Ponzi Scheme Operator Who Bilked Seniors Sentenced In Federal Court

RIVERSIDE COUNTY, CA — A Moreno Valley man was sentenced to more than 15 years in federal prison for running a Ponzi scheme that lasted nearly 20 years and bilked more than $24 million from at least 200 investors, many of them elderly, authorities announced this week.

Paul Horton Smith Sr., 61, of Moreno Valley was sentenced Monday by U.S. District Judge Jesus G. Bernal, who also ordered him to pay $13,331,505 in restitution.

Smith pleaded guilty on January 8 to one count of wire fraud.

According to federal prosecutors, Smith's scheme involved his operation of Riverside-based companies named Northstar Communications LLC, Planning Services Inc., and eGate LLC.

From July 2000 to May 2020, Smith convinced investors — who often were elderly or retired — to put their money in something he called "Northstar."

Smith falsely claimed that Northstar was an annuity or an investment like an annuity. Prosecutors said another ruse Smith used was claiming that Northstar invested in real estate or followed the stock market.

Smith promised the investments would generate a fixed rate of return and were safe.

The money was never invested, however. Instead, Smith deposited all investor funds into a non-interest-bearing checking account. He used some of the money to pay some investors, but the shell game was not sustainable.

For example, in April 2019, Smith got one victim to invest $400,000. The money came from a life insurance policy that was paid after the victim’s spouse died, according to prosecutors.

Smith promised he would place the $400,000 in a safe investment with a 5% rate of return.

Instead, the money was used to pay other investors who were feeling cheated.

In an effort to conceal the criminal activity, Smith made 11 payments to the $400,000 investor that totaled $163,324, according to prosecutors.

"This defendant’s greed and deceit caused major losses for his victims, who discovered that the supposed gains for their retirement were nothing more than a lie," said U.S. Attorney Martin Estrada.

Estrada encouraged the public "to use caution and skepticism" with regard to any investments, especially those that seem too good to be true.

"Paul Smith's clients trusted him. Smith knew that and used it to his advantage, selling them on a bogus investment opportunity and pocketing those funds," said Akil Davis, assistant director in charge of the FBI Los Angeles Field Office. "The fact that the bulk of his investors were seniors, men and women alike, and in various stages of vulnerability, makes this case all the more heartbreaking."