LUBBOCK, TX—Benny Lee Judah, 50, a businessman from Lubbock, Texas, was remanded into federal custody this afternoon following his guilty plea to felony offenses stemming from his defrauding at least 250 investors of more than $50 million, announced U.S. Attorney James T. Jacks of the Northern District of Texas (NDTX). U.S. District Judge Sam R. Cummings ordered a pre-sentence investigation report with a sentencing date to be set upon the completion of that report.
Specifically, Judah, who operates numerous restaurants and related businesses, including Excel Lease Fund, Inc., pleaded guilty to one count of money laundering and one count of sale and delivery after sale of unregistered securities. The money laundering count carries a maximum statutory sentence of 20 years in prison and a $250,000 fine; the securities count carries a maximum statutory sentence of five years in prison and a $250,000 fine. As part of the plea agreement with the government, parties agree that the loss in the case is $50,162,707 and that the restitution owed is $48,394,207.
On February 1, 2001, in U.S. District Court for the NDTX, Judah and his company, Excel, were subjects of a final judgment of permanent injunction filed by the Securities and Exchange Commission (SEC) that permanently restrained and enjoined them in the offer or sale of unregistered securities, in providing through the mails any communication employing any scheme to defraud or material misrepresentation, or from engaging in any transaction or practice which would operate as a fraud or deceit on any purchaser. Judah and Excel were ordered to pay a $50,000 civil penalty as part of the Court’s final judgment, and Judah was put on notice of the illegal fraudulent securities violations in which he had engaged.
Judah, an accountant by education and training, is not a licensed securities broker. Since at least 2001, he has sold Excel debentures, guaranteeing a high rate of return. Essentially, however, while purporting to manage and operate the Excel leasing business, Judah was actually operating a Ponzi scheme.
Judah admitted that from October 2005 until April 2009, he schemed to fraudulently obtain $50,162,707 from victim investors in Excel who purchased Excel debentures. He operated this scheme successfully until April 21, 2009, when the SEC filed a civil Complaint against him and Excel alleging violations of federal securities laws. That same day, the Court granted the SEC’s motion to appoint a receiver, signed an order freezing their assets, and signed an injunction prohibiting them from taking further actions in violation of federal securities laws.
As part of his scheme, Judah misrepresented the viability of Excel by failing to disclose the true and actual use of investor funds, and the true financial condition of Excel, thus allowing him to conceal, disguise and convert investor monies for unauthorized purposes. He generated false documents consisting of prospectuses, balance sheets, income statements and interest accrual letters that were represented to be true in order to perpetuate the image of a successful company. He mailed these fraudulent documents to investors and received approximately $50,162,707. He represented to investors that Excel was profitable, when it was not, and grossly overstated the value and nature of Excel’s assets.
After an investment was made, Judah would mail the victim investors the debentures for the investor to sign and then the investors would mail the signed debentures back to Excel and Judah. Oftentimes, Judah would mail false account statements to the investors showing that their investments were earning interest at the 10% rate he had represented. Regarding the money laundering charge, Judah knew that while conducting and attempting to conduct his financial transactions, that the property involved in those financial transactions represented proceeds of his unlawful activity of mail fraud.
Judah admitted using investor proceeds in a manner grossly inconsistent with representation he had made. For example, he lost at least $5 million of the proceeds by “day trading” and used investment proceeds to provide related-party loans to himself and to other businesses he controlled.