Riverside County man sentenced to 100 years for operating Ponzi scheme
In what federal prosecutors described as the longest sentence ever imposed for a financial crime in Southern California, a Riverside County man was sentenced Monday to 100 years in prison for operating a Ponzi scheme that bilked investors of about $35 million.
Richard Monroe Harkless, 65, who ran the operation from 2000 to 2003 through a company he called MX Factors, was sentenced by U.S. District Judge Virginia A. Phillips in federal court in Riverside.
Dozens of the company’s estimated 700 investors wrote the judge to demand a stiff sentence. They described postponed retirements, sleepless nights and prescriptions for antidepressant medication. One investor said she could no longer pay her son’s college expenses as a result of the crime.
Prosecutors said Harkless, using a team of sales agents, told clients that he would invest their money in government-guaranteed construction loans and promised monthly returns as high as 14% every three months.
Instead of investing in construction, Harkless wired some of the money to foreign banks, paid high commissions to agents and launched a crab-fishing business in Ensenada, prosecutors said.
Some early investors were paid dividends that came from later investors -- a classic Ponzi scheme, said Assistant U.S. Atty. Eric D. Vandevelde.
The operation collapsed in March 2004, prompting an investigation by the Internal Revenue Service, U.S. Postal Service and FBI. When Harkless learned of the criminal investigation, he shredded customer files and fled to Mexico, where he hid for three years, Vandevelde said. Harkless was arrested in 2007 after returning to the United States.
Harkless “has shown zero remorse throughout the entire process,” the prosecutor said. “It’s an appropriate sentence, given the incredible amount of harm he caused.”
Acting as his own attorney at trial, Harkless blamed the losses on a failed business model and told jurors that agents had made inappropriate promises to investors without his knowledge. In his closing argument, Harkless said he had no regrets and would make the same decisions again if he had the opportunity.
A jury convicted Harkless in July of three counts of mail fraud, three counts of wire fraud and one count of money laundering.
The judge, in explaining her sentence, said Harkless had caused “every kind of grief imaginable.”
Thom Mrozek, a spokesman for the U.S. attorney’s office, said federal prosecutors could think of no other fraud case locally that had resulted in a sentence of more than 30 years in prison. By comparison, Bernard L. Madoff, who pleaded guilty to running a $65-billion Ponzi scheme, was sentenced in June to 150 years in prison.
Among those who lost money in the Riverside operation were Bryan and Dana Hanson, who said they invested all of their savings -- about $60,000 -- with Harkless in hopes of building enough money to retire.
As a result, “we are working harder than ever in a time in our life when we should be looking forward to time with our grandchildren,” Dana Hanson wrote in a letter to the court. “Frankly, I don’t know if there will ever be a retirement. This is really disheartening.”
Another investor was Anthony Ciranna, a 79-year-old retiree from Huntington Beach. He said he lost $85,000 and now depended on free meals from a senior center and local churches.
“If I had that money today, it would be extremely significant,” Ciranna said in an interview with The Times. “You just have to deal with the reality and go on. There’s no sense in getting emotional about it.”
Another investor, Boni Muzzey, wrote that she and her husband lost $25,000 they had invested with the company. It was the inheritance she’d received from her father.
“My father was a farmer and worked hard all his life to save some money to leave to his children. And they now have mine,” Muzzey wrote.
In addition to the prison term, Judge Phillips ordered Harkless to pay $35 million in restitution to about 600 victims who lost money as a result of the scam.
The Securities and Exchange Commission sued the company in 2004, obtaining an emergency order that allowed a court-appointed receiver to manage its remaining assets. The receiver was able to repay investors about $4 million of the $39 million they had invested, Vandevelde said.
Three of Harkless’ sales agents -- Daniel Berardi, Thomas Hawkesworth and Randall Harding -- had previously pleaded guilty and received sentences of up to six years in federal prison.
About 100 of the company’s investors managed to withdraw their money before the scheme collapsed, Vandevelde said. The Hansons were not among them.
“We had built up to about $200,000-some when we stopped receiving notices about our account,” Bryan Hanson said.
“We had friends that also invested at the same time. Some got out in time, but others didn’t. We still haven’t recovered from this.”
--
