What a surprise! Yet another real estate scam. This one was perpetrated in Missouri and resulted in an astonishing $62 million in losses by investors. United States Attorney, Beth Phillips, revealed the scheme set up by a Leawood attorney and a real estate speculator from Great Britain. Both individuals have pleaded guilty.
The Missouri attorney, James Brown, and British citizen Derek Smith, of Oxfordshire, pled guilty in separate appearances in U.S. District Court in St. Louis. The pair operated over a 10-year period from 2000 to 2010 through an operation known as British Lending Program (BLP). During this time, the pair received $62.5 million in "loans".
In classic Ponzi scheme fashion, investors believed they were loaning money for legitimate real estate projects. Brown and Smith, however, used the money for themselves or to pay interest and principal to the first group of lenders.
Brown had practiced law in England prior to his involvement in BLP. During the ten years BLP operated in Missouri, Brown gave up his law practice. Instead, he ran BLP, receiving substantial fees under other DBAs, such as British American Group and J. Scott Brown and Associates.
Smith was a business and real estate speculator/developer in England operating as Princess Hotels Management and Distinctive Properties. His investment in a series of small hotels began to fail during the 1990s, and he was in dire need of capital to sustain the properties.
The British Lending Program, according to the Missouri indictment, was a classic Ponzi scheme. The money that came in was used to repay previous investors' principal and interest while Brown and Smith, received large fees. Brown has admitted to marketing BLP through a series of false, fraudulent and deceptive representations.
By pleading guilty, Brown and Smith agreed to forfeit the property and money received from the sham. The pair are subject to sentencing of up to five years in prison and fines totaling $250,000.
Another Missouri scheme bites the dust--and it is safe to say more will be exposed.
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Tags: ‧ indictment ‧ investment ‧ developer ‧ lenders ‧ projects ‧ investors ‧ scam ‧ missouri ‧ lending program ‧ ponzi scheme ‧
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Real Estate Ponzi Scheme Uncovered in Missouri
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