[Editor's note: The following report is based on a press release from the U.S. Attorney's office.]
David B. Fein, United States Attorney for the District of Connecticut, announced that Garrett L. Denniston, 62, formerly of Sandy Hook, Conn., and Boothbay Harbor, Maine, waived his right to indictment and pleaded guilty today before United States District Judge Janet Bond Arterton in New Haven to one count of wire fraud stemming from his operation of a multimillion dollar investment fraud scheme.
“This defendant operated an investment fraud scheme by representing to investors that he ran a successful investment business and could offer them a special ‘friends and family’ deal investing in companies for a guaranteed return of their investment plus a high rate of interest,” stated U.S. Attorney Fein. “I commend the FBI and the Greenwich Police Department for shutting down this scheme, and I urge the investing public to be extremely skeptical of any promises of risk-free investments and guaranteed returns.”
According to court documents and statements made in court, from approximately 2005 to 2012, Denniston defrauded individuals through a Connecticut company called ConsensusOne, LLC, by holding himself out to potential investors as operating a successful investment business specializing in mergers and acquisitions, and by convincing individuals to make investments in phony stock options or other similarly non-existent investments.
During the scheme, Denniston told investors that their money would be used to invest in one of the companies that he or his investment business owned and, specifically, that their money would be used to purchase stock options (or promissory notes) convertible into the company’s stock at a substantial discount to the value of the stock on the date of conversion. Denniston also told investors that the companies were on the verge of being sold or had already been sold in deals that were closing on an accelerated schedule.
He further indicated that an investment was refundable if the deal did not close, and that he and his company would guarantee the investments, so that the investments were risk-free. Denniston also told people that the investment was being offered to them as part of a “friends and family” deal pursuant to which he had access to a limited pool of stock options that would yield a guaranteed return on investment.
In reality, Denniston did not invest his victims’ funds in stock options or in any other legitimate investments. Rather, he spent the money on his own personal and business expenses, as well as for other unauthorized uses.
Denniston used some money for gifts to family members, and spent additional amounts on airfare, hotels, restaurants, country club memberships, golf and ski outings, mortgage and rent payments, cable and telephone bills, furniture, home renovation costs, and other personal living expenses.
Through this investment scheme, Denniston defrauded more than 50 victims out of a total of more than $2.5 million. Individual investment amounts ranged from a few thousand dollars to nearly $500,000
Denniston concealed his fraudulent activities by preparing fake legal documents and forging signatures of those documents. At times, he also used one investor’s funds to repay other investors.
Denniston has been detained since .
Judge Arterton has scheduled sentencing for June 11, 2013, at which time Denniston faces a maximum term of imprisonment of 20 years.
This matter is being investigated by the Federal Bureau of Investigation and the Connecticut Securities, Commodities and Investor Fraud Task Force, notably the Greenwich Police Department. The case is being prosecuted by Special Assistant United States Attorney Kerry L. Quinn.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.
To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.