Back in October 2010, The Santa Barbara Independent published a story with the headline “Bad Dream or Ponzi Scheme?” related to the activities of David Prenatt, a charismatic area resident unable to pay back more than a dozen creditors millions of dollars that he said would be invested in various money-making ventures. It turns out the tale was not only both a bad dream and a Ponzi scheme, according to bankruptcy documents filed in U.S. Federal Court, but also a criminal activity, according to a guilty plea Prenatt filed in federal court this week.
Prenatt pleaded guilty to knowingly making a false financial statement to CoastHills Federal Credit Union when he was seeking a loan. While he noted mortgage payments and car loans, he neglected to tell the bank about $8.7 million in unsecured promissory notes he owed several individuals. While pleading guilty to such a charge could lead to more than a decade in prison, federal sentencing guidelines dictate a term more in the four- to five-year range. The judge has complete discretion, however, when Prenatt is sentenced in the coming months.
Several individual creditors were hung out to dry when Prenatt filed for bankruptcy in October 2009. As part of his plea arrangement, the U.S. Attorneys’ Office won’t file charges for any potential crimes related to those individuals. A trustee report generated as part of Prenatt’s bankruptcy showed he borrowed the money not to invest but to support an extravagant lifestyle. Included among Prenatt’s lavish spending habits were hundreds of thousands of dollars in travel expenses, home decorating and improvements, car payments and purchases, and more. The trustee’s analysis showed that without the receipt of additional loan proceeds, Prenatt could not have maintained the debt service and made the required interest payments.