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A federal grand jury has indicted a Santa Rosa man on charges he stole $2 million in an investment scheme targeting the founder of a Virginia nonprofit that provides online classes to students around the globe.

Douglas Dean Hollingsworth, 62, is accused of taking loans under false pretenses from Appu Kuttan, chairman of the National Education Foundation, and using the money for his own financial gain.

"To me, it's stealing from kids," said Kuttan, a businessman and philanthropist who founded the Alexandria, Va., charity in 1989. "It's horrible."

Hollingsworth was indicted on nine counts of wire fraud. If convicted, he faces a maximum 20-year federal prison sentence for each count.

He was arrested Sept. 1 and pleaded not guilty at his arraignment in U.S. District Court in San Francisco. He surrendered his passport and posted an appearance bond of $100,000. His next hearing is Sept. 28.

Hollingsworth would not answer questions about the indictment, but issued a statement through his attorney representing him in a separate civil case.

"It would be inappropriate for me or any of my advisors to comment indepth on a pending criminal case. We have not had a chance to review fully the indictment. However, we feel this is more in the nature of a civil dispute and we will address it at the appropriate time," Hollingsworth said in the statement, read by attorney Bob Anderson of Lanahan Steever & Anderson LLP.

Hollingsworth is represented by Chris Andrian in the criminal case. He could not be reached for comment.

The 11-page indictment accuses Hollingsworth of fraud occurring between June 2008 and May 2009 when he was doing business as Baytree Investors. The alleged victim — identified only as A.K. in court papers — is described as someone introduced to him by a mutual acquaintance.

Hollingsworth claimed to have created a profitable trading method that would bring significant returns in the form of high monthly interest rates, according to the indictment.

After communicating with Hollingsworth by phone and email, Kuttan agreed to make the first of nine loans, wiring $250,000 to Hollingsworth's Bank of America account on July 1, 2008.

Hollingsworth promised to pay back the loan at the rate of 4 percent per month, beginning with a $10,000 payment within 30 days of receiving the money, the indictment said.

"Hollingsworth knew these statements were false at the time they were made to A.K. because, in fact, Hollingsworth had no intention of trading A.K.'s money," the grand jury indictment said.

About two weeks later, Kuttan entered a second loan agreement, this time for $1.2 million at 8 percent interest. The money was wired from the nonprofit's Wachovia account on July 31, 2008, the indictment said.

Seven more loans followed over the next four months. In all, Kuttan sent $2.35 million to Hollingsworth, the indictment said. Hollingsworth made one $10,000 interest payment in July 2008 and a $264,000 payment six months later, but nothing more, the indictment said.

Meanwhile, Hollingsworth's account showed no trading activity from Jan. 1, 2007, to July 30, 2010, the indictment said.

Instead, money was allegedly used for other purposes including cash withdrawals, transfers to an account Hollingsworth shared with his wife and payments to individuals, including Baytree Investors.

The money also covered personal expenses such as buying jewelry, home furnishings and food at restaurants, the indictment said.

Kuttan said in a phone interview Thursday he hoped to get some of the money back. He would not discuss details of the alleged scam.

"A lot of kids could have been helped by that money," Kuttan said.

He said his nonprofit group provides educational assistance to disadvantaged students through grants and training. It also trains adults re-entering the workforce.

"Unfortunately, people like Hollingsworth would say they love our mission so much they want to help kids," Kuttan said. "Turns out they had other ideas."

Hollingsworth was ordered to forfeit any property obtained by the transactions. More than $80,000 has already been seized from various accounts, the indictment said.

Hollingsworth and his wife, Rebecca, are named in a separate civil lawsuit from a Santa Rosa investor.

Paul Danoff is seeking reimbursement for losses of more than $1 million, said his lawyer, Tom Kelly. Like the federal case, Danoff lent money to Hollingsworth and was not fully repaid, Kelly said.

A trial in the civil case is set for Nov. 4 in Sonoma County Superior Court.