Licensed Securities Broker Sentenced to More Than Three Years in Prison for Defrauding Investors
Kept Loan Payoffs and Provided False Statements to Investors
|U.S. Attorney’s Office November 08, 2012|
A registered securities broker dealer was sentenced today in U.S. District Court in Seattle to 40 months in prison, three years of supervised release. Restitution will be determined at a hearing scheduled for January 2013. Charles Chesterfield, 50, of Seattle, Washington, was the owner of Chesterfield Mortgage Investors Inc. (CMI), a registered mortgage broker dealer with the Washington State Department of Financial Institutions. Chesterfield was the sole owner of CMI, and he took in funds from investors to make loans to high risk borrowers. Over an 18-month period from March 2009 to September 2010, Chesterfield stole more than $3 million from some 150 different investors and used it for his own benefit. At sentencing U.S. District Judge Thomas S. Zilly told him, “Your lawyer called it ‘diversion’; the correct term is ‘steal’....Over a long period of time, involving many investors, [you] literally stole their money and tried to keep [your] business afloat.”
According to records filed in the case, Chesterfield represented to his investors that each investment was secured by a deed of trust on a specific property. CMI mailed monthly lender statements to each investor. The lender statements would detail the payments due to the investor for each loan, including any interest payments due for outstanding loans and any return of capital payments for repaid loans. The lender statements would also list the maturity date for each loan owned by the investor. But as early as March 2009, when a borrower would pay off the loan early, Chesterfield failed to pay off the investors as was required by their investment agreements, instead keeping the pay-off funds for his own use. Chesterfield issued false statements to the investors and provided interest-only payments instead of returning their investments. Chesterfield kept the payoff funds on 19 different loans. The Washington State Department of Financial Institutions discovered the fraud during an audit of CMI in August 2010 and shut down the company. A receiver has been sorting through the assets available to investors.
In asking for a significant sentence, prosecutors noted that 18 investors each lost more than $50,000 in the scheme. “The defendant’s criminal conduct had a far-reaching financial impact on this community. Unlike the victims in certain fraud cases who invest in ‘too good to be true’ schemes, Chesterfield’s victims were predominantly experienced investors looking to build their savings in a reasonable and calculated manner....The victim impact statements in this case portray victims who trusted the defendant with their life savings, retirement funds, health care funds, and their children’s and grandchildren’s education funds. The victims were often elderly—left with little time to recoup the losses caused by the defendant. The devastating effects of the defendant’s crime cannot be overstated,” prosecutors wrote in their sentencing memo.
The case was investigated by the Washington State Department of Financial Institutions and the FBI. The case was prosecuted by Assistant United States Attorney Matthew Diggs.