UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA ) No. 09 CR 974

)
v. ) Violation: Title 18, United States
) Code, Section 1341
JAY NOLAN )

COUNT ONE

The UNITED STATES ATTORNEY charges:

1. At all times material herein:

a. Defendant JAY C. NOLAN was a commodities futures trader, who

resided in Northfield, Illinois.

b. Lodge Capital Group, LLC (Lodge Capital Group) was an Illinois

limited liability company with its principal place of business located in Northfield, Illinois.

Defendant JAY C. NOLAN founded, owned and operated Lodge Capital Group.

c. Lodge Diversified Fund, L.P. (Fund) was an Illinois limited partnership

formed by defendant JAY C. NOLAN in or about November 2004. The Fund shared offices

with Lodge Capital Group, which was its general partner. The Fund purported to be in the

business of investing in commodities-related trading to achieve capital growth with

consistent returns.

d. Defendant JAY C. NOLAN offered and sold limited partnership

interests in the Fund to the public. During the period from in or about early 2005 through

in or about November 2009, defendant JAY C. NOLAN raised approximately $3,900,000

from the sale of these limited partnership interests in the Fund to about ten investors.
 2. Beginning in or about early 2005 and continuing to in or about November

2009, in the Northern District of Illinois, Eastern Division, and elsewhere,

JAY C. NOLAN,

defendant herein, knowingly devised and intended to devise a scheme to defraud limited

partners in the Fund and to obtain money from limited partners by means of materially false

and fraudulent pretenses, representations, and promises and by material omissions, which

scheme is further described below.

3. It was part of the scheme that defendant JAY C. NOLAN fraudulently offered

and sold limited partnership interests in the Fund by, among other things, misrepresenting

the profitability of the Fund, the risks associated with an investment in the Fund, the status

of investments in the Fund and the use of proceeds raised from limited partners in the Fund.

In furtherance of the scheme, the defendant created and distributed phony periodic account

statements, caused to be created and distributed fraudulent income tax information, made

ponzi-type payments to certain limited partners and misappropriated some of the limited

partners’ funds for his own benefit.

4. It was further part of the scheme that, in offering and selling limited partnership

interests in the Fund, defendant JAY C. NOLAN falsely represented to investors and

prospective investors that the Fund was profitable, typically representing that the Fund had

made between 1 and 1½ percent profit each month. Defendant JAY C. NOLAN knew the

Fund had never been profitable over any extended period of time, losing approximately 26%

in 2005, 5% in 2006, 61% in 2007, 99% in 2008 and 54% in 2009.

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 5. It was further part of the scheme that, in order to retain funds already invested

and to induce new investments, defendant JAY C. NOLAN created phony periodic account

statements and distributed them to limited partners. The defendant falsely represented on

these periodic account statements that both limited partners and the Fund were making

profits, when neither was true. For instance, on an October 2009 account statement the

defendant provided to Investor A, the defendant falsely represented that the value of the fund

was $6,308,409.51 and that Investor A’s Limited partnership interest was worth

$5,611,901.26. As the defendant knew, the entire Fund had assets of only about $200,000

as of October 30, 2009.

6. It was further part of the scheme that defendant JAY C. NOLAN also made

oral misrepresentations about the profitability of limited partnership interests, including those

the defendant made to at least one limited partner during periodic telephone updates about

the status of the limited partner’s investment.

7. It was further part of the scheme that defendant JAY C. NOLAN paid returns

to certain limited partners, even though there were no profits out of which to pay such

returns. As a result, the defendant made ponzi-type payments, using previously invested

funds to pay purported profits.

8. It was further part of the scheme that defendant JAY C. NOLAN falsely

represented to at least one limited partner that money invested in the Fund was collateralized

by Treasury bills held by the defendant in a bank account. As the defendant knew, there

never were any Treasury bills collateralizing the assets of the Fund.

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 9. It was further part of the scheme that defendant JAY C. NOLAN

misappropriated for his own benefit over $600,000 of the funds raised through the offer and

sale of limited partnership interests.

10. It was further part of the scheme that defendant JAY C. NOLAN caused

fraudulent income tax documents to be prepared and distributed to limited partners. These

income tax documents falsely represented that the Fund’s trading had been profitable.

11. It was further part of the scheme that defendant JAY C. NOLAN concealed and

hid, and caused to be concealed and hidden, the purposes of the acts done in furtherance of

the scheme.

12. As a result of the scheme, defendant JAY C. NOLAN fraudulently obtained

over $3,500,000. Although the defendant fraudulently represented that the value of the Fund

had increased to more than $6,000,000 just before his scheme was uncovered, the actual

value of the Fund was less that $200,000, due in part to undisclosed commodities-related

trading losses, ponzi-type payments to certain investors and misappropriations by the

defendant.

