Former Forest City Investment Adviser Pleads Guilty to Wire Fraud and Aggravated Identity Theft
A former Forest City investment adviser, who stole money from clients to fund the operation of an ethanol plant in Hopkinton, pled guilty yesterday in federal court in Cedar Rapids.
Darrell Smith, age 61, from Forest City, Iowa, was convicted of Wire Fraud and Aggravated Identity Theft. Smith’s guilty pleas follow his conviction in federal court and 13-month prison sentence last year for tax fraud.
Smith’s admissions at the plea hearing and evidence presented in prior court proceedings established that he was a broker and adviser for several investment firms. From 2010 to 2013, Smith caused funds to be withdrawn from his investment clients’ accounts without his clients’ knowledge or authorization. The funds were transferred to Energae, LP, a partnership Smith previously had formed with another individual to invest in different bio-energy companies. Smith then used those funds to pay expenses related to the operation of Permeate Refining, LLC, which operated a now-defunct ethanol plant in Hopkinton. In order to transfer funds from client accounts, Smith used authorizations purportedly signed by the client authorizing the withdrawal of funds from the investment account. He either forged his clients’ signatures on the authorizations or used pre-signed, blank authorization forms. In 2013, Smith consented to having his securities agent license and insurance producer license in the State of Iowa revoked.
Sentencing before United States District Court Judge Linda R. Reade will be set after a presentence report is prepared. Smith remains in custody of the United States Marshal after a detention hearing on May 3, 2017. At the detention hearing, Judge Reade found Smith was “a serious risk” to “obstruct justice or attempt to obstruct justice.” The Court noted that, while on pretrial release in 2016, Smith had violated a no-contact order, made misrepresentations to the Court, and distributed a report to prospective investors that contained several misrepresentations. The Court also found Smith was a continuing “financial danger” to the community.
Smith faces a mandatory minimum sentence of 2 years’ imprisonment and a possible maximum sentence of 22 years’ imprisonment, a fine, $200 in special assessments, and 4 years of supervised release following any imprisonment.
The case is being prosecuted by Assistant United States Attorney Tim Vavricek and investigated by the Federal Bureau of Investigation, the United States Postal Service Inspection Service, Internal Revenue Service-Criminal Investigation, and the United States Department of Agriculture, Office of Inspector General.
Court file information at https://ecf.iand.uscourts.gov/cgi-bin/login.pl.
The case file numbers are 17-CR-2030-LRR and 17-MJ-111-LRR.
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