Posted by CotoBlogzz 06-30-2009 3:30 PM

Defendant’s wife was also convicted of filing false tax returns

SANTA ANA, CA - Jeffrey Gordon Butler was convicted today of stealing the life savings of numerous seniors in a “Ponzi” scheme and filing false tax returns on his ill-gotten profits after fraudulently raising more than $11 million in investments from unsuspecting elderly victims through the illegal sale of unqualified promissory notes or stocks.

Mr. Butler, 51, San Juan Capistrano, was found guilty by a jury of 693 felony counts for making untrue statements of material fact in the offer and sale of securities, the offer and sale of unqualified securities, theft from elderly persons, using a scheme to defraud in the sale of a security, and filing false tax returns for years 2001 through 2004. The defendant’s wife, Peggy Warmath Butler, 49, San Juan Capistrano, was convicted of four felony counts of filing false tax returns and excessive taking sentencing enhancements. Due to the large number of criminal charges, it took two days for the verdict to be read, beginning yesterday, Monday, June 29, 2009.

Jeffrey Butler now faces a maximum sentence of over 300 years in state prison. Peggy Butler faces a maximum sentence of 10 years in state prison. Sentencing for Jeffrey and Peggy Butler is scheduled for Sept. 18, 2009, in Department C-41, Central Justice Center, Santa Ana.

A jury of 12 people and eight alternates was selected from a pool of 2,200 prospective jurors. The jury trial, which began Nov. 7, 2008, lasted almost eight months and included testimony from 92 victims, including 82 elderly victims, and video testimony from 49 victims, which was recorded prior to trial to ensure that the victim’s testimony was preserved in the event that they were unavailable to testify at trial due to death or illness. At least six victims died during the course of the trial and 52 victims died prior to the case being brought before the jury.

Circumstances of the Ponzi Scheme and Tax Fraud
A “Ponzi” scheme is when investors are offered high, short-term returns on investments, but instead of the investments generating actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors. Jeffrey Butler sold more than 300 promissory notes or stocks without obtaining a license for the notes from the California Department of Corporations, as required by law. The majority of the victims involved in this case were over 65 years old and unaware of the risks of their investments. Several of the victims lost their life savings and many died waiting for the jury trial.

Jeffrey Butler first met many of his victims while operating a company called Senior Information Services, which offered to assist senior citizens in the creation of living wills, trusts and other estate planning structures for a fee. Through this business, the defendant gained the trust of many of his clients, whom he later victimized. Between 1995 and 2004, in a series of businesses that changed forms and names, Jeffrey Butler failed to provide his investors with any documents or other information about his companies, how the companies made money, or any of the risks of investing in the companies as required by law to protect consumers and investors. The defendant transferred investments between companies on several occasions without informing or providing only limited information to his elderly investors. The defendant immediately took 10 percent of the investors’ money for himself without their knowledge or consent.

In 2000, Jeffrey Butler moved his clients’ funds to his newest venture, Global Network Providers (Grenada), Inc. (GNPG), without the knowledge of the investors. The clients’ money went to the development of a “telecommunications” company supposedly located on the eastern Caribbean island of Grenada. The company had very few assets and no income.

Jeffrey Butler convinced investors that GNPG paid 12 percent interest per year on promissory notes, when in fact the notes did not require payment for up to three years, and did not specify a time or method of payment. Investors were not made aware that these investments were not authorized to be sold in California. Some of the victims agreed to invest after being misled into believing that GNPG was an Individual Retirement Account (IRA) qualified investment, when in reality the investments were not IRA qualified. In an effort to fool his investors, Jeffrey Butler simply had “IRA” typed at the top of the promissory notes. He failed to inform many of the investors that the “telecommunications” company was based in Grenada. Being that GNPG was on the island of Grenada in the Caribbean, the company was not subject to U.S. laws. Butler eventually ran out of funds to maintain his scheme and sent his victims a letter in which he continued to lie to investors, claiming that Hurricane Ivan had caused a delay in payments.

Peggy Butler worked with her husband, Jeffrey Butler, by maintaining the financial records for each of the Butlers’ companies and accounting for the deposits and expenditures of investor funds. Between 2001 and 2004, the Butlers filed false tax returns and failed to report income of more than $5.5 million, resulting in an unpaid tax liability of more than $530,000.