Newport Man Convicted in $1 Billion Investment Fraud

A former stockbroker and an investment manager were convicted today for their role in a scheme to bilk $1 billion from investors, who were actually undercover FBI agents.

William J. Ferry, 70, of Newport Beach, and Dennis Clinton, 64, of San Diego, were found guilty by a federal jury of one count of conspiracy, two counts of mail fraud and six counts of wire fraud, according to prosecutors.

Ferry and Clinton, who are scheduled to be sentenced Feb. 1, face up to 20 years in prison on each fraud count.

In a separate trial, Paul R. Martin, 63, of New Jersey, was found guilty Aug. 3 of one count of conspiracy, two counts of mail fraud and six counts of wire fraud. Martin, who was a senior vice president and managing director of Bankers Trust, is scheduled to be sentenced Feb. 1 and faces up to 20 years in prison on each count, according to federal prosecutors.

From February to December 2006, Ferry, Clinton, Martin and others promoted a high-yield investment fraud scheme that promised high returns at little to no risk to principal. The defendants argued they were operating a ``Fed trade program'' regulated by the Federal Reserve Bank, prosecutors said.

FBI agents, posing as investors, were told the investment programs aimed to generate money for project funding and humanitarian programs such as relief for Hurricane Katrina victims, prosecutors said.

Ferry acted as an underwriter, Martin as a banking expert and Clinton as a troubleshooter, according to prosecutors.

``Mr. Ferry and Mr. Clinton tried to dupe undercover agents into believing their high-yield investment program would earn them extremely high rates of return,'' said Assistant Attorney General Lanny Breuer.

``In fact, Ferry and Clinton were conspiring to steal their money, along with the money of trusting investors,'' Breuer said. ``Undercover operations are an integral part of our efforts to stop financial fraudsters before they wipe out the life savings of innocent victims. Based on today's verdict, the defendants will now pay a heavy price for their conduct.''

Ferry, Clinton and Martin were indicted in August 2008, along with John Brent Leiske of Oregon; Alex Chelak, a Canadian citizen; Richard Arthur Pundt of Iowa; Brad Keith Lee of California; and Ronald J. Nolte of Florida.

Nolte was acquitted today of all charges. Charges against Pundt were dismissed by prosecutors in August 2010.

Lee pleaded guilty to wire fraud and conspiracy to commit mail fraud and wire fraud in April 2009 and was sentenced to January 2010 to 24 months in prison.

Leiske pleaded guilty in Oregon in January and is scheduled to be sentenced Sept. 19.

Chelak is a fugitive, prosecutors said.

- City News Service