High-Yield Investment Scam Nets 2 Convictions

Two investment advisors, William J. Ferry and Dennis J. Clinton, were found guilty of a high-yield investment fraud scheme that swindled a wealthy investor out of $1 billion. The scheme, which was uncovered by the FBI, promised extremely high returns with little or no risk to principal.

According to Assistant Attorney General Lanny A. Breuer, Ferry and Clinton tried to dupe undercover agents into believing their high-yield investment program would earn them extremely high rates of return. In reality, the defendants were conspiring to steal their money, along with the money of trusting investors.

Ferry, 70, of Newport Beach, Calif., and Clinton, 64, of San Diego, were each found guilty in U.S. District Court for the Central District of California of one count of conspiracy, two counts of mail fraud and six counts of wire fraud. They face a maximum penalty of 20 years in prison on each fraud count.

The scheme, which was promoted from February to December 2006, promised investors a high return at little or no risk to principal. The defendants falsely represented that their high-yield investment program was a ‘Fed trade program’ regulated by the ‘Fed’ (Federal Reserve Bank), and that they had to follow strict Fed guidelines.

Investors were also told that once they had passed compliance, they would become registered in Washington, D.C., with the Fed. The defendants falsely represented to FBI undercover agents that they would arrange for them to meet a Federal Reserve official and/or the chairman of the board of a major U.S. bank to confirm the existence of the defendants’ HYIP.

The scheme was uncovered by the FBI, who posed as wealthy investors and investment managers in an effort to stop fraudsters before they actually harmed victims. The defendants will be sentenced on Feb. 1, 2013, and face a maximum penalty of 20 years in prison on each fraud count.

The case is a result of an indictment that was handed down on Aug. 21, 2008, which also named Paul R. Martin, a former senior vice president and managing director of Bankers Trust, who was found guilty in a separate trial on Aug. 3, 2012. Martin faces a maximum penalty of 20 years in prison on each fraud count at sentencing, scheduled for Feb. 1, 2013.