Guy W. Gane Jr.'s investors may never get much of their money back, but they got the satisfaction of seeing Gane in court Friday, charged along with two of his cohorts with mail fraud in the alleged bilking of $5.8 million of their savings.
Gane, 55, who promised 10 percent returns on investments of waterfront property he never bought, was finally charged by the federal government, nearly two years after U.S. postal inspectors raided his Sweet Home Road offices in Amherst.
The U.S. attorney's office charged Gane; his attorney, James F. Lagona, 50; and Ian Campbell Gent, 58, all of Amherst, following a grand jury indictment.
All three men told U.S. Magistrate Judge H. Kenneth Schroeder Jr. that they had no funds to hire an attorney.
Gane had been assigned a federal public defender a short time ago after learning he was a target of the grand jury, and Gent was assigned a court-appointed attorney, Robert Liebers, at the same time.
Lagona, a practicing attorney, told Schroeder that he has not worked since February 2009, has $120 in his bank account, another $400 in his attorney's account, and makes $800 a month teaching two health law classes at the University at Buffalo.
Lagona said his house in Amherst is being foreclosed on, and another 10 to 15 properties he owns on the East Side of Buffalo also are in the process of foreclosure.
Schroeder said Lagona qualifies for a free government attorney, drawing anguished looks from several investors in the courtroom.
Tom Campbell, a public relations consultant who lost $33,000 to Gane and once considered him a friend, was in the courtroom.
"I ran into him at Wegmans two weeks ago and let him have it," Campbell said of Gane. "There was no remorse, no apologies."
The indictment lays out a scheme in which Gane and his company, M-One Financial Services, started selling unregistered securities in January 2006.
The investments were described as debentures and were linked to waterfront property in Maine, as well as college dormitory construction.
Gane and his sales staff, including Lorenzo Altadonna, who married Gane's niece, convinced mostly retirees to transfer their IRAs and other retirement funds to his company. Altadonna announced his intention to plead guilty last week and is expected to testify against Gane.
Operating out of newly built offices on Sweet Home Road -- the building has since been foreclosed on -- Gane and his salesmen eventually took in $5.8 million from more than 50 investors, Assistant U.S. Attorney Gretchen L. Wylegala said.
The money was sent to a California investment firm, and some of the investors believed their money was on deposit there, Wylegala said.
Instead, the indictment said, Gane then had the investment firm send the money back to him.
Prosecutors said Gane took nearly $1 million of the investor funds for his own purposes. Money from newer investors was used to repay those people who demanded their money back, the indictment said.
U.S. Attorney William J. Hochul Jr. said the adage was proved right again.
"In this case," Hochul said, "The deal was too good to be true."
Lagona, as the company attorney, was charged in the indictment with drawing up the phony debentures and then writing letters to investors falsely assuring them of the value of their investments.
The scheme was first uncovered in August 2007, when investigators from the Financial Industry Regulatory Authority made an unannounced visit to M-One offices, following up on earlier inquiries.
By May 2008, U.S. postal inspectors raided Gane's office, and the U.S. Securities and Exchange Commission shut down the business.
SEC attorneys filed suit and seized whatever money Gane still had in the bank.
Hochul defended the delay in bringing the criminal charges, saying that financial crimes are complicated and that prosecutors wanted to make sure they had everything right.
All three men were released on their own recognizance but turned in their passports, including Gent, a Canadian citizen.
Lagona, a psychic who often led Gane and other members of the staff in readings on their financial plans, was denied permission to keep his Nexus card to cross into Canada.
Lagona told the judge that he is a chaplain who leads meetings in Sherkston Shores from spring to fall. Schroeder said that because he is charged with felonies, the Canadian government would not allow him to cross the border.