Two Sent to Prison for $2.8 Million Investment Fraud Targeting Elderly Victims

Two men were sentenced to more than 11 years and almost six years in prison, respectively, for their roles in a $2.8 million investment fraud scheme targeting the elderly and other vulnerable victims, according to the US Justice Department.

Robert Stencil, 62, of Charlotte, N.C., was sentenced to 135 months in prison and ordered to pay over $2.7 million in restitution and forfeit nearly $900,000. Michael Duke, 51, of Richardson, Tex., was sentenced to 70 months in prison and ordered to pay more than $1.6 million in restitution.

Following a three-week trial in January 2019, Stencil and Duke were each found guilty of one count of conspiracy to commit mail and wire fraud. Stencil was also found guilty of 13 counts of mail fraud, 13 counts of wire fraud and four counts of money laundering. Duke was found guilty of three counts of mail fraud, one count of wire fraud, and one count of money laundering.

Court documents show that from 2012 through most of 2016, Stencil, Duke and their co-conspirators sold millions of dollars of “worthless” stock in a company named Niyato Industries, of which Stencil was the purported CEO and Duke his top salesperson.

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The two allegedly falsely claimed that Niyato had a headquarters in Charlotte, N.C., at least one operational facility, and had sold 2,700 electric vehicles that it had purportedly manufactured. They also claimed the company “possessed patented technology and proprietary hardware,” was an original equipment manufacturer of compressed natural gas (CNG) and liquid petroleum gas (LPG) vehicle, was contracted to establish 5,000 CNG pumps across the US and employed a former executive of Toyota as its COO.

But none of this was true, according to the Justice Department, which said Niyato had no patents, facilities, products, nor plans for an IPO. Its corporate address was a private mailbox in a commercial mail receiving agency in Charlotte.

To entice investors, Stencil, Duke, and their co-conspirators – which included Stencil’s wife – told them Niyato was close to launching an IPO at no less than $5.00 per share, but that they could buy in at $0.50 per share in a pre-public offering. They also said the company would use over 97% of the money it raised selling shares as working capital to grow its business and expand operations. They sold approximately $2.8 million in stock to approximately 140 victims, many of whom were elderly or vulnerable for other reasons.

“Stencil, Duke and their co-conspirators used nearly all of the money raised by selling Niyato stock for their own personal benefit, with Stencil paying salespeople – like Duke – half or nearly half of the money they solicited from each investor on behalf of Niyato,” said the Justice Department in a statement. “Moreover, Stencil used Niyato’s bank account as his own personal piggybank.”

Five other defendants have pleaded guilty in the matter and have already been sentenced, while one other – Daniel Broyles Sr., 62, of Beverly Hills, Calif. – was also charged but remains a fugitive.

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Tags: abuse, Department of Justice, Elderly, finance, Fraud, Michael Duke, Niyato Industries, old age, Robert Stencil

The board of trustees of the Police and Fire Retirement System of the City of Detroit is suing its own investment committee to prevent a 75% pay increase to the retirement system’s former deputy CIO.

The lawsuit, which the trustees filed in US Bankruptcy Court, Eastern District of Michigan Southern Division, alleges that the investment committee overstepped its authority, breached its fiduciary duty, and subverted the pension and city’s personnel payment policies.

The investment committee was established within a plan of adjustment that was created as part of the bankruptcy filed by the city of Detroit in fiscal year 2014-2015. The nine-member committee assumed responsibility for the investment of the pension plan’s assets. It is comprised of four police and fire retirement system trustees and five financial professionals selected by the state of Michigan, the city of Detroit, and the Police and Fire Retirement System Board of Trustees, in consultation with the Foundation for Detroit’s Future.

“This adversary proceeding is brought to remedy the breaches of fiduciary duty committed by the PFRS Investment Committee and its individual members and Chief Investment Officer,” said the complaint, “to obtain injunctive relief and declare the parties’ rights and responsibilities … pursuant to the terms of the Eighth Amended Plan of Adjustment of Debts of the City of Detroit.”

The complaint was filed with the court on behalf of the board of trustees by outside special counsel Couzens Lansky.

The conflict between the pension and the investment committee is centered on pay raises the investment committee promised to its CIO and deputy CIO that would have raised their annual salaries to $315,000 and $285,000, respectively. According to the pension’s board of trustees, CIO Ryan Bigelow’s compensation was increased twice since last winter – first in December to $264,000 from $242,000, and then again March to $315,000.

The committee also approved a 75% pay raise for then deputy CIO Kevin Kenneally to $224,000 from $162,781 annually. When the pension’s trustees objected, the investment committee arranged a deal for Kenneally to resign as an employee and be hired as an independent contractor with fewer duties, higher pay, and a $60,000 signing bonus.

Kenneally resigned from the pension board staff on Dec. 27 and assumed a role as an independent contractor on Jan. 6. However, the board of trustees has refused to pay invoices submitted by Kenneally. The board also authorized the hiring of special counsel to assist in writing the complaint to request that the Federal Bankruptcy Court, which approved the plan of adjustment, rules on the validity of the contract and the ability of the board to set employee wages.

The trustees also claim the investment committee has indicated that it would attempt to delay or prevent approximately $18.3 million in payments from the so-called “Grand Bargain” that was part of the city’s bankruptcy unless the trustees agree to fund the pay raises.