Franklin financial Adviser William Walter Spencer Pleads Guilty in Investment Fraud Ponzi Scheme
Franklin, Tennessee financial advisor William Walter Spencer has pleaded guilty to two counts of mail fraud ,and two counts of wire fraud, as charged in a felony Information filed on April 2, 2010, announced Jerrry E. Martin, U.S. Attorney for the Middle District of Tennessee.
At the hearing, on May 28, 2010, Spencer admitted that, for approximately12 years between December1997 until approximately November 2009, he operated an investment Ponzi scheme in which he borrowed and solicited more than $1,897,718 from approximately 100 friends, clients, and investors by promising inflated returns of between 10% to 12%. Spencer further admitted to the following facts as a part of the scheme; that he had characterized each investment as a “personal loan” and executed and provided a promissory note to each investor; that he had pledged his personal assets and life insurance policies as collateral for each promissory note, and promised each investor that he would repay the principal for each loan in periods ranging from six months to one year; that during the life of the Ponzi scheme he had solicited and persuaded approximately one hundred individuals to invest and/or loan him funds secured by promissory notes; that at the time he solicited the loans and executed each promissory note he did not have the liquid assets or income necessary to pay the interest promised to investors or to return the loan principal as each promissory note matured; that he lied to investors about the value of his personal wealth and about the amount of life insurance available to be pledged as collateral for the promissory notes; that he also lied to investors about the total aggregate amount of debt he owed on the promissory notes and concealed his inability to repay the promissory notes at maturity.
Spencer also stated at the hearing that as a further inducement to invest in his Ponzi scheme, he falsely represented to investors that their investments had been safely invested in pooled investment funds intended to maximize their return on investment. To discourage investors from cashing-out their investments as their notes matured, Spencer said that he warned that doing so would reduce their rate of return and would negatively impact the returns received by other pooled investors. When questioned by investors, Spencer admitted that he refused to disclose the exact nature or location of invested funds, and restricted withdrawals until a replacement investor could be found. Spencer said he falsely told investors that the reason for restricting cash-outs was to protect other investors from being negatively impacted. In fact, Spencer never invested any of the solicited funds, and instead, used client funds to pay personal expenses and to occasionally disburse fictitious earnings and return of principal to other investors in order to satisfy maturity of the promissory notes or to cover investor requests for cash-outs.
On or about August 31, 2009, the National Association of Securities Dealers, Inc. (now known as the Financial Industry Regulatory Authority (“FINRA”)) issued a permanent bar against Spencer for violation of FINRA conduct rules, thus prohibiting him from future broker – dealer registration through FINRA. Also,on or about November 16, 2009, Spencer entered into a consent order with the Tennessee Commissioner of Commerce and Insurance in which his insurance producer license and registration as an agent under the Tennessee Securities Act was revoked and he was permanently barred from applying for or seeking any future registration or license from the Tennessee Securities Division and the Tennessee Insurance Division.
“Cases like these are devastating to investors, especially people who invest their life’s savings with individuals they trust, only to find that their trust has been misplaced,” United States Attorney Jerry E. Martin said. “In this case, a lot of people invested money they couldn't afford to lose, particularly in hard economic times. The United States Attorney’s Office will diligently and aggressively prosecute those who perpetrate such schemes and prey on unsuspecting and trusting investors.”
The charges in the Information were brought following a coordinated investigation conducted by agents from the FBI, the United States Postal Inspection Service, and with the cooperation of the Franklin Police Department. Assistant United States Attorney John K. Webb is prosecuting the case for the United States.
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