Brent Lee Newbold, 58, of Granite Bay, was sentenced to four years and three months in prison and ordered to pay more than $2.9 million in restitution for defrauding 13 individuals and a corporate investor, United States Attorney Benjamin B. Wagner announced.
Newbold was the chief executive officer of Holy Cow, a Rocklin-based business that produced a “green” cleaning product, marketed to stores such as Wal-Mart, ACE Hardware, and Bed, Bath & Beyond. On September 3, 2015, he pleaded guilty to a scheme to defraud investors that ran from October 2007 to January 2010.
In sentencing, U.S. District Judge Morrison C. England Jr. noted that this was a classic “Ponzi scheme” in which Newbold regularly took money from investors and “used it to pay other investors, his wife, and his mortgage.” One victim who spoke at sentencing noted that Newbold was able to gain her trust, but in the end turned out to be “nothing more than a common thief.” Another victim who spoke at sentencing told the court that the financial hardships he suffered at Newbold’s hands played a role in ending his marriage.
“Brent Newbold lied not only to gain the trust of investors; he twisted the truth to use investor money for his personal expenses and conceal his scheme,” said FBI Special Agent in Charge Monica Miller of the Federal Bureau of Investigation’s Sacramento field office. “Newbold’s lies caused significant personal and financial hardship for his victims. Today’s sentencing demonstrates to Newbold and would-be fraudsters that such lies have consequences. By working with partners such as IRS Criminal Investigation, the FBI continues its work to protect the investing public and uphold the integrity of the U.S. financial system.”
“Mr. Newbold raised money from investors through misrepresentations and false promises,” said Michael Batdorf, Special Agent in Charge, IRS Criminal Investigation. “Then, without authorization, he diverted investor funds to himself and others for his own personal benefit. This chain of events led the company into bankruptcy and to Mr. Newbold’s sentence today. Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable for their actions.”
According to court documents, Newbold made a variety of misrepresentations to investors about the financial health of the company, including the company’s debt levels and how invested funds would be used. Based on Newbold’s claims, a corporate investor, Spence Enterprises, invested $2 million in Holy Cow.
Between July 2008 and January 2010, Newbold solicited 13 individual investors that were not disclosed to Spence Enterprises. Newbold falsely claimed that he was authorized to act on behalf of Holy Cow; that he owned Holy Cow; that he owned the majority of Holy Cow stock; and that Holy Cow was financially sound, stable and profitable. In some cases, Newbold provided his individual investors with false Holy Cow stock certificates, false Holy Cow purchase order reports, and corporate promissory notes.
In fact, Holy Cow bore a significant amount of debt, and Newbold continued to take additional debt related to Holy Cow. Newbold used investor funds for nonbusiness purposes, diverting it to himself and his wife, paying his mortgage, and paying previous investors. By December 2009, Spence Enterprises put Holy Cow into bankruptcy as a result of the unauthorized and undisclosed debt. The loss amount was over $2.9 million.
This case was the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Assistant United States Attorney Michael M. Beckwith prosecuted the case.