Ponzi scheme operator sentenced to 8 years

By: Frank Green | Richmond Times-Dispatch
Published: July 19, 2011

A 62-year-old Richmond man who ran a Ponzi scheme that led to almost $9 million in losses to investors was sentenced to 8 years and one month in prison this morning.

Julius Everett Johnson used at least 10 different area businesses and bank accounts he owned and controlled to shift around money from investors in Virginia and North Carolina so that new investments could pay off old ones.

“People are deeply wounded by these schemes,” said U.S. District Judge James R. Spencer before sentencing Johnson. Spencer noted that some of the victims were elderly and lost their life savings.

Given a chance to address the judge before sentencing, Johnson, married for 42 years with three children and no prior criminal record, said, “I take responsibility for this and I’m very, very sorry.”

“I never set out to hurt people the way I have,” he said. He told Spencer that when he is released he will work as long and hard as possible in an attempt to pay back his victims.

But one victim, Michael Craft, 47, of Lawrenceville pointed out that Johnson would be at least 70 years old when released and not in a good position to earn the money needed to reimburse the losses.

He told Spencer that Johnson was a thief.

“People are suffering," he said. "It’s like somebody slapped ‘em right in the face and took it.

After the sentencing, Craft said he felt the prison term was adequate. He said he and his wife lost $195,000, their life savings.

Johnson pleaded guilty on April 11 to conspiracy to commit mail, wire and bank fraud and engaging in unlawful monetary transactions.

According to pleadings filed in court by prosecutors, “The fraud to which Johnson pleaded is not a run-of-the mill fraud. It involved more than 150 investors, millions of dollars and multiple business entities and bank accounts.

“It was so complex that Johnson needed detailed records to track into which of the multiple business and bank accounts he had stashed each investor’s money,” authorities alleged.

The victims included 92, 89 and 87-year-olds, Kevin Muhlendorf, a special assistant U.S. attorney told Spencer. “These are people for whom there is no second chance to recoup losses.”

Businesses owned by Johnson included Virginia Group Benefits, Mid-Atlantic Insurance, Benefit Contractors Administrators, Inc., River City Cleaners, Roberts Awning LLC and Norvell Awning, LLC.

According to a statement of facts signed by Johnson, he solicited investors in North Carolina and Virginia along with Walter Reinhart, who is facing state charges in North Carolina.

Most investors were told the money would be invested in specific companies and were usually promised a return of 6 to 10 percent over periods ranging from one to four years.

In one case in summer 2007, Johnson did not have the money to pay back two investors who wanted parts of their investments returned. Reinhart allegedly obtained the needed funds from new investors.

In October, 2009, Johnson told Reinhart he needed money to make quarterly interest payments. Reinhart drove an investor from North Carolina to Virginia to put $200,000 in Norvell Awning.

The investor was told the money would be used for business expansion and computer systems. Instead, most of it covered the quarterly payments due other investors.

Johnson’s lawyer, Jeffrey Everhart, acknowledged the victims were seriously hurt. But, he argued, “the intent was not to deceive, the intent was to try and address the needs of his various companies -– at least that’s the way it started out.”

“He got caught up in it up to his eyeballs,” said Everhart. “It’s like a washing machine it’s just all in there going around and around.”

Spencer allowed Johnson to remain free and to surrender to authorities to begin his sentence Aug. 22. Noting Johnson’s otherwise sterling background, Spencer said, “it’s just puzzling to me.”

Muhlendorf, noting that Johnson accepted responsibility and aided investigators, joined Everhart in asking for a sentence at the low end of federal sentencing guidelines of 97 to 121 months.

(This has been a breaking news update. Read more in tomorrow's Richmond Times-Dispatch.)