Folsom Man Pleads Guilty in Investment Fraud Scheme

United States Attorney Benjamin B. Wagner, FBI Special Agent in Charge Drew S. Parenti, and IRS Special Agent in Charge Scott O’Briant announced today that Luis Fernandez, 36, of Folsom, pleaded guilty to wire fraud and conducting monetary transactions in criminally derived property in connection with his operation of an investment scheme.

According to the plea agreement filed in court today, Fernandez was the owner and president of Fernandez Financial Inc. (FFI) in Folsom. Between September 2004 and March 2009, Fernandez collected approximately $7.4 million from investors by promising them a 3 percent monthly return on their money.

How he did it

Fernandez falsely represented to investors that FFI was profitable in both good markets and bad and that it was consistently generating a return on investment that was sufficient to pay the promised rate of return. During this time, Fernandez invested approximately $4.6 million in the stock market, sustaining a loss in five of the six calendar years.

To lull existing investors into keeping their money with FFI, Fernandez and others, acting at Fernandez’s direction, falsely represented that FFI was doing well and provided investors with false documentation showing stock market gains and concealing the losses. After subtracting monthly payments to investors totaling approximately $5.3 million, Fernandez caused a total loss to investors of approximately $2.1 million.

Fernandez also admitted that he used investors’ money to purchase cashier’s checks made payable to Elliot Homes for $168,872.75 for the purchase of a house located in Folsom.

FBI Special Agent in Charge Parenti said, “These Ponzi schemes and other securities related frauds have a devastating impact on the victims. We continue to give these investigations top priority and will use every available resource to bring justice to those who corruptly deprive innocent investors of their financial security.”

Fernandez is scheduled to be sentenced on August 31, 2010 at 9:15 by U.S. District Judge Lawrence K. Karlton.