Advance Fee Scheme Targeted Developers Seeking Financing For Construction Projects In Areas Devastated By Hurricane Katrina
Earlier today, William C. Lange, 66, a resident of Gig Harbor, Washington, pleaded guilty to two counts charging conspiracy to commit wire fraud and conspiracy to commit securities fraud and wire fraud for his leadership role in two separate schemes. In the first scheme, Lange, the founder and President of Harbor Funding Group, Inc. (“HFGI"), defrauded developers and their clients seeking to rebuild regions of the South devastated by Hurricane Katrina of more than $9 million through false representations, including that HFGI had the funds to provide millions of dollars in private financing in exchange for a ten percent down payment.
In the second scheme, Lange, the founder and secret controller of Black Sand Mine, Inc. (“BSMI"), induced investors to purchase stock in BSMI by lies about, among other things, the qualifications and experience of BSMI’s officers and directors, and by concealing, among other things, his leadership role with BSMI.
Pursuant to his plea agreement with the government, Lange has agreed to a forfeiture money judgment of $10 million and to forfeit his claim to three Harley Davidson motorcycles purchased using proceeds from the fraud. When sentenced, Lange faces up to 20 years in prison and the payment of approximately $10 million in restitution to the victims of his frauds. In March 2014, co-defendants Brad Russell and Kristofor Lange were convicted by a federal jury in Brooklyn, following a six-week trial, on all charged counts. The trial of co- defendant Frank Perkins is scheduled to begin on Sept. 22, 2014.1
The guilty verdicts were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Philip R. Bartlett, Inspector in Charge, New York Division, U.S. Postal Inspection Service (USPIS), and Frank Montoya, Jr., Special Agent in Charge,
Federal Bureau of Investigation, Seattle Field Office (FBI).
Lange, the orchestrator of the advance fee scheme, told land developers and their clients that HFGI had lenders and millions of dollars in funds available to provide financing for their real estate projects. As a condition for financing, HFGI required investors to place ten percent of the loan amount in an attorney escrow account. Contrary to Lange’s representations, HFGI did not have lenders or funds available to finance the loans. As soon as the money was placed in escrow, Lange and his co-conspirators stole it, at times through the use of a sham escrow agreement. Through this scheme, Lange and his co-conspirators stole more than $9 million from approximately 300 individuals. The $9 million was spent on, among other things, salaries, fishing and hunting trips for Lange and his son, remodeling and landscaping for Lange’s new house, and other business ventures started by Lange.
After the $9 million was spent, Lange and his co-conspirators moved on to BSMI and the gold mine investment scheme. BSMI claimed that it would mine gold and other precious metals on Sitkinak Island in Alaska. Through the use of in-person presentations, cold calls, and “webinars," Lange and his co-conspirators convinced investors to purchase BSMI stock by lying to them about the credentials of BSMI’s officers and directors, BSMI’s assets and liabilities, the intended use of investor funds, and by concealing their prior involvement in HFGI. Lange also concealed his own tarnished name and his leadership role in BSMI. Almost $1 million collected from investors in BSMI was spent on salaries and other personal expenses for Lange and his co- conspirators.
“Lange exploited the demand for housing caused by the destructive force of Hurricane Katrina to execute his devious advance fee scheme. Hiding behind his Brooklyn- based attorney, Lange deceived investors to the tune of $9 million with false representations and assurances that were not worth the price of the paper used to print the phony documentation. His voracious appetite for easy money then led him to bilk another million dollars from investors in the gold mine scheme. He will now be held to account for his crimes," stated United States Attorney Lynch. Ms. Lynch thanked the USPIS and the FBI for their hard work and dedication through the course of this five-year investigation and prosecution. Ms. Lynch also extended her grateful appreciation to the United States Attorney’s Office for the Western District of Washington for its assistance in the case.
The government’s case is being prosecuted by Assistant United States Attorneys
Winston M. Paes, Alixandra E. Smith, and Melanie Hendry.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The Defendant:
WILLIAM C. LANGE Age: 66
Residence: Gig Harbor, Washington
E.D.N.Y. Docket No. 10-CR-968 (DLI)
1 The charges against Frank Perkins are merely allegations, and he is presumed innocent unless and until proven guilty.
Source: U.S. Department of Justice, Office of the United States Attorneys
