William J. Ferry, a former stock broker and investment adviser, and Dennis J. Clinton, a former real estate investment manager, were found guilty by a federal jury in Santa Ana, California for their roles in a conspiracy to defraud a wealthy investor of $1 billion in a high-yield investment fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division. The investor was, in reality, part of an undercover FBI team that posed as wealthy investors and investment managers in an effort to stop fraudsters before they actually harmed victims.
“Mr. Ferry and Mr. Clinton tried to dupe undercover agents into believing
their high-yield investment program would earn them extremely high rates of
return,” said Assistant Attorney General Breuer. “In fact, Ferry and Clinton
were conspiring to steal their money, along with the money of trusting
investors. Undercover operations are an integral part of our efforts to stop
financial fraudsters before they wipe out the life savings of innocent victims.
Based on today’s verdict, the defendants will now pay a heavy price for their
Ferry, 70, of Newport Beach, California, and Clinton, 64, of San Diego, were
each found guilty in U.S. District Court for the Central District of California
of one count of conspiracy, two counts of mail fraud, and six counts of wire
fraud. They face a maximum penalty of 20 years in prison on each fraud count.
They will be sentenced on February 1, 2013.
Paul R. Martin, a former senior vice president and managing director of
Bankers Trust, was found guilty in U.S. District Court for the Central District
of California for his role in the scheme in a separate trial on August 3, 2012.
Martin, 63, of New Jersey, was convicted of one count of conspiracy, two counts
of mail fraud, and six counts of wire fraud. At sentencing, scheduled for
February 1, 2013, Martin faces a maximum penalty of 20 years in prison on each
On August 21, 2008, Ferry, Clinton, and Martin were indicted along with
Oregon resident John Brent Leiske, Canadian citizen and resident Alex Chelak,
Iowa resident Richard Arthur Pundt, California resident Brad Keith Lee, and
Florida resident Ronald J. Nolte.
Evidence at trial established that, from February to December 2006, Ferry,
Clinton, Martin, and others conspired to promote a high-yield investment fraud
scheme promising an extremely high return at little or no risk to principal. The
defendants claimed that their high-yield investment program (HYIP) was a “Fed
trade program” regulated by the “Fed” (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 they had passed compliance, they would
become registered with the Fed in Washington, D.C. 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’ HYIP. 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.
They further falsely claimed that the promised profits from investing in a Fed
program had to be divided, in equal amounts, with one portion going for some
humanitarian purpose, another portion for 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. In the scheme,
Ferry acted as an underwriter and member of the compliance team; Martin acted as
a banking expert; Clinton acted as a troubleshooter during the compliance phase
and transfer of funds to the Swiss banker; Lee acted as the contact with the
Swiss banker; and Leiske acted as the trader. Chelak is charged with having
acted as a compliance officer.
On April 13, 2009, Lee pleaded guilty to wire fraud and conspiracy to commit
mail and wire fraud. On January 11, 2010, he was sentenced to 24 months in
Leiske’s case was transferred to the District of Oregon, where he pleaded
guilty to all counts on January 24, 2012. He is scheduled to be sentenced on
September 19, 2012.
Nolte was acquitted today of all charges by a jury in the Central District of
California. In August 2010, charges against Pundt were dismissed by the
Chelak remains a fugitive.
This continuing investigation is being conducted by the FBI. This case is
being prosecuted by Senior Trial Attorney David Bybee and Trial Attorney Fred
Medick of the Justice Department Criminal Division’s Fraud Section.
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