A former executive of Earthly Minerals Solutions has been sentenced to three years in prison for his role in a Ponzi investment scheme that sold $18 million in mining claims in the desert south of Las Vegas to 250 investors between 2004 and 2006.

The Securities and Exchange Commission originally filed charges in April 2007 against two Henderson, Nevada-based companies-Earthly Mineral Solutions (EMS) and Natural Minerals Processing Company (NMPC)-and their three principal officers Roy D. Higgs, 67, and Frank L. Schwartz, 45, both of Henderson, and Rick Lawton, 63, of Reno, Nevada.

The SEC claimed that between 2003 and 2006, EMS sold investors securities in the form of investment contracts relating to interests in mining claims located on federal land near Las Vegas. By January 2006, EMS raised $20 million from more than 100 investors nationally, many of which, the SEC said, liquidated their Individual Retirement Accounts to invest in EMS's scheme.

EMS offered investors a guaranteed annual return ranging from 7% to 9% on their investment, paid monthly over a five-year period if investors purchased interest in the claims and granted NMPC a right of first refusal to mine the claims. The SEC said Higgs, Schwartz and Lawton told investors that the returns on their investment would be paid out of the operating revenue from EMS' purported fertilizer business, which, the men claimed, would use minerals mined by NMPC from the claims to produce a highly profitably, environmentally friendly fertilizer for retail sale.

However, the SEC said neither EMS nor NMPC ever extracted minerals or produced fertilizer from the mining claims owned or sold to investors by EMS. Indeed, EMS and NMPC never operated a mining and fertilizer business, and EMS received money from only once source: the sale of interests in the mining claims to investors. As in all Ponzi schemes, the monthly returns that EMS initially transferred to investors (before the scheme collapsed in late 2006) came solely from funds invested by new investors.

EMS stopped selling interests in mining claims in March 2006 after Nevada securities authorities issued a cease-and-desist order against EMS, NMPC, Higgs, Schwartz, and Lawton.

Acting U.S. Attorney Michael Reap said Monday that Schwartz was sentenced to three years in prison for his role in the scheme. As part of his guilty plea, Schwartz agreed to settle a civil enforcement action brought by the SEC. The civil case is pending in Las Vegas and has been delayed pending the outcome of the St. Louis case.