BY LINDA BENTLEY | APRIL 25, 2012
Former Scottsdale CPA indicted in $66 million Ponzi scheme
Investors should exercise caution before committing to investment
opportunities that promise high-yield returns with little or no risk
PHOENIX – Last week, a federal grand jury returned a 102-count indictment against former Scottsdale CPA Danny Wise for mail fraud, wire fraud and transactional money laundering, with forfeiture allegations, in connection with a $66 million Ponzi scheme.
According to the indictment, beginning around June 2005 and continuing through December 2008, Wise induced victims to “invest” approximately $66 million with false promises the victims could earn high-yield rates of return by making short-term, high-interest hard money loans in speculative real estate ventures.
Wise did not utilize the money entrusted to him in the manner promised but rather operated a Ponzi scheme, using new investors’ money to pay off old investors.
In the process, Wise siphoned off approximately $7 million in victims’ funds for his own personal use and enjoyment, including purchasing a home in the affluent Desert Mountain golf community in Scottsdale, a home in Flagstaff and a condo in Manhattan.
When victims wanted details about the specific real estate speculators, Wise created scenarios that included fictitious borrowers, named "Gary Firestein," "Richard Fried," and "Pete."
Wise then manufactured fake documents from these fictitious individuals, including documents entitled "Promissory Note" and "Assignment for Funds for Loan," among others, forging the signatures of the non-existent individuals.
When victims insisted upon speaking to these individuals, Wise devised fake phone calls with these fictitious speculators by getting an accomplice to carry out the hoax over the phone with one or more victim investors.
Wise provided the victims with spreadsheet statements that he used to convince investors they were earning sizeable returns on their investments and roll over or reinvest their fake earnings, which reduced the amount of money Wise had to return to victim investors and helped keep the Ponzi scheme alive and undetected.
On April 19, Wise, 55, was arraigned before U.S. District Court Magistrate Judge Michelle H. Burns, where he pled not guilty and was released on his own recognizance.
Wise is currently out on bond for 15 counts of fraudulent schemes and theft in a case scheduled for trial on June 25 in Maricopa County Superior Court.
In that case, Wise is accused of converting to his own use more than $1 million he accepted from clients, as a CPA, for payment of their federal and state taxes. When Wise was confronted about their unpaid taxes, victims claim Wise produced forged cancelled checks to make it appear as though the IRS had misapplied their payments.
Wise was allegedly stealing his clients’ tax money in an effort to keep his Ponzi scheme from becoming detected.
In 2008, when a group of victims realized their investments were not investments at all but part of an elaborate Ponzi scheme, they filed an involuntary bankruptcy against Wise and his various LLCs in order to freeze his assets.
In 2009, the Securities and Exchange Commission (SEC), which has no authority to pursue criminal charges, followed with civil charges against Wise in federal court, accusing him of operating a $70 million Ponzi scheme that involved at least 125 victims in 13 states.
Meanwhile a criminal investigation was underway involving the IRS, the U.S. Postal Inspection Service, the U.S. Department of Labor and the FBI to unravel Wise’s scheme to defraud victims through an intricate web of entities and bank accounts.
Although criminal charges had yet to be filed against Wise in the Ponzi scheme, in 2009, Wise was ordered by the Arizona Corporation Commission Securities Division to pay $67 million in restitution to his victims.
Wise dismissed his last attorney in his state case and has retained David W. Dow to represent him in both state and federal court. Dow, who is not a board certified criminal lawyer, shows his area of focus to be antitrust law, injury and wrongful death, and insurance.
Several victims want to know what Wise, who has been banned from practicing accounting in any form and has had his certification revoked, is doing for money and have asked how he can afford to retain private defense counsel.
According to former friends of the Wises, his wife Cynthia is working a “low-paying 9-5 job” that would be barely enough to support their family, which includes their minor son.
However, no one seems to know what Wise is doing these days, if he’s working and, if so, doing what.
Victims of Wise’s Ponzi scheme have been waiting nearly four years for Wise to be charged, but for many it’s with mixed emotions.
One woman, happy to hear the news of Wise’s indictment, wrote, “Thanks to Dan, I’ve had to go back to work at age 70.”
She’s not the only one. Numerous other victims in their 70s, 80s and 90s have been forced back to work after losing their homes, savings and retirement to Wise’s Ponzi scheme.
Acting U.S. Attorney Ann Birmingham Scheel stated, “The U.S. Attorney’s Office will continue to work with our law enforcement partners to investigate and prosecute those who prey on the public for personal financial gain. This scheme serves as an unfortunate reminder that all investors, both novice and experienced, should exercise caution before committing their hard-earned money to investment opportunities that promise high-yield returns with little or no risk.”
Convictions for mail and wire fraud carry a maximum penalty of 20 years, a $250,000 fine or both. A conviction for transactional money laundering carries a maximum penalty of 10 years in prison, a $250,000 fine or both.