Michigan trucking fraudster sentenced to 17 years for $40M Ponzi scheme

November 29, 2023

A previously convicted fraudster was sentenced to 212 months in federal prison for his role in multiple fraud schemes, including bilking investors out of $40 million in a truck investment venture.

Franklin Ray, 52, of Canton, Michigan, was sentenced Monday in the U.S. District Court for the Southern District of New York after pleading guilty in March to four counts of wire fraud, including one count of wire fraud while he was released on bail.

Once released from prison, Ray will serve five years of supervised release and has been ordered to forfeit more than $42 million and several assets, including a 1968 Chevy Camaro.

U.S. District Judge Analisa Torres has also ordered him to pay restitution, though the amount has not yet been determined.

“In the span of less than two years, Franklin Ray engaged in four separate fraudulent schemes, including a $40 million Ponzi scheme that victimized hundreds of people and schemes that stole funds intended for those in need during the COVID-19 pandemic,” Damian Williams, U.S. attorney for the Southern District of New York, said in a statement.

What happened?

Over a 10-month period — June 2021 until April 2022 — Ray admitted he defrauded 275 investors in CSA Business Solutions LLC, headquartered in Imlay City, Michigan, telling them he had 4,704 trucks and 4,909 drivers when he only had two trucks and four drivers. He purportedly told investors that he used the $40 million to purchase over 2,000 trucks. However, that wasn’t the case.

Prosecutors claim Ray also set up a separate bank account and collected another $1.9 million from investors after his arrest in March 2022.

According to court documents, Ray induced individuals to enter into contracts with CSA Business Solutions by stating that for every $20,000 contributed by an investor, the company “would procure and operate a truck for the investor in the course of its purported trucking business.”

Investors were told the money was going toward trucks for a large, multinational e-commerce company, but Ray later told investors they could switch from the e-commerce company to have the trucks work for a multinational shipping company “if they were willing to forgo one expected payment.”

In exchange for the $20,000 investment, Ray told investors they would receive 77% of the net income derived by that truck over a seven-year period. Investigators say the truck reports sent to investors were fabricated and that the company never operated more than a few trucks.

In an exclusive interview with the FMCSA after Ray’s indictment in April 2022, agency officials speaking on condition of anonymity told FreightWaves that while CSA Business Solutions indicated on its initial Motor Carrier Identification Report Form (MCS-150) in November 2021 that it had two trucks, it ramped up its data drastically in April to show the company had 4,707 power units and 4,909 drivers. The addition of thousands of trucks and drivers came more than a month after Ray’s arrest but before the grand jury’s seven-count indictment in mid-April.

FMCSA said the drastic uptick in the purported trucking company’s number of trucks and drivers wouldn’t necessarily raise a red flag since the company was a new entrant and wasn’t due for a new-entrant audit until it hit the 12-month mark.

“FMCSA might not have any information about the indictment and the fact that they changed their number, as they can change their numbers at any time, wouldn’t raise a red flag,” one of the FMCSA officials said on a Zoom call with FreightWaves.

Typically, a safety event triggers a closer look at a carrier when it’s a new entrant, FMCSA said.

PPP, EIDL schemes

Ray also pleaded guilty to fraudulently obtaining nearly $2 million in funds meant to help struggling small businesses stay afloat during the pandemic through the U.S. Small Business Administration’s Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL).

Prosecutors said Ray submitted false information and forged documents to the SBA and commercial lenders and claimed that these businesses engaged in significant trucking business when they had minimal revenues and trucking activity. Ray also committed aggravated identity theft with respect to one of the SBA loan fraud schemes, according to the statement.

He also pleaded guilty to fraudulently inducing a Manhattan-based real estate holding company to pay a $175,000 deposit to cover startup costs for a joint venture between CSA Business Solutions and the unnamed holding company, which was why Ray was indicted on fraud charges in New York instead of Michigan.

Ray was convicted of wire fraud and bank fraud in 2008 in the U.S. District Court for the Eastern District of Michigan and released from prison in 2010. Ray, who owned Marlin Transport and MNR Productions, was ordered to pay more than $1.3 million in restitution to his victims.

“Today’s sentence shows that engaging in fraudulent conduct will have severe consequences,” Williams said.

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