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Tuesday, May 12, 2015

Maryland Man Sentenced to 13 Years in Prison for Operating Ponzi Scheme That Cost Investors Over $28 Million in Losses

Garfield M. Taylor, 56, of Rockville, Maryland, was sentenced today to 13 years in prison and ordered to pay over $28.6 million in restitution for operating a Ponzi scheme that resulted in investors losing money they invested with Taylor and companies he controlled.

The sentencing was announced by Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office and Acting Commissioner Chester A. McPherson of the District of Columbia’s Department of Insurance, Securities and Banking.

Taylor pleaded guilty in March 2014 in the U.S. District Court of the District of Columbia to securities fraud.  He was sentenced by Chief District Judge Richard W. Roberts of the District of Columbia.  Upon completion of his prison term, Taylor will be placed on three years of supervised release.  In addition to the $28.6 million order of restitution, the judge entered a forfeiture judgment in the same amount.  Taylor was taken into custody after the sentencing.

In a parallel action, the U.S. Securities and Exchange Commission obtained a civil judgment against Taylor for his fraudulent conduct.

“Garfield Taylor masterminded a Ponzi scheme to bilk local investors out of over $28 million,” said Acting U.S. Attorney Cohen Jr.  “When his scheme collapsed, his lies left the families and charities who believed his empty promises holding the bag.  This 13-year prison sentence is a reflection of the seriousness of financial crimes and our dedication to vigorous prosecution of securities fraud.”

“Mr. Taylor now faces the consequences of his role in a $28 million fraud scheme that defrauded clients for his own personal gain,” said Assistant Director in Charge McCabe.  “With our partners, the FBI remains committed to investigating those who hide behind deceptive financial fraud schemes.”

“Today’s sentencing demonstrates that defrauding investors in the District of Columbia carries significant consequences,” said Acting Commissioner McPherson.  “Mr. Taylor deceived investors out of millions causing significant financial harm that justifies this sentence.  Together with the U.S. Attorney’s Office, the FBI, the Securities and Exchange Commission and national and local law enforcement, my department will continue to protect investors from the illegal and deceptive practices Mr. Taylor used to defraud investors out of their hard earned money and savings.”

According to the government’s evidence, Taylor devised and employed a scheme from in or about September 2006 through in or about September 2010 in which he convinced investors to invest with him by promising them substantial returns on their investment, telling them that he used a sophisticated securities trading strategy that protected against loss and claiming that he had a proven track record of using this strategy effectively. 

During the course of this scheme, however, Taylor never used the trading strategy that he told investors that he would use.  With the investments he made during this period, Taylor either lost money or made minimal profits far below what was needed to pay the amounts he owed.  The only way that Taylor was able to pay the substantial interest rates was to use portions of the principal invested by new investors to pay amounts that were owed to earlier investors.

In one example from the government’s evidence, Taylor, in April 2010, used approximately half of an investor’s $425,000 investment to pay interest and principal that was due to earlier investors, rather than using those funds to invest in securities, as he had promised to do.  Taylor paid only a portion of the interest payments he was required to pay the investor, before telling the investor that, because of trading losses, he was unable to make any more interest payments or to return the investor’s principal.

At the time of the scheme’s collapse, Taylor owed investors over $28.6 million just to cover the principal he was contractually required to return to them.

In announcing the sentence, Acting U.S. Attorney Cohen, Assistant Director in Charge McCabe and Acting Commissioner McPherson commended the work of those who investigated the case from the FBI’s Washington Field Office and the District of Columbia’s Department of Insurance, Securities and Banking.  They also expressed appreciation to the U.S. Securities and Exchange Commission for its significant assistance.  They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office.  The case was also investigated and prosecuted by Assistant U.S. Attorneys Matt Graves, Lionel André, Catherine K. Connelly, Della Sentilles and Zia Faruqui of the District of Columbia.  Former Assistant U.S. Attorney Bridget Fitzpatrick of the District of Columbia also investigated the matter.

Updated May 12, 2015