. On a non-compounding basis, this translates to an annual return of approximately 400,000%. In total, approximately $5 million was raised from more than 100 investors nationwide.
However, there was no European bank note program. Instead, the men operated what is known as a "prime bank" scheme, and used incoming investor funds to pay interest and principal redemptions to existing investors. Indeed, of the nearly-$500,000 raised from fellow pastors, Kennedy sent $145,000 to Trinity and misappropriated the remainder for his personal use. Kennedy was charged by the Securities and Exchange Commission in July 2008, and was later indicted in March 2012 on seventeen criminal charges, including fifteen counts of wire fraud.
Kennedy is scheduled to be sentenced January 22, 2013, and has agreed to pay $315,000 in restitution to defrauded victims as part of his plea agreement.
A copy of the criminal indictment is below: