A 62-year-old Richmond man who ran a Ponzi scheme that scammed investors out of nearly $9 million was sentenced Tuesday to serve eight years and one month in prison.
Julius Everett "Bud" Johnson used at least 10 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."
Johnson told Spencer that when he is released, he will work as long as possible 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. Craft told Spencer that Johnson was a thief.
"People are suffering," Craft said. "It's like somebody slapped them 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 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 people in their late 80s and early 90s, 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 percent to 10 percent over periods ranging from one to four years.
In one case in mid-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," Everhart said. "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 Aug. 22 to begin his sentence. 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.
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