Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, March 21, 2007

Ponzi Schemer Pleads Guilty

On March 5, Gary L. McNaughton pled guilty to  10  counts  of  securities  fraud,  unlawful  sale  of    unregistered  securities,  mail  fraud  and  attempted  tax   evasion.  McNaughton is scheduled to be sentenced on these charges  on  May  22, 2007. The charges stemmed from McNaughton's role in a Ponzi scheme  in which he fraudulently raised at least $17 million  from  approximately 200 investors and which was the subject of a prior Commission action.

In the criminal case, filed in a Cleveland federal court by  the  U.S. Attorney's Office for the Northern District of  Ohio,  the  indictment charged that McNaughton raised at least $17 million from approximately 200 investors through the sale of unregistered securities in the  form of notes under the name of The Haven Equity  Company.  The  indictment further charged that  McNaughton  fraudulently  guaranteed  an  annual return of 10% to 35% on the investment and told  investors  that  they would receive their returns in the form of monthly interest  payments.  According to the indictment, McNaughton also told  investors  that  he would send their money to a trader and friend in Ontario, Canada,  who  would use a trading  strategy  to  generate  the  guaranteed  returns.  However, rather than investing the  funds,  McNaughton  used  investor funds to, among other things, pay purported interest and principal  to existing investors and pay his personal expenses.

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