Feb 5, 2011 4:59 AM GMT+0800

By The Associated Press

http://www.bloomberg.com/news/2011-02-04/us-moves-to-seize-home-of-iowa-man-in-fraud-case.html

IOWA CITY, Iowa (AP) — Federal prosecutors are trying to seize the home of an Iowa man they say duped investors out of more than $100,000 by pitching phony gold and iron mining deals shortly after he was released from prison in a similar fraud case.

The U.S. Attorney's Office filed a civil complaint in December in a maneuver to take possession of the Cedar Rapids home of Donald Washburn. In an interview Friday, Donald Washburn said the government's allegations against him were false and the home is owned by his wife, who filed paperwork this week in an effort to keep possession.

"I don't understand how the government can say, 'I'm taking your house, period'," Donald Washburn said. "The FBI should be getting Bin Laden instead of picking on somebody in Iowa."

An affidavit an FBI investigator filed in December said the home should be seized because Washburn used an office, computer and fax machine there to launder money and commit wire fraud. Washburn has not been charged, but he said his home was raided and one of his business associates was recently called to testify in front of a grand jury.

Washburn, now 61, served three years in prison after a jury convicted him on 10 counts of wire fraud and two counts of money laundering in 2005. Prosecutors said he defrauded investors in two schemes in which he claimed he would use their money to obtain a DNA research grant or to develop a new dice game to sell to casinos. Instead of doing so and giving them the high rate of return he promised, prosecutors say he kept the money. Washburn maintains he did nothing wrong.

In his affidavit, FBI special agent Shauntay Lett said Washburn came up with similar schemes to dupe more investors while he was on supervised release starting in 2009.

"Donald Washburn fraudulently convinced others to invest or loan him money for his various projects and businesses by falsely and fraudulently representing that the victims' monies would be used to, among other things, develop and promote his business venture of obtaining gold or iron ore from various mines located in and outside of the United States," Lett wrote.

Washburn created fake documents as part of his sales pitch to investors and promised them a high rate of return on their money, but never had any intention of paying them back, the affidavit said. Washburn said the deals were all legitimate.

Washburn convinced one out-of-state investor who had given him money in the past to wire him $60,000, which he said would be used to ship iron ore from an Australian mine to port immediately, the affidavit said. He signed an agreement promising to give the investor $120,000 back within 20 days but instead deposited the money into his checking account, used $20,000 to open a credit card in his name and transferred $15,000 to an investment account, it said.

Washburn convinced another out-of-state investor to give him $74,000 to pay off the remainder of his fine stemming from his 2005 conviction, which helped him get released from supervision last year, the affidavit said. In exchange, Washburn promised to pay the individual $7 million but that hasn't happened, the document said.

A third investor, an Iowa resident, gave Washburn a total of $60,000 for a Nevada mining project, and Washburn promised to give him back more than $800,000, Lett wrote. A fourth investor, also an Iowa resident, gave Washburn $10,000 to invest in a mine in Colorado that Washburn claimed his company bought for $750 million, according to the affidavit; in reality, that mine is inactive and assessed at a tiny fraction of that amount.

"Donald Washburn then well knew, he did not own or have the rights to these mines, nor did he use the money he obtained for the purpose as stated in his contracts, funding agreements, and other documents," Lett wrote.

Washburn said he could explain away every single allegation, and he blamed some of the problems on being misled by others.

"Have I had deals go south? Hell yeah, every damn day something goes wrong," he said. "But did I lie about it? Hell no, hell no, and I can prove it beyond a reasonable doubt."