Henrico County Man Pleads Guilty to Over $7 Million Investment Scheme

March 16, 2010 - RICHMOND, VA—Donald C. Lacey, 43, of Richmond, Va., pleaded guilty today to mail fraud and engaging in unlawful monetary transactions. Lacey faces a maximum penalty of 20 years of imprisonment on the mail fraud charge, and a maximum penalty of 10 years on the charge of engaging in unlawful monetary transactions when he is sentenced by United States District Judge Henry Hudson on June 18, 2010. Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Michael F.A. Morehart, Special Agent in Charge of the FBI’s Richmond Field Office; Keith Fixel, Postal Inspector in Charge, United States Postal Inspection Service, Charlotte Division; and C. André Martin, Special Agent in Charge, IRS Criminal Investigation, Washington D.C. Field Office, announced the plea.

“Donald Lacey admitted he stole millions from hundreds of people through an elaborate Ponzi scheme,” said U.S. Attorney MacBride. “He misled his investors into believing they were purchasing Richmond real estate and helping to improve the city. Now they’ve lost their money, and the properties remain vacant and rundown. Today’s plea is the first step in holding Mr. Lacey accountable and bringing help to his victims.”

"Promoters of Ponzi schemes prey upon trusting investors and then steal their hard earned money. Investors should be wary that programs promising unbelievable returns on investment should be looked at carefully,” said Special Agent in Charge C. André Martin. “Remember the old cliché, 'If it's too good to be true, it probably is.' IRS Criminal Investigation will continue to be aggressively pursued by law enforcement."

Documents filed with the plea agreement show that in October 2006, Lacey formed Capital Funding & Consulting, L.L.C. (“CFC”), headquartered in Henrico County, and promoted CFC as a private real estate lending company that provided short-term loans to qualified borrowers for various real estate projects. Through various means, including a PowerPoint presentation and a website, Lacey solicited individuals to invest in CFC, promising them a 12.5 percent rate of return on their investments derived from the loans made to the borrowers.

In pleading guilty, Lacey acknowledged that he failed to provide material information to potential investors, including: CFC was loaning a significant majority of its funds to entities under Lacey’s control; virtually all of the transactions between CFC and entities under Lacey’s control were channeled through Hermitage Realty, Lacey’s real estate firm; and Lacey used CFC funds to pay agents at Hermitage Realty inflated commissions as an incentive to find properties for Lacey’s other companies. From October 2006, through November 2008, more than 200 investors invested well over $9,000,000 with CFC.

Lacey also acknowledged that, unbeknownst to CFC investors, he caused the transfer of the majority of CFC funds to his other investment companies—entities under Lacey’s complete and sole control. Once funds were loaned or otherwise disbursed to his companies, Lacey utilized those funds in a manner inconsistent with the representations he made to investors. Only a relatively small portion of the funds were actually used to rehabilitate the properties for which the funds were borrowed. In fact, from October 2006 until November 2008, over $5,000,000 of investor funds transferred to the investment companies was further transferred to another company to pay pre-existing debt-service on properties with no connection to CFC; and during that same time period, over $1,000,000 of the investor funds transferred to the investment companies was further transferred to Lacey’s personal accounts and used for personal and business expenses unrelated to CFC. Lacey also transferred funds directly from CFC’s Escrow account into his own personal accounts and used those funds for personal and business expenses unrelated to CFC. The combined loss to the victims is more than $7 million.

This case was investigated by the FBI, the Internal Revenue Service Criminal Investigation, the United States Postal Inspection Service in Richmond, the State Corporation Commission, the Virginia State Police, Henrico County Police, and the National White Collar Crime Center. Assistant United States Attorneys John D. Adams and Michael R. Gill prosecuted the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.