ATLANTA — A prominent Georgia Republican accused of running a $156 million Ponzi scheme has been charged by federal prosecutors with wire fraud, pleading not guilty on Thursday.
The single count of wire fraud against Edwin Brant Frost IV is the first criminal charge to result from an investigation that began after First Liberty Building and Loan collapsed last June.
Frost waived indictment before pleading not guilty, a step that is typically a prelude to a later guilty plea in federal courts. He publicly apologized for his role earlier and is free on bail.
U.S. Attorney Theodore Hertzberg told The Associated Press that Frost is “not going to contest the charges” and is likely to enter a guilty plea in early May. He said that federal prosecutors could consider charges against others, depending on evidence.
The charge carries a potential maximum sentence of 20 years in prison, but any recommended sentence would be heavily dependent on the amount of money that a court determines was stolen. Although $156 million is the amount of money taken in by First Liberty, according to a receiver, the amount lost is lower, at least $65 million, because some investors were repaid.
Hertzberg said prosecutors intend to recommend a sentence close to the top of the 20-year range for Frost, a 68-year-old Newnan man.
“The loss here is very significant,” he said.
First Liberty said it was in the business of taking investor funds and making short-term, high-interest loans to businesses, paying investors up to 18% annual interest. While First Liberty did make loans to businesses, prosecutors allege Frost used new investors’ money to pay previous investors, the definition of a Ponzi scheme. Prosecutors also claim Frost skimmed more than $5 million of investors’ money to finance his own lifestyle. That includes spending more than $140,000 on jewelry and more than $230,000 to rent a vacation home over multiple years in Kennebunkport, Maine, the town where the family of late president George H. W. Bush famously spent summers. Prosecutors say Frost also spent more than $2 million on credit card bills.
The U.S. Securities and Exchange Commission filed a lawsuit last year against the company and Frost. Some investors had complained that criminal charges had been slow to materialize, but Hertzberg said his office has been building a case, and that because Frost is willing to plead guilty, punishment will come quickly now.
“We were operating in the background, and we’ve now come out of the shadows to ensure that Mr. Frost faces full consequences for his actions,” Hertzberg said, praising investigations by the SEC and Georgia Secretary of State Brad Raffensperger’s office.
Among those who lost money were a company run by former Georgia GOP Chairman David Shafer; Alabama state Auditor Andrew Sorrell; and a political action committee controlled by the Republican Sorrell. Party activists have said many grassroots Republicans also lost money, while others were lured by ads on shows hosted by conservatives including Erick Erickson, Hugh Hewitt and Charlie Kirk.
Georgia Secretary of State Brad Raffensperger’s office has levied $500,000 civil fines against three people his office says helped solicit money for First Liberty and asked state prosecutors to consider criminal charges against them.
A federal judge appointed a receiver who is also trying to get money back for investors. The receiver had $5.16 million in cash as of March 23, and was trying to recoup money from nearly 30 unpaid loans by First Liberty.
