Wednesday, March 21, 2007
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.