Two Missouri men were sentenced to more than a dozen years in prison each on Friday for running a Ponzi scheme in which they promised clients that their money would be invested in municipal bonds when the men were actually using the bulk of clients' cash to finance lavish lifestyles, the U.S. Attorney's Office for the Eastern District of Missouri said.
U.S. District Judge Stephen N. Limbaugh Jr. sentenced James "Jim" Johnson to 188 months in prison and Darrell Niswonger to 150 months, the U.S. Attorney's Office said in a Nov. 14 press release. The judge also ordered Johnson, 78, and Niswonger, 69, to repay their victims, the release said.
The long-running scam cost at least 99 victims $5.7 million, according to the release, which said the duo promised clients of their storefront firm in Perryville, Mo., that their investment funds were safe and would be put into municipal bonds earning a 5% return.
"But for nearly two decades Johnson and Niswonger instead spent the bulk of clients' money on lavish lifestyles that included country club memberships, sponsored golf tournaments, hundreds of thousands of dollars in improvements to Johnson's home, educational expenses for a Niswonger relative and yearly salaries of $195,000," the release said.
Johnson and Niswonger also used some of the money to make payments to victims in order to lull them into thinking their investments were safe, the U.S. Attorney's Office said in the release.
The scam began in 2006, when Johnson & Niswonger Financial Resources LLC started having cash flow problems, the release said.
"Johnson and Niswonger started offering clients what they referred to as tax-free and risk-free 'municipal bonds,' knowing they were really going to use the money to keep their business and themselves afloat financially," release said. "They discouraged investors from withdrawing their money and urged them to roll over their investments because they lacked the funds to make the investors whole, their plea agreements say."
The duo swindled friends, relatives, neighbors and a fund to preserve and maintain a cemetery, according to the release, which cited dozens of letters from victims devastated by the loss of inheritances, retirement savings and proceeds from home and farm sales.
"An 87-year-old woman who invested the $150,000 proceeds of the sale of her house said she can no longer afford rent," the release said.
In
Johnson and Niswonger agreed to forfeit the $301,749 sales proceeds of Johnson's home, a 2019 Audi A5 Premium, $61,734 in two bank accounts and $53,588 in brokerage accounts, the release said.
The Federal Bureau of Investigation and the U.S. Postal Inspection Service investigated the case, which was prosecuted by Assistant U.S. Attorney Gwendolyn Carroll, the release said.
