Oscar Villarreal

A new FBI document sheds more light on how former Gates Mills resident Oscar Villarreal wooed Cleveland investors. A federal grand jury indicted Villarreal, a native of Mexico, earlier this week for fraud. (Bob Migra)

CLEVELAND, Ohio -- Oscar Villarreal, the suspected swindler who set up shop in tony Gates Mills, put on a real show in 2009 to hook some of Cleveland's biggest players in business and philanthropy.

Villarreal invited several of them to his native Mexico to tour his business operations and meet his business contacts.

"During the trip, two families with separate security teams, including armored SUVs, greeted and transported the potential investors," according to an FBI affidavit recently made public.

Villarreal then delivered a "very professional presentation" to the investors and showed them a Mexican steel company with "significant inventory," according to the affidavit.

They were impressed.

A federal grand jury indicted Villarreal Tuesday on 19 charges of fraud and money laundering related to an alleged $9.6 million Ponzi-like investment scheme. Securities and Exchange Commission sued him last month for the same alleged practices. (UPDATE Monday, Sept. 22: Villarreal's attorney, John McCaffrey says Villarreal repaid investors $12 million. You can read more about this here.)

The 39-page affidavit was unsealed after Villarreal's indictment Tuesday. The affidavit -- made by an FBI agent who is former stockbroker -- was used to support the government's case against Villarreal. It offers new details about how Villarreal, 27, convinced Clevelanders and others to give him millions of dollars, which he promised to invest in oil-drilling and steel companies doing business in Mexico.

The affidavit also sheds more light on how the investment schemes caught the government's attention. You can read the affidavit in the box below. The Northeast Ohio Media Group reported last September that several Cleveland businessmen were worried about their investments and that Villarreal's funds were the subject of FBI and SEC inquiries. (For more details about the Villarreal's investments, read the Northeast Ohio Media Group's story on the SEC lawsuit here.)

The FBI affidavit identifies one of the investors on the 2009 trip to Mexico as "Investor B," who soon after the trip agreed to invest $50,000 with Villarreal and join the advisory board of WW Capital Partners, one of three investment offerings Villarreal pushed. Investor B later resigned his position because of a conflict of interest.

The description of Investor B matches that of James C. Boland, a retired partner at Ernst & Young and former president of the Cleveland Cavaliers, who is now chairman of JobsOhio - the state's non-profit economic development agency.

Boland told the Northeast Ohio Media Group in 2013 that he joined the advisory committee after traveling to Mexico.

"I did go to Mexico because I wasn't about to go on the board until I see what the hell was going on," Boland said in the 2013 interview. Boland also said then that he invested $50,000 but left the advisory board soon after because of a conflict of interest.

Boland and others interviewed in 2013 said that Christopher M. Connor, chairman and chief executive of The Sherwin-Williams Co., also traveled to Mexico in 2009. The Northeast Ohio Media Group obtained documents last year that show more than a half-dozen Cleveland business leaders originally lent their names to one of Villarreal's funds.

The affidavit doesn't mention any investors by name but the indictment refers to several investors by their initials. These initials match several investors identified earlier. You can also read the indictment in a box below.

The FBI affidavit states Investor B and others met Villarreal through a "mutual friend," who is not identified by name. The affidavit says another investor, identified as Investor A, met Villarreal in 2007 or 2008 and ultimately invested $1.57 million in Villarreal's offerings.

Investor A described Villarreal as the "poorest provider of information you will ever meet," according to the affidavit.

Villarreal raised nearly $10 million between 2008 and 2013 from investors, who believed they were getting limited partnerships interests in his funds. But the federal government says he used the bulk of the money to cover speculative personal trades in the stock market, where he lost millions. He also used portions of the investors' money on personal items, including the purchase of $100,000 Steinway piano and a $134,000 Lamborghini sports car, according to the affidavit.

Villarreal came under federal scrutiny in December 2012, when the Cleveland Division of the FBI received a referral from the Ohio Department of Commerce's Division of Securities, according to the affidavit. The referral from the commerce department included a complaint filed by a private investigator hired by an unidentified investor to dig into Villarreal's businesses holdings and investment claims.

The FBI then began interviewing investors and an accountant for Investor A. The FBI also recorded a meeting between Investor A's accountant and Villarreal, according to the affidavit.

On August 22, 2013, the FBI raided Villarreal's Pepper Pike office, where agents interviewed four employees who knew little about Villarreal's investment operations, according to the affidavit.

"It is unusual for employees of a legitimate investment company to not have heard of the investment company that they purportedly work for, that the employees would be unaware of their company's one and only fund; and that none of the employees would have any interaction with investors and that the employees would have little to no experience in the finance/investment industry," the affidavit states.

The workers largely performed bookkeeping and payroll and back-office matters for a separate Villarreal company, the affidavit said.

Nearly a week after the raid, Villarreal flew from Cleveland to Mexico City. A few days later, on September 3, he traveled to Dallas to meet with Cleveland investors and executives of a local oil concern, who pressed Villarreal for answers. He didn't say much and spent most of his time looking at his computer but he agreed to cooperate with an independent audit of his businesses and investment offerings, according to the affidavit.

After the meeting, Villarreal flew back to Mexico and then tried to arranged to have his household belongings moved from two Gates Mills homes to Mexico, the affidavit says.

Through his brother, Jorge, Villarreal offered a Willoughby moving company two checks totaling $28,000 and "$7,000 in $100 bills," to haul his belongings to an undisclosed location in Texas and transfer the belongings to other trucks headed to Mexico, the affidavit states. It remains unclear if the company, which raised concerns about the unusual nature of the request and payment, completed the move.

The FBI believes Villarreal remains in Mexico today.

This post will be updated with responses from investors and representatives for Villarreal as they become available.

<a href="http://s3.documentcloud.org/documents/1302996/oscaffid.pdf">Oscaffid (PDF)</a> <br /> <a href="http://s3.documentcloud.org/documents/1302996/oscaffid.txt">Oscaffid (Text)</a>