(CBS-DETROIT) — The former CEO of a Grand Rapids-based investment firm was sentenced to five and a half years in prison for defrauding investors of $5 million.
Gifford “Chip” Cummings, Jr., 61, of Grand Rapids, pleaded guilty to carrying out a scheme to defraud customers while serving as president and CEO of Red Oak Capital.
In December 2019, Cummings put $5 million of client money into an unauthorized investment, which officials said immediately lost hundreds of thousands of dollars in value. When his business partners discovered the investment, they asked Cummings to get the money back and return it to the company.
Instead, Cummings allegedly changed account statements to make it appear as if his investment was performing better than what it was, to hide the staggering losses. Cummings is also accused of creating a false document to show he was trying to return investors’ money when he had not. Ultimately, Red Oak Capital was only able to recoup $761,522.90 of the initial investment.
During the company’s investigation into Cummings, it also found that the 61-year-old failed to repay a $1,350,000 debt. Instead of paying back the debt, officials say Cummings deposited the money into a bank account he had control over.
“Mr. Cummings deliberately defrauded investors of hundreds of thousands of dollars for his personal gain,” U.S. Attorney Mark Totten said in a news release. “Financial fraud is a serious problem, and my office will not hesitate to prosecute fraudsters whose schemes cause devastating financial harm to legitimate businesses and honest investors.”
In addition to the prison sentence, Cummings must serve two years of supervised release and pay $5,755,477 in restitution.
The case was investigated by the FBI.
