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June 6, 2003
The United States Attorney's Office for the Northern District of California announced that Sherman S. Smith of Napa, California, pled guilty today to securities fraud in violation of 15 U.S.C. §§ 78j(b), 78ff; 17 C.F.R. § 240.10b-5 in connection with his fraudulent handling of approximately $1.77 million of an investor's inheritance funds. He also agreed to sell or forfeit a home he owns in Kentucky in order to help make restitution.
Mr. Smith, 57, was indicted by a federal Grand Jury on September 5, 2002 . He was charged with one count of wire fraud, 17 counts of mail fraud, one count of securities fraud and six counts of money laundering. The Indictment also sought the forfeiture of Mr. Smith's Kentucky home.
In pleading guilty, Mr. Smith admitted that he defrauded Anita Walters of Florida by causing her to give him money for investments in stock and securities he promised to make that he said would earn 12 percent interest. Mr. Smith later sent false account statements and stock certificates to Ms. Walters to make it appear that he had invested her money in a church consulting business he controlled, Donne Corporation. Mr. Smith admitted that when he sent the Donne stock certificates, Donne was losing money and he had already spent most of Ms. Walters' money for his own benefit.
As part of his plea, Mr. Smith also agreed to make restitution to all of the other Donne investors and other clients of his former investment advising business, SSS&A.
The sentencing of Mr. Smith is scheduled for October 31, 2003 at 11:00 a.m. before Judge Illston in San Francisco. The maximum statutory penalty for each count in violation of 15 U.S.C. §§ 78j(b), 78ff; 17 C.F.R. § 240.10b-5 is 10 years imprisonment and a fine of $250,000, plus restitution. However, the actual sentence will be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed in the discretion of the Court.
The prosecution is the result of a joint investigation by agents of the Federal Bureau of Investigation and the Securities and Exchange Commission. Jeffrey L. Bornstein is the Assistant U.S. Attorney who prosecuted the case with the assistance of Lori Lucchetti, legal technician.
A copy of this press release may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can. Related court documents and information may be found on the District Court website at www.cand.uscourts.gov or on http://pacer.cand.uscourts/gov.
All press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415)436-7181.
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