Get $242,000 in restitution
HELENA — Restitution payments totaling over $242,000 will be made to victims of Cornerstone Financial, Inc. from Montana’s new Securities Restitution Assistance Fund.
The restitution was announced Tuesday by Commissioner of Securities Monica Lindeen and U.S. Attorney for the District of Montana Michael Cotter, who worked together to shut down the multi-million dollar Ponzi scheme in 2009. Charges in the case included wire fraud, mail fraud and money laundering.
Cornerstone is the one of the largest Ponzi schemes in Montana history. Ponzi schemes involve a cycle where early-stage investors are paid with funds given by new investors. When the number of earlier investors begins to exceed the number of subsequent investors the scheme collapses.
“These defendants preyed on those in their community when they were in moments of financial necessity. Such abuse of individuals under the guise of legitimate business is a crime that will be prosecuted by the Montana United States Attorney’s Office whenever it occurs and wherever it is discovered,” Cotter said. “This prosecution sends a strong message to persons engaged in such activity that they will be prosecuted to the fullest extent of the law.”
The two men at fault, Robert Congdon and Keith Kovick, are serving time in federal prison. Since the investments they offered weren’t registered with the state or backed by a legitimate securities firm, victims had no way of getting their money back.
“The assistance we’re giving today really is the last chance for a lot of Montanans to get back on their feet,” Lindeen said. “Although it’s not much compared to what they lost, these checks may just be what pays the energy bill, the credit card, the mortgage this month for victims of securities fraud.”
Lindeen said even after Cornerstone’s assets had been liquidated, there was little left to give to the victims of the fraudulent investment firm. Losses ranged from $49,000 to $784,000, with 14 out of more than 100 victims losing over $100,000.
“Generally these aren’t wealthy people, they’re just average, everyday Montanans,” she said.
The Securities Restitution Assistance Fund was created from a law passed in 2011 that states victims of securities fraud can receive 25 percent of their losses or $25,000 whichever amount is less. The fund, the second of its kind in the nation, is modeled after Indiana’s restitution fund. Money comes from court orders, orders from the commissioner and voluntary contributions from firms and brokers who violate the state securities law.
Victims were sent letters informing them they could apply to receive restitution from the Securities Restitution Assistance Fund, and 20 seized the opportunity.
In 2013, Lindeen and Rep. Duane Ankney, R-Colstrip, passed House Bill 81 that funnels a portion of fees collected by Lindeen’s office into the restitution fund. The legislation will add nearly $272,000 to the fund each year.