Jury Convicts Pasadena Man in $11 Million Investment Fraud Scheme

PLANO, TXA 58-year-old Pasadena, Texas man has been found guilty of investment fraud charges in the Eastern District of Texas. A federal jury needed just six minutes to convict Gary Lynn McDuff of conspiring to defraud investors of over $11 million in connection with an investment fraud scheme and laundering the proceeds. The verdict was handed down on March 27, 2013, following a two-day trial before U.S. District Judge Richard A. Schell. McDuffs co-conspirators, Gary Lancaster, 61, of Oregon, and Robert Reese, deceased, of Carmel, California, previously pleaded guilty and were sentenced to federal prison for their roles in the scheme. According to information presented in court, McDuff and Lancaster agreed to create the Lancorp Investment Fund, to draft a prospectus for the fund, and to solicit investments from individuals across the United States. While McDuff controlled the operation, Lancaster agreed to serve as the front since McDuff could not possess a securities license or sell securities because of a past felony conviction. McDuff recruited Reese to also sell the investment, despite the fact that Reese had been barred by the State of California from selling securities based on past fraudulent conduct. McDuff, Lancaster, and Reese made numerous false representations to their investors in order to induce payments, including representations that the fund would only invest in A+ or A1 rated bonds, that the principal of each investment would be insured and never at risk, and that Lancaster had experience operating this type of investment. McDuff, Lancaster, and Reese never disclosed McDuffs felony conviction or Reeses securities ban. McDuff then laundered the criminal proceeds in order to promote the operation of the fraudulent scheme. McDuff faces up to 20 years in federal prison on each count of conviction. A sentencing date has not been set.