Investors Might Have To Pay For Ponzi Scheme Investors Who Got Some Cash May Have To Pay Money To Those Who Lost Investments

Beneficiaries of a fraudulent investment scheme that collapsed in 1996 could be forced to pay as much as $2 million in U.S. Bankruptcy Court.

Dan O’Rourke, trustee for D.L. Ward & Associates Inc., has filed complaints against dozens of investors who received payments from the Spokane company shortly before it filed bankruptcy.

Meanwhile, the U.S Attorney’s Office is close to obtaining indictments in the case.

The investor funds, if recovered, would be used to pay off some of the $10.8 million in claims against Ward. Many of those named in the six trustee complaints are among those who filed claims.

D.L. Ward was founded by Donald and Loletta Ward in 1982. The company used investor funds to buy receivables at a discount. Profits were split as the accounts were repaid.

The business is called factoring.

In a January 1997 Bankruptcy Court hearing, attorney Tony Grabicki said the company operated legitimately until the late 1980s, when some accounts soured and there wasn’t enough cash to repay investors.

Ward began transferring money among accounts, he said. What had been a solid business became an illegal Ponzi scheme in which money from new investors are used to pay those who invested earlier.

By 1992, Ward was doing no factoring whatsoever. Don Ward died the following year.

In her own tearful testimony, Loletta Ward said she kept the business going because she did not want to shut down what her husband had started.

Other investments failed to reverse the company’s fortunes, she said, but new funds continued to pour in, attracted by quarterly statements that showed returns as high as 30 percent.

Ward, who paid herself $70,000 a year, took in $1.8 million in 1996 alone.

But by mid-year, investors said, payments faltered, then stopped. The company, with virtually no assets, filed for liquidation.

Trustees can sue for the return of any money paid to investors or anyone else within 90 days of the bankruptcy filing.

Attorney John Campbell, who helped the recovery lawsuits, said the total amount sought probably falls short of $2 million because some claims overlap.

Ward itself had almost no assets, he said.

A spokesman for the U.S. Attorney’s Office said the total amount lost by investors will be about $4 million. But that figure, he added, does not include taxes investors paid on paper profits dating to 1991.

Indictments on mail fraud are expected next month, he said.