Wednesday, June 2 2010 5:59 PM EDT2010-06-02 21:59:10 GMT
A civil suit stemming from a multi-million dollar ponzi scheme in Richmond goes to trial this month. A Richmond family is suing David Silver and his now defunct business for fraud. Silver gave their money to Hanover County businessman and for police officer Donald Lacey. Lacey was convicted in March of running an elaborate real estate scheme.More >>
Friday, February 19 2010 5:33 PM EST2010-02-19 22:33:13 GMT
A federal investigation into the investment deals of a Hanover County man may leave dozens of old homes in the city empty for years.More >>
By Rachel DePompa - bio | email Posted by Terry Alexander - email
RICHMOND, VA (WWBT) – Donald Lacey admitted to mail fraud and an unlawful monetary transactions related to a yearlong federal investigation.
Lacey is a former police officer who many people in Richmond trusted with their money. Today he was on the other side of courtroom, pleading guilty to two felonies.
Donald Lacey gathered hundreds of investors from around the country and promised big returns. You give him your money. He invests it in third party builders. Then buys, fixes and re-sells old homes in the city.
"Sometimes you'd almost have to laugh or then you'd cry," said Investor Marc Denning.
Marc Denning's family thought it was investing a quarter of a million dollars into a home in Church Hill, except, there was no house.
"Unless there's oil underneath this lot I don't see it being worth a quarter of a million dollars. So, we'd like to know where the money is for this property," said Denning.
Denning is just one of dozens of investors we've talked to around the country who have money tied up in homes in Richmond that have never been renovated. And they claim their money is gone.
Last year Donald Lacey defaulted on every loan; 170 investors, 17 million dollars.
The U.S. government says Lacey invested the money into funds like Tower, Premier...all companies he controlled. The government says Lacey rarely used the money for the actual real estate investments.
Lacey admitted to mail fraud and taking $55,000 of investor's money to pay his American Express account.
"Had a plea agreement, plead guilty and that's where we are right now," said Jeffery Everhart, Lacey's Attorney.
Under Lacey's plea deal, prosecutors won't charge him with anything else involving these transactions, but there's no agreement on a sentence. That will be up to a federal judge.
Lacey is out on bond. He'll be sentenced in June and faces up to 30 years in prison.
The judge was concerned about bond and how much money this case involves, and whether Lacey could flee. But prosecutors say most of the money is tied to assets, and they need Lacey available to work with investigators to account for the hundreds of Richmond properties. It's too soon to tell whether investors will get any of their money back.
See below for press release.
Donald C. Lacey, 43, of Richmond, Va., pleaded guilty today to mail fraud and engaging in unlawful monetary transactions. Lacey faces a maximum penalty of 20 years of imprisonment on the mail fraud charge, and a maximum penalty of 10 years on the charge of engaging in unlawful monetary transactions when he is sentenced by United States District Judge Henry Hudson on June 18, 2010. Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Michael F.A. Morehart, Special Agent in Charge of the FBI's Richmond Field Office; Keith Fixel, Postal Inspector in Charge, United States Postal Inspection Service, Charlotte Division; and C. André Martin, Special Agent in Charge, IRS Criminal Investigation, Washington DC Field Office, announced the plea.
"Donald Lacey admitted he stole millions from hundreds of people through an elaborate Ponzi scheme," said U.S. Attorney MacBride. "He misled his investors into believing they were purchasing Richmond real estate and helping to improve the city. Now they've lost their money, and the properties remain vacant and rundown. Today's plea is the first step in holding Mr. Lacey accountable and bringing help to his victims."
"Promoters of Ponzi schemes prey upon trusting investors and then steal their hard earned money. Investors should be wary that programs promising unbelievable returns on investment should be looked at carefully," said Special Agent in Charge C. André Martin. "Remember the old cliché, 'If it's too good to be true, it probably is.' IRS Criminal Investigation will continue to be aggressively pursued by law enforcement."
Documents filed with the plea agreement show that in October 2006, Lacey formed Capital Funding & Consulting, L.L.C. ("CFC"), headquartered in Henrico County, and promoted CFC as a private real estate lending company that provided short-term loans to qualified borrowers for various real estate projects. Through various means, including a PowerPoint presentation and a website, Lacey solicited individuals to invest in CFC, promising them a 12.5% rate of return on their investments derived from the loans made to the borrowers.
In pleading guilty, Lacey acknowledged that he failed to provide material information to potential investors, including: CFC was loaning a significant majority of its funds to entities under Lacey's control; virtually all of the transactions between CFC and entities under Lacey's control were channeled through Hermitage Realty, Lacey's real estate firm; and Lacey used CFC funds to pay agents at Hermitage Realty inflated commissions as an incentive to find properties for Lacey's other companies. From October 2006, through November 2008, more than 200 investors invested well over $9,000,000 with CFC.
Lacey also acknowledged that, unbeknownst to CFC investors, he caused the transfer of the majority of CFC funds to his other investment companies – entities under Lacey's complete and sole control. Once funds were loaned or otherwise disbursed to his companies, Lacey utilized those funds in a manner inconsistent with the representations he made to investors. Only a relatively small portion of the funds were actually used to rehabilitate the properties for which the funds were borrowed. In fact, from October 2006 until November 2008, over $5,000,000 of investor funds transferred to the investment companies was further transferred to another company to pay pre-existing debt-service on properties with no connection to CFC; and during that same time period, over $1,000,000 of the investor funds transferred to the investment companies was further transferred to Lacey's personal accounts and used for personal and business expenses unrelated to CFC. Lacey also transferred funds directly from CFC's Escrow account into his own personal accounts and used those funds for personal and business expenses unrelated to CFC. The combined loss to the victims is more than $7 million.
This case was investigated by the FBI, the Internal Revenue Service Criminal Investigation, the United States Postal Inspection Service in Richmond, the State Corporation Commission, the Virginia State Police, Henrico County Police, and the National White Collar Crime Center. Assistant United States Attorneys John D. Adams and Michael R. Gill prosecuted the case on behalf of the United States.