KA-BOOM! SEC Files Emergency Action In Alleged Richard Elkinson ‘Uniform’ Ponzi Scheme; U.S. Attorney General Warns Fraudsters, ‘You Are Writing Your Ticket To Jail’

Ka-boom! A federal judge has frozen the assets of alleged Ponzi schemer Richard Elkinson, accused of fleecing investors in Massachusetts by telling them he brokered deals for government uniforms and uniforms worn by Olympic athletes.

Meanwhile, the attorney general of the United States ventured to Florida today and gave a dramatic speech at the Forum Club of the Palm Beaches. The speech was important symbolically — indeed, Florida is awash in a sea of Ponzi and mortgage-fraud schemes — and Holder wanted to reassure the noontime crowd of 700 that the government was doing everything it could to restore faith in the markets.

But the speech also was important politically. The Obama administration wanted to showcase its new Interagency Financial Fraud Enforcement Task Force, which the President announced in November, and Holder chose Florida to drive home the message that Ponzi schemers, mortgage fraudsters and financial criminals are going to have many sleepless nights in the months ahead.

“To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned. “If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

Even as Holder was delivering his remarks, the SEC announced that it had sued Elkinson in an emergency action in Massachusetts that complemented the FBI’s criminal action in the case, dubbed a “Mini-Madoff” because it allegedly was both a Ponzi scheme and a case of affinity fraud that targeted Jewish investors.

Court records show that the FBI was working the case on Christmas Eve, even as the government was shutting down for the holidays. Records also show that Massachusetts Secretary of State William Galvin sent a team of investigators to conduct interviews and to get to the heart of the matter while Massachusetts residents were doing their last-minute holiday shopping.

State and federal agencies now have filed three separate actions in the Elkinson case. Elkinson, 76, was arrested at a casino in Biloxi, Miss., fresh off a trip to casinos in Las Vegas. The FBI said he had conducted at least $3.7 million in transactions at the Las Vegas casinos since 1998 and that investors in his Ponzi scheme were out $29 million.

The SEC said today that Elkinson had “no relationship” with a uniform manufacturer based in Japan. Elkinson had told investors he had an exclusive arrangement and that only he was permitted to do business with the manufacturer.

“Unfortunately, it was all make-believe,” the SEC said in its complaint. “Elkinson had no
relationship with a Japanese uniform manufacturer, and there were no contracts to purchase uniforms. While some investors did receive payments of principal and interest, those payments were made using funds obtained from other investors, and Elkinson was able to keep the scheme going as long as most of the investors kept rolling over their investments.”

Elkinson’s purported contracts to provide uniforms for government workers also were “fictitious,” the SEC said.

The current attack on financial crime by law enforcement may be unprecedented. Holder said today that the FBI is investigating 2,800 cases of mortgage fraud, up a staggering 400 percent from 2005 case totals.

In his Palm Beach remarks, Holder also dropped the names of Ponzi schemers.

“Palm Beach is, in many respects, ground zero for the $65 billion Ponzi scheme perpetrated by Bernard Madoff — the largest investor fraud case in our nation’s history,” the attorney general said. “Before the house of cards Madoff built collapsed in 2008, before he was sentenced to 150 years in prison last June, before he became a notorious criminal on the cover of newspapers around the world, he was one of your neighbors.

“His former home sits just north of us,” Holder continued. “An 8,700-square-foot mansion that’s worth . . . well, we’ll know what its worth once the U.S. Marshals Service auctions it off and the proceeds are distributed to Madoff’s victims.”

Holder also mentioned the Ponzi cases of Tom Petters of Minnesota, Allen Stanford of the United States and Antigua and disbarred Florida attorney Scott Rothstein of Fort Lauderdale.

“I’m proud that these men, along with more than 450 others convicted of corporate and securities fraud in 2009, have been taken out of the game,” Holder said.

In Massachusetts, U.S. District Judge Joseph L. Tauro issued a temporary restraining that froze Elkinson’s assets. Tauro also entered an order freezing all proceeds of the misconduct held by others, and an order prohibiting the acceptance of additional investor funds.

At the same time, Tauro ordered an accounting of assets and issued an order prohibiting the alteration or destruction of documents.

The orders in the SEC case — as well as the legal action filed earlier this week by Galvin — bottle up any profits made by people who helped Elkinson promote the scheme.

Holder said the law-enforcement community is fighting back against people who have licensed themselves to steal.

“They’ve robbed people of their homes and their economic security,” Holder said.  “They’ve depleted bank accounts and pension funds.  In some places, they’ve dried up philanthropic giving and shuttered charities.  They’ve placed unfair challenges before cash-strapped governments, local police departments, small businesses, and American workers and consumers.”

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7 Responses to “KA-BOOM! SEC Files Emergency Action In Alleged Richard Elkinson ‘Uniform’ Ponzi Scheme; U.S. Attorney General Warns Fraudsters, ‘You Are Writing Your Ticket To Jail’”

  1. The Interagency Financial Fraud Enforcement Task Force has a good ring to it. It is a much needed Agency as the coordination of the fight against financial fraud was an overdue assignment.

    If Eric Holder’s speech in Florida is anything to go by, we may cautiously look forward to a new era where there is a serious risk in turning a blind eye to the realities of the “internet marketing industry and its perpetrators will no longer get off scott free. White collar crime is just as damaging to its victims as conventional crime and in this post-Maddoff era it is necessary that the public understand this and do not forgive it so easily, just because noone got shot.

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  2. Yes the task force does have a nice ring to it, but the main focus of this task force is in the mortgage industry and the financing that goes along with it. These are the financial criminals they are talking about, not the ones that operate on the Internet and all their investment scams. I know because I have spoken to people that comprise this task force.

    Maybe one day in the future they might change their focus, but right not it is the mortgage fraud area this task force will focus on and operate. Don’t get me wrong, this task force is badly needed in the mortgage industry; but it also misleading advertising of its purpose.

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  3. Thanks for that clarification Lynn. In the light of the Maddoff ponzi downwards, I can only say that it is a shame that the Task Force isnt taking into account the billions of dollars lost annually to the rest of the financial fraud “industry” and it is to be hoped that they amplify their field of focus pronto

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  4. Quick note: Here is the focus of the Task Force, as outlined by Holder:

    “We will focus on four key types of financial crime:

    * Mortgage fraud — from the simplest of ‘flip’ schemes to systematic lending fraud in our nationwide housing market;

    * Securities fraud – from traditional insider trading, to Ponzi schemes, to accounting fraud, to misrepresentations to investors;

    * Recovery Act and rescue fraud – including the theft of federal stimulus funds and the illegal use of taxpayer dollars intended to shore up our financial institutions; and

    * Financial discrimination – including predatory lending practices in minority communities and the sale of financial products that exploit the elderly and disadvantaged.”

    Patrick

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  5. Quick note:

    Here is the President’s Executive Order forming the Task Force:

    http://www.whitehouse.gov/the-press-office/executive-order-financial-fraud-enforcement-task-force

    Here is Sec. 3(a) of the order:

    (a) provide advice to the Attorney General for the investigation and prosecution of cases of bank, mortgage, loan, and lending fraud; securities and commodities fraud; retirement plan fraud; mail and wire fraud; tax crimes; money laundering; False Claims Act violations; unfair competition; discrimination; and other financial crimes and violations (hereinafter financial crimes and violations), when such cases are determined by the Attorney General, for purposes of this order, to be significant;

    Patrick

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