Wednesday, August 11, 2010

California Man Pleads Guilty to Central Illinois Ponzi Fraud Scheme

$15 Million Estimated Investor Losses

PEORIA, IL—A La Jolla, California man, William Huber, 61, appeared this afternoon in federal court in Peoria, where he waived indictment and pled guilty to an information charging him with operating a multi-million dollar Ponzi fraud scheme for more than a decade in the Decatur area. During today’s hearing, before U.S. District Judge Joe Billy McDade, Huber entered guilty pleas to the charges as filed in the information, that from 1998 through 2009, he defrauded approximately 300 investors of an estimated $15 million.

“This defendant took criminal advantage of some decent people,” said U.S. Attorney Jim Lewis, Central District of Illinois. “As a result of the excellent work by the investigative agencies, we now have a plea that should hold the defendant accountable and begin to set it right.”

“William Huber lured investors into his scheme by touting his trading prowess,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “He fabricated his investment returns to collect performance fees he never earned in order to support his lavish lifestyle.”

“The Internal Revenue Service, Criminal Investigation Division, follows the money trail,” said Lucy Cruz, Acting Special Agent in Charge, IRS CID, Chicago Field Office. “In Ponzi schemes, a critical element of the investigation is the ability to track the money.” According to the information, Huber was responsible for all aspects of Hubadex, Inc., an Illinois corporation with its main office in Forsyth, Illinois. Hubadex represented that it served as the general partner for two pooled investment funds, The Quarter Funds, L.P. and The Symmetry Fund, L.P., and for an investment club known as The Trimester Fund.

Huber admitted that he did not invest clients’ funds as represented; rather, he engaged in a Ponzi-type scheme whereby clients who requested redemption, based on the falsely-inflated position of their investments, were paid with funds invested by other clients. Huber mailed to investors monthly account statements and “Performance Update and Commentary” that grossly inflated and substantially misrepresented the amount of assets managed and the amount of returns. Huber also sent emails to investors falsely reassuring them as to the safety of their investments and his own honesty. Huber invested funds for friends and acquaintances and obtained new investors by deceiving existing investors as to the success of their investments.

Huber admitted that he diverted client funds to support a lavish lifestyle, paying personal expenses for himself and others. These expenses included mortgage payments and remodeling expenses for residences in La Jolla, California, and Naples, Florida; a $197,000 down payment for another’s residence; and, more than $331,000 in life insurance policy premiums.

Further, Huber admitted that he provided false and fraudulent information to the Securities and Exchange Commission. Among other lies, Huber admitted that in September 2009, he claimed that he and Hubadex managed more than $40 million in investor funds when, in fact, Huber and Hubadex managed approximately $3 million.

On Sept. 29, 2009, the U.S. Securities and Exchange Commission sought and obtained a civil injunction in the Northern District of Illinois that ordered Huber to cease his fraudulent actions, stop making misrepresentations to investors and freezing his assets. Further, the federal court appointed a receiver over Huber, Hubadex and the funds to marshal and preserve investor assets.

Stu McArthur, Special Agent in Charge of the FBI Springfield Division, said, “Mr. Huber deceived nearly 300 customers in order to selfishly support a lavish lifestyle in Florida and California. The FBI is committed to stopping this and other Ponzi-type schemes, and bringing those responsible to justice.”

“Investors need to know the market and understand realistic terms and rates of return before investing,” said J.R. Ball, Assistant Inspector in Charge of the U.S. Postal Inspection Service St. Louis Field Office. “Victims in these types of cases often become shortsighted and only focus on front-end promises.”

Agencies conducting the investigation include the U.S. Securities and Exchange Commission; Internal Revenue Service - Criminal Investigation; the U.S. Postal Inspection Service; and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Darilynn J. Knauss.

Sentencing has been scheduled on Dec. 10, 2010. For the offenses of mail fraud and money laundering, each carries a maximum statutory penalty of 20 years in prison; for engaging in a prohibited monetary transaction, the statutory penalty is up to 10 years in prison. The defendant may also be ordered to pay restitution to victims of the offenses.

No comments: