Richard G. "Rick" Burton, 59, Nixa, Missouri, and Kathy Cyrena Allen, also known as Kathy Stanton, 66, Sarcoxie, Missouri, were charged in a 19-count indictment returned by a federal grand jury in Springfield on Tuesday, Nov. 17, 2009. 

The federal indictment alleges that Burton and Stanton, through their companies, conspired to defraud financial institutions of more than $2.6 million through a series of illegal financial transfers related to stolen escrow payments. The indictment also alleges that Burton and Stanton attempted to conceal their criminal activities through a substantial check-kiting scheme.  

Burton and Stanton were the co-owners of Guaranty Title Company of Southwest Missouri, Guaranty Title Company d/b/a Guaranty Title and Closing Company, and Guaranty Properties, Inc. The companies, referred to collectively as Guaranty, provided real estate title and closing services. Guaranty's main office was located in Nixa, Missouri, with at least 10 branch offices located in Aurora, Branson, Mount Vernon, Ozark, Springfield and Republic, Mo.  

Conspiracy to Commit Wire Fraud:

The federal indictment alleges that Burton and Stanton participated in a conspiracy to commit wire fraud from May 12, 2005, to June 18, 2007. According to the indictment, Burton and Stanton defrauded mortgage companies and individual customers of escrow money which had been wired to Guaranty to pay real estate closing costs.

When real estate buyers and sellers hired Guaranty to facilitate the closing of real estate contracts, Guaranty agreed to hold buyers' money for closing costs in an escrow funds account separate from funds that Guaranty owned. Guaranty was prohibited from commingling that escrow money with the firm's business operations money, because it did not own the escrow money it received. The escrow money deposited into Guaranty's main escrow account was electronically transferred to certain escrow accounts at several branch banks in southwest Missouri. These transfers made escrow money available for mortgage closings at a particular Guaranty branch office that a particular branch bank served.

In May 2005, Burton and Stanton allegedly began taking a portion of the escrow money that had been transferred into these escrow accounts. In violation of Guaranty's promise not to do so, Burton and Stanton caused $2,040,937 of stolen escrow funds to be deposited into the firm's business operations account and used the money for the day to day business operations of Guaranty.

Burton and Stanton allegedly instructed Guaranty's in-house bookkeeper to record deposits of stolen escrow money into Guaranty's business operations account as loans from Stanton or from a fictitious company called "K & S Investments" (named for Stanton's initials).

In addition to the conspiracy, the indictment charges Burton and Stanton with six counts of wire fraud related to wire transfers of escrow funds from financial institutions into Guaranty's main escrow bank account.

Conspiracy to Commit Bank Fraud:

The federal indictment alleges that Burton and Stanton participated in a conspiracy to commit bank fraud from April 1, 2007, to June 18, 2007.

By April 2007, the indictment says, current deposits into Guaranty's main escrow account no longer covered shortages caused by the theft of escrow funds. Burton and Stanton concealed this shortage by causing checks to be written and deposited between various accounts held by Guaranty at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks. This check-kiting scheme continued until June 18, 2007, when Old Missouri Bank discovered the fraud and closed the bank account. As a result of this check kiting, Burton and Stanton caused Ozark Mountain Bank to lose approximately $682,954.

In addition to the conspiracy, the indictment charges Burton and Stanton with five counts of bank fraud related to financial transactions that occurred as part of the check-kiting scheme.

Conspiracy to Commit Money Laundering:

The federal indictment alleges that Burton and Stanton participated in a conspiracy to commit money laundering from May 12, 2005, to June 18, 2007.

Burton and Stanton allegedly conducted financial transactions that involved the proceeds of the wire fraud and bank fraud conspiracies, in order to promote that criminal activity and to conceal the source of the proceeds of the unlawful activity.

In addition to the conspiracy, the indictment charges Burton and Stanton with five counts of money laundering related to financial transactions of wire fraud proceeds.

