Sentence in Fake Borrower Ponzi Scheme

Rachel Dollar —  October 7, 2015 — Leave a comment

Paul Sloane Davis, 76, Santa Rosa, California, was sentenced to 36 months in prison and ordered to pay $1.7 million in restitution, for a Ponzi scheme he perpetrated along with co-defendant Diane Cobb, 58, currently a resident of the State of Ohio.  The sentencing follows a guilty plea in which Davis admitted to running a fraudulent scheme.  Court documents establish that Davis and Cobb profited by more than a million dollars.

Davis was charged by indictment on October 31, 2013, for his part in the scheme.  According to the indictment, Davis and Cobb operated a financial services company in Marin County known as DM Financial.  Through DM Financial, Davis and Cobb offered investors the opportunity to fund purported short-term “bridge loans” to borrowers who, according to Davis and Cobb, needed short-term financing for residential real estate transactions.  The defendants fraudulently provided to these investors, among other things, the identity of the purported borrower, a promissory note reflecting the amount and terms of the loan, and a deed of trust securing the loan to the borrower’s real property.  Based upon these documents and other representations made by Davis and Cobb, the investors believed the defendants were directing the funds into secured loans with borrowers.

Purported borrowers received none of the investors’ money and did not even know that their identities were being used to solicit investments.  Instead, Davis and Cobb diverted substantially all the money—approximately $2.4 million—for their own personal use or to make interest payments to prior investors to keep them from discovering the true nature of the scheme.

Davis was charged with one count of conspiracy, in violation of 18 U.S.C. § 1349; four counts of mail fraud, in violation of 18 U.S.C. § 1341; and nine counts of wire fraud, in violation of 18 U.S.C. § 1343.  On March 19, 2015, Davis pleaded guilty to all counts.

The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge.  Judge Breyer also sentenced the defendant to a three year period of supervised release, and ordered restitution of approximately $1.7 million to the victims of Davis’s offense.  Cobb pleaded guilty to the same charges on July 2, 2014, and is scheduled to be sentenced on January 13, 2016, before Judge Breyer.

The sentence was announced by acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation, Special Agent in Charge David J. Johnson.  Assistant U.S. Attorney Benjamin Kingsley is prosecuting the case with the assistance of Jessica Meegan. The prosecution is the result of an investigation by the Federal Bureau of Investigation.



Rachel Dollar

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