Two Sentenced for Pyramid Scheme that Victimized At Least 99 Missourians

CAPE GIRARDEAU – Two Missouri men were sentenced to more than 12 years in prison on Friday for operating a long-running Ponzi scheme that cost at least 99 victims $5.7 million.

U.S. District Judge Stephen N. Limbaugh Jr. sentenced James “Jim” Johnson, 78, to 188 months in prison and Darrell Niswonger, 69, to 150 months. Judge Limbaugh also ordered Niswonger and Johnson to repay their victims.

Johnson and Niswonger promised clients of their storefront firm in Perryville, Missouri that their investments were safe and would be placed in municipal bonds earning a moderate, 5% return. But for nearly two decades Johnson and Niswonger instead spent the bulk of clients’ money on lavish lifestyles that included country club memberships, sponsored golf tournaments, hundreds of thousands of dollars in improvements to Johnson’s home, educational expenses for a Niswonger relative and yearly salaries of $195,000. They also used some of the money to make payments to victims to lull them into believing that their investments were secure.

The crime began in 2006, when Johnson & Niswonger Financial Resources LLC began experiencing cash flow problems. Johnson and Niswonger started offering clients what they referred to as tax-free and risk-free “municipal bonds,” knowing they were really going to use the money to keep their business and themselves afloat financially. They discouraged investors from withdrawing their money and urged them to roll over their investments because they lacked the funds to make the investors whole, their plea agreements say.

The pair bilked friends, relatives, neighbors and a fund to preserve and maintain a cemetery in Ste. Genevieve County. In dozens of letters, victims described being devastated by the loss of inheritances, retirement savings and the proceeds of the sale of homes and farms.

In one letter to Judge Limbaugh, a widow wrote that she “can’t believe 2 people pretending to be your friend could do such a horrible thing. In this day and time is there no one you can trust?”

One couple wrote that “Niswonger stole what it took us a lifetime to earn. We gave up comforts and luxuries so we could be prepared for the future, and he treated our sacrifices as if they were his to squander. Even now, he continues to rob us; not just of money, but of our peace in these last years of our lives. We cannot go back and earn it again. At our age, there is no starting over.”

Another victim wrote of the theft of $25,000 that her grandmother left to her to buy a house – the only way her family could afford to buy one.

Yet another victim wrote, “I’d like to state how shaken I have become about dealing with people in a county where many still use a handshake to make a deal.”

An 87-year-old woman who invested the $150,000 proceeds of the sale of her house said she can no longer afford rent.

“Niswonger and Johnson’s scheme victimized teachers, factory workers, truck drivers, farmers, a rancher, a waitress and even one of their own employees,” said U.S. Attorney Thomas C. Albus. “Their victims were not investing to amass luxuries or pay for vacation properties but to provide for their families, buy their first house or pass on a nest egg to their children or grandchildren, and Niswonger and Johnson preyed on that desire for safe and secure investments.”

“Jim Johnson and Darrell Niswonger exploited and defrauded members of their community for personal gain. The irreparable damage they caused has finally ended and justice has prevailed,” said Acting Special Agent in Charge Christopher Flowers of the FBI St. Louis Division. “Though the devastating financial impact of their actions will not be forgotten, it is our hope that today’s sentencing brings some closure to their many victims.”

“The U.S. Postal Inspection Service is dedicated to defending the nation’s mail system from criminal activity, preserving the integrity of the U.S. Mail, and protecting United States Postal Service employees. The U.S. Postal Inspection Service values our law enforcement partners for supporting our mission to protect the integrity of the U.S. Mail,” said Ruth M. Mendonça, Inspector in Charge of the Chicago Division of the U.S. Postal Inspection Service, which includes the St. Louis Domicile Office.

Johnson and Niswonger pleaded guilty in U.S. District Court in Cape Girardeau in August to one count each of wire fraud, securities fraud and investment adviser fraud. Niswonger also pleaded guilty to four additional counts of wire fraud.

Johnson, of Perry County, and Niswonger, of Perryville, agreed to forfeit the $301,749 sales proceeds of Johnson’s home, a 2019 Audi A5 Premium, $61,734 in two bank accounts and $53,588 in brokerage accounts.

The FBI and the U.S. Postal Inspection Service investigated the case. Assistant U.S. Attorney Gwendolyn Carroll prosecuted the case.