PatrickPretty.com

Day: October 19, 2009

  • BREAKING NEWS: FBI Arrests Maryland Man With ‘Star Wars’ Knowledge On Espionage Charges; Spy Case Will Be Co-Prosecuted By Office In Charge Of Alleged ASD Ponzi

    The FBI has arrested a Maryland man in a sting and charged him with attempting to pass U.S. defense and space secrets to Israel.

    Stewart David Nozette, 52, of Chevy Chase, Md., accepted $11,000 in payments from the FBI, believing the payments had come from the Mossad, Israel’s spy agency. The payments actually came from the FBI as part of the sting, and Israel was not involved, authorities said.

    Nozette once worked for the White House. He is among a group of scientists credited with discovering water on the moon in a project known as “Clementine,” and also has vast experience in weapons systems, including the Strategic Defense Initiative, where he worked in the Office of Survivability, Lethality, and Key Technologies, according to his resume.

    The Strategic Defense Initiative, which came into being under President Reagan, was known as “Star Wars.”

    “Those who would put our nation’s defense secrets up for sale can expect to be vigorously prosecuted,” said Channing D. Phillips, Acting U.S. Attorney for the District of Columbia. “This case reflects our firm resolve to hold accountable any individual who betrays the public trust by compromising our national security for his or her own personal gain.”

    Phillips is the boss of the prosecutors handling the AdSurfDaily Ponzi prosecution. His office will co-prosecute Nozette, along with the Counterespionage Section of the Justice Department’s National Security Division.

    The prosecution will occur in U.S. District Court for the District of Columbia, the same venue in which the civil-forfeiture case against ASD’s assets is being heard. The identity of the judge assigned to hear the case was not immediately clear.

    U.S. District Judge Rosemary Collyer, the judge in the ASD case, is one of the judges in the district.

    Nozette, who was charged with attempted espionage, faces a maximum sentence of life in prison, if convicted. The case is a reminder of the grave matters of national security that come to the attention of prosecutors in Phillips’ office, with Washington, D.C., being the center of government in the United States.

    “The conduct alleged in this complaint is serious and should serve as a warning to anyone who would consider compromising our nation’s secrets for profit,” said David Kris, assistant Attorney General for National Security.

    “The FBI is committed to protecting the nation’s classified information and pursuing those who attempt to profit from its release or sale,” said Joseph Persichini Jr., assistant director for the FBI’s Washington Field Office.

    On Sept. 3, prosecutors said, “Nozette was contacted via telephone by an individual purporting to be an Israeli intelligence officer, but who was in fact an undercover employee of the FBI.”

    “During that call, Nozette agreed to meet with the [undercover agent] later that day at a hotel in Washington D.C. According to the affidavit, Nozette met with the [undercover agent] that day and discussed his willingness to work for Israeli intelligence,” prosecutors continued.

    “Nozette allegedly informed the [undercover agent] that he had, in the past, held top security clearances and had access to U.S. satellite information,” prosecutors said. “Nozette also allegedly said that he would be willing to answer questions about this information in exchange for money.”

    An undercover agent “explained to Nozette that the Israeli intelligence agency, or ‘Mossad,’ would arrange for a communication system so that Nozette could pass information to the Mossad in a post office box,” prosecutors said. “Nozette agreed to provide regular, continuing information to the [undercover agent] and asked for an Israeli passport.”

    On Sept. 4, Nozette and the undercover agent met again in the same hotel, prosecutors said.

    During the meeting, Nozette told the agent that, although he no longer had legal access to any classified information at a U.S. government facility, “he could, nonetheless, recall the classified information to which he had been granted access, indicating that it was all still in his head,” prosecutors said.

    Nozette inquired about getting paid, saying “he preferred to receive cash amounts ‘under ten thousand’ [dollars] so he didn’t have to report it,” prosecutors said.

    At the conclusion of the Sept. 4 meeting,  Nozette said to the undercover agent, “Well I should tell you my first need is that they should figure out how to pay me . . . they don’t expect me to do this for free,” prosecutors said.

    Undercover FBI agents left $2,000 in cash in a letter in a designated post office box for Nozette on Sept. 10, prosecutors said.

