Wednesday, March 30, 2016

Budget Finance in New Martinsville in Ponzi scheme investigation

A Ponzi scheme in New Martinsville WV appears to have included nearly 800 victims who have been bilked out of tens of millions of dollars. Over 500 of the victims were West Virginians, about 150 Ohioans, and several from other states. Many of the victims are older people and middle income folks who came in to some money through the recent development of shale gas in the areas near the Ohio river including Wetzel, Tyler, Marshall, Pleasants, Wood, Ritchie, Doddridge, and other counties.

The case is being investigated through partnerships of several federal and state entities including the FBI, the US Attorney for the Southern District of Ohio, the IRS, the US Postal Inspector, the WV Auditor's office, the WV Division of Financial Institutions (WVDFI), the Wetzel County prosecutor's office, and others.

The alleged perpetrator, owner of Budget Finance in New Martinsville, lives in Ohio. The company had been in business in New Martinsville for decades, was trusted among members of the community, and had been in both short-term lending and real estate rental businesses as well as investments.

According to investigators at a town hall meeting of victims held in New Martinsville on March 15, 2016, the story began to break in October 2015 when some Budget Finance investors became concerned when told they could not withdraw their funds on deposit right away. The first official to start looking into it was the Wetzel County prosecutor Tim Haught who quickly reached out to the President of Budget Finance for information and to remind her of her obligation under state law to have a local office open at least 4 days weekly. When he did not get a satisfactory response he contacted state finance regulators who began investigating. Soon federal law enforcement was also included in the investigation, and the case is still in the investigation phase now.

At the meeting on March 15 victims were told several important things about the status of the case:

  • The US Attorney's office for the Northern District of WV who would normally have jurisdiction over the case has some kind of conflict of interest regarding the matter so the US Department of Justice has assigned the US Attorney for the Southern District of Ohio to investigate and lead the prosecution. He said he has been doing law enforcement legal work for over 40 years and this is the biggest case of this case he has seen.
  • Several different federal and state law enforcement and regulators repeated that victims are likely to get only "pennies on the dollar" as there appear to be very little assets available to return to them.
  • Charges have not yet been brought, and there is likely a 5 year statute of limitations on several possible kinds of charges, but the US Attorney expects to bring charges in 2016 and avoid delay.
  • There are various tax implications on the theft loss and victims will not likely receive 1099 or other forms from Budget Finance for tax year 2015. The Taxpayer Advocate from the IRS is available to victims and their tax accountants to answer questions about filing taxes for this year and amendments for previous years related to the theft.
  • The reason the scheme had not been detected earlier by regulators is that no one at Budget Finance had any kind of license or registration to sell investments. Though the lending business was licensed and regularly audited by WVDFI no state authority had any idea the investment business existed, and therefore no one had a duty to audit or regulate it for consumer safety.

  • One of the reasons this kind of scheme was able to be perpetrated on such a large scale and for so long is that this business was trusted in the community. Had anyone ever contacted the WV Auditor's Office to ask if they were in good standing to sell investments there would have likely been an investigation prompted. But no one ever made that call. Community member investors were receiving high interest returns and regular payments so no one had a complaint. Had anyone recognized that these high rates were too good to be true and started checking it is likely the scheme would have been thwarted before it could get this large.

    WVSLA is available to any WV victim of this scheme age 60 or over who has legal questions or problems. We cannot provide tax advice but we can offer legal advice and information for resulting debt, housing, benefits, or other issues.

    for more information see articles in the Charleston Gazette from December and the Wheeling Intelligencer from November


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