In Austin this morning, 43-year-old Christopher Brown Cornett of Buda, TX, and 49–year-old Heidi Beryl Beyer of Scottsdale, AZ, were sentenced to 40 years and six years in federal prison, respectively, for carrying out a Ponzi scheme which victimized more than 150 individuals and resulted in a total estimated loss to investors of over $10.6 million announced United States Attorney Robert Pitman, Federal Bureau of Investigation Special Agent in Charge Armando Fernandez and Internal Revenue Service-Criminal Investigation Special Agent in Charge Steve McCollough.
In addition to the prison terms, United States District Judge Sam Sparks ordered that the defendants jointly and severally pay restitution in the amount of $9,525,031.77. Judge Sparks ordered Cornett to pay an additional $795,701.62 restitution. Furthermore, Judge Sparks ordered that both defendants be placed under supervised release for a period of three years after completing their prison terms.
“Mr. Cornett and Ms. Beyer defrauded investors out of millions of dollars, and the sentences handed down today exemplify the consequences criminals face for such crimes. Investment schemes cause serious damage to victims, both financially and emotionally, and therefore demand serious punishments. My office is committed to bringing white collar criminals to justice, and today’s sentences are evidence of that commitment,” stated United States Attorney Robert Pitman.
In October 2012, Cornett pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering; Beyer pleaded guilty to one count of wire fraud. By pleading guilty, Cornett admitted that from April 2008 to October 2011, he devised a scheme to obtain money from investors under false pretenses. Beyer joined in the scheme in September 2009. According to court records, the defendants represented to investors that their money would be placed into a common pool of funds that would be invested in foreign currency exchange trades, and that investors would receive the profits of the trades, less a fixed share of the profits for the defendants (usually between 25 to 30% of the profits). These representations were made both orally and in writing, in the form of emails and, eventually, in the form of a Subscription Agreement each investor had to sign.
Information which the defendants failed to disclose to investors included the fact that: Cornett had previously been fired from Morgan Stanley for failure to follow company rules; Cornett was terminated from Brookstreet Securities in 2002 because he had violated securities regulations; on January 8, 2003, the National Association of Securities Dealers (“NASD”) barred Cornett from associating with any member of the NASD in any capacity based on Cornett’s theft of approximately $28,000 of an investor’s money; Cornett was not properly registered as required by the Commodities Exchange Act and CFTC regulations; as well as Cornett’s previous federal conviction in 2003 for five counts of federal bank fraud and the fact that he served two years in federal prison as a result of that prior conviction.
According to court records, the defendants solicited from pool participants a total of approximately $14.6 million during their scheme. The defendants lost approximately $7.3 million of the pool’s funds in foreign currency exchange trading. They used the remaining pool funds for personal enrichment or to make payments to other investors so as to lull those investors into the mistaken belief that their investment was profitable and sound. Court records reflect that Cornett used pool funds to cover gambling losses in Las Vegas which exceeded $600,000 and to purchase a new Chevrolet Corvette.
“This type of scheme threatens our economy and undermines the trust in our financial system,” stated Internal Revenue Service-Criminal Investigation Special Agent in Charge Steve McCollough. “IRS-Criminal Investigation wants to make sure that criminals face the consequences of their actions just as these defendants did.”
“The FBI, IRS-CI and the Western District of Texas United States Attorney's Office recognize the importance of protecting Americans from criminals who steal from victims without violence but through broken promises and deceit. Americans now, more than ever in tough economic times, count on law enforcement to protect them from white collar criminals and to send messages to future fraudsters that these law enforcement agencies will actively pursue them to ensure crime does not pay,” stated Federal Bureau of Investigation Special Agent in Charge Armando Fernandez.
This investigation was conducted by the Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation. Assistant United States Attorney Chris Peele prosecuted this case on behalf of the Government.