Matt J. Whitworth, United States Attorney for the Western District of Missouri, cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Randall D. Eggert. It was investigated by the Federal Bureau of Investigation, IRS-Criminal Investigation and the Missouri Department of Insurance, Financial Institutions and Professional Registration.

O'Connell admitted his participation in a mortgage fraud scheme that occurred from at least July 2003 through December 2007, in connection with his former businesses PB Enterprises, Inc., and Greater Atlantic Associates, Inc., located on Central Avenue, Albany, New York. O'Connell admitted that, together with others, he knowingly and willfully executed a scheme to defraud banks and other mortgage lenders by arranging to secure excessive mortgages for numerous residential properties in the Capital District through the use of fraudulent loan applications and settlement statements, and by diverting mortgage funds for his personal use, and to others. O'Connell admitted that the scheme operated in the following manner:

O'Connell and others identified below-market real estate properties for sale by owner, which were in need of substantial rehabilitation. The properties were located in Albany, Rensselaer, and Schenectady Counties. O'Connell and others located buyers for the properties with the promises of ownership of income-producing property and money back at or after closing, for necessary repairs. In order to obtain funding for the purchases, O'Connell and others caused buyers to submit fraudulent loan applications to lenders which concealed the source of the buyers' funds necessary for down payments and other associated closing costs. In some instances, O'Connell and others loaned buyers "gift" money to make the purchases and to pay closing costs. The "gift" loans, in reality, were buyer liabilities that were not disclosed in loan applications. In other instances, they merely placed money into the bank accounts of buyers to increase the likelihood that lenders would approve the loan applications, and then withdrew the funds after the loans were approved. As part of the scheme, sales contracts and other documents submitted to mortgage lenders contained forged signatures and other false statements.

O'Connell and others created and used "Assignment of Contract of Sale" agreements to disguise the purchase and resale of properties by PB Enterprises and Greater Atlantic. The agreements permitted PB Enterprises and Greater Atlantic to "assign" their contracts to buy the distressed properties to other purchasers. Frequently, the original sellers were unaware that O'Connell and others had executed such contractual assignments on their properties. O'Connell and others then assigned their contracts to the buyers they had recruited, at new and significantly higher prices.

O'Connell and others used "double HUD closings", by which they arranged for the closings for the original sellers and those for the newly-assigned buyers to be held at different times. At the original seller's closing, the HUD-1 itemized all of the fees associated with the sale of the property. The sales price reflected the lower sales amount that PB Enterprises or Greater Atlantic and the seller had agreed upon. The seller was paid the asking price, and all valid fees that were disclosed on the HUD-1 were paid. At the newly-assigned buyer's closing, the HUD-1 reflected the higher sale price. However, the forms used to record the sales of the properties, which were filed in the various county clerks' offices, did not reflect the fact that in each instance, PB Enterprises or Greater Atlantic purchased the property from a seller at a given price, and then resold that property to another buyer at a higher amount. The forms that were filed with the corresponding county clerk's offices reflected only the lower sale price, and falsely showed that the original seller sold the property to the end buyer who was assigned the contract from PB Enterprises or Greater Atlantic. No records exist at the county clerk's offices that PB Enterprises or Greater Atlantic purchased and resold the properties.

O'Connell and others also typically arranged for multiple purchases, by the same buyer, to take place close in time - often on the same day - so that subsequent lenders did not learn of the buyer's recent loans and liabilities. These additional mortgage loans held by buyers were not disclosed to the lenders at the time of the subsequent closings, and the subject loan applications were not amended to include the buyers' additional liabilities. In contrast to what was reported to lenders on the HUD-1 Settlement Statements and sales contracts associated with the loans, sellers received only the actual asking prices for properties, minus the amount used to pay off existing mortgages. After paying sellers actual asking prices and the valid fees disclosed on HUD-1s, O'Connell and others fraudulently directed the settlement agent to disburse the remaining mortgage proceeds to themselves, to buyers, and to other third parties, in manners and in amounts not disclosed on the HUD-1 documents, in the sales contracts, or in any other manner to the lenders.

