A Southern California investment adviser authorities believe bilked $814 million from thousands of clients in a nationwide scam was arrested early this morning at a Houston motel, an FBI spokesman said.
James Paul Lewis Jr., 57, was expected to appear before U.S. Magistrate Frances Stacy today. He was arrested without incident at a Houston motel sometime after midnight , said Bob Doguim, a Houston FBI spokesman.
Doguim said Lewis is accused of "stealing from Paul to pay Mary."
"That money was never invested in anything," he said. "All he was doing was finding others (investors). That is the money he used to show some kind of return."
When the FBI raided his office Dec. 22, Lewis was supposed to have $814 million on hand for the firm's clients, but bank accounts held about $2.3 million. Federal authorities have frozen those accounts.
The FBI and Securities and Exchange Commission allege Lewis fabricated more than $730 million in interest payments. Even accounting for the fictitious funds, Lewis still should have $75 million more than investigators can find, the SEC said. A temporary receiver appointed to find more assets put the shortfall at $100 million.
Speaking of nationwide scams, all retirement funding privatization schemes lead to stories just like this one. Which is not to say that all privatization advocates are crooks, but they are advocates of an inherently riskier system that allows for criminal negligence of the types we've seen in a number of mutual fund companies — thanks largely to the investigations of New York Attorney General Eliot Spitzer.
"Stealing from Paul to pay Mary" is Lewis's variation on the Republican theme of "stealing from working taxpayers to pay corporate donors."
James Paul Lewis Jr. was captured only because his namesake father did not have the foresight to fix the Supreme Court, get him appointed president of the United States, and turn his crimes into federal policy.