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New Jersey man pleads guilty to Ponzi scheme fraud

A man from Sparta, New Jersey, has pleaded guilty to operating a Ponzi scheme with a co-conspirator. According to The Associated Press, the man pleaded guilty to fraud charges on Wednesday in U.S. District Court in Newark. The 57-year-old man faces a minimum of 16 years in prison. He will be sentenced in July. The case appears to be an example of a businessman whose legitimate business spiraled over time into a fraud.

The man was arrested last fall and charged with operating a $135 million Ponzi scheme. His Ponzi scheme started as a legitimate business, but eventually became a fraudulent one. New Jersey FBI agents investigated the man's medical device company and found that the company took out $135 million in bank loans from 2002 to 2010. The loans were supposed to be used to purchase medical equipment that would then be leased to medical patients.

While the business started out by providing legitimate medical leasing services, eventually the loan money was no longer used to buy medical equipment. The man and a co-conspirator set up a separate corporation. The co-conspirator wrote fake invoices that were meant to demonstrate that people had been leasing medical equipment.

When banks tried to check on whether people were truly leasing equipment, the two men cited medical confidentiality laws to block these inquiries and investigations. According to the AP, the FBI said that the business scheme was sophisticated and difficult to tell that the business was not actually making money. About $50 million of the money was used to pay back loans.

Source:

NJ man pleads guilty in $135M health care fraud (Bloomberg Businessweek)

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