Debra Wong Yang
United States Attorney
Central District of California
United States Courthouse
312 North Spring Street
Los Angeles, California 90012
October 17, 2005
Thom Mrozek (213) 894-6947
Financial Advisory Consultants Victims Lost Tens of Millions of Dollars
Los Angeles, CA - James Paul Lewis Jr., who operated the Orange County-based Financial Advisory Consultants (FAC), pleaded guilty today to federal mail fraud and money laundering charges for running a massive Ponzi scheme that raised approximately $300 million and caused victims to lose at least $50 million.
James Paul Lewis Jr., 59, of Villa Park, pleaded guilty this morning to the two felony counts in Santa Ana before United States District Judge Cormac J. Carney.
Lewis, who has been in custody since his arrest on January 22, 2004, is scheduled to be sentenced by Judge Carney on January 23, 2005. At sentencing Lewis faces up to 30 years in federal prison.
According to court documents, Lewis offered investors two purported investment opportunities: a Growth Fund and an Income Fund. Lewis, through false and fraudulent brochures and other promotional material issued by FAC, told investors that they would earn annual rates of return of up to 18 percent in the Income Fund, which claimed to generate revenue from the leasing of medical equipment, commercial lending and financing insurance premiums. FAC promised investors 40 percent annual returns in the Growth Fund, which claimed to generate revenue through the purchase and sale of distressed businesses.
Lewis induced investors to contribute approximately $300 million to FAC. Instead of using the investors' money as promised, Lewis used the funds to further the scheme and to enrich himself and others. Lewis used investors' funds to purchase homes in Villa Park, Laguna Niguel, Palm Desert, San Diego and Greenwich, Connecticut. He also used investors' money to purchase luxury automobiles for himself, his wife and his girlfriend.
In addition to spending the money on consumer goods, Lewis used FAC money from 1996 to 2003 to trade currency futures, incurring losses of at least $22 million. Lewis also utilized investors' funds to invest in companies, including one where he served as president.
To conceal the scheme at FAC, Lewis used the money of new investors, or subsequent investments of existing investors, to pay the rates of return promised to prior investors to effectuate a Ponzi scheme.
As of December 2003, according to court documents, FAC's computer records showed that FAC had nearly 3,300 investors with a purported total balance of $813,932,080. However, on December 22, 2003, FAC and Lewis's bank accounts held only slightly more than $2 million.
This case is the product of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation Division. The United States Securities and Exchange Commission provided substantial assistance.
Release No. 05-144
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