DENVER A Utah man will serve 41 months in prison for bilking many Four Corners residents out of their life savings through a Ponzi scheme.
Frederick H. K. Baker approached a Durango resident in summer 2006, claiming he had a way to make risk-free money off fluctuations in world currency markets.
Instead, he invested the money in various other Ponzi schemes, knowing they were scams but thinking he could scam the scammers, his lawyer said in court Friday.
Baker understood that Ponzi schemes typically pay out high yields to the first few investors and wipe out later investors, said Matthew Belcher, his attorney. Baker thought he could make money if he got in early, which Belcher admitted was incredibly reckless and not a smart plan.
Baker had pleaded guilty to two counts of wire fraud and conspiracy earlier this summer.
Belcher asked District Judge Philip Brimmer for a one-year prison sentence, but Brimmer did not stray from federal guidelines, which called for a minimum sentence of 41 months.
Assistant U.S. Attorney Robert Mydans argued for a 41-month sentence, referring to anguished letters from many of the 79 victims.
They are heartbreaking to read, Mydans said. The actions of Mr. Baker have destroyed families, have caused divorces.
Other victims lost their houses or had to declare bankruptcy, Mydans said.
In all, Baker and a co-defendant took in $1.7 million in the scheme, prosecutors say.
Brimmer ordered Baker to pay $776,000 in restitution. Baker said he had saved up $1,500 and his family which has been destitute since the scheme unraveled is setting aside $400 a month for the victims.
I know that thats not enough, but Ill do whatever is honorable and do my best to pay this back as best I can, Baker said, his voice breaking.
Baker said he was most ashamed that because of his felony conviction, he would lose his right to vote and bear arms.
Although Brimmer refused to lighten the sentence, the judge was clearly impressed by Bakers otherwise upstanding life.
Ive never heard anyone mention that they regretted not being able to vote. But I agree with Mr. Baker that thats something a decent person would regret, Brimmer said.
Baker also regretted that his family he has five kids at home probably would have to go back on welfare when he is in prison, and his own imprisonment would cost the taxpayers money.
Durango resident Mark Akins faces a 49-count indictment for marketing Bakers scheme to unwitting investors. Brimmer turned down Akins request to have most counts of his indictment dismissed in a separate hearing Thursday.
Martin Stuart, Akins lawyer, said Akins might not have known that Baker was running a Ponzi scheme when the two got involved.
Stuart said its unclear whether the money at issue in Akins case was part of the original scheme or a separate investment scheme.
The indictment fails to allege any basis to believe that Mr. Akins participated in a fraudulent scheme or knew Mr. Baker had a fraudulent scheme, Stuart wrote in a brief.
But on Thursday Brimmer declined to modify the indictment. Mydans said prosecutors took care to indict Akins only for money they can prove came from the foreign currency scam.
Baker used accounts with a company called e-Bullion to transfer money.
Just recently, lawyers on both sides learned that federal agents in California had seized e-Bullions computer servers in a separate fraud investigation.
E-Bullions owner, James Fayed, is currently on death row in California after a jury found him guilty of the stabbing death of his wife in May.
Neither defendant is alleged to have had anything to do with the murder.
Stuart said he will ask prosecutors to provide data from the e-Bullion servers that might shed light on how much Bakers various schemes were intertwined with the money in Akins case.
A trial is scheduled for Jan. 3. Akins remains in federal custody.
Baker is free on bond but soon will have to report to a federal prison.
Reach Joe Hanel at joeh@cortezjournal.com.