In US district court in Oregon, siblings Gary Holcomb and Michael Holcomb pleaded guilty to money laundering and felony conspiracy in a $40M Ponzi fraud that bilked approximately 40 investors. The brothers were formerly executives at financing company Berjac. The insurance business went bankrupt in 2012.
Berjac was supposed to issue loans to small businesses so they could pay their insurance premiums. The loans were considered low risk, with Berjac getting to keep an interest in the part of the insurance premium that went unused should a business default on a loan.
Investors were told they’d get quick returns by investing in Berjac, and as borrowers repaid the loans with interest. The financing company made it appear as if that were the case by instead paying investors with funds given to them by other investors in Ponzi-like fashion. Meantime, the Holcombs would issue quarterly statements that contained false information to investors, even as the brothers used the money to pay down their debt, purchase a vacation home, and get involved in speculative real estate projects. When Berjac failed, investors lost their principal investments.
As part of their plea agreement, prosecutors withdrew 35 criminal charges against the two men. Michael Holcomb’s daughters Kristen Van Breeman and Jennifer Chalmers, who were office managers at Berjac, pleaded guilty to felony money laundering. 34 other criminal charges against them also were dismissed.
With a Ponzi fraud, payments issued to investors that are supposedly returns typically come not from actual returns but from the funds put in by new investors. High returns are often touted and investments are supposedly no risk or low risk. There are few legitimate earnings or none at all in a Ponzi scheme. There always need to be new investors willing to put in money for this type of fraud to stay afloat. When bringing in new investors becomes challenging or too many investors decide to cash out at the same time, that is when a Ponzi scam often ends up failing.
Four plead guilty to Oregon Ponzi scheme that defrauded 400, BizJournals, September 15, 2017
Holcomb brothers, other defendants plead guilty in Berjac Ponzi scheme case, The Register-Guard, September 16, 2017