Investor Fraud Summit in Walnut Creek Arms Consumers with Information to Protect Retirement Funds and Life Savings
Residents of Rossmoor Retirement Community Provided Ways to Avoid Being Victims
|U.S. Attorney’s Office October 09, 2012|
PORTLAND, OR—An Investor Fraud Summit designed to provide participants with the information they need to deter future violators and protect their retirement income during today’s rise in investment fraud schemes was held today at Rossmoor Retirement Community in Walnut Creek, California, United States Attorney Amanda Marshall announced. United States Attorneys for the Northern, Eastern, Central, and Southern Districts of California; Alaska; and Oregon; along with representatives from the U.S. Department of Justice, FBI, and the Securities and Exchange Commission participated in the event.
“Many of us have a family member, friend, or neighbor who has fallen for a fraudulent investment scheme,” remarked U.S. Attorney Amanda Marshall. “These scammers not only steal money, they steal something far more valuable: piece of mind. Fraudsters lure people in by building trust. Victims are left not only broke, but humiliated because they trusted someone who ripped them off. We can all help prevent the elders in our lives from losing their money, their dignity, and their security. This summit was one important step in the continued effort of the Department of Justice and U.S. Attorney Community to educate the public about how to protect against investment fraud.”
“Investor fraud crimes can erode faith in our financial markets, threaten our nation’s ongoing economic recovery, and undermine the fabric of our communities,” said Attorney General Eric Holder. “That’s why protecting the American people from fraud is a top priority for today’s Justice Department. And through the Investor Fraud Summits we announce today, we’ll take our anti-fraud efforts to a new level—by raising awareness about these devastating offenses, educating consumers on how to report suspected fraud schemes, and empowering members of the public to fight back.”
Today’s summit featured U.S. Attorney Melinda Haag of the Northern District of California, U.S. Attorney Ben Wagner for the Eastern District of California, U.S. Attorney Andre Birotte of the Central District of California, U.S. Attorney Laura Duffy of the Southern District of California, and U.S. Attorney Amanda Marshall of the District of Oregon. Also on hand were representatives from the FBI, the Financial Crimes Enforcement Network, the SEC, Google, and CNBCs American Greed.
The FBI reports an unprecedented rise in investment fraud schemes, involving thousands of victims and staggering losses. Since 2011, the Justice Department’s Criminal Division and 85 U.S. Attorneys’ Offices have reported that approximately 800 defendants have been charged, tried, pleaded, or sentenced in approximately 500 federal prosecutions involving investor fraud. The total reported amount swindled from victims for this time period tops more than $20 billion. This staggering number includes cases where the total amount victims lost range from tens of thousands of dollars to hundreds of millions and, in some cases, billions in hard-earned savings.
The United States Attorney’s Office for the District of Oregon has prosecuted a significant number of investor fraud cases over the last 18 months, including the following. Defendants are presumed innocent until proven guilty.
U.S. v. Douglas Buckley
On July 27, 2010, Douglas Buckley was indicted with wire fraud and mail fraud. A jury found Buckley guilty of soliciting investors by falsely representing himself to be a registered commodities broker and falsifying account statements to general fees for himself. Losses to victims are approximately $400,000. Sentencing is scheduled for January 28, 2013.
U.S. v. Joseph LaCoste
On April 24, 2011, Joseph Anthony LaCoste, 46, former Chief Executive Officer of Willamette Development Services, LLC (WDS), Joene Pearl Clyde LaCoste, the spouse of Joseph Anthony LaCoste, and Angela Marie McCoy, 43, former Investment Relations Manager for WDS, were arraigned in federal court on a superseding indictment charging them with committing securities fraud, bank fraud, mail fraud, wire fraud, bankruptcy fraud, and money laundering. The indictment alleges that from April 2006 through December 2007, through misrepresentations by Joseph LaCoste and McCoy, WDS obtained approximately $5,285,300 from investors for the ostensible purpose of developing at least ten profitable real estate projects, and that WDS incurred $10,795,820 of additional indebtedness from lenders. By January 2008, none of the projects were completed and WDS was insolvent. The investors lost their entire principal of $5,285,300. Secured lenders recovered portions of their loans through foreclosure actions. The indictment further alleges that between January 2008 and June 2010, through Witham Investments LLC, Joene and Joseph LaCoste caused victims to lose more than 1,000 acres of property. Due to misrepresentations by the LaCostes, one couple lost 889 acres and another couple lost more than 200 acres that had been in their family since the 1860s. Trial is scheduled for March 6, 2013. On February 8, 2011, the former chief financial officer for WDS pleaded guilty to conspiring to commit securities fraud. He is scheduled to be sentenced on March 5, 2013.
