Investment Firm’s Chief Arrested in Probe of Ponzi Scam

Federal investigators raided a Santa Ana investment firm Thursday that allegedly bilked Latino investors of more than $10 million.

Jose Fernandez, president of American Investment & Finance Group, was arrested and will be arraigned today in U.S. District Court in Los Angeles in connection with the alleged scam, officials said.

The company, which advertised heavily in the Spanish-language media, allegedly promised investors returns of 18% to 22% on one-year investments of at least $1,000.

Officials said the company appeared to be operating a Ponzi scheme, in which investors are paid a small initial return with money provided by an ever-expanding circle of new investors rather than with profits from investments.

The officials said an investigation of Fernandez and his company began in response to complaints from investors who had not received interest payments as promised.

The company’s ground-floor offices at the old Santa Ana city hall were crowded with federal marshals, postal inspectors and police officers Thursday, and they apparently seized about 20 boxes of documents as evidence.

A man who arrived for a job interview at the offices--only to find out that his potential employer had been arrested--said Fernandez was recruiting a sales manager to train a new Latino sales force.

The man, who asked not to be identified, said Fernandez had spoken of the need to overcome the distrust of many recent immigrants and persuade them to invest with the company, which, in turn, would invest their funds in real estate, gems and stocks.