Former Insurance Agents Indicted In Massive Investment Fraud

Attorney General Spitzer announced today that he has obtained indictments against two Amherst men for defrauding some 45 Western New Yorkers -- many of them senior citizens -- out of their life savings.

Spitzer also announced that he has reached an agreement under which Metropolitan Life Insurance Company will voluntarily contribute $1.25 million to create a restitution fund for 28 of the victims who were solicited by the defendants while they worked for Met Life.

The case is one of the largest investment frauds in Western New York history. The amount of the fraud, which took place between 1993-98, totals $5 million. The victims on average lost $100,000 each.

Dennis McNerny, 53 of Williamsville, owner of World Wide Capital Funding (WWCF) and Michael Ferguson, 42 of East Amherst, were to be arraigned on a 35-count indictment this morning before State Supreme Court Justice Russell Buscaglia.

"These two men preyed on unsophisticated investors, many of them elderly, and turned what should have been the victims' golden years into a nightmare," said Spitzer. "We will vigorously prosecute the defendants to ensure that they pay for their crimes and all the anguish they've caused."

McNerney was a sales representative for Met Life in the Buffalo area from December of 1990 until September of 1995. He continued to recruit victims after he left the company. Ferguson was a Met Life agent from October of 1988 until June of 1999.

Met Life agreed to create the $1.25 million restitution fund after it was informed by the Attorney General that McNerney began clandestinely soliciting investors while he was employed by the company. Ferguson, also without Met Life's knowledge or permission, received commissions from McNerney for soliciting investors for him after McNerney left Met Life.

The $1.25 million will be distributed on a pro-rated basis to 28 of the defendants' victims and will equal approximately 90% of the monies they invested with WWCF while McNerney and Ferguson were with Met Life.

Spitzer commended Met Life for working with his office and helping to restore finances of victims.

The indictment alleges that McNerney and WWCF bought accounts receivable at a discount from companies in exchange for an up front fee. In order to purchase these accounts, McNerney allegedly raised capital by offering investors WWCF "joint venture agreements," which he represented as "fully secured," "insured," and "guaranteed."

In fact, Spitzer's investigation revealed that these deals were not fully secured, guaranteed or insured, but instead were extremely high-risk. WWCF would often invest in longshot start up companies, or firms with troubled financial histories.

Spitzer's office estimates that about 45 investors were convinced to invest most or all of their life savings and retirement annuities into these "low-risk, guaranteed" investments. In return they were paid on average 10% or 11% for their investments.

Many of the victims were elderly, unsophisticated investors looking for a conservative vehicle for their retirement funds that would generate a greater return than their bank accounts, but would be much safer than the stock market. For example, one 91 year old woman from Alden, NY, invested her life savings of $198,000 with WWCF.

It is alleged that McNerney raised over $5 million through his "joint venture agreements" with investors. He lost much of the money in his highly questionable investments.

"We want this case to serve as a warning to investors. Investors should do a thorough review of anyone or any company with which they're going to invest their hard earned monies. And if a deal sounds too good to be true, it probably is."

Individuals concerned about their investments with WWCF are encouraged to contact Attorney General Spitzer's Consumer Frauds Bureau in his Buffalo Regional Office at (716) 853-8404.

All charges in the case are to be considered accusations, and the defendants are presumed innocent until proven guilty.

The case is being handled by Assistant Attorney General Dennis Rosen, under the supervision Buffalo Regional Office Head Barbra Kavanaugh. They worked with Eric Dinallo, Chief of Spitzer's Investor Protection Bureau, and Janet Cohn, Chief of the Criminal Prosecutions Bureau.

RELEVANT CASE INFORMATION:

Dennis J. McNerney
DOB: 6/25/46
Address: 65 Old Orchard Lane, Williamsville, NY

Charged:

  • Grand Larceny in the Second Degree - 5 counts - C Felonies (each count is punishable up to 15 years in prison);
  • Grand Larceny in the Third Degree - 8 counts - D Felonies (each count up to 7 years in prison);
  • Forgery in the Second Degree - 1 count - D Felony (punishable up to 7 years in prison);
  • Fraud in the Sale of Securities - 13 counts - E Felonies (up to 4 years in prison); Scheme to Defraud - 1 count - E Felony (up to 4 years in prison);
  • Attempted Fraud in the Sale of Securities - 1 count - A Misdemeanor (up to 1 year in prison);
  • Attempted Grand Larceny - 1 count - A Misdemeanor (up to 1 year in prison); and
  • Unregistered Securities Broker-Dealer - 1 count - A Misdemeanor (up to 1 year in prison).

Michael R. Ferguson
DOB: 8/27/57
Address: 44 Wellington Drive, East Amherst, NY

Charged:

  • Scheme to Defraud in the First Degree - 1 count - E Felony (up to 4 years in prison); and
  • Prohibited Acts in the Sale of Securities - 4 counts - A Misdemeanors (up to 1 year in prison).

 

 

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