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Ponzi schemer Spell gets a dozen years in federal prison
Judge: "There are losses you can't always judge by the dollar value"
0821Wendell Spell
Wendell Ray Spell

A self-described "master of deceit" who bilked dozens of investors out of at least $16 million in the largest fraud in Hall County history was sentenced Thursday to 12 years in federal prison.

Wendell Ray Spell, 50, apologized for orchestrating a Ponzi scheme through his Gainesville heavy equipment company that ensnared 79 investors over a span of more than three years.

"I became the master of deceit, the master of deception," Spell told U.S. District Court Judge William C. O’Kelley.

Spell said he was sorry for taking advantage of the trust of investors.

"I pray some day that they’ll find it in their hearts to forgive me," Spell said.

Only eight or nine victims came to court for the sentencing, and just two chose to address the court.

"Wendell lies for a living," said Don Johnson of Carrollton, a construction manager who lost $50,000 to Spell. Johnson took out a loan on his house for the money and now is faced with paying back the sum at age 60.

"This has had a devastating effect on my life," he said.

James Torchia, who lost more than $1 million, said Spell used religion to gain credibility with investors. Spell’s investments were recommended to Torchia through a physician friend. He said he made the mistake of neglecting to check Spell’s background before giving him money.

Spell was convicted of fraud-related charges in Virginia in 1997.

"He’s caused a lot of investors pain, and some who lost less are likely to feel even more heartache," Torchia said.

O’Kelley noted that two of the victims who submitted statements to the court were forced out of retirement after losing their savings to Spell’s scheme. One went back to work as a waitress.

"Their lives have absolutely been destroyed in their old age," O’Kelley said.

The judge’s sentence was two years above the 8- to 10-year range recommended by the federal sentencing guidelines. The judge said he took into consideration the human impact of Spell’s actions beyond the dollar amount that was lost.

"There are losses you can’t always judge by the dollar value," O’Kelley said.

When Spell pleaded guilty to a single count of wire fraud in March, the U.S. Attorney’s Office announced he had defrauded more than 50 investors of $60 million.

Assistant U.S. Attorney Russell Phillips said Thursday that Spell took in $62 million for his Ponzi scheme but paid out some $45 million in "phantom profits" to investors, leaving a net loss to victims of $16.7 million.

Phillips said forensic analysts looked extensively at bank and business records and Spell and business associates were repeatedly interviewed, but prosecutors have not been able to definitively determine where all of the $16.7 million went.

Spell claimed he paid overhead of $200,000 to $300,000 a month on his business, which employed 60 people in locations in Gainesville and Chattanooga, Tenn., at its height. Spell also paid himself a $300,000 annual salary.

A $2 million home, $60,000 boat and other properties were heavily mortgaged and have since been foreclosed on.

"All the money that was brought in, it’s gone," defense attorney Paul Cognac said. "There’s no hidden money, there’s no Swiss bank account. It’s all gone."

Prosecutors said no other people, including Spell’s employees, had knowledge of the scheme.

"There was no evidence we could find that anyone else was criminally responsible," Phillips said. "If we could find that evidence, we would have charged those people."

The $16 million loss amount still is in question. At least one investor who was not counted among the losses claims to have lost $3 million to Spell and wants to be included in any restitution order made by the court.

Ledgers and documents seized by investigators included some gaps, and prosecutors relied on documentation provided to them by victims. Some had none.

"What was most shocking to me is that many victims had no records whatsoever," the judge said. "I just find that hard to comprehend. But I also can’t comprehend investing money in something like this."

Spell’s scheme involved the promise of using investor money to buy heavy equipment and sell it overseas at a substantial profit. He promised returns of 36 percent to 48 percent annually. The investment money he took in from the newest investors was used to pay out phantom profits to other investors. Spell made bogus bills of sale and other counterfeit documents to keep the scheme going.

Spell’s lawyer said the investors, many of whom were local physicians, attorneys and other professionals, should have been wary. One local doctor recruited more than 20 people to invest money with Spell, according to Cognac.

"Some of these victims are very sophisticated people," Cognac said. "There’s an element of ‘if it’s too good to be true, it probably is,’ and a 36 percent to 48 percent return on your money is too good to be true."

Spell’s wife of 30 years asked the judge for leniency, saying "I made a covenant with God and I married Wendell for better or worse."

"I in no way want to negate anything he’s done and the harm he’s done and the detriment he’s caused to the community," Pamela Spell told the judge. "I do come to you asking for leniency.

"I know from my heart, he didn’t intentionally set out with a vast scheme to swindle people out of money."

Spell’s wife blamed his actions on pressure to maintain his business and provide for his family and employees.

"I honestly feel it was something he did once to pay someone who wanted to get out of an investment, and it just snowballed," she said.

O’Kelley also heard from Spell’s stepfather and adult son.

A restitution order is still pending. But any restitution Spell makes is likely to be only a fraction of the losses, and most won’t be paid until Spell is released from prison. The government only was able to seize a few pieces of heavy equipment and almost no cash, Phillips said.

"There is not a pot of money the victims are going to be able to divvy up," Phillips said.

The 12-year sentence imposed by the judge has no parole. O’Kelley denied a request for Spell to voluntary report to the federal Bureau of Prisons at a later date. Spell had been free pending sentencing on a $25,000 unsecured bond.

"With $16 million unaccounted for, a 12-year sentence, and an unsecured bond, I just have difficulty with that," O’Kelley said of the request to report to prison later.

The judge said that Spell’s case and cases like it, as well as the numerous mortgage fraud cases heard in federal court, were "symptomatic and probably a major contribution to our current economic conditions."

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