A Carmel man has been sentenced to seven years in federal prison for taking part in a Ponzi-like scheme that robbed numerous investors of their retirement savings, the U.S. Department of Justice announced Friday.
George R. McKown, 71, was convicted of conspiracy to commit securities fraud and wire fraud in October after a five-day jury trial before United States District Court Judge Philip Simon in Hammond, Indiana.
In handing down the sentence, Simon also ordered McKown to pay more than $5.2 million in restitution to his victims.
McKown and Richard E. Gearhart of Lowell, Indiana, sold securities to individuals who transferred their traditional individual retirement accounts, pensions, annuities, 401(k)s, and cash to Asset Preservation Specialists, a company controlled by Gearhart and McKown.
McKown and Gearhart promised investors returns of 6% to 8% and ensured liquidity. They also provided investors a fraudulent monthly statement showing positive returns even though they were losing money. Without the investors’ knowledge or consent, McKown and Gearhart used their money to fund ventures in which both had an interest.
The pair also used money from investors to repay other clients to keep them from getting suspicious.
Authorities say the loss to at least 25 individual who made investments from 2008 to 2013 was more than $5 million. Many of the victims learned that they had lost their savings in 2013 when Gearhart filed for bankruptcy, listing them as creditors rather than investors. Authorities said all of the victims were between 50 and 90 years old when they began giving their assets to McKown and Gearhart.
Gearhart pleaded guilty to conspiracy to commit securities fraud and was sentenced last year to five years in prison and ordered to pay more than $5 million in restitution.