A Tennessee man was sentenced to serve the next fourteen years in federal prison after pleading guilty to masterminding an $18 million Ponzi scheme. Terry Kretz, 61, received the sentence from U.S. District Judge Todd J Campbell, and was also ordered to pay nearly $15 million in restitution to defrauded investors. Kretz received the sentence after pleading guilty earlier this year to securities fraud, money laundering, conspiracy to commit securities fraud, wire fraud and mail fraud.
Kretz was the former chief executive officer of Hanover Corporation ("Hanover"), an investment firm that purportedly traded stock options, equities and other securities largely through the offering of promissory notes to potential investors. In return, the client was promised lucrative regular interest payments and the return of their principal at maturation of the promissory note. In total, Hanover raised more than $18 million from investors during the time period of January 2004 to August 2006.
However, authorities alleged that Hanover's representations to investors were false and that the handsome returns paid to investors were instead derived through a massive Ponzi scheme. In addition to suffering consistent losses using investor funds, Kretz and other individuals used investor funds for their own personal use that included the payment of salaries and other luxury purchases such as a $600,000 residential building lot, a $176,000 donation to a church, and golf memberships. Kretz and Robert Haley, Hanover's former chief financial officer, were indicted in November 2009.
Notably, Tennessee state securities regulators reportedly attempted to shut down Hanover in 2005, but their attempt was ultimately rejected by a Davidson County judge. As a result, Hanover was able to raise an additional $7 million from investors before Hanover was placed into involuntary bankruptcy in October 2006.
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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