SAN DIEGO–A local man Monday was sentenced in a San Diego federal court for investment fraud scheme.
United States District Court Judge John A. Houston sentenced Richard M. Hersch to serve 110 months in federal prison and three years of supervised release. Judge Houston also ordered Hersch to pay at least $9.2 million in restitution for investors he defrauded in the scheme. Hersch pled guilty on November 16, 2009 to mail fraud and conspiracy to structure financial transactions.
As part of his guilty plea, Hersch admitted that he operated an investment scheme in which he recruited investors by promising returns of two-to-six percent per week on investments into his company, All States ATM, Inc. Hersch told investors that All States ATM had contracts with major horse racing tracks in California and around the country to operate Automated Teller Machines (ATMs) on the “back side” of the racetrack, an area used by employees of the racetrack, horse owners, horse trainers and others, and not accessible to the general public. Hersch also claimed that the contracts his company had with the racetracks allowed him to operate a check-cashing or loan service on the back side of the track for the exclusive use of those with access to that area. Hersch claimed that he had 160 employees and hundreds of ATMs and that his company was in its eighth year of business. The horse racing tracks identified by Hersch reported having no contracts with him or All States ATM to provide financial services of any sort. Based on these false representations, Hersch and others recruited more than 150 investors to invest approximately $25 million in All States ATM.
In addition, Hersch admitted during his guilty plea that he conspired with others to structure 15 transactions, totaling $141,500, for the purpose of evading the currency reporting requirements. Hersch and others withdrew cash from a Wells Fargo Bank Account in amounts between $9,000 and $9,500 because they knew that withdrawals of cash over $10,000 triggered the currency reporting requirements.
United States Attorney Duffy stated, “Today’s sentence demonstrates our commitment to investigating and prosecuting those individuals who prey upon innocent victims in our community through fraudulent investment schemes.”
Federal Bureau of Investigation Special Agent in Charge Keith Slotter commented, “Today’s sentencing should remind the public of the financial perils associated with high yield investment fraud scams.
The FBI will continue to aggressively investigate those individuals that engage in fraudulent investment practices that victimize the American public and undermine our economy.”
“Currency report information filed by banks and financial institutions provides a paper trail, or roadmap, for investigations of financial crimes and illegal activities, including tax evasion, embezzlement, and money laundering. Individuals who deliberately break down cash withdrawals into amounts less that $10,000, so as not to trigger a bank’s reporting requirement, are committing a financial crime,” said Leslie P. DeMarco, Special Agent in Charge for IRS-Criminal Investigation in the Los Angeles Field Office. “In this investigation, IRS special agents used their financial expertise to uncover Mr. Hersch’s intentionally structured cash withdrawals, designed to hide his investment fraud scheme.”