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May 18, 2016

MINNESOTA MAN SENTENCED TO 35 YEARS IN PRISON FOR $150 MILLION INVESTMENT FRAUD IN LARGEST PONZI SCHEME IN ORANGE COUNTY HISTORY

Filed under: California Defense Attorney — fayarfa @ 2:43 am

SANTA ANA, Calif. – A Minnesota man was sentenced today to 35 years in state prison and ordered to repay $21 million restitution back to over 55 Orange County victims and pay a fine of $42 million for a $150 million investment fraud Ponzi scheme. This is the largest Ponzi scheme to be prosecuted in Orange County history and the defendant committed the crime without ever entering the State of California. Gerard Frank Cellette, 51, formerly of Anoka County, Minnesota, pleaded guilty to a court offer yesterday, May 16, 2016, to 455 felony counts including 46 counts of selling unregistered securities, 382 counts of money laundering, and 27 counts of using an untrue statement in the purchase and sale of a security, with sentencing enhancements and allegations for property damage over $3.2 million, money laundering transactions in excess of $2.5 million, aggravated white collar crime over $500,000, and causing over $100,000 loss.

At the sentencing today, the People read victim impact statements submitted to the court by Steven Q. and Robert A. Steven Q. stated in part, “I hope you enjoyed your high rolling days being a big shot. I hope you enjoy the next 15 plus years in prison thinking about the lives and relationships you destroyed.”

Robert A. stated in part, “You nearly ruined my life, my wife’s life, and my son’s life and you certainly negatively impacted all of our lives and I am still clawing my way back from debt. However, this emotional toll this took on me and my family and friends and the victims and their families and friends will never be offset and it is irreparable. You nearly ruined countless other good peoples’ lives with your actions in numerous ways and you certainly negatively altered all of the victims’ lives.”

The Ponzi Scheme
At the time of the crime, Cellette lived in Minnesota and owned Minnesota Print Services, Inc., which he operated out of a room in his home. Cellette falsely claimed to have large printing contracts with major corporations and was seeking investors for fake printing projects with the promise of 10 to 15 percent returns on investments. Cellette presented investors with fraudulent copies of contracts, known as “deal sheets,” which contained details including the name of the fictitious corporation/customer, the total contract price, and the time period within which the investment would be returned with interest (generally 60 to 90 days).

Cellette operated a massive Ponzi scheme by using funds from new investors to pay back previous investors their initial investment plus interest with the intention of misleading them into believing that the investments were legitimate and lucrative and to encourage them to continue investing with him. He committed this crime across the country in States including California, Minnesota, Georgia, Arizona, Colorado, Hawaii, and Illinois.

Crime in Orange County
In 2005, Cellette met an Orange County man, Steven Q., who was visiting a relative in Minnesota, and offered him an investment opportunity with Minnesota Print Services. After Steven Q. invested with Cellette, the defendant paid back the initial investment plus returns and offered Steven Q. future investment opportunities.

Steven Q. returned to Orange County and, along with friends Robert A. and Adam B., continued investing and receiving returns from the defendant. The three men began unofficially acting as brokers for Cellette in Orange County and throughout California and Cellette provided the three men with lists of fictitious printing contracts, for which funding would be needed. The men would then obtain investors for the defendant for these projects, not knowing they were fake, including family members, friends, and personal and professional associates.

Cellette provided high quality brochures and deal sheets to entice the new investors to invest in the company. New investors provided their funds to either Steven Q., Robert A., or Adam B., who then wire-transferred the investments to Cellette. The defendant fraudulently received and paid back all investments and returns to Orange County through wire transfers. For the entire duration of the crime, the defendant never entered the State of California.

Over time, Cellette slowed down his repayment of investments and returns to the Orange County victims. In 2009, Steven Q., Robert A., and Adam B. became suspicious and asked the defendant for copies of his financial records. Cellette provided falsified records and contracts to show that he was receiving payment from corporation and printing clients.

In September 2009, the three men then flew to Minnesota to confront the defendant, where they determined based on legitimate bank records that Cellette was running a Ponzi scheme.

Loss Amount
Between 2005 and 2009, Cellette received over $150 million from over 55 investors in California, the large majority being from Orange County. The net loss to all Orange County victims is over $21 million.

Nationwide, the defendant received over $200 million, including the $150 million from Orange County, and the net loss is over $53 million, including the $21 million from Orange County.

Cellette spent the stolen money on luxury personal items including cars, time on private jets, and multiple homes with features including a Go-Kart track, bowling alley, and 50s-style malt shop.

Investigation
Upon discovering the crime, the case was referred by Steven Q., Robert A., and Adam B. to the Hennepin County Attorney’s (HCA) Office in Minnesota. In November 2009, HCA contacted the Orange County District Attorney’s Office (OCDA) regarding the Orange County victims.

Collette was prosecuted and convicted in Minnesota for his victims in that state and is currently serving an eight-year prison sentence in that case. He was extradited from Minnesota to Orange County on Feb. 4, 2013, by Investigators from the OCDA Bureau of Investigation.

The OCDA Bureau of Investigation investigated the large Orange County case and the OCDA prosecuted the defendant for all the California victims.

Senior Deputy District Attorney Marc Labreche of the Major Fraud Unit prosecuted this case.

*Defendant stole $21 million from over 55 victims in Orange County

Orange County District Attorney / Case # 12CF1917 / May 17, 2016

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