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Regulation and Compliance > Litigation

2 Members of $20M Scam Convicted, Could Face Rest of Lives in Prison

By Jeff Berman

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What You Need to Know

  • The last two of the more than 10 conspirators in a massive, multi-state investment scam have been convicted.
  • One faces a maximum sentence of more than 200 years, the other more than 90 years.
  • One of them was already one of six people targeted by the SEC in a 2015 complaint.

 Two more of the 10 conspirators in a massive, multi-state investment scam that defrauded over 100 investors at or near retirement age out of more than $20 million were convicted Wednesday by a jury in U.S. District Court for the Eastern District of Virginia, according to court documents and the Justice Department.

David Alcorn, 78, of Scottsdale, Arizona was convicted of conspiracy, wire fraud and money laundering. He faces a maximum penalty of more than 200 years in prison when sentenced on June 23, the Justice Department said in a news release on Thursday.

Aghee William Smith II, 70, of Roseville, California, was convicted of conspiracy and wire fraud, and he faces a maximum penalty of more than 90 years in prison when sentenced on June 23. Both of them were indicted on March 21, 2019.

Actual sentences for federal crimes, however, are usually less than the maximum penalties, the Justice Department pointed out. A federal district court judge will determine the actual sentences after taking into account the U.S. sentencing guidelines and other relevant statutory factors, according to the Justice Department.

But, considering the ages of both defendants, it is possible they could spend the rest of their lives behind bars regardless of their sentences.

The lawyers representing Smith declined to comment on Monday. The attorney representing Alcorn did not immediately respond to a request for comment.

SEC Case

In 2015 in Arizona, the Securities and Exchange Commission charged 12 companies and six individuals, including three of the 10 defendants charged in the Virginia case, with defrauding investors in a scheme that raised more than $12.4 million from investors involving applications to the Federal Communications Commission for cellular spectrum licenses.

According to the SEC’s complaint, filed in U.S. District Court for the District of Arizona, on April 6, 2015, Alcorn and Kent Maerki orchestrated the offering fraud through Janus Spectrum LLC, a Glendale, Arizona-based company they founded and managed.

Criminal Case

According to court records and evidence presented at trial in the Virginia case, from about 2011 through 2017, Alcorn and Smith were part of an investment fraud conspiracy that operated out of Arizona, California, Florida, Idaho, the Hampton Roads area of Virginia and other locations across the country.

Their co-conspirators were: Maerki, 78, and his wife Norma Jean Coffin, 60, of Arizona; Daryl Bank, 51, of Florida (also a defendant in the SEC case); insurance salesman Tony Sellers, 62, of Idaho; insurance salesman Tom Barnett, 69, of California; attorney Billy Seabolt, 56, of Williamsburg; Raeann Gibson, 49, of Florida; and Roger Hudspeth, 51, of Suffolk.

The defendants convinced their victims to invest in or send money to companies owned and controlled by Alcorn, Bank and Maerki. Alcorn and others then misappropriated major chunks of the investment funds to pay for their criminal enterprise and lavish lifestyles, as well as to pay enormous commissions to Smith and other salesmen, according to court documents and the Justice Department.

Smith began selling the fraudulent investments in 2011 for Alcorn, Maerki and Bank. The conspirators used material misrepresentations to sell their illiquid, highly speculative investment vehicles that were then used as vehicles for fraud.

Based on those fraudulent misrepresentations, their victims cashed out of 401(k) and other retirement accounts to invest without knowing that Alcorn, Bank and Maerki were immediately transferring 20%–70% of the funds to other companies they controlled in the form of purported “fees,” the Justice Department said.

The Last 2 Standing

Alcorn and Smith were the last two defendants to be convicted in the case. Bank was convicted after trial of conspiracy, mail and wire fraud, selling unregistered securities, securities fraud, and money laundering, and was sentenced in September to 35 years in prison, the Justice Department said.

Maerki pleaded guilty to conspiracy and was sentenced in March 2021 to 16 years in prison. Seabolt was convicted after trial of conspiracy and mail fraud and sentenced in September to 10 years in prison. Gibson pleaded guilty to conspiracy and was sentenced in February 2020 to 10 years in prison.

Hudspeth pleaded guilty to investment advisor fraud and money laundering and was sentenced in May 2018 to over 12 years in prison. Sellers pleaded guilty to conspiracy and was sentenced in January to five years in prison. Coffin and Barnett each pleaded guilty to conspiracy and will be sentenced in March and May 2022, respectively, the Justice Department said.

Jeff Berman

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