Case # 14HF3054
Date: December 6, 2016
MAN CONVICTED AND SENTENCED TO 10 YEARS IN PRISON FOR RUNNING $11 MILLION PONZI SCHEME BASED ON FRAUDULENT INSURANCE POLICIES
*Over 27 victims, mainly senior citizens, targeted with sale of unsecured securities
SANTA ANA, Calif. – An Orange County man was convicted and sentenced yesterday to 10 years in state prison for running an $11 million Ponzi scheme and victimizing over 27 people with sale of unsecured securities based on fraudulent insurance policies. Joseph Francis Bartholomew, 77, Lake Forest, pleaded guilty to a court offer on Dec. 5, 2016, to one felony count of the use of a device or scheme to defraud and 28 felony counts of using an untrue statement in the purchase or sale of a security with sentencing enhancements for aggravated white collar crime over $500,000 and loss greater than $3.2 million. In addition to prison, Bartholomew was ordered to pay restitution.
Co-defendant Wendy King-Jackson, 56, Laguna Niguel, pleaded guilty yesterday to two felony counts of the use of an untrue statement or omission in connection with the purchase or sale of a security. King-Jackson faces a maximum sentence of six years in state prison at her sentencing on Feb. 2, 2018, at 8:30 a.m. in Department C-57, Central Justice Center, Santa Ana.
The defendants engaged in a “Ponzi scheme,” which is a fraudulent operation that offers investors high, short-term returns on investments. Instead of using the money to generate actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors.
Bartholomew owned and operated MBP Insurance Services, Inc. (MBP), which offered and sold unsecured securities based on fraudulent insurance policies. Between July 2005 and May 2014, Bartholomew defrauded over 27 investors, the majority of whom were senior citizens, and falsely promised them he would provide a return of 15 to 40 percent in interest from their investment.
King-Jackson worked at MBP as an insurance agent. The defendant offered and sold unsecured securities based on fraudulent insurance policies by misleading clients that the policies were legitimate and legal investments when they were not. King-Jackson failed to disclose to clients that the California Department of Corporations (now “California Department of Business Oversight”) did not authorize MBP to sell the securities, as required by law, and did not inform clients of the risks associated with the investments as required by industry practice.
In September 2011, Bartholomew failed to pay monthly interest payments to investors, and by March 2013, all monthly payments to investors ceased. Bartholomew collected more than $11.3 million from investors.
In May 2014, Bartholomew offered an unsecured investment to John Doe claiming that he would pay him $10,000 monthly for a $500,000 investment. The defendant fraudulently assured John Doe that he was making a legitimate investment on stranger-third party life insurance policies and stated he had no difficulties in paying back any of his other investors for the past 10 years.
A victim reported the crime to the California Department of Insurance, who investigated this case.
Deputy District Attorney Nagy Morcos of the Major Fraud Unit is prosecuting this case.