By Ed Runyan
Warren native Kevin Harris began serving a seven-year federal prison sentence in March for engineering a $20 million Ponzi scheme based from a former electrical workers union hall on Parkman Road Northwest.
But the U.S. Commodity Futures Trading Commission has worked the past two years to impose civil penalties and return some of the $15.7 million the enterprise stole from hundreds of investors.
Recently the commission’s attorneys filed a memorandum with U.S. District Court Judge David Dowd of Akron asking for sanctions against Kevin Harris, his brother Keelan Harris, their Canadian business partner Karen Starr, the Warren company Majestic Enterprises Collision Repair, and UCAN Overseas.
The judge may act as soon as this month on the default judgment, sought because neither Kevin Harris, Keelan Harris, Starr, Majestic Enterprises or UCAN responded to the complaint.
The Harris brothers and Starr ran companies called Complete Developments and Investment International Inc. starting in November 2006, offering interest of between 5 percent and 12 percent per month on foreign-exchange trading, known as forex. They promised that 80 percent of the investors’ money was safe, but it was not.
The companies portrayed Kevin Harris as their trader; he and Starr had no experience in trading forex, the government said. The Harris brothers and Starr each had criminal records.
The trio hired a person from Warren who was not a registered certified public accountant to produce a report in April 2007 indicating he had audited the companies and could certify that no more than 20 percent of investments were at risk, the Trading Commission said.
By using a Canadian marketing firm, they reached hundreds of potential investors in the Toronto, Canada, area, where Starr lived, and persuaded more than 400 to invest more than $23 million. The companies made payments of $7,360,297, leaving $15,776,617 still owed to investors, the trading commission said.
The enterprise folded in October 2008, when it was no longer able to pay fake “interest” payments to investors. A Ponzi scheme operates by paying interest for a time to give the false impression there are actual investments, when in truth the payments actually come from other investors’ funds.
When Harris was sentenced in March, he was ordered to pay restitution of more than $15.7 million.
The memorandum says Majestic Enterprises, which Kevin Harris formerly ran as an auto repair shop on Parkman Road Northwest, received $302,277 from Complete Developments and Investment International. UCAN received $768,000, the memorandum says.
The Harris brothers and Starr each played major roles in the operation of the companies, the memorandum says.