Youngstown, FLA – Lakeland-based David L Olson, founder of A&O Companies, a company that defrauded 100 victims in nine states in a $14.8 million Ponzi scam, will plead guilty April 5 before Hon. Benita Y Pearson, Northern District Judge, according to court records.
According to the indictment, Olson founded and was president of the A&O Companies, which he ran along with CEO Edward A Allen, of Auburndale, Fla., who is similarly charged. It is alleged in the indictment that in the period from 2006 through Jan 20, 2009, the duo solicited investments in their real estate ventures, but used the money raised to pay for salaries, personal expenses and promised returns to other investors, ranging from 20 to 45 percent. According to the court documents, the victims belonged to Niles, Girard, Boardman, Youngstown, North Olmstead, Olmstead Township and Columbiana.
The two misled investors by claiming that their investments were safe – having promissory notes as collateral and guaranteed by a Florida property on a lakefront. According to the indictment, this property was charged as collateral on over $8 million of promissory notes, but was purchased for only $425,000. Even this value evaporated when a sinkhole developed in the lake and drained its water.
According to filings, the pair approached investors who had good credit and purchased properties on behalf of the company. Though the property was transferred to the name of the investor, A&O was to make payments on the mortgage. However, the defendants then went on to provide false information about the mortgages to the financing institutions.
It is further charged in the indictment that after issuing the promissory notes, the two set up a Ponzi scheme to pay the interest on the notes “to give the false impression that these were actual investments”, by using money received from new investors to pay interest to original investors.
The criminal case follows on from a civil suit filed against the defendants by the SEC, charging that they fraudulently conducted unregistered sales and offers of securities, thereby raising about $14.8 million from at least 10 victims in nine states, based on promises of 20 percent annual returns. The SEC complaint alleged that they spent about $5.1 million on real estate, $3 million on salaries, $2.2 million for themselves and $1 million on a new office building.
According to the complaint, Olson and Allen were able to solicit investors through World Group Securities, Inc, a Georgia-based firm where they functioned as registered representatives. Victims were made to take loans against home equity so as to invest with A&O, while others were persuaded to restructure existing home mortgages to reduce monthly installment payouts and invest the cash saved with the company, according to the records.
Post his guilty plea, David L Olson is likely to face a maximum of 20 years in prison and a fine of $5 million on charges of conspiracy, securities fraud, mail fraud, money laundering and wire fraud.