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Former Ohio Brokers Allen and Olson Charged with Securities Fraud in $14 Million Promissory Note Ponzi Scheme

Former Ohio stockbrokers Edward A. Allen and David L. Olson were recently indicted by a Grand Jury in the U.S. District Court for the Northern District of Ohio Eastern Division on 30 federal charges related to a $14 million promissory note investment scheme. The charges included: securities fraud, mail fraud, wire fraud, and conspiracy.

According to the indictment, for a period of approximately three years (from some time in 2006 to around January 20, 2009), Allen and Olson, along with other unnamed persons, solicited investments in A&O Companies with promises that the "guaranteed and safe" investments would render return rates as high as 45 percent. Investors allegedly were given promissory notes and promised monthly interest payments.
 
The indictment claims that while the defendants told investors that the funds would be used to purchase residential real estate properties, which would then be sold for a profit, most of the funds were converted to Allen and Olson's personal use. Additionally, the indictment claims that the defendants misled investors by issuing $8 million worth of promissory notes that the defendants represented as backed by Olson's lakefront property in Florida. Investors were not told that the property's value had been reduced by the development of a sinkhole, which drained water from the lake. Investors throughout Ohio, including in North Olmsted, Youngstown, Boardman, and Township, purchased the notes.

Allen and Olson also stand accused of misappropriating investor funds and using investor money to make Ponzi-style interest payments to previous investors and to pay the salaries and personal expenses of the defendants, among other things.

Additionally, the indictment claims that Allen and Olson solicited investors who participated in the promissory note scheme to enter into "joint venture agreements," in which investors with good credit ratings purchased real estate property on behalf of A&O Companies. The property was to be held in the investors' names, but A&O Companies would pay the mortgages. For their participation, investors would be paid a monthly fee. When the properties were sold, A&O would receive the profits. Allen and Olson allegedly used funds obtained through the promissory note investment scheme to participate in the "joint venture agreements."

According to the indictment, the properties obtained through the "joint venture agreements" were obtained fraudulently, in part because the lending institutions involved were provided false and misleading information, such as information that stated the properties would be used as primary residences.

The men were charged with one count of conspiracy, fourteen counts of mail fraud, thirteen counts of wire fraud, one count of securities fraud, and one count of conspiracy to launder monetary instruments.
 
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