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CEDAR RAPIDS — A former Forest City investment adviser, previously serving prison time for tax fraud, was sentenced last week to over 14 years for stealing money from his clients to fund the operation of an ethanol plant in Hopkinton.

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Darrell Smith, 62, pleaded guilty last year in U.S. District Court to one count each of wire fraud and aggravated identity theft. During the plea, Smith admitted that he was a broker and adviser for several investment firms. From 2010 to 2013, Smith withdrew funds from his clients’ accounts without their knowledge or authorization. The funds were then transferred to Energae, LP, a partnership Smith had formed with another individual to invest in bioenergy companies.

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Evidence shows Smith used those funds to pay expenses related to the operation of Permeate Refining, LLC, which operated a now-defunct ethanol plant in Hopkinton. Smith used authorizations allegedly signed by the client authorizing the withdrawals from the investment account.

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As a broker and investment adviser, Smith solicited many of his clients to invest money in Permeate and other biofuel companies by having those funds transferred to Energae. Many clients agreed to this but other didn’t.

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As part of the scheme, Smith either used pre-signed, blank authorization forms or forged his clients’ signatures without their authorization. Court documents detail allegations regarding three of Smith’s clients in 2012 and 2013 — an Alaska resident, a Forest City clergyman and a trust created for a retired veterinarian from Mississippi.

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Sentencing documents show Smith defrauded 10 victims over the course of the scheme. Smith disputed that some did not give him permission to use for Energae. He also disputed the amount of loss, saying the restitution was lower, according to court documents.

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In 2013, Smith consented to having his securities agent license and insurance producer license in Iowa revoked.

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Smith was convicted of payroll fraud last year, which stemmed from the same fraud scheme, and served a year in prison.

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U.S. District Senior Judge Linda Reade sentenced Smith, in this recent case, to 175 months in prison on the two convictions. He was also ordered to $1,056,910 in restitution, $2,947 for prosecution fees, and three years of supervised release.

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l Comments: (319) 398-8318; trish.mehaffey@thegazette.com

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