William J. Ferry of Newport Beach Convicted of Investor Fraud Tied to Hurricane Katrina Relief
My colleague R. Scott Moxley wrote an excellent, twisty, true-crime cover story on the fraudulent scheme in September 2011:
From February to December 2006, Ferry pitched his "$1 billion" investment trade program to his potential marks. Claiming he was just awaiting any-day-now final clearance from the Federal Reserve Bank--a.k.a. "The Fed"--he laid out the plan.
According to the Department of Justice (DOJ), Ferry told the undercovers that for very little investment risk they would get a cut of funding from a Fed program that solicited project and humanitarian funds for disasters like Hurricane Katrina. They were further told the high yields would come after the Fed-approved and -regulated account divvied up funds equally between the humanitarian effort, project financing and the investors.
Among the false accusations about the totally phony baloney trading program: that once the program cleared compliance it would become registered by the Fed, that program managers had followed strict Fed guidelines, that a Fed trade administrator administered the program and that compliance duties were handled by a Fed compliance officer. Ferry acted as an underwriter and member of the compliance team.
A DOJ statement says that the undercover FBI agents were told they would get to meet a Fed official and/or the chairman of the board of a major U.S. bank to confirm the existence of the trade program, and that the investors funds would be kept in an offshore bank account managed by a Swiss banker who was already managing billions of dollars for those who set up the program.
Indeed, to make the scheme seem legit Ferry of course needed help. Former real estate investment manager Dennis J. Clinton, 64, of San Diego, acted as a troubleshooter during the compliance phase and transfer of funds to the Swiss banker. The role of banking expert was played by Paul R. Martin, 63, a former senior vice president and managing director of Bankers Trust out of New Jersey. Californian Brad Keith Lee was the contact with the Swiss banker, Oregonian John Brent Leiske acted as the trader, and Canadian Alex Chelak is charged with having acted as a compliance officer.
With the evidence of the dupe in hand, all those men were indicted on Aug. 21, 2008, as were Iowa's Richard Arthur Pundt and Florida's Ronald J. Nolte. Charges against Pundt were dismissed in August 2010, and Nolte was acquitted in federal court in Santa Ana on Tuesday.
Not so lucky were Nolte's co-defendants Ferry and Clinton, who were each found guilty by the same federal jury in Santa Ana of one count of conspiracy, two counts of mail fraud and six counts of wire fraud. They face up to 20 years in the federal pen on each fraud count at their scheduled Feb. 1, 2013, sentencing.
"Mr. Ferry and Mr. Clinton tried to dupe undercover agents into believing their high-yield investment program would earn them extremely high rates of return," says Assistant Attorney General Lanny A. Breuer in the DOJ statement. "In fact, Ferry and Clinton were conspiring to steal their money, along with the money of trusting investors."
At a separate trial, Martin was convicted Feb. 1 on the same counts as Ferry and Clinton. Martin faces the same prison stretch at his looming sentencing. Lee, who had pleaded guilty to wire fraud and conspiracy to commit mail and wire fraud, was sentenced on Jan. 11, 2010, to 24 months behind bars. Leiske pleaded guilty of all counts against him this past Jan. 24 and he is to be sentenced on Sept. 19.
Chelak remains a fugitive, reports the DOJ.
Follow OC Weekly on Twitter @ocweekly or on Facebook!