By JIM BUTLER
After years of allegedly dancing around the flame Jay Pearson flitted too close.
On Friday he pleaded in federal court to one count of wire fraud and faces up to 20 years in prison.
According to the government’s case, Pearson, 61, of Alexandria in effect took more than $3.4 million entrusted to him and used it for personal benefit.
His Mid South Retirement Services on Harold Miles Road managed about $40 million in Self Directed IRAs from 2012 to 2021, according to the government.
National experience has shown such funds to be a popular tool for Ponzi schemes targeting the approximately $100 billion pot of retirement funds.
The promise of extraordinary interest on investment proves too hard to resist for many and as long as some keep investing the scheme thrives.
An SDIRA is an IRA held by a custodian that allows investment in a wider range of assets than most conventional IRA custodians permit.
The government asserted Pearson created a scheme to defraud clients wherein he would take funds that Mid South was holding as the custodian, and transfer them to other accounts he controlled, without the client’s permission.
Pearson would misrepresent to clients that he was investing the funds as they had directed, when, in fact, he was taking the money.
Pearson faces a sentence of up to 20 years in prison, three years of supervised release and a fine of up to $250,000.
The sentencing hearing has been scheduled before Senior Judge Dee Drell for December 3.
Ironically the firm Drell was a member of before his appointment (2012) represented Pearson at one point.
Records indicate it responded through another firm member to inquiries in August 2009 regarding Pearson’s failure to make interest payments to investors in Crumbs R Us, essentially saying Pearson was scrambling to hold ventures together in the face of dire economic circumstances.
According to records, as early as 2006 that enterprise proposed to purchase homes for less than $100,000, rent them for a fixed period, then sell for profit. Return on investors’ promissory notes was to be 12 percent.
Pearson’s association with California enterprises on regulators radar go back beyond that, records show.
Chances of Pearson’s victims recovering any or all of the money are apparently as good as they are of getting 12 percent interest.