, former CEO and owner of The Duncan Group, has pleaded guilty to yesterday to federal fraud charges
involving a $3.9 million investment scheme.
According to court documents, Duncan represented that The Duncan Group was involved in real estate investments, including buying, rehabilitating and selling residential real estate. Duncan solicited investors in Missouri and around the United States to participate in his real estate projects through The Duncan Group by making false representations regarding the security of investments and the rates of returns promised.
Bank records revealed that Duncan operated The Duncan Group investment program as a Ponzi scheme. Investors who were repaid on their principal investments were paid from funds obtained from other investors, rather than from returns on investments in real estate projects as promised and represented. At no time did Duncan advise investors that their returns, if paid at all, would be paid from other investors' principal.
Typically, Duncan falsely told investors that their principal investments were secured by a specific property. For example, some investors were told that an investor's name would be placed on a particular deed or that investors were "securitized" by first mortgages on properties.
Bank records show that beginning no later than December 2005, Duncan was experiencing personal financial problems and was often late on his home mortgage payments.
The scheme operated from roughly January 2006 until Duncan advised investors of his intention to declare bankruptcy in October 2008. During the scheme, Duncan received investment principal from more than 50 investors who ultimately lost a total of approximately $3.9 million. Records recovered during the investigation revealed that Duncan only bought approximately ten (10) properties, and that these ten properties lost money in total. Investor money was not used as promised and represented, instead, investor money was routinely used to pay other investors, pay routine expenses of the business, and to pay Duncan's personal expenses.
Duncan, 33, of Defiance, pleaded guilty to one felony count of mail fraud and one felony count of money laundering before United States District Judge Carol E. Jackson. Sentencing has been set for July 27, 2010.
"Promoters of Ponzi schemes prey upon trusting investors and then steal their hard earned money. Investors should be wary that programs promising unbelievable returns on investment should be looked at carefully," said Toni Weirauch, Special Agent in Charge of IRS Criminal Investigation, St. Louis Field Office.
"Mr. Duncan conned potential investors by promising a high rate of return on real estate and a fast turnaround," said Michael Kaste, Assistant Special Agent in Charge of the FBI St. Louis Division. "Anytime before investing, people should do their homework and check with agencies like the Secretary of State, the Securities and Exchange Commission, the Better Business Bureau and other court records. But even then, con men will build a 12-foot ladder to climb an 11-foot wall."
Mail fraud carries a maximum penalty of 20 years in prison and/or fines up to $250,000; money laundering carries a maximum penalty of ten years in prison and/or fines up to $250,000.
This case was investigated by Internal Revenue Service Criminal Investigation, Postal Inspection Service, Federal Bureau of Investigation, and the Securities Division of Missouri Secretary of State Robin Carnahan's Office. Assistant United States Attorney John Bodenhausen is handling the case for the U.S. Attorney's Office.