Man Who Ran Bogus Fund Gets 4-Year Term

A former Orange County man who created a sham mutual fund was sentenced Monday to nearly four years in federal prison after his guilty plea in June to cheating 250 investors out of millions of dollars.

Wilfred J. Madon, 67, formerly of Coto de Caza, also was ordered by U.S. District Judge Alicemarie Stotler to pay about $10.9 million in restitution to his victims.

From 1983 until his scheme collapsed in 1997, Madon claimed to run a stock fund called Capital Growth Group, which he said had $46 million in assets and compared favorably to Fidelity Investments’ high-profile Magellan Fund, prosecutors said.

But little money, if any, was used to buy stock, and Capital Growth wasn’t registered with federal regulators as an investment advisor. Madon acknowledged using the money to fund his own unprofitable ventures and to pay gambling debts, prosecutors said.

Investor funds also were used to operate a Ponzi scheme, in which money from new investors was used to pay off earlier investors, Assistant U.S. Atty. Gregory Weingart said in a press release.

Court documents accuse Madon of taking in more than $20 million and losing a total of $7.9 million.

In sentencing Madon to 46 months in prison, the prosecutor said, Stotler noted that Madon had abused the trust of his victims, particularly when he began defrauding them out of their retirement funds.

Madon’s defense attorney, Craig Wilke of Santa Ana, had argued for leniency because of Madon’s age, poor health and “extraordinary acceptance of responsibility.”

In 1998, the Securities and Exchange Commission settled a separate civil suit against Madon, freezing his assets. In May, FBI agents arrested him in Portland, Ore., where he had moved earlier this year from his south Orange County home. He has been held without bail since then.