Ann Scarborough, 66, Hopkinsville, Kentucky was sentenced on September 30, 2011, to serve 72 months in prison for her role in a real estate investment scam.
The sentence follows her conviction by a federal jury in October 2010 on seven counts of wire fraud and one count of money laundering for her role in a multi-million-dollar investment scam. In imposing the sentence, U.S. District Judge William J. Haynes also ordered that the prison term be followed by three years of supervised release, two of which must be spent in a halfway house, and also ordered that Scarborough be immediately remanded to the custody of the U.S. Marshal while awaiting transfer to the Bureau of Prisons.
At the October 2010 trial, the jury heard extensive evidence related to the three-year investment scam that defrauded victims in both Kentucky and Tennessee. According to the evidence, four defendants ““ Sheila Kennedy, her husband Kenneth Kennedy, Ann Scarborough, and Philip Russell perpetrated the scam from April 2005 to into mid 2008.
As previously reported by Mortgage Fraud Blog, Sheila Kennedy, who has already been sentenced, purported to be a real estate guru who could obtain huge returns on properties to be developed. She enlisted Ann Scarborough, a personal friend from Kentucky, and later, Russell, a financial advisor in Brentwood, Tennessee, to solicit investors for these projects. Victims were told of projects involving strip malls in Las Vegas, a Disney theme park in Middle Tennessee, a medical center in Arizona, and new land for the Bonnaroo music festival, among many others. In each case, investors received a “promissory note,” guaranteeing their initial investment and promising them five or more times their money in just a few months. According to financial records and testimony by law enforcement agents, however, none of the purported real estate deals ever existed. Instead, the investor money was misappropriated for the benefit of Sheila and Kenneth Kennedy, Scarborough, and Russell.
When the promissory notes came due, Sheila Kennedy, Scarborough, Russell, and Kenneth Kennedy offered investors various excuses, including that the money was “tied up” because of IRS problems, the Patriot Act, and banking regulations stemming from the terrorist attacks on September 11, 2001. Later, investors were assured that they would be paid from a purported billion-dollar inheritance that Sheila Kennedy was to receive from a distant relative. As told to different victims with varying details, this inheritance was from a step-grandfather from Russia who fled to the United States shortly before the Bolshevik revolution.
According to the defendants, the inheritance had been tied up in the courts and with the Office of Comptroller of Currency for years. As the scheme progressed, Kenneth Kennedy and Ann Scarborough solicited some investors specifically for the purpose of obtaining this purported inheritance, claiming that more money was needed to get the inheritance “released” or to pay related expenses. On cross examination, however, both Scarborough and Kenneth Kennedy admitted they had never seen a single document related to this inheritance.
At sentencing, the Court found that the defendants’ scheme caused nearly $3 million in losses to over 50 victims. In addition to imposing the prison sentence, the Court also ordered Scarborough to pay restitution to the victims.
The case was investigated by agents with the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation, and the United States Postal Inspection Service. The United States was represented by Assistant U.S. Attorneys Ty Howard and Sandra Moses.
Jerry E. Martin, U.S. Attorney for the Middle District of Tennessee, announced the sentence.
“This is a significant sentence for a significant crime,” said U.S. Attorney Jerry Martin. “White collar criminals who defraud victims pose a continuing threat to Middle Tennessee citizens. The U.S. Attorney’s Office and its law enforcement partners will continue to investigate and prosecute those who commit these type of crimes.”