An insurance agent pleaded guilty Thursday in a promissory note scam that bilked nearly 80 clients out of $8.2 million.
John Hogan, 77, of Swissvale, Penn., entered his pleas to five counts of mail fraud in the scheme run out of his Hogan & Associates business. Prosecutors will ask for more than five years in prison at sentencing, scheduled for Aug. 30.
Hogan was a licensed insurance agent who sold whole life insurance policies to his clients. He also claimed to be a financial planner, though he wasn’t licensed to sell investment products and isn’t a certified investment adviser.
Beginning in 2002, Hogan persuaded his clients to borrow against the cash value of their insurance policies so he could lend their money to other clients in the short term, authorities said. Hogan promised they’d get at least a 10 percent return, but he instead used the money to prop up 25 homes and investment properties he owned across the country, including in Pennsylvania, Arizona, Florida and Hawaii, authorities said.
Federal authorities have tried to seize the homes, but most are underwater, meaning Hogan owes more on their mortgages than the properties are worth. As such, if they’re sold, banks will get the money and Hogan’s clients will receive little or nothing in return.
Assistant U.S. Attorney Gregory Melucci described the fates of three clients, including one woman who frittered away $1.7 million by sending Hogan 249 checks, each for less than $10,000. She’s received a few interest payments, but none of the principal has been repaid, Melucci said.
In reality, Hogan had no borrowers and spent the money trying to maintain the properties or on condominium fees or to pay his own high-interest debts, Melucci said.
Melucci described it as one of the biggest Ponzi schemes in the 25-county federal court district in western Pennsylvania.
Defense attorney Jerry Johnson said Hogan is remorseful and didn’t set out to swindle anybody. He contends Hogan’s real estate investments crashed when the housing bubble burst in the Great Recession, and he has been playing catch up ever since.
Hogan will remain free on bond until sentencing.
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