Leader of $17 Million Investment Fraud Scheme Sentenced to over 3 Years for Mail Fraud and Money Laundering Conspiracy
Baltimore, Maryland - U.S. District Judge William M. Nickerson sentenced Joseph Poteat, age 61, of Danville, Virginia, today to 37 months in prison, followed by three years of supervised release for 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. Judge Nickerson deferred ruling on the restitution amount, awaiting further information about the victims’ losses. A restitution order is expected to be filed within 90 days.
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.
Judge Nickerson sentenced co-defendant Marie Bellamy, age 70, of Baltimore, today to 18 months probation with the first six months to be served in home detention with electronic monitoring, for filing a false tax return. Judge Nickerson also ordered Bellamy to pay restitution of $56,768 to the Internal Revenue Service.
Acting Special Agent in Charge Don Fort, IRS Criminal Investigation stated, "Money laundering and tax evasion are not victimless crimes. Not only are innocent people "duped" by various schemes, but the underground untaxed economy harms the entire nation's economic strength. Honest, hardworking Americans pay the price when others choose to evade their tax obligations."
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 prosecuted the case.