13. On or about November 8, 2005, in the Northern District of Illinois, Eastern

Division, and elsewhere,

JAY C. NOLAN,

defendant herein, for the purpose of executing the above-described scheme, and attempting

to do so, did knowingly cause to be delivered by the United States Postal Service according

to the direction thereon, a envelope containing a subscription agreement addressed to

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Investor D in Chicago, Illinois in connection with Investor D’s investment in the Fund;

In violation of Title 18, United States Code, Section 1341.

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 COUNT TWO

The UNITED STATES ATTORNEY further charges:

1. The allegations in paragraphs 1through12 of Count One of this indictment are

realleged and incorporated as if fully set forth herein.

2. On or about September 17, 2008, in the Northern District of Illinois, Eastern

Division, and elsewhere,

JAY C. NOLAN,

defendant herein, for the purpose of executing the above-described scheme, and attempting

to do so, did knowingly cause to be delivered by the United States Postal Service according

to the direction thereon, a envelope containing a fraudulent periodic account statement

addressed to Investor A in Northbrook, Illinois;

In violation of Title 18, United States Code, Section 1341.

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 COUNT THREE

The UNITED STATES ATTORNEY further charges:

1. The allegations in paragraphs 1 through 12 of Count One of this indictment are

realleged and incorporated as if fully set forth herein.

2. On or about January 24, 2009, in the Northern District of Illinois, Eastern

Division, and elsewhere,

JAY C. NOLAN,

defendant herein, for the purpose of executing the above-described scheme, and attempting

to do so, did knowingly cause to be delivered by the United States Postal Service according

to the direction thereon, a envelope containing a fraudulent account statement addressed to

Investor A in Northbrook, Illinois;

In violation of Title 18, United States Code, Section 1341.

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 COUNT FOUR

The UNITED STATES ATTORNEY further charges:

1. The allegations in paragraphs 1through12 of Count One of this indictment are

realleged and incorporated as if fully set forth herein.

2. On or about April 15, 2009, in the Northern District of Illinois, Eastern

Division, and elsewhere,

JAY C. NOLAN,

defendant herein, for the purpose of executing the above-described scheme, and attempting

to do so, did knowingly cause to be delivered by the United States Postal Service according

to the direction thereon, a envelope containing a fraudulent account statement addressed to

Investor C in Chicago, Illinois;

In violation of Title 18, United States Code, Section 1341.

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 COUNT FIVE

The UNITED STATES ATTORNEY further charges:

1. The allegations in paragraphs 1through12 of Count One of this indictment are

realleged and incorporated as if fully set forth herein.

2. On or about November 17, 2009, in the Northern District of Illinois, Eastern

Division, and elsewhere,

JAY C. NOLAN,

defendant herein, for the purpose of executing the above-described scheme, and attempting

to do so, did knowingly cause to be delivered by the United States Postal Service according

to the direction thereon, a envelope containing a fraudulent account statement addressed to

Investor A in Northbrook, Illinois;

In violation of Title 18, United States Code, Section 1341.

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 FORFEITURE ALLEGATION

The UNITED STATES ATTORNEY further charges:

1. The allegations of this information are hereby realleged and incorporated

herein by reference for the purpose of alleging forfeiture pursuant to Title 18, United States

Code, Section 981(a)(1)(C) and Title 28, United States Code, Section 2461(c).

2. As a result of his violations of Title 18, United States Code, Section 1341, as

alleged in the information,

JAY C. NOLAN,

defendant herein, shall forfeit to the United States, pursuant to Title 18, United States Code,

Section 981(a)(1)(C) and Title 28, United States Code, Section 2461(c), any and all right,

title, and interest he may have in any property constituting, and derived from, gross proceeds

he obtained directly and indirectly as the result of such violation.

3. The interests and property of the defendant subject to forfeiture pursuant to

Title 18, United States Code, Section 981(a)(1)(C) and Title 28, United States Code, Section

2461(c), include the sum of at least $3,000,000.

4. If any of the forfeitable property described above, as a result of any act or

omission by the defendant:

(a) cannot be located upon the exercise of due diligence;

(b) has been transferred or sold to, or deposited with, a third party;

(c) has been placed beyond the jurisdiction of the court;

(d) has been substantially diminished in value; or

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 (e) has been commingled with other property which cannot be divided

without difficulty,

the United States of America shall be entitled to forfeiture of substitute property under the

provisions of Title 21, United States Code, Section 853(p), as incorporated by Title 28,

United States Code, Section 2461(c),

All pursuant to Title 18, United States Code, Section 981(a)(1)(C) and Title 28,

United States Code, Section 2461(c).

UNITED STATES ATTORNEY

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