March 29, 2010 / 10:37 PM / 10 years ago

Four charged in $60 million Ponzi scheme in Canada

CALGARY, Alberta (Reuters) - Canadian police laid fraud and money laundering charges on Monday against four people accused of bilking 1,000 investors across North America in a $60 million Ponzi scheme.

The Royal Canadian Mounted Police charged three men and a woman in connection with the business of a company called HMS Financial Inc, which allegedly promised investors returns of 8 percent to 12 percent between 2001 and 2004.

The four are from Alberta, where RCMP commercial crime investigators arrested two men last year in connection with a separate scheme that allegedly fleeced investors out of as much as C$400 million ($392 million).

Police charged Murray Stark, 73, Robert Fyn, 62, and Garth Bailey, 57, fraud over C$5,000 ($4,900) and conspiracy to commit fraud. The three, plus Katherine Rodrique Bailey, 53, were charged with laundering the proceeds of crime.

A Ponzi scheme is one in which early investors are paid with the money of new clients. In 2008, such swindles took on monumental proportions when the financial empire of Wall Street heavyweight Bernard Madoff was revealed to be a $65 billion fraud.

In the Alberta case, police said investors were told their investments were risk-free and were allegedly advised that Garth Bailey, HMS Financial’s lawyer, held millions of dollars in bonds that would be liquidated if the investments failed to pay out.

“Investigators have not been able to identify the existence of any bonds and believe this high-yield investment program was a Ponzi scheme,” RCMP said in a statement.

The scheme collapsed in March 2004 when the company could not meet its payout obligations, police said. That is when RCMP began its investigation.

The accused are scheduled to appear in court in Drumheller, Alberta, on April 16.

It was not the only Ponzi case that came to light on Monday. U.S. federal prosecutors charged Cuyahoga Falls, Ohio, resident Enrique Villalba, a graduate of the West Point military academy, of perpetuating a $30 million Ponzi scheme.

($1=$1.02 Canadian)

Reporting by Jeffrey Jones; editing by Rob Wilson

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