    “In the letter, the FBI asked Nozette to answer a list of questions concerning U.S. satellite information,” prosecutors said. “The serial numbers of the bills were recorded. Nozette retrieved the questions and the money from the post office the same day.”

    On Sept. 16, agents captured Nozette on videotape as he left “a manila envelope in the designated post office box in the District of Columbia. The next day, FBI agents retrieved the sealed manila envelope that Nozette had dropped off and found, among other things, a one-page document containing answers to the questions posed by the undercover agents and an encrypted computer thumb drive.

    “One of answers provided by Nozette contained information classified as Secret, which concerned capabilities of a prototype overhead collection system,” prosecutors said. “In addition, Nozette allegedly offered to reveal additional classified information that directly concerned nuclear weaponry, military spacecraft or satellites, and other major weapons systems.”

    On Sept. 17,  undercover FBI agents left a second letter in the post office box for Nozette.

    “In the letter, the FBI asked Nozette to answer another list of questions concerning U.S. satellite information,” prosecutors said. “The FBI also left a cash payment of $9,000 in the post office box.”

    Nozette retrieved the questions and the cash from the post office box later that same day, prosecutors said.

    On Oct 1, undercover agents videotaped Nozette “leaving a manila envelope in the post office box,” prosecutors said. “Later that day, FBI agents retrieved the manila envelope left by Nozette and found a second set of answers from him. The answers contained information classified as both Top Secret and Secret that concerned U.S. satellites, early warning systems, means of defense or retaliation against large-scale attack, communications intelligence information, and major elements of defense strategy.”

  • 68-Year-Old Texas Woman Charged In Alleged Ponzi

    A 68-year-old Texas woman has been charged with running a $500,000 Ponzi scheme.

    Julia Ann Schmidt was indicted in Waco. She now joins a roster of other senior citizens recently implicated in alleged Ponzi schemes or convicted of crimes in which a Ponzi was the modus operandi.

    Federal prosecutors said today that Schmidt posed as an agent for Fortis Investments.

    Between April 2007 and May 2009, Schmidt “solicited money from clients promising to generate an approximate 30% return on their investments,” prosecutors said. “Schmidt informed clients that portions of their investments would involve the Texas Ranger Museum, Hillcrest Hospital and the Waco Riverwalk Project.”

    Unsuspecting investors were fleeced out of more than $500,000, prosecutors said. The FBI is handing the probe. Investors who believe they were scammed by Schmidt are asked to call the Waco office at 254-772-1627, according to Acting U.S. Attorney John E. Murphy.

    Some Recent Ponzi Schemes Featuring Seniors

    Topping the list of seniors implicated in Ponzi schemes, age-wise, is Richard Piccoli, the alleged operator of the Gen-See Ponzi in the Buffalo, N.Y., area. Piccoli is 82.

    Arthur Nadel, implicated in Florida amid allegations more than $300 million in investor funds went missing in a Ponzi scheme, is 76.

    Andy Bowdoin, who presided over the alleged $100 million AdSurfDaily Ponzi scheme in Quincy, Fla., is 74.

    Bernard Madoff, convicted in an alleged $65 billion Ponzi, is 71. In June, Madoff was sentenced to 150 years in prison.

    Ronald Keith Owens, 73, was sentenced in January to 60 years in prison for operating a “prime bank” Ponzi scheme that allegedly was set up in the Bahamas and elsewhere.

    James Blackman Roberts, 71, of Heber Springs, Ark., was sentenced in January to 15 years in prison for running a $43.5 million Ponzi scheme.

    Larry Atkins, 65, was convicted of swindling investors of $3 million in a North Dakota Ponzi scheme. In February, he was sentenced to eight years in prison.

    Judith Zabalaoui, 71, was accused in February of swindling Greater New Orleans clients out of more than $3.2 million in an elaborate Ponzi fraud. In August, she was sentenced to eight years in prison.

    Zabalaoui established a bogus entity known as Paragon Co., which actually was a mailbox Zabalaoui rented at a UPS store in Montrose, Colo., prosecutors said.

    Part of the scheme was to call the mailbox a “suite,” prosecutors said.

    Zabalaoui also set up a fake company known as Omni Clearing, this time using a UPS store in Dover, Del. Prosecutors said she invented “fictitious people,” claiming they were employees, fabricated emails using the names of fictitious employees, and she set up a phone, fax and email systems to help perpetrate the fraud.

