PatrickPretty.com

Day: October 26, 2009

  • HYIP/AUTOSURF SHOCKWAVES: Regulators Order Canadian Ponzi Schemers To Pay Penalties Totaling $26 Million And To Disgorge Illegal Profits Of $16 Million; Case Has Parallels To AdSurfDaily And AdViewGlobal

    The British Columbia Securities Commission (BCSC) has ordered four respondents in a civil action to pay penalties of $26 million for operating a Ponzi scheme and to surrender $16 million in illegal profits.

    In forceful findings that may echo throughout the HYIP and autosurfing universe, BCSC said the schemers tried to skirt securities laws by selling a fraudulent HYIP currency-trading program in Canada through an MLM-syle operation while hiding behind “non-disclosure” agreements and operating in an environment of secrecy.

    AdViewGlobal (AVG), an autosurf firm with close ties to the alleged AdSurfDaily (ASD) Ponzi scheme in the United States, created a similar structure in which participants were advised to keep news within “association” walls and not to disclose information to outsiders.

    BCSC also found that the companies named in the Canadian complaint disseminated false information and used intimidation tactics in a bid to prevent participants from cooperating with authorities.

    “Because of those [non-disclosure] agreements, and because of false but intimidating statements made to them by the respondents, many investors refused or were reluctant to cooperate with the Commission’s investigation,” BCSC said.

    In recent weeks, some ASD members have circulated emails that suggested participants should not cooperate with the U.S. Secret Service in the ASD probe. During the summer, AVG, which had suspended member cashouts, threatened to sue members for sharing information with outsiders and also threatened to contact the Internet Service Providers of participants who complained on a company forum.

    In yet another similarity to the ASD case, some of the purveyors of the Canadian scheme also pushed what Canadian authorities described as a “private common law spiritual trust.”

    Some of ASD’s and AVG’s most ardent supporters have used similar phrasing and referenced common law in defending the surfs.

    BCSC minced no words as it laid out the penalties against Hal (Mick) Allan McLeod, David John Vaughan, Kenneth Robert McMordie (also known as Byrun Fox) and Dianne Sharon Rosiek.

    BCSC pegged losses at $13 million, saying the respondents “fraudulently distributed securities and made misrepresentations” through Legacy Capital Inc., Legacy Trust Inc. and Manna Trading Corp Ltd.

    The Canadian respondents also cited a tie to an entity known as the Manna Humanitarian Foundation.

    AVG, in promotional material, cited a tie to the World Rain Forest Movement in what some observers saw as a bid to sanitize the AVG business by linking it to a worthwhile cause.

    “At AVGlobal Association we believe we should go beyond the basics of ethical business practices and embrace our responsibility to people and to the planet,” AVG said on its website. “We believe this brings sustained, collective value to our members, our employees, our customers and society.”

    AVG announced a suspension of payouts June 25. It is unclear if any worthwhile cause ever received money from the company.

    A BCSC panel fined McLeod $8 million. Vaughan, Rosiek and McMordie were dispensed penalties of $6 million each. The panel also ordered each respondent, including the companies, to disgorge the $16 million the scheme obtained from investors.

    The suggested payout percentages of the Canadian entities actually were significantly lower than the suggested payout percentages of both ASD and AVG.

    “Manna promised investors 7 [percent]  monthly returns (later reduced to 5 [percent]), sometimes compounded,” BCSC said.

    ASD and AVG both promoted compounding. Some ASD members promoted returns of 365 percent a year, claiming $100,000 in ASD returned $1,000 a day.

    Similar to ASD and AVG, investors who became “affiliates” or “consultants” of the Canadian companies could bring in new investors.

    “When they did so, they earned a commission on the amount invested and a continuing share of the return on the new investment,” BCSC said.

    The private, common-law spiritual trust “was a mechanism Fox concocted ostensibly to avoid the application of tax and securities laws to investments in the Manna scheme,” BCSC said.

    BCSC pegged losses in the Canadian scheme at $13 million, saying as many as 800 people lost money.

    “They created a multi-level marketing structure to maximize distribution of the Manna securities,” BCSC said.

    “The respondents knew exactly what they were doing when it came to dealing with securities laws,” a BCSC panel said. “They were well aware of the requirements of the Act, and of the role of the Commission in enforcing the Act. They took numerous actions calculated to escape detection. They attempted, unsuccessfully, to construct the Manna scheme in a form that would fit within a specific exemption in the Act.”

    Authorities said the scheme was inexcusable.

    “Nothing strikes more viciously at the integrity of our capital markets than fraud, and this case represents a particularly aggressive and flagrant assault on the public’s confidence in our markets,” BCSC said.

    BCSC’s announcement followed on the heels of announcements Oct. 15 by the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission that they were targeting a Florida company that allegedly tried to hide behind a corporate registration in Panama.

    The actions by the SEC and CFTC expose the vulnerability of autosurfs that register as corporations offshore and arrange web-hosting overseas, but do not comply with securities laws of the United States and foreign countries in which they have a paper footprint or are not regulated in the foreign countries.

    The moves also demonstrate that U.S. securities regulators — no matter where a company arranges webhosting — intend to treat American owners who flout laws as issuers of unregistered securities, unregistered investment advisers and operators of unregistered foreign investment companies from inside the United States

    Named defendants in emergency actions filed Oct. 15 in U.S. District Court for the Middle District of Florida were David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services Inc., MDD Consulting Inc. and Go ! Tourism Inc.

