Solana Beach money trader sentenced in currency scam

Gets nine years in federal prison for fraudulent investment practices
Mark Todd Hauze, who in January was found guilty of organizing a Solana Beach-based investment fraud scheme from 2002 to 2005, was sentenced Tuesday to nine years in federal prison and three years of supervised release thereafter.

Hauze, 51, was convicted on eight counts of mail fraud, six counts of wire fraud and one count of filing a false tax return while running his Universal Money Traders fund. He was originally charged with 11 counts of mail fraud and eight counts of wire fraud, but prosecutor John Owens said the extra charges were dropped.

The former Santa Fe Christian Schools football coach will begin serving his sentence July 9, as ordered by U.S. District Judge Thomas Whelan.

According to a news release from the U.S. Attorney’s Office, Hauze solicited more than $10 million from investors, many of whom were parents of SFCS students. They invested their retirement accounts and other funds into UMT, which advertised a 30 percent or greater annual return and guaranteed that losses would be limited to no more than 15 percent for each $2,000 invested.

But according to the release, Hauze honored withdrawal requests with money from new clients, reported bogus trading results and provided online statements with false balances. Meanwhile, UMT is said to have lost the original funds with bad investments made. When UMT failed to honor clients’ withdrawal requests in 2005, the release stated Hauze falsely asserted accounts were frozen due to an IRS audit.

“He testified at trial that he never promised his victims that their investments would be guaranteed, but every single victim testified the exact opposite,” Owens said, adding that Hauze blamed a lot of the false statements on his alleged mistress, a co-worker at UMT who was not charged.

Defense attorney Jason Conforti, who did not return a call by press time, argued Hauze was not guilty based on a lack of criminal intent. He said it was negligence, mismanagement and miscommunication within Hauze’s investment company that led to reporting errors to clients. Conforti said there was no intention of fraud, which he said is a valid defense due to criminal court’s required high burden of proof. Conforti argued that if clients had made money through Hauze’s investments, there would have been no criminal charges.

Dave Guilford worked with Hauze as a commodities trader in the 1990s at the now-defunct Concorde Trading Group in La Jolla. He described Hauze, then the branch manager, as a “gut trader,” or someone that takes risks based on his sense of where the market is heading.

“That style of trading died with the Internet in 1995, Hauze just never got the memo,” Guilford said. “It used to be only a very select few people had access to the real information.”

However, Guilford said he was unsure whether Hauze’s intentions were fraudulent from the start.

“One of two things happened; either he went into this saying ‘Screw it, I’m just going to run this scam and I’m just going to take all these people’s money, make as much as I can and get out.’ That’s scenario one,” he said. “Scenario two would be he actually thought he could do it, he could produce returns but then was met with the ugly reality that he couldn’t, and he decided, ‘Well I’m going to fudge the numbers.’”

When asked why so many investors may have trusted Hauze, Guilford said friendship and word of mouth from people that knew him made financial decisions easier.

“You’re understating and underestimating the social component of the fraud. People want to believe it’s easy. Back in 2000, when Qualcomm was doubling every day, people wanted to believe it was that easy,” Guilford said. “People want to believe there’s a new technology that’s going to put them on easy street.”

Instead of building his clients’ portfolios, Owens said Hauze spent the money to purchase a Porsche, a Volkswagen Touareg and a Cadillac Escalade, which he then modified. Hauze also gambled $10,000 with a sports bookie and bought a membership at the Lomas Santa Fe Country Club, according to Owens.

“He was telling people ‘I’m doing great with your money, give me more,’ and people did, when in fact people did very poorly,” Owens said.

Hauze was living in Salem, Ore., and working as the defensive backs coach for the University of Willamette football team. Conforti has noted that Hauze, who has a right to appeal, never lived a lavish lifestyle and was residing in a modest home.

A hearing will take place on July 7 to determine how much restitution Hauze will owe the victims.

Related posts:

  1. Hauze pleads not guilty in Solana Beach-based Ponzi scheme case
  2. Former coach guilty in Solana Beach-based Ponzi scheme
  3. Currency Cafe brews new blend of foreign exchange
  4. Telephone scam targets elderly
  5. Man sentenced for sexually assaulting woman in Solana Beach

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Posted by on May 26, 2010. Filed under Archives. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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