From the AP:
ALBUQUERQUE, N.M. — Wrapping up a criminal case that ruined lives from Washington state to New Jersey, a federal judge on Wednesday is scheduled to sentence a real estate executive who acknowledged running a Ponzi scheme that bilked 600 investors out of $75 million.
U.S. District Judge Bruce Black is expected to give Doug Vaughan no more than 12 years in custody under a plea agreement reached in December when Vaughan pleaded guilty to two felony charges.
It was unclear on Tuesday, however, if the Albuquerque man who turns 65 next month would be able to live out what could be his final years in a minimum-security federal prison camp for white-collar criminals or a traditional lockup with more hardened convicts.
Defense attorney Amy Sirignano said the U.S. attorney’s office reneged on a deal that would have landed him in the less-restrictive environment of a prison camp.
As part of the original plea agreement, prosecutors agreed to Vaughan’s request to voluntarily surrender and to be able to go to a prison treatment plan for alcohol issues, she said. Both actions would have reduced Vaughan’s score under the federal prison system that will determine which lockup he qualifies for.
But prosecutors in their presentencing report opposed those two points.
“The government went back on its word,” Sirignano said, “… and that’s outrageous conduct.”
Sirignano met with New Mexico U.S. Attorney Ken Gonzales Tuesday afternoon. A spokesman for Gonzales said she could not comment on the case but that a response would be filed before Vaughan’s sentencing on Wednesday at 2 p.m. in Santa Fe.
In her filings, Sirignano cites a Dec. 12, 2011, letter in which assistant U.S. attorney Gregory Fouratt said he would not oppose the treatment program or voluntary surrender, which means Vaughan would not be taken into custody in the courtroom after his sentencing.
But in his presentencing report to the court, Fouratt wrote that Vaughan has had plenty of time to get his affairs in order.
“Whatever benefit may accrue to Vaughan were he allowed to ‘voluntary surrender’ is dwarfed by the measure of justice the victims will derive from witnessing Vaughan finally begin his incarceration,” he wrote.
As for the defense’s request that Vaughan get treatment for alcohol issues, Fouratt wrote the defense was seeking that treatment “only to trim up to a year off his prison sentence.”
He said that while the defense maintains Vaughan drinks Chardonnay on a daily basis, so do millions of other people “and thousands of doctors recommend doing so.”
“Most importantly, there is no credible evidence that the long-term Ponzi scheme that Vaughan masterminded and operated was fueled by alcohol,” he wrote. “Greed, narcissism, an insatiable desire for the spotlight and the adoration of others, perhaps, but not alcohol.”
The scheme involved people loaning money to Vaughan in exchange for promissory notes that carried high interest rates and were issued through his now-defunct Vaughan Company Realtors. The loans were supposed to be used for real estate investments, but prosecutors said Vaughan used the money to support a lavish lifestyle and pay back earlier investors. The scheme collapsed in 2010.
Vaughan had victims in at least eight states, including New Mexico, Arizona, Texas, Colorado, Wyoming, New Jersey, Oregon and Washington.
This undated photo provided by Doug Aurand shows the 6,800-square-foot mansion where alleged Ponzi schemer Doug Vaughan lived alone in luxury from 2006 to earlier this year. (AP Photo/Courtesy Doug Aurand via The Albuquerque Journal)
ALBUQUERQUE (CN) – A prominent New Mexico real estate man was sentenced to 12 years in federal prison for his role in a $74 million Ponzi scheme.
Douglas F. Vaughan, 64, of Albuquerque, was sentenced Wednesday for wire and mail fraud charges and ordered to pay $74.7 million in restitution, the U.S. Attorney’s Office said in a statement.
Vaughan agreed to forfeit $38.3 million in previously seized money and real estate in Spring Valley, Nev., prosecutors said.
Vaughan raised more than $74 million from 600 investors by promising them big returns.
A 30-count indictment in February 2011 accused him of raising the money by selling promissory notes to fund his real estate brokerage, Vaughan Company Realtors. The scheme collapsed in early 2010 and Vaughan pleaded guilty in December 2011 to wire fraud and mail fraud.
The plea included 16-pages of stipulated facts, in which Vaughan admitted to the allegations in the indictment and described in detail how he established, marketed and administrated the Ponzi scheme.
“Vaughan led investors to believe that their investments in the promissory note program were actually or virtually risk-free because they were guaranteed by VCR, Vaughan’s personal guarantee, and a $2.5 million deed of trust on certain real estate,” prosecutors said in the statement. “Vaughan marketed his promissory note program by representing that the invested funds would be used to purchase real estate and to acquire smaller real estate companies.”
Instead, Vaughan used the money to pay the interest and principal on notes taken out by earlier investors, to pay himself under the guise of salary and bonuses, and to subsidize VCR.
Prosecutors said that without money from new investors, VCR was insolvent by 2005, when the scheme began.
But Vaughan continued to distribute the same marketing materials for the promissory note program, sign the same promissory notes, and make the same corporate and personal guarantees.
He told investors he would not make more than $2.5 million in notes, but company records show that he was responsible for more than $24.35 million in notes by the end of 2004. This ballooned to more than over $74 million by the end of 2009, with annual losses for 2009 of more than $13.9 million.
“Vaughan admitted that, when his Ponzi scheme began to collapse and he became unable to meet the monthly interest payments to note holders, he made false and misleading excuses to investors and failed to disclose that VCR had insufficient revenue to make the interest payments,” prosecutors said.
“In Feb. 2010, when Vaughan filed for personal and corporate bankruptcy, the aggregate principal balance owned to approximately 600 note holders was approximately $74,745,723.93 and the interest expense owed to note holders exceeded $1 million per month.”
He used to be a up standing guy … greed changes a person to someone you do not recognize … sad ending to a man who started out right and was envied to a simple. Crook
As a person who was on the inside, watching all of this go down, I was totally shocked that the justice system did not prosecute his girlfriend Susie Fairchild along with Douglas. She was the one who brought him new investors constantly and convinced them herself that Doug was valid and that the investment was sound. Susie went scott-free and paid no price for her part in the Ponzi scheme. She has gone on to take a vantage of other prominent men in Albuquerque. Once they discover how greedy and selfish she is, they dump her like a hot potato. But she never spent one day in jail for her part in the Ponzi scheme. For all the time and money that the justice department spent on this crime, they missed the second most important criminal.
Doug came into a training class for his new realtors (1993) and took off a 25k watch to pass around, I guess to inspire us. When it came to me I looked at the time on it. Then I looked at the $12 Walmart watch I was wearing and it had the same exact time-so I was not impressed by his at all. Seemed silly to pay that much. I did not succeed at real estate, and never lived large, as he did. But I never spent a day in prison either, or hurt other people. I’m glad greed never seduced me.