WHEELING, W.Va. — Federal prosecutors and the owner of the now-defunct Budget Finance Co. have reached a plea agreement connected to what U.S. Attorney for the Southern District of Ohio Benjamin Glassman described as a“classic Ponzi scheme” that cost investors anywhere between $9.5 million and $25 million.
During a press conference Wednesday at the Federal Building in Wheeling, officials announced Donna Brown of Clarington has agreed to plead guilty to charges of wire fraud, mail fraud and money laundering.
On each count, Brown faces a maximum of 20 years in prison, a $250,000 fine, three years of supervised release and restitution to victims.
The federal investigation was launched after Budget Finance closed its New Martinsville office suddenly in November 2015.
Glassman said the U.S. Attorney’s office for the Northern District of West Virginia was not involved in the investigation because one of its employees was a victim in the case.
Between 2005 and 2015, Brown’s business allegedly opened nearly 800 investment accounts with investments totaling more than $31 million, with the guarantee of annual returns for investors between 8-12 percent.
An investigation by Glassman’s office, the FBI, the Internal Revenue Service, West Virginia Attorney General Patrick Morrisey’s office and numerous other agencies found that Brown’s company held no substantial investments to generate such returns, and instead used funds from subsequent investors to pay prior ones.
Brown also allegedly mailed fraudulent quarterly investment statements to clients, as well as IRS 1099 forms, which she did not submit to the IRS.
The plea agreement estimated losses between $9.5 and $25 million. According to Anthony Martin, senior deputy attorney general for the state of West Virginia, some individuals invested up to $500,000 with Brown’s business. The plea agreement said 25 or more victims experienced serious financial hardship.
Brown, who has not yet officially entered her plea, made an initial appearance in federal court Wednesday in Wheeling before Senior U.S. District Judge Frederick Stamp. Her case will continue under Stamp, who will make the final decision as to Brown’s penalty, including her likely responsibility to pay back those affected.
Glassman said if restitution is deemed necessary by the court, his office will be responsible for accessing Brown’s assets and enforcing repayment.
He said Brown may “not 100 percent” have the needed funds to restore investors’ losses. He referenced Brown’s actions, using new investor payments to appease prior clients, as a system that ensured some received their money.
“But certainly Ms. Brown is on the hook,” Glassman said.
Wetzel County Prosecutor Timothy Haught also expressed doubt as to whether many of Brown’s former clients ever will be made whole.
He also urged the public to invest only with licensed brokers, noting if something “sounds too good to be true, it probably is.”
“I am disappointed and extremely saddened by the fact that there appears to be few, if any, unsecured assets to recover for the victims of this case, many of whom were senior citizens who lost their life savings,” Haught said.“These accounts were not insured by FDIC and it appears that almost all of the money that Ms. Brown was taking in was being sent out to cover payments to other investors. The enormity of this Ponzi scheme is shocking. My thoughts and prayers go out to the people who lost their investments.”
The company’s sudden closure prompted concern from clients, which led to the investigation. Many New Martinsville residents who invested with Brown expressed their shock and disappointment, calling Brown someone they trusted and considered a member of their community.
“For years, Donna Brown preyed upon investors and defrauded them out of their hard-earned money in order to support her personal lifestyle,” Special Agent Robert Johnson of the FBI’s Pittsburgh Field Office said. “As a result of the scheme devised by Brown, many of the victims in this case lost everything.”
A plea hearing has yet to be scheduled.
Lauren Matthews contributed to this report.