Woodstock Man Gets Six Years in Federal Prison

A Woodstock man was sentenced to six years in federal prison for engaging in an investment fraud scheme that swindled more than $5 million from about 150 victims who invested in funds he purported to operate.

Scott M. Ross, 42, pleaded guilty to mail fraud in March and was sentenced Tuesday, Patrick J. Fitzgerald, U.S. Attorney for the Northern District of Illinois, and Robert D. Grant, special agent in charge of the Chicago Office of the FBI, announced Wednesday.

He will begin serving his sentence in October.

According to prosecutors, Ross misused money he raised from investors for his own benefit, including salary and a stadium skybox, and to make Ponzi-type payments to certain customers who complained.

Federal authorities said Ross used the money to purchase things like a $75,000-a-year skybox at the Indianapolis Colts’ football stadium and to pay his $319,000 salary.

U.S. District Judge William Hibbler also ordered Ross to pay outstanding restitution totaling $3,699,834.

According to a release, Ross owned and operated Harbor Wealth Management LLP, and two subsidiaries that together engaged in the insurance investment business primarily from an office in Schaumburg. Between 2006 and 2009, Ross’ businesses offered and sold investments to the public in three investment funds: the Elucido Fund LP, the Moondoggie Fund LP, and the Maize Fund LP.

Ross raised about $1.9 million from about 25 investors in the Elucido Fund, which claimed to invest in life settlement contracts, described as the purchase of the right to receive death benefits upon the death of the insured on a life insurance policy.

He raised about $3.1 million from approximately 134 investors in the Moondoggie Fund, which purported to invest in the stock of Moondoggie Technologies Inc., and its reported development of a dual-sided computer monitor.

Ross caused more than 150 of these investors to lose more than $5 million they invested in the two funds by commingling the money he raised and misappropriating funds for his own use and benefit. He made fraudulent statements to investors about his business and investment background, the risks involved in the investments, the return on investment, the use of investors’ funds, and the status of investments, authorities said.

As part of the fraud scheme, Ross falsely represented to certain investors that he was board certified in estate planning; was a certified fund specialist, and “had passed a comprehensive seven-year background review with all regulatory bodies, including the NASD, SEC, and all state insurance and securities boards,” authorities said.

Ross falsely represented to investors in the Elucido Fund that they could expect returns of as much as 34 percent. In offering and selling interests in the Moondoggie Fund, Ross falsely represented that Moondoggie Technologies had agreed to buy back its shares purchased by the fund for $3.75 each in 30 months and later for $5 per share in 36 months; however, Moondoggie Technologies never agreed to repurchase any of its shares at any price, authorities said.