  • NO AUTOSURF ENVY: Newspaper Circulation Plunges; Top Publications Hemorrhage Print Readers As Industry Looks To Harness Power Of Internet Advertising

    EDITOR’S NOTE: If you’ve been approached by individuals or a downline “team” and invited to join an online “surfing” program that purports to be an “advertising” company, this column may be of some value to you. Extremely well-known publishing companies — companies that produce titles you know and love, and companies that know advertising and business inside and out and through and through — are having trouble keeping readers’ eyes glued to print publications. Many of the famous companies have experienced serious revenue declines. Almost all of them have experienced spectacular print circulation declines even as actual readership was increasing. These famous companies are struggling to find ways to compete online and monetize their hugely popular websites, almost all of which get tremendous traffic.

    And yet none of them has turned to the so called “autosurf” model — even though the companies could crush “advertising” firms such as Florida-based AdSurfDaily, which is confronting allegations that it engaged in wire-fraud and money-laundering while operating a $100 million Ponzi scheme.

    Despite the fact these famous publishing companies have professional talent, audited readership, audited financials and the economies of scale to destroy so-called “advertising” firms such as ASD or BizAdSplash or AdViewGlobal — and scores of others — these companies do not position themselves against the surfs.

    Some of the surfs are collecting millions of dollars — if not tens or hundreds of millions of dollars — during a time the traditional publishing/advertising business is awash in a sea of red ink. All of the traditional companies could use the money autosurf participants are throwing at the surfs.

    Autosurf promoters would have you believe traditional publishing/advertising companies are struggling because the famous brands don’t understand the autosurf business model. Surf promoters position people such as ASD President Andy Bowdoin as vastly misunderstood geniuses and visionaries being picked on by the government. The surfs are positioned as cash cows for both the operators and members, and the “new” way to advertise.

    Promoters would have you believe that these celebrated publishing/advertising companies just don’t “get it” — and that the people promoting autosurfs in the hyped-up style of MLMs are the modern-day Henry Fords and Thomas Edisons — people who do get it.

    Surf promoters are unable to explain rationally why famous companies that could crush the surfs and take away all of their business — while delivering content that gives people a nonfinancial reason to visit highly professional sites and later share in hundreds of millions of dollars in revenue — have not leveraged their marketplace advantages and enormous volume of website traffic to make the companies and their readers rich by opening an autosurf.

    The reason is simple: The model as practiced in the so-called autosurf advertising “industry” is plainly illegal. It flouts securities laws, wire-fraud laws, mail-fraud laws, racketeering laws, banking laws, money-services laws and other laws — and the surfs try to sanitize it all by saying “rebates aren’t guaranteed,” which is just a contractual disclaimer designed to legalize theft.

    When reading the story below, keep in mind that each of the companies mentioned has advantages none of the surfs can offer, including some of the most highly talented writers, editors, designers and advertising-sales executives in the world — people who can deliver millions of eyeballs to websites and produce good results for advertisers both in product sales and branding.

    And yet these companies have not turned to Andy Bowdoin of ASD or Clarence Busby of BizAdSplash for guidance.

    Now, after this lengthy introduction, the story . . .

    Circulation at USA Today plunged 17.15 percent in the six-month period ending in September, compared to the same period in 2008, according to figures released today by the Audit Bureau of Circulations (ABC).

    Circulation losses experienced by the San Francisco Chronicle (-25.82 percent), the Star Ledger of Newark (-22.22 percent), the Dallas Morning News (-22.16 percent), the Boston Globe (-18.48 percent) and the New York Post (-18.77 percent) were even steeper, ABC reported.

    Elsewhere, the Houston Chronicle lost 14.24 percent of its print circulation during the period, and The Daily News (New York) lost 13.98 percent.

    Meanwhile, the Arizona Republic (-12.30 percent), the Cleveland Plain Dealer (-11.24 percent), the Los Angeles Times (-11.05 percent), the St. Petersburg (Florida) Times (-10.70 percent), the San Diego Union Tribune (-10.05 percent), the Chicago Tribune (-9.72 percent), the Detroit Free-Press (-9.56 percent) and the Pittsburgh Post-Gazette (-9.50 percent) also lost significant print circulation, ABC reported.

    The Post-Gazette explained today that much of its loss is attributable to an April decision to quit delivering the newspaper to certain outlying areas. The Post-Gazette says its website “remains the region’s most visited site.”

    Between the site and the print publication, the Post-Gazette reaches more than 1 million people every week, the newspaper reported.

    ABC’s numbers do not mean that actual readership of the publications is plunging. Many print-publishing companies have the dominant websites in their regions. And because the Internet has introduced the sort of immediacy once available only to TV and radio stations — and because print publications generally have larger news-gathering operations than their local competitors — the websites of newspapers and magazines have become enormously popular.

    What has not followed — at least not across the board — is an increase in revenues. Some famous print publications have declared bankruptcy, switched to an online-only model or a combination of online and print — or even folded.

    Print, in general, is struggling in every corner of the United States — and yet readership and reach never have been higher.

    Despite the advantages of readership, reach and talent pools autosurf companies only could dream about, there continues to be great stress in the worlds of publishing and advertising.

    No famous publishing house has adopted the autosurf model, even though promoters of the model would have would-be members/advertisers believe it is the magic cure.