Wedding Singer Falls Flat in $5 Million Fraud
NEW YORK (MainStreet) It's the last dance for a wedding singer and former investment advisor in Oklahoma, charged with securities fraud in a long-running Ponzi scheme. Larry J. Dearman, Sr. and an associate, Marya Gray, raised at least $4.7 million from more than 30 investors in a nearly four-year fraud. The pair spent most of the money on gambling, personal expenses, payments to other businesses controlled by Gray, and Ponzi payments to some investors. In addition, Dearman also ripped off roughly $700,000 from additional clients in other schemes.
The SEC complaint says that Dearman and Gray were able to lure victims to the swindles in part because "many of them had known him and his family since childhood, thought of him as an active member of their church, and knew him as a popular local wedding singer."
The complaint, filed in the U.S. District Court in Tulsa alleges that Dearman invested his clients in various businesses that Gray owned in Bartlesville, Okla., including an Internet service provider named Bartnet Wireless Internet, Inc.
Dearman recommended Bartnet as an investment to approximately 17 clients, raising more than $1.7 million through the sale of promissory notes, telling clients Bartnet was a growing Internet company that needed funds to purchase transmission towers and equipment. He assured them that the notes bore little or no risk, but provided clients virtually no other information about the investment. The SEC says that Bartnet has never earned a profit.
The notes typically bore three to five year terms with up to 10% interest rates. Gray paid Dearman a 3-5% fee on the face value of each note he sold.
The SEC investigation revealed that on several occasions Dearman learned that Bartnet investors had not received scheduled interest payments, prompting him and Gray to "scramble to find funds to make the payments." In some cases, Gray used funds from new investors to pay earlier investors. In others, Dearman paid interest from his own accounts to stay ahead of revealing a fraud.
At one point, things were going so badly that in May 2011, Gray emailed Dearman to "make something up" to explain why Bartnet had not paid interest to an investor.
--Written by Hal M. Bundrick for MainStreet