Former Gates Mills Man Indicted for Defrauding Investors of Millions of Dollars
A 19-count federal indictment was filed charging a former Gates Mills resident with operating a $9.6 million investment scheme in which he defrauded investors and enriched himself, law enforcement officials said.
Oscar Villarreal, age 27, of Mexico, used the ill-gotten money to purchase a Lamborghini, a Steinway piano and otherwise live a lavish lifestyle, according to the indictment.
He has been charged with 10 counts of wire fraud, seven counts of money laundering, one count of securities fraud and one count of investment adviser fraud.
“This defendant used lies and deception to rip off investors and lead an extravagant lifestyle,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.
“Mr. Villarreal utilized his charisma and bogus information to defraud hard working individuals,” said Stephen D. Anthony, Special Agent in Charge of the Federal Bureau of Investigation’s Cleveland office. “It is believed that Mr. Villarreal has fled the Cleveland area and the FBI is asking the public to provide any information they have regarding his current whereabouts so that he may answer for his numerous years as a fraudster.”
“When you knowingly mix deceit and trickery into the financial well-being of individuals, you create a recipe for devastation that could last a lifetime,” said Kathy A. Enstrom, Special Agent in Charge, IRS Criminal Investigation, Cincinnati Field Office.
The investment scheme took place between 2008 and 2013. At different times, Villarreal operated numerous partnership or limited liability corporations, including WW Capital III, L.P., WW Capital III LLC (also known as WWCIII), WW Capital Partners LLC, (also known as Fund II) and Black Mountain Enterprises, LLC, and maintained several bank accounts and E-Trade trading accounts, according to the indictment.
WWCIII was a fund that purported to pursue investments with companies in Mexico related to the petroleum, steel, metals and real estate industries. Villarreal promoted and sold investment contracts in the form of limited partnership interests in the funds to approximately 46 investors in Ohio, Florida, New Jersey and New York in the amount of more than $9.6 million, according to the indictment.
From January 2008 through January 2009, Villarreal solicited approximately $550,000 from seven investors for Fund II, falsely representing the money would be used in the Mexican metal industry, according to the indictment. In February 2009, Villarreal distributed approximately $715,000 to Fund II investors, which he misrepresented as profits from their investment. He failed to disclose to investors that he had received a consulting fee of $1.5 million from a Cleveland-area company for unrelated services, and that he used money from that, as well as from his personal line of credit, to pay Fund II investors. Villarreal later falsely represented to potential investors in WWCIII that Fund II had generated a 45 percent rate of return, when he knew Fund II had generated no returns, according to the indictment.
Rather than investing WWCIII funds for their stated purpose, Villarreal used investor money to make speculative trades from his E-Trade accounts, pay business expenses necessary to promote the investment scheme, purchase luxury items such as a Steinway piano and a Lamborghini, and otherwise fund a lavish lifestyle, according to the indictment.
Villarreal falsely reported to WWCIII investors, both orally and in writing, that their funds would be pooled and used to invest in the Mexican steel and petroleum industries, Mexican real estate and/or Mexican infrastructure projects. Villarreal further represented that he would use personal and family business connections in Mexico to make the investments, according to the indictment.
Instead, he diverted investor funds into an E-Trade account where he made speculative stock trades which lost millions of dollars in investor funds. Villarreal falsely represented to WWCIII investors that they were achieving positive returns on their investments, causing most investors to be lulled into the belief they were making money. Based upon his false statements, some of the WWCIII investors placed even more money into other investment opportunities offered by Villarreal, according to the indictment.
This indictment is the result of an investigation by Federal Bureau of Investigation, the Internal Revenue Service—Criminal Investigations and the Securities and Exchange Commission. The case is being prosecuted by Assistant U.S. Attorney Adam Hollingsworth and Special Assistant U.S. Attorney Derek Kleinmann.
If convicted, the defendant’s sentence will be determined by the court after a review of the federal sentencing guidelines and factors unique to the case, including the defendant’s prior criminal record (if any), the defendant’s role in the offense and the characteristics of the violation.
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.