An Ohio investment advisor was convicted for stealing more than $9.3 million from victims during the course of a multiyear Ponzi scheme, according to the Justice Department.
Raymond A. Erker, a 50-year-old former advisor from Avon, Ohio, was convicted this week following a seven-day trial in Cleveland. During the course of the investigation, it was revealed that one of his alleged victims, a former prosecutor and judge, wore a hidden wire in order to tape a confession from the advisor, according to local outlets.
Previously, Erker was a state-registered rep, though the Ohio Division of Securities revoked his license in 2012 after he had “not disclosed material changes and disclosable matters” on certain documents, showing a “lack of good business repute,” according to Erker’s AdviserInfo page. Previously, Erker worked for Merrill Lynch and had a seven-year stint with LPL, before owning and operating SageGuard Wealth Management (among a number of SageGuard entities) until 2019.
According to the DOJ’s indictment, Erker, as well as co-defendants Kevin Krantz and Tara Brunst, began the scheme that affected at least 54 investors in January 2013 (both Krantz and Brunst previously pleaded guilty). The trio solicited clients to invest in the companies GenSource and Provident, assuring investors that they were purchasing annuities and senior secured notes “with no exposure to risk of loss and with guaranteed rates of return.” They said the proceeds would be used for safe investments resulting in guaranteed lifetime income payments.
But neither of the companies had the authority to issue annuities, and the notes Provident issued to clients were not secured by any real assets; according to the indictment, Erker, Krantz and Brunst instead steered investors’ funds toward Erker’s SageGuard entities, Erker’s personal bank accounts and to pay previous investors in a Ponzi-like fashion. The trio also didn’t tell investors they had ownership interests in both GenSource and Provident, according to the indictment.
To hide evidence of the scheme, Erker and his co-conspirators set up fronts in Nevada and Delaware, employed call centers, and created fake materials (including brochures and websites) as well as fake account balances for clients. To keep up the charade, they communicated with victims through in-person meetings, phone calls, mail and emails, according to the DOJ.
One of these victims was Paulette Lilly, a former judge in Lorain County, Ohio, according to The Chronicle-Telegram. Lilly had served as a judge for 12 years, and previously worked as an assistant Lorain County prosecutor for six years. She’s currently chief assistant criminal prosecutor in the Erie County Prosecutor’s Office.
Lilly previously represented Erker in a divorce case before investing (and losing) about $200,000 in the Ponzi scheme, according to reporting from Cleveland.com. In Nov. 2018, Lilly agreed to work with police and wore a listening device when meeting Erker at a restaurant, in which Erker admitted his role, according to prosecutors.
According to Cleveland.com, in a tape of the meeting played during the trial, Erker told Lilly that he had “f*cked up” and that she had “every right to sue the sh*t out of me, throw me in prison.” Edwin Vargas, Erker’s attorney during the trial, said that while Erker failed his clients, he never intended to defraud them. When responding to a WealthManagement.com request for comment, Vargas said the jury had not reached a unanimous consensus as of lunchtime yesterday, but was given further instructions by the judge and eventually returned a guilty verdict.
"You're disappointed, but we've got to get ready for sentencing," Vargas said about the decision. "That's the next task in front of us."
Other alleged victims have come forward in recent years, with 72-year-old Margaret Whelan telling Cleveland 19 News in 2020 that Erker had stolen money she’d raised over a career as a nurse spanning nearly four decades.
Krantz and Brunst are still awaiting sentencing after pleading guilty, while Erker is scheduled to be sentenced on July 7. He faces an estimated sentence ranging between 27 and nearly 34 years in prison, though the sentencing judge will have the final say on the outcome.