An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
US Treasury Bond Ponzi Targets Elderly
February 19, 2014
A few years back, Gary H. Lane, 59, Reno, NV, was employed as a financial advisor by Bank of America Investment Services. (which merged with Merrill Lynch). Lane sought out elderly or inexperienced investors averse to risk but seeking high returns. Oooookay. Risk averse investors seeking above-market returns. Spoiler Alert: This ain't gonna end well.
As it turned out, Lane fed his pigeons on the purported breadcrumbs of U.S. Treasury Bonds, which he claimed paid over 6% with a two-year maturity.
You might ask: Hey, Bill, where the hell could you have gotten T-bonds with only two-year maturities paying over 6% between 2010 and 2011.
To which I might reply: Ahhh, if only the pigeons had asked the same question.
Fantasy Bond Land
After receiving the money from the victims, Lane gave it to his spouse, who deposited the funds into her E-Trade account, from which the investors' funds were withdrawn and earmarked either for Lane's personal use or a la Ponzi to pay off earlier investors. In fact, Lane never, ever purchased any U.S. Treasury Bonds, much less the non-existent 6%-plus two-year maturities. In order to keep his scam rolling, Lane fabricated trade confirmations -- a nice touch, given that no such trades were ever executed (on top of the fact that no such bonds existed).
IRS Ire
Between January 2010 and March 2011, Lane defrauded some six victims out of over $2 million. Further, federal prosecutors alleged that he had filed false and fraudulent individual tax returns for 2006 through 2010, in which he substantially understated both his income and the tax due and owing to the Internal Revenue Service. Screwing the elderly and the inexperienced is one thing. Playing games with the IRS is quite another.
Down For The Counts
On August 8, 2012, Lane was indicted on 12 counts of mail fraud and five counts of attempt to evade or defeat tax. At the time of the federal indictment, Lane had already been in state custody on an unrelated matter and thus was unable to make a federal arraignment in the District of Nevada until March 1, 2013. If convicted, Lane faced up to 20 years in prison for each mail fraud count and up to five years in prison on each tax count, as well as fines of up to $250,000 per count.
On September 4, 2013, Lane pled guilty to all counts. On February 11, 2014, he was sentenced to 10 years in prison, 5 years of supervised release, and ordered to pay restitution to his victims.