California man stole $4.7 million through elaborate eight-year fraud scheme
Indianapolis – United States Attorney Josh Minkler announced today that Kenneth Ray Cleveland, 64, of Agoura Hills, California, was sentenced to 84 months (seven years) in federal court by U.S. District Court Judge Tanya Walton Pratt. Cleveland’s sentence followed his guilty plea to previously filed federal fraud and money laundering charges in connection with a long-running investment fraud aimed at Cory Redding, a former NFL player, and others.
“People should have confidence that those they entrust with their hard-earned money will treat them fairly and honestly,” said Minkler. “This defendant exploited that trust through lies and deception for purely personal gain. Today’s sentence underscores that such egregious conduct cannot, and will not, be tolerated.”
Cleveland worked as Redding’s financial advisor for a decade, starting not long after Redding entered the NFL after college. Redding did not want to become the all-too-common story of a sports star who squandered his earnings, so he sought out professional financial advice to help he and his family save for his inevitable retirement from football. Cleveland, who was referred to Redding through a college professor, held himself out as an investing guru and sold Redding on a simple investment strategy that appealed to Redding’s life goals: put your money in conservative investments, live off the interest, and the principal will be there for you when you retire. Cleveland called it “fixed income” investing.
Over the next decade, Redding invested millions with Cleveland. Throughout this time, Cleveland kept Redding apprised of the status – and purported “success” – of his investments. Through financial statements, emails, text messages, and in-person meetings, Cleveland described down to the penny how much money Redding had and how much he was making through his smart investment decisions. He made money available to Redding when he needed it. He periodically paid Redding “interest.” He even played on Redding’s fears and stoked his confidence by comparing him to less financially successful NFL players. By the end of the 2014 season, when Redding was ready to retire from the NFL, Cleveland claimed to have made him millions.
But that was a lie. Redding’s money was gone. It had been gone for some time. There were no “investments.” Years before, beginning in 2007, Cleveland started spending Redding’s money for his own purposes: credit cards, mortgages, office rent, employee payroll, legal expenses, utilities, health care, cash withdrawals, daily personal and business purchases, and even payments to his mother, sister, and daughter. He also used Redding’s money to pay “interest” to other “investors” (victims) whom he had also promised financial success. In other words, he used Redding’s money in a Ponzi scheme. In fact, Cleveland had used Redding’s money to make “interest” payments to Redding himself. At the end, there was nothing left.
Redding, however, did not know any of that. The dozens of financial statements, emails, and text messages that Cleveland sent to Redding, and the information Cleveland conveyed during numerous in-person meetings, were all part of an elaborate scheme to conceal the fact that Cleveland was stealing Redding’s money. Even as Cleveland was being prosecuted in California for another fraud scheme, he still tried to convince Redding that his money was safe. At this point, though, Redding knew better.
But the damage had been done. Cleveland had stolen over $4.7 million from Redding. As a result, Redding did not retire after the 2014 season with the Indianapolis Colts. He played one additional season for the Arizona Cardinals to try to earn back a portion of what was taken.
This case was investigated by the Federal Bureau of Investigation.
“This sentence reaffirms the FBI’s commitment to aggressively pursue and investigate those who utilize positions of trust and influence to commit financial fraud,” said Grant Mendenhall, Special Agent in Charge of the FBI’s Indianapolis Division.
In October 2017, United States Attorney Josh J. Minkler announced a Strategic Plan designed to shape and strengthen the District’s response to its most significant public safety challenges. This prosecution demonstrates the Office’s firm commitment to prosecuting complex, large-scale fraud schemes, particularly those that exploit positions of trust. See United States Attorney’s Office, Southern District of Indiana Strategic Plan 5.1)
Assistant United States Attorney Nick Linder, who prosecuted the case for the government, said that Cleveland was also ordered to pay full restitution of $4,706,066.86.