Mastermind Of Massive Ponzi Scheme Pleads Guilty To 18 Felonies
SAN FRANCISCO - William J. Wise pleaded guilty in federal court in San Francisco yesterday to one count of conspiracy to commit mail and wire fraud, twelve counts of mail fraud, three counts of wire fraud, one count of money laundering and one count of tax evasion, Melinda Haag, United States Attorney for the Northern District of California, and Thomas G. Walker, United States Attorney for the Eastern District of North Carolina, announced.
In pleading guilty to the conspiracy and fraud charges, Wise admitted to running a scheme to defraud more than 1200 investors by selling fraudulent certificates of deposit (CDs). The CDs were issued by three different entities – Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust – all of which Wise controlled with a co-defendant allegedly acting as his co-conspirator and right-hand person in running the scheme. The fraudulent CDs promised guaranteed rates of return that Wise admitted he and his co-defendant (and others working at their direction) falsely claimed were generated by profitable overseas investments. Wise admitted that he and his co-defendant knew that they were operating a Ponzi scheme, through which earlier investors’ guaranteed interest payments consisted of later investors’ funds. Wise also admitted that for the year 2008, he owed more than $1 million in taxes to the United States based on his earnings from the Ponzi scheme, and that he evaded that tax by various means – including by making interest payments on a private jet and paying for construction and furnishings on a large personal property in St. Vincent and the Grenadines.
The Ponzi scheme ran from 1999 to late March 2009. Wise admitted that, from January 2004 to March 2009 alone, he and his co-defendant sold more than $129.5 million worth of bogus CDs to investors, causing those investors to suffer actual losses of more than $75 million.
“The United States Attorneys around the country have identified an unprecedented rise in investment fraud schemes, involving thousands of victims and staggering losses,” said U.S. Attorney Melinda Haag. “The fraudsters prey upon vulnerable victims, do not respect local or even state boundaries, and often loot the victims’ life savings. This case is an example of U.S. Attorneys working together – from the Northern District of California to the Eastern District of North Carolina – to identify the schemes, find the perpetrators and bring them to justice.”
“This case demonstrates the commitment of each and every United States Attorney to prosecute the individuals who attempt to use economic crimes for their personal gain,” stated Thomas G. Walker, U.S. Attorney for the Eastern District of North Carolina. “The individuals who commit these crimes have no regard for the well-being of their victims – only the desire to make a quick buck. United States Attorney’s offices, along with federal, state and local law enforcement officials, work diligently each and every day to see that those who commit these crimes are the ones who pay.”
The criminal charges against Wise and his co-defendant followed a civil suit filed by the Securities and Exchange Commission in U.S. District Court in Texas. As part of his guilty plea, Wise agreed to work with the government and the Receiver appointed by the Texas District Court to obtain control over any remaining investor funds in bank accounts in the United States or in foreign countries.
The Sterling Bank and Trust referred to in the indictment and plea agreement is not affiliated with the Sterling Bank & Trust headquartered in Southfield, Michigan, with thirteen branches in the San Francisco Bay Area.
Wise, 62, formerly of Raleigh, N.C., and his co-defendant were indicted by a federal Grand Jury on February 21, 2012. Wise was charged with one count of conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 1349; twelve counts of mail fraud, in violation of 18 U.S.C. § 1341; three counts of wire fraud, in violation of 18 U.S.C. § 1343; one count of money laundering, in violation of 18 U.S.C. § 1957; and one count of tax evasion, in violation of 26 U.S.C. § 7201. Under the plea agreement, Wise pled guilty to all counts. His co-defendant was charged with the sixteen conspiracy and fraud counts, as well as four counts of filing false tax returns, one count of obstruction, and one count of making false statements.
Wise has been in custody since April 16, 2012, when he voluntarily came to San Francisco from his native Canada to face the charges. The sentencing of Wise is scheduled for March 13, 2013, before Judge Edward M. Chen in San Francisco. The maximum statutory penalty for each conspiracy and fraud count, in violation of 18 U.S.C. §§ 1341, 1343, and 1349, is 20 years’ imprisonment and a fine of $250,000 or twice the gross gain or loss (whichever is greater). The maximum statutory penalty for money laundering, in violation of 18 U.S.C. § 1957, is 10 years’ imprisonment and a fine of $250,000 or twice the amount involved in the transaction (whichever is greater). The maximum statutory penalty for tax evasion, in violation of 26 U.S.C. § 7201, is 5 years’ imprisonment and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
This prosecution is the result of a joint investigation by the United States Attorney’s Office for the Northern District of California and the United States Attorney’s Office for the Eastern District of North Carolina. In San Francisco, Tracie L. Brown is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Rayneisha Booth and Beth Margen. In Raleigh, North Carolina, Evan Rikhye is the Assistant U.S. Attorney who is prosecuting the case. The prosecution is the result of a lengthy investigation by the IRS-Criminal Investigations Division.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The United States Attorneys are launching an Investor Fraud Initiative and hosting regional Investor Fraud Summits during the first two weeks of October in Walnut Creek, Calif.; Denver, Colo.; Nashville, Tenn.; Miami, Fla.; Cleveland, Ohio; and Stamford, Conn. The Walnut Creek summit will take place on Oct. 9, 2012. The primary goal of the Investor Fraud Initiative is to raise public awareness about investor fraud by identifying the types of schemes and schemers prosecuted by the Justice Department, educating investors on ways to protect themselves from becoming victims of fraud, and encouraging individuals to report suspicious activity. Conference participants include all four U.S. Attorneys in California, U.S. Attorneys from Oregon, Washington, Arizona, Hawaii, Alaska, and Texas, and senior officials from the Department of Justice, SEC, FBI and other financial fraud enforcement and regulatory agencies.