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A Weber County man has been sentenced to serve nearly five years in federal prison and ordered to pay $6.5 million in restitution to the people he defrauded in a scam that involved a Vernal real estate project.

SALT LAKE CITY — A Weber County man has been sentenced to serve nearly five years in federal prison and ordered to pay $6.5 million in restitution to the people he defrauded in a scam that involved a Vernal real estate project.

Armand R. Franquelin, of Liberty, was sentenced Wednesday in U.S. District Court to serve 57 months in federal prison for securities fraud and money laundering. Judge Dale Kimball also ordered Franquelin to make restitution to his victims and placed him on supervised release for three years after his prison sentence is complete.

Franquelin and Martin A. Pool, of Atlanta, were each charged in April with one count of securities fraud and one count of money laundering. Court records show they pleaded guilty to the charges in May. Pool was sentenced in September to serve 6 ½ years in federal prison.

Franquelin, 57, and Pool, 44, admitted that from 2006 to 2010 they convinced investors to convert traditional IRAs to self-directed IRA accounts and invest their funds in a residential real estate project in Vernal known as Haven Estates, according to court records.

In return, investors were given notes promising monthly interest payments at annual rates between 8 percent and 20 percent, federal investigators said. Pool and Franquelin, operating as the Elva Group, told investors their funds would be used to develop Haven Estates and promised to secure their loans with first lien position on property at Haven Estates, authorities said.

No investors ever received any collateral or any interest in real property in Haven Estates or anywhere else, court records show. Instead, federal authorities said investor funds were used by Franquelin, Pool and their associates for personal benefit and to pay interest to earlier investors as "Ponzi payments."

"The Ponzi payments had the effect of lulling the earlier investors, persuading them to leave their funds in the company and inducing them to renew their promissory notes from time to time," the U.S. Attorney's Office for Utah said in a statement issued Thursday. "The payments also enticed new investors to invest."

Investors were not told of mortgages already in place on Haven Estates, according to investigators, and when the Elva Group began defaulting on the loan for Haven Estates, investors were not immediately informed. Ultimately, Haven Estates was foreclosed.

The case against Franquelin and Pool was built through an investigation conducted by agents with the FBI, the IRS, the Utah Division of Securities, the Alabama Securities Commission and the Baldwin County District Attorney's Office in Alabama.

"This commission is proud to have joined the collaborative efforts of the federal and state law enforcement agencies and their professional staff members to see that justice is served for the victims in this important case," Alabama Securities Commission Director Joseph Borg said in a statement, adding that the case sends a message "that this financial crime, and others like it, will not be tolerated and will be prosecuted to the fullest extent of the law."

Email: gliesik@deseretnews.com

Twitter: GeoffLiesik