OH, FLORIDA! Spectacular New Allegations Raised In George Theodule Ponzi Scheme; Bank Sued For $68 Million Amid Accusation It Funneled Investors’ Cash To Fraudster Through ‘Drive-Thru’ Window

The Miami Herald broke the story last night (see link at bottom of post) that Wells Fargo, which merged with Wachovia Bank in December 2008 and assumed its liabilities, has been sued for $68 million by the court-appointed receiver in the George Theodule Ponzi scheme in Florida. Theodule largely targeted the Haitian-American community in his scheme — in part by trading on religion, in part by routing money to the scheme through “investment clubs”  and in part by making investors believe a “regulatory agency” that later proved to be bogus was keeping their money safe.

Allegations contained in the complaint by receiver Jonathan Perlman are both mind-numbing and stunning, perhaps especially given the fact that Wachovia was charged criminally in a separate case in March 2009 with willfully failing to establish an anti-money laundering program and opening its doors to an international cocaine cartel. Wachovia settled the criminal case by entering into a deferred prosecution agreement with the Justice Department and agreeing to pay $160 million.

Now, with the filing of the complaint by Perlman, Wachovia’s allegedly lax standards have jumped up to bite it again.

Among the dramatic allegations against the bank:

  • A Wachovia branch in Lake Worth, Fla., accepted Theodule’s business after Washington Mutual (WAMU), his original bank, rejected it after observing a pattern of suspicious transactions. The Wachovia branch that  opened multiple accounts for Theodule was “just down the street” from the WAMU branch — and Wachovia did not call WAMU to make any inquiries about Theodule.
  • Wachovia did not review Theodule’s website and did not verify the corporate standing of his business.
  • Wachovia initially misclassified Theodule’s business as a “Professional Service Provider with a business activity designation of ‘Money Service Business.'” The initial classification triggered an internal Wachovia review on the very same day he opened the accounts. Several days later, Wachovia determined that Theodule actually was a “financial advisor” in the “investment business” — and the bank changed the business designation to “Securities/Commodities.”
  • Wachovia’s own reclassification of Theodule’s business gave it the knowledge that Theodule owed a fiduciary duty to his clients. Regardless, Wachovia did nothing to confirm that either Theodule or his companies were properly licensed. A “simple inquiry” to licensing agencies would have shown they were not. Not even cursory Google research was performed. The Ponzi nature of the business “would have been self-evident” had even basic research been performed.
  • Wachovia missed suspicions about Theodule that had been raised online, including information that suggested he had lied about being the “finance director at several large companies” and truthful assertions that “investment clubs” were funding his operations.
  • Within five weeks of the opening of Theodule’s accounts at Wachovia, 36 “investment club” accounts suddenly were opened at Wachovia. The club accounts fed Theodule’s Ponzi scheme. During the first month alone, the club accounts fed $2.2 million to the Ponzi. Theodule’s sister, wife and the best man at his wedding all opened feeder accounts at Wachovia.
  • A large sum of cash — actual currency — from  trusting investors was deposited into the feeder accounts. Wachovia then transferred the deposits to Theodule’s business account. During the first month, Wachovia permitted Theodule to withdraw $235,000 in actual “greenbacks,” even though the bank knew the money belonged to investors.
  • Wachovia made “special accommodations for Theodule’s extraordinary cash withdrawals by agreeing to deliver large amounts of cash through the drive-thru window in order to reduce the risk of theft from having Theodule or a Creative Capital employee walk out of the branch carrying the large bags of cash Wachovia was providing.”
  • Wachovia noticed suspicious activity in a feeder account opened in the name of Wealth Builders Circle LLC, which was managed by Dorothy Delisfort, (who went on to become Theodule’s wife).  The bank froze the Wealth Builders Circle account but did not freeze Theodule’s accounts. The bank lifted the freeze on the Wealth Builders Circle account four days later — after it received a fax from a Theodule company. The fax purported to be a “business plan.” Among the assertions in the fax was that the Theodule company was following “the lessons learned by the great investing minds of our time . . . including Warren Buffet . . .”
  • Theodule and his cohorts laundered more than $10 million through Wachovia between May 9, 2008, and July 31, 2008. They withdrew from the bank nearly $5 million more than they deposited.

Read the Miami Herald story from last night.

(NOTE: At the moment, the complaint is available on the newspaper’s website. It is worth a full read. An exhibit from the SEC case attached to the complaint lists the names of the “investment clubs.” One of the names referenced is Crowne Gold Inc.  Many of the clubs had high-sounding names. It was not immediately clear if the Crowne Gold Inc. referenced in the Wachovia lawsuit was the same Crowne Gold Inc. referenced in court filings in the EMG/FinanzasForex case.  The alleged EMG/Finanzas scheme was yet-another scheme pitched from the ASA Monitor and TalkGold forums — and some of the money has been linked to the international narcotics trade. It also is worth noting that scammers routinely use the names of business titans such as Warren Buffet to pull off massive swindles. As noted above, the lawsuit against Wachovia in the Theodule case alleges that Buffet’s name was used to sanitize the Theodule caper.)

