An unlicensed “investment adviser” from Vancouver, Washington, was sentenced Friday in U.S. District Court in Tacoma to 75 months in prison for mail fraud in connection with his scheme to defraud investors, including friends and family members, out of more than $4 million, announced U.S. Attorney Nick Brown last week.
The defendant, Charles Richard Burgess, 67, “originally tried to blame the COVID-19 pandemic for the loss of victim funds. But in fact, Burgess had lost the bulk of investors’ money many years earlier and had concealed the losses from them,” according to a news release from the U.S. Attorney’s Office.
At Burgess’ sentencing hearing on Friday, Chief U.S. District Judge David Estudillo addressed the “long-lasting effects of the crime on the victims.”
Estudillo told Burgess, “To lie, to cheat, to steal seem to be the values you were living by,” according to the news release.
“It is heartbreaking to read the victim statements describing how their lives have been dramatically altered — no retirement, no funds to care for disabled children, in one instance a victim’s home placed at risk of foreclosure,” Brown said in a written statement. “From the mid-1990s until 2021, Mr. Burgess led his victims — mostly friends and family members — to believe that he was successfully investing their funds for retirement. He sent fake statements showing significant gains. In truth, since at least 2013, the investment fund was insolvent and losing value, and Mr. Burgess took more than $1 million in fees for his own benefit.”
According to records filed in the case, in the mid-1990s, Burgess began selling investments in an unregistered investment vehicle that Burgess called “the pool.”
Burgess himself never became a registered or licensed investment adviser, but between January 1995 and April 2021, he convinced 64 people to invest $13.4 million in “the pool,” according to the U.S. Attorney’s Office.
Burgess sought investments from friends, family members and others with whom he had a trusting relationship.
“Burgess did nothing to screen the investors to see what type of risk they could tolerate, and often did not provide them with written materials about the nature of the investments,” according to the news release.
According to the U.S. Attorney’s Office, Burgess told investors he would collect fees only if the fund made money and told some he would personally absorb any trading losses. Burgess provided the investors with statements indicating their account balances had grown substantially over time.
“However, those statements were false,” wrote the U.S. Attorney’s Office. “For example, in 2016, Burgess sent investors statements indicating their investments had grown about 10 percent that year. In fact, the investments lost money.”
As early as 2013, Burgess was not able to repay all the investors’ principal, let alone the profits he was falsely telling them they had earned, according to the U.S. Attorney’s Office. In December 2013, Burgess told investors that the value of the investor accounts exceeded $4.2 million. In fact, at that time the pool’s assets were only about $711,000, per the U.S. Attorney’s Office. By the end of December 2015, Burgess told investors their accounts totaled over $5.2 million, when the true value was only about $365,000. By the end of 2020, Burgess represented in year-end statements that the collective value of victims’ accounts exceeded $10.3 million. In fact, the Pool’s assets totaled only $113,000, according to the news release.
“As the financial picture worsened, Burgess paid off earlier investors with money from new investors — a classic Ponzi scheme,” wrote the U.S. Attorney’s Office.
One victim speaking in court during Burgess’s hearing on Friday said Burgess is a “pathological liar.” Another wrote to the court, “He is a con, nothing more than that in my eyes.”
A 91-year-old victim wrote, “He needs to be held accountable for the many lives he has shattered.”
In all, 32 investors lost $4.3 million in principal payments that they had made to Burgess. Burgess was ordered to pay $4,383,617 to the victim investors.
“While I’m glad Mr. Burgess accepted responsibility for his actions, the amount stolen from his victims warrants a lengthy sentence,” said Richard A. Collodi, special agent in charge of the FBI’s Seattle field office, in a written statement. “Crimes like these traumatize victims who lose their entire life’s savings. I applaud the work of our investigators and partners with the state who worked to bring this scheme to an end.”
The case was investigated by the FBI and the Washington State Department of Financial Institutions.
The case is being prosecuted by Assistant United States Attorney Seth Wilkinson.