Guilty plea in California Ponzi Scheme

Rachel Dollar —  January 19, 2016 — Leave a comment

Diane Cobb, 58, Ada, Ohio, was sentenced to 41 months in prison  for her role in a Ponzi scheme.  The sentencing follows a guilty plea in which Cobb admitted to running a fraudulent scheme with co-defendant Paul Sloane Davis through which they profited by more than a million dollars.

Cobb was charged by indictment on October 31, 2013, for her part in the scheme.  According to the indictment, Davis and Cobb operated a financial services company in Marin County known as DM Financial.  Davis and Cobb, through DM Financial, allegely offered investors the opportunity to fund purported “bridge loans” to borrowers who, according to Davis and Cobb, needed short-term financing for residential real estate transactions.  Cobb was charged with providing investors with, among other things, the identity of the purported borrower, a promissory note reflecting the amount and terms of the loan, and a deed of trust securing the loan to the borrower’s real property.  Based upon these documents and other representations made by Davis and Cobb, the investors believed the defendants were directing the funds into secured loans with borrowers. 

As part of her plea agreement, Cobb admitted that she falsely represented to investors that the bridge loans would be secured by, in part, residential property that the borrowers were purchasing with the bridge loans.  Cobb also acknowledged falsely telling investors that they would receive regular interest payments from the borrowers and a return of principal after the loan period ended.  Cobb admitted she knew all of these representations were false.  Further, Cobb admitted that to convince the borrowers that the loans were legitimate, she prepared fake promissory notes and deeds of trust for the purported bridge loan agreements that she knew did not exist.  Purported borrowers received none of the investors’ money and did not even know that their identities were being used to solicit investments.  Instead, Davis and Cobb diverted substantially all the money—approximately $2.4 million—for their own personal use or to make interest payments to prior investors to keep them from discovering the true nature of the scheme.

On March 19, 2015, Cobb pleaded guilty to one count of conspiracy, in violation of 18 U.S.C. § 1349; four counts of mail fraud, in violation of 18 U.S.C. § 1341; and nine counts of wire fraud, in violation of 18 U.S.C. § 1343.

The sentence was handed down by the Honorable Charles R. Breyer, U.S. District Judge.  Judge Breyer also sentenced the defendant to a three year period of supervised release, and ordered restitution of approximately $1.7 million to the victims of Davis’s offense.  Davis pleaded guilty to the same charges and was sentenced by Judge Breyer to 36 months of prison.

The plea was announced Acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge David J. Johnson.  Assistant U.S. Attorney Benjamin Kingsley is prosecuting the case with the assistance of Jessica Meegan. The prosecution is the result of an investigation by the Federal Bureau of Investigation.

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Rachel Dollar

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