A federal jury has returned a guilty verdict against a California man for masterminding a massive Ponzi scheme that bilked investors out of over $250 million. James Stanley Koenig, 60, was found guilty of all but one of the three dozen criminal charges levied against him by prosecutors. Koenig will remain in custody until his June 11, 2013 sentencing, and could receive a sentence of up to 50 years in prison.
Koenig ran Asset & Real Estate Investment Company ("AREI") along with fifty affiliated companies, telling potential investors that it specialized in senior housing centers. Beginning in 1997, AREI controlled more than twenty senior housing and residential assisted-living centers, representing that they were suitable as a secure and profitable vehicle for tax-sheltered property exchanges. After purchasing an assisted living facility, Koenig would then sell ownership shares in the property to investors. Eventually, more than 1,000 victims would invest hundreds of millions of dollars with Koenig.
However, while Koenig represented that investor funds and facility revenues were reinvested back into the facilities, this was not the case. Instead, Koenig used investor funds to to pay returns to existing investors, as well as finance a luxury lifestyle enjoyed by himself and two co-conspirators. This lifestyle included an 80-acre castle estate, a Lear jet, luxury homes and fancy cars.
While investigators charged that AREI was insolvent no later than May 2007, Koenig continued to bring in new investors based on promises of false profitability. After an investigation, criminal authorities arrested Koenig in 2009 and charged him with 77 criminal charges - 40 counts of securities fraud and 37 counts of residential burglary that were predicated on Koenig's entry into investor homes to induce them to invest in his scheme. Investor losses were estimated at over $200 million.
According to authorities, Koenig failed to disclose to investors that he had a previous 1986 conviction stemming from his role in a gold-selling scam. He served two years in federal prison and was ordered to pay over $5 million in restitution to defrauded investors.