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Posted by Fay Arfa | Sep 15, 2017 | 0 Comments

SANTA ANA, Calif. – Orange County District Attorney (OCDA) Tony Rackauckas is opposing the parole of a man who stole the life savings of numerous seniors in an elaborate Ponzi scheme and failed to pay $530,000 in taxes on his ill-gotten profits.Jeffrey Gordon Butler, 59, San Juan Capistrano, is currently being held at Correctional Training Facility prison in Soledad, California. Butler was sentenced on Jan. 4, 2010, to 90 years and eight months in state prison. He is currently scheduled for a parole hearing tomorrow, Sept. 15, 2017, at the prison before the Board of Parole Hearings, California Department of Corrections and Rehabilitations.

Butler is being considered for early parole due to the passage of Proposition 57, voted in by Californians last November. The legislation, which focused on reducing prison overcrowding through the early release of “non-violent” offenders was lax on language as to who would be considered and which crimes were deemed violent, one of several reasons the OCDA vehemently opposed the measure. Moreover, early release decisions will be made without a public hearing, with prosecutors and victims only receiving 30 days, when properly notified, to provide written objections. Prosecutors and victims are not allowed to attend the hearing.

“We believe the short notice for this proceeding violates the victim's right to due process,” said District Attorney Tony Rackauckas. “The victims in this case were elderly when the crimes took place,” he continued. “We requested additional time to locate them and believe many have passed on, but we would still like the opportunity to seek out their families or representatives and give them the option of being heard; unfortunately our request was denied.”

“Butler ruthlessly destroyed people's lives and dreams after gaining their trust,” said Rackauckas. “If released, Butler will no doubt return to what he knows best — preying on the vulnerable. He is certainly not who voters had in mind when addressing prison overcrowding, but that doesn't make him any less dangerous to the public. It also sends the wrong message to fraudsters who are thinking about committing these crimes,” concluded Rackauckas.

Senior Deputy District Attorney William Overtoom of the Major Fraud Unit sent a strong opposition letter to the Parole Board as well as materials, including a compelling video of victim testimony, to defend public safety and advocate for justice.

Circumstances of the Ponzi Scheme and Tax Fraud

A Ponzi scheme is when investors are offered high reward, short-term returns on investments, but instead of the investments generating actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors. Butler sold more than 300 promissory notes or stocks without obtaining a license for the notes from the California Department of Corporations, as required by law. The majority of the victims involved in this case were over 65 years old and unaware of the risks of their investments. Several of the victims lost their life savings and many died awaiting the jury trial.

Butler met many of his victims while operating a company called Senior Information Services, which offered to assist senior citizens in the creation of living wills, trusts and other estate planning structures for a fee. Through this business, the defendant gained the trust of many of his clients, whom he later victimized. Between 1995 and 2004, in a series of businesses that changed forms and names, Butler failed to provide his investors with any documents or other information about his companies, how the companies made money, or any of the risks of investing in the companies as required by law to protect consumers and investors. The defendant transferred investments between companies on several occasions without informing or providing only limited information to his elderly investors. The defendant immediately took 10 percent of the investors' money for himself without their knowledge or consent.

In 2000, Butler moved his clients' funds to his newest venture, Global Network Providers (Grenada), Inc. (GNPG), without the knowledge of the investors. The clients' money went to the development of a “telecommunications” company supposedly located on the eastern Caribbean island of Grenada. The company had very few assets and no income.

Butler convinced investors that GNPG paid 12 percent interest per year on promissory notes, when in fact the notes did not require payment for up to three years, and did not specify a time or method of payment. Investors were not made aware that these investments were not authorized to be sold in California. Some of the victims agreed to invest after being misled into believing that GNPG was an Individual Retirement Account (IRA) qualified investment, when in reality the investments were not IRA qualified. In an effort to fool his investors, Jeffrey Butler simply had “IRA” typed at the top of the promissory notes. He failed to inform many of the investors that the “telecommunications” company was based in Grenada. Being that GNPG was on the island of Grenada in the Caribbean, the company was not subject to U.S. laws. Butler eventually ran out of funds to maintain his scheme and sent his victims a letter in which he continued to lie to investors, claiming that Hurricane Ivan had caused a delay in payments.

One one of Butler's many victims was born in 1909, lived through two World Wars, and worked in a shipyard until his retirement. He and his wife then went on to run a small retail store before her death. Butler persuaded the victim to turn over all his money with the promise of providing a “handsome” monthly return. As a result of losing everything, the victim started delivering newspapers twice a day in order to live and pay the rent for his room in a mobile home. This is just one example of Butler's many victims.

In the trial against Butler, a jury of 12 people and eight alternates was selected from a pool of 2,200 prospective jurors. The jury trial began Nov. 7, 2008 and lasted nearly eight months. It included testimony from 92 victims, including 82 elderly victims, and video testimony from 49 victims, which was recorded prior to trial to ensure that the victim's testimony was preserved in the event that they were unavailable to testify at trial due to death or illness. At least six victims died during the course of the trial and 52 victims died prior to the case being brought before the jury. Due to the large number of criminal charges, it took two days for the verdict to be read.

Orange County District Attorney / Case # 06NF0425 / September 14, 2017

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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