Organizers of $14 million Ponzi scheme in Montana sentenced to prison

MISSOULA, Mont. - Two men were sentenced to prison Thursday for their involvement in what was the largest Ponzi scheme in Montana history.

Between 2000 and early 2009, Robert Congdon and Keith Kovick, both 61, fraudulently purloined over $14.3 million from investors through their management of the Polson-based Cornerstone Financial, Inc.

Kovick, now of Williston, N.D., was sentenced to 2 1/2 years in prison, while Congdon, of Polson, received a two-year term in a federal court hearing in Missoula on Thursday.

Both pleaded guilty to at least 16 counts of mail fraud, wire fraud, and money laundering. The convicted businessmen will also be forced to pay $1,169,092 in restitution, and will be subjected to three years of supervised release upon completion of their prison sentences.

Focusing on brokerage of hard money loans for individuals seeking to buy real estate but unable to secure bank funding, Cornerstone began operations in 2000, but never registered with the Montana State Securities Department, as required by law. For years, the firm had a successful run by pairing borrowers with investors and pocketing a commission on each transaction.

Investigators would later reveal that, "many of the (promissory notes issued to investors) were not secured by real properties" as promised, and Congdon and Kovick "were using the investors' funds to pay prior investors, and ... for their own personal expenses," according to an offer of proof presented in the case.

By 2008, Cornerstone had come under scrutiny from both the Federal Bureau of Investigation and the Internal Revenue Service's Criminal Investigation Division. At that point, the tanking economy hampered Cornerstone's ability to attract new investors and consequently the firm began to fail to make interest payments to existing investors, who contacted the Montana State Securities Department.