Convicted Felon Sentenced for His Role in More Than $21 Million Ponzi Scheme
|U.S. Attorney’s Office December 06, 2011|
TAMPA, FL—U.S. Attorney Robert E. O’Neill announces that U.S. District Judge Steven D. Merryday today sentenced James Davis Risher, a/k/a Jay Risher (61, of Sanibel, Florida) to 19 years and seven months in federal prison for mail fraud, money laundering, and engaging in an illegal monetary transaction. The court also ordered Risher to forfeit a 2007 Lexus, a 2008 Lexus, a 2008 Smart Car, 10 pieces of diamond and other jewelry, and a painting, which are traceable to proceeds of the offenses. As part of his sentence, the court also entered a money judgment in the amount of $12.4 million—proceeds obtained by Risher, as part of the charged criminal conduct.
Risher pleaded guilty on September 9, 2011.
According to court documents, Risher, who held multiple residences in Lee County (Florida), Sarasota County (Florida), and Mars Hill, North Carolina, fraudulently represented himself as a well-trained, experienced, and successful principal money manager and investor. Risher omitted any mention of his prior convictions for state and federal felony fraud offenses from his personal biography, including convictions for mail fraud, securities fraud, and money laundering in United States v. James Davis Risher (Case # 96-103-CR-FTM-25). He did so in order to entice victim-investors to place their investment funds with him in a purported private equity fund, referred to as the Preservation of Principal Fund.
Risher enlisted the assistance of an insurance agent, who had a pre-existing business and client base in Lakeland, Florida to promote the purported private equity fund and to solicit the agent’s clients to invest in the fund. The insurance agent assembled written promotional materials to promote the fund, which included materials on Risher’s fabricated biography as well as false data concerning Risher’s prior success in handling investors’ funds and extraordinarily high rates of return. Some of the returns were reported to have been earned while Risher was in federal prison. The promotional materials also represented that victim-investors’ funds would be held at Penson Financial Services, Inc. (“Penson”), of Dallas, Texas, in an account titled “The Preservation of Principal Fund.”
At least 106 victim-investors transmitted more than $21 million for investment in the purported fund. Risher mailed documentation to victim-investors acknowledging receipt of their investment funds and representing that such investment funds had been accepted by and would be traded through Penson. In fact, there was never an account titled “The Preservation of Principal Fund” at Penson. Rather, Risher created, used, and controlled several accounts with Penson, which were titled in his name, his and his spouse’s names, or the names of other shell entities controlled by him. He then used these Penson accounts to transfer millions of dollars of investment funds to his personal bank account or other accounts he controlled.
To perpetuate the fraud scheme, Risher made fraudulent reports of the purported fund’s quarterly performance to the insurance agent. The insurance agent used Risher’s reports to generate quarterly account statements which were transmitted to victim-investors via the U.S. mail. In addition, Risher used approximately $3.8 million of funds invested by later victim-investors to make distribution payments to earlier victim-investors, in order to make it appear that the fund was performing as represented, as in a typical Ponzi scheme.
Risher used approximately $4.1 million of victim-investors’ funds to compensate the insurance agent for his role in promoting the purported private equity fund and diverted approximately $12.4 million of the victim-investors’ funds for his own personal enrichment by transferring the funds to accounts in his name and to accounts in the names of entities he controlled. Risher used the funds for jewelry, art, travel, motor vehicles, real property, and other goods and services.
“Promoters of Ponzi schemes, like the one orchestrated by James Risher, cause substantial harm by stealing investors’ hard earned money. Investors should be wary of investment programs that promise unbelievable returns on investment,” stated Ismael Nevarez, Assistant Special Agent in Charge, Internal Revenue Service-Criminal Investigation. “IRS-Criminal Investigation is committed to collaborating with our law enforcement partners in investigating Ponzi schemes in order to protect the financial well being of the American public.”
This case was investigated by the Internal Revenue Service-Criminal Investigation, U.S. Postal Inspection Service, Federal Bureau of Investigation, Florida Department of Law Enforcement, and the State of Florida Office of Financial Regulation, with assistance from the U.S. Securities and Exchange Commission, Miami Regional Office. It was prosecuted by Assistant United States Attorney Rachelle DesVaux Bedke.