Westlake Village Man Who Orchestrated $64 Million Ponzi Scheme Sentenced to 25 Years in Federal Prison
Victims Were Told Money Would Buy Insurance for South Los Angeles Churches
|U.S. Attorney’s Office November 03, 2009|
A Los Angeles County man who was the leader of a $64 million Ponzi scheme that bilked 63 investors in California and Texas with false promises of huge returns from investments in a bond-trading program and a life insurance pool that would benefit members of African-American churches in South Los Angeles was sentenced today to 300 months in federal prison.
Curtis D. Somoza, 41, who was residing in Westlake Village when he was indicted three years ago but has been in jail since April 2007, was sentenced following a two-day hearing by United States District Judge A. Howard Matz in Los Angeles. In addition to imposing the prison term, Judge Matz ordered Somoza to pay $44,175,525 in restitution.
During today’s hearing, Judge Matz said the 25-year prison term was warranted because of the danger Somoza posed to the community, his unwillingness to accept responsibility for the fraud scheme, and the deterrent effect the lengthy prison term should have on others.
Somoza pleaded guilty last year on the second day of his trial to 19 felony counts: conspiracy, six counts of mail fraud, four counts of wire fraud and eight counts of money laundering.
In court documents filed since the case was indicted in the summer of 2006, the government has contended that Somoza and co-defendant Robert Coberly solicited investors with claims that their money would be invested in sophisticated bond trading programs or used to buy pools of life insurance policies purchased on behalf of parishioners of predominantly African-American churches in South Los Angeles. Investors were told that the life insurance policies would be purchased on behalf of more than 1,000 members of the Personal Involvement Center, an African-American church-based organization run by the senior pastor at the Praise of Zion Baptist Church. The policies had a face value of $275,000 and, upon the death of an insured, $15,000 would be paid to the insured’s family, $20,000 would go to the PIC and the remaining $240,000 would go back to the company Somoza and Coberly used to facilitate the scam.
During the course of the scheme, investors were promised annual returns of 25 percent and were told their “risk-free” investments would eventually yield five-to-one returns. In fact, the majority of the investors’ funds were used by Somoza and Coberly to pay for multi-million dollar homes, cars, jewelry and their extravagant lifestyles. Somoza himself spent more than $27 million of the victims’ money in only 16 months. Judge Matz noted that Somoza spent victims’ money on two homes, each worth at least $15 million, and more than $860,000 on jewelry. “This was an orgy of self-indulgence,” Judge Matz said.
Somoza persuaded one elderly victim from Texas to invest a total of $25 million, and he suffered losses of more than $21 million.
A financial analyst with the Federal Bureau of Investigation performed an extensive financial analysis of bank accounts controlled by Somoza and Coberly, determining that victims invested approximately $64 million. Somoza and Coberly made approximately $28 million in repayments and payments to investors. The investigation identified a total of 91 investors, 63 of whom lost money in the scheme. Taking into account payments that were more than some investors’ original investment, the FBI analyst concluded that investors suffered an actual loss of approximately $44.2 million.
Coberly previously pleaded guilty in the case and is scheduled to be sentenced by Judge Matz on December 14.
The case was investigated by the Federal Bureau of Investigation, the United States Postal Inspection Service and IRS-Criminal Investigation.
Assistant United States Attorney Jill Feeney
Deputy Chief, Major Frauds Section
Assistant United States Attorney Ruth C. Pinkel
Deputy Chief, General Crimes Section