EDWARD P. MAY SENTENCED FOR ORCHESTRATING $350,000,000
PONZI SCHEME - LARGEST EVER IN MICHIGAN
Edward P. May, age 75, was sentenced today to16 years in federal prison for orchestrating the largest Ponzi scheme in the Eastern District of Michigan history, United States Attorney Barbara L. McQuade announced. McQuade was joined in the announcement by Andrew G. Arena, Special Agent in Charge, Federal Bureau of Investigation, Detroit Field Division. May was sentenced by the Honorable Arthur J. Tarnow.
On April 29, 2011, May pleaded guilty to all 59 counts of mail fraud alleged in a federal indictment charging him with orchestrating a decade-long investment fraud scheme. Specifically, the 59 count indictment alleged, in part, the following:
In 1997, EDWARD P. MAY formed E-M Management Co. LLC, which was located in rented office space in Lake Orion, Michigan. After forming E-M Management, MAY then formed more than 150 limited liability corporations (“LLCs”). MAY told hundreds of individuals in the Detroit metropolitan area and elsewhere across the country that the LLCs acquired telecommunications equipment and then provided telecommunications services to various hotels in Nevada, New York, New Jersey, California, elsewhere in the United States, and in foreign countries. MAY induced numerous people to invest large amounts of money in the LLCs, for what proved to be ficticious investments in “contracts” or “agreements” providing telecommunications equipment and services to various hotels.
MAY also caused fraudulent “private offering memoranda,” “subscription agreements,” and “investment recaps” for the LLCs to be drafted and distributed to potential investors. The offering memoranda fraudulently stated that E-M Management Co. had entered into agreements with various hotel corporations to “provide all of the telecommunication services to the hotel properties” and to “install new equipment where needed, to purchase existing equipment where practicable and to cut over the services from present providers,” and fraudulently promised investors that the funds raised “will be used solely for the purpose of purchasing telephone, high speed internet, low speed internet, [and] DVD equipment.”
The offering memorandums guaranteed a minimum monthly income to each investment LLC ranging from $30,000 to more than $100,000 per month. MAY deceived victim investors into believing that their funds were being invested as represented, and concealed from victim investors and others the fact that these "investments" were actually being used to support a pyramid or "Ponzi" scheme. May operated the pyramid scheme by paying purported investment returns to some investors with funds actually obtained from other investors.
MAY diverted and misappropriated the funds invested in the LLCs to his own personal use and to the benefit of his company, E-M Management. MAY spent some of the funds on travel to Las Vegas and gambling. Over the course of the scheme, MAY induced over 1,200 individuals to invest more than $350,000,000 in over 250 LLCs. MAY’s scheme resulted in a total loss of over $49 million to the individuals who invested in the fraudulent LLCs.
United States Attorney Barbara L. McQuade stated, “Complex fraud schemes like this one rob investors of their savings and erode public confidence in legitimate investments. This loss of public confidence in investment opportunities, in turn, depresses our economy. By prosecuting those who commit fraud, we hope to deter others from committing similar crimes.”
Special Agent in Charge Andrew G. Arena stated, ”The public should be aware that even though the FBI continues to vigilantly pursue these types of criminal violations, we live in a buyer beware investment environment. Investors should vigorously investigate the background information of all investment vehicles, and stick to the old adage that if it is too good to be true, it probably isn't."
U.S. Attorney McQuade congratulated the hard work of the FBI for its efforts in pursuing this case. The case was prosecuted by Assistant U.S. Attorneys Sarah Resnick Cohen, Craig Weier, and Stephen Hiyama.