Texas Men Sentenced for $6..4 Million Diamond Investment Fraud

The Participants in The Investment Fraud

Two men in Texas have been convicted of investment fraud regarding $6.4 million in diamonds. John Parker is the U.S. Attorney for the Northern District in Texas. Jay Bruce Heimburger of Dallas and Craig Allen Otteson McKinney were sentenced by Sidney A. Fitzwater, the U.S. District Judge. In July of 2017, both men pleaded guilty to one count of mail fraud. Otteson was ordered to pay restitution of $4,704,784, and was sentenced to federal prison for 121 months. Heimburger was ordered to pay restitution of $4,707,794, and was sentenced to federal prison for 97 months. Christopher Arnold Jiongo was the co-defendant from Houston, and pled guilty. His sentencing is scheduled for November 21st of 2017.

The Documentation

The documentation showed Otteson was the Chief Compliance Officer and Managing Member of Stonebridge Advisors, LLC. The Dallas firm was Worldwide Diamond Ventures, L.P.’s Managing partner, and acted as Worldwide Diamond’s Principle Partner. Otteson was additionally listed as the Director and registered agent for JBH Securities. The company provided advice regarding investments. Worldwide Diamond purchased and resold diamonds in the international market. Worldwide Diamonds filed bankruptcy on October 1st of 2013 in the Northern District of Texas.

The Indictment

According to the indictment, Jiongo drafted diamond notes for $50,000. These were used by Heimburger, Otteson and Jiongo in the generation of investment funds. American Safe Retirements was informed by these men all investments would be used to purchase and sell diamonds, and Worldwide Diamond would secure the diamonds and cash. The men understood the sales agents of ASR would represent to the investors that all funds invested in diamond notes would be secured by Worldwide Diamond’s inventory of cash and diamonds. The indictment also stated during the summer of 2011, Heimburger, Otteson and Jiongo concluded their original business plan was failing, and they would be unable to honor the representations and promises they had made to the investors. Instead of notifying ASR, the men chose to deceive the company. They did not inform ASR none of their investment funds were secured by Worldwide Diamond’s inventory of cash and diamonds. The men were aware this was deceiving the investors regarding the use of the investor funds.

The Plea Documents

The pleas documented by Otteson established the period of the scheme was from February of 2012 until March of 2013. Heimburger and Otteson participated in a scheme designed to defraud investors. They employed fraudulent and false promises, and representations and pretenses to obtain property and money from the investors. Otteson admitted in the plea papers he and Heimburger participated in a scheme to conceal the investor funds were used for unauthorized purposes. These purposes defrauded the investors, and were unrelated to buying and selling diamonds. Otteson additionally admitted the scheme included the sale of fraudulent promissory notes by himself and Heimburger. The value of the notes was $1,280,000, and they were sold to 23 clients in California.

The Sentencing

The allegations of the indictment stated Heimburger, Otteson and Jiongo fraudulently collected $6.4 million from investors in 77 Worldwide Diamond’s from 2011 through 2013. During the sentencing, the testimony of witnesses stated Otteson and Heimburger were responsible for letters sent to the ASR and Texas State Securities Board in June of 2011. These letters contained false statements. The case was investigated by the U.S. Postal Inspection Service, and the prosecutor was David Jarvis.