PatrickPretty.com

Day: February 22, 2012

  • BULLETIN: SEC Says California Man Was Running THREE Ponzi Schemes — One Of Them Allegedly Duped Investors Into Believing They Were Funding FedEx Distribution Facility In Las Vegas

    BULLETIN: The SEC has gone to federal court in the Southern District of California, alleging that Steven L. Hamilton of Carlsbad was running three Ponzi schemes through three companies he set up “to solicit unsuspecting investors.”

    Hamilton is 42, the SEC said.

    One of the offers allegedly duped people into believing they were investing in a Las Vegas distribution center for FedEx, the famous courier company.

    “Hamilton, however, did not have an agreement with Federal Express to build a Federal Express facility in Las Vegas, Nevada, and did not have a signed lease with Federal Express,” the SEC charged. “Instead, Hamilton converted the investor funds to his own use.”

    Hamilton and his companies also duped investors into believing they were investing in real estate loans secured by deeds of trust or certificates of deposit.

    Charged with Hamilton were Verde Retirement LLC of San Diego, Verde FX Nevada LLC of San Diego and Covenant Capital Partners of Encinitas, Calif.

    “Hamilton used the money he raised from these three fraudulent offerings to pay his personal living expenses,” the SEC charged. “In order to perpetuate his scheme, and to make his purported investments appear successful, Hamilton also used a portion of the monies he raised to pay fictitious returns to investors when, in fact, his investments were non-existent and he was simply using investors’ monies to pay other investors.”

    The combined fraud schemes operated between 2007 and February 2011, raising at least $1.6 million from at least 23 investors, the SEC said.

    And Hamilton also touted certificates of deposit — while trading on the name of the government and engaging in website chicanery to sanitize the scheme, the SEC said.

    “Fliers for the Verde CDs, posted by Hamilton on the Verde website, advertised ‘fixed income accounts’ that ‘earn 5x more than a comparable term current bank CD,’” the SEC charged.

    Site visitors were told that capital was “protected by our highly conservative senior loans against high quality, income producing commercial real estate,” the SEC charged.

    “In a September 2010 iteration of the website, Verde represented that its fixed income accounts were ‘supported by the monthly interest payments’ Verde received from its portfolio of ‘well chosen, US Government Agency guaranteed (Fannie Mae Freddie Mac), conservative, senior loans,’” the SEC charged.

    At the same time, the website further assured  prospects “that the Verde mortgage portfolio was ‘backed 100% by the US Government Agencies, thus ensuring [investor] principal and income [were] safe,’” the SEC charged. “By November 2010, the website had been revised to eliminate references to a portfolio that included ‘FDIC insured CDs.’”

    Regulators and U.S. law enforcement long have warned that fraud schemes destroy confidence in legitimate capital markets and that the Internet has been used by hucksters to disguise criminality and create the appearance of legitimacy.

    Read the SEC complaint.

  • VANCOUVER SUN: Investors From At Least 3 Countries Plowed Millions Into Scheme That Has Led To Suspension Of British Columbia Notary Public; Ponzi Probe Triggers Questions About Overlooked Red Flags And Lack Of Due Diligence By Salesman

    EDITOR’S NOTE: Some investors in Canada, the United States, the United Kingdom and potentially elsewhere got an unpleasant Valentine’s Day surprise when they learned that an investment scheme into which they had plowed millions of dollars was under investigation by the British Columbia Securities Commission (BCSC) in Canada.

    In the early stages of the probe, it appears as through the investment was pushed through mainstream channels. Even so, the case may provide a learning experience for would-be Ponzi-board purveyors who’ve been nudged toward the darkness by the serial scammers who populate the boards.

    Indeed, the BCSC action exposes the myth that here are no consequences for ignoring or downplaying red flags and not performing legitimate due diligence before recommending an investment scheme. 

    The PP Blog’s brief and a link to recommended reading are below . . .

