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updated: 11/16/2010 7:43 PM

Men charged in $7 million Ponzi scheme

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Two McHenry County businessmen were indicted by a federal grand jury Tuesday following accusations that the men defrauded investors out of more than $7 million.

Francis X. Sanchez, 49, of Woodstock and James D. Bourassa, 53, of Gilberts face 20 counts of mail fraud and wire fraud after using the majority of investors' funds to pay their own salaries, other expenses and to pay out initial investors with new investment money, according to the indictment.

The men operated a business known as, later known as InvestForClosures Financial, that brought in investments to buy distressed houses, rehabilitate the houses and sell them at a profit, according to the indictment.

The indictment states that the business was not making enough money from property sales to pay the interest owed to investors but was using cash received from new investors to pay the prior investors.

To prevent investors from demanding their money back, the men told investors they were developing a real estate project in Mexico known as the "Sands of Gold," according to the indictment.

The men marketed the project as an exclusive, luxury residential community that would be built on oceanfront property, according to court records.

Sanchez and Bourassa falsely told investors the government of Mexico had promised to invest "millions of dollars" in infrastructure necessary for the development and that they were finishing negotiations with a major hotel chain for the construction of a hotel at Sands of Gold, according to the indictment.

Each charge brought against the two carries a maximum potential sentence of up to 20 years in prison and a fine of up to $250,000, as well as restitution ordered by the court.

An arraignment hearing is scheduled for Nov. 23.