7 Years Given in Investment Scam
Thomas D. Carter, accused of bilking investors of up to $55 million in one of Orange County’s largest investment fraud cases, was sentenced to more than seven years in prison Monday after pleading no contest last March to 22 counts of selling unregistered securities.
But the 38-year-old Carter, formerly of Corona del Mar, will escape prosecution on 44 more serious counts of fraud and grand theft. Superior Court Judge Myron S. Brown dismissed those charges following Monday’s sentencing, explaining that even if Carter were found guilty after a lengthy trial, his prison sentence would not be appreciably longer.
Brown’s action drew sharp criticism from the prosecutor as well as from an angry group of mostly elderly investors who gathered outside the courtroom Monday.
“It’s ridiculous. He steals millions and gets a slap on the hand,” said 64-year-old Westminster resident Jean Cademartori, who lost $13,000 to Carter’s investment scheme.
Deputy Dist. Atty. Mark Sevigny, who argued that Carter should be tried on the more serious counts, said it is likely that his office will appeal the dismissal in hopes of getting the charges reinstated.
Carter has denied intentionally defrauding the investors. According to Sevigny, he has said that he relied on bad advice from attorneys and did not complete the proper paper work before selling the securities.
Carter, whose possessions included a $1-million home in Corona del Mar and a fleet of luxury cars, once said his dream was to build an entertainment empire to rival Disneyland. His most recent home was in Henderson, Nev., and he is under investigation in that state as well, Sevigny said.
Some of the 2,800 investors believed to have been bilked by Carter’s investment firms described him as an affable, “all-American boy” who lured them with his charm and promises of making a 46% annual return on their money.
Sevigny said Carter’s scam was a classic Ponzi scheme, referring to a type of investment fraud that works by paying off old investors with money from new investors.
Carter’s empire, according to Sevigny, began to crumble in 1983 when the Securities and Exchange Commission accused him in federal court of defrauding investors of millions of dollars through a bogus investment plan called medical factoring.
Medical factoring was purportedly the business of purchasing medical claims at a discount from hospitals and doctors and then redeeming them at full value from the insurance company.
But in reality, according to Sevigny, “there was no purchase of any medical accounts receivables. . . . There were no claims redeemed with insurance companies. There were no profits at all. . . . The Carter Co. was merely a conduit for funds for Tom Carter’s own use personally and in his other ambitious business enterprises.”
Within months of the SEC accusation, Carter agreed, without admitting or denying guilt, to an injunction that barred him from selling securities. He and his company filed for bankruptcy, and the SEC dropped its inquiry. However, the Orange County district attorney’s office continued its investigation and filed the 66 counts against him in 1984.
