Investment advisor pleads guilty in Ponzi scheme
John Pirro Updated 10:41 p.m., Thursday, September 13, 2012
A Danbury-based investment adviser pleaded guilty in federal court to operating a Ponzi scheme that cheated a dozen investors, including members of his own church, out of more than $600,000 over the past decade.
Stephen B. Blankenship, 63, of Candlewood Isle, New Fairfield, used the money for mortgage payments, travel, home improvements and other personal expenses, according to the United States Attorney in Connecticut and the Securities and Exchange Commission.
Blankenship, who operated Deer Hill Investment Group in Danbury, waived indictment Wednesday to one count each of mail fraud and security fraud and faces up to 20 years in prison on each charge when he is sentenced in U.S. District Court in Hartford on Dec. 5.
"Over the course of several years, this defendant deceived investors into entrusting him with their funds, and then into believing their funds were safe and their investment accounts were appreciating," said U.S. Attorney David B. Fein. "All along, he was using those funds to pay business and personal expenses, and to pay other investors as part of the Ponzi scheme."
Blankenship funded the scheme by luring clients whose accounts he'd handled at investment firms in California and New York by promising them a greater rate of return than they had been receiving, authorities said.
Among the victims were members of the Walnut Hill Community Church in Bethel, which Blankenship also attended.
Not only did he take money from church members, said David Bergers, director of the SEC's regional office in Boston, he also used them as references to entice other victims.
"Many of them were senior citizens who could ill-afford to lose the money," Bergers said.
None of the money he took was invested, according to investigators. Instead, Blankenship used it to reimburse clients who'd asked for their funds back, as well as do grocery shopping, pay credit card bills and other expenses, Bergers said.
He also prepared fictitious statements showing clients their accounts were increasing in value, Bergers said.
New Fairfield town records list Blankenship as co-owner, along with May Blankenship, of an 1,100-square-foot, split-level home on Ridge Road that they purchased in 2001. In November, 2011, the property, which has an appraised value of $322,000, was placed in May Blankenship's name only, the records show.
The SEC has filed a complaint in federal court seeking return of Blankenship's ill-gotten gains, a civil fine, and a permanent injunction against his working as a securities broker in the future, Bergers said.
Blankenship was freed on $150,000 bond pending his sentencing, according to Thomas Carson, a spokesman for the U.S. Attorney. He has also been barred from traveling out-of-state and ordered to surrender his passport.
