Two North Texas men who defrauded at least 77 investors of more than $6.4 million after their business plan cratered in 2011 will be going to a federal prison.
Craig Allen Otteson, 65, of McKinney and Jay Bruce Heimburger, 59, of Dallas each pleaded guilty to one count of mail fraud, according to a news release from the U.S. attorney’s office. Otteson was sentenced to more than 10 years and Heimburger received a sentence of more than eight years. Each man was ordered to pay more than $4.7 million in restitution.
A co-defendant in the case, Christopher Arnold Jiongo, 57, of Houston, pleaded guilty to his role and is scheduled to be sentenced Nov. 21.
Otteson, Heimburger and Jiongo each owned separate companies they used to defraud investors and later lied to a state regulating agency, according to a news release from the U.S. attorney’s office.
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Sometime in the summer of 2011, Jiongo, Otteson and Heimburger all realized that their original business plan was not working out as planned and that they therefore could not honor the original promises they made to investors, according to a federal indictment.
Rather than tell investors of the changed circumstances caused by their failed business plan, Jiongo, Otteson and Heimburger chose to lie and failed to inform investors that 100 percent of all the investment funds collected would not be secured by cash or the diamond inventory of Worldwide Diamond, where Heimburger was the principal partner.
Heimburger was also director of JBH Securities, which was primarily involved in the business of providing investment advice. Several other companies providing investment advice were also established and affiliated with this scheme, court documents stated.
Worldwide Diamond was primarily involved in the business of buying and reselling diamonds on the international market. The conspirators discovered they were unable to purchase and resell diamonds as they planned. On Oct. 1, 2013, Worldwide Diamond filed for bankruptcy in the Northern District of Texas.
The conspirators used investor funds, loans and solicited money from new investors to keep the fraudulent business afloat, and were taken advantage of themselves after giving more than $1.4 million to a third party for gold dust or diamonds that were never delivered, court documents said.
The conspirators eventually reached a point where they could not meet all their obligations and were indicted, court documents showed.