James W. Bailey Jr. From Asheville Sentenced To 32 Years In Prison For Ponzi Scheme

3:46 PM, Feb 27, 2013   |    comments
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Asheville, NC (ACT) -- A former Asheville businessman who ran a Ponzi scheme that cheated investors out of more than $13 million over the course of a decade was sentenced Wednesday to 32 years in federal prison.

James W. "Bill" Bailey Jr. lived a lavish lifestyle paid for with the proceeds of his crimes, Judge Martin Reidinger said in handing down the sentence in U.S. District Court.

"This was a theft that was cold-blooded," the judge said. "He knew he was stealing and spending their life savings. He did that out of greed. He kept on stealing million after million after million from hardworking people."

Bailey, 65, pleaded guilty in 2011 to charges of securities fraud, mail fraud and filing false tax returns.

As operator of Southern Financial Services on Exchange Street, he took money from investors and paid returns with money from subsequent investors - not from actual profits, according to the government.

Bailey dealt in asset management, individual retirement accounts, wills and trusts, federal prosecutors and investigators said in a bill of information laying out their case against him.

The Asheville businessman did not have a license to trade securities and fabricated returns using money from other investors despite telling his customers their investments were earning interest, according to court records.

He created limited liability companies for his clients in this scheme and purchased real estate through the companies, federal prosecutors said. He led his investors to believe that their money was parked in an account held by Southern Financial Services. Instead, he had commingled funds from other frauds to buy the properties.

The scheme collapsed in November 2010 when Bailey bounced three checks worth $4.8 million. He had moved the checks in and out of his 1031 Exchange Services account at HomeTrust Bank into a Smith Barney account despite knowing that neither account had enough money to support the amounts.

Bailey must forfeit 12 properties he owns as part of his deal with federal prosecutors, along with a Mercedes, Ford truck, motor home and funds in five bank accounts.

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