    She collected millions in the the scheme by promising “safe” and “guaranteed” returns ranging from 13 percent to 26 percent, prosecutors said.

    Read a prosecution filing on Zabalaoui.

  • UPDATE: No Vana Blue Shares Have Traded Hands Since Oct. 8; No Praebius Communications Trades Since Oct. 9

    UPDATED 4:30 P.M. EDT (U.S.A.) No shares of Vana Blue were reported traded today. No trades have occurred since Oct. 8, a period encompassing seven full trading days. Some shares of Praebius did trade today, so its string of no trading since Oct. 9 ended.

    Here, below, our earlier post . . .

    Two Pinksheet penny stocks whose names became associated with the so-called autosurf “industry” have not recorded any trading of shares for days.

    No shares of Vana Blue have traded hands since Oct. 8, a period that includes six full trading days and part of a seventh. No Praebius Communications shares have traded hands since Oct. 9.

    In news releases, Vana Blue identified itself as the owner of eWalletPlus, a payment processor later linked to the AdViewGlobal (AVG) autosurf.

    Vana Blue, which used mailing services in Phoenix and Las Vegas as its address, is a registered corporation in Nevada. Its website now resolves to a server that beams ads.

    The company has claimed to own a company that variously has been described as TMS Corp. and TMS Association, which purportedly developed eWalletPlus. In January, Vana Blue also claimed to own a company that variously has been described as Karveck Corp. or Karveck International, a purported advertising and media company.

    In February, Vana Blue reported that Karveck had posted $1.8 million in revenue in January — the month AVG was in prelaunch.

    In an August news release, Vana Blue said it “has canceled all agreements with Karveck Int’l and has no affiliation with [the] company or its affiliates.”

    The company claimed to own Karveck International in February 2009, declaring it a “newly acquired asset” that had produced $1.8 million in revenue in January. Karveck was described as a company that “specializes in internet advertising and promotion in a search engine and ad clicking type environment.”

    Vana Blue’s August news release, however, said the deal once described as completed never was finalized and that the cancellation came as a result of “further due diligence.”

    AVG, an autosurfing company with close ties to AdSurfDaily Inc., suspended member cashouts in June. The U.S. Secret Service seized tens of millions of dollars from ASD President Andy Bowdoin in August 2008, amid allegations of wire fraud, money-laundering and operating an international Ponzi scheme.

    On Sept. 30 and Oct. 1 of last year, an evidentiary hearing in the ASD forfeiture case was held in U.S. District Court for the District of Columbia. The hearing centered on the Ponzi allegations, ASD’s “rebate” program and issues of income streams and solvency.

    In August, prosecutors said ASD was insolvent.

    “According to its own records, ASD sold ad packages worth approximately $39 million during the Miami rally, worth over $29 million from the Tampa convention, and worth over $27 million from the Chicago rally,” prosecutors said. “Even without including ad ‘sales’ that occurred over the Internet and the bonuses offered to rally participants, ASD would need assets of more than $118 million to pay these individuals their 125% return,” prosecutors said.

    At the evidentiary hearing, ASD introduced an unaudited balance sheet that showed it had posted approximately $100.88 million in revenue in the first seven months of 2008. Prosecutors countered by saying ASD had promised to pay out more money than it had taken in, producing evidence showing ASD “will” pay rebates until members received 125 percent of what they had paid for “advertising.”

    U.S. District Judge Rosemary Collyer did not make a ruling from the bench at the conclusion of the hearing, instructing attorneys from both sides to prepare additional briefs and noting she would take the testimony and evidence introduced by both sides at the hearing under advisement.

    During the period in which Collyer was deliberating the Ponzi and solvency issues, ASD announced on its Breaking News website that it expected a $200 million capital infusion from Praebius. Some ASD members raced to forums and websites covering the ASD case to share the news about the purported Praebius venture.

    Some ASD members, however, questioned the news. ASD then removed its announcement about Praebius from the Breaking News website.

    Shares of Vana Blue traded hands during 11 straight trading days between Sept. 10 and Sept. 24. After Sept. 24, shares traded hands in six of the 10 trading days through Oct. 8. No trades have posted since Oct. 8.