St. Peters Stockbroker Pleads Guilty to Federal Charges Involving a Ponzi Scheme
| U.S. Attorney’s Office November 04, 2009 |
ST. LOUIS, MO—Kenneth G. Neely pleaded guilty to a mail fraud charge involving an investment Ponzi scheme in which he swindled investors out of more than $400,000, Acting United States Attorney Michael W. Reap announced today.
Kenneth Neely worked for a number of investment/ brokerage firms between the mid-1980s and July 2009. Beginning in or around 2000, Neely experienced a decrease in income, but maintained and even increased his discretionary spending at such places as country club in St. Charles, MO. As a result, he had less income than was necessary to support his lifestyle and normal expenses.
Beginning in 2001, Neely borrowed some money from another person. Rather than treating that money as a loan, he created a fictional entity called "The St. Louis Investment Club" and treated the borrowed money as an investment in that entity. Thereafter, Neely began to solicit more people to invest in The St. Louis Investment Club by representing to investors that The St. Louis Investment Club made money through an investment he called the St. Charles Real Estate Investment Trusts (St. Charles REITS). The St. Charles REITS purportedly made money by buying and selling real estate. In reality, there was no investment club and no St. Charles REITS. The scheme succeeded for a while because he used new investor money to make interest payments due to old investors, i.e. a Ponzi scheme. Neely also used investor money to pay his own expenses.
Investors typically paid $3,000 for a share or unit in the club. Neely provided phoney records which gave the investors a false sense of security and belief that their principal had been invested as promised. As a result of the this scheme, investors lost more than $400,000.
"The Postal Inspection Service has no shortage of Ponzi schemes to investigate and this is just another example of greed overcoming honest business practices," said J.R. Ball, Assistant Inspector in Charge for the St. Louis Field Office. He added, "Relying on a reputation or relationship is not enough, investors must still verify information, especially if there are claims of outperforming the market."
"Kenneth Neely swindled people who trusted him," said Roland J. Corvington, Special Agent in Charge of the FBI in St. Louis. "Unfortunately it is not uncommon for scam artists to prey on people within their own social circles."
Neely, 56, St. Peters, MO, plead guilty to one felony count of mail fraud. He appeared before United States District Judge Jean C. Hamilton. He now faces a maximum penalty of 20 years in prison and/or fines up to $250,000, and also mandatory victim restitution. Sentencing has been set for January 29, 2010.
Reap commended the Financial Industry Regulatory Authority (FINRA) for referring the case to our office for consideration, the U.S. Postal Inspection Service and the Federal Bureau of Investigation; and Assistant United States Attorney John Bodenhausen, who is handling the case for the U.S. Attorney’s Office.