Court of Appeals Affirm Convictions in Case Involving Watermark Financial
BUFFALO, N.Y. — The U.S. Attorney’s Office announced today that the United States Court of Appeals for the Second Circuit has affirmed the convictions of Ian Campbell Gent and James F. Lagona. The defendants were convicted of conspiracy and mail fraud by a federal jury in February 2011. Lagona was sentenced to 11 years in prison; Gent was sentenced to eight years. Gent and Lagona appealed their convictions and sentences claiming in part that there was insufficient evidence that they had intent to defraud and knowledge of the scheme.
Gent and Lagona assisted in an investment fraud scheme in connection with financial service firms M-One Financial and Watermark Financial Services Group. The firms were owned by Guy W. Gane who was convicted in December 2010 and sentenced to 13 years in prison. The firms operated out of 2425 Sweet Home Road in Amherst, NY until May 2008 when federal agents executed a search warrant and the SEC filed a civil action in federal court. The scheme involved promising high returns to investors on “debenture” investments or “promissory notes.”
The Court found that Gent and Lagona had intent to defraud and knowledge of Watermark’s illegal scheme. Specifically, Lagona actively prepared new debentures even after becoming aware that payments to investors of previously issued debentures were due and could not be paid, as promised, with profit; attended at least one sales meeting in which he participated in procuring an investment based on false representations; signed letters assuring investors that their non-existent investments were safe; and did these things at times when he was aware that no investments and no income were being generated.
The Court further stated that when he was hired, Gent knew that the company was “bleeding money” and was paying new investors back with prior investor money. While working for Gane, Gent encouraged the sale of debentures or promissory notes to pay off earlier investors. Lagona falsely assured investors that their investments were safe. Losses suffered by the investors totaled over $6,000,000.
The Court also affirmed Lagona’s sentence but sent Gent’s sentence back for the U.S. District Court in Buffalo to make additional findings regarding a sentencing guideline issue.