Franklin Financial Adviser William Walter Spencer Sentenced to 78 Months for Investment Fraud Ponzi Scheme
|U.S. Attorney’s Office August 24, 2010|
NASHVILLE, TN—Former Franklin, Tennessee financial advisor William Walter Spencer, 68, was sentenced yesterday by United States District Court Judge William J. Haynes, Jr., to 78 months in prison, the maximum under federal sentencing guidelines, announced Jerry E. Martin, United States Attorney for the Middle District of Tennessee. The sentencing followed Spencer’s guilty plea to multiple counts of mail and wire fraud on May 28, 2010, during which he admitted orchestrating an investment fraud Ponzi scheme and embezzling more than $1,897,718 from approximately 100 friends and investors, including members of the church where Spencer served as an Elder.
In response to the sentence, United States Attorney Jerry E. Martin stated, “The United States Attorney’s Office is pleased that the court saw fit to impose a significant sentence on Mr. Spencer for his fraud that hurt so many innocent victims. Such financial crimes cause damage far beyond just the monetary losses, and the United States Attorney’s Office will continue to aggressively prosecute those who commit such frauds.”
As part of his guilty plea, Spencer disclosed extensive details of how he operated and concealed the investment Ponzi scheme for approximately 12 years between December 1997 and November 2009, to include the following facts: that he solicited investors, mostly from his church congregation, by promising inflated returns of between 10 percent and 12 percent; that to induce investors into believing that their money was safe, he characterized each investment as a “personal loan” and executed and provided each investor with a promissory note; that he pledged his personal assets and life insurance policies as collateral for each promissory note and promised each investor that he would repay the principal for each loan in periods ranging from six months to one year; that at the time he solicited the loans and executed each promissory note, he did not have the liquid assets or income necessary to pay the interest promised to investors, or to return the loan principal as each promissory note matured; that he lied to investors about the value of his personal wealth and about the amount of life insurance available to be pledged as collateral for the promissory notes; that he also lied to investors about the total aggregate amount of debt he owed on the promissory notes and concealed his inability to repay the promissory notes at maturity; that he never invested any of the funds with which he had been entrusted, but instead, he embezzled the money and used it to fund his personal living expenses.
Spencer also admitted that, as a further inducement to invest in his Ponzi scheme, he falsely represented to investors that their investments had been safely invested in pooled investment funds intended to maximize their return on investment. To discourage investors from cashing-out their investments as their notes matured, Spencer warned investors that doing so would reduce their rate of return and would negatively impact the returns received by other pooled investors. When questioned by investors, Spencer refused to disclose the exact nature or location of invested funds, and restricted withdrawals until a replacement investor could be found. Spencer said he falsely told investors that the reason for restricting cash-outs was to protect other investors from being negatively impacted.
Before a packed courtroom at sentencing, Judge Haynes heard statements from 12 victims, all but two who were elderly and were members of the church of which Spencer had served as an Elder. Each of the testifying victims, along with others who filled the courtroom, had lost all or a significant part of their retirement savings as a result of Spencer’s fraud. After considering that and other evidence, Judge Haynes imposed a 78-month prison sentence. In addition to the prison term, Judge Haynes sentenced Spencer to serve three years of supervised release following his incarceration, and ordered him to pay restitution to victims in the amount of $1,456,177.
This case was investigated by the FBI, the United States Postal Inspection Service, and the Tennessee Department of Commerce and Insurance. The United States was represented by Assistant U.S. Attorney John K. Webb.