Orange County Investment Adviser Pleads Guilty to Fraud Charges in Ponzi Scheme That Caused Over $6 Million in Losses

SANTA ANA, CA—The owner and operator of a Santa Ana investment firm pleaded guilty today to mail fraud and securities fraud charges for operating a Ponzi scheme that collected more than $10 million from about two dozen victims, many of whom were elderly residents of Orange County and Los Angeles County. As a result of the scheme, victims suffered losses of approximately $6.22 million.

Richard H. Nickles, 58, of Irvine, the owner of Innovative Advisory Services, Inc., pleaded guilty to the two felony charges before United States District Judge Cormac J. Carney.

Nickles admitted in court today that he placed advertisements in the Orange County Register and the Los Angeles Times advertising safe investments through Innovative Advisory Services. The advertisements variously described the investments as “U.S. Government Guaranteed,” “FDIC Insured,” “Guaranteed,” or “Insured” and stated that there was a “$50,000 Minimum Investment.” After being contacted by potential investors, Nickles met with them and offered investments in various types of low-risk bonds. According to court documents, Nickles took money from investors, but, instead of investing the money in the bonds he recommended, he used the money to pay off prior investors or trade in securities not authorized by the investors. As part of his scheme, Nickles created fraudulent statements from Innovative Advisory Services that were mailed to investors.

The charge of mail fraud carries a statutory maximum penalty of 20 years in federal prison. The charge of securities fraud carries a statutory maximum of five years in prison. Therefore, when he is sentenced by Judge Carney on August 8, Nickles faces a maximum possible penalty of 25 years in federal prison.

Nickles has been in custody since he was arrested by special agents with the FBI on July 9, 2010, during a meeting with two victims at his Santa Ana office.

Nickles and Innovative Advisory Services were named in a civil complaint filed by the Securities and Exchange Commission that alleged Nickles operated a fraudulent scheme. United States District Judge James V. Selna issued a preliminary injunction in April that prevents Nickles from being involved in the sale of securities without being registered as a broker and/or dealer, neither of which Nickles was at the time of his arrest (see: http://www.sec.gov/litigation/litreleases/2010/lr21486.htm).

The criminal case against Nickles is the result of an investigation by the Federal Bureau of Investigation.

CONTACT:
Assistant United States Attorney Joshua Robbins
(714) 338-3538