Moreno Valley man, accused of $24 million Ponzi scheme, pleads guilty

Press-Enterprise (Riverside, CA)

A Moreno Valley man has pleaded guilty to a federal charge after authorities say he ran a two-decade-long Ponzi scheme that defrauded more $24 million from at least 200 investors.

Paul Horton Smith Sr., 59, pleaded guilty on Monday, Jan. 8, to one count of wire fraud, the U.S Attorney’s Office said.

From July 2000 to May 2020, Smith operated Riverside companies named Northstar Communications, Planning Services, and eGate, soliciting individuals to invest in something Smith called “Northstar,” according to the plea agreement. Many of Smith’s victim investors were retired.

He falsely told them that Northstar was an investment like an annuity and that Northstar invested in real estate or followed the stock market, the U.S Attorney’s Office said. He typically told the investors that their investments would generate a fixed rate of return and was a “safe investment,” prosecutors said.

Smith, however, never invested the money and instead deposited the funds into a non-interest-bearing checking account, federal prosecutors said. He then used some funds from later Northstar investors to pay earlier Northstar investors’ monthly interest payments, and to repay earlier investors who wanted to withdraw their money.

So the total loss to investors through the fraud, federal officials said, was $13,331,505.

In one instance, in April 2019, Smith got one victim to invest with him $400,000 from life-insurance proceeds after the victim’s spouse died.

Over the course of his scheme, Smith fraudulently obtained more than $24 million from at least 200 investors, with 106 of them having not been fully repaid, court records show.

Smith is scheduled to be sentenced on April 1, when he faces a maximum sentence of 20 years in federal prison.