U.S. v. Johnny Mickey Brown
On May 11, 2011, a federal jury convicted Johnny “Mickey” Brown of wire fraud, false statements to a financial institution, and tax evasion. The evidence presented at trial proved that Brown fraudulently obtained credit cards from unsuspecting victims, many of whom were elderly or financially naïve, who believed they were investing in vacuum cleaner inventory for a profitable business. Once he secured the victims’ cards through false promises of no-risk dividends based upon the sale of the vacuum inventory, he immediately obtained all the available credit balance from each card. Brown did this by running the cards through a U.S. Bank Merchant Point of Sale terminal and falsely disguised each transaction as a sale of merchandise when, in fact, he did not sell anything at all. Each of these pretext or “fake” sales caused U.S. Bank to automatically deposit the amount of the fraudulent sale entered in the credit card machine into defendant Brown’s business bank account. The total amount of losses to victims in Brown’s scheme exceeded $6 million. Brown was sentenced on December 12, 2011, to 130 months in prison.
U.S. v. Louis J. Borstelmann
On October 21, 2011, Louis J. Borstelmann was indicted by a federal grand jury with mail fraud and money laundering in connection with an alleged Ponzi scheme. As part of the scheme, he admitted to soliciting individuals to invest in real estate through his company Sunburst Associates Inc., a California corporation. Borstelmann falsely claimed to offer hard-money loans through his company that were secured by real estate deeds of trust. To entice potential investors, he falsely promised high rates of return and a security interest in the property allegedly pledged to secure the investment. The scheme he used swindled more than 100 people out of more than $18 million. A majority of Borstelmann’s victims were elderly and retired individuals living in Florence, Oregon, although other victims lived in places as far away as Hawaii, Montana, and Texas. Borstelmann was sentenced to 108 months in prison.
U.S. v. Jon Michael Harder
On September 21, 2012, a federal grand jury indicted Jon Michael Harder with defrauding more than 1,000 investors out of approximately $130 million during the period 2006-2008. Harder is accused of controlling a network of companies which bought, constructed, and managed a nationwide collection of assisted living facilities. At its height, the corporate organization that Harder controlled, Sunwest Management and related companies, owned approximately 300 assisted living facilities, serving over 15,000 residents with an average age of 85. The case is pending.
Although the defendants in these federal prosecutions used a variety of tactics and schemes, they often took the same approach, guaranteeing high returns and, in many instances, providing falsified investment documents to victims. As a result, those victims lost retirement savings, military survivor benefits, family death settlements, and money set aside for college tuition and mortgage payments. While the Justice Department has already obtained prison sentences for many of these scammers, including one sentence of up to 50 years, for many of the more than 100,000 victims the damage to their families is irreparable.
Since 2011, the SEC, an FFETF partner agency, has charged 887 individuals and entities in 359 actions involving retail investor fraud. Nearly $9.7 billion have been alleged lost by over 1.2 million investors in those cases.
“Whether a cold-call, polished website, or e-mail solicitation, fraudsters will use every means at their disposal to convince investors to part with their money,” said SEC Director of Enforcement Robert Khuzami. “That is why investor education is so critical—in maintaining financial health as much as physical health, an ounce of prevention is worth a pound of cure.”
Attorney General Eric Holder and the Department of Justice’s U.S. Attorneys’ Offices, together with the department’s Criminal and Civil Divisions; representatives from the FBI, Securities and Exchange Commission (SEC), U.S. Department of Treasury’s Financial Crimes Enforcement Network, U.S. Commodity Futures Trading Commission, U.S. Bankruptcy Trustees, the Financial Industry Regulatory Authority, the AARP, and the Better Business Bureau are holding investor fraud summits across the country to help consumers protect their hard-earned money from fraud.
Prior to today’s summit in Walnut Creek, summits were held in Stamford, Connecticut, and Nashville, Tennessee. Three additional summits are scheduled to take place across the country: October 10, in Denver; October 11, in Cleveland; and October 12, in Miami.
In addition to the investor fraud summits across the country, in the coming weeks the Victims’ Rights Committee of the Financial Fraud Enforcement Task Force will host an unprecedented event, in partnership with the Justice Department, the Certified Financial Planner Board and the Foundation for Financial Planning, to offer free financial consulting services to 8,000 victims of an investment fraud scheme that was indicted in Chicago. In this case, the defendant falsely guaranteed high rates of return in a Ponzi scheme that caused the loss of more than $300 million of investors’ funds. Many of the victims were retirees who found the promised high rates of return, coupled with other false promises, an attractive investment alternative for their individual retirement account (IRA) and other retirement-type investments.
If you think you may be a victim of investor fraud, please call your local FBI office for assistance. To find your local office, please visit: www.fbi.gov/contact-us/field.
For tips on how to spot investor scams and for more information on investor fraud in general, please visit: www.stopfraud.gov.
President Obama established the interagency Financial Fraud Enforcement Task Force (FFETF) to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force, chaired by Attorney General Eric Holder, includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the FFETF, please visit: www.stopfraud.gov.
Electronic court filings and further procedural and docket information are available at https://ecf.ord.uscourts.gov/cgi-bin/login.pl.
For information on upcoming court hearings, please call the District Court Clerk’s Office at 503-326-8003.