Date: 08-26-2024

Case Style:

United States of America v. Paul Horton Smith Sr.

Case Number: 5:20-cr-00120

Judge: Jesus G. Bernal

Court: The United States District Court for the Central District of California (Los Angeles County)

Plaintiff's Attorney: The United States Attorney’s Office in Los Angeles

Defendant's Attorney:

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Description:

Los Angeles, California criminal defense lawyer represented the Defendant charged with
Ponzi Scheme
Moreno Valley Man Sentenced to More Than 15 Years in Prison for Ponzi Scheme that Drew in More Than $24 Million from Victims

Paul Horton Smith Sr., 61, of Moreno Valley, was sentenced by United States District Judge Jesus G. Bernal, who also ordered him to pay $13,331,505 in restitution.

Smith pleaded guilty on January 8 to one count of wire fraud.

“This defendant’s greed and deceit caused major losses for his victims, who discovered that the supposed gains for their retirement were nothing more than a lie,” said United States Attorney Martin Estrada. “My office will continue to aggressively prosecute fraudsters who take advantage of victims in our community, and I also encourage everyone to use caution and skepticism with regard to any investments, especially those that seem too good to be true.”

“Paul Smith's clients trusted him. Smith knew that and used it to his advantage, selling them on a bogus investment opportunity and pocketing those funds,” said Akil Davis, Assistant Director in Charge of the FBI Los Angeles Field Office. “The fact that the bulk of his investors were seniors, men and women alike, and in various stages of vulnerability, makes this case all the more heartbreaking. Now, he's finally being held accountable. The FBI will continue shutting down crooks like this to help find justice for their victims.”

Smith operated Riverside-based companies named Northstar Communications LLC, Planning Services Inc., and eGate LLC. From July 2000 to May 2020, Smith obtained money from investors by soliciting individuals – who often were elderly or retired – to invest in something Smith called “Northstar.” Some of the investors previously were Planning Services clients.

Smith communicated with the victim investors regarding Northstar in person, over the telephone, and via email and text messages. He falsely told investors that Northstar was an annuity or an investment like an annuity. He falsely told other investors that Northstar invested in real estate or followed the stock market. He typically told the investors that their investment would generate a fixed rate of return and was a “safe investment.”

While Smith led most Northstar investors to believe his company reinvested their initial investment, generating the percentage they were to earn, in fact, he never invested the money. Instead, Smith deposited all investor funds into a non-interest-bearing checking account.

Smith used some money from later Northstar investors to pay earlier Northstar investors’ monthly interest payments and to repay earlier investors who wanted to withdraw their investment.

For example, in April 2019, Smith caused one victim to invest with him $400,000 – life insurance proceeds after the victim’s spouse had died. The victim wrote a personal check for that amount and the check was deposited into a bank account in Riverside, which then was electronically transferred to the bank’s Alabama headquarters for processing.

Smith promised the victim he would invest the $400,000 in a safe investment with a 5% rate of return. But Smith never invested the money. Instead, he transferred the funds to pay other victims of his Ponzi scheme. In an attempt to conceal his criminal activity, Smith made 11 payments to the victim that totaled $163,324.

As a result of the scheme, Smith fraudulently obtained more than $24 million from at least 200 investors. Of these investors, 106 victims have not been fully repaid. The total loss for these victims is $13,331,505.

The FBI investigated this matter. The United States Securities and Exchange Commission, which filed a complaint and obtained a judgment against Smith and Northstar Communications LLC in 2020, provided assistance.

Assistant United States Attorney Benjamin J. Weir of the Riverside Branch Office prosecuted this case.

Outcome:

Defendant was found guilty and sentenced to 188 months in federal prison

Plaintiff's Experts:

Defendant's Experts:

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