Fraudster Gets 30 Years for Ripping Off Seniors

(CN) - A man who founded a bogus charity and used it to defraud hundreds of elderly people of millions of dollars must serve 30 years in prison, the Sixth Circuit ruled.

Richard Olive, 47, and his wife Susan Olive, 48, skimmed millions in a scheme that involved setting up a Tennessee charity, National Foundation of America, and using it as a vehicle to raise money, not for charity, but for themselves.

The Olives targeted senior citizens while marketing charitable gift annuities -- essentially a financial transaction in which the senior would transfers his annuities to the charity, in exchange for a tax deduction and a lifetime stream of income.

The charity would then keep the remainder of the fit upon the donor's death.

However, according to a complaint filed in the Nashville Federal Court, the defendants diverted the funds to their own personal benefit, and were well aware that the National Foundation of America did not have enough money to guarantee income to its clients.

In addition, the purported foundation completed contracts that promised clients higher returns, but often surrendered client annuities early for a substantially lower cash payout, court documents says.

The foundations completed contracts worth $19.3 million, and surrendered them for $16.5 million cash.

But the Foundation was not the only vehicle for the Olives' alleged scheme. They were also accused of running a similar scheme through a Florida charity called "We The People" that raised over $75 million, and continued this operation even as regulators in several states issued cease-and-desist orders against National Foundation of America.

The Securities and Exchange Commission's complaint against the couple says, "Throughout the relevant period, We The People did minimal charitable work, but paid the Olives more than a million dollars.

"Indeed, the Olives took far more than that, misappropriating hundreds of thousands of dollars in investor funds without the knowledge or approval of anyone at We The People. The Olives funded their scheme through the sale of bogus investment products: the CGAs [charitable gift annuities]," the SEC continued.

The Sixth Circuit affirmed Richard Olive's fraud convictions Tuesday, finding that the lower court did not make errors at trial requiring reversal.

"In our view, admission of the cease-and-desist orders did not constitute an abuse of discretion," U.S. Circuit Judge Alan Norris said, writing for the three-judge panel. "They were introduced to show that defendant was aware of the fact that tax-exempt status was, at the very least, in doubt. His decision not to divulge them to his prospective clients and financial advisers is probative of his knowledge and intent."

The Cincinnati-based appeals court also upheld a sentencing enhancement based on the vulnerability of Olive's victims, who had an average age of 77, and for his involvement as a leader of the scheme.

Although Olive procured his victims through financial advisers - and paid them a handsome commission of nine percent for their services - the lower court found "no question [Olive] was the leader of this criminal activity," and no advisers were prosecuted for their actions.

Olive was sentenced to 372 months in prison, and three years of supervised release, and ordered to pay restitution of $6 million.

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