Donahoo Sentenced To 48 Months In Federal Prison After Pleading Guilty To Wire Fraud, Money Laundering, And Failure To File Tax Return In Investment Scheme;
SALT LAKE CITY - James Ronald Donahoo, II, age 36, of Pleasant Grove, who pled guilty to wire fraud, money laundering, and failure to file a tax return in June, will serve 48 months in federal prison. U.S. District Judge Dee Benson imposed the sentenced Thursday afternoon in U.S. District Court in Salt Lake City.
Donahoo must serve three years of supervised release after he finishes his federal prison sentence and pay $2,739,501.17 in restitution to victims of the fraud. A forfeiture money judgment has been entered in the same amount.
Donahoo’s convictions stem from a scheme to defraud individuals and companies he recruited to invest in Paradigm Investing, Inc., a Utah corporation he exercised control over.
As a part of the plea agreement, Donahoo admitted that he misrepresented to investors that if they would invest in Paradigm, they would make a 1 to 3 percent return on their investment, which would be paid out monthly. Paradigm never earned any revenues on any of its purported investments from which interest payments could have been made.
Donahoo admitted he told investors that Paradigm was in the business of making bridge loans or “hard money loans” to small businesses. According to the plea agreement, Paradigm did invest approximately $1.5 million in various businesses. However, the investments were not in bridge loans or hard money loans at Paradigm’s investors were told. Instead, businesses that received money were run by Donahoo’s friends, associates, or family members.
He created false bank statements for Paradigm that he showed to investors to convince them that the investment was safe, low risk, and a good investment. He also told investors that the risk was mitigated by the fact that for every dollar invested, he had a dollar in the bank.
Donahoo made payments to investors totaling more than $267,000 out of investor funds in furtherance of what was a Ponzi scheme.
Donahoo admitted that on or about Dec. 5, 2008, he caused two investors to send a $100,000 wire transfer from California to Utah as an investment in Paradigm. On about December 11, 2008, he purchased fur coats in Park City in excess of $10,000. He admitted in the plea agreement that he knew this transaction involved money obtained from his criminal scheme.
He also admitted that he did not file a tax return for 2008, even though he transferred funds from the Paradigm bank account to his personal bank account totaling $335,000. He used those funds for personal purposes.
The case was investigated by special agents of IRS-Criminal Investigation and prosecuted by the U.S. Attorney’s Office in Salt Lake City.