Plea Agreement Reached in Wetzel County Ponzi Scheme
WHEELING Federal prosecutors and the owner of the now-defunct Budget Finance Co. have reached a plea agreement connected to what U.S. Attorney for the Southern District of Ohio Benjamin Glassman described as a “classic Ponzi scheme” that cost investors anywhere between $9.5 million and $25 million.
During a press conference at the Federal Building in Wheeling, officials announced Donna Brown of Clarington has agreed to plead guilty to charges of wire fraud, mail fraud and money laundering. On each count, Brown faces a maximum of 20 years in prison, a $250,000 fine, three years of supervised release and restitution to criminal victims.
The federal investigation was launched after Budget Finance closed its New Martinsville office suddenly in November 2015.
Glassman said the U.S. Attorney’s office for the Northern District of West Virginia was not involved in the investigation because one of its employees was a victim in the case.
Between 2005 and 2015, Brown’s business allegedly opened nearly 800 investment accounts with the guarantee of annual returns for investors between 8-12 percent. An investigation by Glassman’s office, the FBI, the Internal Revenue Service, West Virginia Attorney General Patrick Morrisey’s office and numerous other agencies found that Brown’s company held no substantial investments to generate such returns, and instead used funds from subsequent investors to pay prior ones.
Brown also allegedly mailed fraudulent quarterly investment statements to clients, as well as IRS 1099 forms, which she did not submit to the IRS.
The plea agreement estimated losses between $9.5 and $25 million. According to Anthony Martin, Senior Deputy Attorney General for the State of West Virginia, some individuals invested up to $500,000 with Brown’s business. The plea agreement said 25 or more victims experienced serious financial hardship.
Brown, who has not yet officially entered her plea, made an initial appearance in federal court today in Wheeling before Senior U.S. District Judge Frederick Stamp. Her case will continue under Stamp, who will make the final decision as to Brown’s penalty, including her likely responsibility to pay back those affected.
Glassman said if restitution is deemed necessary by the court, his office will be responsible for accessing Brown’s assets and enforcing repayment. He said Brown may “not 100 percent” have the needed funds to restore investors’ losses. He referenced Brown’s actions, using new investor payments to appease prior clients, as a system that ensured some received their money.
“But certainly Ms. Brown is on the hook,” Glassman said.
Wetzel County Prosecuting Attorney Timothy Haught gave the following statement:
“I am thankful for the cooperation of the Department of Justice in the investigation and prosecution of this case and hope that justice will be served in this case. I am disappointed and extremely saddened by the fact that there appears to be few, if any, unsecured assets to recover for the victims of this case, many of whom were senior citizens who lost their life savings. These accounts were not insured by FDIC and it appears that almost all of the money that Ms. Brown was taking in was being sent out to cover payments to other investors. The enormity of this Ponzi scheme is shocking. My thoughts and prayers go out to the people who lost their investments. I urge people to only invest with licensed brokers and to be extremely cautious about promises of ridiculous rates of return like those offered in this case. If it sounds too good to be true, it is. Going forward the West Virginia Legislature needs to act to address the investigation and regulation of businesses such as this and develop a more efficient system for detecting this type of fraud. I hope that I never witness a fraud of this magnitude again.”
Notably, Haught also received a certificate from the United States Department of Justice, Federal Bureau of Investigation, recognizing him for his cooperation and assistance with assisting victims in the Budget Finance Company investigation.