Former Duluth man pleads guilty to mail fraudA former Duluth man accused in a $2.5 million investment fraud scheme pleaded guilty Thursday in federal court to mail fraud.
By: Kevin Murphy, For the Superior Telegram
MADISON — A former Duluth man accused in a $2.5 million investment fraud scheme pleaded guilty Thursday in federal court to mail fraud.
Garry Milosevich, 67, had been charged in 2007 with Daniel Tepoel, formerly of Barnes, Wis., with mail and wire fraud used to defraud 22 individuals in the Twin Ports area who thought they were investing in “no-risk, high-yield” international bank debentures.
Milosevich remained at large while Tepoel was convicted of mail and wire fraud and lying to a jury in March 2008. He was sentenced to 11½ years in prison and ordered to repay $775,000 to his victims.
Milosevich was apprehended on an arrest warrant in 2011 and deported to the U.S. when he attempted to renew his passport at an American embassy in Honduras.
The case was heading to a Feb. 4 trial until Milosevich signed a plea agreement Wednesday and District Judge William Conley set a plea hearing for Thursday.
Court documents showed that Milosevich said they gave proceeds from investments to another person who was to give them to the investors, but the individual absconded with the money.
That was one of the stories Milosevich and Tepoel told investors in September 2001 when they began to ask the defendants about the status of their invested money.
Investors had been told their funds were guaranteed to earn 120 percent annual return, compounded and paid quarterly.
The defendants had mailed quarterly statements to their clients that falsely stated their funds had been invested in overseas currency trading and bank debt that Milosevich and Tepoel could buy at a discount because of their insider status and resellfor millions of dollars in profit.
The defendants also falsely stated the investments were regulated by the International Chamber of Commerce; however, the supposed bank financial instruments don’t exist, according to the U.S. Comptroller of the Currency, an office in the U.S. Treasury Department that regulates and supervises national banks and branches of foreign banks in the U.S.
Other funds were to be invested in a resort development in Grenada called Cinnamon Hills.
Tepoel collected the funds and deposited them in the Republic Bank of Duluth under the name Interstar Management Ltd.
Instead of investing the funds as promised, they were siphoned off and spent on the defendants’ personal travel, living expenses and gifts to family members. Some funds were invested in the Grenada resort, which failed.
When investors weren’t paid as promised, Tepoel and Milosevich told them their funds had been stolen by various individuals. The defendants also reminded their clients that they had signed agreements prohibiting clients from disclosing any information about the investment or contacting any third party.
Eventually, some defrauded investors complained to authorities, whose investigation resulted in charges.
Milosevich faces maximum penalties of 20 years in prison and restitution at his April 2 sentencing.