David L. Johnson and Michael L. Putnam were sentenced Monday following their convictions for tax crimes related to their involvement in the Genesis Fund, the Justice Department and Internal Revenue Service announced.
Both Johnson and Putnam had previously pleaded guilty before U.S. District Judge Dale S. Fischer in the Central District of California. According to the original indictment filed in this case, the Genesis Fund was a private investment fund that was marketed as investing in foreign currency trading, but that operated as a ponzi scheme. Investors gave the fund $80 million.
The Genesis Fund was relocated from Anaheim, California, to Costa Rica in April 2000.
Johnson, 73, of Loma Linda, California, was sentenced to 30 months in prison for filing two false tax returns in which he failed to disclose his bank account in Costa Rica to the IRS. According to the plea agreement, Johnson used this bank account to conceal Genesis Fund distributions from the IRS. Judge Fischer also ordered Johnson to pay restitution of $2.3 million, approximately $1.9 million to investors in the Genesis Fund and $400,000 to the IRS.
Putnam, 68, of St. George, Utah, formerly of Huntington Beach, Calif., was sentenced to 12 months and a day in prison for conspiracy and tax fraud and ordered to pay over $13 million in restitution: approximately $10 million to investors in the Genesis Fund and $3 million to the IRS. According to court documents, Putnam had cooperated with the government in the prosecution of other defendants charged for their involvement in the Genesis Fund.
According to court documents, Johnson and Putnam received significant distributions that they hid in foreign bank accounts and did not report to the IRS.
Johnson received over $2.4 million while Putnam received over $1.5 million.
Johnson and Putnam are the 10th and 11th defendants to be sentenced for crimes related to the promotion of the Genesis Fund.
The U.S. government characterized the fund as a ponzi scheme in which interest payments are made from funds provided by new investors. The government said that the organization promised investors 4 percent a month returns.
• John S. Lipton, 58, a founder and the principal manager of the Genesis Fund, who lived in Mission Viejo and Laguna Hills, California, until about March 1998 when he relocated to Costa Rica. He pleaded guilty in 2010 and received 70 months in prison.
• Richard B. Leonard, 71, another early investor, and later a promoter and manager of the Genesis Fund, who lived in Littleton, Colo., until he relocated to Costa Rica in about June 2000. He also pleaded guilty.
• Victor H. Preston, 64, a founder and manager of the Genesis Fund, who from about July 1994 to about June 2000 lived in Huntington Beach and Laguna Hills, Calif., after which he relocated to Costa Rica. He also pleaded guilty, said the Justice Department.
Lipton and Leonard lived in the upscale Tangomar subdivision on the east shore of the Nicoya Peninsula. Preston lives in La Sabana.