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Leader of $7M Ponzi scheme pleads guilty to defrauding 200 investors
By ED RUNYAN
CLEVELAND
David J. Harriett of Howland, president of D.J. Harriett Inc. development company of Canfield, pleaded guilty Wednesday in federal court to mail fraud and faces a possible prison sentence of up to 61/2 years.
Prosecutors say Harriett defrauded about 200 investors from August 1996 until January of this year in a $7 million Ponzi scheme.
About 30 to 35 of those investors were in the courtroom when Harriett entered his plea before Judge Kathleen M. O’Malley.
Harriett, 60, will be sentenced in that same courtroom at 1 p.m. Aug. 18. He faces a 63- to 78-month prison term. Judge O’Malley set his bond at $10,000.
Harriett, of Springbrook Drive in the Spring Run condominiums off North River Road, maintained offices on Seville Drive in Canfield.
The U.S. attorney’s office said many of Harriett’s victims are people from the Mahoning Valley whom Harriett met while working at the GM Lordstown tassembly plant.
Mike Tobin, a spokesman for U.S. Attorney Steven M. Dettelbach of the Northern District of Ohio, said the court will try to recover as much of the stolen money as possible to repay investors, but he didn’t know how much money would be recoverable.
Prosecutors said Harriett solicited investors, and in exchange for their investments, Harriett provided them promissory notes purportedly guaranteeing the return of their investment, plus significant interest.
Harriett told investors he and his company were “project managers” for the construction of new McDonald’s and Pioneer Chicken franchise restaurants in Northeast Ohio, New York, Indiana, Pennsylvania and Florida, prosecutors said.
Mailings Harriett sent to potential investors falsely claimed Harriett “had 12 [McDonald’s] franchises planned for 2008,” Dettelbach said. In truth, Harriett had no contracts with McDonald’s, Dettelbach said.
Harriett knew the investor money wasn’t being put to any legitimate use but instead went to make Ponzi payments to other investors, to operate the company and for his own use, Dettelbach said.
Tobin said Harriett worked at the GM plant for about 30 years. Tom Mock, a GM spokesman, said Harriett left GM about three to four years ago. Harriett was a plant production leader at the time.
In a lawsuit filed in Trumbull County Common Pleas Court on Dec. 18, 2009, Diana K. Edwards of New Springfield said she invested $200,000 with Harriett’s company on July 29.
The promissory note Harriett signed called for her to receive $218,000 in principal and interest on Oct. 2, 2009, but Harriett failed to make the payment upon request, the lawsuit said.
Edwards’ lawsuit said she’d been investing with Harriett since 2005, and her July 29 transaction called for 11 percent interest on her money.
In the lawsuit, Edwards said Harriett was developing the Rebecca Megan Sports and Fitness Complex at 812 Youngstown-Kingsville Road, Vienna Township, across from Squaw Creek Country Club.
Among the nine other individuals filing lawsuits in Trumbull County Common Pleas Court against Harriett starting in November 2009 were two residents each from Cortland, Niles and Warren; and one each from Kinsman, Mason and Sagamore Hills, all in Ohio.
The lawsuits sought payment of promised amounts of $400,000, $257,000, $245,000, $386,000, $146,000, $113,000 and $17,500.
Sixteen similar lawsuits were filed against Harriett in Mahoning County Common Pleas Court starting in November 2009.
The Better Business Bureau of Columbiana, Mahoning and Trumbull County, says D.J. Harriett Inc. began doing business in 1998, and the BBB revoked the company’s accreditation on February 17, 2010, based on complaints.