A federal jury has found two Sacramento men guilty of wire fraud in connection with a fraudulent investment scheme.
According to court documents, Ronald Wesley Groves, 69, was the co-founder and president of Money Growth Solutions, which operated from approximately April 2005 to April 2006. Donald Charles Mann, 54, was the co-founder and secretary-treasurer.
During the firm's year of operation, Groves and Mann raised about $4.8 million from approximately 642 investors by promising extremely high rates of return on "international bank trades," according to a federal Department of Justice news release. The defendants told investors that the bank trades were a highly secretive investment vehicle known only to a few people around the world.
According to evidence presented at trial, in one program investors were offered a 10 to 1, or 1,000 percent, return on their investment within a matter of weeks. In a later offering, Groves and Mann promised a 40 to 1, or 4,000 percent, return in the same amount of time.
The defendants told investors that until their money was placed into a bank trade, it would be maintained in an escrow account that could not be touched for any other purpose. Investors also were told that if the defendants were unable to execute a bank trade, the investors would receive their entire investment back plus 6 percent interest within 12 months. But with the exception of a few people who were able to obtain refunds, Money Growth Solutions investors lost their entire investments.
According to Matthew Johnson, a commissioned bank examiner from the U.S. Department of Treasury, Office of the Comptroller of the Currency, who was called as an expert witness, such "international bank trades" do not exist but have been used for decades in investment scams. Johnson testified that to discourage inquiry, the promoters of such schemes frequently claim that they are prohibited from disclosing details about the investment due to nondisclosure agreements. The promoters also use technical jargon consisting of real financial terms and concepts that are strung together in a way that would not make sense to anyone knowledgeable about economics or finances. They also provide their investors with various excuses as to why the bank trades have not been completed.
Although several federal agencies post warnings about these high yield investment schemes, the schemes persist through the Internet and urban folklore, according to the news release.
The federal investigation revealed that by April 2006, out of a total of approximately $4.8 million, Money Growth Solutions had less than $65,000 remaining in its bank account. Officials said the defendants pocketed approximately $300,000 apiece. Of the remainder, approximately $300,000 went to a Liberian presidential candidate and approximately $2.5 million to a Florida company that was supposedly developing a revolutionary battery, according to the news release. The Security and Exchange Commission later determined that the battery company was a scam and its owner was federally indicted.
The defendants gained the trust and confidence of many investors by quoting scripture and claiming to be engaged in humanitarian ventures, which, according to testimony presented during the trial, is a claim often seen in fraud cases of this type.
Because Groves and Mann face another trial in September on other charges, U.S. District Court Judge Kimberly J. Mueller postponed sentencing in this case until that trial is completed. Both men currently are in custody.
The case resulted from an investigation by the Sacramento Division of the Federal Bureau of Investigation.