A Westwood man pleaded guilty on Feb. 16 to federal money laundering and tax evasion charges for running a scheme that defrauded victims out of more than $5 million by purporting to sell bonds for large-scale construction projects, and evading payment of $1.2 million in taxes.

Tommy Lester Watts, 63, also known by the aliases Michael Nesbeth, Michael Kent and Alex Mason, pleaded guilty to one count of transactional money laundering and one count of tax evasion. According to his plea agreement, Watts operated the scheme from September 2016 to September 2019. The defendant falsely claimed to have experience in providing surety bonds and other financial guarantees for large-scale projects, according to authorities. Watts told victims that he would assist them in obtaining financing for projects through his companies, including Source One Surety LLC, based in Sherman Oaks. Watts told victims that the bonds and guarantees were underwritten by well-known companies and banks, and that they were backed by millions or billions in assets, prosecutors said.

Watts and his companies were not licensed to sell surety bonds in California, and his claims to victims were not true. To make his scheme appear legitimate, Watts hijacked the corporate filings of other companies and created fake employees and accounts for underwriters and banks, according to the plea agreement.

Watts was responsible for losses of approximately $5.2 million to victims. Prosecutors said he spent the majority of the money on personal items such as classic and luxury cars, rent for luxury apartments and expensive retail goods.

Watts also laundered victim payments through accounts held in the names of corporations that were not registered and used fake taxpayer identification numbers, prosecutors said. He used those accounts to spend victim funds as his own, and hid that income from the IRS from 2017-19, when he failed to file tax returns. Watts admitted that he received $4.6 million in income that he failed to report to the IRS.

Watts has agreed to forfeit nearly $60,000 seized from two bank accounts he controlled, and Mercedes-Benz and Subaru vehicles. He also has agreed to pay $.2 million in restitution. He is scheduled to be sentenced on Sept. 8 and faces 15 years in federal prison.