RECOMMENDED READING: ‘Naras Funds’ Was Ponzi Scheme Tied To 2 Other Fraud Schemes, Prosecutors Say; 50-Count Indictment Returned After 4-Year FBI/IRS Probe

“He marketed his plan as ‘simply the best financial plan ever created.'” — Office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California, Sept. 14, 2012

A California man and his 76-year-old father-in-law ran a $7 million Ponzi scheme called Naras Funds, federal prosecutors said yesterday.

The younger man — Lee Loomis, 54, of Granite Bay — joined with five others in two mortgage-fraud schemes that caused more than $10 million in losses, prosecutors said.

Now, all seven individuals have been charged in a 50-count indictment after a four-year investigation by the FBI and the IRS, prosecutors said.

Loomis, also known as Lawrence Leland Loomis, was arrested yesterday. His father-in-law, John Hagener of Granite Bay, is said to be cooperating with investigators.

From a statement by prosecutors yesterday (italics added):

The three frauds are connected to a wealth-building program offered to the public through Loomis Wealth Solutions (LWS) in California, Illinois, Washington, and elsewhere from 2006 through 2008. According to the indictment, Loomis encouraged members who joined LWS: (1) to purchase whole life insurance; (2) to “harvest” home equity and retirement accounts to buy shares in the Naras Funds; and (3) to serve as “nominees” in the purchase of residential real estate controlled by Loomis. Loomis promised members of Loomis Wealth Solutions that they could acquire real estate at no cost to themselves. Moreover, he said he would pay them more than $300 per month for each home they agreed to acquire and those payments could be applied to the life insurance premiums. He marketed his plan as “simply the best financial plan ever created.”

In the Naras Funds Ponzi scheme, Loomis and Hagener are charged with falsely promising 12 percent annual returns in two investment funds: (1) Naras Secured Fund #1 and (2) Naras Secured Fund #2. According to the indictment, to induce people to invest in the Naras Funds, Loomis and Hagener falsely promised that the Naras Funds were invested in junior mortgages paying 14 percent annual returns. The two men also claimed that the Naras Funds were guaranteed by secured deeds of trust in residential real estate and by backing from a third-party company. According to the indictment, those statements were false. In fact, Loomis and Hagener used the money to pay operating expenses of various Loomis-controlled companies, to pay themselves, and to pay earlier investors. Loomis and Hagener are charged with mailing false monthly investment reports to victims and arranging wire transfers of victims’ home equity and retirement accounts to the failing Naras Funds in 2008.

Meanwhile, the Sacramento Bee is reporting this (italics added):

The alleged fraud was so complex that federal agents and prosecutors took years before they were ready to seek an indictment, and the cast of characters that Loomis surrounded himself with were worthy of a screenplay.

One was a white supremacist, another a lifelong con man who fled the country and was eventually arrested coming in from Canada with $70,000 crammed in his cowboy boots.

Read the report in the Sacramento Bee.

Read yesterday’s statement by prosecutors on the website of the FBI.