Federal prosecutors filed a 110-count felony indictment Thursday against Doris “Dee” Nelson, architect of an alleged international Ponzi scheme that netted $126 million to prop up payday lender Little Loan Shoppe.
Nelson asked for a federal public defender during an initial appearance in U.S. District Court on Thursday afternoon. U.S. Magistrate Judge Cynthia Imbrogno wanted to review financial disclosures before giving Nelson a taxpayer-funded defense attorney.
Nelson will remain in custody until a Monday bail hearing.
Criminal defense attorney Carl Oreskovich, who has been working on behalf of Nelson and sat in the audience section of the courtroom, declined to comment on the charges.
Nelson faces 71 counts of wire fraud, 22 counts of mail fraud and 17 counts of international money laundering.
Agents with the FBI and the Internal Revenue Service arrested Nelson Thursday morning – an action widely anticipated in the wake of a complicated business bankruptcy, a court-ordered financial examination that uncovered fraud, and a broad civil action brought against Nelson and others in September by the U.S. Securities and Exchange Commission.
Nelson on Wednesday asserted her Fifth Amendment right against self-incrimination in the SEC case.
The grand jury indictment unsealed Thursday accuses Nelson of building a network of 800 investors, many of whom bought promissory notes assuring them a 40 percent to 60 percent annual return.
While most of the money went into the business, Nelson is accused of using millions to fund home improvements, gambling jaunts to Las Vegas, shopping sprees, luxury sports cars and high salaries.
To meet the interest payment promises made to early investors, Nelson borrowed new money.
Nelson and her husband denied running a Ponzi scheme in a brief and tearful interview with The Spokesman-Review two months ago outside their home in Colbert, north of Spokane.
Nelson opened her first payday loan business 14 years ago near Vancouver, B.C. She moved to Spokane in 2001 as the business grew.
Prosecutors allege she lived an extravagant lifestyle with business funds.
The indictment alleges that Nelson paid herself millions of dollars and put personal expenses of $374,000 on company credit cards within two years. She bought a $127,000 motor home, paid $61,000 for a Chevy Corvette and $112,000 for a Mercedes Benz S550.
During a five-year run she spent $220,000 with clothier St. John Knits and another $217,000 at Nordstrom. Nelson also gambled away investor funds, including $400,000 at Las Vegas casinos including the Mirage, New York New York, Monte Carlo, Luxor and the Bellagio, the indictment says. Tens of thousands more were spent on luxury vacations and artwork.
Federal agents already seized an extensive jewelry collection 18 months ago.
Many of her investors, meanwhile, lost everything.
“Their stories are just terrible. Heartbreaking,” said Sandpoint attorney Ford Elsaesser, who represents more than 360 investors. “Some of these folks lost everything and their hardship is real.”
The investors are from across the United States and Canada. Nelson also solicited money from investors in Mexico and Spain.
Many were members of the Jehovah’s Witnesses denomination.
As Nelson defends herself against lawsuits and criminal charges, investors must pin their hopes for any financial recovery on the bankruptcy process.
A trustee is unraveling the finances of Little Loan Shoppe and has even filed claw-back lawsuits against investors – essentially suing them to return payments from Little Loan Shoppe in an effort to make an equitable disbursement.
It may be the best chance at any recovery since the business and its remaining assets are worth little.