EDITORIAL: TelexFree’s La-La Land Leaves Trail Of Missed Signals, Willful Blindness And MLM Arson

In case you missed the big news yesterday, TelexFree figures James Merrill and Carlos Wanzeler were charged criminally.

Unofficially this brings the number of charged MLM HYIP “programs” (or clients) with links to MLM attorney Gerald Nehra to three in recent years. Nehra was an “expert witness” for AdSurfDaily in 2008. He testified that ASD, a 1-percent-a-day “program,” was a legitimate business and not a Ponzi scheme.

ASD operator Andy Bowdoin, who compared the men and women who guard the President of the United States to “Satan” and the 9/11 terrorists and clucked that “God” * was on his side, later was charged criminally and sentenced to a lengthy term in federal prison.

Nehra was brought in for marquee value and as an adviser to Zeek Rewards, Zeek operator Paul Burks said in late 2011 or early 2012.  Zeek executives Dawn Wright-Olivares and Daniel Olivares later were charged criminally.  Zeek was a 1.5-percent-a-day “program.”

At some point in 2012 or 2013, Nehra began to advise TelexFree. TelexFree executive Steve Labriola, like Zeek’s Burks before him, also saw marquee value in Nehra, according to Labriola’s comments in a TelexFree promo on YouTube. Now, Merrill and Wanzeler face the prospect of jail. Because the investigation is ongoing, others may, too.

TelexFree’s bogus returns were not tied to sales of its VOIP product and computed to more than 200 percent a year, making the “program” a classic Ponzi- and pyramid swindle, according to court filings. Some promoters claimed $15,125 returned $57,200. One promoter allegedly told an undercover federal agent that he’d scored $1.6 million in TelexFree “without selling a TelexFree product.”

News of the TelexFree criminal charges broke on an otherwise ordinary day in MLM La-La Land. Some “supporters” of TelexFree were petitioning the federal judge overseeing the SEC’s major civil action filed last month to “bail out” the “program,” for example. This occurred after TelexFree “supporters” earlier had petitioned a U.S. Bankruptcy Judge for a similar “bail out,” despite the fact TelexFree was trying to “reject” its contracts with promoters.

This is a column about willful blindness and feigned obtuseness. (Think Faith Sloan.) It’s also a column about missed signals, whether they’re missed purposely or otherwise. (Think: Why would TelexFree hire Nehra after ASD and Zeek — and why would Nehra ever accept the work, which was bound to lead to racketeering allegations? Put another way, if you’re at the scene of too many highly suspicious fires, you shouldn’t be surprised if serious people start to believe you’re the arsonist or the arsonist’s helper. Even assuming Nehra is no MLM arsonist or racketeer, accepting the TelexFree work potentially put him in the position of being extorted or otherwise abused by the trade’s arsonists and racketeers.)

Spot any common themes or information roadmaps in the quoted material below?

AdSurfDaily “is not” a Ponzi scheme. “It is a legally structured, direct selling business model with multilevel compensation.” — Gerald Nehra, MLM attorney, Aug. 18, 2008. (Context: Nehra’s submitted testimony as defense witness in civil forfeiture action in the $119 million AdSurfDaily MLM HYIP Ponzi case. **)

“[AdViewGlobal] is the next iteration of the Ponzi scheme auto-surf programs, which [are] staffed with former [AdSurfDaily] executives and Bowdoin disciples.” — Class-action attorneys suing AdSurfDaily operator Andy Bowdoin and AdSurfDaily attorney Robert Garner of North Carolina, June 30, 2009. (Context: Motion in member-filed lawsuit against Bowdoin and Garner that alleged RICO (racketeering) violations.)

“With all of our efforts to punish and deter this criminal enterprise, the rights of innocent parties are protected and will subsequently be returned.” — A.T. Smith, assistant director, U.S. Secret Service Office of Investigations, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)

“We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes.” — Assistant Attorney General Lanny A. Breuer, U.S. Department of Justice, Criminal Division, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)

“Just having him on retainer and having him on our team, it goes a long way from keeping anybody from launching an attack. Because generally when Gerry Nehra is involved, the Feds know that he’s cleaned up the act really well.” — Paul Burks, Zeek Rewards operator, c. December 2011. (Context: Burks’ remarks to early Zeek members that MLM attorney Nehra was on board.)

