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Press Release

Former KC Woman Sentenced for Fraud Scheme to Steal Victim's Lottery Winnings

For Immediate Release
U.S. Attorney's Office, Western District of Missouri

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a former Kansas City, Mo., woman was sentenced in federal court today for engaging in a fraud scheme in which she stole $440,000 in lottery winnings from her victim as part of a scheme that resulted in a total loss of more than $640,000.

Freya Pearson, 44, of Conyers, Ga., formerly of Kansas City, was sentenced by U.S. District Judge Beth Phillips to five years in federal prison without parole. The court also ordered Pearson to pay $640,667 in restitution to her victims.

On Oct. 27, 2016, Pearson was found guilty at trial of three counts of wire fraud, four counts of money laundering, one count of tax evasion and one count of making false statements to the Department of Housing and Urban Development (related to her application for federal housing benefits).

According to evidence presented during the trial, Pearson convinced her 61-year-old victim to transfer $480,000 into the bank account of an organization called Recidivism at Work (RAW), a nonprofit entity Pearson established, which was opened the day before her victim made the first wire transfer. This victim, who had been working as a housekeeper at Research Hospital before going on disability and who lived in public housing, won $2.4 million in the Missouri Lottery in 2008. After setting money aside for taxes then purchasing a home for herself, a home for a daughter and a car for another daughter, she established an annuity to provide approximately $30,000 per year for the rest of her life. As a result of Pearson’s fraud scheme, however, she is now financially insolvent and had to take a reverse mortgage in order to keep her home.

Pearson convinced her victim she was a friend and falsely represented herself as a financial advisor. Pearson instructed the victim to withdraw her lottery winnings from the annuity account. The victim made three wire transfers in April, May and June 2010 to deposit the funds into Pearson’s RAW checking account. Whether the money was an investment or a business loan, Pearson materially omitted to disclose to the victim that she would use the money to gamble and for her own personal expenses. A partial summary of Pearson’s gambling expenses, which began the day after the first wire transfer, was over $96,000. Pearson also spent $12,000 on travel, purchased three vehicles (a Cadillac Escalade, a Pontiac Sunfire and a Chevrolet Tahoe) and spent money on restaurants, shopping and other personal expenses while she lived in the St. Louis, Mo., metropolitan area. Pearson made payments to her victim of approximately $1,200 per month for a little over a year before she quit paying her altogether – a total of approximately $38,000. No identifiable money was used for the nonprofit entity, and little for any business purpose.

When she met the victim in 2010, Pearson was unemployed and her only income came from child support and Social Security benefits for one of her children. While she was receiving hundreds of thousands of dollars from her victim’s lottery winnings, Pearson applied for and received federally subsidized housing benefits under the Section 8 program meant to assist low income residents. In March 2010, Pearson applied with the Weston Housing Authority (in Platte County, Mo.) for Section 8 benefits – claiming that she was unemployed and homeless. Based on these representations, the Weston Housing Authority arranged for the rental of a duplex in Kansas City-North, with housing authority paying $875 per month and Pearson paying $200 per month. Although Pearson didn’t actually live in the Kansas City residence, she continued to receive federal benefits after moving to Orange County, Calif., in March 2012, until she was terminated from program for fraud in 2014. Pearson received a total of $76,837 in federal housing benefits over four years. In 2011, Pearson also began receiving welfare and/or food stamp benefits.

Pearson filed for Chapter 7 bankruptcy protection on Dec. 2, 2010, but did not disclose the RAW bank accounts, which had total balances of $56,506. Pearson received a discharge of her debts (totaling more than $90,000) on March 15, 2011.

Pearson filed no tax return for tax year 2010, and thus did not pay income taxes of $122,000 that would have been due on the $441,830 of taxable income Pearson received as a result of defrauding her victim.

Pearson defrauded the victim of a total of $441,830. Pearson evaded $122,000 in federal income tax. Pearson defrauded the Weston Housing Authority of $76,837 in housing benefits. Pearson thus caused a total loss of at least $640,667.

According to court documents, while on bond awaiting trial in this case, Pearson also made false statements on a credit application at a Conyers, Ga., car dealership in order to purchase a vehicle. Pearson listed a false address and false employment and income on her credit application.

This case was prosecuted by Assistant U.S. Attorneys Kathleen D. Mahoney and Jane Pansing Brown. It was investigated by the Kansas City, Mo., Police Department, IRS-Criminal Investigation and the Dept. of Housing and Urban Development, Office of Inspector General.

Updated February 22, 2017

Financial Fraud