Several victims in court and offered testimony

HOUSTON - Kenneth Alfred Scudder, 56, of The Woodlands, Texas, has been sentenced to 53 months for operating a Ponzi Scheme in the Houston area, United States Attorney Kenneth Magidson announced today. Approximately 30 victims were present at the sentencing, which concluded moments ago, five of whom offered testimony and recounted the emotional and economic harm Scudder’s scheme caused them and their families.

The scheme began in 2005 and lasted until October 2010, during which time Scudder induced approximately 45 individuals to invest in excess of $11 million to purchase houses, renovate them and either sell or rent them. Scudder told investors they would receive 50 percent ownership in the sale of the properties or they would receive 50 percent of the rent from the properties. 

In reality, Scudder used new investors’ money to pay older investors for the alleged sale or rent from the real estate he allegedly purchased. However, during the course of the scheme, Scudder never purchased any of the real estate he said he did. To further the scheme, Scudder created documents that purportedly showed an investor’s ownership interest in the real estate properties. The documents indicated the alleged properties would be purchased by Scudder with the investor and Scudder each owning 50 percent in the property. To mislead investors, Scudder used real addresses for the properties he claimed to have purchased and investors could drive to the address and see the properties, which were located throughout the Houston area. In truth, Scudder never purchased the properties. The alleged investment documents consisted of “Agreements Between Parties” and “Partnership Agreements,” which were nothing more than false documents designed to lull investors into believing that they had invested in legitimate transactions. 

Scudder also convinced investors he owned a Taco Bell restaurant in The Woodlands and that they could purchase a percentage of ownership in it. He, in fact, never owned a Taco Bell restaurant, yet still recruited such investors.

Of the approximate $11 million Scudder received from investors, there was a resulting loss of approximately $5.2 million due in large part to a disproportionate amount of overpayments to some investors.        

During the course of the scheme, Scudder utilized investor funds to purchase a 50 percent ownership in 12 properties with two individuals for his personal ownership and benefit. He also purchased full ownership of a condominium in Galveston, Texas, and he used investor funds to make mortgage payments on his personal residence in The Woodlands. He also utilized investor funds to purchase approximately 15 pieces of jewelry.

United States District Judge Lynn N. Hughes, who handed down the sentence today, has set a hearing regarding the forfeiture of the 12 properties and jewelry for tomorrow at 11:00 a.m. Previously released on bond, Scudder was remanded to federal custody following the hearing today where he will remain pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future.

This case was investigated by the FBI and prosecuted by Assistant United States Attorney Quincy L. Ollison.