Yesterday we reported that the British Columbia Securities Commission (BCSC) ordered penalties and disgorgement totaling $42 million in the case against Legacy Capital Inc., Legacy Trust Inc., Manna Trading Corp Ltd. and Manna Humanitarian Foundation.
We reported several parallels to the ongoing investigation in the United States into the business practices of AdSurfDaily/Golden Panda Ad Builder and the AdViewGlobal (AVG) autosurf.
Another parallel has emerged, and it is a significant one: Two of the principals in the Canadian scheme previously had been disciplined for banking or securities violations.
Hal (Mick) Allan McLeod was disciplined by the British Columbia Superintendent of Financial Institutions in 2003 for violations of the Financial Institutions Act and ordered to “cease carrying on a trust or deposit business,” BCSC said.
Citing the superintendent’s order, BCSC said two companies with which McLeod had served as a director — First Capital Trading & Financing Corp. and First Capital Credit Corp. — “took and kept funds from the public, and engaged in conduct that was deceptive and misleading.”
David John Vaughan, meanwhile, “was disciplined by this Commission [in 1999] for engaging in an illegal distribution that had many features in common with the Manna scheme,” BCSC said. “Orders against him from that misconduct remain in force today.”
In the 1990s, both ASD President Andy Bowdoin and Golden Panda Ad Builder President Clarence Busby had run-ins with securities regulators.
Bowdoin pleaded guilty to felonies in Alabama and was sentenced to a year in prison. The sentence was suspended when he agreed to pay restitution. In August 2008, he sent his victims a restitution check for $100. One month earlier, in July 2008, nearly $50,000 in ASD funds were used to purchase a luxury Lincoln sedan registered in the name of Bowdoin/Harris Enterprises, prosecutors said.
Florida now has revoked ASD’s corporate registration and dissolved the registration of Bowdoin/Harris Enterprises. Although both companies are involved in serious litigation that potentially affects thousands of people, neither company submitted required annual reports to maintain their corporate standing. Florida provided the companies a five-month buffer to file the required paperwork. Neither firm complied.
In May 1998, a federal judge permanently enjoined Clarence Busby from violations of the Securities Act of 1993 and the Securities Exchange Act of 1934. Busby was ordered to pay $15,000 in disgorgement for ill-gotten gains he had received “from sales of interests in three prime bank schemes,” the SEC said.
The SEC waived the penalty because Busby certified he was unable to pay, the SEC said.
Busby and Bowdoin went on a decade later to form Golden Panda Ad Builder after discussing the surf on a Georgia fishing lake in April 2008. In July 2008 — just prior to the seizure of tens of millions of dollars from the bank accounts of ASD and Golden Panda — Bowdoin distanced himself from Busby after Busby’s run-in with the SEC became known publicly.
The “cause and effect” of Bowdoin’s actions with Golden Panda never has been clear. For example, was Bowdoin really too busy to run Golden Panda with Busby — as Bowdoin suggested — or did Bowdoin distance himself from Golden Panda because he learned about Busby’s alleged SEC violations and feared the allegations could lead to a probe of ASD?
Golden Panda surrendered its claim to more than $14 million in the U.S. Secret Service probe. Busby now is listed as the “chief consultant” to BizAdSplash (BAS), another surf — one that purports to be operating offshore.
BAS suspended payouts earlier this year, and then announced a relaunch. The firm, according to its website, now is selling tiered “charter memberships” for as much as $10,000.
A “Presidential” charter membership is priced at $10,000; an “Executive” charter membership is priced at $5,000. Two other tiered charter memberships — “Visionary” and “Pioneer” — are sold at $2,500 and $1,000, respectively.
BAS has not updated the news on its website since Oct. 7, nearly three weeks.
Canadian officials say the whereabouts of three of the respondents in the Manna probe who were ordered to pay huge financial penalties is unknown. McLeod, Vaughan and Kenneth Robert McMordie (also known as Byrun Fox) “have fled the jurisdiction,” BCSC told The Globe and Mail, in a story published this morning.
The Royal Canadian Mounted Police have opened a criminal investigation, BCSC said.
Like ASD/Golden Panda, AVG and BizAdSplash, the Canadian Ponzi schemers pushed debit cards to offload profits, BCSC said.
“Manna fraudulently used the investments of later investors to fund the promised returns to earlier investors, to pay commissions to the affiliates and consultants, to invest in an online gaming business, and to buy real estate in Costa Rica,” BCSC said.
Other traits the Canadian scheme and the alleged U.S. scheme involving Bowdoin, Busby and offshoot companies had in common include:
- Secrecy. AVG, for instance, did not identify its executives, morphed into a “private association” and advised members not to share information outside association walls.
- False information. Some ASD members repeatedly have asserted that the U.S. government has admitted ASD was not a Ponzi scheme. Other members have sent emails that suggest participants should not cooperate with the U.S. Secret Service.
- Offshore venues. Both AVG and BAS, for example, claim connections to South America and Central America, leading to fears that money could be hidden.
- Use of ‘common law’ in various writings. Some ASD pro se litigants have cited common law in court filings in defense of the surf. One apparent argument of the litigants is that all commerce is legal as long as there is is contract between two parties. In the Canadian case, some purveyors of the scheme pushed what authorities described as a “private common law spiritual trust.â€
- Efforts that can be viewed as intimidation tactics. AVG, for example, threatened to sue members who shared information and to file abuse complaints with the Internet Service Providers of participants who complained on online forums.
- Purported ties to charitable entities. AVG, for instance, advertised that it supported the World Rain Forest Movement. In Canada, Manna advertised the Manna Humanitarian Foundation.
- An MLM-style sales structure. All of the Canadian and U.S. entities sold the programs as multilevel marketing opportunities.
- Earnings “compounding.” Both the Canadian schemes and the alleged American schemes encouraged members to keep money in the systems and employ compounding strategies to maximize earnings.