It’s starting to read like Ian Fleming fare, something straight out of James Bond and “Octopussy.”
R.J. Zayed, the receiver in the alleged Trevor Cook/Pat Kiley Ponzi scheme in Minnesota, says he did not find Cook’s collection of Faberge eggs when, armed with a court order, he searched Cook’s home in Apple Valley. The precise size of the collection is unclear, but it has been described in court filings as featuring “numerous” eggs.
The fabulous jeweled eggs also didn’t turn up at the Van Dusen mansion in Minneapolis, which Cook and Kiley used as an office. Potentially “millions” of Iraqi dinars once stored on the third floor of the mansion also are missing, according to court filings.
Zayed was able to get cursory information on Cook’s island getaway in Canada, though — thanks to a real-estate appraiser who was willing to venture to the Rainy Lake Island property near Fort Francis, Ont., on a snowmobile.
“Given the difficulty traveling to the island during the winter, however, no other licensed appraisers have been able to make an on-site inspection as of [yesterday],” Zayed said.
Additional appraisals will be obtained with the spring thaw, presumably in April, “when the weather allows easier access to the island,” Zayed said.
The Rainy Lake Island property consists of 2.3 acres of land. There are “several structures on the property, including an 1130 square foot log cabin, a guest cabin, docks and sheds,” Zayed said.
“The dwelling structures are newly constructed and weather tight, but unfinished on the inside. The property is serviced with electrical power supplied by under water cable originating from the Minnesota side of the lake,” Zayed said.
He estimated that the property was worth about $400,000 to $500,000.
Cook, who is jailed for contempt of court for not turning over receivership assets, purportedly purchased a submarine to access the island, but discovered the waters were too dark for the submersible craft.
Because of the unfriendly waters, Cook talked about moving the craft to Panama, whose waters he believed more suited for use of his submarine, according to court filings. The submarine purportedly was purchased on eBay.
Zayed was able to locate 31 watches in a collection described in court filings as “vast,” including a “diamond studded Rolex watch that Cook gave to his wife and that she maintained in a safe deposit box.” He also recovered a ROM exercise machine that retailed for $14,165.
Investors in the alleged $190 million scheme may get “pennies on the dollar,” Zayed said.
Prior to being jailed in January, Cook asked Chief U.S. District Judge Michael Davis for a monthly allowance of $6,679, including a monthly outlay of $105 to cover the expenses of his three housecats and $100 for a gym membership.
While searching Cook’s home, Zayed seized three automobiles: a 2005 Lexus 33 series; a 2004 Lexus L43; and a 1997 BMW 328ic. He is seeking to auction them off.
Zayed already has sold a 1989 Rolls Royce; a 2004 Audi RS6; a 1985 Pontiac Fiero “Lamborghini Kit Carâ€; a 1998 BMW Z3; a 1989 Mercedes 420 SEL; and a 2000 Lexus. The cars, some of which had high mileage, fetched $73,100, according to court filings.
All buyers were required to “sign a statement certifying that they were not serving as a proxy” for Cook or any other person or entity that is part of the probe, Zayed said.
Meanwhile, Zayed sold Cook’s large-screen, high-definition TVs and other items such as computers and gambling equipment for “at least” $24,000 — higher than the expected amount, according to court filings. A final accounting of the auction was not yet finalized.
An inventory of items suggested that the collection featured 10 TV sets with 50-inch screens and two sets with 42-inch screens. Like the car-buyers, the TV-buyers had to certify they were not acting as a proxy.
The Cook/Kiley entities perpetrated “a massive scheme to defraud and that they never operated as legitimate investment vehicles,” Zayed said, noting that he believes the entities “have no value as ongoing businesses” and that “the value of any ‘investments’ in these entities has a present value of zero dollars.”
Zayed said the Van Dusen mansion has a “still-confidential buyer” willing to pay $1.6 million in cash for the historic structure. A deal could close next month, if no buyer willing to pay more emerges.
The property was marketed for $1.995 million, and racked up some big bills for security, repair of furnaces, repair of the alarm system, snow removal, cleaning and other maintenance.
