Fraud victims respond to Farah and Dodge's guilty pleas
October 13, 2010
MEREDITH — The principals of two failed firms involved in a Ponzi scheme have pled guilty to fraud charges, though victims say this will not help them get back what they lost.
On Oct. 4 Scott Farah and Donald Dodge entered plea agreements at US District Court in Concord.
Farah's company Financial Resources Mortgage and Dodge's company CL and M suddenly closed the door to their Meredith offices, leaving millions of dollars unaccounted for. Nearly a year later, the state legislature has determined failings in the process by the Banking Department, the Securities and Exchange Commission, and the Attorney General's Office that lead to complaints being passed down for over 10 years.
Farah pled guilty to mail fraud and wire fraud on the agreement that he receive the low end of the advisory sentencing guideline. The maximum sentence is 20 years in prison. The plea acknowledges that a scheme existed to defraud or obtain money by false or fraudulent pretenses, Farah knowingly participated in the scheme with intent to defraud, and he used the mail and interstate wire communications to commit fraud.
Dodge pled guilty to wire fraud with the stipulation that he serve no more than 121 months (or approximately 10 years) in prison. The plea acknowledges that he defrauded or obtained money by false or fraudulent pretenses and knowingly and willingly participated in the scheme with intent to defraud using interstate wire communications.
Sentencing for both is pending.
Victims of the scheme have said they believe Farah and Dodge deserve to be punished, but they are still left with the financial mess of what happened. They also expressed anger at state regulatory authorities for not addressing the issue before it was too late.
Harry Bean of Gilford said he and his wife lost $1.988 million in the FRM scheme over the course of nearly four years.
"It started out small; it appears now that that was to draw me in," Bean said "The first few things there were $40,000, $50,000, $25,000 – it was made to look good and it went from there."
Several members of his family also invested with FRM and lost substantial amounts of money. Bean said his parents lost $1 million, his two sisters each lost $100,000, his brother Ronny lost $125,000, his son lost $75,000, and a cousin lost $25,000.
Bean said he had no other suspicions of trouble before the firm closed its doors, though one particular investment had suspicious qualities in retrospect. Bean said he invested in property south of Boston through Farah that was supposedly in the process of construction. He then visited the property and found the work was significantly lacking; the two-car garage and porch had not been constructed, the paved driveway had not been installed, and landscaping was not done.
Bean said he then contacted Farah asking who the inspector was, saying he was going to sue the inspector for taking his money without having any work done. Bean said Farah would not give him the name of the inspector, but said he took full responsibility for the lack of work and would have the problem rectified at no cost to Bean. Farah later told him he sold the property with no monetary loss to Bean and said he himself lost around $50,000.
"At that point I said, 'This guy's all right. Anybody can make a mistake, but if you correct your mistake…'" Bean said. "I don't know if that was all part of a plan, (but) it worked really well with me."
Even when the company closed in November of 2009, Bean said he did not know what was happening and thought a series of investments collapsed with Farah unable to manage the problem. Bean said he was originally concerned about Farah when he heard he was missing. Some of his first thoughts were concern for the safety of Farah's father, Pastor Robert Farah, from angry investors.
"I went up there and sat in the driveway with my wife at the church watching for people that looked suspicious: someone with trenchcoat or crying a lot or irate," Bean said, saying he and his wife saw no one suspicious by the church.
Bean said he now believes Robert Farah was involved in the scam.
Bean's brother Ronny Bean died of leukemia on Sept. 29. Harry Bean said his brother gave FRM $30,000 before closing its doors and he worked to get his money back for the last 11 months of his life.
"That was the last of all the money that he had," Bean said. "He knew he was terminal and he was trying to get his money back so his family would be good."
Bean wrote a letter to Farah that was read in court after he plead guilty.
"I'm satisfied that he's going to jail, but I think he should have gotten double the time and Dodge should have gotten half," Bean said. "Some of the stuff he did he should have known better. Farah was the boss."
