Michigan Real Estate Promoter Sentenced for Running Ponzi-Type Scheme
On April 24, a Michigan judge sentenced a former real estate promoter to prison after a jury convicted him in March of orchestrating what the state attorney general and the U.S. Securities and Exchange Commission described as a Ponzi scheme. Even at his sentencing hearing, Joel I. Wilson maintained he never intended to defraud anyone, even as his victims testified about their losses. Conversely, Wilson’s family, who also lost money in the scheme, pleaded with the judge for leniency.
State of Michigan v. Wilson
The SEC previously filed a civil complaint against Wilson in November 2012. He failed to appear in court and a federal judge entered default judgment for the SEC in July 2013. According to the SEC’s complaint, Wilson ran a real estate business in Bay City, Michigan. He also sold securities tied to his real estate investments. Between 2009 and 2012, the SEC said Wilson “raised approximately $6.7 million from approximately 120 investors.”
Basically, Wilson promised to use investor funds to “purchase the servicing rights on land contracts on residential properties” owned by his companies. These contracts represented properties where buyers made monthly payments. Wilson told investors these were “secured” land contracts, meaning if the buyers defaulted on their payments, the investors would still own the underlying properties. Of course, investors were also promised returns of nearly 10% annually.
But in practice, Wilson used most of his investors’ funds to make unsecured loans to his own businesses. Although the SEC noted Wilson warned investors he “might” do this in his offering documents—with no risk to the guaranteed 10% returns—this “exception quickly became the rule.” Although initially investing in land contracts as promised, Wilson soon “began using the investors’ money strictly to make loans to his companies.” These companies failed to generate enough revenue to meet Wilson’s promised returns, leading him to falsify account statements and otherwise lie to investors. Wilson also diverted more than $500,000 of investor funds for his personal use.
The SEC ultimately ordered Wilson to pay over $6.7 million in civil penalties, disgorgement and interest. But that was just the beginning of his legal troubles, as the Michigan attorney general’s office filed a separate criminal case based on the SEC’s findings. On March 5, a jury in Bay County, Michigan, found Wilson guilty of six counts of securities fraud, larceny and racketeering. Judge Joseph K. Sheeran subsequently sentenced Wilson to “concurrent prison terms of 105 months to 20 years and 80 months to 10 years.” The judge also ordered Wilson to pay $6.5 million in restitution to his victims. This is in addition to the SEC’s civil penalties.
Always Be Skeptical
Wilson argued he never had any “criminal intent” and that this was simply a case of a legitimate business naturally failing in the marketplace. But federal and state prosecutors saw it differently. They pointed to the 120 people who lost millions based on Wilson’s false promises. As Michigan Attorney General Bill Schuette told the press after Wilson’s conviction, “Be skeptical of anyone who promises huge returns for a small investment.”
If you have been the victim of a Ponzi scheme or similar con and need independent legal advice from an experienced Florida securities fraud attorney, contact Gregory Tendrich, P.A., immediately to discuss your legal options.