Ponzi Scheme

Bloomfield Hills Investment Planner Sentenced for Ponzi Scheme Fraud


March 26, 2010 - U.S. Attorney Barbara McQuade announced that Richard Taft Johnson, a 67-year-old Bloomfield Hills, Michigan investment planner, was sentenced to eight years' imprisonment today by the Honorable Stephen J. Murphy for his fraud of more than 50 victims in a Ponzi scheme causing them a cumulative loss of $13.2 million in principal alone.

The fraud arose when Johnson, doing business in Bloomfield Hills, Michigan as Investor Planning Services, began representing to potential investors in the late 1990s that they could invest in a low-risk program called the American Charitable Program. Johnson represented that this investment program would provide a very competitive rate of return that would be tax deferred, investors’ principal would be secure, and could be withdrawn at any time. Johnson’s American Charitable Program also included the purchase of an insurance policy that would provide a future benefit to a charity or qualified non-profit organization. The investors understood that, ultimately, their investments would benefit charitable organizations such as universities or other educational institutions, individual teachers or pastors. In the interim, the investors believed they would receive a rate of return of 10 percent per quarter and that they could withdraw their principal investment if necessary. Johnson also provided Investors with fraudulent periodic statements making it appear that there were separate accounts for each investor that continued to accumulate interest.

Over 130 investors are known to have provided millions of dollars to Mr. Johnson for his American Charitable Program. These investors are primarily from Michigan, but a number reside in Florida and other states. As in all Ponzi schemes, Johnson paid earlier investors, or investors who demanded a return of their money, with newer investors’ monies. But he also diverted significant money to his personal use. The defendant’s scheme began to unravel in 2008 and 2009.

The Court has also ordered defendant to pay restitution totaling to more than $13.2 million to the victim investors. The Court also has taken the unusual step of appointing a receiver to determine what assets might be recovered to repay victims.

At the sentencing, the emotional impact of Mr. Johnson’s fraud was evident. One 82-year-old victim informed the court how Johnson had destroyed them financially. “Our dreams have been stolen” she exclaimed. Another indicated how she and her husband, her 87-year-old father, and her sister, would never recover from the fraud of nearly $2 million they had incurred.

United States Attorney Barbara McQuade stated that, “Mr. Johnson’s Ponzi scheme was insidious because he represented it to be a safe investment that, ultimately, would benefit charitable and educational organizations.”

Like most Ponzi schemes, it went undetected for a number of years and permitted some investors to receive a very healthy return on their investments. This, in turn, helped promote their sense of trust in defendant causing them to share their experience with friends and relatives and encourage them to invest. In the end, a number of the investors, some quite elderly, lost their life savings because Johnson used their monies to keep the scheme going until the inevitable collapse.

“We consider it very important to investigate and prosecute such long term predatory Ponzi schemes and help ascertain what, if anything, the victims’ might be able to salvage of their financial worth, which is why our office took the unusual step of asking the Court to appoint a receiver,” McQuade said.

McQuade thanked the FBI, along with the investigators of the State of Michigan Office of Financial Insurance Regulation and the State of Florida Division of Insurance Fraud who worked very hard to investigate and compile the information about Mr. Johnson’s fraudulent activities.

The investigation of this case has been conducted by Special Agent Daniel J. Troccoli of the FBI and prosecuted by Assistant U.S. Attorney Ross I. MacKenzie.