A Minnesota man will appear in court Wednesday to face charges in what the Orange County District Attorney's office is calling the "largest Ponzi scheme in Orange County History."
Gerard Frank Cellette, 48, was convicted of an investment scam involving his printing business and is scheduled to make his first appearance in court tomorrow in Santa Ana to face charges in a $200 million Ponzi scheme targeting Orange County investors, according to prosecutors.
Cellette, who is serving a six-year prison sentence in Minnesota, fought extradition for six months and was brought to Santa Ana on Monday night to face charges, Deputy District Attorney Marc Labreche said. Cellette, owner of a "small-time" printing business called Minnesota Print Services Inc., met an Orange County man while he was visiting a relative in Minnesota in 2005, and the Orange County man -- who is not identified in court papers -- invested in Cellete's business, Labreche said.
Cellette paid back the investment, with profit, and offered more investment opportunities, the prosecutor said.
Cellette typically promised investors returns of 10-15 percent in two to three months, according to Labreche, who said the victims were in California, Minnesota, Georgia, Arizona, Colorado, Hawaii and Illinois.
Between 2005 and 2009, Cellete took in more than $200 million nationwide, including $150 million from Orange County investors, Labreche said.
The net loss in the alleged Ponzi scheme is about $53 million, with $21 million in losses for Orange County victims, Labreche said. In all, there were 55 investors in California, most of them living in Orange County, he said.
The second-biggest pool of ripped-off investors were in Georgia, Labreche alleged.
"He had a constant flow of investors coming in," the prosecutor said.
Cellette would tell investors he had printing contracts with major corporations and needed money up-front to get a 20 percent discount on purchasing paper, Labreche said.
"They would come up with the money themselves or get other investors," Labreche said.
The defendant would give investors phony contracts, known as "deal sheets," that included details of bogus printing jobs, Labreche alleged.
Cellette allegedly spent the money on himself, including cars, flights on private jets and multiple homes. A Go-Kart track, bowling alley and a 1950s- themed malt shop were among the luxuries at some of his homes, the prosecutor said.
The Orange County man Cellette met in Minnesota, along with two other local men, ended up becoming unofficial brokers for Cellette in Orange County, Labreche said. They would get some of the money from investors locally and wire it to Cellette, who never came to Orange County, Labreche said.
When the returns on investments slowed in September 2009 the three men went to Minnesota to confront Cellette, Labreche said. They suspected then it was a Ponzi scheme and alerted authorities in Hennepin County, Minn., Labreche said.
No one else has been charged in connection with the Ponzi scheme, but the investigation is ongoing, Labreche said.
It's unclear whether Cellette would have the ability to make restitution if he is convicted, Labreche said. His property and assets have been liquidated, the prosecutor said.
"It's unclear whether he has other money out there hiding someplace," Labreche said.
Cellette has since been convicted in Minnesota and was serving six years in prison there when Orange County prosecutors began extradition proceedings last year, which the defendant fought, Labreche said.
Cellette faces up to l04 years in prison if convicted at trial. He was charged in June with 116 felony counts, including 46 counts of selling unregistered securities, 43 counts of money laundering and 27 counts of using an untrue statement in the purchase and sale of a security. He also faces sentencing enhancement allegations for property damage exceeding $3.2 million, money laundering transactions in excess of $2.5 million, aggravated white collar crime more than $500,000 and causing more than $100,000 in losses.
- City News Service