A man serving an eight-year prison sentence in Minnesota is scheduled to be arraigned in Santa Ana Wednesday for pulling the largest known Ponzi scheme in Orange County history--without stepping foot in California. Gerard Frank Cellette, who is accused of masterminding a $200 million, multi-state investment fraud that stung at least 55 Orange Countians for more than $21 million, would get to know the Golden State quite well with a conviction. The maximum penalty he faces is 104 years in a California state prison.
Cellette owned and operated Minnesota Print Services, Inc. out of his home in Andover, Minn., falsely claiming he had large printing contracts with major corporations and seeking investors for fake printing projects with the promise of 10 to 15 percent returns on investments, according to a statement from the Orange County District Attorney's office (OCDA).
He presented would-be investors "deal sheets" with the names of corporate clients, total contract prices and time periods within which investments would come to fruition with interest payments (generally 60 to 90 days). The problem was, according to the OCDA, all this was phony information.
Like other Ponzi schemes, early investors who bought in received what they thought were interest payments but were instead portions of the investments of others who joined later, according to the prosecution headed up by Orange County Senior Deputy District Attorney Marc Labreche of the Major Fraud Unit. Cellette is further accused of taking hunky chunks for himself.
His marks are said to have been spread out across the country--in Minnesota, Georgia, Arizona, Colorado, Hawaii, Illinois and California--especially Orange County. One local who visited Minnesota and bought Cellette's line in 2005 apparently returned home and convinced three others to not only join him in buying in but of recruiting family, friends and business associates to become investors as well.
Investors began receiving promised payments via wire transfers without Cellette even visiting California, according to the OCDA, which alleges those transfers eventually began slowing down. By 2009, the OC man who originally visited Minnesota and two of his friends became suspicious and asked for copies of certain financial records from Cellette, who is accused of turning over false documents. The three Orange County men flew to Minnesota in September 2009 to match those documents against legitimate bank records, which exposed the Ponzi scheme, according to prosecutors.
The trio contacted the Hennepin County Attorney's office in Minnesota, which in November 2009 clued in the OCDA regarding the Orange County victims. The subsequent investigation revealed Cellette received more than $200 million from investors nationwide, with $150 million of that coming from Orange County. The net loss to these investors was more than $53 million nationally, with $21 million of that coming from OC, according to the OCDA.
Collette is accused of rolling his ill-gotten profits into luxury personal items, including cars, time on private jets, and multiple homes with features including a Go-Kart track, bowling alley and 1950s-style malt shop.
He was prosecuted and convicted in Minnesota for the damage done to victims in that state.
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Having been extradited to Orange County from his Minnesota prison cell Monday, Cellette now faces 116 felony counts for allegedly selling unregistered securities, money laundering, and using untrue statements in the purchase and sale of securities, with sentencing enhancements and allegations for property damage over $3.2 million, money laundering transactions in excess of $2.5 million, aggravated white collar crime over $500,000, and causing over $100,000 loss.
He is being held in lieu of $21 million bail and were he to try to post bond he'd have to prove the funds came from a legitimate source, according to the OCDA.
Meanwhile, prosecutors are fishing for more victims to possibly increase the criminal counts. If that sounds like you or someone you know, contact Supervising District Attorney Investigator Ron Frazier at 714.347.8691.