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If it Sounds too Good to be True…

Everyone has heard of Bernie Madoff. But have you heard of James and Verna Pilon? If you live in Chicagoland, you better pay attention-the Pilons are a couple from Joliet that have swindled investors out of over $1 million. Both are headed to federal prison.

Before the Pilons were caught and sentenced however, they perpetrated a fraud against nearly 40 investors. How did this happen?

Enemies, and an Error, of the State
According to the court, the Pilons were investigated first by the state of Illinois in 2005. The couple, living in Monee at the time, was ordered by the Illinois Securities Department to stop selling investments in the state. While the extent of what the state of Illinois knew and didn’t know in 2005 wasn’t revealed, it’s easy to wonder why the State didn’t take more aggressive action at the time. Considering the damage the Pilons ended up wreaking on innocent people, simply saying “stop that in Illinois” wasn’t enough. The Pilons simply ignored this warning and continued to proceed with their schemes.

Madoff Knockoffs
What were those schemes? If you followed the spectacular crimes of Bernie Madoff, this will sound familiar. The Pilons operated numerous businesses that sold two forms of investment. One of the investments was for the “Mortgage Acceleration Program.” The Mortgage Acceleration Program encouraged investors to make payments to be “invested” under the Pilons supervision, and the “proceeds” from the payments would be used to pay off investors’ mortgages. The scheme essentially promised that monthly mortgage payments would be made from the investment. Additionally, the Pilons promised that the investor’s mortgage would be paid off within two years AND there would be additional profits. The other type of investment was for the Private Placement Program. The Private Placement Program promised unnaturally high returns of 100% or more within 90 days.

Tragically, neither of these investment programs actually existed. The Pilons used some of the initial investment money to make payments back to the same investors to lure more people to invest, and then kept the rest of the money for themselves. This is a hallmark trait of a Ponzi scheme-paying returns to investors from their own money or money paid by subsequent investors. The money being “invested” doesn’t go into anything. In this case, the Pilons used initial investments to fraudulently demonstrate the validity of their operation. Once more investors and more money came onboard, the Pilons stopped paying the money back and instead kept it for themselves.

If it Sounds too Good to be True, it Probably is
There’s a logical yet essential old cliché that applies here: if it sounds too good to be true, it probably is. Most mortgages in the US take around 30 years to pay off. How could an investment promise to not only pay off a mortgage in 2 years but also receive further profits after that? The answer is “it couldn’t.” A “mortgage acceleration” like that isn’t real. How could an investment promise a 100% return in a mere 90 days? It can’t. If these programs offer promises that sound too good to be true, it probably is.

On Wednesday, James Pilon was sentenced to 53 months in federal prison. Verna Pilon received a 78-month sentence last May. The wife received a longer sentence because she initially took her case to trial, while her husband immediately pled guilty. Verna Pilon pled guilty after the second day of her trial, after eight of her former victims testified against her. Together they were ordered to pay nearly a million dollars in restitution.

The (Temporary) Life of Crime
The Pilons spared no expense when it came to their lifestyle. The court revealed that they used their illegally obtained funds to purchase a trendy residence in California, buy a $14,000 diamond ring, and get a new $54,000 SUV. According to U.S. District Judge Virginia Kendall, the Pilons “lived a life of ease while others were being pushed out into the streets.”
Tragedy
The “others” are the real tragedy here. Gary Shapiro, US Attorney for the Northern District of Illinois, succinctly summarized the sad fate of the investors, “the victims in this case were hard-working individuals who did not have money to spare.” Many investors refinanced their mortgages in order to invest, and sadly those mortgage payments were never made, with some investors facing foreclosure on their homes.

Schemes like this are all the more common in these brutal economic times. Don’t be a victim. Be smart. If it sounds too good to be true, it probably is. If you think the Pilons or a similar scheme may have victimized you, please call us immediately. We can help.
M. Hedayat & Associates has been successfully practicing commercial litigation, bankruptcy, and real estate law for nearly two decades. We have a proven track record of helping our clients while avoiding costly protracted litigation. Call us.

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