"Spokane Ponzi Scheme Operator Pleads Guilty To 110 Count Indictment On Eve Of Jury Trial"
Spokane – Michael C. Ormsby, United States Attorney for the Eastern District of Washington, announced that Doris E. Nelson, 55 of Colbert, Washington, entered guilty pleas to the 110 counts contained in a Superseding Indictment handed down in December 2013. The 110 counts related to charges of Wire Fraud, Mail Fraud, and International Money Laundering connected to a massive "Ponzi scheme" that Nelson operated. Senior United States District Court Judge Robert H. Whaley accepted each of Nelson's guilty pleas. Sentencing is scheduled for July 7, 2014.
By pleading guilty Nelson admitted the allegations set forth in the Superseding Indictment – that she ran a Ponzi scheme for over eight years and took in approximately $137 million from at least 650 investors worldwide. As alleged, Nelson operated an unprofitable payday and short-term lending business, known as the Little Loan Shoppe, which she began in British Columbia, Canada in approximately 1997 and which she continued in Spokane, Washington beginning in approximately 2001. Despite the Little Loan Shoppe's unprofitability, Nelson solicited hundreds of investors by leading them to believe, falsely, that her payday loan business was profitable and that her business profits allowed her to pay investors a 40% to 60% (and up to as much as 75%) annual return. Nelson claimed that these astronomical returns would be paid from the profits of the Little Loan Shoppe. Nelson also made numerous false and fraudulent statements about the Little Loan Shoppe in order to induce investors. She communicated with her investors in person, by telephone, by email, and through the mails. Nelson solicited investors who resided throughout the United States and in international locations, including Canada and Mexico.
As alleged, rather than paying her investors returns from a profitable business as Nelson had claimed, investors were paid "interest" with their own money or the money of other investors. In contrast to her consistent representations, Nelson was operating a massive Ponzi scheme where investors' individual returns were paid using their own investments or monies paid by other investors. Investor funds rarely, if ever, were used to fund new customer loans, as Nelson assured investors they would be, and the Little Loan Shoppe lending operations did not generate profits from which investor payments could be made. As Nelson developed a history of paying investors "lulling payments" from subsequent investments, her track record became the single most persuasive factor for additional investors. In this way, Nelson's scheme to defraud grew rapidly until it could no longer sustain itself. The scheme collapsed in 2008, when the flow of new funds could no longer support the payments required on the earlier investments and Nelson abruptly announced that all investments would be changed to a 10% interest rate. Nelson ended most payments to investors around this time, and by February 2009 she suspended all payments.
As alleged, Nelson's scheme resulted in personal withdraws of investor money of approximately $4.3 million. With these proceeds, she funded a lavish lifestyle for herself and her family. For example, Nelson spent approximately $223,000.00 in St. John Knits stores located in Las Vegas, Nevada, New York, Honolulu, and Beverly Hills as well as approximately $217,000.00 in purchases from Nordstrom. She also spent approximately $58,000.00 on art work while on a cruise in 2006. Nelson also incurred substantial gambling losses -- approximately $432,000.00 in 2008, and approximately $960,000 in 2007, at the MGM Grand Casinos in Las Vegas.
As Nelson's fraudulent scheme began to collapse in 2008, Nelson's investors forced the Little Loan Shoppe into bankruptcy in the summer of 2009. Shortly thereafter, the scheme was brought to the attention of IRS-CI, the FBI, and the United States Attorney's office. An investigation was commenced and in April, 2010, agents with the IRS-CI and the FBI seized, among other assets, cash, a Mercedes Benz, a Corvette, and jewelry from her residence.
Michael C. Ormsby said, "The resolution of these charges by Ms. Nelson's guilty pleas show the commitment of this office, the IRS Criminal Investigations, and the FBI to thoroughly investigate allegations of fraud and to bring those accused of defrauding others before the court so that they may fairly and justly be held to accountable for their criminal conduct. The dedication exhibited by the efforts of Federal law enforcement officers and the Assistant United States Attorneys involved in this case underscores their continuing commitment to investigate and prosecute "white collar" crimes in the Eastern District of Washington."
This case was investigated by the Internal Revenue Service-Criminal Investigations and the FBI. This case was prosecuted by K. Jill Bolton and Caitlin A. Baunsgard, Assistant United States Attorneys for the Eastern District of Washington.