Jan.20, 2010

A local man is facing up to a 30-year prison sentence for money laundering and mail fraud.

On Jan. 12, a federal grand jury returned an indictment charging Luis Fernandez with the crimes. The charges stem from Fernandez’s operation of an investment scheme called Fernandez Financial Investment Fund.

Assistant United States Attorney R. Steven Lapham, the case’s prosecutor, said the indictment alleges that Fernandez was the owner and president of Fernandez Financial, Inc. in Folsom. Between September 2004 and March 2009, Lapham says Fernandez collected approximately $7.4 million from investors by promising them a 3 percent monthly return on their money.

Federal investigators claim that during this time, Fernandez invested approximately $4.6 million in the stock market, sustaining a loss in five of the six calendar years during that period. After subtracting monthly payments to investors totaling approximately $5.3 million, he allegedly caused a total loss to investors of approximately $2.1 million.

A Department of Justice press release said the purpose of this scheme was to obtain money from prospective investors and to induce existing investors to keep their funds in FFI. Fernandez falsely represented to investors that his firm was profitable in both good markets and bad and that it was consistently generating a return on investment that was sufficient to pay the promised 3-percent rate of return, according to the release.

To lull existing investors into keeping their money with FFI, Fernandez and others allegedly acting at his direction, falsely represented that FFI continued to do well and provided investors with false documentation purporting to show stock market gains and concealing the losses, according to investigators.

The indictment also charges that Fernandez purchased a cashier’s checks made payable to Elliott Homes in the amount of $168,872.75 for the purchase of a residence located in the area, which was paid for with funds derived from the scheme.

“Many of the FFI investors lived in New York. Some of them got suspicious,” Lapham said during a phone interview, “and contacted the authorities.” By May of last year, search warrants had been issued.

He said that the Federal Bureau of Investigation and the Internal Revenue Service worked together during the investigation.

A status conference is scheduled for next month.