SANTA ANA, CA—The owner and operator of
a Santa Ana investment firm was sentenced today to 144 months in federal prison
for operating a Ponzi scheme that collected more than $10 million from
approximately 36 victims, many of whom were elderly residents of Orange County
and Los Angeles County.
Richard H. Nickles, 59, of Irvine, who
was the owner of Innovative Advisory Services, Inc., was sentenced by United
States District Judge Cormac J. Carney. In addition to the prison term, Judge
Carney ordered Nickles to pay $6.8 million in restitution.
“Investment fraud schemes that target
senior citizens are particularly sinister,” said United States Attorney Andre
Birotte Jr. “Mr. Nickles went to great lengths to disguise the criminal nature
of his scheme, and his actions caused harm to many investors, including the
elderly victims who trusted his false promises. This lengthy sentence in
federal prison should serve as a warning to others who want to follow in Mr.
Nickles’ footsteps: the end of the line for con men is a prison cell.”
Nickles pleaded guilty in June 2011 to
mail fraud and securities fraud, admitting that his scheme raised more than $10
million and three dozen victims suffered losses of approximately $6.8 million
because some of the money was returned to investors during the course of the
scheme.
As part of the investment scheme,
Nickles placed advertisements in the Orange County Register and the Los Angeles
Times that promoted safe investments through Innovative Advisory Services. The
advertisements variously described the investments as “U.S. Government
Guaranteed,” “FDIC Insured,” “Guaranteed,” or “Insured” and stated that there
was a “$50,000 Minimum Investment.” After being contacted by potential
investors, Nickles met with them and offered investments in various types of
low-risk bonds. According to court documents, Nickles took money from
investors, but, instead of investing the money in the bonds he recommended, he
used the money to pay off prior investors or trade in securities not authorized
by the investors. As part of his scheme, Nickles created fraudulent statements
from Innovative Advisory Services that were mailed to investors. Investigators
also determined that of the funds investors deposited, Nickles transferred
hundreds of thousands of dollars to his personal bank accounts and those of his
family members. Furthermore, investigators found that Nickles had transferred
approximately $170,000 to bank accounts in the Turks and Caicos.
In sentencing documents filed with the
court, prosecutors emphasized “the sophistication and audacity of defendant’s
fraud, the extensive suffering inflicted on his victims, and his flagrant
defiance of court orders” in a related civil case brought by the Securities and
Exchange Commission. In particular, prosecutors noted that Nickles withdrew
victims’ funds from a bank account that a federal judge had ordered frozen at
the SEC’s request.
Nickles has been in custody since he was
arrested by special agents with the FBI on July 9, 2010 during a meeting with
two victims at his Santa Ana office.
The criminal case against Nickles is the
result of an investigation by the Federal Bureau of Investigation.
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