Cook, Kiley and several companies were implicated in an alleged $190 million Ponzi and forex fraud in November by the SEC and the CFTC. Kiley formerly hosted a show on Christian radio.
It was a case that was all about the numbers. In the end, the number with the most meaning to Nilton Rossoni was 68 — the number of months he’ll be spending in federal prison.
Rossoni conducted more than 5,500 fraudulent auctions on eBay. He pulled off his scheme by using at least 260 bogus accounts, at least 59 mail drops, six names, four bogus passports and three banks.
Rossoni, 50, formerly of Sunny Isles and Hallandale Beach, Fla., collected $717,000 in the scheme between October 2003 and June 2008. The bizarre fraud was smashed by the U.S. Postal Inspection Service
Winning bidders were notified via e-mail to send a check or money order payable either to Celso Ferreira, Jorge Carlos, Joao Santos, Lourival Philipps, Prime Hill Inc. or Primo Hill Inc. Buyers were instructed to send payments via U.S. Mail to specific addresses, all of which proved to be mail drops.
“Elaborate” barely described the scheme.
“Rossoni rented at least 59 separate private mail boxes at various Commercial Mail Receiving Agencies (CMRA), including The UPS Store, Mail Boxes Etc., and Pak-Mail, using fraudulent Brazilian passports in the names of Celso Ferreira, Jorge Carlos, Joao Santos, or Lourival Philipps as identification,” prosecutors said. “After receiving payment, Rossoni deposited the money into various bank accounts he opened at Bank of America, Citibank, and SunTrust Bank, under these aliases.”
As part of the scheme, “Rossoni registered and established hundreds of eBay accounts and used various names, e-mail addresses, phone numbers, and mailing addresses on those accounts to post items for auction,” prosecutors said.
He then purchased inexpensive items from himself and posted positive “feedback†on the transaction, prosecutors said.
Confident that Rossoni was an honest broker because of his positive feedback, buyers lined up to be fleeced, prosecutors said. Rossoni sold them textbooks, computer flash drives, rotisserie grills, tools, sporting equipment, DVD collections, airline tickets, saddles, saddlebags, designer luggage, appliances, metal detectors and more.
The spread of online commerce has been accompanied by a spread of elaborate frauds — some of which have gathered tens of millions of dollars.
Accompanying the fraud have been stares of disbelief. Not all of the stares have been directed at the fraudsters themselves. Indeed, thousands and thousands of people globally at any point in time simply refuse to believe they’ve been scammed — perhaps owing to embarrassment.
Some of them point the finger of blame at law-enforcement agencies that take actions against the cyberspace scammers.
Online fraud can be particularly elaborate. It often takes advantage of brand names people trust. In the alleged AdSurfDaily Ponzi scheme in Florida, for example, prosecutors say Google’s name was used by ASD promoters as a means of instilling trust in customers.
Names of other famous companies also were used by ASD promoters — names such as Kodak, Starbucks, Quiznos Sub, Callaway Golf, Macy’s, Toshiba, NBC, Farmers Insurance, USA Today, Priceline.com and more.
Today comes word that a Florida man has been convicted in a scheme carried out on eBay, one of the most famous websites and brands in the world.
Nilton Rossoni, 50, of Hallandale Beach, Fla., faces up to 20 years in prison.
How elaborate was the scheme?
Prosecutors said Rossoni created “more than 260 different eBay accounts” using aliases “or the real names and address of unsuspecting individuals.”
Rossoni gathered money for more than 5,500 items but never shipped them. He netted $717,000 over time, prosecutors said. Rossoni averaged about $130 per fraudulent sale.
Here is a breakdown of some of the listings:
Textbooks.
Computer flash drives.
Rotisserie grills.
Tools.
Sporting equipment.
DVD collections.
Airline tickets.
Saddles.
Saddlebags.
Designer luggage.
Appliances.
Metal detectors.
“When the auction ended, the winning bidders were notified to send payment to the defendant at a private mail box,” prosecutors said today.
