Colorado Man Sentenced In $5 Million Cattle Ponzi Scheme

A Colorado rancher was sentenced to 41 months in federal prison after pleading guilty in a cattle ponzi scheme that defrauded more than 100 investors of nearly $5 million.

Richard K. Sears, 73, entered a guilty plea last May to one count each of mail fraud and money laundering. He faced a maximum of 30 years imprisonment on those charges alone. He also agreed to the repayment of investors’ losses. In exchange, federal prosecutors dropped nine other charges.

According to court records, Sears began the scheme in 2008 with the goal of developing a new breed of cattle called Rocky Mountain Romangus. The breed was to be the result of cross-breeding Angus heifers with Romangnola bulls, but investigators said the breed never became a reality under Sears’ management.

Sears’s proposal was to use investors’ cash to purchase Angus cows he would then lease back to mate with Romagnola bulls, a breed whose history can be traced to the late 19th century in the Emilia-Romagna region of Italy. Prosecutors said Sears offered to handle managing the herd and to cover all costs related to its care.

The case indictment says Sears operated “Trophy Outfitters, Inc.” and he was the leasee of several southern Colorado properties for hunting. He solicited hunting customers with mail advertisements and appealed to those customers to invest in the expansion of his cattle herd. Sears purchased heifers using the investors’ “entry fee,” then breed and care for the heifers and keep the calves.

In return, investors would receive an annual payment of 10% of what they paid in, and the right to either reclaim cows after a certain period of time, or the return of their full investment, prosecutors said. Sears would keep all the calves born as a result of the arrangement.   

In 2011, however, the cattle operation was under stress, which is when prosecutors claim the business began its fraudulent activity. Prosecutors say he never bought all the cattle he promised he would, and ceased buying new stock at all after 2011, yet he continued to raise money.

Sears admitted the operation was suffering financial issues due to drought, increasing hay and feed costs, reductions in available irrigation water and a disease that caused the herd to be quarantined.

Despite those problems, Sears continued raising money, prosecutors said. He received an additional $800,000 from a dozen new investors with whom prosecutors said Sears was not truthful about the condition of the program. The new funds, prosecutors said, was used to cover earlier losses. In some cases Sears accepted funds but purchased only a fraction of the new heifers specified in the contract, or none at all.

Prosecutors also said Sears failed to disclose to investors that he used money raised through the cattle scheme to repay $278,274 to the Internal Revenue Service to settle a 2013 judgement in which he failed to file an income tax return.

In July 2014, one investor became suspicious and filed a court order demanding Sears’ herd be inventoried. Colorado brand inspectors determined Sears’ herd was far short of the number he claimed to own with his investors. Sears filed for bankruptcy in 2015. Federal prosecutors filed their indictment against Sears in 2019.

“Sears promised investors that he would purchase or acquire in excess of 5,000 cows in total for such investors,” the indictment reads. “Over the course of the scheme, however, Sears only purchased or acquired, and branded approximately 2,000 cows for investors despite his promises.”

U.S. District Court Judge Robert E. Blackburn sentenced to 41 months in federal prison, three years supervised probation upon his release, and restitution for the 111 investors in the amount of $4,969,384.35.

“Creative fraudsters may go to great lengths to hide their crimes, but we are going to uncover them,” said United States Attorney Cole Finegan.  “Dedicated experts in this office and our law enforcement partners use painstaking means to stop complicated fraudulent schemes and bring fraudsters to justice.”

“This complex case required thousands of hours of investigation by U.S. Postal Inspectors and other investigative staff,” said Ruth Mendonça, Inspector in Charge of the Denver Division of the U.S. Postal Inspection Service. “This sentence makes every minute spent unraveling this scam worthwhile.”

Sears has until noon on March 1, 2022, to report to the U.S. Bureau of Prisons to begin serving his prison term.