Unlicensed "Investment Advisor" Pleads Guilty

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Photo: Getty Images

An unlicensed “investment advisor” from Vancouver, Washington, pleaded guilty today in U.S. District Court in Tacoma to mail fraud in connection with his scheme to defraud investors, including friends and family members, out of more than $4 million, announced U.S. Attorney Nick Brown. Charles Richard Burgess, 66, faces up to 20 years in prison when sentenced by U.S. District Judge David Estudillo on November 4, 2022.

“For more than two decades Mr. Burgess led his victims to believe that he was successfully investing their funds for retirement. But in fact, since at least 2013, the investment fund was insolvent and losing value, and Burgess was stealing investor funds to line his own pockets,” said U.S. Attorney Brown. “More than two dozen people have lost retirement savings because of Mr. Burgess’s fraud.”

According to records filed in the case, in the mid-1990s Burgess began selling investments in an unregistered investment vehicle that Burgess called “the pool.” Burgess never became a registered or licensed investment advisor. But between January 1995 and April 2021, he convinced 64 people to invest $13.4 million in “the pool.” He sought investments from friends and family members with whom he had a trusting relationship. Burgess did nothing to screen the investors to see what type of risk they could tolerate, and he did not provide them with written materials about the nature of the investments.

Burgess told investors that he only took a share of the profit made by the investments and he claimed to some that he would personally absorb any losses. Burgess provided the investors with statements indicating their account balances had grown substantially over time. However, those statements were false. For example, in 2016 Burgess sent investors statements indicating their investments had grown about 10 percent that year. In fact, the investments lost money.

As early as 2013, Burgess was not able to repay all the investors’ principal, let alone the profits he was falsely telling them they had earned. In December 2013, Burgess owed investors $2.3 million in principal and represented that the value of investor accounts exceeded $4.2 million. In fact, at that time the pool’s assets were only about $711,000. By then end of December 2015, it was even worse, with investors being told their accounts totaled over $5.2 million, when the assets totaled only about $365,000. By the end of 2020, Burgess owed investors $4.5 million in principal and represented in year-end statements that the collective value of their accounts exceeded $10.3 million. In fact, the Pool’s assets totaled only $113,000. 

As the financial picture worsened, Burgess paid off earlier investors with money from new investors –a classic Ponzi scheme.

Despite his assurances that he only took a share of the profit from the fund, Burgess actually used investor money for his own expenses. From 2014-2021 Burgess transferred $1.4 million to his personal account.

In all, 32 investors lost $4.3 million in principal payments that they had made to Burgess. Under the plea agreement, Burgess will be ordered to pay $4,359,113 to the victim investors. Prosecutors have agreed to recommend the low end of the sentencing guidelines range when Burgess is sentenced.  Judge Estudillo is not bound by prosecutors’ recommendation and can impose any sentence up to the 20-year statutory maximum after considering the sentencing guidelines and other statutory factors.

The case was investigated by the FBI with assistance from the Washington Department of Financial Institutions.

The case is being prosecuted by Assistant United States Attorney Seth Wilkinson.

Source: U.S. Attorney for Western Washington

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