Through their mortgage fraud scheme, O'Connell and others obtained excessive mortgages totaling at least $5,324,225.00, in at least 73 real estate transactions, and diverted a total of approximately $4,628,886.48 of mortgage proceeds to themselves and others. All 73 of these mortgages were subsequently placed in foreclosure, resulting in substantial losses to various financial institutions and other lenders. O'Connell admitted he laundered the fraudulent mortgage proceeds in a variety of ways, with the intent to promote the continuation of the scheme.

O'Connell agreed to forfeit criminal proceeds totaling over $4.6 million, and to pay full restitution. Chief Judge Mordue scheduled O'Connell's sentencing for March 1, 2010, at 10:30 a.m. in U.S. District Court in Albany. O'Connell faces a maximum possible sentence of twenty years of imprisonment, a fine of up to $500,000, a period of up to five years of supervised release and the legal disabilities flowing from conviction of a felony.

The case is being investigated by the Internal Revenue Service, Criminal Investigation Division, the Albany Division of the Federal Bureau of Investigation, and the United States Postal Inspection Service. It is being prosecuted by Assistant United States Attorney Joshua S. Vinciguerra.

On March 25, 2008, a Weld County grand jury indicted Strodtman (and two other individuals) for his involvement in a mortgage fraud scheme that left many Greeley, Colorado area families in foreclosure and defrauded lenders.

The Weld County District Attorney's investigation, which began in 2007 and lasted approximately one year, began with a tip from a local realtor and resulted in the first COCCA (Colorado Organized Crime Control Act) to be tried by the Weld County District Attorney's Office.

The two other individuals indicted by the Grand Jury along with Strodtman, Nelson Feliciano and Flora Carmona, both testified for the prosecution in this case.
Strodtman will be sentenced on January 5, 2010, at 1:30 p.m.

Chief Deputy District Attorney Christian Schulte and Deputy District Attorney Matt Pring represented the People of Colorado in this case.

As previously reported on Mortgage Fraud Blog, Antoine devised a scheme to defraud AmeriDream, Inc., a company that provided down payment assistance to first-time home buyers. The scheme involved Antoine posing as a mortgage loan originator, applying to Ameridream for funds on behalf of his purported clients. In some cases, Antoine used stolen identities and Social Security numbers of midlands residents to apply for the funding. Between February and September 2008, he falsely represented to Ameridream that 38 different loan closings would be taking place, causing AmeriDream to transfer approximately $328,000.00 to Antoine.

Antoine will be sentenced on March 18, 2010. He faces a maximum possible sentence of 30 years in federal prison and a fine of $500,000.00.

United States District Judge Cameron McGowan Currie accepted the guilty plea, which occurred just as jury selection was to begin.

The case was investigated by the United States Secret Service. Assistant United States Attorney Nathan S. Williams of the Columbia office is handling the case.

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According to the indictment, from October 2004 through July 2007, the defendants participated in a conspiracy to defraud involving more than 100 properties that provided profits in the millions to members of the conspiracy through the fraudulent purchase of real estate and the laundering of profits.

The indictment alleges that in furtherance of the conspiracy, the defendants and their associates recruited and controlled individuals in key positions, including straw buyers, real estate appraisers, notaries and escrow agents. The defendants encouraged straw buyers and others to purchase homes throughout Northern California by falsely promising: to pay them large sums of money and at times paying them large sums of money, that the real estate transactions were legal, that the buyers would not be responsible for the mortgage payments, and that the mortgage payments would be taken over by another person shortly after the purchase of the property.

The indictment states that the defendants directed straw buyers to sign mortgage loan applications that contained false information and false supporting documentation, and paid the straw buyers thousands of dollars in exchange for allowing the defendants to purchase property in their names. The defendants are also alleged to have hired notary publics who were willing to notarize documents by falsely attesting to having witnessed signatures on loan documents when in fact the documents were not signed in the presence of the notaries.

