Duluth man gets prison for mail fraudMADISON - A former Duluth man was sentenced Tuesday in federal court to 6½ years in prison for defrauding 22 Twin Ports area investors in a $2.8 million Ponzi scheme.
By: Kevin Murphy/For the Superior Telegram, Superior Telegram
MADISON - A former Duluth man was sentenced Tuesday in federal court to 6½ years in prison for defrauding 22 Twin Ports area investors in a $2.8 million Ponzi scheme.
Gary Milosevich, 67, teamed up with Daniel Tepoel, formerly of Barnes, Wis., to dupe unsuspecting individuals into buying what the men touted as “secret, no-risk, high-yield bank instruments,” said District Judge Barbara Crabb.
“The scheme you devised enriched you ... and you took advantage of people who weren’t in a financial condition to just give you that amount of money,” Crabb told Milosevich.
Milosevich and Tepoel appeared to their investors as “international high rollers” who not only were developing a resort in Grenada but claimed to have unique access to international discounted bank debentures, said U.S. Attorney John Vaudreuil.
The men brought a Duluth restaurateur to Grenada and showed her the Cinnamon Hills Resort under development in order to set her up for their bank debenture sales pitch, said Vaudreuil.
She never again saw the $50,000 she ended up giving Milosevich and Tepoel, said Vaudreuil.
The men took the investors’ money in 1997 to 2000 promising annual returns of 120 percent. They mailed quarterly statements falsely indicating the investments were appreciating in value. However, when the investors began to ask for some of the returns, they received excuses instead of money, Vaudreuil said.
The two men reminded their clients they couldn’t disclose any information about the investments or contact a third party.
Tepoel had collected and deposited the investors’ funds in the Republic Bank of Duluth under the name Interstar Management Ltd.
Instead of purchasing the bank notes as promised, Tepoel and Milosevich used the investor funds for personal expenses, travel and gifts to family members. Some funds were invested in the Grenada resort that ultimately failed.
Eventually some defrauded investors complained to authorities, which lead to Tepoel and Milosevich being indicted in 2007 for mail, wire and bank fraud.
Tepoel went to trial, was convicted on mail and wire fraud and lying to the FBI. He was sentenced in 2008 to 11½ years in prison.
Milosevich fled the country remaining at large until he went to a U.S. Embassy in Honduras last year to renew his passport and was arrested.
Milosevich pleaded guilty in January to wire fraud.
Attorney David Geier sought leniency for his client saying Verlin P. Swartzenruber controlled the bank accounts and when Milosevich learned funds were being stolen, he sued Swartzenruber in a Grenada court trying to get them back.
Swartzenruber was charged with a similar offense in a South Dakota court.
Crabb heard a similar explanation from Milosevich but cutting him off and ultimately admonishing him, “at some point I hope you have some understanding of the hell you put these investors through.”
Two men, who invested a combined $1.9 million with the defendants, had testified at Tepoel’s trial that they didn’t feel defrauded and didn’t want their loss added to the restitution amount.
That reduced restitution to the remaining defrauded investors to $775,000; Milosevich and TePoel jointly responsible.