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Businessman in handcuffs

Regulation and Compliance > Litigation

Unlicensed Advisor Gets Over 6 Years for Ponzi Scheme

By Jeff Berman

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What You Need to Know

  • An unregistered advisor was sentenced to 75 months in prison for mail fraud in connection with a scheme in which investors lost more than $4 million.
  • The investors included his own family members and friends.
  • Victims lost their retirement money and, in at least one case, had no funds to care for disabled children.

An unlicensed investment advisor was sentenced on Friday in U.S. District Court in Tacoma, Washington, to 75 months in prison for mail fraud in connection with a scheme that defrauded investors out of over $4 million, according to Nick Brown, U.S. attorney for the Western District of Washington, and court documents.

Charles Richard Burgess, 67, of Vancouver, initially attempted to blame the COVID-19 pandemic for the loss of victim funds. Some of the victims were his own family members and friends.

In reality, Burgess had lost most of the investors’ money many years earlier and had concealed the losses from them, the Justice Department had alleged in its original information, filed Aug. 4, 2022, in U.S. District Court for the Western District of Washington at Tacoma.

In all, 32 investors lost about $4.3 million in principal payments they had made to Burgess. In addition to his prison sentence, Burgess was ordered to pay $4.4 million to his victims.

At the sentencing hearing on Friday, Chief U.S. District Judge David Estudillo pointed to the “long-lasting effects of the crime on the victims,” Brown said in a news release. Estudillo told Burgess, “To lie, to cheat, to steal seem to be the values you were living by.”

From the mid-1990s until 2021, Burgess led his victims, mostly friends and family, to believe he was successfully investing their funds for retirement. He sent fake statements showing significant gains. In truth, since at least 2013, the investment fund was insolvent and losing value, and Burgess took over $1 million in fees for his own benefit, according to Brown.

“It is heartbreaking to read the victim statements describing how their lives have been dramatically altered — no retirement, no funds to care for disabled children, in one instance a victim’s home placed at risk of foreclosure,” Brown said in a statement.

According to records filed in the case, in the mid-1990s, Burgess started selling investments in an unregistered investment vehicle that Burgess called “the pool.”

Burgess never became a registered or licensed investment advisor, according to Brown. Yet, between January 1995 and April 2021, he convinced 64 people into investing $13.4 million in the pool, the Justice Department alleged.

Burgess didn’t screen the investors to see what type of risk they could tolerate, and he often didn’t even provide them with written materials about the nature of the investments, according to case records.

He told investors he would collect fees only if the fund made money and told some of them he would personally absorb any trading losses.

Burgess provided the investors with statements indicating their account balances had grown substantially over time. But those statements were false. For example, in 2016, Burgess sent investors statements indicating their investments had grown about 10% that year when, in fact, the investments lost money, Brown said.

As early as 2013, Burgess couldn’t repay all the investors’ principal, let alone the profits he dishonestly told investors they had earned, according to Brown. In December 2013, Burgess told investors the value of the investor accounts exceeded $4.2 million. In reality, the pool’s assets were only about $711,000 at that time.

By the end of 2020, Burgess represented in year-end statements that the collective value of victims’ accounts surpassed $10.3 million when the assets totaled only $113,000, according to Brown.

As the financial picture grew bleaker, Burgess paid off earlier investors with money from new investors in a “classic Ponzi scheme,” Brown noted.

(Image: Adobe Stock)

Jeff Berman

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