FARGO -- A former Fargo investment broker is facing new charges accusing him of defrauding 18 clients out of more than $900,000 in what state securities officials describe as a "Ponzi-type scheme" than ran for more than a decade.
Robert Medhus, 65, was charged in December with two counts of felony theft in Cass County District Court, but prosecutors added 14 additional charges Thursday -- 13 counts of securities fraud and one count of selling unregistered securities. All 16 charges are Class B felonies, which can bring 10-year prison terms upon conviction.
Court documents claim Medhus took investors' money for his own personal use rather than investing it in securities, then made faked or exaggerated account statements for them on letterhead printed with his company's name, Associated Financial.
One victim, who had been writing checks to Medhus since 2002, believed her account had more than $200,000 in it and was set to retire in a month when she found out her broker had been charged criminally with stealing from his clients.
"By his behavior, he's destroyed these people's lives," said Cass County prosecutor Cherie Clark. "He's caused his victims to lose all the money for their retirement they thought they had."
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Mike Daley, an attorney with the North Dakota Securities Department, said the statements clients were receiving showed their accounts growing. He said the case was "one of the top 5" of securities fraud his office has ever uncovered.
"They wouldn't know until they go to withdraw the money and find it's gone. It was often older investors," Daley said.
Daley said cases like these can go on for years, or at least as long as there are new investors being drawn in by the scheme.
"They can be difficult to find -- as long as there's new money coming in, we aren't likely to get complaints," he said.
Court documents allege Medhus would often pay fake interest to clients which he funded by the investments of new clients. His victims ranged in age from 53 to 95 years old.
Court documents allege George Gaukler and three other men were bilked out of $50,000 each by Medhus. The money was meant for investment in One Oak Place, a senior-living community Fargo.
"We had a long-term, positive relationship for 20 years," said Gaukler, 76, Valley City, N.D. "I'm very surprised things turned out the way they ended up."
Daley said the securities department's investigation is fairly complete at this point, although Clark said it's possible more victims could step forward.
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In June, state officials issued a cease and desist order against Medhus.
Medhus is set to be arraigned on the new charges April 11.
Neither he nor his attorney could be reached for comment.
