THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, March 31, 1995 TAG: 9503310511
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY JOE JACKSON, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 51 lines
A Peninsula man pleaded guilty in federal court Thursday to defrauding 11 investors of about $628,000 since 1989.
Robert Allen Shirey, 32, pleaded guilty to one count of mail fraud. He faces a maximum penalty of five years in federal prison and a $250,000 fine when he is sentenced June 27.
On March 1, a grand jury indicted Shirey's 39-year-old business partner, Salomon S. Loayza, on six counts of mail fraud. Loayza and Shirey owned three investment companies on the Peninsula: Colonial Capitol Resources Inc. and Salomon, Roberts and Co. Inc., both of Hampton; and Provident Capital Management of Newport News.
According to court records, Shirey and Loayza, whose trial is scheduled in May, promised clients - most of whom were elderly - that their money would be invested in nationally known mutual funds and then returned, with interest, after a specified period.
However, the money was never invested, federal prosecutor Alan Salsbury said. Instead, the two men allegedly used the money to pay off personal and business expenses. To make it appear that their victims' investments were doing well, they allegedly used the funds of new investors to make periodic interest payments to earlier investors - a pattern usually called a Ponzi scheme.
The victims were first contacted by phone, then visited at home, records showed. In some cases, they were pressured to liquidate legitimate investments and transfer the funds to Shirey and Loayza.
In a typical letter, Loayza begged one investor to close out an investment in another company and transfer the funds to him.
``I have never begged a client to do anything before,'' he wrote.
``On this issue, however, I have to say this - I am begging you to get the money out of this account before it's too late. . . by not doing this, the end results will be disastrous.''
Loayza also guaranteed clients a 12 percent return if they invested with him, records showed.
The scheme lasted from March 1989 to December 1993, court records show. Except for some early investors who recovered a small portion of their investments in the form of the bogus interest payments, Loayza's clients lost their money, according to court records.
KEYWORDS: FRAUD by CNB