MAN FACES TRIAL FOR DEFRAUDING 125 INVESTORS, MOSTLY SENIORS, OUT OF $11 MILLION IN PONZI SCHEME AND NOT PAYING $530,000 IN TAXES

MAN FACES TRIAL FOR DEFRAUDING 125 INVESTORS, MOSTLY SENIORS, OUT OF $11 MILLION IN PONZI SCHEME AND NOT PAYING $530,000 IN TAXES

SANTA ANA – Opening statements will begin Monday against a man for taking the life savings of numerous seniors in a “Ponzi” scheme and filing false tax returns on his profits.  The case involves charges of fraudulently raising more than $11 million in investments from unsuspecting victims, most of them elderly, through the illegal sale of unqualified promissory notes or stocks. Jeffrey Gordon Butler, 50, San Juan Capistrano,  is charged with 874 counts related to making untrue statements of material fact in the offer and sale of securities, the offer and sale of unqualified securities, theft from elderly persons, using a scheme to defraud in the sale of a security, and filing false tax returns for years 2001 through 2004.  Peggy Warmath Butler, 48, San Juan Capistrano, is also charged with filing false tax returns with her husband, Jeffrey Butler. If convicted, Jeffrey Butler faces a maximum sentence of 321 years in state prison and Peggy Butler faces a maximum sentence of 11 years and four months in state prison. Opening statements are scheduled to begin Monday, Nov. 10, 2008, at 10:00 a.m. in Department C-41, Central Justice Center, Santa Ana.

Jeffrey Butler is accused of operating a “Ponzi” scheme, a fraudulent scheme 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. He is accused of selling more than 300 promissory notes or stocks without getting a license for the notes from the California Department of Corporations as required by law.  The majority of the victims involved in this case were over 65 years old and unaware of the risks of their investments. Several of the victims lost their life savings and many have died waiting for the trial of the Butlers.

In the early to mid 1990s, Jeffrey Butler operated a company called Senior Information Services (SIS) offering to create living trusts, wills, and other estate planning structures for senior citizens for a fee.  The business generated many of the victims who began to trust Jeffrey Butler.  Between 1995 and 2004, in a series of businesses which changed forms and names, Jeffrey Butler is accused of failing to provide investors with any documents describing the new company, how it made money, or the risks of investing in the company as required by law to protect consumers and investors. He is accused of transferring investments between companies on several occasions without informing his elderly investors or providing them with only limited information.  The defendant is accused of immediately taking 10 percent of the investors’ money for himself without their knowledge or consent. 

In 2000, Jeffrey Butler is accused of shifting his clients’ funds to his newest venture, Global Network Providers (Grenada), Inc. (GNPG), without the knowledge of the investors.  The clients’’ money went to the development of a “telecommunications” company supposedly located on the eastern Caribbean island of Grenada. The company had no assets or income.

Jeffrey Butler is accused of convincing investors that GNPG paid 12 percent interest per year on promissory notes, when in fact the notes did not require payment for up to three years, and did not specify a time or method of payment. Investors were not made aware that these investments were not authorized to be sold in California. Some of the victims agreed to invest after being misled into believing that GNPG was an Individual Retirement Account (IRA) qualified investment, when in reality the investments were not IRA qualified. Butler is accused of simply having “IRA” typed at the top of the promissory notes. Butler is accused of failing to inform many of the investors that the telecommunications company was based in Grenada. Being that GNPG was on the island of Grenada in the Caribbean, the company was not subject to U.S. laws.  Butler is accused of running out of funds to maintain his scheme and sending his victims a letter in which he lied to investors, claiming that Hurricane Ivan had caused a delay in payments.