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If it seems too Good to be True - Do Not Invest: San Diego Woman Sentenced to Nearly Six Years in Federal Prison for Ponzi Scheme Run Via Sham Commercial Real Estate Investments

Posted by Fay Arfa | Dec 10, 2019 | 0 Comments

A federal district court judge sentenced Susan Margaret Werth, 58, a San Diego woman who ran a multimillion-dollar Ponzi scheme to 70 months in federal prison for deceiving investors by falsely claiming their money would be used to make short-term construction loans to other investors seeking to defer capital gains taxes through “1031 like-kind exchanges.”

            Werth, who pleaded guilty on May 2 to one count of wire fraud, solicited millions of dollars from victims by falsely claiming their funds would be used to provide short-term construction loans to clients who were engaged in like-kind exchanges of commercial properties. She ran the Ponzi scheme out of two San Diego-based companies, Commercial Exchange Solutions, Inc. (CES) and Exchange Solutions Company, Inc. (ESC).

A 1031 like-kind exchange is a method of deferring the payment of capital gains taxes pursuant to section 1031 of the tax code in which a taxpayer sells an investment property and reinvests the proceeds to buy a like-kind investment property of equal or greater value.

            Werth and others working at her direction falsely promised victims that their investments were risk-free and 100 percent guaranteed by CES's “collateral account” at Wells Fargo. She lulled her victims by creating fictitious Wells Fargo bank statements to show that CES had an account with a balance of $7.2 million, as well as fabricating emails she claimed were from an employee of Wells Fargo Asset Management. Werth also falsely told investors that her companies were investing in properties that had been evaluated by the international valuation firm of Duff & Phelps.

            In return for their short-term investments of 30 to 90 days, Werth promised victims a rate of return of at least 15 percent. In reality, Werth knew the representations were false and fraudulent because she operated CES and ESC as a Ponzi scheme, in which the vast majority of its incoming revenue was comprised of victim-investor funds, which defendant Werth used to repay prior victim-investors, to pay her personal expenses, to withdraw cash, to repay investors' principal, and to make fictitious profit payments to some investors.

            The total loss resulting from Werth's Ponzi scheme exceeded $6 million. The federal district court judge also ordered Werth to pay $6,290,510 in restitution to her victims.

About the Author

Fay Arfa

Fay Arfa has the distinction of being Certified as a Specialist in two separate areas of law – Criminal Law as well as Appellate Law – by the California State Bar, Board of Specialization. The National Board of Trial Advocacy has also awarded her a board Certification in Criminal Trial Advocacy. ...


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