Daniel J. Flynn III’s Ponzi Scheme: Guilty Plea and 4-Year Sentence

The Daniel J. Flynn III Ponzi scheme was a real estate investment fraud run out of Milton, Massachusetts that defrauded more than 90 victims of over $21 million between roughly 2007 and its unraveling a decade later. Flynn, a Boston-area real estate broker and well-known charity auctioneer, pleaded guilty in February 2017 to seven counts of wire fraud and two counts of mail fraud, and in May 2017 a federal judge sentenced him to four years in prison followed by three years of supervised release.¹

How the Scheme Worked

Beginning around 2007, Flynn and an associate created the DJF Real Estate Opportunity Fund and solicited money from friends, business associates, and other investors. He leaned on his real estate résumé and promised guaranteed annual returns of 12 to 20 percent on promissory notes.¹ To make the fund look sound, he produced fraudulent promissory notes said to be worth millions and presented them as legitimate debts owed to it.²

No real estate returns were funding the payouts. Money from new investors paid earlier ones, the classic Ponzi structure. Prosecutors also identified several property-specific frauds layered on top of the fund:

A Quincy apartment complex Flynn had bought in 2005 for $995,000, which he arranged for the fund to “buy” from him for roughly $2.2 million. He kept soliciting investor loans to develop and purchase a property he already owned, and never repaid them.¹
Greenleaf Street condominiums, for which Flynn took $875,000 from investors in 2012 on a property he already owned, using a fabricated purchase and sale agreement to suggest a profitable deal.³
Two Dorchester properties Flynn sold as broker, keeping $451,000 in profits instead of turning the proceeds over to the owner.¹

As investors began catching on, Flynn allegedly renamed the business and set up similar entities in third parties’ names to hide his ongoing role.³ He later admitted to spending stolen money on personal expenses, including a $100,000 basement renovation at his Milton home.⁴

Indictment, Guilty Plea, and Four-Year Sentence

A federal grand jury indicted Flynn on September 23, 2015, on seven counts of wire fraud and two counts of mail fraud.³ He pleaded not guilty at his October 2015 arraignment, then reversed course more than a year later. On February 1, 2017, he pleaded guilty to all nine counts in the U.S. District Court for the District of Massachusetts.⁵

Senior U.S. District Judge Rya W. Zobel sentenced Flynn on May 9, 2017. Prosecutors had asked for 70 months. Zobel imposed 48 months plus three years of supervised release, citing community support for Flynn and her belief that he was unlikely to reoffend.⁶ Conditions of release bar him from buying or selling real estate or taking on debt without his probation officer’s permission, and the Department of Justice separately barred him from working in real estate.⁷

Victims and Restitution

The size of the fraud was disputed at sentencing. Flynn admitted defrauding at least 10 victims of $9.5 million. The U.S. Attorney’s office put the loss at more than $21 million across roughly 150 victims, and the DOJ press release referenced more than 90 victims overall, with about 60 individuals and entities losing a combined $18.4 million through the DJF Real Estate Opportunity Fund alone.⁵¹

In August 2017, the court entered a restitution order totaling $20,154,827, payable to 73 identified victims. Individual awards ranged from $10,000 to more than $2.6 million, and the victims were listed by number rather than name in court documents. The U.S. Attorney’s financial litigation unit was authorized to enforce payment on a monthly plan for up to 20 years after Flynn’s release. If he cannot pay in full, victims will not fully recover.⁸

Prosecutors said Flynn preyed on friends and family. One former business partner committed suicide, according to prosecutors, and another victim died of heart failure shortly after a heated argument with Flynn about missing money.⁸¹

The Related Lerner v. Colman Civil Case

Flynn’s fraud also surfaced in a separate civil lawsuit. In August 2019, Sandra Colman Lerner sued Stephen J. Colman, Flynn, James F. Canavan, and several Colman family members, alleging a conspiracy to divert assets from the estate of William “Bill” Colman. She brought federal RICO claims and state-law claims for fraud and breach of fiduciary duty.⁹

Two alleged schemes involved Flynn directly. In the “East Howard Scheme,” Flynn allegedly listed a Quincy property and lied to both the seller and an investor, George Brewster, about the price, keeping a $500,000 upcharge on a sale Brewster believed cost $1,325,000 but that actually closed at $825,000. The complaint also folded in the DJF Fund and Greenleaf schemes underlying Flynn’s criminal conviction, along with allegations concerning a Utah water right and shares of Solar Resources, Inc., a company sold in 2012 for $11 million.⁹

On September 4, 2020, U.S. District Judge William G. Young dismissed the RICO claims. He held that four of the five alleged schemes were actionable as securities fraud and therefore barred as RICO predicates under Section 107 of the Private Securities Litigation Reform Act, and that the remaining Solar Resources scheme by itself could not establish a RICO pattern. Without federal claims or diversity jurisdiction, he dismissed the state-law claims without prejudice.¹⁰ The First Circuit affirmed on February 17, 2022, agreeing that the PSLRA bar applies to conduct actionable as securities fraud regardless of whether the particular plaintiff could bring a securities claim, and that the two remaining schemes were not sufficiently related to form a RICO pattern.⁹ Lerner’s state-law claims were left for state court.

1
U.S. Department of Justice. Former Milton Auctioneer Sentenced for Defrauding Investors of $21 Million
2
Berkshire Eagle. Developer With Berkshire Ties Facing Federal Wire, Mail Fraud Charges
3
Patriot Ledger. Real Estate Mogul Dan Flynn Indicted
4
Boston Globe. South Shore Auctioneer Sentenced to Four Years in Prison for Real Estate Fraud
5
Patriot Ledger. Quincy Real Estate Mogul Admits to Fraud
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Patriot Ledger. Four Years in Prison for Flynn
7
Boston Globe. Swindler by Day, Charity Auctioneer by Night
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Patriot Ledger. Dan Flynn Owes Victims $20 Million in Restitution
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FindLaw. Lerner v. Colman
10
Massachusetts Lawyers Weekly. RICO — Securities Fraud Exception