According to the indictment, the defendants increased their profits on the purchase of properties by submitting documents to lenders, including purchase and sale agreements that falsely inflated the purchase prices of the properties, thereby causing the lenders to unwittingly provide loans in amounts that exceeded the true purchase prices and values of the properties. Once the properties were purchased, the defendants disbursed funds from the escrow accounts into bank accounts held by the defendants. The defendants also regularly failed to make the mortgage payments on the purchased properties, causing lenders to foreclose on the properties which resulted in financial losses to the lenders and damaged the credit ratings of the buyers.

Amy Schloemann, aka Amy Kinney, was a licensed realtor and president of Hiddenbrooke Mortgage in Vallejo, Calif. She completed and caused others to complete false loan application for straw buyers and fictitious buyers. She also acted as a real estate broker for both straw buyers and fictitious buyers.

Karim Akil, aka Scott Kinney, aka Scott Kenny, was the president of Marsh Group Corporation in Oakland, Calif. He was the husband of Schloemann. Akil employed and paid co-conspirators to recruit individuals to act as straw buyers of real estate.

Schloemann and Akil held signature authority on business checking accounts in the names of Hiddenbrooke Mortgage Group, Marsh Group, the Brooke Property Management Company and Sanford and Son MTG. Schloemann and Akil used these accounts to launder the profits of the fraudulent scheme, to make deposit payments on real property purchases in the names of straw and fictitious buyers and to make payments to co-conspirators.

Michelle McGuire worked as a personal assistant for Akil. She was responsible for assisting in the completion of loan applications for straw buyers and fictitious buyers and submitting these loan applications and supporting documentation to lenders. She was paid hundreds of thousands of dollars for her involvement in the fraud scheme.

Wonda Louise Kidd was a manager and escrow officer of Financial Title Company in Castro Valley, Calif. Kidd was the escrow officer on more than 100 properties involved in this scheme, disbursing profits to Schloemann and Akil through wire transfers and checks to their various accounts.

James Ross and Darnell Thomas worked with Akil to recruit straw buyers to purchase real property. Thomas also falsified information on a loan application submitted to a lender for a property he purchased. They were each paid hundreds of thousands of dollars for their involvement.

Kashka Clay aka Mark Lane aka Michael Lewis was a real estate agent who purchased two properties using the alias, Mark Lane. Clay also authorized the use of his telephone number to falsely represent to lenders that Clay's number belonged to a certified public account.

Schloemann and McGuire were arrested on Nov. 2, 2009 and made their initial appearance in federal court in Oakland on that date. They are currently out on bond. Kidd, Clay and Ross were arraigned yesterday in Oakland federal court and were released on $100,000 bond. Thomas was arraigned today and released on $100,000 bond. Akil, who is presently serving a sentence in state custody, is scheduled to appear on Nov. 19, 2009 for arraignment. The case is assigned to District Judge Phyllis Hamilton. The defendants are scheduled to make their initial appearance before Judge Hamilton on Nov. 25, 2009 at 1:30 p.m.

Stephen G. Corrigan is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kathleen Turner. The prosecution is the result of an investigation by the FBI and IRS-Criminal Investigation with the assistance of the Alameda County District Attorney's Office.

Please note, an indictment contains only allegations against an individual and, as with all defendants, Schloemann, Akil, Kidd, McGuire, Clay, Ross and Thomas must be presumed innocent unless and until proven guilty.

According to the indictment, Preston owned and managed a real estate appraisal company known as Redding Appraisers, and provided appraisals of real and commercial real estate in Connecticut to real estate agents. On approximately October 23, 2006, Preston did knowingly and willfully make a false statement or report in a mortgage loan application submitted to IndyMac Bank, a financial institution headquartered in Pasadena, California. The false statement related to a real estate appraisal that he made, which he knew would be submitted with the mortgage loan application, on a residential property in Westport, Connecticut. The appraisal stated that the property had three habitable floors when, in fact, it had only two habitable floors. The alleged false statement allowed Preston to justify his appraisal that the property was worth $2.7 million, which corresponded with the stated value in the loan application.

