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SAN JOSE – A founder of the S3 Partners was sentenced March 17, 2015 to 36 months on investment fraud charges, announced United States Attorney Melinda Haag and FBI Special Agent in Charge David J. Johnson.
Sam Stafford, 59, formerly a resident of Campbell, CA now living in Temecula, CA., pleaded guilty on Oct. 17, 2013, to Conspiracy to Commit Wire Fraud, Mail Fraud, and Bank Fraud, in violation of 18 U.S.C. § 1349. Stafford admitted in his plea agreement that from 2006 to 2009, he and his co-defendants Melvin Russell “Rusty” Shields and Michael Sims conspired to defraud individual investors and banks in connection with various real estate development projects. The three defendants used the name “S3 Partners” and conducted business out of a variety of locations including San Jose, CA; Campbell, CA; Hickory, NC; and Valrico, FL.
Shields, Sims, and Stafford collectively obtained more than $21 million from individual investors and banks. Ultimately, all the S3 Partners’ real estate development projects failed and, as a result of the defendants’ illegal conduct, many of the investors sustained a near total loss of their investments.
Stafford admitted in his plea agreement that he, Shields and Sims knowingly created and maintained the false appearance that both private individual investor and bank funds were being used for sound, secured real estate development projects that offered high rates of return. Nevertheless, Stafford admitted in his plea agreement that he, Shields, and Sims did not use the majority of S3 investment monies on the specific real estate projects promised to investors. Instead, they diverted substantial portions of investor monies to other projects, company overhead and other unauthorized uses, including to their personal use. Stafford also admitted in his plea agreement that in many instances he knowingly obtained substantial funds from banks as a result of forged or fraudulent documents. Further, Stafford admitted he knowingly submitted to banks invoices falsely claiming capital improvements on certain S3 Partners projects. Stafford admitted in his plea agreement that his offense conduct harmed more than 10 victims and caused an actual loss to investors and banks of more than $2,500,000.
U.S. District Judge Ronald M. Whyte imposed the 36 month prison term on March 17, 2015 and ordered Stafford to self-surrender by Apr. 21, 2015. Stafford has been out of custody on home electronic monitoring since his May 2012 arrest. In addition to the prison term, Stafford also likely will be ordered to pay some amount of restitution to his victims.
Judge Whyte stated that within 90 days he will issue an order regarding the amount of restitution Stafford will have to pay.
A jury previously convicted Shields and Sims on investment fraud charges on Dec. 23, 2013 following a seven week trial. Judge Whyte on Nov, 17, 2014, previously sentenced Shields to 78 months in prison and Sims to 30 months in prison.
Assistant U.S. Attorneys Joseph Fazioli and Timothy Lucey prosecuted the case with the assistance of Lakisha Holliman and Laurie Worthen. This prosecution is the result of an investigation by the FBI.