On Friday, June 24, 2011, U.S. District Judge William J. Haynes sentenced Kenneth Kennedy, 67, of Clarksville, Tennessee to 100 months in prison for his role in a multi- million-dollar investment scam. Kennedy, a retired military lawyer and former elected Trigg County Attorney in Cadiz, Kentucky, was found guilty of three counts of wire fraud and five counts of mail fraud following a four-week trial in October 2010.
“This is a significant sentence for a significant crime,” said U.S. Attorney Jerry Martin. “White collar criminals who defraud victims pose a continuing threat to Middle Tennessee citizens. The U.S. Attorney’s Office will continue to prosecute those who commit such crimes.”
At the October 2010 trial, the jury heard extensive evidence related to the multi-year investment scam that defrauded victims in both Kentucky and Tennessee. According to the evidence, four defendants—Sheila Kennedy, her husband Kenneth Kennedy, Ann Scarborough, and Philip Russell—perpetrated the scam from April 2005 to mid 2008. Sheila Kennedy represented herself to investors as a real estate guru who could obtain huge returns on properties to be developed. She enlisted Ann Scarborough, a personal friend from Kentucky, and later, Russell, a financial advisor in Brentwood, Tennessee, to solicit investors for these projects.
Victims were told of projects involving strip malls in Las Vegas, a Disney theme park in Middle Tennessee, a medical center in Arizona, and new land for the Bonnaroo music festival, among many others. In each case, investors received a “promissory note,” guaranteeing their initial investment and promising them five or more times their money in just a few months. According to financial records and testimony by law enforcement agents, however, none of the purported real estate deals ever existed. Instead, the investor money was misappropriated for the benefit of Sheila and Kenneth Kennedy, Scarborough, and Russell.
When the promissory notes became due, Sheila Kennedy, Scarborough, Russell, and Kenneth Kennedy offered investors various excuses, including that the money was “tied up” because of IRS problems, financial restrictions related to the Patriot Act, and banking regulations stemming from the terrorist attacks on September 11, 2001. Later, investors were assured that they would be paid from a purported billion-dollar inheritance that Sheila Kennedy was to receive from a distant relative. As told to different victims with varying details, this inheritance was from a step-grandfather from Russia who fled to the United States shortly before the Bolshevik revolution. According to the defendants, the inheritance had been tied up in the courts and with the Office of Comptroller of Currency for years. As the scheme progressed, Kenneth Kennedy and Ann Scarborough solicited some investors specifically for the purpose of obtaining this purported inheritance, claiming that more money was needed to get the inheritance “released” or to pay related expenses. On cross examination, however, both Scarborough and Kenneth Kennedy admitted they had never seen a single document related to this inheritance.
At sentencing, the court found that the defendants’ scheme caused over $3 million in losses to over 50 victims. In addition to imposing the prison sentence, the court also ordered Kennedy to pay restitution to his victims and to remain on supervised release for three years following his release from prison.
Monday, July 4, 2011
Kenneth Kennedy Sentenced to 100 Months in Prison for Investment Fraud Scam
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