Purchase Factoring Rep Sentenced in Fraud Case
| U.S. Attorney’s Office January 18, 2012 |
NEW BERN—United States Attorney Thomas G. Walker announced that in federal court today, United States District Judge Louise W. Flanagan sentenced JAMES EDWARD WHITLEY, 66, of Greensboro, North Carolina, to 120 months’ imprisonment followed by three years supervised release.
A federal grand jury returned a criminal indictment on September 15, 2010. On May 11, 2011, WHITLEY pled guilty to one count of wire fraud and one count of money laundering.
According to the indictment, from 2006 to 2009, WHITLEY represented himself as being in the factoring business. Purchase order factoring, sometimes called “contract funding,” addresses a need when suppliers want a business to pay up front via cash on delivery while the buyers want to purchase the goods within 30-60 days. This helps the supplier by providing incoming cash during manufacturing, product shipment, and invoice maturity, and the business by freeing up cash for critical business operational expenses. WHITLEY informed potential investors that he had contracts with unidentified businesses, and the investors’ funds went directly to one of those funds, with WHITLEY receiving a small portion for commission. Those who chose to invest with WHITLEY either wired him the funds or personally handed him a check. In exchange, WHITLEY generally provided the investor with a promissory note for their first investment, and generally extended the note for reinvestment.
However, instead of investing the money as he claimed, WHITLEY used the money to make interest payments or payments of principal to other investors. Additionally, he used the money for personal use, either to make payments to the builder or on his construction loan for his residence on Bald Head Island, to purchase vehicles, pay his taxes, pay his credit card bills, or to travel for pleasure.
Mr. Walker commented: “The defendant victimized many who were close to him and operated a basic Ponzi scheme. He breached their trust. Investment opportunities should be investigated carefully, thoroughly, and with a regard to friendships and personal relationships. Too much is at stake.”
“Mr. Whitley perpetrated a sophisticated fraud scheme on investors,” said IRS Special Agent in Charge, Jeannine A. Hammett. “In order to guard against such fraud schemes, citizens are reminded that, if an investment seems too good to be true, it almost certainly is.”
“James Whitley preyed on his childhood friends and neighbors promising huge investment returns, but only he profited. The FBI and our partners at the IRS will keep exposing those responsible for these schemes as long as innocent people are being swindled out of their hard earned money,” said Chris Briese, Special Agent in Charge of the Charlotte Division of the FBI.
Investigation of this case was conducted by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division. Assistant United States Attorney David Bragdon served as prosecutor for the government.