    On Feb. 14, BCSC issued this Investor Alert on Rashida Samji and Arvindbhai B. Patel. Samji is a notary public. Just a week earlier — on Feb. 7 — her license was suspended by the BC Society of Notaries Public. Her property has been put under the control of a custodian.

    Patel, a financial planner and mutual-fund salesperson, allegedly recommended Samji’s investment scheme, which “offered a 12% annual return,” BCSC said, noting that the funds were “purportedly held in a trust account administered by Samji.” (Italics added.)

    What Ponzi-Board Promoters Can Learn From BCSC Action

    Although the purported opportunity was not the type typically promoted on the Ponzi and fraud boards and there has been no suggestion that Samji’s alleged program was offered on the boards, the events surrounding Patel have produced a cautionary tale. It is one that upstart promoters should embrace and use as a reason not to follow their Ponzi-cesspit colleagues into the darkness.

    Of concern to Ponzi-board purveyors, whether upstart affiliates, serial cheerleaders for investment schemes or the owners of “programs”:

    • Patel is under investigation by the British Columbia government for recommending the scheme.
    • BCSC has filed liens against his real estate.
    • Certain of his other assets have been frozen, including his retirement savings and brokerage accounts.
    • Electronic communications appear to have been used to introduce prospects to the scheme.
    • Patel allegedly plowed his own money into the scheme and introduced others who followed his lead and plowed money into the scheme.

    Patel has not formally been accused of wrongdoing. Even so, the investigation to date showcases the legal thicket that may rise to consume individuals who recommend or actively promote highly questionable investment schemes.

    Because BCSC has tied Patel to Samji’s scheme, it has taken measures to stop the damage in its tracks by denying him the ability to dissipate or liquidate assets. His financial life effectively is on hold as the investigation continues — and that is something that can happen to Ponzi-board promoters at any point in time.

    Of further relevance to Ponzi-board hucksters is another series of facts: the opportunity Patel allegedly recommended promised returns of “only” 12 percent annually and he appears to have known Samji in some real-world way — i.e., his contact with her may not been have been exclusively virtual in nature, meaning he has actually seen her or can speak about her intelligently.

    On the Ponzi boards, promoters routinely tout investment schemes that promise returns that dwarf the returns allegedly promised by Samji — and they may have no contact with scheme operators beyond the virtual. This means they may have even less legal cover if a government action or other litigation ensues. They may not even be able to demonstrate they were engaging with a real person or business entity if called to the witness stand to explain their actions as promoters.

    The PP Blog highly recommends this story that appears today in the Vancouver Sun.

    Of particular note is Patel’s explanation to the BCSC for his alleged conduct,  portions of which the the newspaper published after obtaining a transcript of a proceeding last week. The proceeding has led to questions about red flags that were ignored and due diligence that was shelved in favor of simply believing Samji’s line.

    Not questioning a “line” or performing even minimal due diligence is something that happens daily — even hourly and minute-by-minute — on the Ponzi boards. Virtually all downstream consequences on both promoters and victims are ignored as promoters fire up “I got paid” posts.

    A snippet from the newspaper account on Patel’s explanation to BCSC. (Italics added):

    “I asked her if I could talk to someone at Mark Anthony Group and see if I could verify the structure of the investment,” he told the panel.

    “She indicated to me, basically, it’s very confidential information – She told me she had consulted a lawyer and she did not require any disclosures or memorandums.”

    Any person who has spent so little as five minutes on the Ponzi boards has seen this type of explanation advanced. “Program” sponsors may refer to lawyers without naming them, imply secrecy is required and preemptively deny that any disclosures are required. Promoters then parrot the information, whether or not it is true. Such “explanations” about purported confidentiality requirements and the need to compartmentalize information frequently accompany HYIP “programs” and prime-bank swindles.

    Before Patel even uttered his explanation, here is what BCSC had to say:

    “We felt it was important to warn investors not to send any money to either of these individuals,” said Lang Evans, director of enforcement for the BCSC. “We encourage anyone who had dealings with Samji or Patel to contact the BCSC.”

    Visit the BCSC information page on the case.