SUNDAY NEWS AND NOTES: South Carolina Ponzi Victims Included Widows, Alzheimer’s Patients, Seniors And Amputee; ‘Shocks The Conscience,’ FINRA Says

EDITOR’S NOTE: These briefs are based on information from recent Ponzi or fraud schemes. As noted yesterday and previously, the United States has formed a Financial Fraud Enforcement Task Force. Cases such as the ones below are part of the reason why.

SOUTH CAROLINA AND TENNESSEE: Among the more than 30 victims in the Oren Eugene Sullivan Ponzi scheme case in South Carolina were five widows, two Alzheimer’s patients and an individual with developmental impairments, the Financial Industry Regulatory Authority (FINRA) reported.

Separately, The Herald newspaper of Rock Hill, S.C., reported that one of the victims was a “woman in a wheelchair, legs amputated, who is retired from a Christmas ornament plant.

“She gave Sullivan tens of thousands of dollars,” the newspaper reported.

“At least eight of the affected clients were over 80 years old and another four were over 70 years of age,” FINRA reported. “Numerous victims considered Sullivan a close family friend.”

Sullivan’s case “shocks the conscience,” said Susan L. Merrill, FINRA executive vice president and chief of enforcement.

FINRA banned Sullivan, who pleaded guilty last week to mail fraud, in October. Authorities said he operated the Ponzi scheme for 20 years.

At the same time FINRA banned Sullivan, it also banned William Walter Spencer Sr., of Franklin, Tenn.

Over 11 years, Spencer “borrowed” nearly $2 million in a promissory notes Ponzi scheme from elderly members of his church and from customers of his employing broker-dealer, Wiley Bros.-Aintree Capital LLC, FINRA said.

“All of the individuals from whom Spencer borrowed funds were of modest means,” FINRA said.

Among his targets was a 62-year-old school bus driver for special-needs children who gave Spencer $60,000 after her husband’s death.

“Spencer used the loan to repay other customers,” FINRA said. “Another customer faced the threat of foreclosure on his home due to Spencer’s failure to repay the $12,250 loan he made. To avert the pending foreclosure, Spencer used funds from another customer to make the payment owed. An 80-year-old customer loaned Spencer $20,500. She later needed to make repairs to her home, but was unable to do so because of Spencer’s failure to repay the principal and interest due.”

Merrill did not mince words when describing the Spencer and Sullivan schemes.

“The misconduct of these brokers was nothing short of egregious — and their financial exploitation of the elderly, the infirm and people who considered them trusted friends shocks the conscience,” she said.

OKLAHOMA: On Nov. 25, we published an early report on an alleged financial and affinity-fraud scheme in Oklahoma that targeted ethnic Chinese. Named in litigation by the CFTC was Kenneth Lee, who was imprisoned between 1996 and 2001 after being convicted in Texas of two financial felonies.

Lee also had a $3 million civil judgment placed against him in the 1990s in a fraud case, CFTC said. Also named in the complaint was Lee’s alleged business partner, Simon Yang, who was accused of hatching a new scheme with Lee in 2003 that targeted members of Yang’s church in Edmond, Okla.

Information shown prospects to get them to join the scheme claimed Lee was an exceptional trader. But when investigators reverse-engineered literature about Lee’s alleged prowess, they discovered that Lee was in prison during a time in which Lee and Yang claimed Lee was “achieving great returns,” CFTC said.

Investors were told accounts were “insured,” CFTC said. It’s a common claim in various fraud schemes, and sometimes the schemers claim or imply that banks, other lending institutions and even the government protects individual investment accounts against trading or investment losses.

Or, put simply, the schemers say or imply there is no way an individual investor can lose because a lending institution or the government backs the program. Such claims were present in both the alleged Lee/Yang fraud scheme in Oklahoma and the alleged AdSurfDaily Ponzi scheme in Florida.

In ASD’s case, an upline group implied that the FDIC insured individual members’ ASD accounts. The same upline group also claimed that ASD provided “shelter” from the FTC and the SEC.

The Edmond Sun newspaper — as part of its reporting on the alleged Lee/Yang fraud — interviewed experts who said such claims should be viewed as a red flag.

“There are never any kind of guaranteed investment returns associated with any investment account and no investment account of any kind is ever FDIC insured by the financial institution,”  Nick Massey told the newspaper.

Massey is regional vice president of Edmond, Householder Group Financial Advisors.

“If anyone ever suggests that, you should turn around and run, and then run to the authorities to report it,” Massey said.

See this story to get a free PDF that compiles President Obama’s Executive Order forming the Financial Fraud Enforcement Task Force and a speech by Attorney General Eric Holder.

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2 Responses to “SUNDAY NEWS AND NOTES: South Carolina Ponzi Victims Included Widows, Alzheimer’s Patients, Seniors And Amputee; ‘Shocks The Conscience,’ FINRA Says”

  1. We’ve only seen the tip of the iceberg. The number of crooks out there outnumber the honest people these days. Hopefully one crook will scam another crook.

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  2. We’ve only seen the tip of the iceberg. The number of crooks out there outnumber the honest people these days. Hopefully one crook will scam another crook.

    Hmm, isn’t that what AVG was for?

      (Quote)

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