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Vaughan Pleads Guilty; Headed to Prison

Realtor Doug Vaughan, left, enters U.S. Bankruptcy Court in Downtown Albuquerque with his own security personnel in March 2010.
Realtor Doug Vaughan, left, enters U.S. Bankruptcy Court in Downtown Albuquerque with his own security personnel in March 2010.

SANTA FE – Doug Vaughan, wearing a pinstriped navy-blue suit, white shirt and plain navy-blue tie, was all business Wednesday as he pleaded guilty to running “the largest Ponzi scheme in New Mexico history.”

In a clear, steady voice he answered a series of questions put to him by U.S. District Chief Judge Bruce D. Black regarding his change of plea from the original not guilty to guilty. When asked whether he had committed the two counts of fraud in his plea agreement, Vaughan answered, “Yes, your honor.”

Flanked by his two attorneys, Vaughan set the wheels in motion to spend from 10 to 20 years in prison, but has yet to offer a public apology to the 600 investors whom he now admits ripping off.

Timeline on the Doug Vaughan saga
September 2009 – The New Mexico Securities Division launches a criminal investigation into Vaughan’s sale of unregistered promissory notes after receiving complaints from investors.
Feb. 22, 2010 – Vaughan and Vaughan Company Realtors file separate but related petitions for U.S. Bankruptcy Court protection.
Feb. 25 – The revelation that Vaughan was under investigation for running a possible Ponzi scheme surfaces when agents for the New Mexico Securities Division arrest him for driving with a revoked license.
March 23 – The U.S. Securities and Exchange Commission files a civil complaint in U.S. District Court with the first official allegation that Vaughan was operating a Ponzi scheme.
April 26 – Vaughan Company Realtors, once reputed to be the largest independent residential real estate brokerage in the metro area, shuts down.
Feb. 25, 2011 – Vaughan is arrested in a North Valley home in connection with a 30-count criminal indictment and jailed in the Regional Correctional Center in Downtown Albuquerque.
Feb. 28 – Vaughan is released to the custody of his girlfriend without having to put up any cash for his bond.
Dec. 21 – Vaughan pleads guilty to one count each of wire fraud and mail fraud in U.S. District Court in connection with running a Ponzi scheme.

The one-time pillar of the business community, whose lavish lifestyle was well-known, is looking at a stark financial future once he gets out of jail. In his plea agreement, he agrees to pay restitution to his victims in amounts to be determined.

Vaughan even admits to the amount of his fraud, which has been officially calculated at $74,745,723.93.

The plea agreement whittles down the original 30-count criminal indictment, which carried a 45-year prison term, to one count each of wire and mail fraud with a 20-year prison sentence.

Assistant U.S. Attorney Greg Fouratt, who prosecuted the case with associate John C. Anderson, told the court an agreement has been reached with Vaughan’s attorneys to recommend a sentence of 10 to 12 years, meaning Vaughan would get out of prison at either age 74 or 76.

Judge Black will determine Vaughan’s exact time in prison at a sentencing hearing that has yet to be scheduled.

U.S. Attorney Kenneth J. Gonzales, who attended Wednesday’s plea hearing, acknowledged afterward that the plea agreement benefited Vaughan but added, “I would hope people see this as a benefit to the public at large.”

Since his indictment in late February, Vaughan and his attorneys Amy Sirignano and Trace Rabern had tried to devise a defense against a mountain of evidence that included more than 40,000 documents, computer hard drives and the testimony of victims and former associates.

Within the past month, the defense team’s filing of one motion after another, accumulating to hundreds of pages of legal documents and supporting material, ceased.

The motions ceased after the Journal reported that Vaughan’s former bookkeeper, Martha Runkle, had reached her own plea deal with prosecutors and was set to testify at Vaughan’s trial in May. The likelihood of Runkle testifying against Vaughan was first reported in the Journal in July 2010.

Sirignano declined to talk about the case with the Journal after Wednesday’s hearing. Gonzales wouldn’t speculate on whether the prospect of Runkle’s testimony at trial was the knockout blow to Vaughan’s defense.

“There’s lots of very strong evidence that we have beyond cooperative testimony,” he said.

The investigation into Vaughan’s activities started in September 2009 after the New Mexico Securities Division received complaints from investors who weren’t getting paid the promised interest payments on promissory notes that Vaughan and his associates had sold them.

Investors loaned money to Vaughan in exchange for promissory notes that carried high interest rates. Their loans were supposed to be used for real estate investments that were never made.

Evidence was mounting that Vaughan had been running a type of investment swindle called a Ponzi scheme by the time he and his flagship real estate brokerage, Vaughan Company Realtors, filed for U.S. Bankruptcy Court protection in February 2010.

The bankruptcies were triggered by Vaughan’s inability to attract enough new investors in his promissory notes to pay fake profits to his earlier investors, which is the essence of a Ponzi scheme. Vaughan’s scheme had grown big enough to require annual payments of about $12 million in fake profits.

While the criminal investigation continued, the U.S. Securities and Exchange Commission filed a civil complaint against Vaughan and his company in March 2010. The complaint, which was the first formal action alleging a Ponzi scheme, barred him from raising any more money from investors.

Vaughan’s businesses were raided in April 2010, resulting in major hauls of documents and computer hard drives. The investigation had grown to include the FBI, U.S. Postal Inspection Service, Secret Service and eventually the U.S. Attorney’s Office.

The investigation led to the grand jury indictment and Vaughan’s arrest. Vaughan spent a weekend at the Regional Correctional Center in Downtown Albuquerque before being released to the custody of his girlfriend on a bond that required no upfront cash.

FBI Special Agent in Charge Carol K.O. Lee said in a statement that Vaughan’s plea was the result of the hard work and dedication of the FBI special agents and U.S. Attorney’s Office prosecutors “to bring to justice the individual responsible for the largest Ponzi scheme in New Mexico history.”

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