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Texas man confesses to $14M investment fraud

A Texas man accused of masterminding a scheme to defraud investors from North Dakota and elsewhere out of millions of dollars pleaded guilty to wire fraud Friday.

Verlin Swartzendruber was charged with 11 felony counts, including wire fraud, money laundering and conspiracy to defraud the United States. In exchange for his guilty plea to one count, prosecutors dropped the other charges.

“We’re happy with the resolution,” defense attorney Clint Broden said after Friday’s hearing.

Court documents accuse Swartzendruber of soliciting between $14 million and $16 million from more than 500 investors. The plea agreement calls for Swartzendruber, 68, of Laredo, Texas, to forfeit $10 million and pay about $1 million in restitution.

“We’re hopeful that moneys we obtain from him and a co-defendant will at least provide a fair amount of return to the people who lost money on this,” Assistant U.S. Attorney Brett Shasky said in an interview.

Prosecutors said Swartzendruber told investors he had unique access to international trading programs that would generate high rates of returns, when he knew that such funds did not exist. He recruited investors through promoters, who often received bonuses, court documents show.

One of the promoters, Minot commodities broker Frederick Keiser Jr., was convicted in March 2007 on 22 counts and sentenced to 12 years in prison. One of Keiser’s associates, Neville Solomon, was convicted earlier this year on three counts and faces a total penalty of 35 years in prison. He’s scheduled to be sentenced in June.

Swartzendruber would have faced a maximum sentence of 115 years in prison had he been convicted on all 11 counts. Now he’s facing a term of no more than five years.

“The fact that he’s looking at five years right now is largely because he stepped up and took responsibility and pled guilty. Those other guys didn’t,” Shasky said, referring to Keiser and Solomon.

U.S. District Judge Ralph Erickson gave Swartzendruber an opportunity to speak at the close of Friday’s hearing, but he declined. He had earlier told the judge he was seeking medical treatment for unexplained chest pains.

“I’ve had a lot of medical expenses in this last year,” Swartzendruber said.

The plea agreement allows Swartzendruber’s wife, Lois, to keep a $22,000 motor home, a $13,000 vehicle, a $6,000 fishing boat, her Social Security income, and part of the proceeds from the Strawberry Lake Christian Bible Camp in Minnesota. The couple is managing the camp this summer.

Sentencing is set for Aug. 3.

Prosecutors said Swartzendruber ran the bank trading scheme from St. Vincent and Grenada, in the West Indies, where he went by the name of Joseph Severin. He was indicted by a federal grand jury in 2006 and arrested in Laredo, Texas, in 2008.

Shasky said there are “quite a few” people from North Dakota, South Dakota and Minnesota who invested in the scheme. The investigation started about 10 years ago after a complaint was filed with the North Dakota Securities Commission.

“Once we started investigating it, we had sufficient ties to North Dakota to charge it here,” Shasky said.