As state lawmakers are considering a proposal which would reduce certain crimes from felonies to misdemeanors, an Orange County man was convicted this week of stealing the life savings of numerous unsuspecting seniors in a $11 million "Ponzi" scheme. Jeffrey Gordon Butler, 51, San Juan Capistrano, was found guilty by a jury of 693 felony counts for making untrue statements of material fact in the offer and sale of securities, the offer and sale of unqualified securities, theft from elderly persons, using a scheme to defraud in the sale of a security, and filing false tax returns.
"Sacramento lawmakers are currently considering reducing many felonies, including those for which the Butlers have been convicted, into misdemeanors. If they go through with this dangerous proposal, we may have to retroactively dismiss many of the counts," stated District Attorney Tony Rackauckas. "The California Legislature and the Governor are considering this foolish plan, which could decriminalize these types of fraud because these cases often require the use of search warrants and take years to investigate."
Reducing these crimes to misdemeanors automatically reduces the applicable statute of limitations for filing charges to one year from the date of the offense. This will make it even more difficult, if not impossible, to effectively investigate and successfully prosecute these offenses. Compounding this is the fact that, with few exceptions, search warrants may only be issued when there is evidence of a felony. Law enforcement will be unable to get authorization from a magistrate to search a suspect’s property and seize the elicit evidence. Search warrants are vital and extensively used in the investigation of fraud cases.
“In practice, by reducing crimes involving insurance fraud, mortgage fraud, automobile thefts and chop shops, foreign money laundering, sales of securities and tax fraud to misdemeanors, lawmakers will be decriminalizing and doing away with the prosecution of these crimes,” stated Rackauckas.
“The consequences of this will be unavoidable. Given the size and scope of large, complex fraud cases, and with no ability to search for and seize evidence, there is simply no reasonable expectation that such crimes could be discovered, investigated and prosecuted within a 1-year period. Conspiracies to commit fraud will be even more difficult to prove as the defining characteristic of such crimes is secrecy,” stated District Attorney Tony Rackauckas.
The defendant's wife, Peggy Warmath Butler, 49, San Juan Capistrano, was also convicted of four felony counts of filing false tax returns and excessive taking sentencing enhancements. Jeffrey Butler now faces a maximum sentence of over 300 years in state prison. Peggy Butler faces a maximum sentence of 10 years in state prison. Sentencing for Jeffrey and Peggy Butler is scheduled for Sept. 18, 2009, in Department C-41, Central Justice Center, Santa Ana.
A jury of 12 people and eight alternates was selected from a pool of 2,200 prospective jurors. The jury trial, which began Nov. 7, 2008, lasted almost eight months and included testimony from 92 victims, including 82 elderly victims, and video testimony from 49 victims, which was recorded prior to trial to ensure that the victim's testimony was preserved in the event that they were unavailable to testify at trial due to death or illness. At least six victims died during the course of the trial and 52 victims died prior to the case being brought before the jury.
Jeffrey Butler sold more than 300 promissory notes or stocks without obtaining a license for the notes from the California Department of Corporations, as required by law. The majority of the victims involved in this case were over 65 years old and unaware of the risks of their investments. Several of the victims lost their life savings and many died waiting for the jury trial.
Jeffrey Butler first met many of his victims while operating a company called Senior Information Services, which offered to assist senior citizens in the creation of living wills, trusts and other estate planning structures for a fee. Through this business, the defendant gained the trust of many of his clients, whom he later victimized. Between 1995 and 2004, in a series of businesses that changed forms and names, Jeffrey Butler failed to provide his investors with any documents or other information about his companies, how the companies made money, or any of the risks of investing in the companies as required by law to protect consumers and investors.
The defendant transferred investments between companies on several occasions without informing or providing only limited information to his elderly investors. The defendant immediately took 10 percent of the investors' money for himself without their knowledge or consent.
In 2000, Jeffrey Butler moved his clients' funds to his newest venture, Global Network Providers (Grenada), Inc. (GNPG), without the knowledge of the investors. The clients' money went to the development of a "telecommunications" company supposedly located on the eastern Caribbean island of Grenada. The company had very few assets and no income.
Jeffrey Butler convinced investors that GNPG paid 12 percent interest per year on promissory notes, when in fact the notes did not require payment for up to three years, and did not specify a time or method of payment. Investors were not made aware that these investments were not authorized to be sold in California. Some of the victims agreed to invest after being misled into believing that GNPG was an Individual Retirement Account (IRA) qualified investment, when in reality the investments were not IRA qualified. In an effort to fool his investors, Jeffrey Butler simply had "IRA" typed at the top of the promissory notes. He failed to inform many of the investors that the "telecommunications" company was based in Grenada.
Being that GNPG was on the island of Grenada in the Caribbean, the company was not subject to U.S. laws. Butler eventually ran out of funds to maintain his scheme and sent his victims a letter in which he continued to lie to investors, claiming that Hurricane Ivan had caused a delay in payments.
Peggy Butler worked with her husband, Jeffrey Butler, by maintaining the financial records for each of the Butlers' companies and accounting for the deposits and expenditures of investor funds. Between 2001 and 2004, the Butlers filed false tax returns and failed to report income of more than $5.5 million, resulting in an unpaid tax liability of more than $530,000.
The recommendation to reduce these crimes from felonies to misdemeanors was included in "Prison Population and Budget Reduction Proposals- June 2009" from the Schwarzenegger administration's California Department of Corrections and Rehabilitation. The proposal states that the "budget reduction proposals have been developed in response to the state's fiscal crisis".
According to Susan Kang Schroeder, Public Affairs Counsel, Orange County District Attorney's Office, this proposal "would be literally letting people like Butler get away with it and it would virtually eliminate {these crimes} as even a prosecution".
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Source- http://www.pe.com/localnews/inland/stories/PE_News_Local_S_sanjacinto13.468cad7.html 
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