After a federal jury convicted Gary Lynn McDuff of conspiring to defraud investors, a U.S. District Court for the Eastern District of Texas judge sentenced the 58-year-old to 25 years behind bar for the $11 million investment scam. McDuff’s co-conspirators, Robert Reese and Gary Lancaster, had both pleaded guilty—Reese has since died. They too received prison terms.
The three men lied to investors when they told them their funds would be invested in top rated bonds that carried low risk. Instead, the fraudsters laundered investor money.
They solicited investments from customers throughout the U.S. while working at Lancorp Investment Fund. The indictment says that McDuff claimed that Lancaster was a registered adviser and the fund was properly registered.
Misrepresentations were made to customers to get them to give money, including that only A+ and A1 rated bonds would be invested in and each investment’s principal would be insured. Lancaster was touted as someone with previous experience in these investments.
In a statement, the Plano Texas U.S. attorney said that McDuff was in charge of the Ponzi scam while Lancaster was the ‘front.’ A prior felony conviction prevented McDuff from having a securities license or selling securities. Reese, who had previously been accused of fraudulent conduct in California, was also brought in to sell. The men’s prior convictions and violations were never mentioned to customers.
As part of the sentence, McDuff must pay $6.5 million in restitution to investors that were bilked in the Ponzi scam.
Shepherd Smith Edwards and Kantas, LTD LLP is a Texas securities fraud law firm that works with investors to get their money back.
Pasadena Man Sentenced to 300-Month Term in Multi-Million-Dollar Investment Fraud Scheme, FBI, April 16, 2014
Jury Convicts Recidivist Ponzi Man, Courthouse News Service, March 29, 2013
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$550M Securities Fraud Case Between Texas’ Wyly Brothers & SEC Goes to Trial, Stockbroker Fraud Blog, April 2, 2014
Mixed Securities Verdict Reached in SEC Case Against Texas-Based Life Partners Holdings, Stockbroker Fraud Blog, February 19, 2014
US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013