Inland Empire Man Arrested on Wire Fraud Charge that He Engineered $10 Million Ponzi Scheme Targeting Elderly and Retired Victims
RIVERSIDE, California – A Riverside County man was arrested this morning on a federal criminal complaint alleging he swindled dozens of his clients, many of them elderly retirees, in a long-running Ponzi scheme that took in more than $10 million in victim-investor money.
Paul Horton Smith Sr., 56, of Moreno Valley, was taken into custody today by the FBI and is expected to make his initial appearance this afternoon in United States District Court in Los Angeles.
The complaint charges Smith with one count of wire fraud, a crime that carries a statutory maximum sentence of 20 years in federal prison.
According to the affidavit filed with the complaint, from at least 2013 until the present, Smith offered 75 clients an investment he called “Northstar,” which he said was a private annuity contract that was a safe alternative to the stock market and provided a generous annual rate of return of between 5 percent and 6 percent. Instead, Smith used his victim investors’ money as lulling payments to earlier investors.
Smith, who advertised himself on his website as a chartered senior financial planner, is the owner of several businesses in the Riverside area, including Planning Services, Inc. and Northstar Communications LLC.
He also conducted free seminars via Planning Services at various locations around the Riverside area where he discussed estate planning, trust creation to protect assets, and other financial matters. Smith solicited some of his victims at this seminar, the affidavit states.
One victim, a 70-year-old woman who had known Smith from their mutual church association in the 1990s, sold a home in Arizona in August 2016 and wrote a $175,000 check to Northstar for investment. Instead of investing the victim’s money, Smith transferred her funds to other investors and he used her money to pay off the other investors’ tax bills with the IRS and the Franchise Tax Board, according to the affidavit.
In November 2019, another victim, an 86-year-old woman who had known Smith for many years, invested approximately $169,126 in Northstar from the sale of a rental property. The following day, Smith took $134,863 of the victim’s money to pay off another victim investor.
A review of bank records show that these victims have transferred more than $10 million to Smith’s business entities since 2013 and there is evidence that this scheme goes back to the early 2000s, according to the affidavit.
A complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
The FBI investigated this matter. The Securities and Exchange Commission provided substantial assistance.
This case is being prosecuted by Assistant United States Attorney Benjamin J. Weir of the Riverside Branch Office.