Insurance Commissioner Dave Jones Announces Arrest of Southern CA Agents in Million Dollar Ponzi Scheme
News: 2012 Press Release
Insurance Commissioner Dave Jones today announced that Edwin Salazar, 34, of Downey, and Michael Zuniga, 41, of Fullerton have each been arrested on 57 felony counts for defrauding Latino consumers, many of them senior citizens, in a $1.3 million Ponzi scheme. Bail was originally set at $1.3 million each, but has since been reduced to $100,000 for Salazar and $50,000 for Zuniga.
"These agents allegedly conspired to rip-off trusting members of their own community," said Commissioner Jones. "Preying on senior citizens for financial gain is deplorable and it will not go unpunished."
"The defendants defrauded investors with promises of guaranteed returns and even convinced some victims to refinance their own homes in order to participate in the scheme," said Attorney General Kamala D. Harris. "What victims thought was a resourceful real estate investment only brought them losses and heartbreak."
According to a joint California Department of Insurance (CDI) and California Department of Justice (DOJ) investigation, Zuniga, a currently licensed insurance agent, and Salazar, a former insurance agent, allegedly owned and conducted business as the Omega Investment Group (Omega), an unlicensed entity located in Downey, California. The investigation revealed crimes of a Ponzi scheme aimed at Latinos, often targeting them right in their own homes. The 57 count complaint includes violations of the California Corporations Code for Securities Fraud, and violations of the Penal Code including Grand Theft, Elder Abuse, Burglary, and Conspiracy. There are 18 victims throughout Los Angeles County.
Beginning in January 2007 and continuing through December 2008, the suspects issued over $1.3 million in fraudulent securities, in the form of one-year promissory notes, purportedly to invest in foreclosed real estate, to individuals in Southern California they befriended through their insurance business.
The suspects entered the homes of the victims, and in some cases, assisted them in refinancing their homes in order to invest in their "risk-free" scheme. They fraudulently represented that Omega was a profitable business that for three years had bought and sold real estate that was in foreclosure. Omega claimed that these types of investments were so successful; they guaranteed a 15 percent secured interest annually to those who invested.
The investigation revealed, however, that property and bank records had shown that Omega had not purchased or sold any property for three years prior to January 2007. A further review of Omega's bank records revealed that it was never a profitable business and did not secure investments with property or any other assets as promised. Instead, the investigation revealed that Omega's owners had diverted $663,000, from the $1.3 million collected for the purchase of real estate to an undisclosed entity known as Homes Brought Current, and then used these fraudulently diverted funds for their personal benefit. Additionally, in true Ponzi fashion, payments Omega made to newer investors were from prior investor funds, rather than business profit.
Administrative action is currently pending against Zuniga's insurance license. Salazar's license expired in 2009.
This case was investigated by CDI's Los Angeles Investigation Division and DOJ's Attorney General's Office, Special Crimes Unit. The case is being prosecuted by the California Attorney General's Office.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2013 the California Department of Insurance received more than 170,000 calls from consumers and helped recover over $63 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.