Don’t call it a Ponzi scheme

Richmond Federal Courthouse

Richmond Federal Courthouse

Ahead of his criminal trial next week, a local businessman and former UVA football player accused of bilking dozens of investors out of millions has sought to prevent federal prosecutors from using a certain 5-letter word in the courtroom.

Attorneys for Merrill Robertson Jr. sparred in recent week in court filings with the U.S. Attorney’s Office in an attempt to prohibit the government’s use of the terms “Ponzi scheme” or “Ponzi-like” during the jury trial, which is set to begin Aug. 14.

Robertson was arrested in August 2016 and then indicted by a grand jury in October 2016 on eight counts including mail fraud and bank fraud for allegedly defrauding more than 50 investors of over $9 million during a period of nearly seven years. He has since pleaded not guilty.

His attorneys, Patrick Hanes and Jonathan Lucier of Williams Mullen, argued in a July 25 filing that those “Ponzi”-related terms are not contained in the criminal statutes under which Robertson is charged individually and are not explicitly used in the indictment against him.

Such terms were used in a separate civil case filed last year by the SEC to describe the alleged conduct of Robertson, his business partner Sherman C. Vaughn Jr. and their Midlothian-based company Cavalier Union Investments (CUI). It described an alleged “Ponzi-like scheme using money from new investors to pay back old investors and finance their luxurious personal lifestyles.”

The SEC’s case has since been set aside in favor of the current proceedings.

Citing a dictionary definition, Robertson’s attorneys argued that a Ponzi scheme is conducted “usually without any operation or revenue-producing activity other than the continual raising of new funds” from investors, which would then be used to pay back other investors.

“The evidence at trial will show that CUI invested in and operated a variety of revenue-producing restaurants and other food establishments,” the filing states. “CUI thus was not a ‘Ponzi scheme’ or ‘Ponzi-like’ and the government should be prohibited from describing CUI using those terms.”

The U.S. Attorney’s Office argued otherwise in an Aug. 1 response.

“The evidence presented at trial will show that Robertson and his partner collected millions of dollars from investors before they ever opened a single business, and after all these businesses failed,” the response states. “…the defendant’s operation of some restaurants during the course of his scheme does not alter the fundamental nature of the scheme – which involved using new investor funds to repay early investors.”

Robertson won a minor victory in the matter Friday, when Gibney issued a ruling that prohibits prosecutors from using “Ponzi scheme” or “Ponzi-like scheme” during opening statements of the trial. However, the government may request permission during the remainder of the trial to use the terms during presentation of “evidence that tends to establish such a scheme.”

Robertson’s trial is set to begin 9 a.m. on Aug. 14 in the Richmond federal court building.

He has remained free on bond, but on home confinement. Robertson has publicly denied the charges in an interview with the Times-Dispatch.

At least four other men, including Vaughan, have pleaded guilty in related cases that each name Robertson as a co-conspirator.

Vaughn pleaded guilty in September 2016 to conspiracy to commit mail fraud and making an unlawful monetary transaction. He’s set to be sentenced Sept. 12.

In February 2017, Missouri businessman Marlon Hardy pleaded guilty to counts of conspiracy to commit bank fraud and unlawful monetary transaction. Court records show those allegations related to efforts by Eaton, Robertson and others to obtain fraudulent loans from financial institutions. Hardy is set to be sentenced Sept. 12.

In May 2017, New Jersey resident Jason Eaton pleaded guilty on similar charges.

Most recently in June, Northern Virginia businessman Frederick Davis II pleaded guilty to similar allegations, along with a count of conspiracy to defraud the government. His case names Hardy, Eaton and Robertson as co-conspirators.

Eaton’s sentencing is set for Sept. 11. No sentencing date has been set for Davis.

Richmond Federal Courthouse

Richmond Federal Courthouse

Ahead of his criminal trial next week, a local businessman and former UVA football player accused of bilking dozens of investors out of millions has sought to prevent federal prosecutors from using a certain 5-letter word in the courtroom.

Attorneys for Merrill Robertson Jr. sparred in recent week in court filings with the U.S. Attorney’s Office in an attempt to prohibit the government’s use of the terms “Ponzi scheme” or “Ponzi-like” during the jury trial, which is set to begin Aug. 14.

Robertson was arrested in August 2016 and then indicted by a grand jury in October 2016 on eight counts including mail fraud and bank fraud for allegedly defrauding more than 50 investors of over $9 million during a period of nearly seven years. He has since pleaded not guilty.

His attorneys, Patrick Hanes and Jonathan Lucier of Williams Mullen, argued in a July 25 filing that those “Ponzi”-related terms are not contained in the criminal statutes under which Robertson is charged individually and are not explicitly used in the indictment against him.

Such terms were used in a separate civil case filed last year by the SEC to describe the alleged conduct of Robertson, his business partner Sherman C. Vaughn Jr. and their Midlothian-based company Cavalier Union Investments (CUI). It described an alleged “Ponzi-like scheme using money from new investors to pay back old investors and finance their luxurious personal lifestyles.”

The SEC’s case has since been set aside in favor of the current proceedings.

Citing a dictionary definition, Robertson’s attorneys argued that a Ponzi scheme is conducted “usually without any operation or revenue-producing activity other than the continual raising of new funds” from investors, which would then be used to pay back other investors.

“The evidence at trial will show that CUI invested in and operated a variety of revenue-producing restaurants and other food establishments,” the filing states. “CUI thus was not a ‘Ponzi scheme’ or ‘Ponzi-like’ and the government should be prohibited from describing CUI using those terms.”

The U.S. Attorney’s Office argued otherwise in an Aug. 1 response.

“The evidence presented at trial will show that Robertson and his partner collected millions of dollars from investors before they ever opened a single business, and after all these businesses failed,” the response states. “…the defendant’s operation of some restaurants during the course of his scheme does not alter the fundamental nature of the scheme – which involved using new investor funds to repay early investors.”

Robertson won a minor victory in the matter Friday, when Gibney issued a ruling that prohibits prosecutors from using “Ponzi scheme” or “Ponzi-like scheme” during opening statements of the trial. However, the government may request permission during the remainder of the trial to use the terms during presentation of “evidence that tends to establish such a scheme.”

Robertson’s trial is set to begin 9 a.m. on Aug. 14 in the Richmond federal court building.

He has remained free on bond, but on home confinement. Robertson has publicly denied the charges in an interview with the Times-Dispatch.

At least four other men, including Vaughan, have pleaded guilty in related cases that each name Robertson as a co-conspirator.

Vaughn pleaded guilty in September 2016 to conspiracy to commit mail fraud and making an unlawful monetary transaction. He’s set to be sentenced Sept. 12.

In February 2017, Missouri businessman Marlon Hardy pleaded guilty to counts of conspiracy to commit bank fraud and unlawful monetary transaction. Court records show those allegations related to efforts by Eaton, Robertson and others to obtain fraudulent loans from financial institutions. Hardy is set to be sentenced Sept. 12.

In May 2017, New Jersey resident Jason Eaton pleaded guilty on similar charges.

Most recently in June, Northern Virginia businessman Frederick Davis II pleaded guilty to similar allegations, along with a count of conspiracy to defraud the government. His case names Hardy, Eaton and Robertson as co-conspirators.

Eaton’s sentencing is set for Sept. 11. No sentencing date has been set for Davis.

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