Lakeland Men Charged in Ponzi Scheme

A federal grand jury returned a 30-count indictment charging Edward A. Allen, age 34, of Lakeland, Florida, and David L. Olson, age 59, of Lakeland, Florida, with conspiracy, securities fraud, mail fraud, wire fraud, and money laundering, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.

Allen and Olson were business associates and partners in A&O Companies. Allen and Olson and others associated with the companies solicited investors from the areas of Youngstown, Ohio, Arizona, Florida, and Texas to invest money with various companies under the umbrella of A&O Companies, according to the indictment.

Investors were told that the purpose of A&O Companies was to purchase residential real estate properties and sell them at a profit. In fact, the investments were used to pay salaries to employees of the companies, personal expenses, so-called “interest” payments to various investors, and mortgage payments on real estate purchased on behalf of A&O Companies by investors, according to the indictment.

Allen and Olson promised investors that they would earn a high rate of return on their principal, in one case as high as 45 percent, and that they would receive monthly interest payments reflecting that rate of return on their investments. Investors then received promissory notes in exchange. Allen and Olson further misled investors about the security of their investments by representing that numerous promissory notes were collateralized by David L. Olson’s personal property, according to the indictment.

This lakefront property was purchased for approximately $425,000. However, its value dropped significantly after a sink hole developed and drained the water from the lake in 2006. Nevertheless, approximately $8 million in promissory notes were “collateralized” by this single piece of property, according to the indictment.

A&O Companies paid some investors purported “interest” payments for a period of time so as to give the false impression that there were actual investments when, in fact, any “interest” payments came from other investors’ funds as part of a classic “Ponzi” scheme. A “Ponzi” scheme is where one set of investors’ funds are used to pay supposed “interest” payments to other investors to encourage others to invest, or re-invest, and to keep investors from realizing that there are no investments and that they have been defrauded.

In total, A&O Companies, obtained approximately $14 million in funds through the use of these promissory notes, according to the indictment.

The charges allege that Allen and Olson, doing business as A&O Companies, then used portions of this money to obtain real estate on behalf of A & O Companies through “joint venture agreements”. Allen and Olson solicited investors from the promissory note program to enter into joint venture agreements. Pursuant to these joint venture agreements, investors with good credit ratings would purchase property on behalf of A&O Companies. The property would be in the investor’s name, but the mortgage would be paid by A&O Companies. The investor would be paid a monthly fee, and the investor agreed that when the property was sold, the profit would go to A&O Companies. The lending institutions were provided with false and misleading information about the purpose of the mortgage, who was responsible for paying the mortgage, and the source of money provided to the lending institution.

As a result of this fraudulent activity, A&O Companies purchased approximately 80 properties in Ohio, Florida and South Carolina, using the “joint venture agreements,” according to the indictment.

If convicted, the defendants’ sentences will be determined by the court after review of factors unique to this case, including each defendant’s prior criminal record, if any, each defendant’s role in the offense and the characteristics of the violations. In all cases the sentences will not exceed the statutory maximum and in most cases it will be less than the maximum.

The investigation was conducted by the Federal Bureau of Investigation and the Internal Revenue Service. The case is being prosecuted by Assistant United States Attorney David M. Toepfer.

An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.