After Jeffrey Gordon Butler, 51,
of San Juan Capistrano, was convicted in June of stealing the life savings of more than 125 unsuspecting elderly victims in a “Ponzi” scheme by fraudulently soliciting more than $11 million in investments through the illegal sale of unqualified or stocks and filing false tax returns on his ill-gotten profits, he could have received a sentence of 300 years in state prison.
Fortunately for him, the judge showed some leniency on Monday, sending Butler to the big house for a mere 90 years and eight months.
A jury in Orange County Superior Court on June 30 found Butler guilty of 693 felony
counts of making untrue statements of material fact in the offer and
sale of securities, the offer and sale of unqualified securities, theft
from elderly persons, using a scheme to defraud in the sale of a
security, and filing false tax returns for years 2001 through 2004. Due to the large number of
criminal charges, it took two days for the verdict to be read. A Jan. 29 restitution hearing has been set.
The crime was all in the family: Butler's 49-year-old wife, Peggy Warmath Butler,
convicted of four felony counts of filing false tax returns and
excessive taking sentencing enhancements. Over the objections of prosecutors, who advocated a minimum sentence of three years and four months in prison, she got a year in jail and seven months probation. However, she will have to serve seven years in prison if she violates her probation. The Mrs. could have got up to 10 years in the can.
Jeffrey Butler first met many of his victims while operating a company called Senior Information Services, which offered to assist senior citizens in the creation of living wills, trusts and other estate planning structures for a fee. He gained the trust of many clients who would become victims of his “Ponzi” scheme.
According to a statement from the Orange County District Attorney's office:
* Between 1995 and 2004, in a series of businesses that changed forms and names, Butler failed to provide his investors with any documents or other information about his companies, how the companies made money, or any of the risks of investing in the companies as required by law to protect consumers and investors. He transferred investments between companies on several occasions without informing or providing only limited information to his elderly investors–and immediately took 10 percent of the investors' money for himself without their knowledge or consent.
* He moved his clients' funds to his newest venture, Global Network Providers (Grenada), Inc. (GNPG), in 2000 without the knowledge of the investors. The clients' money went to the development of a “telecommunications” company supposedly located on the eastern Caribbean island of Grenada. The company had very few assets and no income.
* Butler convinced investors that GNPG paid 12 percent interest per year on promissory notes, when in fact the notes did not require payment for up to three years, and did not specify a time or method of payment. Investors were not made aware that these investments were not authorized to be sold in California.
* Some victims agreed to invest after being misled into believing that GNPG was an Individual Retirement Account (IRA) qualified investment, when in reality the investments were not IRA qualified. In an effort to fool his investors, Jeffrey Butler simply had “IRA” typed at the top of the promissory notes.
* He failed to inform many of the investors that the “telecommunications” company was based in Grenada. Being that GNPG was on the island of Grenada in the Caribbean, the company was not subject to U.S. laws.
* Butler eventually ran out of funds to maintain his scheme and sent his victims a letter in which he continued to lie to investors, claiming that Hurricane Ivan had caused a delay in payments.
* Peggy Butler maintained the financial records for each of her husband's companies and accounting for the deposits and expenditures of investor funds. Between 2001 and 2004, the Butlers filed false tax returns and failed to report income of more than $5.5 million, resulting in an unpaid tax liability of more than $530,000.
* In the end, Butler sold more than 300 promissory notes or stocks without obtaining a license for the notes from the California Department of Corporations,
as required by law.
"Many of Jeffrey Butler's victims had trouble believing that he was capable of stealing their life's savings,” stated Orange County District Attorney Tony Rackauckas. "He stole more than money from the people who trusted him. Jeffrey Butler also stole his victims' dignity, independence, and dreams.
"By sentencing him to 90 years in prison it means that Jeffrey Butler will spend the rest of his life in prison unable to victimize another person.”
The Butlers' trial, which began on Nov. 7, 2008, and lasted almost eight months, included testimony from 92 victims, including 82 elderly victims, and video testimony from 49 victims, which was recorded prior to trial to ensure that the victim's testimony was preserved in the event that they were unavailable to testify at trial due to death or illness. At least six victims died during the course of the trial and 52 victims died prior to the case being brought before the jury.
The case prompted Rackauckas' office to issue these "District Attorney Tips on How to Avoid Becoming an Investment Fraud Victim”:
* When making an investment decision, it is important to use common sense and
remember: If it looks too good to be true, it probably is.
*You should always know what you are signing.
*You don't get something for nothing.
*If you aren't sure about the investment, talk to a qualified, independent professional.
When listening to someone about a great investment opportunity, ask yourself:
1. Why are they offering this to me? Why can't they get money from the bank?
2. Why are they offering me such a great deal when they can get my money cheaper in other ways?
3. Can I afford the higher risk for the promise of a higher return?
4. Why have other brokers/investors/businesses passed on this deal?
5. Has the promoter provided professional references, not including other investors with a vested interest, for the promoter and his investment?
The DA's office advises, before investing, always check with the California Department of Corporations to find out if the promoter and the investment have been qualified. Never turn over your life's savings without first discussing it with a qualified, independent professional.