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17 Responses to “OH, FLORIDA! Spectacular New Allegations Raised In George Theodule Ponzi Scheme; Bank Sued For $68 Million Amid Accusation It Funneled Investors’ Cash To Fraudster Through ‘Drive-Thru’ Window”

  1. You wrote, “…They withdrew from the bank nearly $5 million more than they deposited.”

    My bank doesn’t do that – I want in on that deal!

    -PWD

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  2. I have said this more than once. but do you know how many playas in ASD used the ” do you know how tough it is to get a Bank of America business account” ( I know Andy did not have one) but still, it looks like no red flags get popped up if the deposits are all cash.
    I do not know what is worst. ASD hiring bank of america employees or using the drive thur to give the cask back. I would say UNBELIEVABLE but then again not really. Happy New year to all

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  3. I had a business account when I ran my business. I walked into a local bank, told them I wanted a business account, showed them my business license and filled out the paperwork. That was it.

    What I find interesting is that Wachovia allowed one man or entity to open so many accounts and then have even amounts shuffled from feeder accounts and into his account. Then he was able to withdraw cash or send funds to his personal brokerage accounts. I doubt I would have been able to do that.

    Normal businesses have rent, vendors, employees and other bills. The amounts are not even and a great majority of the funds go to vendors and suppliers or employees. You’d think that the bank could tell by the pattern of payments that Theodule’s activity merited at least some scrutiny.

    Frode Jorgensen from PlexPay was called out by a small bank in Norway precisely because he had a similar pattern of lots of smaller deposits being aggregated in to one account and then being redistributed in a predicable pattern.

    I have said this more than once. but do you know how many playas in ASD used the ” do you know how tough it is to get a Bank of America business account” ( I know Andy did not have one) but still, it looks like no red flags get popped up if the deposits are all cash.

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  4. Dirty, I knew that was bogus about getting a business account. In fact in my case I started a business using a personal checking account. After making deposits every other the day the teller told me ” I needed to talk to a business banker” Then he told me what I needed to make my business legit, and off I went.
    Again, I was depositing $50 to $150.00 a day in to a personal checking account and was told to see the business banker, but Faye or Andy or who ever walking into the little branch of Bank of America in Quincy FL. with 10’s of thousands of dollars and no one blink!!

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  5. Oh And I forgot the money orders and checks were made out to AD surf daily INC

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  6. (from the Miami Herald) “The suit says Wachovia is the only large U.S. bank ever prosecuted for these for such violations.”

    Judging from some of the recent reporting over the financial crisis, including that relating the financing of mortgages, it is beginning to look as if strict compliance with the Bank Secrecy Act, by the banks, has not been always been the case.

    The BSA also includes the immediate reporting of transactions or group of related transactions which pass the $10,000 mark.

    After reading a summary of the BSA, the names AdSurfDaily/Andy Bowdoin/Bank of America also spring to mind.

    http://en.wikipedia.org/wiki/Bank_Secrecy_Act“>/a>

    As the US Government tightens up on the enforcement of the laws that regulate the financial institutions, could that sentence become

    “The suit says Wachovia is the FIRST large U.S. bank ever prosecuted for these for such violations.”??

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  7. I find it interesting that some of Bowdoins’ victims still maintain a belief that the Bank of America was somehow involved in what transpired.

    It’s almost as if that last little jump from “anger” to “acceptance” is the hardest to make.

    This appears to be especially true of those for whom ASD was their first foray into the murky world of ‘net investing and who had no previous knowledge of the Bank Secrecy Act, much less its’ workings.

    Roughly interpreted, the principle of”Occam’s razor” can be taken to mean the most obvious answer is more likely to be accurate or select the competing hypothesis that makes the fewest new assumptions.

    It appears, at least from the outside that the BSA worked as intended in the Bowdoin case.

    The prosecutors were fully armed with all the relevant information WRT account numbers, totals and banking details when they presented the initial complaint.

    Further, there was no mention of court orders being required to access such information mentioned in the complaint.

    I stand to be corrected by future revelations, but, without the need to get into some sort of conspiracy theory/ies, what transpired is exactly what one would have expected to happen, right down to the length of time taken between reporting and prosecuting.

    The population of the USA currently numbers upward of 320 MILLION.

    The number of annual bank transactions/accounts must number in the billions.

