Executive Sentenced to Five Years in Federal Prison on Wire Fraud Conspiracy Conviction
Ran Ponzi Scheme Involving Medical Insurance Investments
|U.S. Attorney’s Office April 04, 2014|
DALLAS—Duncan MacDonald, III, 50, of Dallas, was sentenced yesterday afternoon by U.S. District Judge Jane J. Boyle to five years in federal prison following his guilty plea in July 2013 to a felony information charging conspiracy to commit wire fraud. Restitution owed will be determined at a later date. The announcement was made today by U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
In a related case, Gloria Ann Solomon, 71, also of Dallas, will be sentenced by Judge Boyle on April 17, 2014. She pleaded guilty to an information charging the same offense.
According to documents filed, from at least 2006 and continuing into at least September 2012, MacDonald was resident and director of Global Corporate Alliance Inc. (GCA). MacDonald operated GCA out of offices in Addison and Euless, Texas. He hired co-conspirator Solomon in January 2007 as GCA’s chief administrative officer.
GCA managed the North American Consumer Alliance (NACA), a not-for-profit member association that created and packaged insured benefit association health care programs and policies administered to corporations, organizations, and other entities. GCA sold the health care policies throughout the U.S. and maintained a conservative management fee. It collected fees called “overages” that were in excess of the conservative management fee.
In 2008, MacDonald created GCA’s “Overage Program” to sell interests in the overages through “Overage Purchase Agreements.” An investor’s potential return was directly related to the number of people who enrolled in a health care plan by purchasing a health care policy from CGA. GCA would pay the investor for each new health care plan enrollee. MacDonald installed Solomon as the program’s manager, and she worked with MacDonald in conducting GCA’s activities regarding the Overage Program.
MacDonald initially planned to have only a single person invest in the Overage Program, but when one couldn’t be found, GCA fractionalized the program to make it available for multiple investors to provide smaller amounts of funds. GCA contracted with a sales agent to solicit individuals to invest, and the sales agent used information regarding the Overage Program that was provided by MacDonald and Solomon. That information included the number of current and projected health care plan enrollees that would drive investors’ potential returns.
MacDonald admits that he significantly inflated the current and projected enrollment figures by the thousands in an attempt to sell the Overage Program to investors. He and Solomon knew that the figures were false and that the sales agent would relay the figures to investors he was soliciting.
MacDonald also personally acquired investors for the Overage Program. In fact, MacDonald and Solomon provided false information to persuade one particular investor to invest $2 million in the Overage Program. They then used this money to make payments to existing program investors.
When GCA had difficulty making timely payments to Overage Program investors, MacDonald authorized Solomon to respond to investor complaints and inquiries with excuses for the delayed payments. Solomon sent these e-mails from accounts that were created for fictitious GCA employees.
The Overage Program did not generate any income or revenue. Less than 50 people actually bought any health care policies during the lifetime of the program. MacDonald and Solomon admit that any payments made to existing investors came from money that GCA received from new investors in the program.
In a parallel action, both defendants were also charged by the U.S. Securities and Exchange Commission (SEC) with securities fraud and conducting an unregistered securities offering while acting as unregistered broker-dealers. That complaint alleges that GCA had raised nearly $10 million from investors and returned about $2 million to investors in the form of Ponzi payments. On August 8, 2013, the district court entered Agreed Partial Judgments against both defendants, enjoining them from future violations of federal securities laws. The SEC continues to seek disgorgement plus prejudgment interest and civil penalties against both defendants.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, which was established in 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
The FBI conducted the investigation. The SEC’s Fort Worth Regional Office also provided valuable assistance. Assistant U.S. Attorney Chris Stokes led the prosecution.