A California executive linked to the 2005 disappearance of more than $2 million invested by Hawai’i teachers and University of Hawai’i professors pleaded guilty to seven counts of mail fraud and one count of money laundering last month as part of a plea agreement with federal prosecutors.

Francis William ‘Bill’ Reimers, president of Plan Compliance Group (PCG), admitted to carrying out a fraud scheme that ultimately cost investors as much as $15 million. Reimers is scheduled for sentencing on Aug. 3 in federal court in Oakland, Calif., where he faces a maximum of 20 years in prison on each count, plus fines and restitution.

PCG had been hired to process tax deferred retirement investments for employees of the Department of Education (DOE) and UH. The company provided similar services to school districts in California, Texas and Michigan.

In September 2005, funds deducted for retirement investments during the normal state payroll process were turned over to the company but never forwarded for investment. Hawai’i officials were the first to call public attention to the missing funds after employees noticed the payments did not appear on their accounts. At the time, the company blamed tax liens and changes in bank accounts for delays in processing deposits, but additional reports of missing funds quickly emerged.

The state of Hawai’i filed suit on behalf of the DOE against Reimers and PCG on Dec. 5, 2005, citing losses of $2,280,194.60. UH separately placed its losses at $421,000. Just a week after the Hawai’i suit was filed, Reimers attempted suicide. While he was still hospitalized and recovering from a gunshot wound, PCG filed for bankruptcy protection, reporting assets of less than $500,000 and outstanding debts estimated between $1 million and $10 million.

According to the federal charges, in 1996 Reimers persuaded individual clients to give him direct control investments in order to take advantage of what he claimed to be a proprietary computer program that could predict when mutual fund prices would rise and fall.

The government charges that Reimers never actually invested any of the funds he controlled. Instead, he provided false financial statements to clients while actually using their money to pay for luxury cars, vacations, hunting trips, mortgage payments and credit card payments. Reimers also used some of the money to provide start-up capital for two new companies, PCG and Univest Capital Management, both offering third party administration services.

For several years, Reimers was able to maintain a delicate shell game, using individual investors money for his own personal and business needs, while raiding the funds handled by PCG and Univest to pay dividends to the individual investment clients or to pay off those who demanded refunds.

There appears to be little chance of any substantial recovery from the ongoing bankruptcy case. The DOE would not comment on how it covered its $2.2 million loss or the more than $325,000 in legal fees incurred to date and referred questions to the attorney general, who could not be reached for comment.

---