PLANO, Texas (CN) - A South Texas man was sentenced Wednesday to 25 years in federal prison for an $11 million Ponzi scheme that lied about investing in top-rated bonds.
Gary Lynn McDuff, 59, of Pasadena, also was ordered to pay more than $6.5 million in restitution. He faced up to 40 years in prison.
A jury convicted McDuff in March 2013 of conspiracy to commit wire fraud and money laundering, after deliberating for only six minutes.
McDuff was sentenced in 1994 to three years in federal prison for money laundering and fled to Mexico, the SEC said in 2008.
One of McDuff's co-conspirators, Gary Lancaster, 62, of Oregon, pleaded guilty and was sentenced to federal prison. His other co-conspirator, Robert Reese, of Carmel, Calif., pleaded guilty, was sentenced to prison and died.
The men created Lancorp Investment Fund in West Linn, Ore., and solicited investments from people across the country. McDuff claimed the fund was properly registered and that Lancaster was a registered adviser, according to the indictment.
"While McDuff controlled the operation, Lancaster agreed to serve as the 'front' since McDuff could not possess a securities license or sell securities because of [the] past felony conviction," prosecutors said in a statement. "McDuff recruited Reese to help sell the investment despite the fact that Reese had been barred by the state of California from selling securities."
The three men claimed that the fund would invest only in A+ or A1-rated bonds and that the principal would be insured and never at risk.
"McDuff, Lancaster, and Reese never disclosed McDuff's felony conviction or Reese's securities ban," prosecutors said. "McDuff then laundered the criminal proceeds in order to promote the operation of the fraudulent scheme."
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