Leader of $17 Million Investment Fraud Scheme Pleads Guilty to Mail Fraud and Money Laundering Conspiracy
Co-Defendant Pleads Guilty to Tax Fraud in “Scheme that Seemed Too Good to Be True”
Baltimore, Maryland - Joseph Poteat, age 61, of Danville, Virginia, pleaded guilty today to conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with a fraudulent investment scheme, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Co-defendant Marie Bellamy, age 70, of Baltimore, also pleaded guilty today to filing a false tax return.
United States Attorney Rod J. Rosenstein said, “Schemes that seem too good to be true usually are not true, and promoters who guarantee returns based on mysterious investments often are just old-fashioned con artists. Joseph Poteat kept up appearances for a few years by using the investments of new victims to pay off earlier victims. In the end, however, he could not pay guaranteed returns when he wasn’t investing enough of the proceeds to earn the required income.”
Acting Special Agent in Charge Don Fort, IRS Criminal Investigation stated, "The IRS aggressively investigates abusive tax schemes in order to maintain public confidence in the fairness of the tax laws. Laundering untaxed dollars unfairly shifts the tax burden to all honest taxpaying citizens."
According to the plea agreement, Poteat controlled a “private membership organization” known as the CEP Group, and JLR Development, Ltd., both of which operated out of Danville, Virginia. Poteat represented to potential investors that JLR was an entity that invested in offshore ventures. In order to invest in JLR, individuals had to first join CEP by paying a membership fee of $80.
Poteat and others recruited individuals from throughout the United States to join CEP, making misleading representations to the investors as to how their investment in JLR would work and the amount of guaranteed return. Poteat would send the investors monthly and quarterly statements containing false information about the returns the investors were earning. Poteat also encouraged investors to become “mentors” in JLR’s program and recruit others to become investors in CEP and JLR. As a mentor, an investor was supposedly entitled to receive a percentage of the earnings of the investors they recruited. Bellamy participated in CEP and JLR, and was listed as a “mentor” on numerous other investors’ accounts with CEP and/or JLR. As a mentor, Bellamy was supposedly entitled to receive a percentage of the earnings of investors she brought into JLR’s program.
Between 1999 and 2001, Poteat and his coconspirators collected approximately
$17 million in investments from investors in JLR and from members in CEP, according to the indictment, but failed to make the investments they promised. In order to lull investors into believing that their investments were earning returns, Poteat and his coconspirators made several million dollars in payments to investors by providing them with funds invested by later investors. Between 1999 and 2001, Poteat engaged in a series of financial transactions through which he and/or family members received approximately $700,000 in CEP member and JLR investor funds.
During that same time frame, Poteat made periodic transfers of funds from JLR and/or CEP’s bank account to bank accounts controlled by Marie Bellamy. Bellamy acknowledges that she willfully failed to report at least some of the funds from JLR as income on her tax returns for tax years 1999 and 2000, and that she did not file a federal income tax return for tax year 2001. In this way, Bellamy evaded the payment of federal income tax due on those funds for those tax years.
Ultimately, Poteat and his coconspirators caused the investors to lose more than $7 million.
Poteat faces a maximum penalty of 20 years in prison followed by 5 years of supervised release and a $500,000 fine on the money laundering conspiracy and 5 years in prison, followed by 3 years of supervised release and a $250,000 fine on the mail fraud conspiracy. Bellamy faces a maximum penalty of three years in prison, followed by one year of supervised release and a $100,000 fine for filing a false tax return. U.S. District Judge William M. Nickerson has scheduled sentencing for both defendants on March 27, 2008, with Poteat being sentenced at 10:00 a.m. and Bellamy at 11:00 a.m.
United States Attorney Rod J. Rosenstein praised the Internal Revenue Service - Criminal Investigation for their investigative work. Mr. Rosenstein thanked Assistant U.S. Attorneys A. David Copperthite and Jonathan Biran, who are prosecuting the case.