EDWARD P. MAY PLEADS GUILTY TO $200 MILLION PONZI SCHEME
Edward P. May, age 74, pleaded guilty today to all 59 counts of mail fraud alleged in a federal indictment charging him with orchestrating a decade-long investment fraud scheme, 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.
Specifically, the 59 count indictment alleged 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, purportedly for investment in “contracts” or “agreements,” providing telecommunications equipment and services to various hotels. In fact, the contracts and agreements did not exist.
May 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, including Hilton Hotels, Sheraton Hotels, Hyatt Hotels, and MGM Grand Hotels, 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.
The guaranteed monthly income promised by May to each investment LLC ranged 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, by paying purported investment returns to some investors with funds actually obtained from other investors.
During the scheme, May utilized the services of a stock broker and investment advisor to solicit investments in the LLCs. This individual was a registered representative of two securities firms that were members of the National Association of Securities Dealers, Inc. (“NASD”) and the Securities Investor Protection Corporation (“SIPC”) and registered as broker-dealers with the U.S. Securities and Exchange Commission (“SEC”). MAY also utilized the services of an accounting firm to legitimize the investments.
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. Among other things, May used the money invested by individuals in the LLCs: to make payments to earlier investors which May falsely represented to the investors as a return of principal and income generated by the investment LLCs; to pay finder’s fees, or referral fees, to several individuals who brought in new investors; to pay fees to several individuals who provided administrative assistance to May such as preparing and sending monthly checks and distribution reports to investors; to pay professional fees for tax preparation services for all of the investment LLCs, for May personally, and for May’s other businesses; to pay for travel to and from Las Vegas; to gamble and pay personal gambling debts; to pay off personal bank loans; to personally invest in oil and gas leases and REITs; to personally invest in a number of businesses in Nevada and Michigan, including West Coast Marketing, LLC, Fore Honors Las Vegas LLC, Fore Honors LLC, Las Vegas Million Dollar Shootout LLC, Great Shots, LLC, Creto International, Inc., R3 Advertising LLC, Camelot Club Inc., and E-M Management & Associates, LLC; and to pay his ordinary living expenses.
Over the course of the scheme, May induced individuals to invest more than $200,000,000 in over 150 LLCs. MAY’s scheme resulted in a total loss of over $35,000,000 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."
Each count of the indictment carries a maximum penalty of 20 years’ imprisonment and/or a fine of up to $250,000.00.
A sentencing hearing was set by Judge Tarnow for August 11, 2011 at 2pm..
U.S. Attorney McQuade congratulated the hard work of the FBI for its efforts in pursuing this case. The case is being prosecuted by Assistant U.S. Attorney Sarah Resnick Cohen and Assistant U.S. Attorney Craig Weier.