Wednesday, March 11, 2009

John M. Donnelly Charged With $11 Million Ponzi Scheme; Wife Deborah is "Relief Defendant"

A Charlottesville man, John M. Donnelly, has been arrested and charged with a Ponzi scheme, according to documents released by the Securities and Exchange Commission and local news sources.

Donnelly created limited partnerships to solicit investors' money: Tower Analysis Inc., Nasco Tang Corporation, and Nadia Capital Corporation, which have all been named as Relief Defendants. A relief defendant is defined as "a person or entity who has received ill-gotten funds or assets as a result of the illegal acts of the other named defendants."

The SEC Complaint names Donnelly's wife, Deborah, as a "Relief Defendant."

The Hook reports that Deborah Donnelly is the Executive Director of UVA's Curry School of Education Foundation, which is responsible for garnering charitable donations.

The Complaint requests the Court "Order the freezing of Defendant and Relief Defendants' assets...." which includes the house pictured above, on Church Plains Road in Crozet. The house was purchased after the alleged Ponzi scheme began.

The 5 bedroom, 4.5 bath, 3,000 sq ft house
is on 3.4 acres in the Church Hill subdivision. It was purchased in 2003 for $440K; it is currently assessed for $597,700.

The SEC's complaint additionally lists Deborah Donnelly as a Relief Defendant because
"On at least one occasion, funds were wired from a joint account in the name of John and Deborah Donnelly to a Tower Fund investor to satisfy a withdrawl request." Tower Investments is currently thought to have assets of $190,000.

The Hook reports, "Reached at her office this afternoon, Ms. Donnelly claimed it was the first she’d heard of the alleged Ponzi scheme run by her husband, but did say her husband had been arrested this afternoon."

The SEC filed the complaint in the United States District Court, Western District. The Complaint states in Allegation 3, "During the relevant time period, Defendant Donnelly represented to investors that he would pool their funds to trade in, among other things, stock and bond index derivatives and claimed to generate annual investment returns of as much as 22%."

On February 9, Donnelly confessed to an anonymous party, identified in the complaint as "Investor B," that he did not have the assets. "Investor B" notified the SEC. As it turns out, Donnelly had done no trading since 2002.

This is bad, serious stuff, to put it mildly.

We can't help but wonder, of course, if any of her husband's "investment entities" "contributed" to the Curry School Foundation?

And we wonder if any of the "31 investors" from whom Donnelly is alleged to have solicited millions will be here in the Charlottesville area?

This is going to supercede The Landmark Hotel for media coverage in the coming weeks.

Relevant Reading:

Madoff Lite: Feds Claim Charlottesville Ponzi Scheme
by Lindsey Barnes, The Hook
SEC Press Release
SEC Complaint Against John M. Donnelly
US Commodities Futures Trading Commission Press Release
SEC Press Releases - The SEC received heavy criticism for failing to stop Bernie Madoff years ago; now it seems the SEC finds Ponzi and Real Estate schemes everywhere.

1 comment:

Doug Ramsey said...

This six part series by an excellent fiduciary financial planner in the same city talks about how to safeguard your money against this type of fraud. It is a really good list of what to insist on.
Check out Safeguarding Your Money at
http://www.emarotta.com/article.php?ID=319

D. Ramsey