Sometimes seeing the enforcement results of Bank Secrecy Act reporting requirements can make all the labor and deliberation seem worthwhile. A recent release from the FBI, adapted here, is a case in point:
Case of the “caring” fraud
Like many successful con men, William C. Lange made people believe that he really cared about them—even as he looked them in the eye and took their money.
However, last March the 67-year-old Washington state businessman was sentenced to 22 years in federal prison for swindling more than 300 investors in the U.S. and overseas out of $10 million, the FBI said. The conviction came, in part, through analysis of financial records provided by financial institutions.
Lange had befriended some of his victims at Rotary Club functions. Many thought they would be obtaining loans to rebuild after the devastation of Hurricane Katrina in 2005.
“Unfortunately, this type of white-collar crime is all too common,” said Special Agent Ben Williamson, who investigated the case with Special Agent Mike Brown from the FBI’s Seattle Field Office. “Some investors lost their life savings.”
The FBI began to receive complaints about Lange’s business dealings, and in 2009 partnered with the U.S. Postal Inspection Service, which had also begun looking into his activities. During the investigation, countless financial documents were reviewed, victims were interviewed, and cooperating witnesses were engaged to help unravel the frauds. Lange was arrested in 2011.
How the fraud worked
Lange and his co-conspirators, including his son, operated two companies that were “based entirely on lies,” FBI’s Brown said. Lange founded the Harbor Funding Group, Inc. (HFGI) in 2006, and not long after began to target real estate developers and their clients seeking to rebuild after Hurricane Katrina. The pitch was that Harbor Funding had access to lenders and millions of dollars in funds to finance real estate projects. To get that money, however, Harbor Funding required investors to place 10% of the loan amount in an escrow account.
In reality, Harbor Funding had neither lenders nor funds. As soon as the money was placed in escrow, Lange took it to finance his own lavish lifestyle.
That advance fee scheme netted more than $9 million, which Lange spent on salaries, fishing and hunting trips, landscaping for his new house, Harley-Davidson motorcycles, and other business ventures. After the money was gone, Lange set up another sham business—Black Sand Mine, Inc.—with the supposed intention of mining gold and other precious metals on an Alaskan island.
Beginning in 2009, Lange convinced investors—through lies and misrepresentations—to purchase Black Sand Mine stock. Almost $1 million was collected, but instead of using it to mine for gold, the money was spent on salaries and other personal expenses for Lange and his crew.
In September 2014, Lange pled guilty to conspiracy to commit wire and securities fraud and admitted his leadership role in both the advance fee fraud and the gold mine investment schemes. Other co-conspirators have already been convicted or pled guilty in related cases, Williamson said, “but clearly Lange was the mastermind behind these crimes.”
Aftermath of a fraud
Both Williamson and Brown are pleased that Lange received a lengthy jail term, but they also remember the hundreds of victims in the case.
One individual who lost nearly $100,000 in the Harbor Funding scheme wrote in a victim impact statement for the court, “Our life savings have gone—we have nothing. Life financially has been horrific for us.”
Another victim of the same fraud wrote, “We live in England, and this property investment opportunity was widely publicized here as a way to make a positive contribution to rebuilding the Katrina affected area as well as making a financial return.”
“We are glad that Lange is off the streets,” Brown said, “and unable to victimize anyone else.”