Home Sacramento Press Releases 2010 Folsom Man Charged in Investment Fraud Scheme
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Folsom Man Charged in Investment Fraud Scheme

U.S. Attorney’s Office January 12, 2010
  • Eastern District of California (916) 554-2700

SACRAMENTO—United States Attorney Benjamin B. Wagner, FBI Special Agent in Charge Drew S. Parenti, and IRS Special Agent in Charge Scott O'Briant announced today that a federal grand jury returned an indictment charging LUIS FERNANDEZ, of Folsom, with money laundering and wire fraud. The charges stem from FERNANDEZ' operation of an investment scheme called FFI Investment Fund.

This case is the product of an extensive investigation by the Federal Bureau of Investigation and the Internal Revenue Service.

According to Assistant United States Attorney R. Steven Lapham, who is prosecuting the case, the indictment alleges that FERNANDEZ was the owner and president of Fernandez Financial, Inc (FFI) in Folsom, Calif. Between September 2004, and March 2009, FERNANDEZ collected approximately $7.4 million from investors by promising them a three percent monthly return on their money. During this time, FERNANDEZ invested approximately $4.6 million in the stock market, sustaining a loss in five of the six calendar years during that period. After subtracting monthly payments to investors totaling approximately $5.3 million, FERNANDEZ caused a total loss to investors of approximately $2.1 million.

The purpose of this scheme was to obtain money from perspective investors and to induce existing investors to keep their funds in FFI. FERNANDEZ falsely represented to investors that FFI was profitable in both good markets and bad and that it was consistently generating a return on investment that was sufficient to pay the promised three percent rate of return.

To lull existing investors into keeping their money with FFI, FERNANDEZ, and others acting at FERNANDEZ's direction, falsely represented that FFI continued to do well and provided investors with false documentation purporting to show stock market gains and concealing the losses.

The indictment also charges that FERNANDEZ purchased a cashiers checks made payable to Elliot Homes in the amount of $168,872.75 for the purchase of a residence located in Folsom, Calif., which was paid for the with funds derived from the aforementioned scheme.

The indictment was handed up by the Grand Jury on January 7, 2010, and Mr. Fernandez made his initial appearance before United States Magistrate Judge Dale A Drozd on January 11, 2010. The matter has been assigned to United States District Judge Lawrence K. Karlton. A status conference has been scheduled before Judge Karlton on February 17, 2010.

The maximum penalty for wire fraud in violation of 18 U.S.C. § 1343 is 20 years’ imprisonment and a fine of $250,000. The maximum penalty for monetary transactions in criminally derived property in violation of 18 U.S.C. § 1957 is 10 years imprisonment and a $250,000 fine. However, the actual sentence will be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed at the discretion of the court.

The charges are only allegations and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

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