Photo by Lauren Matthews The former offices of Budget Finance Co., the owner of which schemed hundreds of investors out of millions, now sit empty in New Martinsville.

NEW MARTINSVILLE — Billy Arnolds is 75 years old, but he figures he will be working for the rest of his life after losing $350,000 in what has been called the largest Ponzi scheme in West Virginia’s history.

Arnolds, a Jacksonburg, W.Va., resident was among hundreds victimized by Donna Brown, owner of the former Budget Finance Co. in New Martinsville. He was among those who shared their stories during last week’s sentencing hearing for Brown, who will spend the next 10 years and one month in a federal prison for her crimes.

“I’m not ashamed of anything,” Arnolds said. “The good Lord will give (Brown) what she needs. If God wanted us to have our money back, we’d have it — right now.”

Arnolds presented a positive, yet realistic outlook on what is in store for him. He said he can’t live on Social Security alone, so the former service station worker, school bus driver and worker in the oil and gas business said he figures he will be working the rest of his life.

There was plenty of pain to go around in Judge Frederick Stamp’s courtroom — from the trickle of tears on numerous faces and the cracking voices during anger-filled statements, to accounts of families torn apart by recruiting each other into investing with Brown, then ultimately suffering financial ruin.

“It’s the case that bothers me the most,” said Wetzel County Prosecutor Tim Haught, who said he was the first to hear about the company closing its doors without notice in November 2015. “Not many state prosecutors have a case with 800 victims.”

The total amount of loss could exceed the estimated $31 million, he said.

Federal investigators continue adding to the list of victims and the amount each invested — and lost. That list is due to Stamp by April 17, when the judge will figure the final amount and terms of Brown’s restitution.

Haught said he discovered Brown’s scheme in November 2015 after an 84-year-old investor told him through tears that Budget Finance closed without notice. He investigated further and quickly urged a federal investigation. Within a week, then-U.S. Attorney William Ihlenfeld had FBI investigators poring over company records, Haught said.

In a quick turnaround for such a voluminous case, last year Brown pleaded guilty to three felonies: mail fraud, wire fraud and money laundering for her unlicensed — and therefore unmonitored and illegal — sales of securities under the auspices of her Budget Finance Co., a business licensed only to offer small loans.

Similar cases can take up to three years, Haught said.

Pyramid Schemes Eventually Collapse

Federal investigators, including those with the IRS, say Brown was running a Ponzi scheme — using the money she got from new investors to pay returns to earlier investors rather than actually investing the money. She promised a high interest rate of about 10-12 percent, that ended up being 8 percent near the end of the scheme, but still much higher than banks’ 2-3 percent rates.

If it sounds too good to be true, it is likely a scam, Haught said.

In addition, Brown was mailing false statements every month, showing a fake account status.

Ponzi schemes were named after Charles Ponzi, who was arrested in about 1910 after bilking about $20 million from his victims. Such pyramid schemes always fail, Haught said.

“At first you might make money on a Ponzi scheme, but in the end, all the money is being consumed in the payout,” Haught said. “There is a point where it becomes exponentially harder to bring in enough money to pay out.”

Brown’s clients, mostly people over the age of about 65, put in a range of investment sums from $5,000 to $400,000, Haught said. In many cases, they have lost their entire life savings.

According to Stamp, as a result of Brown’s crime, some victims have gone without food. Some suffer embarrassment, fear, anxiety and grief, or continue to go without sleep. Some have lost the ability to retire or afford higher education, he said, reading from what he called a summary of ways hundreds of victims said they’ve been harmed.

His summary lists 30 ways, including victims’ inability to pay taxes or to make necessary repairs to their vehicles. They have suffered the financial inability to travel to see grandchildren, or have being forced to live on Social Security because of the lack of any retirement income.

Forfeitures, Restitution in the Works

Meanwhile, the federal government is working on forfeitures of Brown’s assets that will likely include some of about 50 properties in Brown’s other business, River Rentals, located at 255 Riverview Lane, also in New Martinsville.

Some properties won’t be eligible, though, as they are secured by mortgages, making the banks secured creditors. Others may be owned by Brown’s husband, Haught said.

All forfeitures will go toward restitution, according to U.S. Attorney Daniel Brown of the Southern District of Ohio — which prosecuted the Brown case because of a conflict of interest with the U.S. Attorney’s Office for the Northern District of West Virginia.

Unfortunately, though, investors won’t be made whole, Haught said. They will likely get only pennies on each dollar lost.

Officials with the IRS, as well as Daniel Brown, said Donna Brown does not have a large amount of cash to be collected. Rather, the weight of the money she owed investors demanded that the money go toward investors’ payouts.

In other words, she had to keep up those payments so she wouldn’t get caught.

And, investigators believe she acted alone.

Victims Suffer

It wasn’t until her scheme collapsed and investors began to complain, that any government body knew she was doing something illegal.

West Virginia officials from the Office of the State Auditor of West Virginia were initial investigators of the scheme, and worked with state and federal prosecutors to gather evidence that led to Brown’s conviction, according to a news release from Auditor John B. McCuskey. Attorney General Patrick Morrisey’s office also helped identify some of the victims.

Haught said some victims relied on investment returns as monthly income. For example, Haught knows a woman, age 80, who invested $80,000. Until the money just disappeared, she used what she thought were interest payments, to make monthly payments on her trailer.

Roger Weese, a practicing attorney in New Martinsville, was also among the victims who spoke at Brown’s sentencing. He said he put $100,000 of his money into Brown’s hands, and talked his mother into doing the same.

“I feel guilty,” Weese said, noting he believed with his level of education, he should have known it was a scam.

Investors’ Trust Shattered

“I went to school with her,” Weese said of Brown. “I believed in her. … More egregious to me is that she recruited people like myself … to bring new money in. I was foolish. I didn’t know what was (actually) going on.”

Weese is similar to the majority of Brown’s victims, because he is near retirement age and is among the approximately 70 percent of victims who are from West Virginia and Ohio.

Haught estimates 5 percent of the victims were from Wetzel County. He noted the area already has suffered since the Ormet plant in Hannibal closed in 2014, causing about 700 job losses.

“It’s had an impact. It’s hit the local area hard,” Haught said of Ormet’s loss.

In the Northern Panhandle of West Virginia, there were victims from Wheeling, Sistersville and more. However, this was a national scam, with victims as far away as Alaska and Florida, among other states, Haught said.

Marcellus Shale Money Fueled Scheme

Haught said some investors had recently come into money after receiving leasing payments or royalties from oil and gas producers in the Marcellus Shale play. Some even got payments for allowing pipelines on their properties.

Wetzel County was the second-highest producer of wet gas and oil, in terms of revenue, during the peak producing years, from 2008 through 2014, Haught said. Harrison County in Ohio was first.

For many property owners, having money to invest was a new experience. Likely, some of Brown’s victims were lured by the promise of high interest on their newfound wealth — or, in the wake of the financial collapse of 2009, they had a fear of banks, Haught said.

Tips to Avoid Being Victimized

Haught said it is never a good idea to put all of one’s money in a single investment. Rather, he urges investors to make conservative, balanced investments through a licensed financial advisor.

“You diversify in case something happens,” he said, noting some people cashed out their 401(k)s, or pension plans to invest with Brown.

Haught also said new legislation to better regulate small-loan businesses might help prevent pyramid schemes in the future.