Two men will do prison time in what prosecutors called one of the largest real estate Ponzi schemes in California history, with investor losses estimated at $250 million. James Stanley Koenig, 60, could face 50 years in prison after being convicted this week in Shasta County Superior Court on 35 of 36 felony counts and two counts of first-degree burglary. Gary Armitage, 62, was previously sentenced to 10 years in prison after pleading guilty.
Prosecutors said that beginning in 1997, Koenig and Armitage “created a number of companies and affiliates for the purpose of obtaining, financing, leasing, managing and disposing of property,” and another firm, ePlanning Securities Inc., a broker-dealer that was used to sell the securities that were necessary to obtain the properties.
Later, Koenig and Armitage specialized in obtaining residential care facilities and selling undivided tenant-in-common interest in the properties.
“Early failures of a number of the companies were covered by related entities to continue investor confidence in the continuing offered investment products,” prosecutors said. “The debt load from these past failures and the overvaluation of offered properties created a situation where new investors were needed to fund established investors. To create new funding the companies started purchasing their own property back from original investors and resold it to new investors at substantially increased values,” until the scheme collapsed in June 2008.