If convicted of the charge, Preston faces a maximum term of imprisonment of 30 years and a fine of up to $1 million.

Preston appeared before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport and entered a plea of not guilty to the charge. Following the arraignment, Preston was released on a personal recognizance bond.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Rahul Kale.

U.S. Attorney Nora R. Dannehy stressed that an indictment is only a charge and is not evidence of guilt. The defendant is entitled to a fair trial at which it is the Government's burden to prove guilt beyond a reasonable doubt.

In July 2009, the U.S. Attorney's Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including "foreclosure rescue" schemes, and "short sale" schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

As previously reported on Mortgage Fraud Blog, Dr. Holder, a professor of nursing at Middle Tennessee State University and the former coordinator of the statewide Tennessee Board of Regents On-Line Degree Program, was originally charged in a four-count indictment in June 2008. At trial, the jury heard evidence that Dr. Holder and others helped orchestrate a multi-million dollar mortgage-fraud scheme that involved a "straw buyer" with a good credit score, who was deceived by Dr. Holder into borrowing $2.4 million for the purpose of purchasing a $1.5 million dollar home in Hendersonville, Tennessee. In the months leading up to the purchase, Dr. Holder helped prepare or send false documents that, among other things, falsely claimed that the straw buyer was president of "Team Fat Man," an automotive-sales business owned by Dr. Holder's deceased husband, and greatly inflated the straw buyer's income. Through those documents and other fraudulent misrepresentations, Dr. Holder was able to qualify the straw buyer for large loans well beyond what the straw buyer could afford. The scheme involved loans obtained at Bank of Nashville, Countrywide Home Loans, and First Tennessee Bank. After the straw buyer purchased the lavish home, Dr. Holder and her husband moved in and spent the excess loan funds on various purchases, including several pieces of diamond jewelry. When the straw buyer was unable to make the monthly mortgage payments of approximately $10,000, the mortgage defaulted and the property was foreclosed upon.

At the sentencing hearing, the government focused on the profound damage that Dr. Holder's crime caused an innocent victim and the negative effect of mortgage fraud on the banking industry and the lending process. After the sentencing, United States Attorney Edward Yarbrough remarked, "Mortgage fraud is a serious crime, and we are pleased that the Court has imposed an appropriately serious sentence in this case. The United States Attorney's Office and our law-enforcement partners will continue to investigate such frauds and bring those who commit them to justice." In addition, My Harrison, Special Agent in Charge of the FBI's Memphis Division, stated, "The FBI will continue to target those who criminally manipulate our financial system for personal gain and keep working to bring criminals like this to justice to ensure that they pay for their crimes."

The investigation of the case was conducted by the Federal Bureau of Investigation. Assistant U.S. Attorney Ty E. Howard of the Middle District of Tennessee and Trial Attorney Peter A. Frandsen of the U.S. Department of Justice Fraud Section represented the United States.

Wrolstad was sentenced to 108 months on a 34-count indictment for his involvement in the scheme.

As previously reported on the Mortgage Fraud Blog, Wrolstad's co-defendant, Russell Todd McBride, who was sentenced to 135 months yesterday, was an operator of Century Mortgage and Finance, Inc., which was in the business of providing mortgage-related services, and had offices located in Sikeston, Cape Girardeau, St. Louis County, and elsewhere. As a mortgage broker, Century Mortgage would locate and obtain prospective mortgage lenders for prospective borrowers. Employees and others associated with Century Mortgage would prepare mortgage applications and supporting documents for borrowers. Then, for a fee, Century Mortgage would find a mortgage lender to make the loan. Wrolstad worked with McBride and for Century Mortgage, providing services including assisting in closing real estate transactions and working with title companies.

