Ex-O.C. Man Pleads Guilty to Running Sham Mutual Fund

A former Orange County man who created a sham mutual fund pleaded guilty Monday in Santa Ana federal court to cheating 250 investors out of millions of dollars.

From 1983 until his scheme collapsed in 1997, Wilfred J. Madon claimed to run a stock fund called Capital Growth Group, which he said had $46 million in assets and compared favorably to Fidelity Investments’ high-profile Magellan Fund, prosecutors said.

But little money, if any, was used to purchase stock, prosecutors said, and Madon acknowledged using the money to fund his own unprofitable ventures and to pay gambling debts. Court documents accuse him of taking in more than $20 million and losing a total of $7.9 million.

Prosecutors allege that Madon operated a Ponzi scheme, paying earlier investors with money from new ones.

Madon, 66, who entered his guilty plea before U.S. District Judge Alicemarie Stotler, is scheduled for sentencing Oct. 30. Under federal sentencing guidelines he faces three to five years in prison for his pleas to four counts of securities fraud and mail fraud, Assistant U.S. Atty. Gregory Weingart said.

Madon’s attorney, Craig Wilke of Santa Ana, argued that the sentence should be less because of Madon’s age, poor health and “extraordinary acceptance of responsibility.”

In 1998, the Securities and Exchange Commission settled a separate civil suit against Madon, freezing his assets. The FBI arrested him last month in Portland, Ore., where he had moved this year from his home in gated Coto de Caza in south Orange County.