A federal felony criminal information against William W. Spencer, 67, a former Franklin financial advisor, was filed on April 2 in U.S. District Court for the Middle District of Tennessee, charging Spencer with 11 counts of fraud.
The charges of mail and wire fraud are based on Spencer’s alleged role in embezzling more than $1.4 million in client investment funds, said Ed Yarbrough, U.S. Attorney for the Middle District of Tennessee, in a statement. Joining Yarbrough's team in the investigation were agents from the Federal Bureau of Investigation, the United States Postal Inspection Service and the Franklin Police Department. Assistant U.S. Attorney John Webb is prosecuting the case for the federal government.
They allege that, from December 1997 until last November, Spencer operated an investment Ponzi scheme in which he borrowed and solicited $1.9 million from about 100 friends, clients and investors by promising annual returns of between 10 percent to 12 percent.
Spencer characterized each investment as a “personal loan” and executed and provided a promissory note to each investor. He also pledged his personal assets and life insurance policies as collateral for each note and promised investors he would repay their principal in between six months and a year.
Spencer told investors that their money had been put to work in pooled investment funds intended to maximize their return on investment. He also discouraged investors from cashing out their investments as their notes matured, saying that doing so would lower their returns as well as those of other pooled investors.
Investigators say Spencer never had the assets or income needed to pay the interest he was promising investors. When questioned by investors, he refused to disclose the exact nature or location of invested funds and restricted withdrawals until a replacement investor could be found.
The indictment against Spencer say he never invested any of the solicited funds, but instead used them to pay personal expenses and to occasionally disburse fictitious earnings or return principal to some investors.
Regulators moved against Spencer starting last summer. In August, the Financial Industry Regulatory Authority permanently barred Spencer from being a broker-dealer for violating its rules of conduct and in mid-November, Spencer entered into a consent order with the Tennessee Commissioner of Commerce and Insurance. That order revoked his insurance producer license and registration as an agent under the Tennessee Securities Act and permanently barred him from applying for a license in the future.
“Cases like these are devastating to investors, especially people who invest their life’s savings with individuals they trust, only to find that their trust has been misplaced,” Yarbrough said.
POSTDATA: WARRANTY DEEDS