SAN DIEGO–The owner of several San Diego telemarketing companies involved in a real estate investment fraud scheme, was sentenced Monday in federal court in San Diego to serve 30 months in prison and three years of supervised release based on his previous convictions for mail and tax fraud.
U.S. District Court Judge Roger T. Benitez ordered Michael Alexander, owner of Rose Fund, LLC, to pay restitution in the amount of $1,799,580.78 to the victims of the fraud scheme and to the Internal Revenue Service for unpaid taxes.
According to court records, Alexander pled guilty on April 24, 2008, to charges of mail fraud and filing a false tax return. In his plea, he admitted that he formed the Rose Fund, LLC, to solicit investor money to fund loans secured by real property and that he formed TRF Holdings, Inc., a related entity, to provide “seed money” to capitalize the Rose Fund. Alexander hired a convicted felon, William Wright, to be his lead salesman.
Alexander further admitted that, in order to make sales, they misrepresented to investors, among other things, that investor funds were safe and would be used to make loans secured by real estate; they would receive a 5 percent sales commission; and that the businesses were well-established, successful, and operated by experienced real estate professionals. They also intentionally misled TRF Holdings, Inc. investors into believing that their investments would be used to fund real estate loans rather than provide seed money for the Rose Fund. In addition, they concealed from investors that Wright had been previously convicted of mail and wire fraud and that the Securities and Exchange Commission (SEC) had begun an investigation of the Rose Fund in April 2003. After learning of the April 2003 SEC investigation, Alexander solicited more than $2 million from new and existing investors by concealing the existence of the SEC investigation.
In pleading guilty, Alexander admitted that he fraudulently obtained more than four million dollars from more than 100 investors during the one year that the fraud scheme operated between October 2002 and October 2003. Although investors were promised that their investments would be used to make secured real estate loans, Alexander funded only 16 loans totaling $1.8 million. By contrast, Alexander fraudulently diverted more than $1.4 million of investor funds to himself and $665,000 to Wright.
In May 2008, Wright was indicted in San Diego on federal fraud charges stemming from his involvement in the Rose Fund/TRF fraud scheme. In February 2010, Wright pled guilty in a federal court in New York to conspiracy to commit mail and wire fraud and is scheduled to be sentenced on May 25.
This case was investigated by Special Agents of the Internal Revenue Service – Criminal Investigation, the United States Postal Inspection Service, and the Federal Bureau of Investigation.