Investment Fraud: Three Texas Residents Indicted Of Conspiracy to Commit Wire Fraud and Three Counts of Wire Fraud
Federal Grand Jury Indicts Three in $6.5 Million Diamond Investment Fraud Scheme
DALLAS — A federal grand jury in Dallas has indicted three Texas residents on various charges stemming from their involvement in a diamond investment scheme they ran from approximately March 2011 to November 2013, announced U.S. Attorney John Parker of the Northern District of Texas.
Defendants Craig Allen Otteson, 64, of McKinney, Jay Bruce Heimburger, 58, of Dallas, and Christopher Arnold Jiongo, 55, of Houston, surrendered to federal authorities on Friday morning, September 9, 2016, and made their initial appearances that afternoon before U.S. Magistrate Judge David L. Horan. Each was released on bond.
Specifically, the 10-count indictment charges each defendant with one count of conspiracy to commit wire fraud and three counts of wire fraud. In addition, Otteson and Heimburger are each charged with six counts of mail fraud.
According to the indictment, Otteson acted as the Managing Member and Chief Compliance Officer of Stonebridge Advisors, LLC, located on Belt Line road in Dallas. Stonebridge Advisors was involved as the Managing Partner of Worldwide Diamond Ventures, L.P., located at 6029 Belt Line in Dallas, and it acted as the General Partner of Worldwide Diamond. Heimburger acted as a Principal Partner of Worldwide Diamond, and he was also listed as the registered agent and Director of JBH Securities, Inc. located on San Rafael in Dallas. JBH Securities was primarily involved in the business of providing investment advice. Worldwide Diamond was primarily involved in the business of buying and reselling diamonds on the international market. On October 1, 2013, Worldwide Diamond filed for bankruptcy in the Northern District of Texas.
According to the indictment, the defendants initially attempted to raise funds for their new business of purchasing and reselling diamonds by offering the sale of additional limited partnerships, in the minimum amount of $100,000, in Worldwide Diamond, but were unable to raise sufficient capital funds in this manner. Then, in March 2011, defendants attempted to raise additional needed start-up funds by offering “Non-Recourse Promissory Notes” (diamond notes). The defendants hired three outside companies to market and sell the diamond notes to investors in Texas, Pennsylvania and California. Each $50,000 diamond note had a nine-month maturity date and an 8% rate of return.
The indictment alleges that from approximately March 2011 through November 2011, Otteson, Heimburger and Jiongo defrauded their first round of investors when they fraudulently concealed material information from them, including how they used investor funds, and other information, which caused 57 investors to invest a total of $5,141,699 with Worldwide Diamond Ventures.
The indictment further alleges that from February 2012 through May 2013, Otteson and Heimburger defrauded the second round of investors when they fraudulently concealed material information from investors, including how they used investor funds and other information, which caused 20 new investors to invest a total of $1,333,000 with Worldwide Diamond Ventures.
Defendants promised investors that all investor funds would only be used to purchase and resell diamonds. However, as part of the fraudulent scheme, the defendants concealed from investors that defendants used nearly $2.5 million of investor funds to make unauthorized loans to third parties. As a result of the defendants’ investor fraud scheme, these 77 investors sustained a total loss of at least $4,922,811.
An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. However, if convicted, the maximum statutory penalty for each of the counts charged in the indictment is 20 years in federal prison and a $250,000 fine. The indictment also includes a forfeiture allegation that would require the defendants, upon conviction, to forfeit the proceeds obtained as a result of the offense. Restitution could also be ordered.
This case is one of several felony prosecutions of bankruptcy-related crimes generated by the Bankruptcy Fraud Initiative in the Northern District of Texas. Twenty defendants have been charged as part of that initiative; 16 were convicted, one resulted in a mistrial and three are pending trial.
The U.S. Postal Inspection Service is conducting the investigation. Assistant U.S. Attorney David Jarvis is in charge of the prosecution.