Investment Adviser Admits Ponzi Scam

ST. LOUIS (CN) - The president of Rate Search, a Clayton, Mo. investment firm, pleaded guilty to federal fraud and tax charges. Prosecutors say Scott Luster, 53, of Belleville, Ill., ran a Ponzi scheme that defrauded customers of $4.5 million.

Between January 2000 and June 30, 2007, Luster marketed and brokered certificates of deposit through Rate Search to its customers and directed Rate Search's daily operations, according to court documents.

Prosecutors say Luster and Rate Search failed to buy CDs for customers even after customers paid for them, and failed to tell the customers that the CDs had not been bought. Luster and Rate Search allegedly used the money for unrelated business and personal expenses.

Prosecutors also say that Luster and Rate Search failed to roll over customer CDs when requested and used the money for unrelated business and personal expenses. Luster also allegedly failed to report additional income of $807,911 for the taxable years of 2002 through 2006.

"Mr. Luster engaged in a Ponzi scheme, in which customer monies were used for purposes other than what was intended by trusting investors," Assistant U.S. Attorney Michael W. Reap said in a statement. "Even though Mr. Luster will be required to pay restitution to these victims, many have lost hundreds of thousands of dollars of their retirement savings."

Luster pleaded guilty to one felony count of mail fraud and one felony count of filing a false tax return. He faces up to 20 years in prison and $250,000 in fines on the mail fraud charge and 3 years in prison and $100,000 in fines on the tax charge at his April 21 sentencing. Restitution is mandatory on the mail fraud charge.

Co-defendant Clark Schultz, 42, pleaded guilty last December to related charges and will be sentenced March 5. Schultz was responsible for finding the rates for the bank CDs and placing the CDs for the customers of Rate Search.

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