Baltimore Man Sentenced to over 15 Years in Investment Fraud Scheme
Received $8 Million from Over 900 Investors, Including Hurricane Katrina Victims
Baltimore, Maryland - U.S. District Judge Richard D. Bennett sentenced David McDowell Robinson, age 56, of Baltimore, today to 188 months in prison followed by five years of supervised release for 27 counts of wire and mail fraud arising from a fraudulent investment scheme involving over 900 investors throughout the country, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Bennett also ordered Robinson to pay more than $3.063 million in restitution.
U.S. Attorney Rod J. Rosenstein said, "David Robinson’s sentence is one of the longest imposed in Maryland in a white collar crime case and sends a message that law enforcement will not tolerate criminals who prey on the trust of others. This case demonstrates how important it is for people to be cautious about investment proposals that sound too good to be true. David Robinson perpetrated an $8 million Ponzi scheme that victimized innocent investors, including Hurricane Katrina victims who were induced to invest their money in a worthless venture."
According to the 27-count indictment to which Robinson pleaded guilty as modified in court, Robinson was the sole shareholder, president and chief executive officer of Liberty Trade International, Inc. (LTI). LTI solicited investors throughout the country by e-mail, voice-mail, public meetings and word of mouth, offering three investment options: invest $2,500 at a 20% rate of return over 60 days; invest $5,000 at a 25% rate over 90 days; or invest $10,000 at a 30% rate over 120 days.
LTI accepted investments from September 2004 to March 2006, receiving over $8 million in funds from over 900 investors. Robinson falsely represented to investors that LTI would provide short-term financing to home buyers or persons refinancing their homes to generate the returns necessary to pay the promised rates of interest; that these loans would all be secured; and that a separate reserve account owned by LTI would be established to ensure timely repayments and interest to investors. None of these representations were true. Robinson extended only around $300,000 in loans to individuals who were personal acquaintances, none of which were capable of generating sufficient returns to pay the amounts he had promised investors, and most of which carried little or no security.
Rather than use funds generated by loans or real estate transactions to pay the rates of return promised to its investors by LTI, Robinson instead used funds received by LTI’s own investors to pay the promised rates of return. Between September 2004 and March 2006, LTI made payments to its investors totaling almost $3.6 million, all of which was derived from principal invested by other LTI investors.
Starting in November 2005, LTI began to run short of funds to pay the returns owed to its investors. In January 2006, as part of a search for new investors, Robinson dispatched an LTI employee to Gulfport, Mississippi to make a presentation about LTI. Many of those attending the presentation were victims of Hurricane Katrina in September 2005. LTI received about $80,000 in investments from residents of the Mississippi Gulf Coast area as a result of that presentation.
The Securities Division of the Maryland Attorney General’s Office began an investigation of Robinson and LTI in February 2006. As a result of litigation commenced by the Securities Division, LTI’s assets were placed under the control of a court-appointed receiver on March 26, 2006. The court-appointed receiver found that LTI owed its investors about $7.082 million, and that LTI’s obligations to its investors were continuing to accrue at a rate of over $600,000 a month. In contrast, LTI’s assets consisted of approximately $1.4 million in its bank accounts, approximately $300,000 in outstanding personal and business loans of varying degrees of collectibility; and ownership interests in real estate located in Georgia and North Carolina that were worth substantially less than the approximately $2 million expended to acquire them. Robinson is alleged to have expended over $600,000 in investors’ funds received by LTI on personal items; presents for a family member and female friends, including a mink coat for a woman with whom Robinson was romantically involved; and leases of luxury automobiles.
United States Attorney Rod J. Rosenstein praised the Securities Division of the Maryland State Attorney General’s Office and the Federal Bureau of Investigation for their investigative work in this matter. Mr. Rosenstein thanked Assistant U.S. Attorney Jefferson M. Gray and Special Assistant U.S. Attorney Lori Leonovicz, who prosecuted the case.