“Customers of eBay sent payment to the defendant at 59 different private mailboxes opened in names of multiple aliases during the course of the scheme,” they continued. “Once the defendant received payment from the eBay auction winner, the funds were deposited in bank accounts under the control of the defendant, but in the name of a nominee entity or person.”
The one-year anniversary of the seizure of AdSurfDaily’s bank accounts and tens of millions of dollars occurred yesterday, but there was no discussion about it on the Pro-ASD Surf’s Up forum. No one appears to have started a thread to commemorate the anniversary.
ASD’s Breaking News site, which recently went offline and now resolves to a parked page that beams ads, gave Surf’s Up its official endorsement Nov. 27. The endorsement occurred eight days after a federal judge ruled ASD had not demonstrated at an evidentiary hearing that it was a legal business and not a Ponzi scheme.
ASD asked for the hearing. The government did not object. ASD President Andy Bowdoin took the 5th Amendment, advising the court through his attorneys that he would not testify at a proceeding his own company requested.
Although some Surf’s Up members continue to blame the government for events and criticize the prosecutors for being slow to issue refunds from seized funds, the ASD side is responsible for slowing the case to a crawl. At the same time, Bowdoin always has claimed in court filings that the money belonged to him and not the members. It’s one of the few areas in which both Bowdoin and the prosecutors are in agreement.
Bowdoin submitted to the forfeiture in January, meaning the case nearly was litigated to conclusion. His forfeiture decision put the government in position to begin an orderly process to implement a restitution program for participants who certified they were crime victims. The first step, according to the government, was to liquidate ASD’s assets. The government advised victims that patience would be required because it would take time to liquidate real estate and other seized assets and to carry out other administrative functions. (See story.)
ASD’s motion to submit to the forfeiture was filed Jan. 13; it was the 39th entry on the case docket, and the judge’s order (Jan. 22) granting Bowdoin’s request to forfeit the money was the 41st. The docket now has 80 entries, meaning it effectively has doubled in size despite the fact the case nearly was litigated to conclusion in January.
Less than two weeks after the judge granted Bowdoin’s forfeiture motion, pleadings by pro se litigants who opposed the government’s point of view and sought to intervene in the case began to appear on the docket. The docket has been dominated since January by pro se litigants, including Andy Bowdoin, who fired his paid attorneys and said he changed his mind about submitting to the forfeiture after consulting with a “group” of members.
As of today, various pro se pleadings have resulted in delays of at least seven months in implementing the orderly restitution process the government said it contemplates for crime victims. ASD has been ordered to show cause by Aug. 7 why Bowdoin’s motions — and why motions filed by a new Bowdoin attorney — should not be denied. The judge said she had heard neither from Bowdoin nor his attorney since May.
Timeline
Judge Rosemary Collyer issued the ruling that ASD had not demonstrated it was a legal business and not a Ponzi scheme Nov. 19. On the same date, ASD said on its Breaking News site that it was “Shaken but Not Stirred!” by the ruling, punctuating its comment with an exclamation point. ASD gave Surf’s Up its official endorsement on the Breaking News site Nov. 27, eight days after Collyer’s ruling.
References to a new surf with ties to ASD — AdViewGlobal (AVG) — began to appear online by mid-December. On Dec. 19, federal prosecutors filed a second forfeiture complaint tied to assets allegedly paid for with money that originated with ASD, including automobiles, a boat, jet skis and marine equipment, and a mortgage on the Tallahassee home of George and Judy Harris. George Harris, whom Bowdoin identified as head of ASD’s real-estate division, is Bowdoin’s stepson.
On June 10 and June 11 alone, prosecutors said, almost $240,000 in ASD funds were used for personal purchases by Bowdoin family members or friends. The purchases were made less than two weeks after ASD concluded a rally in Las Vegas in which Bowdoin told participants that he thanked God for making him a “money magnet.” He implored attendees to visualize themselves wealthy, to “have an attitude of gratitude with God” and to imagine lots of big checks coming in from AdSurfDaily.
