West Covina Man Pleads Guilty in Ponzi Scheme Based on Bogus Investments in Latex Gloves After 9/11 Attacks

February 5, 2010 - A West Covina man has pleaded guilty to federal mail fraud charges for running a Ponzi scheme that took nearly $700,000 from victims who thought they were investing in latex gloves, which were portrayed as being in high demand following the 9/11 terrorist attacks.

Miguel Salazar, 36, pleaded guilty late yesterday to one count of mail fraud before United States District Judge Manuel Real.

Salazar's former partner, Carlos Flores, 43, of Lakewood, pleaded guilty to mail fraud in December.

Salazar and Flores operated SF Capital, which had mail drops in Alhambra and Glendale, and was described to investors as being in the business of factoring accounts receivable for latex gloves. Investors in SF Capital were typically told that the terrorist attacks of 9/11, concerns about infectious diseases, and other global issues had resulted in an extraordinarily high demand for latex gloves and that this enormous demand provided a secure investment vehicle for individuals and institutions. SF Capital investors were typically promised quarterly returns of 5 percent.

Between 2002 and 2006, more than 30 individuals invested more than $1.3 million with SF Capital. Many individuals renewed or increased their investments after receiving payments from SF Capital that appeared to be interest or dividend payments. However, SF Capital was not in the business of financing accounts receivable and the purported investment returns paid to investors were Ponzi payments that came from other investors. Flores and Salazar also used proceeds from the scheme for their personal benefit. For example, Salazar used investor money to pay more than $140,000 for luxury dugout seats at Dodger Stadium.

As a result of the scheme, victims lost nearly $700,000.

Salazar is scheduled to be sentenced by Judge Real on May 3. Flores is scheduled to be sentenced on February 22. Both men face statutory maximum sentences of 20 years in federal prison.

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