Orange County Man Pleads Guilty to Ponzi-style Investment Fraud Scheme
LOS ANGELES – An Orange County man pleaded guilty today in federal court to conducting a Ponzi-style investment fraud scheme that caused approximately 28 victims to suffer a total loss of approximately $2.7 million.
Timothy Melvin Murphy, 70, of Orange, pled guilty to a single count of mail fraud, in violation of Title 18, United States Code, Section 1341. Murphy is a retired Colonel in the California Army National Guard who previously served as the Commanding Officer of the Guard’s base in Los Alamitos, California.
At his change of plea hearing, Murphy admitted that he devised and executed a scheme to obtain money from certain of his clients by means of material false promises. Murphy admitted that he executed the scheme through his business, Capital Investors, Inc., which he operated out of Orange, California.
Murphy admitted that, in furtherance of his scheme, he offered fraudulent investment opportunities to certain of his clients, and that he created and used a variety of false documents to execute the scheme. The investigation revealed that, in presenting the bogus investment opportunities, Murphy falsely represented that certain clients’ funds would be invested as promised and would generate substantial rates of return, which, in some cases, he falsely portrayed as “guaranteed” rates of return. Murphy created false account statements to mislead his clients into thinking that their money was properly invested and generating the promised income. In fact, as he admitted today, Murphy did not use the clients’ investment funds as he promised he would, and the government estimates that Murphy’s victims suffered losses in the amount of approximately $2.7 million.
The charge of mail fraud carries a statutory maximum sentence of 20 years in federal prison; a fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greatest; and 3 years supervised release. In addition, Murphy will be required to pay restitution to the victims of his fraud scheme.
Murphy is expected to be sentenced in this case on June 25, 2012 before United States District Court Judge David O. Carter.
The case against Murphy was investigated by the Federal Bureau of Investigation.
Release No. 12-043
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