Ed May sentenced to 16 years; scheme lasted 10, cost investors nearly $50M
The Ponzi schemer who helped bring about the destruction of independent broker-dealer GunnAllen Financial Inc., was sentenced in Michigan yesterday to 16 years in federal jail.
Edward P. May, 75, in April pleaded guilty to 59 counts of mail fraud that federal prosecutors alleged, charging him with creating a decade-long investment fraud that raised more than $350 million from investors. The scheme touted bogus investments in telecommunications services in hotels in Las Vegas, New York, New Jersey, California and elsewhere, according to federal prosecutors. In total, investors lost $49 million in the Ponzi scheme, according to prosecutors.
The scam collapsed in the summer of 2007, spurring an outcry among the investors — many based in Detroit and its suburbs — as well as an FBI investigation.
According to the U.S. attorney's office in the Eastern District of Michigan, Mr. May's scheme was the largest Ponzi scheme ever in the district.
In 1997, Mr. May formed E-M Management Co. LLC and operated out of a small office in Lake Orion, according to a statement by the U.S. attorney's office. He eventually solicited 1,200 investors to invest in 250 limited-liability companies, while guaranteeing monthly income of $30,000 to $100,000 from each LLC.
Mr. May stole the funds invested in the LLCs for his personal use and used some of the funds to travel to Las Vegas and gamble.
Mr. May worked closely with former GunnAllen Financial stockbroker Frank Bluestein, who at one time was hailed as one of the nation's top 10 independent registered reps by a trade publication.
Mr. Bluestein's sale of Ed May private placements, and the onslaught of lawsuits that followed, was widely acknowledged as a key reason for the demise in March 2010 of GunnAllen Financial, one of the fastest growing broker-dealers of last decade. At its peak, GunnAllen boasted almost 1,000 producing registered reps and $150 million in gross revenue.
According to a 2009 Securities and Exchange Commission complaint, Mr. Bluestein raised $74 million from 2002 to 2007 in a scheme that attracted more than 800 investors. During that time, he was affiliated with GunnAllen and Questar Capital Corp. According to the complaint, Mr. Bluestein specifically targeted elderly investors, encouraging them to pay for the Ed May private placements by refinancing their homes.
Mr. Bluestein has said he had no knowledge of the Ponzi scheme, and he had bought the investments himself. That matter is still pending.
David Foster, Mr. Bluestein's attorney in the SEC matter, said Mr. May's sentence was “not surprising, given amounts of money involved.” He made no comment about Mr. Bluestein.
