Orange County District Attorney
Tony Rackauckas, District Attorney
401 Civic Center Drive West
Santa Ana, CA 92701
For Immediate Release
December 10, 2009
Susan Kang Schroeder
SENTENCING TO BEGIN AGAINST PONZI SCHEMER CONVICTED OF DEFRAUDING 125 MOSTLY-ELDERLY INVESTORS OUT OF $11 MILLION AND FAILING
TO PAY $530,000 IN TAXES
*Defendant’s wife will also be sentenced for filing false tax returns
SANTA ANA – Sentencing will begin tomorrow for a man convicted of stealing the life savings of over 125 unsuspecting elderly victims in a “Ponzi” scheme by fraudulently soliciting more than $11 million in investments through the illegal sale of unqualified promissory notes or stocks and filing false tax returns on his ill-gotten profits. Jeffrey Gordon Butler, 51, San Juan Capistrano, was found guilty by a jury June 30, 2009, of 693 felony counts for 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.
The defendant’s wife, Peggy Warmath Butler, 49, San Juan Capistrano, was also convicted June 30, 2009, of four felony counts of filing false tax returns and excessive taking sentencing enhancements. Jeffrey Butler now faces a maximum sentence of over 300 years in state prison. Peggy Butler faces a maximum sentence of 10 years in state prison. Sentencing for both defendants is scheduled to begin tomorrow, Friday, Dec. 11, 2009, at 1:30 p.m. in Department C-41, Central Justice Center, Santa Ana. The sentencing may take several days and last into next week due to the large number of victims expected to make victim impact statements.
Circumstances of the Ponzi Scheme and Tax Fraud
A “Ponzi” scheme is when investors are offered high, short-term returns on investments, but instead of the investments generating actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors. Jeffrey Butler sold more than 300 promissory notes or stocks without obtaining 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 died awaiting the jury trial.
Jeffrey Butler first met many of his victims while operating a company called Senior Information Services, which offered to assist senior citizens in the creation of living wills, trusts and other estate planning structures for a fee. Through this business, the defendant gained the trust of many of his clients, whom he later victimized. Between 1995 and 2004, in a series of businesses that changed forms and names, Jeffrey Butler failed to provide his investors with any documents or other information about his companies, how the companies made money, or any of the risks of investing in the companies as required by law to protect consumers and investors. The defendant transferred investments between companies on several occasions without informing or providing only limited information to his elderly investors. The defendant immediately took 10 percent of the investors’ money for himself without their knowledge or consent.
In 2000, Jeffrey Butler moved 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 very few assets and no income.