By the end of July — after more ASD rallies — Bowdoin plunked down nearly $50,000 to purchase a new Lincoln. His assets were seized days after the purchase.
On a date uncertain in either December or January, some of the Mods and members of Surf’s Up started a forum to promote AVG. Reports suggested that as many as 30 former ASD members were “founders” of AVG.
On Jan. 15, two days after Bowdoin advised the court that he intended to submit to the forfeiture and never reintroduce his claims to tens of millions of dollars and other seized property, three ASD members sued Bowdoin for racketeering. Bowdoin has not responded to the complaint. No attorney has entered an appearance notice for him.
AVG’s graphics were seen on an ASD-controlled website Jan. 31, just hours before AVG’s official launch after operating in prelaunch phase in January — and after AVG had specifically disclaimed any affiliation with Bowdoin or ASD. Pro se filings in the ASD case began to appear within days of AVG’s formal launch.
On Feb. 24, reports surfaced that the U.S. Secret Service had seized the bank accounts of at least four additional participants in ASD, including at least one participant who had joined AVG. On Feb. 25, Bowdoin signed the first of his pro se pleadings. As February drew to a close — and before the world knew about Bowdoin’s shift in strategy to pro se — a Surf’s up Mod implored members to be patient, hinting the case soon would take a turn for the better from ASD’s point of view.
“[J]ust hold on — a little bit longer now baby,†the Mod implored.
On March 20, less than two months after its formal launch, AVG announced that Chief Executive Officer Gary Talbert had resigned but would continue to working in “accounting.” Talbert was an ASD executive who signed a sworn affidavit in the ASD case. In an Aug. 18 docket entry, Talbert identified himself as “Human Resource Manager, Assistant CFO and Website Editor.â€
Although AVG identified Gary Talbert as the CEO of AdSurfDaily, Talbert did not say the same thing about himself in court filings.
On Feb. 3, AVG identified Talbert as ASD’s chief executive officer, despite Talbert’s own court filings in which he noted his titles and never claimed to be ASD’s CEO. AVG continued to insist there was no affiliation with ASD.
On March 23, AVG announced its bank account had been suspended. Members also reported glitches with eWalletPlus, a money-exchange business associated with AVG. On March 26, three days after the announcement of the account suspension, an AVG promoter sent out an email that said $5,000 spent with AVG turned into $15,000 “instantly!” because of a matching-bonus program AVG was running. The promoter was identified as a participant in the CEP Ponzi scheme.
ASD once advertised it accepted CEP Trust as a payment method. CEP Trust was the failed payment processor associated with the CEP Ponzi scheme. AVG advertised huge matching bonus programs for weeks in what some people saw as a bid to collect large sums of cash as quickly as possible. eWalletPlus eventually went offline.
ASD once advertised it accepted CEP Trust, the failed payment processor associated with the CEP Ponzi scheme. A CEP promoter named in court filings sent out a promotion for AVG in March, claiming $5,000 spent with AVG turned into $15,000 'instantly!' The promotion was emailed three days after AVG announced its bank account had been suspended because too many members had wired transactions in excess of $9,500.
On or around May 23, AVG announced the launch of a new website. The launch failed, and members grumbled. On June 1, AVG announced the launch of yet another new website. By June 25, AVG announced that it was suspending member cashouts, making an 80/20 program mandatory and exercising its version of a “rebates aren’t guaranteed” clause that permitted it to keep members’ money.
Thicket Gets Thicker
The AVG site operated by some of the Surf’s Up Mods and members went offline after AVG made the June 25 announcement about suspended payouts. On the same date, AVG threatened members and media outlets with copyright-infringement lawsuits for sharing news about the suspended cashouts.
Four days later — on June 29 — Bernard Madoff was sentenced to 150 years in prison for operating a massive Ponzi scheme.
On June 30, AVG’s name was mentioned in documents filed in the racketeering lawsuit that had been filed against Bowdoin in January. The documents listed the names of some employees or members AVG and ASD had in common, but AVG has not been named a defendant in the RICO case.
