Final tally: Officials seek $24 million more from Dowdell's minions
With the prosecution winding down its decade-long work on the Terry Dowdell Ponzi scheme– one of the world's largest until Bernie Madoff took such crimes to new depths– prosecutors and investigators took a victory lap of sorts Friday at the Charlottesville federal courthouse. They announced an effort to seek more than $24 million in restitution atop the $34 million recovered by a quick-thinking Securities and Exchange Commission official's account freeze.
"It's a great message case," said Steve Levine, the SEC official who reportedly froze Dowdell's accounts nearly ten years ago, just a day before a pack of wire transfers were about to move the money to Dowdell and fellow conspirators. Levine notes that most of the convicts were brokers, those whose training is designed to prevent them from ever claiming that they, too, were duped.
The most recent broker to fall is Brigit "Gitte" Mechlenburg. A now 63-year-old Dane who'd been working in Massachusetts, Mechlenburg had already been barred by the SEC from the investment industry when she allegedly rounded up about $13 million from investors in what Dowdell and others had been calling their "Vavasseur" program.
After pocketing a tidy $1.6 million in commissions for herself and feeling the heat from federal investigators, Mechlenburg fled the United States. Plucked from from the streets of the tiny European nation of Andorra, Mechlenburg would eventually plead guilty last September right here in Charlottesville to a count of conspiracy to commit wire fraud.
In January, Mechlenburg received the maximum sentence of five years, and Judge Norman Moon is currently weighing prosecutors' request on the exact amount of restitution that she and others will owe. While awaiting transfer to the federal penitentiary system, she currently resides on Avon Street, at the Albemarle-Charlottesville Regional Jail.
The mastermind of the scheme was Albemarle-based Terry Dowdell. Sentenced in 2004 to a 15-year sentence, Dowdell spent some time behind bars in West Virginia, but the now 64-year-old has reportedly suffered from such profound health problems that he's been moved to the Devens Federal Medical Center, a hospital jail for men located on a former military base about 40 miles north of Boston.
It's quite a change for Dowdell, who– if his house hadn't been seized by the feds– might have eventually found himself living on the same street as former UVA men's basketball coach Dave Leitao in the million-dollar-plus mansions in the hilly but-recently-wildfire-scorched Rosemont subdivision near Ivy.
Dowdell's misdeeds also got his wife and daughter in trouble, as both were found guilty of accepting stolen property. In addition to getting stung by criminal convictions, including a jail term for Mrs. Dowdell, they were among many who were subject to "claw-back" provisions.
At the March 4 press conference, one official measured Dowdell's Ponzi scheme at $250 million but conceded that most of the money was in the form of false gains and illicit payouts to investors. The actual amount eagerly handed over to Dowdell's minions in the hopes of receiving stratospheric returns was about $60 million, according to federal receiver Roy M. Terry Jr.
In his 2004 plea agreement, Dowdell agreed to pay about $121 million in fines and restitution. Now the government is seeking about $25 million from Mechlenburg and fellow convict Kenneth G. Mason.
It was the largest financial fraud ever prosecuted in the Western District of Virginia and one of the largest Ponzi schemes ever prosecuted in the country, according to United States Attorney Timothy Heaphy who used some of his time at the podium to ask citizens to check out stopfraud.gov to report scams directly to the government task force trying to smash them.
"This was a complete ponzi scheme," says Heaphy. "Not one dollar was actually invested."
Unlike most Ponzi schemes, the asset freeze in this one gave the government a rare opportunity to recover a significant portion of the lost money, about sixty percent of which has been disbursed, Heaphy said.
A British victim of the scheme, Elizabeth Watson, has alleged that officials have consumed millions of dollars to retrieve millions of dollars, and a radio reporter at the press conference asked how much the investigation has cost.
"It's been tremendous, but worth it," said Heaphy, who said he didn't know the cost.