Former Los Al Base Commander to Go to Prison for Ponzi Scheme

By John Crandall

ORANGE COUNTY, CA -- After confessing to a Ponzi scheme that bilked about $3 million out of two dozen people, the former commanding officer of the Los Alamitos military base was sentenced to 8 years in federal prison Tuesday, officials said.

Timothy Melvin Murphy, former commander of the Joint Forces Training Base, was sentenced by United States District Judge David O. Carter, according to a Department of Justice spokesman. Carter also ordered Murphy, 70, to pay full restitution – $2,953,758 – to his fraud victims.

Murphy was the commanding officer of the Los Alamitos base in the 1980s but retired from the National Guard in 2006, prosecutors said.

He pleaded guilty to one count of mail fraud. According to Thom Mrozek, a spokesman for the United States Attorney’s Office, Murphy admitted he used his business, the Orange-based Capital Investors Inc., to offer fraudulent investment opportunities.

As part of the scheme, Murphy, a resident of Orange, created false account statements to mislead his clients into thinking that their money was properly invested and was generating the promised income. He pretended the company typically yielded annual returns of 12 percent and, in some cases, came with “guaranteed” rates of return.  

Instead of using the victims’ money to make investments, Murphy used the funds to make Ponzi payments to earlier investors and to pay for a variety of personal expenses, including refurbishing and maintaining classic automobiles, making payments on home loans and buying a membership at a weight loss clinic, according to prosecutors.

Murphy also lied to most of the investors that their money would be invested in truck-leasing companies based in Gulfport, Mississippi, officials said. The false documentation included bogus account statements that appeared to be issued by “The Sterling Trust Company,” a third-party financial services firm.

The FBI investigated the case against Murphy.

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