Denver Business Owner Pleads Guilty to Mail Fraud and Money Laundering as Part of a Ponzi Scheme
|U.S. Attorney’s Office March 07, 2013|
DENVER—Michael James Turnock, age 68, of Denver, Colorado, pled guilty earlier this week before U.S. District Court Judge Christine M. Arguello to one count of mail fraud and one count of money laundering, the United States Attorney’s Office, the Federal Bureau of Investigation, IRS-Criminal Investigation, and the United States Postal Inspection Service announced. Turnock, who is free on bond, is scheduled to be sentenced by Judge Arguello on May 28, 2013.
Turnock was originally charged by information on February 14, 2013. He waived his right to be charged by an indictment. According to the facts contained in the information as well as the stipulated facts contained in the plea agreement, beginning no later than January 2002 and continuing through August of 2012, Turnock devised a scheme to defraud note-holders by obtaining money by means of materially false and fraudulent pretenses, representations, and promises. The scheme ended on August 14, 2012, when the Securities and Exchange Commission (SEC) filed a complaint in federal court in Denver and obtained a court order freezing Bridge Premium Finance’s (BPF) assets. At that point, BPF’s note-holders included 58 who had invested and lost approximately $4,168,145.
In about 1996, Turnock became the majority owner of Berjac of Colorado LLC, and in 2004, he became the sole owner. Two years later, Turnock changed the name of the company to Bridge Premium Finance LLC. BPF was in the business of providing financing to clients. The clients were small businesses whose insurance carriers required them to pay the full amounts of their annual premiums in advance. BPF’s clients paid 25 percent of the premiums, and BPF loaned the remaining 75 percent. The clients usually repaid the principal amounts of the loans over eight- or nine-month periods and made interest payments to BPF at rates between 12 and 18 percent. Nearly all of the money coming into BPF during this time came from investors, who received a promissory note from BPF signed by Turnock. At times, BPF had more than 100 note-holders.
Turnock told prospective note-holders that by charging its clients interest rates higher than the rates at which note-holders were paid, BPF generated enough funds to pay principal and interest to note-holders. However, Turnock knew BPF had not been a profitable business since at least 1998, and since 2002, its financing of small businesses had not generated sufficient revenue to make interest payments to note-holders or to repay them. For each year from 2002 through 2011 and into 2012, the amount that BPF owed to note-holders exceeded the amount of money that BPF had on hand. During that time, Turnock used most of the money invested by note-holders for purposes other than to make loans to BPF’s clients. He used note-holders’ money to pay BPF-related expenses, and he also diverted the note-holders’ money to fund his other businesses, make loans to an entity involved in real estate transactions, pay fees to himself, and pay personal expenses. He used money from new investments to pay redemptions requested by note-holders who had invested earlier and to make interest payments to earlier note-holders. Turnock also prepared false and misleading reports, which misrepresented BPF’s financial position.
In early 2012, a note-holder asked to withdraw a portion of his investment. Turnock misrepresented that $150,000 was available at that time. Because BPF did not have that much money, Turnock persuaded two other individuals to invest $500,000 in BPF. On the same day, Turnock used those funds to write a $150,000 check to the note-holder requesting the withdrawal. Turnock solicited and obtained the additional investment in an effort to continue to operate his scheme.
“Ponzi schemes in this case hurt both those who were defrauded into investing, and the economy as a whole,” said U.S. Attorney John Walsh. “One of this office’s top priorities is identifying and prosecuting investment fraud scams like this one.”
“The FBI will continue to protect the financial markets by working closely with its law enforcement and regulatory partners,” said FBI Denver Special Agent in Charge James Yacone. “We trust that the outcome of this investigation will deter others who are seeking to engage in similar criminal activity and attempting to defraud innocent investors.”
“The U.S. Postal Inspection Service will continue to vigorously pursue those who utilize the U.S. mail to perpetrate fraud schemes and steal our customers’ hard earned money,” said Adam Behnen, Inspector in Charge of the U.S. Postal Inspection Service Denver Division. “We are appreciative of our quality law enforcement relationships with the Federal Bureau of Investigation and IRS-Criminal Investigation for their hard work in this case.”
“Investment fraud is like a ‘house of cards’: the underlying structure can fall apart at any time, leaving many investors in financial ruin,” said Stephen Boyd, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office. “Defrauding investors is a serious offense and those who do will be held accountable.”
Turnock faces one count of mail fraud, which carries a penalty of not more than 20 years in federal prison and a fine of up to $250,000. He also faces one count of money laundering which carries a penalty of not more than 20 years in federal prison and a fine of up to $500,000.
This case was investigated by the Federal Bureau of Investigation (FBI), the Internal Revenue Service-Criminal Investigation (IRS-CI), and the United States Postal Inspection Service.
This matter is being prosecuted by the Economic Crimes Section of the United States Attorney’s Office for the District of Colorado.