Texas Man Pleads Guilty to Felony in $375,000 Investment Scheme
CHARLESTON, W.Va. – United States Attorney Mike Stuart announced today that Leonard Theodore Kern, 64, of Plano, Texas, entered a guilty plea to obstruction of justice for his role in an investment scheme that resulted in the loss of over $375,000 to a West Virginia woman.
“Kern’s scheme resulted in a significant loss to the victim,” said United States Attorney Mike Stuart. “This case serves as a reminder to all of us that if it sounds too good to be true, it probably is. Fortunately, as a result of his plea agreement, Kern will be required to pay restitution.”
Kern faces up to 20 years in prison when he is sentenced on March 29, 2021, and he will be required to pay restitution to the victim.
Kern convinced the victim to invest $375,000 in a “Private Placement Platform” with two other individuals by promising a low risk financial transaction for an exclusive group of investors and an abnormally high rate of return over a period of just two months. Several years later, the victim received no return on the investment. As part of a federal grand jury investigation, grand jury subpoenas were served upon a company owned and controlled by Kern requesting documentation and records related to the investment transaction. At the plea hearing, Kern admitted that he intentionally obstructed the grand jury investigation by concealing hundreds of documents responsive to the grand jury subpoenas.
The Federal Bureau of Investigation (FBI) conducted the investigation. United States District Judge Frank W. Volk presided over the hearing. Assistant United States Attorneys Andrew J. Tessman and Joshua C. Hanks are handling the prosecution.
Individuals should consult with a licensed investment broker prior to responding to solicitations for investments into “Platform” trading investments. The FBI has participated in numerous investigations of fraud activity commonly referred to as Platform Trading, Private Platform Programs (PPPs), Prime Bank Trading, or Medium-Term Note Trading Programs. In these schemes, perpetrators falsely represent their ability to offer above-average market returns with below-market risk through the trading of bank instruments.
Several common characteristics include claims that: (1) investor funds can be placed in a bank account and then used, without risk, to trade bank debentures or other financial instruments; (2) invested funds can be used to lease or rent U.S. Treasury Obligations and then use these same leased securities as collateral for further trading programs; (3) trading Medium Term Notes (MTNs), Prime Bank Notes, or any other bank instruments, on a riskless basis, will yield above market returns; (4) Letters of Credit or Standby Letters of Credit can be discounted or traded for profits; (5) certain high-yield foreign trading programs are sanctioned or supported by the Federal Reserve, International Monetary Fund, International Chamber of Commerce, or other U.S. or international agencies; (6) special connections to the Federal Reserve or some other internationally renowned organization such as the United Nations, the IMF or the World Bank; (7) benevolent, humanitarian, or charitable projects; (8) the need for extreme secrecy and nondisclosure agreements; (9) banking and regulatory officials will deny knowledge of such instruments; (10) these investment opportunities are by invitation only, available to only a handful of special customers, and historically reserved for the wealthy elite; (11) the financial instruments are too technical or complex for non-experts to understand.
In general, investment programs that purport to offer an introduction to secret investment markets, which offer above-market rates of return with below-market rates of risk for privileged customers with special access, are fraudulent. There are no secret markets in Europe or in North America in which banks trade securities.
A copy of this press release is located on the website of the U.S. Attorney’s Office for the Southern District of West Virginia. Related court documents and information can be found on PACER by searching for Case No. 5:20-cr-00183.