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Wayzata is a premier suburb located 11 miles west of downtown Minneapolis. With a population of 4,500 people, Wayzata is a tight-knit community which is known for its vibrant downtown and picturesque setting on Lake Minnetonka. A popular destination for visitors, Wayzata’s downtown is home to a number of specialty shops, boutiques, professional services, and restaurants.

Thursday, December 09, 2010

David H. McCaffrey of Wayzata sentenced to 2.5 years in prison for $8 million fraud scheme

A Wayzata man was sentenced earlier today in federal court in Minneapolis in connection with a scheme to defraud investors, including a Minnesota-based financial investment group, out of approximately $8 million. United States District Court Judge Patrick J. Schiltz sentenced David Hugh McCaffrey to 30 months in prison on one count of conspiracy to commit wire fraud and one count of tax evasion in connection to his crime. He was charged on April 30, 2010, and pleaded guilty on May 20, 2010.

Following today’s sentencing, Kelly Jackson, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division’s (“IRS-CID”) St. Paul Field Office, said, “Investment fraud is like a house of cards. The underlying structure can fall apart at any time and leave many investors in financial ruin. Today’s sentencing of David McCaffrey shows that the IRS-CID, along with our law enforcement partners, are committed to investigating investment schemes in an effort to protect the financial well being of the American public and to make certain that everyone is complying with their tax obligations.”

In his plea agreement, McCaffrey admitted that between October of 2004 and February of 2007, he conspired with others to defraud the Carlton Financial Corporation, a Minnesota-based investment group, and others out of money by making false representations. McCaffrey worked as Chief Executive Officer for the ConServe Corporation, which provided electricity submetering services to apartment complexes. ConServe financed its operations, in part, by attracting investors to finance the installation of the submetering equipment. The Carlton Financial Corporation was one of ConServe’s primary investors, providing the company with millions in operating dollars.

McCaffrey admitted that ConServe defrauded the investors by representing that installation projects were in place or going to be put in place, when, in fact, he knew those representations to be false with respect to several of the installations. Based on those fraudulent representations, investors would provide financing for phony installation projects.

McCaffrey admitted that during the course of the fraud scheme, false invoices were created that reflected expenses connected to installations that were never done. Those invoices were then submitted to investors, including Carlton, as purported documentation of legitimate projects that needed to be financed. To support the scheme, phony acceptance certificates were also created to “certify” those false installations.

Specific to the charges filed in this case, McCaffrey admitted that on December 5, 2005, more than $700,000 was transmitted via wire from a Carlton-related bank account to a ConServe bank account. The total amount of loss to investors from the scheme to defraud was approximately $8 million.

In addition, McCaffrey admittedly filed a false 2007 tax return. That return listed only $34,858 in taxable income for McCaffrey and his wife, when, in truth, their taxable income for that year was in excess of $100,000.

This case was the result of an investigation by the Wayzata Police Department and the IRSCID. It was prosecuted by Assistant U.S. Attorney David M. Genrich.

Info courtesy DOJ.


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