FOUR CHARGED IN PONZI SCHEME ANTELOPE VALLEY VICTIMS MAY NUMBER IN HUNDREDS.

Byline: KAREN MAESHIRO

Staff Writer

LANCASTER -- Four people, one a Palmdale man, have been charged with defrauding Antelope Valley investors and others through a classic Ponzi scheme in which money from new investors was used to pay off older ones.

The victims are said to number in the hundreds, and the the loss is more than $2 million, though Los Angeles County Sheriff's Department investigators say it could be as high as $9 million.

"This was a fraudulent investment scheme where people were induced to invest money and were promised a high rate of return in a short period of time," said Deputy District Attorney James Belna of the Major Fraud Division. "The idea was to develop land in the Antelope Valley into a residential development."

Two of the defendants, Phoebus Vincent Smith and Saundra Smith, who were married at the time, operated a an investment business called Antelope Valley Banking System, also known as AVBS Inc., in Palmdale.

The Smiths recruited others from local churches and used their "Christian faith" to gain the confidence of the victims, investigators said.

The Smiths, who have since divorced, along with Gwendolyn Hughes, 57, of Los Angeles, and Craig Henry, 46, of Palmdale, have been charged with grand theft, sale of unqualified securities, and use of false statements in sale of securities as part of a 118-count criminal complaint.

The filing of charges in March followed a three-year investigation that began in January 2004 after complaints were filed with the Sheriff's Department.

Phoebus Smith, 45, was arrested by authorities in Surprise, Ariz., where he resided and was being held in lieu of $2.2 million bail.

Saundra Smith, 55, of Los Angeles and Hughes were free after posting $140,000 bail. Henry remained in custody in lieu of $225,000 bail.

Henry, Hughes and Phoebus Smith have pleaded not guilty, and Saundra Smith is scheduled to be arraigned this week.

Detective David Lingscheit said there were about 1,000 victims in the Antelope Valley, the state and throughout the United States.

Individual losses ranged from $100 to $150,000, Lingscheit said.

Local churches hit by the scam included Antelope Valley Christian Center in Lancaster and United Christian Fellowship in Palmdale, Lingscheit said.

The Smiths had operated a similar investment operation in Carson called "Cash Flow Creators" from November 1999 to June 2000, then moved to the Antelope Valley in July 2000, investigators said.

Phoebus Smith was described as being the ringleader. "They lived a lavish lifestyle. Phoebus Smith spent money on clothing, jewelry and cars," Lingscheit said.

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