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Jury Convicts Pasadena, Texas Man in $11 Million Investment Fraud Scheme
PLANO, Texas – A 58-year-old Pasadena, Texas man has been found guilty of investment fraud charges in the Eastern District of Texas, announced U.S. Attorney John M. Bales today.
A federal jury needed just six minutes to convict Gary Lynn McDuff of conspiring to defraud investors of over $11 million in connection with an investment fraud scheme and laundering the proceeds. The verdict was handed down on Mar. 27, 2013, following a two-day trial before U.S. District Judge Richard A. Schell. McDuff’s co-conspirators, Gary Lancaster, 61, of Oregon, and Robert Reese, deceased, of Carmel, CA, previously pleaded guilty and were sentenced to federal prison for their roles in the scheme.
According to information presented in court, McDuff and Lancaster agreed to create the Lancorp Investment Fund, to draft a prospectus for the Fund, and to solicit investments from individuals across the United States. While McDuff controlled the operation, Lancaster agreed to serve as the “front” since McDuff could not possess a securities license or sell securities because of a past felony conviction. McDuff recruited Reese to also sell the investment, despite the fact that Reese had been barred by the State of California from selling securities based on past fraudulent conduct. McDuff, Lancaster, and Reese made numerous false representations to their investors in order to induce payments, including representations that the Fund would only invest in A+ or A1 rated bonds, that the principal of each investment would be insured and never at risk, and that Lancaster had experience operating this type of investment. McDuff, Lancaster, and Reese never disclosed McDuff’s felony conviction or Reese’s securities ban. McDuff then laundered the criminal proceeds in order to promote the operation of the fraudulent scheme.
McDuff faces up to 20 years in federal prison on each count of conviction. A sentencing date has not been set.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation and prosecuted by Assistant U.S. Attorneys Shamoil T. Shipchandler and Camelia Lopez.