Santa Rosa man at helm of DM Financial gets prison sentence for Ponzi scheme

A 76-year-old Santa Rosa man was sentenced to three years in prison Tuesday after pleading guilty to running a Ponzi scheme that federal prosecutors say netted him and a co-defendant more than?$1 million.

Paul Sloane Davis and his business partner, Diane Cobb, operated a Marin County financial services company called DM Financial that offered investors the opportunity to fund purported short-term “bridge loans” to borrowers who were purchasing real estate, U.S. Attorney Brian Stretch and FBI Special Agent in Charge David Johnson said in a press release.

Investors were given detailed information, including the name of a supposed borrower, a promissory note reflecting the amount and terms of the loan and a deed of trust securing the loan to the borrower’s property, establishing credibility for the transaction, the release said.

But the alleged borrowers received no money, nor did they know their identities were being used in the fraudulent scheme. Davis and Cobb diverted nearly all the money - about $2.4 million - for their own use or to make interest payments to prior investors to hide the nature of the scheme, the release said.

In March, Davis pleaded guilty to one count of conspiracy, four counts of mail fraud and nine counts of wire fraud, federal prosecutors said.

In addition to the prison sentence, U.S. District Judge Charles R. Breyer sentenced Davis to a three-year period of supervised release and ordered him to pay about $1.7 million in restitution to the victims of his scheme.

Cobb, now an Ohio resident, pleaded guilty to the same charges in July 2014 and is scheduled to be sentenced by Judge Breyer on Jan. 13.