Ringleader Sentenced to 25 Years for Fraud

Milton Retana, 46, Huntington Park, California, a man who preyed on Spanish-speaking investors with promises of hefty returns during the real estate bubble was sentenced to 25 years in federal prison for bilking approximately 2,300 victims who suffered losses of approximately $33 milion.  Retana was sentenced by United States District Judge R. Gary Klausner.

Retana was found guilty in January 2010 of six counts of mail fraud and one count of making false statements to government agents who were investigating the case. The guilty verdicts followed a week-long trial in which jurors deliberated for less than an hour. Dozens of victims were in court to hear the announcement of the guilty verdicts, and approximately 40 victims were present at today’s sentencing hearing.

Retana began soliciting investors in 2006 through his company, Best Diamond Funding, by telling them that their money would be used to buy and sell real estate. Best Diamond Funding solicited money through advertisements in Spanish-language magazines, on the Internet, and during weekly investment seminars at locations across Los Angeles. The raucous investment seminars often had as many as 300 potential investors and incorporated religious messages. Retana guaranteed returns as high as 84 percent each year, claiming that he would purchase properties in bulk at below-market prices and immediately sell them for a profit. However, records obtained by federal investigators showed that Retana used only a tiny fraction of the victims’ money to purchase real estate and that his company was actually losing money.

Retana began Best Diamond Funding with a single office in Huntington Park, California, but he quickly expanded his scheme to branch offices in Palmdale, North Hollywood, San Fernando and Cathedral City, California. Retana was the undisputed leader of the scheme and participated in nearly every aspect of the fraud, including meeting with victims to convince them to invest with Best Diamond Funding, speaking at the investment seminars where he lied about how investors’ money would be used, and putting out advertisements that touted impossible rates of return.

“All the while, [Retana] knew that Best Diamond was a lie – there were no profits, and [Retana] was simply using money from new investors to pay previous investors,” prosecutors wrote in their sentencing papers.

During the trial, several victims testified that they mortgaged their homes and drained their retirement accounts because they believed Retana‘s promises that their investments were safe. In the sentencing papers, prosecutors pointed out that Retana told people who attended his investment seminars that they would be foolish to use their money for retirement, insurance or paying down their mortgage, rather than investing with Best Diamond.

The victims who testified at trial were largely from working-class families in East Los Angeles, and they included a stone mason, a long-haul truck driver, and a roofer who was also a pastor at his local church. Approximately 870 victims sent letters to Judge Klausner in relation to the sentencing, and 10 of those victims spoke in court today. During the course of the scheme, Retana collected about $62 million from approximately 2,300 victims who suffered actual loses of about $33 million.

Retana‘s scheme was almost uncovered in the summer of 2008, when the California Department of Real Estate audited his company. But Retana stymied that investigation by ordering his employees to hide all of the investor files at the back of his wife’s religious bookstore. Best Diamond Funding was put out of business in October 2008, when federal agents from the United States Postal Inspection Service and the Federal Bureau of Investigation executed search warrants on its offices and the bookstore. During those searches, agents found $800,000 in cash stashed in Retana‘s desk, as well as another $3.2 million in cash hidden in the back of the bookstore. The FBI also seized another $8 million from Retana‘s bank accounts.

This case is the result of an investigation by the United States Postal Inspection Service and the Federal Bureau of Investigation.