July opened in unkind fashion for AVG. On July 1, just days after it announced the suspension of cashouts, AVG announced a new payment plan. Members said the plan was baffling because it appeared not to take into account matching bonuses the company had advertised and also increased the window for earning back money directed at the firm from 150 days to 180 days to 210 days, while at the same time suggesting it might take forever for members to get a return.
AVG identified George and Judy Harris as its owners on July 1. In the hours that followed, it closed its forum, reopened it, and closed it again. The actions occurred over a period of three days — and in the wake of complaints from members who had been pleading with the company to provide understandable explanations and to stop blaming participants for AVG’s seeming inability to explain itself.
In a bizarre communication, AVG advised members that the initial forum closure had occurred because posts by some members were contributing to the confusion of other members. Nearly 50 posts were deleted, members said.
Within days the situation grew murkier. By the end of the month, new questions about AVG were raised after the company was tied to a firm known as Karveck International, a subsidiary of Vana Blue Inc., a Pinksheet stock.
Vana Blue is registered as a corporation in Nevada. The company uses an address in Las Vegas that resolves to a mailing service, and an address in Phoenix that also resolves to a mailing service. VanaBlue says it owns the eWalletPlus payment service, whose website now resolves to a page that beams ads, as does Vana Blue’s own website.
One of the officers of Vana Blue is named a defendant in a counterclaim by the U.S. government that alleges more than $252,000 in federal income tax remains unpaid. The same individual — Donald Rex Gay — is listed in Louisiana records as a person who has been involved in a number of businesses.
Gay denied in pro se court filings that he owed the taxes.
Taking On eBay?
In April 2008, Vana Blue announced that it had “signed an exclusive agreement with Net Auction Plus (an alternative to eBay with lower fees and other eBay processes) to provide online, affordable, and flexible payment services.
“The start-up auction site has already over 200 power sellers from eBay committed to the new site when the site goes live in May,” Vana Blue said. “The fees generated by the new site should tremendously increase monthly revenue based on the business from the power sellers.”
Vana Blue’s TMS Corp. subsidiary — the owner of eWalletPlus — would be a pivotal player in helping Net Auction Plus compete against eBay.
The domain NetAuctionPlus.com throws a server error. But the address listed in the registration data is the same address of the Phoenix mail service Vana Blue used: 4757 E Greenway Rd. Suite 107B-105 Phoenix, Arizona 85032.
Bernard Madoff was charged with securities fraud Dec. 11. The story about the alleged $50 billion Ponzi scheme hasn’t been out of the news since then — not even for a few hours.
Over the weekend we reported that the assets of the Elie Wiesel Foundation had been wiped out in the alleged Madoff fraud. Not even Nobel Prize winners are immune from the charms of a practiced huckster.
Madoff insisted his trading formula was “proprietary.” Investors say he told them to keep their relationship “secret,” that nobody needed to know he was handing their money — and yet people couldn’t keep the secret, which is how Madoff got more clients. Some charities already have closed, throwing employees out of work, canceling important research and projects and making the world a little darker place.
Lawsuits are flying left and right: New York University, for example, sued Ezra Merkin, accusing him of entrusting investment money to Madoff while not performing due diligence. Merkin is a funds manager and also the chairman of GMAC, the lending arm of General Motors Corp.
Ponzi: There’s not another five-letter word quite like it. High net-worth individuals in Palm Beach are selling real estate and yachts to get by. Members of the Jewish faith have been particularly hard-hit. This case is many things. One of them is affinity fraud, something that is proliferating online.
Madoff is infamous now, his Hollywood story of rising from humble life guard to corporate baron in tatters. Someone apparently stole a $10,000 statue depicting a life guard from Madoff’s Florida home. Madoff odds and ends are beginning to appear on eBay.
The Bernard Madoff case is a cautionary tale. At it’s base, however, it’s a simple tale of moving shells and playing word games to hide forbidden math. Forbidden math doesn’t sell because it takes away the dream.
It’s starting to read like Ian Fleming fare, something straight out of James Bond and “Octopussy.”
