http://www.starnewsonline.com/article/20101003/ARTICLES/101009902/-1/opinion?p=2&tc=pg 

A man has been indicted on federal charges of wire fraud and money laundering in an alleged scheme that bilked millions of dollars from investors in Bald Head Island and other places. He also used investors’ money to pay a construction loan of more than $1 million for his home, cars and travel as well as to pay taxes and credit card bills, according to a federal indictment.

James Edward Whitley, who faces six charges of wire fraud and 14 charges of money laundering, told investors he was in the factoring business, or the business of buying accounts receivable sold by businesses at a discount for short-term loans to continue running the business, according to an indictment filed by the U.S. Attorney’s Office.

Court records show Whitley was arrested, but was released on an unsecured bond. Court records also show he was appointed a public defender, but a call to Whitley’s attorney late Friday was not returned.

Brunswick County tax records show Whitley owns a plot of land off Bald Head South worth $250,000 as well as a four-bedroom home worth $2.4 million near that plot of land. Whitley’s address is listed in Greensboro.

As part of a scheme from December 2006 to July 2009, Whitley claimed he would provide loans to businesses that needed quick cash, purchasing accounts receivable or holding them as security in exchange for those loans, according to the indictment.

Whitley told investors their money was being used to buy accounts receivable or to loan money to a company, with accounts receivable being used as collateral while he made a small commission, the indictment states.

Investors, who either wired money to Whitley or gave him checks, thought their money was going to be invested with the company and were under the impression that they would receive a return on their capital when the factoring contract expired, according to the indictment.

Also, Whitley typically provided a promissory note on a first-time investment and then extended the note for reinvestment, the indictment states.

Instead of investing the money as people thought, Whitley used the money to pay interest or principal to other investors, giving investors the impression his investments were successful and prompting them to keep investing or tell other people about it, the indictment states.

The federal indictment shows Whitley wired a total of $1.1 million and show $827,032 was used to make various payments – mostly to Horizon Line Builders and Hubert Vester Chevrolet as well as $11,400 to the state’s Department of Revenue.

Whitley’s investors were from Bald Head Island, Greensboro, and elsewhere, according to the indictment issued in mid-September.