Michael Swanson, 62, Seaside, California, was convicted by a federal jury on charges of mail fraud, wire fraud, securities fraud, and conspiracy to commit mail and wire fraud.
According to the evidence at trial, Swanson was a partner in the management of an investment company called APS Funding, Inc. APS engaged in the business of offering short-term, high-interest loans, also known as hard money lending, for business and real estate development purposes. The three APS partners, including Swanson, established several investment funds under the APS umbrella, including GCF Investment, L.L.C. and the Greenlight Fund.
The partners recruited investors to purchase shares in these funds and assured investors that their investments would be used to fund the loans. According to the evidence at trial, however, the partners attracted few borrowers and made few hard money loans with the invested funds, but instead diverted investor money to pay for the partners’ personal expenses. From 2007 to 2009 APS received more than $5 million from investors, over 90% of which was diverted to the partners for their personal use.
Swanson was convicted of one count of Conspiracy to Commit Mail and Wire Fraud in violation of Title 18, United States Code, Section 1349, twelve counts of Mail Fraud, in violation of Title 18, United States Code, Section 1341, fourteen counts of Wire Fraud, in violation of Title 18, United States Code, Section 1343, and one count of Securities Fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Sections 240.10b-5 and 240.10b5-2. Swanson was acquitted of one count of mail fraud and one count of securities fraud. He is scheduled to be sentenced on December 18, 2013, before the Honorable Lucy H. Koh, U.S. District Judge. Beth Pina, one of Swanson’s partners, pleaded guilty on December 17, 2012, and is scheduled to be sentenced on March 14, 2014.
The maximum penalty for each count of Conspiracy to Commit Mail and Wire Fraud in violation of Title 18, United States Code, Section 1349, and for the substantive Mail and Wire Fraud counts, is 20 years imprisonment and a fine of $250,000 fine, or twice the gross gain or gross loss from the offense, plus restitution. The maximum penalty for each count of Securities Fraud in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Sections 240.10b-5 and 240.10b5-2, is 20 years imprisonment and a fine of $5,000,000 fine, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
United States Attorney Melinda Haag announced the conviction.
Jeff Schenk and Amber Rosen are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Nina Burney. The prosecution is the result of an investigation by the Federal Bureau of Investigation, Securities and Exchange Commission, and the Monterey County District Attorney’s Office.
The RE industry is rife with thugs and fraudsters. Let this be just one warning to them.