Man pleads guilty in $30 million fraud
James Lull of Kauai faces a maximum of 20 years in prison
A Kauai man who federal prosecutors say bilked investors here and on the mainland out of more than $30 million in a Ponzi scheme pleaded guilty to wire fraud yesterday in federal court.
James Lull, 59, faces a maximum 20-year prison term when he is sentenced in January.
Federal prosecutors say Lull used his position as Kauai branch manager of U.S. Financial Mortgage Corp. to access confidential financial information of clients to offer them supposed side deals and investment opportunities with guaranteed returns.
The fake investment opportunities included bridge loans and private mortgages. He told the clients other mortgage applicants needed short-term loans to qualify for a mortgage from U.S. Financial, according to federal court documents. He said the applicants were then charged high interest rates, points or fees payable in advance that would be passed onto the investors.
Other fake opportunities he sold to investors included a condominium/hotel conversion project here and financing of condominiums.
Instead of investing the money as promised, prosecutors say Lull used money from new investors to pay off earlier investors - fraud commonly known as a Ponzi scheme. Eventually, he tried to pay off investors by writing bad checks.
He filed for bankruptcy in December, listing most of the investors as creditors.
Lull pleaded guilty to committing wire fraud on four occasions listed in federal charging documents.
On or about Jan. 10, 2006, Lull persuaded a Hawaii resident to wire $630,000 from a bank in Nevada to an account in the Kauai Community Federal Credit Union to invest in a U.S. Financial client's property here.
Fifteen days later, Lull persuaded another investor to wire $1 million from a bank in Bermuda to his account at First Hawaiian Bank on Kauai to invest in short-term bridge loans. On March 2, 2006, Lull persuaded the same investor to transfer another $695,000 to his First Hawaiian account.
And April 26, he used his cell phone to appease an investor in Florida who had expressed concern about a $760,000 investment.