The former chief executive officer of now defunct Hanover Corporation was sentenced this month to 14 years in prison.
Terry Kretz, 61, of Gallatin, Tennessee, was also ordered to pay $14.8 million in restitution for orchestrating an $18 million Ponzi scheme.
Kretz had offered Hanover clients promissory notes bearing high interest rates. But the company paid off some of the notes with money raised from later investors.
From 2004 to 2006, Kretz told clients that their money would be used for investing in stock options and startup companies.
“In fact, however, more than half of the money invested in Hanover went to repay earlier investors, to pay Hanover’s salaries and overhead and to fund personal luxuries, including Kretz’s purchase of a $600,000 residential building lot, a $176,000 contribution to a church, and golf memberships,” the DOJ said.
Kretz pleaded guilty in January this year to securities fraud, mail fraud, money laundering, and conspiracy to commit securities fraud, wire fraud, and mail fraud.
He and other Hanover employees gave Cornerstone Church in Madison, Tennessee tithes of at least $176,000 during the Ponzi scheme.
Hanover’s bankruptcy trustee sued to get the money back for defrauded investors and other creditors.
The mega-church agreed in 2009 to pay $50,000 to settle the matter.
Kretz’s co-conspirators included Daryl Bornstein, a Hanover salesman, and Robert Haley, Hanover’s chief financial officer.
They pleaded guilty earlier this year to similar charges and are scheduled to be sentenced on August 25.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.