Two Executives Plead Guilty To Wire Fraud Conspiracy Charges For Ponzi Scheme Involving Medical Insurance Investments
DALLAS — Duncan MacDonald III, 50, of Dallas, appeared yesterday in federal court and pleaded guilty to a felony Information charging conspiracy to commit wire fraud. In a related case, last week, Gloria Ann Solomon, 71, also of Dallas, pleaded guilty to an Information charging the same offense. Each defendant faces a maximum statutory penalty of five years in federal prison, a fine not to exceed $250,000, or twice any pecuniary gain to the defendant or loss to the victim(s), and restitution. Both MacDonald and Solomon will remain on bond pending sentencing, which is set for October 3, 2013, before U.S. District Judge Jane J. Boyle. Today’s announcement was made by U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
According to documents filed in the case, from at least 2006 and continuing into at least September 2012, MacDonald was President and Director of Global Corporate Alliance, Inc. (GCA). MacDonald operated GCA out of offices in Addison and Euless, Texas. He hired co-conspirator Solomon in January 2007 as GCA’s Chief Administrative Officer.
GCA managed the North American Consumer Alliance (NACA), a not-for-profit member association that created and packaged insured benefit association healthcare programs and policies administered to corporations, organizations and other entities. GCA sold the healthcare policies throughout the U.S. and maintained a conservative management fee. It collected fees called “overages” that were in excess of the conservative management fee.
In 2008, MacDonald created GCA’s “Overage Program” to sell interests in the overages through “Overage Purchase Agreements.” An investor’s potential return was directly related to the number of people who enrolled in a healthcare plan by purchasing a healthcare policy from CGA. GCA would pay the investor for each new healthcare plan enrollee. MacDonald installed Solomon as the program’s manager and she worked with MacDonald in conducting GCA’s activities regarding the Overage Program.
MacDonald initially planned to have only a single person invest in the Overage Program, but when one couldn’t be found, GCA fractionalized the program to make it available for multiple investors to provide smaller amounts of funds. GCA contracted with a sales agent to solicit individuals to invest, and the sales agent used information regarding the Overage Program that was provided by MacDonald and Solomon. That information included the number of current and projected healthcare plan enrollees that would drive investors’ potential returns.
MacDonald admits that he significantly inflated the current and projected enrollment figures by the thousands in an attempt to sell the Overage Program to investors. He and Solomon knew that the figures were false and that the sales agent would relay the figures to investors he was soliciting.
MacDonald also personally acquired investors for the Overage Program. In fact, MacDonald and Solomon provided false information to persuade one particular investor to invest $2 million in the Overage Program. They then used this money to make payments to existing program investors.
When GCA had difficulty making timely payments to Overage Program investors, MacDonald authorized Solomon to respond to investor complaints and inquiries with excuses for the delayed payments. Solomon sent these emails from accounts that were created for fictitious GCA employees.
The Overage Program did not generate any income or revenue. Less than 50 people actually bought any healthcare policies during the lifetime of the program. MacDonald and Solomon admit that any payments made to existing investors came from money that GCA received from new investors in the program.
In a parallel action, both defendants are also charged by the U.S. Securities and Exchange Commission (SEC) with securities fraud and conducting an unregistered securities offering while acting as unregistered broker-dealers. That complaint alleges that GCA had raised nearly $10 million from investors and returned about $2 million to investors in the form of Ponzi payments.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, which was established in 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit http://www.stopfraud.gov/.
The case is being investigated by the FBI. The U.S. Attorney’s Office also appreciates the assistance of the SEC’s Fort Worth Regional Office. Special Assistant U.S. Attorney Ruben Martinez, Jr. is in charge of the prosecution.