Bean said he also holds Banking Commissioner Peter Hildreth responsible for not taking action on reports on FRM. He is also enraged at the state for not taking measures to close FRM with the many complaints it received of illegal activity. Bean said he hopes the state will "right the wrongs" and address and fix the problems that lead to this end.
Al and Susan McIlvene of Kittery Point, Maine, were in the courtroom when Farah and Dodge plead guilty.
Al McIlvene said thy initially heard about FRM in 2008 after receiving a postcard in the mail. Susan McIlvene said the company piqued their interest and her husband called and spoke with Donald Dodge. The couple was interested enough and drove to Meredith to meet with Farah and attorneys, speaking with Farah for 45 minutes and asking questions.
"We said we'd think about it," Al McIlvene said. "We came back and we proceeded to do our own (research)."
Al McIlvene said they checked with the Better Business Bureau, the Secretary of State, and information on the Internet.
"We could find nothing about him that was anything but four stars," Al McIlvene said. "The Better Business Bureau gave him an A+ rating."
The McIlvenes said they assumed FRM was legitimate because they were licensed by the state. They later learned about the numerous complaints against the company and investigations that resulted in FRM staying open and being licensed.
"You assume that your state regulatory agencies are doing what they should be doing," Al McIlvene said. "Do you have to check on the agencies themselves? The charter of the Banking Commission is to make sure exactly what happened doesn't happen. It's a very sad story on our government and their not assuming responsibility. They had an obligation to protect the public because their charter says that's what they're going to do."
Susan McIlvene said they are also "extremely disappointed" in the Attorney General's Office for forwarding a whistle blower report by a former employee 2004 to the Banking Department and "casually" referring a criminal complaint to the FBI.
"I never knew anything at all was going on until the day they closed," Al McIlvene said.
Al McIlvene said they received a call from another lender in Florida asking about the situation.
"I said 'What are you talking about?' He said, 'Well were ruined. My wife and I have a million (invested),'" he said
The McIlvene's have a list 125 lenders from all over the country, including Baltimore, Philadelphia, Washington state, and many other places.
"They are all over the country and they have no way of knowing what is going on," Al McIlvene said. "You can't go to any of the hearings, you can't go to any of the bank hearings. Events like Scott's trial, legislative hearings, there's a whole host of things that rely on you being close by. My wife and I assumed responsibility for informing them of what's going on. We have seen every human emotion that you can imagine has been experienced by the victims, everything from loss of jobs to Chapter 11 to divorce to one family member committing suicide to desperation to needing medical care to having to go on welfare. The worst thing that they're innocent victims and that's very sad."
The McIlvene's said no sentence can make up for the amount of loss they and the other victims have suffered. Al McIlvene said he believes Scott Farah's only mission is to minimize as much pain and discomfort for himself as he can.
"I've lost everything that we've worked for in 75 years, he doesn't care at all," he said.
They also said the bankruptcy proceedings have claimed much of what could have gone to the victims. They also helped out one of the victims in getting a loan, but said they were told the money she was paying them will now go toward bankruptcy.
"This entire tragedy was completely avoidable if the state had done their job and not just one agency, but two agencies independent of each other," Al McIlvene said.
McIlvene also said he has heard people tell him that if it was too good to be true it probably was and make other criticisms that he should have known therisks. Al McIlvene said his father was a hard moneylender and he understands the process and risks association with such transactions.
"He has a second chance at life," Al McIlvene said. "300 people don't. What kind of a penalty should someone serve for ruining 300 people lives? I'm trying very hard to not put my energy behind how much time Scott gets. If he gets one day or 100 years it doesn't change out financial state. The only concern me and my wife have is getting our life back. Him being in jail doesn't get my life back. I believe he should be punished. I'm going to do everything I can to make him go to jail for 50 years."
For the past 10 months the McIlvenes have been working with the state and legislators to pass legislation and examine laws so this dos not happen again.