Columbia investor pleads guilty to $3 million laundering scam

A former employee of the Vertical Group, a Columbia financial services company, pleaded guilty in an U.S. District Court on Wednesday to conspiracy to commit money laundering, Bradley J. Schlozman, U.S. Attorney for the Western District of Missouri, said in a news release.

Sylvester L. Mitchell III, 36, admitted to his role in a $3 million investment scam, Schlozman said.

From 2004 to 2005, Mitchell solicited investments by telling lenders if they invested $50,000 or more with him they would get a $1 million return within a year. He called the practice “standby letters of credit.”

Standby letters of credit are bank-backed security instruments that are often used in international trade.

Investors were also told there was securities- and bond-backed insurance on their investment worth millions of dollars held in the name of Dennis Cole, 58, of Clearwater, Fla.

Cole, who has since pleaded guilty to his role in the scam, did not have the securities, the release said.

Mitchell told investors that a multimillion dollar investment deal had gone through, using fake documents to support the claim, the release said.

Mitchell also told investors that their money was safely being invested in other “standby letters of credit,” the release said.

Instead of investing the money, the release said, Mitchell gave money to the wife, mother, brother and girlfriend of another person involved, even after that person was arrested. Mitchell also used the money to pay attorney bills of the co-defendant, who was not named, the release said.

In May 2005, the state sought an injunction against the Vertical Group after an FBI investigation found evidence of “prime bank fraud.”

The Vertical Group is a Columbia-based financial company involved in home mortgages, insurance, securities, real estate investment and corporate finance.

Mitchell was indicted by a federal grand jury in January along with Daryl Brown, 28, also of Columbia.

Mitchell will be sentenced after a presentence investigation by the U.S. Probation Office. He faces up to 40 years in federal prison and fines up to $750,000.