Business Partners Jailed for Ripping off Banks and Real Estate Investors

Allison Tussey —  November 21, 2014 — Leave a comment

Melvin Russell “Rusty” Shields, 45, Granite Falls, North Carolina, and Michael Sims, 60, Gilroy, California, the founders of the S3 Partners, were sentenced to prison for investment fraud and fraudulently obtaining millions of dollars from banks by submitting forged and fraudulent invoices and loan closing documents.

The Honorable Ronald M. Whyte, United States District Court Judge sentenced Shields to 78 months in prison and Sims to 30 months in prison.

Following a seven week trial, on Dec. 23, 2013, the jury convicted Shields on 32 of the 39 counts in the superseding indictment, including finding him guilty of conspiracy to commit wire and bank fraud, 14 counts of wire fraud, 7 counts of bank fraud, 7 counts of making a false statement to a bank, and 3 counts of securities fraud. The jury acquitted Shields as to the remaining counts in the superseding Indictment. The jury convicted Sims of 2 counts of wire fraud and acquitted him on the remaining counts in the superseding indictment. The third S3 Partner, Sam Stafford, 57, Campbell, Calif., pleaded guilty on Oct. 17, 2013 to having conspired with Shields and Sims to commit wire, mail, and bank fraud.

Evidence at trial showed that from 2006 to 2009, Shields, Sims, and Stafford defrauded individual investors in the Northern District of California in connection with various real estate development projects. The three defendants conducted their business as “S3 Partners” out of a variety of locations including San Jose and Campbell; Hickory, N.C.; and Valrico, Fla.  Shields, Sims, and Stafford collectively obtained more than $21 million from individual investors and banks. Shields and Sims each diverted a portion of those funds for their personal use, their personal business ventures, and other unauthorized purposes. All the S3 Partners’ projects failed, resulting in a near total loss to many investors.

The jury verdicts and the evidence at trial regarding Shields specifically showed that he engaged in investment fraud targeting elderly investors, encouraging them to cash out their individual retirement accounts, educational savings, and home equity and to wire the proceeds to the S3 Partners for the purchase of shares in an S3 Partners-controlled company or to invest in other S3 projects. Shields then diverted investor funds for unauthorized purposes. The evidence further showed that Shields and Stafford fraudulently obtained millions of dollars from banks by submitting forged and fraudulent invoices and loan closing documents. Shields was responsible for over $7,225,000 in losses suffered by over two dozen individual investors as well as two banks.

In addition, the jury verdicts and the evidence specific to Sims showed that Sims defrauded two special education teachers out of over $411,000, including diverting and spending over $178,000 of what he knew to be their retirement savings. Sims encouraged the two teachers to cash out their individual retirement account (IRA) and wire the proceeds to him for the purchase of a share in an S3 Partners-controlled company which Sims said was a safe investment that would provide predictable returns. Sims instead spent those investors’ retirement funds for unauthorized purposes.

After the sentencing, Judge Whyte ordered Shields and Sims to self-surrender by Jan. 13, 2015. Shields, Sims, and Stafford have been out of custody on home electronic monitoring since their May 2012 arrest. Judge Whyte also ordered Shields to pay restitution in the amount of $7,225,904.73 and Sims to pay restitution in the amount of $411,460.92. Stafford’s sentencing is currently scheduled for Jan. 26, 2015.

United States Attorney Melinda Haag and FBI Special Agent in Charge David J. Johnson announced the sentences.

Assistant U.S. Attorneys Joseph Fazioli and Timothy Lucey prosecuted the case with the assistance of Lakisha Holliman and Laurie Worthen. This prosecution is the result of an investigation by the FBI.

Be Sociable, Share!

Allison Tussey

Posts Google+

No Comments

Be the first to start the conversation.

Leave a Reply

Text formatting is available via select HTML.

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong> 

*