A California man was sentenced in South Carolina last week to 10 years in prison for his role as the ringleader of a nationwide Ponzi scheme that exploited military veterans and retirees.
“Even though the transactions were “sales,” they were actually loans with annual interest rates of as much as 240%.”
Scott Kohn, 68, of Newport, California, ran a corporation called Future Income Payments LLC (FIP), formerly known as Pensions, Annuities, and Settlements LLC. From April 2011 until April 2018, Kohn and his co-conspirators used FIP as a vehicle for a nationwide Ponzi scheme, according to the Department of Justice.
Kohn and his co-conspirators contacted retirees experiencing financial distress, most of whom were military veterans, by offering an upfront lump-sum payment in exchange for an assignment of the rights to their monthly pensions and disability payments.
Even though the transactions were “sales,” they were actually loans with annual interest rates of as much as 240%.
Kohn—working through a network of hundreds of financial advisors and insurance agents nationwide—then solicited thousands of seniors to purchase FIP’s “structured cash flows,” which were the pensioners’ monthly pension payments.
Kohn and his co-conspirators induced these seniors to invest their retirement savings with FIP by making false assurances of a significant rate of return on their investment, concealing the usurious nature of FIP’s transactions with the pensioners and lying about the financial health of the corporation.
During the seven years the scheme operated, Kohn drew upon FIP funds to live a lavish lifestyle. When the Ponzi scheme ultimately collapsed, Kohn and his co-conspirators had caused more than $310 million in losses to more than 2,500 retirees and had placed more than 13,000 veterans into exploitative loans.
“The elaborate Ponzi scheme orchestrated by Kohn and his co-conspirators preyed upon both military veterans experiencing financial hardship and retirees hoping to protect their life savings,” Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s Civil Division, said in a statement. “The department is committed to protecting our military community and America’s seniors from fraud and abuse.”
Four other defendants previously pleaded guilty to conspiracy for their roles in this scheme. Kraig S. Aiken, 53, of Rancho Santa Margarita, California, pleaded guilty on Nov. 20, 2019. David N. Kenneally, 59, of Greenville, South Carolina, pleaded guilty on July 22, 2020. Melanie Jo Schulze-Miller, 40, of Peoria, Arizona, pleaded guilty on Dec.11, 2020. Joseph P. Hipp, 52, of St. Louis, Missouri, pleaded guilty on Dec.21, 2021. Sentencing hearings have not yet been set for these co-conspirators.