Former Portland developer Michael Liberty has been indicted on charges of wire fraud and securities fraud in connection with a multimillion-dollar scheme to trick investors into putting money into a start-up financial technology company, U.S. Justice Department officials said Wednesday.
Liberty, 58, of Windermere, Florida, and Paul E. Hess, 63, of Braintree, Massachusetts, were each charged in an indictment filed Wednesday in federal court in Portland with one count of conspiracy to commit wire fraud, four counts of wire fraud and one count of securities fraud, according to a news release issued by the department. In addition, Liberty was charged with one count of conspiracy to commit money laundering and three counts of money laundering.
Liberty had already been accused of fraud in a civil case filed last year by the Securities and Exchange Commission. The SEC accused Liberty and others of defrauding investors of nearly $50 million. Liberty and other defendants have denied the allegations in formal responses to the SEC action.
Wednesday’s indictment alleges that, beginning in 2010, Liberty and Hess solicited investments in Mozido, a privately held financial technology start-up company based in Austin, Texas, that offered users a way to make payments using their mobile phones, the release said.
Liberty and Hess allegedly raised millions of dollars from investors, telling them, among other things, that their money would be used to finance Mozido’s business operations and that Hess was not being paid to raise the money.
The indictment alleges that a substantial portion of the money did not go to Mozido – which Liberty describes as a mobile wallet. A portion of the money was diverted to pay Liberty’s personal expenses, while Hess received commissions and other payments in return for the money he raised from investors, according to the Justice Department.
Liberty’s Portland-based attorney, Thimi R. Mina, said his client “adamantly denies the criminal charges,” and looks forward to being exonerated. Mina issued a statement on behalf of his client Wednesday evening in response to the government’s legal actions.
“That this criminal action is an unnecessary overreach by the federal government is underscored by the fact that there is already a civil lawsuit brought by the Securities & Exchange Commission in the District of Maine, which is the proper forum to address these allegations,” Mina said.
Mina said that Liberty founded Mozido more than a decade ago and grew the company into an innovative leader in the mobile wallet market that has been awarded several patents around the world.
“Mr. Liberty has been recognized as a visionary who wanted to give unbanked millions across continents access to a mobile financial platform that would provide them with upward economic mobility and the hope of better lives,” Mina said.
Mina said investors stand to benefit from those unique technologies developed by Mozido.
“Ironically, this criminal prosecution, while purporting to be motivated by the desire to protect Mozido’s sophisticated investors, could have an adverse impact on the company’s ability to reap the benefits of patents and technologies invented by Mr. Liberty,” Mina said.
Mina added that Liberty will continue “to work tirelessly to grow Mozido’s business,” while awaiting his day in court.
The defendants face up to 20 years in prison and a fine of at least $250,000 on the wire fraud charges, and up to 20 years in prison and a $5 million fine on the securities fraud charge. In addition, Liberty faces up to 10 years in prison and a fine of at least $250,000 on the money laundering charges.
Liberty is a Gray, Maine, native. He developed Portland’s 100 Middle St. office complex and Chandler’s Wharf condominiums in the 1980s before moving on. Though he now lives in Florida, Liberty still has holdings in Maine and the SEC contends that most of the activity outlined in the civil allegations occurred in Maine.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, Maine U.S. Attorney Halsey B. Frank, Special Agent in Charge Joseph Bonavolonta of the FBI’s Boston Field Office and Special Agent in Charge Kristina O’Connell of the IRS Criminal Investigation in Boston made the announcement Wednesday about the indictment.
The FBI’s Portland, Maine, Resident Agency and IRS-CI are investigating the case. Trial Attorneys Michelle Pascucci and Matthew Sullivan of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Donald Clark of the District of Maine are prosecuting the case.
City Editor John Richardson contributed to this report.
Dennis Hoey can be contacted at 791-6365 or at:
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