Ex-Annapolis lawyer gets 99 years in Texas fraud case

Scheme used leased credit- and debit-card terminals

defendant lived on Eastern Shore

February 24, 2010|By Lorraine Mirabella | lorraine.mirabella@baltsun.com

A former Annapolis lawyer and Eastern Shore resident who was convicted of federal mail fraud in 1990 has been sentenced to 99 years in a Texas state prison for running a fraudulent investment scheme using leased credit- and debit-card terminals.

Edward S. Digges Jr., former managing partner in a now-closed Annapolis law firm, was given the maximum penalty last week by a district court jury in Collin County, Texas, after being convicted of aggregated securities fraud in Texas this month.

Digges controlled an entity called the Millennium Terminal Investment Program, which offered securities purportedly based on revenue generated from point-of-sale terminals used by merchants to process credit- and debit-card purchases, according to authorities. But the terminals didn't produce enough revenue to pay investors.

The Texas State Securities Board and the Collin County district attorney's office prosecuted Digges. Joe Rotunda, director of the enforcement division at the Texas securities board, said Digges raised at least $10 million from about 143 Texas investors, the majority of whom were elderly, and a total of $25 million nationwide.

While running the scheme, Rotunda said, Digges lived on a waterfront estate in Cambridge, Md.

Investigators began their inquiry several years ago when the products were being marketed. "We started taking a look at how many residents" were investing and found "a sizable number had been lured into this scheme," Rotunda said.

According to authorities, a sales force composed mostly of insurance agents would find investors to buy terminals at $5,000 apiece. The investors were promised a 12 percent annual return - payments of $50 a month for each terminal. Millennium also said investors could sell the terminals back to the company after five years and recoup their investment in the equipment.

But authorities said the program operated at a loss. Most lease payments made to investors came from other investors. Company principals also used investor money to pay personal expenses.

Digges did not disclose to investors that he spent two years in federal prison after a 1990 conviction. That year, he had pleaded guilty to mail fraud for defrauding Dresser Industries Inc., his major client at the former Annapolis firm of Digges, Wharton & Levin, out of $3.1 million in an overbilling scheme. Digges also never disclosed to the Texas investors that he had a civil judgment against him for $3.6 million in a lawsuit stemming from the overbilling, authorities said.

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