KNOXVILLE (WATE) – Four people were taken into custody Thursday in connection with an elaborate fraud scheme at a Knoxville investment firm. Additional charges were also filed against two others who had already been indicted in the case.
Brian Murphy, Paulynn Wright, and Dona Rector were arrested Thursday morning by federal agents.
Tiffiny Thompson voluntarily surrendered to authorities after being informed that charges has been filed against her.
The four were indicted on May 21.
Web Extra: Read the superseding indictment [PDF]
The indictment alleges that Benchmark Capital, Inc. was engaged in an elaborate scheme that lured investors, many of whom were elderly, into investing their retirement savings and the equity in their homes into phony annuity investments.
Two other operations – J. Allen Incorporated and Cornerstone Mortgage – also allegedly lured customers in to the Benchmark investments.
Benchmark operated out of a North Knoxville office complex, but according to the grand jury indictment, Benchmark created the illusion that it was a large Chicago-based organization.
Callers to Benchmark’s phone number were supposedly told the call was being taken by an operator in a Chicago high-rise and mail from Benchmark was allegedly stamped with a Chicago postmark.
The indictment says their system worked like a Ponzi scheme, with new investors’ money used to pay earlier investments.
According to the indictment, more than $42.6 million was invested in the Benchmark scheme, resulting in a net loss of more than $18 million to investors.
The scheme unraveled early last year, following the suicide of Benchmark owner Charles Candler in March 2012.
6 On Your Side profiled Louisville homeowner Joy Joines who was a target of one of the schemes.
Joines applied for a reverse mortgage with the group, but later almost lost her home to foreclosure.
Legal Aid of East Tennessee and Sen. Bob Corker’s office stepped in and she was able to avoid losing her home.
Brian Murphy, Tiffiny Thompson and Paulynn Wright are charged with conspiracy to commit mail and wire fraud and money laundering.
Dona Rector is charged with conspiracy to commit wire fraud.
Murphy and Thompson pleaded not guilty during their arraignment.
The superseding indictment also contains additional charges against Joyce Allen and Kay Thomas, who were initially indicted in July 2012.
The money laundering conspiracy charge carries a maximum sentence of 20 years in prison. The maximum sentence for the fraud conspiracy charge is 30 years in prison.
The indictment is the result of an investigation by the IRS, U.S. Postal Inspection Service, and the FBI.