Former EarthWater CFO caught in a multimillion-dollar, high-yield investment fraud scheme

On June 7, the former Chief Financial Officer of Dallas-based EarthWater Limited (EarthWater) pleaded guilty to 22 crimes related to a multimillion-dollar high-yield investment fraud operation that targeted elderly victims. A third person who sold EarthWater securities pled guilty to one felony linked to the investment fraud scheme today.

According to court documents, Barnes, as EarthWater’s CFO, and Duchinsky, as an EarthWater stock salesperson, engrossed in a deceptive scheme to persuade individuals in the United States, the United Kingdom, and Canada to invest in EarthWater under the false presumption that their investment would increase substantially in value in the near future. Barnes, Duchinsky, and their co-conspirators made materially false and fraudulent promises to investors in conjunction with the scam, claiming that the bulk of investor cash would be used to support EarthWater’s activities. In actuality, the money was utilized to pay Duchinsky and others undisclosed, exorbitant commissions for selling EarthWater stock on Barnes’ behalf.

Also, EarthWater’s former President, Beth Ellen DeGroot, 62, of Plano, Texas, pled guilty in a separate case on May 17 to conspiring with Barnes. Following the freezing of the company’s bank accounts, DeGroot and Barnes colluded to instruct EarthWater’s payroll processor to continue paying Barnes and DeGroot’s paychecks despite the fact that the company’s operations had halted and it had insufficient funds to cover wages. DeGroot also used fraudulently obtained pay stubs from the payroll processor to submit a fake mortgage loan application. DeGroot sought to impede the investigation by falsifying a document she presented to a federal grand jury and making a false statement to a federal agent upon learning of the investigation.

Barnes pleaded to one count of conspiracy to commit mail and wire fraud, ten counts of mail and wire fraud, and one count of money laundering. He will be sentenced on 28th June, facing a maximum sentence of ten years in prison for money laundering and up to twenty years in prison for each of the other charges.

Duchinsky pleaded to a single count of mail and wire fraud conspiracy. He will be sentenced at a later date and faces a maximum term of 20 years’ imprisonment, the same as DeGroot, who will be sentenced on September 14.