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Duncan Group Real Estate Ponzi

From the FBI Press Release:

Aaron Duncan, the former CEO and owner of The Duncan Group, was indicted on multiple charges involving a multi-million dollar investment scheme, Acting United States Attorney Michael W. Reap announced today.

The indictment alleges that Aaron Duncan and The Duncan Group took in millions in investor money, purchased only a small number of properties, and caused investors to lose more than $2,500,000 in investments.

Duncan owned, operated, and was affiliated with several businesses that were generally operated under the umbrella and name The Duncan Group with offices in St. Charles and Chesterfield, MO.

The Duncan Group held itself out as being in the business of buying, rehabilitating, and selling real estate, including foreclosed properties, and also claimed to be involved in buying rental property and commercial real estate.

According to the indictment, beginning in December 2005, Duncan was experiencing personal financial problems, including falling behind on the mortgage payments on his personal residence.

Despite these problems, Duncan held himself and his businesses out as being successful. Beginning in 2006 and continuing until October 2008, Duncan operated a fraudulent investment scheme where he solicited individuals to invest in real estate ventures with The Duncan Group.

The indictment alleges that the scheme operated as a pyramid and Ponzi-style investment scheme in which earlier investors were routinely paid returns on their investments using funds obtained from subsequent investors, rather than from returns on legitimate investments, such as the sale of real estate.

The scheme created a false appearance of a successful investment strategy, and had the intended effect of luring new investors and enticing existing investors to make additional investments.

Duncan provided false presentations to investors and potential investors by telling them they would be paid high rates of return on their investments, often in a relatively short period of time. In reality The Duncan Group relied on new investors' money to stay afloat. The indictment alleges that Duncan falsely told investors that their investments were secured by deeds to real property.

The indictment alleges that Duncan failed to disclose to investors and potential investors that The Duncan Group had not purchased and sold enough properties to produce the interest rates represented and promised, and that interest payments were routinely made from other investors' principal and not from real estate transactions and investments.

Finally, the indictment charges that Duncan often used investors' principal to pay himself and to pay for personal expenses, including his personal mortgage, rather than using such money to invest in real estate.

Aaron Duncan and The Duncan Group took in millions of dollars in investor money, purchased only a small number of properties, and caused investors to lose more than $2,500,000 in investments. 

Many investors in the scheme lost all or a substantial percentage of the principal that they invested with The Duncan Group.

"People should diligently check out claims of unusually high rates of return before investing," said Toni Weirauch, Special Agent in Charge of IRS Criminal Investigation. 

"Investors should not blindly follow the advice of any one person and should get a second opinion."

"Investors must be wary about any claims of high rates of return," said J.R. Ball, AIC, St. Louis Postal Inspection Service.

He added, "When statements or sales materials arrive in the mail, carefully scrutinize them for errors or inconsistencies, even if you have already invested."

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Full post as published by Misleading Advertising Law on August 17, 2009 (boomark / email).