The scheme, which occurred from at least July 2005 and continued through November 28, 2006, involved investors recruited by McBride and Wrolstad purchasing real estate primarily located in Sikeston, Missouri. The owners of the real estate would sell the properties at or near fair market value to investors recruited by and known to McBride and Wrolstad. However, the investors paid prices significantly greater than the actual selling price received by the sellers for the properties. The investors would purchase the property at a fraudulent and overvalued price by obtaining loans to purchase the property. As part of the scheme, McBride and Wrolstad obtained appraisals, which significantly overvalued the properties, which enabled them to personally obtain inflated loan proceeds despite having no interest in the conveyed real estate.

McBride, and in some cases, Wrolstad, represented to investors that the residential real estate properties were good investment properties, that the rents would pay the mortgage, that the properties could be acquired with "no money down," and that the properties could be sold, sometimes in approximately a year, at a profit. As part of the scheme, McBride and Wrolstad also paid monies to investors as an inducement for them to purchase residential real estate funded by loans brokered through Century Mortgage. For example, in one case a purchaser paid $66,000 for a property that the seller sold for $7,500. In another real estate transactions, the purchaser paid $54,000 for property that the seller sold for $15,000.

In many cases, purchasers of real estate secured by loans brokered by Century Mortgage did not provide closing costs or down payments to acquire the real estate. McBride and Wrolstad, and others acting on their behalf, provided the investors with the funds for the down payment and closing costs. McBride and Wrolstad also caused mortgage loan companies to send the loan proceeds by wire transfers in interstate commerce, and caused warranty deeds, deeds of trusts and other closing documents to be sent from the offices of the closing agents by commercial interstate carrier to the lenders and the Recorder of Deeds in Scott County, MO.

McBride and Wrolstad directed purchasers and closing agents to pay McBride and Wrolstad substantial sums of the mortgage loan proceeds by checks or wire transfers into their personal bank accounts or other bank accounts controlled by them.

There were approximately 341 transactions involving the sale of residential real estate located in the Eastern District of Missouri during the past six years in which McBride and Wrolstad fraudulently obtained mortgage loan proceeds causing losses to lenders and purchases of between $7 million and $20 million. Wrolstad was ordered to pay restitution exceeding $9 million to the lenders and investors defrauded and victimized by the mortgage fraud scheme.

Wrolstad was sentenced on one count of conspiracy to commit wire fraud and mail fraud, 12 counts of wire fraud and 12 counts of mail fraud. In addition, Wrolstad was sentenced on three counts of money laundering. After sentencing, the district court remanded Wrolstad to the custody of the United States Marshals to commence serving his sentence.

Acting United States Attorney Michael W. Reap  praised the Postal Inspection Service, Federal Bureau of Investigation, the Internal Revenue Service, and Assistant United States Attorney Paul W. Hahn, who handled the prosecution for the government.

"Investors need to know the market and understand realistic terms and rates of return before investing," said J.R. Ball, Assistant Inspector in Charge of the U.S. Postal Inspection Service, St Louis Field Office."Victims in these types of cases often become shortsighted and only focus on front-end promises. In this case, some victims may be holding properties that will never realize their mortgaged value."

"Buying property can potentially be a good investment," said Roland J. Corvington, Special Agent in Charge of the FBI in St. Louis. "But because of unscrupulous people like Mr. McBride and Mr. Wrolstad, investors need to do some research and verify what they are buying and not have blind trust."

The U.S. Attorney's Mortgage Fraud Task Force consists of over 70 residents of the Eastern District of Missouri involved in banking, mortgage brokerage, real estate sales, title insurance, real estate appraising, as well as federal, state, and local law enforcement, regulatory officials, and non-government organizations. Anyone wishing to report suspected mortgage fraud or participate in the work of the task force is encouraged to call the Mortgage Fraud hot line at 1-866-587-9571.

