Tennessee man ordered to repay over $5 million
Published 11:23 am Friday, January 21, 2011
RALEIGH – United States Attorney George E.B. Holding announced Tuesday that United States District Judge James C. Dever III sentenced John Kent Colvin of Nashville, Tennessee to 300 months’ imprisonment followed by three years’ supervised release. The Court also imposed restitution of $5,169,500.17.
On June 11, 2010, following a two-week trial, a jury found Colvin guilty of conspiring to commit mail fraud and five counts of mail fraud.
According to evidence presented at trial and Tuesday’s sentencing, Colvin, a former insurance agent, met co-conspirator Scott Hollenbeck while both were working for Merchant Capital, LLC in Brentwood, Tennessee. The two men thereafter began soliciting investments, primarily from unsophisticated individual investors in North Carolina, in various “funds” and “programs” called Webb Group, Franklin Asset Exchange, and Disciples Trust.
In soliciting these investments, Colvin and Hollenbeck falsely told victims their money would be invested in name-brand companies and was insured by a surety bond program. Hollenbeck and Colvin collected a total of more than $20 million from victims during a two-year period starting in 2003.
In fact, Colvin arranged for most of the victims’ money, approximately $17 million, to be sent to BMP Investments, Inc., an entity involved in developing a coal mine in Montana. BMP failed to repay the money.
Colvin also helped arrange for a liability insurance policy used by Hollenbeck to continue the false representations to victims concerning the safety of the purported investment. Other money stolen from victims was used to make “interest” payments back to victims, lulling them into thinking the investment was legitimate.
Much of this criminal conduct took place after Hollenbeck was served with a cease-and-desist order in April, 2004 by the Securities Division of the North Carolina Secretary of State.
At sentencing, the Court found that Colvin’s continued use of Hollenbeck to sell securities violated this order and increased the advisory sentencing range for Colvin as a result.
Colvin’s profits from the scheme came in large part from commissions based on the money provided to BMP. Colvin retained approximately $1.5 million in commissions over a two-year period and forwarded an additional $1 million to Hollenbeck.
Evidence at trial also demonstrated that Colvin expected a much larger pay-out upon a success of the mining venture.
“Many hours of hard work have been expended by investigators and litigators to bring this defendant to justice,” Holding said. “This is an excellent opportunity to thank each of these individuals publicly for their tenacious work and to remind the public that this office will not give up the fight to find and prosecute those who line their pockets with ill-gotten gains stolen from honest, hardworking citizens.”
Investigation of the case was conducted by the United States Postal Inspection Service, the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. The case was handled by the Economic Crimes Section of the U.S. Attorney’s Office, with Assistant United States Attorneys Clay C. Wheeler and David A. Bragdon prosecuting the case for the government.