A Burbank woman has been sentenced to five years in federal prison for running a Ponzi scheme that collected more than $10 million dollars from investors with bogus promises of 25 percent returns every 45 days.
Clelia Flores was sentenced by United States District Judge Margaret M. Morrow, who also ordered Flores to pay $6,123,063 in restitution to 169 people who were victimized by her scheme.
Flores pleaded guilty in May to two counts of wire fraud and two counts of money laundering. In a plea agreement filed in United States District Court, Flores admitted that she induced investors to give money to her company, Maximum Return Investments, and several other companies under her control, by falsely promising to place their money in "guaranteed" bank programs and other investments. Through the investments that she promoted in 2006 and 2007, Flores promised investors that they would receive approximate rates of return of 25 percent every 45 days. Flores further promised investors that their principal investments could be returned at any time because their money would never leave the bank.
However, as she admitted in the plea agreement, Flores used a significant portion of investor funds to enrich herself and to throw lavish parties for investors. For example, she used hundreds of thousands of dollars of investor money to purchase a luxury home in El Segundo, which she furnished using investor funds. Flores also used money from new investors to make Ponzi payments to earlier investors, thereby concealing the fraudulent scheme by making the earlier investors believe they were earning the promised rate of return.
When investors requested their purported profits, Flores encouraged them to re-invest these supposed returns. And when she failed to convince investors to keep their supposed profits in her investment program, Flores, fabricated reasons as to why the investors could not obtain their money.
Taking into account the payments made to some of the victims, victims lost a total of approximately $6,123,063 as a result of the scheme. The case against Flores is the result of an investigation by the Federal Bureau of Investigation and IRS - Criminal Investigation.
In 2009, the Securities and Exchange Commission charged Flores and her company, Maximum Return Investments, with violations of federal securities laws. This action resulted in a default judgment against Flores and Maximum Return Investments in September 2009, which led to civil penalties of $650,00 against Maximum Return and $130,000 against Flores. Additionally, a federal judge ordered Flores to turn over more than $10.3 million that she collected during the scheme.
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