Former Forest City investment broker convicted, again, in fraud scheme

CEDAR RAPIDS - A former Forest City investment adviser, already serving federal time for tax fraud, pleaded guilty Wednesday to stealing money from his clients to fund the operation of an ethanol plant in Hopkinton.

Darrell Smith, 61, pleaded guilty in U.S. District Court to one count each of wire fraud and aggravated identity theft. Smith admitted during the plea and evidence presented in prior hearings established that he was a broker and adviser for several investment firms. From 2010 to 2013, Smith withdrew funds from his clients' accounts without their knowledge or authorization. The funds were transferred to Energae, LP, a partnership Smith had formed with another individual to invest in bioenergy companies.

Evidence shows Smith used those funds to pay expenses related to the operation of Permeate Refining, LLC, which operated a now-defunct ethanol plant in the small, Delaware County city of Hopkinton. Smith used authorizations allegedly signed by the client authorizing the withdrawals from the investment account.

As part of the scheme, Smith either used pre-signed, blank authorization forms or forged his clients' signatures without their authorization. Court documents detail allegations regarding three of Smith's clients in 2012 and 2013 - an Alaska resident, a Forest City clergyman and a trust created for a retired veterinarian from Mississippi.

In 2013, Smith consented to having his securities agent license and insurance producer license in Iowa revoked.

Smith was convicted of payroll fraud last year, which stemmed from the same fraud scheme, and is serving a year in prison.

U.S. District Judge Linda Reade, in a previous ruling, said Smith is a 'serious risk to obstruct justice or attempt to obstruct justice.” She noted that while on pretrial release in the payroll tax fraud case, Smith violated a no-contact order, made misrepresentations to the court and distributed a report to prospective investors that contained several misrepresentations.

Last year, a U.S. Department of Agriculture official from Ames testified at one of Smith's hearings that a document with a USDA letterhead that Smith filed in federal court was forged.

The USDA official had repeatedly told Smith to stop using his signature, testimony showed.

Smith faces a mandatory minimum sentence of two years and up to 22 years in prison on his recent conviction. Sentencing hasn't been set at this time.

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