February 25, 2011 - 5:53 PM

http://www.canadianbusiness.com/markets/market_news/article.jsp?content=D9LK36180&page=2

ALBUQUERQUE, N.M. (AP) - A prominent New Mexico businessman was arrested Friday morning on numerous charges stemming from an alleged multi-million-dollar Ponzi scheme that involved several hundred investors, U.S. Attorney Kenneth Gonzales said.

Douglas Vaughan, 63, was taken into custody without incident at a home in Albuquerque's north valley after a federal grand jury returned a 30-count indictment that accused the former real estate executive of wire fraud, mail fraud, money laundering and other charges. The indictment came after more than a year of investigation by state and federal authorities.

"As a result of this scheme, hundreds of investors stand to lose tens of millions of dollars and in some cases investors have lost their entire life savings," Gonzales said. "We, by far, cannot guarantee or assure in any way that the victims of this scheme will get any of their investment money back. However, it's my hope that this prosecution will bring some measure of solace to each of the victims."

Gonzales — flanked by officials from the FBI, Secret Service, U.S. Postal Inspection Service, and the Securities Division of the New Mexico Regulation and Licensing Department — said he hopes the prosecution of Vaughan will also serve as a warning to others to "think twice before they use a position of trust to take advantage of innocent victims."

Vaughan had served as the chairman, chief executive officer, president and majority shareholder of Vaughan Company Realtors, which was once the largest independent residential brokerage in New Mexico. In February 2010, he filed for personal and corporate bankruptcy.

Vaughan made an initial appearance before a federal magistrate Friday afternoon in Albuquerque. He will remain in federal custody pending an arraignment and detention hearing Monday morning. He has yet to be assigned a court-appointed attorney.

If convicted, Vaughan faces up to 20 years in prison on some of the counts and as many as 10 years on others, Gonzales said. The indictment also seeks forfeiture of a home in Las Vegas, Nev., as well as a money judgment in excess of $74 million.

Federal investigators allege in the 34-page indictment that Vaughan began a promissory note investment program in 1993 to generate revenue to grow his real estate business. The typical note had a three-year term, an interest rate ranging from 8 to 40 percent and provided for interest to be paid in monthly installments.

Prosecutors accuse Vaughan of signing each promissory note on behalf of his company and leading investors to believe that their investments were virtually risk-free. The notes were guaranteed by the company, a $2.5 million deed of trust on certain real estate and had Vaughan's personal guarantee, according to the indictment.

Investors believed their money would be used to buy real estate and acquire smaller real estate companies. Instead, Vaughan is accused of using the investments to pay the interest and principal on promissory notes taken out by earlier investors, to pay his own salary and bonuses, and to subsidize the operation of his own real estate company, which by 2005 had become reliant on the investments from the promissory notes.

The indictment covers Vaughan's actions from 2005 through 2010, when the alleged scheme collapsed. Federal investigators said at that time, Vaughan owed more than $76 million in unpaid principal and interest payments to approximately 600 investors.

The investigation began in 2009 when a suspecting investor contacted the state securities division. Officials said the magnitude of the case soon became clear.

New Mexico Regulation and Licensing Superintendent J. Dee Dennis Jr. said Vaughan has "the dubious distinction of being the largest alleged Madoff-like Ponzi schemer in New Mexico history."

Such schemes have been going on for decades, but this marks the largest such prosecution in New Mexico, Gonzales said.

Carol Lee, FBI special agent in charge, said the case goes beyond the loss of money for investors.

"This involves a deep loss of trust by a prominent figure in a community," she said. "These schemes highlight the need for law enforcement and regulatory agencies to be ever vigilant of white-collar crime in both good years and bad years economically."