A Vancouver man pleaded guilty Thursday to a federal charge of mail fraud in connection with a Ponzi scheme that defrauded 32 investors of $4.3 million.
Charles Richard Burgess, 66, is scheduled to be sentenced Nov. 4 in U.S. District Court in Tacoma. He faces a potential maximum sentence of 20 years in prison and a $250,000 fine.
The charging information, filed Aug. 4, states that between 1995 and April 2021, Burgess sold investments in an unregistered investment vehicle that he called “the pool.” It states he sold investments to 64 investors totaling $13.6 million. Burgess was never a registered investment adviser and solicited investments from people who trusted him, such as friends and family members.
When people agreed to invest, Burgess instructed them to create a self-directed IRA account and wire money from that account to an account controlled by Burgess, according to the information in the criminal case.
Between about August 2013 and July 2021, Burgess ran a Ponzi scheme; he told investors he’d invest their money into a pool with a history of excellent performance and that he’d be paid 50 percent of the pool’s profits, according to court records.
Instead, the information states Burgess “overstated the past performance of the fund, misrepresented the value of investors’ investments on monthly statements, used funds provided by new investors to repay earlier investors and took for himself far more than the agreed 50 percent of pool profits.”
“For more than two decades, Mr. Burgess led his victims to believe that he was successfully investing their funds for retirement. But in fact, since at least 2013, the investment fund was insolvent and losing value, and Burgess was stealing investor funds to line his own pockets,” U.S. Attorney Nicholas Brown said in a news release. “More than two dozen people have lost retirement savings because of Mr. Burgess’ fraud.”
By the end of 2020, Burgess owed investors $5.4 million in principal and represented that the pool’s year-end value exceeded $10.3 million, court records state. In reality, the pool’s assets totaled $113,000.
The information also states that when Burgess received $300,000 in new investments, he used $131,000 of that money to pay back three investors.
Between January 2014 and June 2021, the pool lost hundreds of thousands of dollars, yet Burgess is accused of paying himself $1.4 million during that time. The information states Burgess had told investors he wouldn’t make any money unless the pool made money and told some that he’d absorb any of the pool’s trading losses.
As part of Thursday’s plea agreement, Burgess agreed to pay $4,359,113 in restitution to the victim investors.
Prosecutors have agreed to recommend the low end of the sentencing range, according to the U.S. Attorney’s Office, but the judge does not have to follow the recommendation. It was unclear what that range will be.
In December, the Washington Department of Financial Institutions Securities Division filed administrative charges against Burgess, accusing him of violating the state Securities Act by using funds from a pooled investment vehicle to make Ponzi payments to investors, among other violations. At the time, it was unclear whether criminal charges would be filed.