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Investors Paid His Way

28 Investors Lost in Ponzi Scheme

Nashville, TN - (Feb. 27, 2009) United States Attorney Edward M. Yarbrough; My Harrison, Special Agent in Charge, Memphis Division of the Federal Bureau of Investigation (FBI); Martin P. Phanco, Inspector in Charge, United States Postal Inspection Service; Mark Gwyn, Director, Tennessee Bureau of Investigation (TBI) and Ricky Watson, Brentwood Police Chief, announced today that Michael J. Park (“Park”), Brentwood, Tennessee, former Brentwood financial advisor and owner of Park Capital Management Group (“PCMG”), entered a guilty plea to charges of mail and wire fraud in a hearing held before District Judge Aleta Trauger on February 27, 2009. A felony Information had previously been filed on December 17, 2008, in United States District Court for the Middle District of Tennessee in Nashville, charging Park with three counts of mail fraud, in violation of Title 18, United States Code, Section 1341; and one count of wire fraud, in violation of Title 18, United States Code, Section 1343.

At the hearing, Park admitted to operating an elaborate Ponzi Scheme to defraud investors who deposited funds with PCMG for investment in brokered stocks and other marketable securities. During the hearing, Judge Trauger heard testimony from a federal law enforcement agent regarding pertinent facts of the case. The agent testified that, as early as September, 2001, Park began operating the Ponzi scheme to defraud investors.

As part of the scheme, Park convinced his broker-dealer clients to become clients of PCMG, and to transfer money to PCMG accounts that purportedly were to be managed personally by Park. As an inducement for clients to invest in PCMG, Park promised investors that he would generate annualized returns on investment of between 10% and 28%. Despite Park’s representations to investors, it was never his intention to invest the client funds he solicited. Instead, Park admitted using the money placed with PCMG to subsidize a lavish lifestyle and to capitalize and operate a new mortgage lending business that he had started known as PCMG Lending.

Park admitted that he made representations to investors that their PCMG investment accounts were profitable and earning inflated returns on investment. In order to conceal the scheme from investors and to encourage future investment in PCMG, Park and another individual fabricated documents designed to deceive investors into believing that their funds were being actively traded and managed, and that Park was generating and meeting the significant growth expectations he had promised. The fictitious investment documents included stock purchase confirmations, account statements, summaries of investments, IRS Form 1099's, and invoices for account maintenance fees and commissions.

In addition to the fabricated investment documents, Park also admitted that he made false representations to investors that their investments were safe. To further assure investors of the validity and safety of their investments, Park and the other Individual caused the seal of the Securities Investor Protection Corporation (“SIPC”) to be placed on fictitious PCMG stock purchase confirmations and quarterly investment statements that were regularly provided to investors. In fact, PCMG was not a member of SIPC, and SIPC provided no protection for PCMG investors.

In order to keep track of changes in fictitious PCMG investor accounts, the other Individual created and maintained a Microsoft Excel spreadsheet in which the Individual recorded each deposit or withdrawal of client funds, any individual requests by investors for purchase or sale of specific securities, and any requests for a report on the status of an individual PCMG account. If a client requested a withdrawal from a PCMG investment account, the withdrawal amount was covered by transferring money from newly solicited or existing client funds.

Park admitted that between September 2001 and June 26, 2008, he solicited and persuaded approximately 28 investors to invest funds in excess of $9,000,000 in PCMG investment accounts. Park admitted that he never purchased or traded securities for clients who invested funds with PCMG, and that the PCMG “managed accounts” existed only on paper.

“Large cases like these are very serious, in particular for the investors," United States Attorney Edward M. Yarbrough said. “Mr. Park repeatedly encouraged people to invest by falsely promising inflated returns on their money, but instead, the investors lost their savings as part of an elaborate Ponzi scheme. In cases like these, a lot of people have invested money they can't afford to lose, particularly in hard economic times. The United States Attorney’s Office will diligently and aggressively prosecute the perpetrators of such schemes.”

"The FBI is committed to working with our regulatory and law enforcement partners to protect investor confidence in the United States financial markets," said FBI Memphis Division Special Agent in Charge My Harrison.

Brentwood Police Chief Ricky Watson stated: “I would like to commend the following law enforcement agencies for their efforts in this case: the United States Attorney’s Office, the FBI, the Postal Inspection Service, TBI, and the Securities and Exchange Commission. These agencies worked tirelessly after the Brentwood Police Department made contact and filed a complaint against this individual. Law enforcement efforts like these will help victims living in Brentwood and the surrounding area receive some justice, and hopefully some of their assets, when they fall victim to fraud schemes like the one alleged here.” Park faces a maximum of 80 years imprisonment and a fine of up to $1,000,000 at sentencing, which is set for June 8, 2009.

The charges in the Information were brought following a coordinated investigation conducted by agents from the Federal Bureau of Investigation, the United States Postal Inspection Service, the Tennessee Bureau of Investigation and the Brentwood Police Department.

John K. Webb, Deputy Criminal Chief of the White Collar and Economic Crimes Section is prosecuting the case for the United States.

SOURCE: United State Department of Justice -- Middle District of Tennessee

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