    Suspicious Activity Reports need to be filed with the FinCEN branch of the US Treasury. FinCEN, which is based in Vienna, Virginia has around 299 employees

    The SEC has around 3500 staff in total.

    I hate to use the cliche’ “do the math” BUT…………………..

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  8. I hate to tell you this but it would take a decent a few days max to put together a program to monitor Ponzi like activity.

    The banks do use software.

    I hate to use the cliche’ “do the math” BUT…

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  9. The banks do use software.

    HeHe, It’s one of the requirements of the BSA

    Even Wikipedia has a section on it:

    “An entire industry has developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions called structuring, which requires SAR filing. Financial institutions are subject to penalties for failing to properly file CTRs and SARs, such as heavy fines and regulatory restrictions, including charter revocation.

    These software applications effectively monitor customer transactions on a daily basis, and using a customer’s past transactions and account profile, provide a “whole picture” of the customer to the bank management. Transaction monitoring can include cash deposits and withdrawals, wire transfers and ACH activity. In the banking industry, these applications are known as “BSA software” or “anti-money laundering software”.

    My point was that the time between a bank filing a SAR and the time when prosecution begins is at least partially governed by the priorities of law enforcement and the number of investigators available.

    Since 911, the main focus of the BSA has shifted noticeably from common fraud to preventing terrorist related money laundering.

    A large number of resources have also been shifted to Homeland Security duties.

    It is worth noting that the abovementioned Wachovia activities occurred in 2003 – 2005, yet the prosecution didn’t take place until 2009.

    “Acting with undue haste” and “a bureaucracy” are not normally associated in the same sentence

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  10. As I said in my first post. ” I have said this more than once” and Littleroundman you have said your side always behind me. And yes I do not know about about the BSA and how it works, and right now I feel like David with a sling shot, but here goes my rock.
    If your telling me that the ball starts rolling when a “suspicious activity report” is filed and you are stating that length of time between reporting and prosecuting was prefect. All I saying is it to bad that this con man was not stopped in late March early April of 08. Because if a ponzi is a ponzi is a ponzi. Then Andy could have been stopped before more victims got hurt and he still would face Felony charges.
    We will probability never know when or who sent in this report, but I think or guess, it was the other bank that Faye and her son deposited the money in that reported. Didn’t the investigation into ASD start at the Miami rally in early July 08 when the highway I-95 was back up with cars trying to give Andy millions of dollars?
    LRM, yes we have 320 million people , but Quincy Fl has only 500.
    Billions of transactions, but what percentage of depoists do you think ASD made up in one day at the little branch of BOA 80%? 90%? 95%? all of this coming from Faye who ran the local flower shop for years and her third husband from out of town.
    It is a known fact ASD hired employee’s of the branch to work part time, most making more an hour at ASD then the bank. Andy never hide what he was doing the Quincy’s Chamber of commerce gave him a special luncheon, at it Andy flew Robert Fava down to give the presentation showing 25% on your money. I would put money on the fact the chamber is like mine up here filled with Accountants, insurance agents, and tons of bankers and no one said “Oh My God!!! this is a ponzi. I would love to see if at this luncheon if a big wig from BOA regional office attended.

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  11. JSOI,

    You may be entirely right in your understanding of what happened, we simply don’t know, and, under the terms of the BSA, will never know.

    The BSA was specifically designed so that NO ONE, outside of the bank and Treasury can know.

    I base my assessment on a couple of things:

    1) many years of observing the “scene” and many years of frustration at the apparent lack of action of regulators.

    I say “apparent” because, in many cases, it was only years later it became public knowledge that investigators had been in, on and around the fraud/s in question months, if not years, prior to members becoming aware.

    2) As mentioned, the regulation/s under which finCEN operates WRT the Bank Secrecy Act and Suspicious Activity Reports specifically precludes ANYONE releasing details INCLUDING under court order.

    I stand to be corrected, but, Applying the Occams’ Razor principle that the simplest explanation is most often correct, I see no reason at all to muddy the waters with conspiracy theories.

    Based solely on previous experiences, I would not have expected the timing or outcome to be any different than it was, and said so at the time.

    What’s more, BoA has a publicly stated policy of fully co operating with investigators AND allowing the suspect accounts to remain active for as long as is required by the investigating agency. This is not necessarily true for the so far unnamed “other bank” which is fully entitled under the finCEN regulations to close suspect accounts.

    3) As for: “It is a known fact ASD hired employee’s of the branch to work part time, most making more an hour at ASD then the bank” I must ask, known to whom ???? How many people actually observed all these bank employees in action and saw their paychecks ???
    How many are relying on what came out of the ASD/Bowdoin camp ???? Why is there no mention at all in any of the complaints or court documents ????

