A disbarred lawyer was arrested in New York and charged with operating a Ponzi scheme that duped his victims out of at least $3 million. James A. MacCallum was arrested after a federal grand jury returned an indictment charging him with mail fraud. MacCallum was arraigned last week and released on bond, though Magistrate Judge Jeremiah J. McCarthy warned MacCallum against any attempt to flee to his native Canada. If convicted, MacCallum could face up to twenty years in prison for each mail fraud count.
According to authorities, MacCallum devised a scheme while he was a practicing attorney to solicit investors with the promise of outsized returns that resulted from real estate and life insurance policies. Through Andrew Mitchell Holdings, LLC ("AMH"), a company that he controlled, MacCallum issued promissory notes to investors bearing annual interest rates of at least 15%. MacCallum allegedly encouraged potential investors to liquidate other investments so that they could invest with him. In total, MacCallum raised over $3.4 million from investors. However, prosecutors allege that MacCallum was running a classic Ponzi scheme in which he used new investor funds to pay fictitious returns to existing investors. In addition, MacCallum is accused of misappropriating investor funds for his own personal use, including personal travel and office expenses.
MacCallum also entered into a settlement agreement with the New Brunswick Securities Commission ("NBSC") in February 2013 relating to the same allegations. A settlement agreement evidencing that settlement includes a section indicating that:
MacCallum is remorseful of his inability to repay the investments and the resulting losses to the investors. This has had an extremely detrimental effect on his family relations and his financial well-being. MacCallum is presently insolvent, and has been suspended from the practice of law in the State of New York as a result of his capital raising activities.
At his first appearance last week, a federal prosecutor warned that the estimated $3.4 million loss was preliminary and could ultimately be much higher.