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Ponzi scheme victims speak at sentencing for man who stole $11 million

The Orange County resident was convicted on 693 felony counts for defrauding more than 125 senior citizens out of their life savings. He faces more than 300 years in state prison.

December 17, 2009|By Gerrick D. Kennedy

A sentencing hearing is continuing this week for a San Juan Capistrano man convicted on 693 felony counts for defrauding more than 125 senior citizens out of their life savings in a Ponzi scheme.

The proceeding began Friday for Jeffrey Gordon Butler, who was convicted in June of stealing more than $11 million from elderly investors through the illegal sale of unqualified promissory notes or stocks and filing false tax returns on his ill-gained profits, said Farrah Emami, a spokeswoman for the Orange County district attorney's office.

Because so many victims want to make statements in Orange County Superior Court, the hearing is expected to continue the rest of the week and possibly stretch into next week.

"This is a very large case that took awhile to investigate," Emami said.

Butler, 51, was found guilty by a jury on charges of making untrue statements in selling securities and unqualified securities, theft from elderly people, using a scheme to defraud in the sale of a security, filing false tax returns from 2001 to 2004 and failing to report income of more than $5.5 million, resulting in an unpaid tax liability of more than $530,000.

He faces a maximum sentence of more than 300 years in state prison.

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, according to court records.

He met his first victims while operating a company called Senior Information Services, which offered to help senior citizens create living wills, trusts and other estate planning structures for a fee.

While operating a series of businesses that changed names from 1995 to 2004, the records show, Butler failed to provide his investors with documents and information about his companies, including how they made money and the risks involved in investing in the companies, as required by law.

In 2000, Butler moved his clients' funds to his newest venture, Global Network Providers Inc., 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 few assets and no income, according to court records.

Emami said Butler's wife, Peggy Warmath Butler, 49, was convicted on the same day as her husband on four felony counts of filing false tax returns. She faces a maximum sentence of 10 years in state prison.

Jeffrey Butler's nearly eight-month jury trial began in November 2008 and included testimony from 92 victims, including 82 people age 65 and older. Video testimony was presented by 49 other victims who recorded their statements before the trial began in case they were later unavailable due to illness or death, Emami said.

At least six victims died during the course of the trial, and 52 victims died before the case was brought before a jury.

"We do see Ponzi schemes often, but this one was on a larger scale, with a lot of victims," Emami said.

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