Guilty Plea in $2.5 Million Ponzi Scheme
|U.S. Attorney’s Office January 18, 2013|
MADISON, WI—John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Garry Milosevich, 67, formerly of Duluth, Minnesota, pleaded guilty late yesterday afternoon in U.S. District Court in Madison to operating a Ponzi scheme using the mail to defraud investors. U.S. District Judge William M. Conley scheduled sentencing for April 2, 2013, at 1:00 p.m. Milosevich faces a maximum penalty of 20 years in prison. He will also be ordered to pay full restitution.
Milosevich and and co-defendant Daniel Tepoel were indicted by a federal grand jury on April 19, 2007. Tepoel was convicted on March 27, 2008, of mail and wire fraud, as well as lying to the FBI, following a four-day jury trial. Tepoel was sentenced to 11 ½ years in federal prison on June 6, 2008, and currently is serving his sentence. Milosevich remained at large until January 2012, when he was found in Honduras and returned, in custody, to the United States.
The government’s proof at the plea hearing established that, from about August 1999 to September 2001, Milosevich and Tepoel solicited individuals to invest in so-called “prime bank guarantees”—supposed financial instruments that are, in fact, completely bogus and do not exist. They did so using the names Rainbow Management Trust and Interstar Management Limited. In connection with the scheme, Milosevich and Tepoel maintained several bank accounts in the United States and Grenada.
Milosevich and Tepoel provided promotional materials to investors and repeatedly assured them that extremely high rates of return were guaranteed and that their principal would never be put at risk. Relying on these promises, dozens of investors invested millions of dollars with Milosevich and Tepoel. Milosevich and Tepoel then used investor funds by spending them on personal items and by using the funds to invest in projects that did place those investors’ funds at risk, including a failed condo resort in Grenada called Cinnamon Hills.
To maintain the illusion that their investment was profitable, Milosevich and Tepoel mailed quarterly statements purporting to show high investment gains, when in fact, these statements were lies. When investors did not receive their promised gains, they were given numerous excuses for the delay, including the events of September 11, 2001, and supposed theft of the money by government operatives. Milosevich’s and Tepoel’s constant, but false, reassurances that the money would be forthcoming resulted in investors not reporting the scheme to law enforcement for years. Ultimately, no investor received any of the promised gains, and most lost all the principal they invested, a total sum of approximately $2.5 million.
The charges against Milosevich and Tepoel were the result of an investigation conducted by the Federal Bureau of Investigation and the U.S. Postal Inspection Service, with assistance provided by the Country of Grenada. Prosecution of the case has been handled by U.S. Attorney John W. Vaudreuil and Assistant U.S. Attorney Meredith P. Duchemin.