Moreno Valley Man Confesses to $24 Million Ponzi Scheme

Paul Horton Smith Sr., 59, from Moreno Valley, California, has entered a guilty plea to a federal charge of wire fraud in connection with a Ponzi scheme. This scheme, which spanned nearly two decades, defrauded over $24 million from at least 200 investors, many of whom were elderly or retired.

Case Overview

  • Charge and Penal Code: Smith pleaded guilty to one count of wire fraud, as defined under 18 U.S.C § 1343.
  • Duration and Scope: From July 2000 to May 2020, Smith operated several companies in Riverside, including Northstar Communications LLC, Planning Services Inc., and eGate LLC, to orchestrate this scheme.

Mechanics of the Scheme

  • Investment Misrepresentation: Smith falsely represented Northstar as an annuity or a similar investment, claiming involvement in real estate or the stock market.
  • Guaranteed Returns: He assured investors of a fixed rate of return, falsely branding Northstar as a “safe investment.”
  • Misuse of Funds: Contrary to his promises, Smith never invested the funds, instead depositing them into a non-interest-bearing checking account.
  • Ponzi Scheme Operation: Smith paid earlier investors with funds obtained from newer investors, a hallmark of Ponzi schemes.

Noteworthy Incident: In a striking case, Smith persuaded a victim to invest $400,000, which was life insurance proceeds. Promising a 5% return on a “safe investment,” Smith instead diverted these funds to maintain his fraudulent scheme.

Legal Implications

  • Wire Fraud (18 U.S.C § 1343): This statute criminalizes the use of interstate communications to perpetrate fraudulent schemes. Smith’s use of emails, texts, and electronic bank transfers to execute his scheme falls squarely under this law.
  • Potential Sentence: Facing a maximum of 20 years in federal prison, Smith’s sentencing highlights the severe consequences of wire fraud.
  • Impact on Victims: The scheme led to significant financial losses, with over 200 investors defrauded and 106 victims still awaiting full repayment, totaling a loss of about $13.3 million.

Investigation and Upcoming Sentencing: The federal investigation into this case demonstrates the commitment to prosecuting financial fraud. United States District Judge Jesus G. Bernal will preside over Smith’s sentencing on April 1.

Write a Reply or Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.