In a rare turn of events, a Seattle woman decided to accept responsibility for masterminding a $126 million payday loan Ponzi scheme on her own terms by rejecting a plea agreement offered by federal prosecutors and instead pleading guilty to each of the 110 criminal charges - a move that could effectively ensure she spends the rest of her life in prison. Doris "Dee" Nelson was indicted in late 2011 and charged with 71 counts of wire fraud, 22 counts of mail fraud and 17 counts of international money laundering. While the rejected plea agreement almost certainly called for Nelson to plead guilty to a significantly smaller number of charges, which would have likely resulted in a prison sentence that would likely allow Nelson to complete in her lifetime, the decision to plead guilty to all 110 counts will likely result in a significantly higher sentence, as well as the possibility Nelson could be deported to Canada.
Nelson was accused of using multiple different business entities to operate a payday/short-term lending business called the Little Loan Shoppe ("LLS"). Authorities alleged that the scheme began in or around May 2000, when Nelson began soliciting investors by promising high yields on investor funds which Nelson claimed would be paid from the profits of the short-term operations of LLS. These purported returns ranged from forty to sixty percent annually, and were often paid to investors via post-dated interest checks mailed to the investor at the time of their investment. Originally centered in British Colombia, LLS moved its operations to Spokane in or around 2001. Soon thereafter in 2003, LLS closed all physical operations and and began conducting the business solely over the internet. When the operation began to encounter financial difficulties in October 2008, investors were offered reduced interest rate payments of ten percent. However, the financial difficulties continued, and by March 2009, Nelson had ceased making any payments.
While Nelson represented to investors that LLS generated huge profits that were used to pay the exorbitant returns, in reality the entire operation was a massive Ponzi scheme, with nearly all investor funds being used to pay interest to existing investors and to sustain Nelson's lavish lifestyle. Nelson alone received over $3 million in funds diverted from investor funds, which were used to purchase, among other things, a motor home, a Chevrolet Corvette, and a Mercedes Benz S550. Additionally, Nelson used investor funds to gamble at Las Vegas casinos, losing nearly $500,000 between 2005 and 2008. Nelson also paid commissions to several investors in return for directing further investment to Nelson's operation.
Little Loan Shoppe filed for bankruptcy in 2009, and the trustee appointed to oversee the liquidation process has filed clawback lawsuits against LLS investors who received interest payments in excess of their original investment. In addition to the criminal charges, Nelson was also charged by the Securities and Exchange Commission, and later faced charges by Canadian securities regulators.
While the decision to plead guilty to all 110 charges will likely result in a significantly higher recommended sentencing range under Federal Sentencing Guidelines, the court is not bound to hand down a sentence within the sentencing range as a result of the Supreme Court's decision in United States v. Booker. Thus, Nelson's ultimate fate will rest in the hands of the district judge overseeing the case.
Nelson's sentencing is scheduled for July.
US v. Doris Nelson Indictment
For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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