RALEIGH, N.C. – Carolyn Grant was a well-known politician in the Raleigh, North Carolina, area, but she used the trust she'd earned over several years to pull off a $14 million Ponzi scheme.
Grant was convicted of mail fraud and sentenced to more than six years in federal prison. She was also ordered to pay $13 million in restitution.
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But that was after the well-connected former head of the local chamber of commerce bilked investors out of thousands of dollars each.
"These investors were doctors, lawyers, businessmen, businesswomen, who often times were investing large sums of money with her because of the trust she had," said Michael Carroll, U.S. postal inspector.
Victims believed they were investing in a real estate development deal with a 20 percent return on their investment.
"That is an exceptionally high rate of return and honestly it was probably based mostly on her reputation," Carroll said. "Her political connections and her reputation is, in my opinion, what really sold a lot of these investors."
One of those investors is a client of fraud victim attorney Johnny Loper.
"She felt a sense of betrayal," Loper said of his client. "She mined her social network, she called her friends and acquaintances from all over. I know we saw a list that had to be 20, 30, 40 people long."
Postal inspectors said another reason Grant was able to keep the money coming in was her use of so-called "lulling payments."
"If you made a small investment up front, you would get your payment back or your interest on that payment, which would then lend confidence that you open up your bank account a little further and offer more money to that investment in hopes of earning more dividends and interest," Carroll said.
Grant received more than $14 million over four years, but her development deal was nothing more than a Ponzi scheme.
"Paying previous investors with current investor money, and then she was converting the money to personal use as well – essentially using none of the money for the purposes that were told to investors," Carroll said.
Postal inspectors warn that an unrealistically high rate of return is often a red flag for a bad investment.