Baytown Man Sent to Federal Prison for Massive Ponzi Scheme
|March 28, 2013|
HOUSTON – Richard M. Plato, 65, of Baytown, has been ordered to federal prison for nearly 20 years following his convictions on several counts in relation to a mail and securities fraud conspiracy, United States Attorney Kenneth Magidson announced today. A federal jury convicted Plato on Sept. 24, 2012, after approximately four hours of deliberation and 10 days of trial.
Plato was subsequently convicted on one count of and five counts of mail fraud. Today, U.S. District Judge David Hittner, who presided over the trial, handed Plato the 235-month sentence. At the hearing today, the government detailed some of Plato’s previous offenses that have occurred over the past 24 years, and stated he stole money from investors in this case and spent it on “wine, women and song.”
In handing down the sentence, Judge Hittner noted that Plato had already committed three massive, multi-million dollar frauds before the one with which he was sentenced today. He read from some of the victims’ statements detailing the consequences Plato’s actions have had on them. One noted that senior citizens like him had used their savings to try to provide some comfort, but now have to modify their standard of living, while Plato continued to live his opulent lifestyle. Another stated that he had hoped to provide for his grandson’s education, but now that money is gone. He added that while this may have been short-term for Plato, the impact on his family and other victims carries life-long consequences.
Judge Hittner ordered Plato to pay restitution in the amount of $3,051,000.74. He will also be on supervised release for three years following completion of his prison term.
Plato owned and controlled Momentum Production Corporation in Baytown.
The Texas State Securities Board (TSSB) began investigating Plato in the fall of 2008 following several complaints by investors with Momentum. Investors from several states reported purchasing securities from Momentum, only to have Momentum default on the notes. The TSSB referred the matter to the United States Postal Inspection Service (USPIS) in 2010.
Evidence at trial indicated Plato had been convicted of fraud on three other occasions, once each in Texas, Florida and Louisiana. At the time the securities were sold, Plato was on supervised release and owed almost $30 million in restitution.
Following his release from federal prison in 2002, Plato began acquiring various oil and gas interests in South Texas. Sometime thereafter, Plato formed Momentum and began directly and indirectly soliciting vulnerable persons throughout the United States to purchase promissory notes. Several of those investors testified at trial and described how they were assured of the investment’s safety, promised a high rate of return and told that the notes were secured by the oil and gas interests in South Texas. Although the notes were advertised as securities, they were never registered with any federal or state agency. Between June 2005 and December 2006, Plato sold more than $6 million worth of notes.
During the sale of these funds, Plato made various material misrepresentations and omissions, failing to disclose his criminal convictions and outstanding restitution obligations. In fact, Plato told investors the oil and gas collateral was owned “free and clear” of any claims, liens or other encumbrances and that, in the event of default in a particular fund, Momentum would substitute collateral from other funds to ensure payment. This was never done.
Agents testified that Plato made periodic payments on the notes to keep his investors satisfied, using the money of other investors and the operating income from the various oil and gas interests. In 2006, however, those interests evidently stopped generating their projected income. At the same time, Plato and his associates were spending millions of dollars that should have been paid to investors. Momentum soon began defaulting on the notes.
The money trail shows that, in total, Plato received approximately $6.2 million from investors. Of this amount, approximately $2 million was diverted to Plato’s benefit.
Plato will remain in custody pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future.
The case was investigated by the U.S. Postal Inspection Service with the invaluable assistance of the Texas State Securities Board. Assistant United States Attorney (AUSA) Sharad Khandelwal and Former AUSA F. Andino Reynal prosecuted the case.