As previously reported on Mortgage Fraud Blog, in July 2003, Hidalgo forged the victim's name on a Grant Deed illegally taking title to a residence in Colton, California. The signature of the victim's husband was also forged on the Grant Deed. The husband had died approximately two years prior to the forgery. The defendant encumbered the property and subsequently sold it for $125,000.

The defendant falsified several real estate deeds and forged the signature and stamp of a notary public. The fraudulent deeds were later recorded at the San Bernardino County Recorder's Office. The issue of restitution has been reserved for an upcoming hearing. The fraud was discovered after an extensive criminal investigation conducted by Investigators from the San Bernardino County District Attorney's Real Estate Fraud Prosecution Unit.

Sassman was arrested at his residence on a total of 100 counts: 43 counts of grand theft, 40 counts of misrepresentation or omission in the sale of a security, 16 counts of first-degree burglary and 1 count of use of a device, scheme, or artifice to defraud in the sale of a security. If convicted, Sassman faces up to 52 years in prison. Sassman is being held in the Sacramento County Jail and bail has been set at $3.2 million.

Over the past decade, Sassman used four companies - InTex, LLC; Formulating Insurance Agency (FIA); Formulating Investments (FI); and Systematic Management Services (SMS)-to solicit investments ranging from approximately $10,000 to $500,000 from more than 50 individuals across Northern California and beyond.

Sassman, a licensed insurance agent, convinced investors, many of whom were senior citizens, to shift their savings from IRAs, annuities, life insurance accounts, 401(k)s and certificates of deposit to "high return" investments with his companies. These investments included foreclosed properties and real estate in Georgia, Mare Island and Vallejo, California; a strip mall in Folsom, California; commercial property in El Dorado Hills, California; the production of a laptop computer stand called the "Notefloat" and annuity, stock and foreign currency investments.

However, Sassman made few, if any, of these investments and rarely paid the double to triple digit returns he promised. Instead, Sassman spent investors' millions financing his lavish lifestyle, including $1.1 million on his American Express card, $300,000 on automobiles, $75,000 at Polo Ralph Lauren and three homes.

The limited funds Sassman invested were channeled into other illegal operations including a "stock trading program" run by a group indicted in federal court earlier this year for running a Ponzi scheme and a European investment scam that promised a 200 percent profit in 45 days or 800 percent annually.

As Sassman burned through investor funds, he paid returns to early investors by using funds from new ones. Investors are still owed close to $4.4 million, and additional losses could reach $3 million.

In September 2009, Sassman and his companies filed for bankruptcy.

Some of Sassman's Victims

In January 2007, a Sacramento couple invested more than $80,000 with Sassman's company SMS to be invested into real estate and to earn interest. Sassman informed the couple that their money had been used to purchase property, which was undergoing renovation. The couple was unaware that their entire investment had been used to pay other investors.

In October 2004, a Sacramento resident invested more than $250,000 in FIA. Sassman promised her a seven percent annual return. Her money was combined with money from other investors for a total of more than $700,000. Of that money, approximately $400,000 was spent on Sassman's personal expenses, more than $50,000 went to Sassman's wife, and more than $34,000 was paid in returns to other investors. The victim lost $170,000 of her investment.

In late 2005, Sassman promised a Rancho Cordova woman that if she closed her $78,000 life insurance policy and invested the funds with him, she would receive an 8 percent return on her investment. In early 2009, the victim was diagnosed with cancer and her son took over her finances. Her son contacted Sassman and requested $7,000 from his mother's investment to help pay for her medical expenses. Sassman promised to send a check, which never arrived. Soon after, the victim's son contacted Sassman and asked him to return the entire balance of the $78,000 investment. Sassman sent a check for $14,000 that bounced. The victim's investment was never returned.

Sacramento-Attorney General Edmund G. Brown Jr. announced the arrest.

"William Arthur Sassman solicited millions of dollars from California investors with promises of high returns on business and real estate investments," Brown said. "In reality, Sassman looted their savings to prop up a Ponzi scheme, so he could buy homes and Ferraris."