News Release

NEWS RELEASE

United States Attorney’s Office Central District of California George S. Cardona Acting United States Attorney

For Immediate Distribution

September 28, 2009

Thom Mrozek, Public Affairs Officer (213) 894-6947 [email protected] www.usdoj.gov/usao/cac

OPERATOR OF MX FACTORS SENTENCED TO100 YEARS IN PRISON FOR PONZI SCHEME THAT COST VICTIMS $39 MILLION In what is believed to be the longest sentence ever handed down in a whitecollar case in this district, the mastermind of a Riverside-based Ponzi scheme that collected well over $60 million from hundreds of investors – and caused more than $39 million in losses – was sentenced today to 100 years in federal prison. Richard Monroe Harkless, 65, who lived in Riverside when he ran the scheme through a company he called MX Factors from 2000 until late 2003, was sentenced this morning by United States District Judge Virginia A. Phillips in federal court in Riverside. During today’s hearing, Judge Phillips said that Harkless cause “every kind of grief and loss imaginable” and that the defendant demonstrated that he “would commit his crimes all over again if given the chance.” In addition the prison term, Judge Phillips ordered Harkless to pay $35,479,310 in restitution to the approximately 600 victims who lost money as a result of the scam. Harkless was sentenced after being convicted in July of three counts of mail fraud, three counts of wire fraud and one count of money laundering. Harkless and a team of salespeople at MX Factors raised funds by telling potential investors that MX Factors provided short-term loans to commercial construction companies that had guaranteed, government-backed contracts. Harkless created the company, controlled its bank accounts, hired and paid agents to solicit investors and created MX Factors promotional literature. Investors were promised returns of up to 14 percent every two or three months, at which time investors could either receive their investments back or roll over their

investments into the next investment period. The vast majority of MX Factors investors were “reloaded,” meaning that they were convinced to invest money more than once. At trial, several victims testified that Harkless and his co-conspirators encouraged potential investors to try out the MX Factors program, investing in one 60- or 90-day cycle and then withdrawing their money to see if it worked. Once victims felt more comfortable with the program, Harkless and his co-conspirators encouraged them to invest even more and to get their families and friends to invest as well. As the scheme began to collapse, Harkless diverted millions of dollars of investor money to Belize and Mexico. In the final months of the scheme, once Harkless knew that he was under investigation by various state regulators, he accelerated his fundraising and accelerated the transfer of funds to his own accounts in Belize. During the scheme, the bulk of the money raised from investors was used to pay off earlier investors, to pay agent commissions, to fund Harkless’ crabbing business in Ensenada, Mexico and to pay for various personal expenses. Over the course of the scheme, approximately 600 victims invested and lost money with MX Factors. Harkless fled to Mexico shortly after the Ponzi scheme collapsed and federal authorities executed search warrants in February 2004. Harkless was arrested by special agents with IRS-Criminal Investigation two years ago when he traveled to Phoenix. At this summer’s trial, Harkless represented himself in court. Three of Harkless’ sales agents – Daniel Berardi, Thomas Hawkesworth and Randall Harding – pleaded guilty and received sentences of up to six years in federal prison. The investigation into MX Factors was conducted by IRS-Criminal Investigation, the United States Postal Inspection Service and the Federal Bureau of Investigation. CONTACT: Assistant United States Attorney Eric D. Vandevelde Major Frauds Section (213) 894-2576 Assistant United States Attorney Alexander A. Bustamante Major Frauds Section (213) 894-3176 Release No. 09-116