Ponzi, Ponzi, Ponzi: Your weekly ScamWatch
Here is a roundup of alleged cons, frauds and schemes to watch out for.
The term “Ponzi scheme,” named after swindler Charles Ponzi, refers to a financial scam that pays early investors returns from later investors. Victims are often attracted by promises of high returns with little or no risk, something that’s unavailable through traditional investments and often is a sign of trouble. This week’s ScamWatch highlights recent enforcement actions against the operators of three alleged Ponzi schemes.
Investment advisors -- A Topanga man has been charged with running a 15-year Ponzi scheme that targeted retired train and bus operators and caused more than $7 million in losses. Thomas L. Mitchell, 64, signed an agreement April 8 to plead guilty to mail fraud, a charge that carries a maximum sentence of 20 years in federal prison. Mitchell operated several companies as part of the scheme, including the purported investment advisory firm of Mitchell, Porter & Williams Inc. in Los Angeles. According to court documents, Mitchell targeted retirees, many of whom had been employed as transit operators by the Los Angeles County Metropolitan Transportation Authority, during a scheme that ran from 1995 to 2010. Mitchell portrayed himself as a successful investment advisor and falsely promised high investment returns through stocks, bonds or real estate. Prosecutors say Mitchell placed only a fraction of investor money in legitimate investments and used the rest to pay returns to early investors and to finance his own lavish lifestyle, which included a luxury apartment, three luxury automobiles, expensive vacations, meals at high-end restaurants and tickets to sporting events and shows. About half of the investors’ money was used to pay returns to early investors, prosecutors said.
ATMs –- A New York man has been sentenced to 20 years in federal prison for his role in a Ponzi scheme that raised $8 million through a fictitious automated teller machine business. From March 2003 to January 2005, Christopher Livanos and others deceived about 300 people into believing they were investing in private ATMs that would generate revenue through fees charged per customer transaction, according to a news release by the U.S. attorney’s office in Phoenix. No ATMs were ever purchased or installed, prosecutors said. Instead, early investors received some money from later investors, and Livanos and others diverted millions to themselves, prosecutors said. Livanos pleaded guilty in March to conspiracy, mail fraud and wire fraud.
Business loans –- The Securities and Exchange Commission has accused a Dallas man of defrauding investors of $8.6 million by promising returns of 25% annually on investments in a series of limited partnerships. Victims were falsely told that their money would be used to make loans to companies with a demonstrated track record and large profit margins, the SEC said in the lawsuit filed in federal court in Dallas. Instead, Donald Ronald Allen, 60, of Dallas and his partners used the money to repay early investors in other companies and to enrich themselves and family members, the SEC said. The lawsuit seeks an order freezing the assets of Allen’s companies, an injunction prohibiting him from accepting new investments and the return of all misappropriated money.
-- Stuart Pfeifer