THREE SENTENCED FOR ROLES IN $1 BILLION HIGH-YIELD INVESTMENT FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, November 20, 2013
Three Investment Advisors Sentenced in California for $1 Billion High-yield Investment Fraud

Three former investment advisers were sentenced on Nov. 19, 2013 for their roles in attempting to defraud a wealthy investor of $1 billion through a high-yield investment fraud scheme.

Acting Assistant Attorney General Mythili Raman of the Criminal Division and U.S. Attorney Andre Birotte Jr. of the Central District of California made the announcement.

William J. Ferry, a former stock broker and investment advisor; Dennis J. Clinton, a former real estate investment manager; and Paul R. Martin, a former senior vice president and managing director of Bankers Trust, were convicted on July 31, 2012, of conspiracy, mail fraud and wire fraud.   The investor they attempted to defraud was, in reality, part of an undercover FBI team that posed as wealthy investors and investment managers to stop fraudsters before they actually harmed victims.

Ferry, 71, of Newport Beach, Calif., was sentenced to serve 15 months in prison.  Clinton, 65, of San Diego, Calif., was sentenced to serve 30 months in prison.   Martin, 64, of New Jersey, was sentenced to 30 months in prison.            

Evidence at trial established that from February to December 2006, Ferry, Clinton, Martin and others conspired to promote a high-yield investment fraud scheme that promised an extremely high return at little or no risk to principal.   The defendants claimed their investment program was a “Fed Trade Program” that was regulated by the Federal Reserve Bank, that they had to follow strict Fed guidelines, and that a Fed trade administrator administered their program, with compliance duties handled by a Fed compliance officer.

Investors also were told that once the investment program passed compliance, it would become registered in Washington, D.C., with the Fed.   The defendants falsely represented to FBI undercover agents that they would arrange for them to meet a Federal Reserve official and/or the chairman of the board of a major U.S. bank to confirm the existence of the defendants’ investment program.   The defendants falsely claimed that these Fed investment programs existed primarily to generate funds for project funding and humanitarian purposes, such as Hurricane Katrina relief.   The promised profits from investing in a Fed program had to be divided in equal amounts, with one portion going to some humanitarian purpose, another portion to some kind of project financing and the remainder to the investor.   The defendants represented to the undercover agents that the agents’ offshore bank account would be managed by a Swiss banker who was already managing billions of dollars for the defendants.

Throughout the scheme, Ferry acted as an underwriter and member of the compliance team; Martin acted as a banking expert; and Clinton acted as a trouble shooter during the compliance phase and transfer of funds to the Swiss banker.
           
Another conspirator, Brad Keith Lee, of California, who acted as the contact with the Swiss banker, pleaded guilty to conspiracy and wire fraud on April 13, 2009, and was sentenced to 24 months in prison on Jan. 11, 2010.   Oregon resident John Brent Leiske, who acted as a trader during the scheme, pleaded guilty in the District of Oregon to conspiracy, mail fraud and wire fraud on Jan. 24, 2012, and was sentenced to 120 months in prison on Feb. 14, 2013.

This continuing investigation is being conducted by the FBI.   This case is being prosecuted by Senior Litigation Counsel David Bybee and Trial Attorney Fred Medick of the Criminal Division’s Fraud Section.