Woman Sentenced to 5 Years in Prison for Investment Scam

A former Orange County woman who sold millions of dollars worth of phony real estate investments in the 1980s was sentenced Monday to five years in prison and fined $50,000.

Linda Swarthout, 51, is scheduled to begin serving her sentence on Oct. 28. She was sentenced in U.S. District Court in Los Angeles.

Swarthout, now a Santa Monica resident, ran a Newport Beach investment business called Lido Homes, which folded in 1985.

She was arrested last year and pleaded guilty in May, 1990, to four counts of mail fraud stemming from the sale to investors of what were supposed to be second-trust deeds on various real estate.

Guy Ormes, the Orange County deputy district attorney who prosecuted the case in conjunction with federal authorities, said Swarthout’s clients initially received monthly interest payments from the second-trust deed investments. Statements from those satisfied clients helped Swarthout sell more trust deed investments.

But few of the trust deeds were real, Ormes said. In a classic Ponzi scheme, he said, Swarthout was using money received from her newest investors to pay the interest owed to earlier investors.

The scheme collapsed in April, 1985, when Swarthout could no longer sell enough new investments to cover the interest payments she owed. At that point, Ormes said, the loss to investors exceeded $3.3 million.