    Is it at all possible individual staff were conned into working for ASD AND SARs were filed by the bank itself ????

    Why accept that ASD was an outright fraud from day one, then believe Bowdoin was telling the truth on this occasion, but lied about everything else, other than his name ???

    Bowdoin was an accomplished fraudster. The fact individual bank employees and the Quincy Chamber of Commerce may or may not have fallen victim to the scam has no bearing on whether or not the compulsory automated SARs were filed by BoA.

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  12. A an ex member (I guess we are all ex members now aren’t we?) of ASD, and as a European, the story of ASD has been fascinating.

    What was quite an eye opener was the path that ASD took in its home country, the United States – the rallies, the passionate road show that accompanied it, the use of religion and above all, the massive amounts of money that were being invested in it. It appeared to be a a snow ball rolling without control and for this participant at least, it seemed to have moved a long way from the supposed advertising company we thought we had joined. (I would point out at this point that I had not worked out the math and realised that the whole business was unsustainable, neither had I any idea about the background of the people who ran it.)

    I, myself, have expressed doubts about the involvement of BoA, not because of any belief that it reduces the responsbilities and accountability of those who ran and “worked it” ASD any way,nor because I find any credibility in the numerous conspiracy theories, but because of a certain awareness of how far small rural bank branches (in many countres) can and sometimes do veer from the practices and rules than their more sophisticated city offices and the negligence and ignorance that can become a habit in their daily operational practices. Massive deposits (many well in excess of 10,000$ were being directed to private bank accounts for well over a year before the raid by the Secret Services. The Bowdoin accounts were most likely the largest personal accounts in the Quincy branch and, as such, would have been well known to all the staff. Whilst I have no knowledge of what in fact happened, it would not surprise me if any reporting of ASD was not done by the Quincy office and that negligence at local level is a distinct possibility. Lets face it, the Chamber of Commerce didnt do its homework either. Equally it would not suprise me if the local BoA branch was instrumental in the reporting, but I dont think that any assumptions are valid at this point.

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  13. As far as the employment of BoA Quincy employees is concerned, the members were told this by both Bowdoin and other senior members, on the internet calls, and ASD employees of the office had also mentioned it to people when they called to complain about delays. It was not a secret at that time that the BoA staff were “moonlighting” at ASD. Whether they were all lying or not is another matter, but I doubt it.

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  14. Quick note:

    In April 2009, three plaintiffs who sued ASD under the federal racketeering statute filed an amended complaint that alleged ASD had hired employees of the BOA branch in Quincy, Fla.

    http://patrickpretty.com/2009/04/27/breaking-news-plaintiffs-in-rico-action-say-adsurfdaily-hired-bank-of-america-employees-paid-them-more-than-others-doing-the-same-work-accuse-bank-of-turning-a-blind-eye-to-ponzi-scheme/

    Patrick

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  15. Agreed.

    With my job, I hit the “s” key, another person hits the “k” key and if I want to use “shift + S” another department has to be involved. For most of my career, I have had free reign to the whole keyboard so to speak.

    “Acting with undue haste” and “a bureaucracy” are not normally associated in the same sentence

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  16. the play starts Tuesday after the second ASD rally in Iowa, with the bank teller for BOA in Quincy Fl a small town 30 years past it prime.
    Bank teller looking out the window: here comes Faye!!!
    asst teller: thank god we only have had three people in today and two of them withdrew.
    Manger of the branch: don’t worry, we have already had wired into one of the accounts $53,000.00 Hello Faye, how’s the family? come sit my my desk and talk>
    Faye: oh Jim (fake name) I’m bushed those trips up north just tire me out.
    Bank manger: I bet Faye Sue (fake name) come over here at take the bag from Faye and start doing the deposits.
    Sue: morning Faye how was your trip was it cold up in Iowa?
    Faye: yes honey very cold thank god for my mink, but you know those Farmers from Iowa are the nicest people I know.
    Sue: Faye is it true your hiring over at your old store? and at 12.50 an hour? I can’t find a part time job in this town and if I did the pay is only $7.50
    Jim: yes Faye, thanks for the job, any more openings?
    Faye: we’re always looking for good people, Sue after work you come over and ask for Juan, I will tell him about you.
    Sue: thanks Faye Oh my god!!! there is a check in here for $250,000.00
    Faye: yes a nice man form Texas flew all the way up to Iowa and handed the check personal to Andy himself.
    Jim: that’s great I think I will be able to fly with you guys to the rally in Minneapolis on the 26th and get some free ad-packs!!!
    Faye: better bring your long underwear!!!!
    everyone: hahahahahahaha!!!!!!!!!
    HAPPY NEW YEAR EVERYONE!!!!

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