Loma Linda Man Sentenced to 14 Years in Federal Prison in Southern California Ponzi Scheme that Caused Over $16 Million in Losses

RIVERSIDE, CALIFORNIA – The last of three defendants was sentenced today to 168 months in federal prison for his participation in a Ponzi scheme that collected, in total, almost $20 million from hundreds of investors around Southern California and that caused over $16 million in losses for those investors.

David Lincoln Johnson, 73, of Loma Linda, who was the president of Gentech Fabrication, Inc., a custom manufacturer of metal products located in Chino, was sentenced by United States District Judge Virginia A. Phillips.  In addition to the prison term, Judge Phillips ordered Johnson to pay $17.2 million in restitution.

“Investor fraud causes serious harm and long-lasting grief to the individual investors who are victimized through fraud and deceit” says André Birotte Jr., whose office prosecuted the case. “Mr. Johnson and his cohorts violated the trust of investors and they will now pay the price with federal prison sentences. The United States Attorney's Office will continue to work with its partners in law enforcement to bring financial criminals to justice.”

Johnson was convicted of fourteen counts of mail fraud in August 2011 following a six-day jury trial.

According to sentencing documents filed with the court, beginning at some point in 2004 and continuing until the beginning of November 2004, Johnson, Christiano Kawika Hashimoto, Jr., 52, of Riverside, and Catherine Lipscomb, 44, of Moreno Valley, devised and executed a scheme to defraud investors.      

Hashimoto was the founder and president of Financial Solutions, with an office located in Riverside, and later Ontario, California.  Hashimoto would solicit potential investors to invest with his company.  Hashimoto would tell potential investors that Financial Solutions was in the business of raising money for and investing in other companies.

One of the options Hashimoto would offer to investors was participation in a government contract lending program by lending money to Gentech.  Hashimoto told investors that their money would be used to fund construction of equipment for the U.S. government and that their investments were guaranteed by a government contract held by Gentech.

“The Postal Inspection Service has no shortage of Ponzi schemes to investigate and this is another sad example of greed overcoming honest business practices,” said B. Bernard Ferguson, Inspector in Charge for the Los Angeles Division. 

“Hundreds of investors collectively lost millions of dollars - many believing they were engaging in a patriotic duty to help their government. Some investors lost their homes and their life savings - many investors' lives were nearly destroyed,” said Leslie P. DeMarco, Special Agent in Charge of the IRS-Criminal Investigation's Los Angeles Field Office.  “Illegal activity involving the investment industry has brought financial ruin to many Americans and the IRS-Criminal Investigation is proud to bring our skills to this joint venture to put a stop to this and other types of white collar fraud.”

According to sentencing documents filed with the court, Johnson agreed with Hashimoto to work together to promote investments in Gentech through Financial Solutions.  Johnson provided potential and actual investors with tours of Gentech’s facilities and information about Gentech, including promotional material.  Johnson misrepresented the contract to construct the C-5 empennage stand as being Gentech’s contract with the government, when in fact, Gentech was never authorized by the U.S. government to assume the contract.

Johnson provided investors with promissory notes that would state the dollar amount of the principal sum and would state that the investor would receive his or her principal plus a specified amount of interest – either 5, 10, or 20% - on the investment in 30 days.  The promissory notes stated that the borrower’s obligations in the promissory notes were secured by a security interest in a specified government contract.  The promissory notes were signed at various times by Johnson, Hashimoto, or Lipscomb for Hashimoto.

Johnson, Hashimoto and Lipscomb knew that the investors’ money was not going to fund Gentech’s construction of equipment for the U.S. government.  Instead the money was going to pay other investors and commissions for sales agents.

Hashimoto was sentenced in December 2011 in United States District Court in Riverside to a term of 120 months after pleading guilty to a single mail fraud count for his role in the investment scheme.

Lipscomb was sentenced in November 2011 in United States District Court in Riverside to a term of 24 months after pleading guilty to a single mail fraud count for her role in the investment scheme.

Johnson is scheduled to surrender to federal custody to begin his prison term on October 1, 2012.

The investigation of Johnson, Hashimoto and Lipscomb was conducted by IRS-Criminal Investigation and the United States Postal Inspection Service.

Release No. 12-088