A McKinney man who ran a Ponzi scheme has been sentenced to five years in federal prison and ordered to pay $13 million in restitution to his victims, Acting U.S. Attorney for the Northern District of Texas Prerak Shah announced.

Patrick O. Howard, owner of Insured Liquidity Partners CGF I, Insured Liquidity Partners CGF II and Capital Ventures, LLC, pleaded guilty to securities fraud in November. He was sentenced May20 by U.S. District Judge Jane J. Boyle and taken into custody immediately after the hearing.

In plea papers, Howard, 49, admitted to running a Ponzi-type scheme, recruiting more than 100 investors to purchase $13 million in membership units for $50,000 apiece. His companies promised investors 12% annual returns, paid quarterly, and “insured liquidity.”

However, instead of properly investing the money, the companies issued phony account statements and paid any investors who elected to receive their earnings quarterly out of the investments of later investors, rather than out of the earnings of the fund.

Howard falsely represented himself as a registered investment advisor and claimed his companies saw 20% annual earnings. Promising that investors could not possibly lose money due to insurance that offset poor performance, the defendant induced at least one investor to turn over his entire retirement savings to the fund.


Read more…