Recovering Losses caused by Investment Misconduct

Two Defendants Convicted in Multi-Million-Dollar Investment Scheme

A jury found two perpetrators of a multi-million-dollar investment scheme guilty last week, according to an Oct. 22 article by The Leaf-Chronicle. Kenneth Kennedy of Clarksville, TN and Ann Scarborough of Hopkinsville, KY were convicted for their roles in soliciting investments in real estate properties and development projects that, according to authorities and evidence presented in court, never existed.

Authorities claim that, from April 2005 to mid-2008, the two defendants (along with two other defendants: Sheila Kennedy and Philip Russell) solicited investors in fraudulent real estate investments, which included: a strip mall in Las Vegas, land for a Bonnaroo music festival, a medical center in Arizona, and a Disney theme park in Tennessee. As part of the deal, the defendants issued each investor a "promissory note" that guaranteed the principal investment and promised a return of up to five times the initial investment in just a few months, according to the article.

When the "promissory notes" became due, the defendants made a number of claims to investors about the delays in repayment. According to the article, these claims included: that the funds were "tied up" with the IRS, that the funds were affected by banking regulations tied to the Patriot Act and the terrorist problems of 9/11, and that Sheila Kennedy was awaiting the release of a large family inheritance from which the notes would be paid. Authorities state that additional investors were even solicited to help "release" the inheritance from the Office of Comptroller of Currency.

After a two-week trial, Kennedy was convicted on three counts of wire fraud and five counts of mail fraud. Scarborough was convicted on seven counts of wire fraud and one count of money laundering. Sentencing for the two defendants is scheduled for March 4, 2011.

Sheila Kennedy pled guilty on March 24, 2009 to one count of wire fraud, one count of mail fraud, and two counts of money laundering, according to a March 27, 2009 press release by the Assistant U.S. Attorney's office. As reported in the press release, "Kennedy admitted that, contrary to her representations to the investors, she never intended to invest the funds in any real estate and, in fact, no such real estate opportunities ever existed. She further admitted that, instead of investing the money she received from investors, she used it for her own and others' benefit." She also admitted to lying to investors about her impending "extremely large inheritance." Sheila Kennedy's sentencing is scheduled for Nov. 12.

The final defendant, Philip Russell, was scheduled to be in this month's trial with Kenneth Kennedy and Ann Scarborough, according to The Leaf-Chronicle article. However, on the first day of the trial (Oct. 5) Russell failed to appear in court. At this time, his whereabouts are unknown, and he is considered a fugitive. A warrant has been issued for his arrest.

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