Gainesville Man Pleads Guilty to Investor Fraud Scheme

Wendell Ray Spell, 50, of Gainesville, Ga., has pleaded guilty in federal district court to charges arising out of a scheme to defraud investors out of more than $60 million.

According to United States Attorney's Office and the information presented in court, from February 2005 through October 2008, Spell was in the business of buying and selling construction equipment in Gainesville. Spell did business in the names of North Georgia Equipment Sales LLC and Cornerstone International Investments LLC.

In order to keep his failing businesses afloat, Spell sought and obtained from investors the necessary funds to purchase additional construction equipment, which he said he could re-sell to third parties for a substantial profit. Spell reportedly promised some of the investors that he would split the profits with them on a 50/50 basis, and he promised other investors that he would pay them interest at the rate of 36% per year.

Based upon such promises, Spell obtained more than $60 million in investment capital from more than 50 investors in Gainesville and elsewhere. Spell then led the investors to believe that he had used their money to purchase specific pieces of construction equipment, which he knew he had not purchased. Spell prepared and provided to the investors bogus bills of sale and other counterfeit documents to make it appear that he had purchased certain equipment as promised, thereby lulling the investors into a false sense of security and delaying or preventing their complaint to law enforcement authorities, and leading them to invest additional funds in his fraudulent scheme.

Authorities say Spell used a substantial portion of the fraud proceeds to pay phantom “profits” to the investors, to pay his own personal expenses, and to purchase a variety of real and personal property for himself and his family members.

Spell was charged in a Criminal Information with one count of wire fraud, to which he pleaded guilty.

He could receive a maximum sentence of 20 years in prison and a fine of up to $250,000.