A scheme that began in 2005, accounting for $74.7 million raised from 600 Ponzi investors, has landed a real estate broker in federal prison for 12 years, and an order to pay the multi-million-dollar sum back in restitution, according to the Courthouse News Service and the U.S. Attorney's office.
D.V., 64, an Albuquerque, New Mexico-based real estate investor, was sentenced for both wire and mail fraud on September 5.
Prosecutors stated that D.V. also must forfeit $38.3 million that was already seized, along with real estate holdings he had in Spring Valley, Nevada.
D.V. faced 30 counts – accusing him of selling promissory notes to raise money to fund Vaughan Company Realtors, his real estate brokerage. The Ponzi scheme collapsed in 2010.
D.V. pleaded guilty to the fraud charges in December 2011. He admitted to the allegations made in the indictment and went on to explain how he began the Ponzi scheme, how he marketed the idea, and how he administered it.
Prosecutors stated, "(D.V.) led investors to believe that their investments in the promissory note program were actually or virtually risk-free because they were guaranteed by VCR, (D.V.'s) personal guarantee, and a $2.5 million deed of trust on certain real estate. (D.V.) marketed his promissory note program by representing that the invested funds would be used to purchase real estate and to acquire smaller real estate companies."
The money that D.V. garnered from his investors was used to pay the interest and principal – on the notes that he had taken out by his earlier investors. He also used the money to subsidize VCR, pay himself a salary and award himself bonuses.
VCR was insolvent by 2005, according to prosecutors, because there were no new investors to keep the flow of money coming in.
However, D.V. kept distributing his marketing materials in hopes of gaining further investors using the promissory note program. He signed the same notes and made the same guarantees.
Company records show that though D.V. told his investors that he would not take more than $2.5 million in notes he took in over $24.35 million by the close of 2004. By the end of 2009 he was responsible for over $74 million in notes.
Annual losses had swollen to over $13.9 million in 2009.
Prosecutors added, "(D.V.) admitted that, when his Ponzi scheme began to collapse and he became unable to meet the monthly interest payments to note holders, he made false and misleading excuses to investors and failed to disclose that VCR had insufficient revenue to make the interest payments. In Feb. 2010, when (D.V.) filed for personal and corporate bankruptcy, the aggregate principal balance owned to approximately 600 note holders was approximately $74,745,723.93 and the interest expense owed to note holders exceeded $1 million per month."
Part of D.V.'s plea agreement resolves his bankruptcy case, and a civil complaint that the SEC had filed regarding the same Ponzi scam was also resolved.
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