$2 Millon Fraud Scheme Lands Former NH Investment Adviser Behind Bars
CONCORD — A former New Castle man will spend 18 months in prison for participating in a wire fraud scheme that defrauded a victim of approximately $2 million.
While living in New Hampshire, Karl Edward Hahn, 44, and currently of Manchester, Connecticut, worked as an investment adviser at investment banks in Portsmouth.
Starting as early as March of 2009 and continuing until July of 2010, he invited one of his investment clients to join him in what he referred to as an "off the books" investment, court record read. Hahn told the victim that he and the victim would each contribute about $2 million, which Hahn would then loan to three individuals who would repay the money within 90 days with interest substantially above market rates. He then allegedly went on to say the "loan" would be secured by three pieces of residential real estate, one owned by each of the three borrowers, which were all unencumbered and which collectively had a value far in excess of the approximately $4 million loan.
Hahn told the victim that no one could know about the investment, including the Hahn's employer, because he was not allowed to enter into financial dealings with clients other than through his employment, court documents showed. In order to prevent his employer from learning of the “off the books” transaction, Hahn asked the victim to transfer the money into a bank account held by one of Hahn’s relatives and that Hahn would then get the money from his relative.
The victim agreed and transferred to Hahn’s relative’s account, in separate transactions, $300,000, $1,600,000, $100,000, and $35,000, totaling $2,035,000.
Hahn allegedly admitted that the entire story of landowners wanting to borrow money was false, that there never were three landowners who wanted to borrow money collateralizing the loans with deeds, and that loans were never made to any landowners using the victim’s money. Hahn simply used the victim’s money to pay personal expenses, according to court records. In 2011, the New Hampshire Bureau of Securities Regulation barred Hahn from being licensed to sell securities.
Officials said Hahn also admitted that during the course of executing the scheme, he made additional materially false representations to the victim that lulled him into a false sense of security and caused him to temporarily refrain from reporting his dealings with Hahn to law enforcement authorities. Those false statements included that the supposed borrowers had defaulted on the loans; that as a result of the alleged defaults, Hahn had possession of the deeds to the supposed borrowers’ properties; and that Hahn had communicated with a hedge fund so the hedge fund could buy the properties, thereby resulting in the return of the victim’s money with interest. Hahn also later falsely represented to the victim that he had been successful in working with the supposed hedge fund and that he was confident that the victim would have his money back by early August of 2010.
Hahn pleaded guilty to the charged Aug. 1. He will begin serving his sentence Dec. 4.