“I am pleading guilty because I am in fact guilty of the offense(s) identified in this Plea Agreement.” — Andy Bowdoin, AdSurfDaily operator, May 2012. (Context: Plea agreement to wire fraud in which Bowdoin disagreed with MLM attorney Nehra and acknowledged AdSurfDaily was a Ponzi scheme.)

“Capitalizing on the strength of our financial task force partnerships, we aggressively pursue criminals using computer experts, forensic specialists, investigative experts and intelligence analysts.” — Dennis Ramos Martinez, special agent in charge, U.S. Secret Service Orlando Office, Aug. 29, 2012. (Context: Prison sentence imposed on AdSurfDaily operator Andy Bowdoin.)

“While [Gregory] McKnight himself referred to Legisi as a “loan” program, and demanded that “members” not refer to their “loan” and an “investment,” Legisi was, in reality, an investment contract, which is considered a security and therefore regulated by the Securities and Exchange Commission. This semantic obfuscation was quite obviously an attempt to sidestep the securities laws.” — Office of U.S. Attorney Barbara L. McQuade, Eastern District of Michigan, September 2012. (Context: Sentencing memo against Gregory McKnight in Legisi $72 million HYIP swindle.)

“I’m not sure how many of you have heard the name ‘Gerry Nehra.’ But it is a very big name in this industry.” — Steve Labriola, TelexFree executive, Newport Beach, Calif., July 2013. (Context: Labriola introducing Nehra to TelexFree members at “Super Weekend” MLM rah-rah fest.)

“ZeekRewards used the enormous power of the Internet to rip off $850 million from hundreds of thousands of victims in less than two years. We will continue to work with our law enforcement partners to take down greedy scam artists who think nothing of stealing the savings of hard working people.” — U.S. Attorney Anne M. Tompkins, Western District of North Carolina, Dec. 20, 2013. (Context: The filing of criminal charges in the Zeek Rewards MLM/HYIP case.)

“The Massachusetts Securities Division charged TelexFREE Inc., with running a Ponzi scheme targeting Brazilian-Americans that has raised over $90 million from Massachusetts residents and around $1 billion globally.” — U.S. Department of Homeland Security, April 17, 2014. (Context: U.S. financial infrastructure protection. Sourced from DHS Daily Open Source Infrastructure Report.)

“At this [TelexFree] ‘super weekend’ event, Attorney Nehra spoke at length to attending investors, assuring them of the legality of TelexFree’s operation stating: ‘It is legally designed . . . you are on very solid legal ground.'” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)

“Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving AdSurfDaily and Zeek Rewards, armed him with the knowledge of what constitutes violations of United States securities law. Indeed, Attorney Nehra was well aware that the use of semantics and obscured phraseology to obfuscate securities laws fails to legitimize TelexFree’s illegal Pyramid Ponzi Scheme.” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)

“Investigating the flow of illicit money across U.S. borders and the criminal enterprises behind that money is one of our top priorities.” — Bruce Foucart, special agent in charge, Homeland Security Investigations, May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)

“As alleged, these defendants devised a scheme which reaped hundreds of millions of dollars from hard working people around the globe.” — U.S. Attorney Carmen Ortiz, District of Massachusetts, May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)

SOURCES USED IN THIS COLUMN:

• U.S. government filings and statements.
• Court filings from private RICO actions.
• Original reporting at ASD Updates.
• Original reporting at BehindMLM.com.
• Original reporting at the PP Blog.

* Like jailed AdSurfDaily operator Andy Bowdoin, TelexFree figure Carlos Costa contends God is on his side. While Bowdoin talked of “Satan,” one TelexFree promoter has called a prosecutor in Brazil a “blonde she-devil.”

** Two members of AdSurfDaily who went on to become members of Zeek Rewards liked Nehra’s opinion so much they used it in a failed lawsuit (2011) against the U.S. government. The members, Todd Disner and Dwight Owen Schweitzer, both are listed as “winners” in the $850 million Zeek Rewards’ scheme. Disner’s Zeek haul was alleged to be more than $1.875 million.