Paul John Boileau, former president of a San Diego investment firm, was arrested and charged Wednesday with bilking 55 people out of nearly $1 million during 1982 in what prosecutors characterized as a "classic Ponzi scheme."
Boileau, 44, was arrested at his home in El Cajon by investigators from the San Diego County district attorney's office. He was booked into County Jail, his bail was set at $500,000, and he was scheduled for arraignment at 10 a.m. today.
Also charged were Lillian Louise Stagliano, 43, of Coronado and Leland Stanford Pierce Jr., 69, of El Cajon, former associates of Boileau. The two have arranged to surrender in time for today's arraignment, according to the district attorney's office.
Boileau and his former associates were charged by the D.A.'s fraud unit with 185 counts ranging from grand theft, selling unqualified securities, filing false documents, misrepresenting securities sales and the fraudulent sale of securities.
The charges stem from the activities between January and June, 1982, at the Boileau & Johnson real estate firm, which solicited money from investors to buy, improve and sell properties. Investors were guaranteed a specified rate of return from the proceeds.
The firm advertised extensively in local newspapers and hired actor Joseph Cotten to make television commercials to entice investors, said Deputy Dist. Atty. Clifford Dobrin, who is handling the case.
But by late 1981, said Dobrin, Boileau's company was faltering. Instead of declaring bankruptcy, Boileau tried to stay in business through a "classic Ponzi scheme" by soliciting new investors to pay off the old ones, Dobrin said.
According to a declaration filed by a district attorney's investigator, Boileau was warned about his allegedly illegal activities in late 1981 by two former business partners.
The former partners became concerned after an independent auditor refused to give the company an audited statement because he found that Boileau had improperly commingled investors' and operating funds in one bank account, the declaration said.
In addition, the auditor warned that Boileau was selling unsecured business notes and trust deeds that were not qualified and registered with the state Department of Corporations, the declaration says.
Boileau allegedly ignored the warning, sometimes showing prospective investors a "balance sheet" that featured arbitrarily inflated values for property.
"Boileau had a favorite story he would tell where he said he was down to under a hundred dollars in the bank," the prosecutor's declaration said. "He had one investor in one conference room who screamed for money and another who wanted to invest money.
"And he said he would run back and forth between the two and tell each, 'I think I can take care of you.' And when the investor who wanted to invest gave Boileau the money, he would take the money to the investor screaming for payment and everyone would be satisfied."
Between January and June, 1982, Boileau allegedly defrauded 55 people, mostly older people, of $950,000, Dobrin said.
Overall, he said, investors lost about $20 million to the Boileau firm, an estimate Dobrin said he derived from Chapter 11 bankruptcy records in federal court.