National Foundation of America Founder Convicted of Defrauding Clients of $30 Million in Assets
Company Misrepresented as Charitable Organization to Investors
|U.S. Attorney’s Office March 11, 2013|
Richard Olive, 47, of Vero Beach, Florida, formerly a resident of Franklin, Tennessee, was convicted by a federal jury on March 7, 2013, of mail fraud, wire fraud, and money laundering related to his operation of National Foundation of America (NFOA), announced Jerry E. Martin, U.S. Attorney for the Middle District of Tennessee.
From January 2006 through May 2007, Olive represented to potential investors that NFOA, which was headquartered in Franklin, Tennessee, was a charitable organization that had been recognized and approved by the IRS as a 501(c)(3) organization. During the scheme, Olive solicited assets from elderly individuals, including annuities and real estate, valued at more than $30 million and promised that, in return, NFOA would issue an “installment bargain contract” that would purportedly give investors a guaranteed payout within a specific time period as well as a generous tax deduction.
“Fraudulent investment scams like these are devastating to investors, especially people who invest their life’s savings with individuals they trust, only to find that their trust has been misplaced,” said U.S. Attorney Jerry E. Martin. “In this case, a lot of people invested money they couldn’t afford to lose, particularly in hard economic times. The U.S. Attorney’s Office will diligently and appropriately prosecute those who perpetrate such schemes and prey on unsuspecting and trusting investors.”
Olive promised clients that in exchange for an NFOA “installment bargain contract,” investors would receive a fixed payment for a specified number of years. Evidence presented by prosecutors at trial demonstrated that NFOA never had sufficient assets to meet these obligations. The majority of assets that Olive solicited were annuities, which incurred high penalties on their surrender. When Olive received these annuities, he surrendered them, incurring the penalties, so that he could access the cash.
Additional evidence presented at trial showed that Olive used the cash to fund his lavish lifestyle, including paying for $153,000 of expenses on credit cards, funding a family trip to New Orleans on a chartered jet, settling a lawsuit against him for $250,000, and using cash to purchase several properties, including a $690,000 condo in Las Vegas. Although Olive held NFOA out to be a “charitable organization,” evidence presented at trial showed that he donated to charity less than half of one percent of the $23.6 million received by NFOA.
Prosecutors also presented evidence showing that Olive made a series of misrepresentations about NFOA assets during the scheme. For example, in February 2006, just days after NFOA had been incorporated, Olive sent financial statements to a financial advisor that falsely represented that NFOA had been in operation in 2003 and 2004 and that it held significant assets. In May 2006 Olive represented to another financial advisor that the company had $35 million in assets, although the charitable tax returns that he filed with the state of Tennessee indicated that from its inception to June 2006, NFOA had received only $2.8 million in revenue.
Other evidence presented at trial showed that throughout the scheme, Olive repeatedly and falsely represented to investors that NFOA had been recognized as a charitable organization by the IRS under Section 501(c)(3) of the Internal Revenue Code. Olive’s former attorney testified that Olive continued to make this false representation, even after being advised on at least two occasions to stop.
The jury also heard testimony that at least five states had issued cease-and-desist orders during the scheme, based in part on their findings that Olive was misrepresenting NFOA’s 501(c)(3) status, and ordered him to stop selling NFOA’s product in those states. NFOA was seized and ultimately liquidated by the Tennessee Department of Commerce and Insurance in May 2007.
Olive faces up to 20 years in prison on each of the mail and wire fraud counts and up to 10 years in prison on the unlawful monetary transaction counts. A sentencing date has not yet been set.
The case was investigated by the FBI and the IRS– Criminal Investigation. Assistant United States Attorneys Kathryn B. Ward and Darryl A. Stewart represented the government.