Ponzi Scheme Operator Pleads Guilty to Securities Fraud
A McKinney man who conned investors out of more than $13 million has pleaded guilty to securities fraud, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
Patrick O. Howard – owner of Insured Liquidity Partners CGF I, Insured Liquidity Partners CGF II, and Capital Ventures, LLC – was charged in June 2018 and pleaded guilty via videoteleconference Tuesday morning.
“This defendant repeatedly lied about his funds’ performance, inducing investors – including several retirees – to turn over considerable sums of money that he then squandered. The Northern District of Texas is committed to investigating and prosecuting financial fraud," said U.S. Attorney Erin Nealy Cox.
In plea papers, Mr. Howard, 49, admitted to running a Ponzi-type scheme, recruiting more than 100 investors to purchase $13 million in membership units for $50,000 apiece.
His companies promised investors 12% annual returns, paid quarterly, and “insured liquidity.” However, instead of properly investing the money, the companies issued phony account statements and paid any investors who elected to receive their earnings quarterly out of the investments of later investors, rather than out of the earnings of the fund.
Mr. Howard falsely represented himself as a registered investment advisor and claimed his companies saw 20% annual earnings. Promising that investors could not possibly lose money due to insurance that offset poor performance, the defendant induced at least one investor to turn over his entire retirement savings to the fund.
Mr. Howard now faces up to five years in federal prison. His sentencing has been set for March 4, 2021.
The Federal Bureau of Investigation’s Dallas Field Office and the Postal Inspection Service conducted the investigation, with a parallel investigation conducted by the U.S. Securities & Exchange Commission. Assistant U.S. Attorney Andrew Wirmani is prosecuting the criminal case.