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  • California Man Who Tried To Flee Country While His Ponzi Was Disintegrating Sentenced To Prison; John Anthony Miller Was Targeted In FBI/State Department Sting

    A California man who tried to adopt the identity of a deceased classmate from his school days to flee the United States while his Ponzi scheme was unraveling has been sentenced to 159 months in federal prison.

    The FBI and the State Department already were aware that John Anthony Miller’s scheme was falling apart when they targeted him in a sting in November 2008.

    Miller, who was convicted in 1998 of racketeering “predicated on mail fraud, wire fraud, and securities fraud offenses” was operating a Ponzi scheme a decade later through a company known as JAM Jr. Enterprises of Newport Beach, Calif., according to the criminal complaint in the case. Miller, 52, lived in San Clemente.

    Working with an informant, an FBI agent who also was an attorney and a former clerk for a judge on the U.S. Court of Appeals for the Third Circuit, set up a sting operation. Miller’s telephone calls with the informant were recorded as the scheme was collapsing.

    Miller sought the informant’s help in obtaining a passport to a country that did not have an extradition treaty with the United States, according to the complaint. Using a story that a family friend knew a corrupt passport official, the informant set up a meeting between Miller and the purportedly corrupt official, who was actually an undercover officer from the U.S. Department of State.

    <!–adsensestart–>Miller agreed to pay $20,000 for the passport, with $5,000 paid up front and the balance of $15,000 upon delivery of the passport. Miller paid the undercover officer $5,000 in cash that had been stuffed in an envelope. He then filled out a passport application that used the identity of his deceased classmate, according to the complaint.

    Worried about his ability to honor redemption requests in the Ponzi scheme, Miller told the informant that he had been “meditating” since 2007 over whether it was best to “hide out in the United States or abroad” and had contacted at least one other individual about obtaining a “fake identity,” according to the complaint.

    By October 2008, according to the complaint, Miller needed between $4 million and $5 million to meet redemption requests and did not have the money. He was worried about “tense” people who could bring him unwanted attention “quick” and wondered how long it would take for the FBI and the SEC to respond to complaints about him if “someone pull[s] the trigger.”

    Miller ultimately concluded it was best to flee the country. After using Ponzi proceeds to pay the undercover agent the $5,000 deposit  required for the bogus passport in November 2008, Miller was told it would take seven to 10 days for the documents to be prepared. He provided two photographs of himself, and used the name, Social Security number and date of birth of his deceased Catholic school classmate in the application.

    FBI agents who had been keeping Miller under surveillance arrested him while he was preparing to flee. He was charged with mail fraud (for bogus statements he sent to investors), bribery, passport fraud and identity fraud. He pleaded guilty last year.

    Investors lost more than $15 million in the scheme, which also involved a Miller company known as Forte Financial Partners.

    “Miller promised investors ‘guaranteed’ annual returns of between 10 percent and 18 percent per year, telling investors that their money would be invested in foreign currency trading, oil wells, real estate and other vehicles,” prosecutors said.

    Some investors raided their IRAs to invest with Miller, who promised better returns, prosecutors said.

  • SEC: Man Switches Company Name For Offering, Buys Autodialer And Database For 17K, Targets Wealthy Investors, Racks Up $1.4 Million Before Scheme Collapses

    UPDATED 6:15 P.M. ET (U.S.A.) A California man ordered by five states to cease and desist from selling unregistered securities started using a different corporate name, bought an autodialer and database with the names of wealthy investors for $17,737 and used it for at least six months to fleece clients before the scheme collapsed in December 2009, the SEC said.

    The scheme, which targeted investors in the United States and Canada, raised at least $1.4 million — some apparently before the database acquisition in June 2009.

    The SEC now has gone to court to stop Thomas L. Labry and his company, Cherokee Gas Systems, from fleecing investors in a fraudulent oil-and-gas scheme at a property in Oklahoma known as the “Walters Field Priddy Sand Unit.”

    The assets of Labry and Cherokee have been frozen and a receiver has been appointed, the SEC said.

    While operating by a different name — Iron Horse Petroleum Inc. — Labry was ordered by five states to cease selling unregistered securities: Illinois, Pennsylvania, Wisconsin, Alabama and Arizona, the SEC said. Some of the orders date back to 2000.

    In addition, Labry was sued in California under RICO statutes for fraud, and the plaintiffs secured a judgment of $647,776.12 in a 2006 case.

    Cherokee was incorporated in Oklahoma in 1991, and conducted business from Costa Mesa, Calif., the SEC said. It is not registered to sell securities. Labry lives in Newport Beach. The Cherokee website was registered in January 2009, according to web records.

    The website appears to use a shared server that hosts 3,751 other sites, which may lead to questions about why a company that charged investors $25,000 per unit and purported that each unit would return $725 a month at a minimum did not use dedicated hosting.

    “In approximately December 2008, Cherokee began soliciting potential investors throughout the United States, including through the use of cold calling,” the SEC said.

    Investors received a brochure from Cherokee that was “almost identical to the brochure previously disseminated by Iron Horse . . . except that the Cherokee brochure refers to ‘Cherokee’ rather than ‘Iron Horse,’” the SEC said.

    The Oklahoma corporate registration of Iron Horse was suspended in August 2006 for failure to pay franchise taxes, records show.

    In December 2008, Labry began to use the name of Cherokee in an investment offer, according to the SEC.

    “To facilitate this general solicitation, Labry, using Cherokee investor monies, purchased dialing software that can automatically place outbound calls from a preloaded database of numbers,” the SEC said. “In these calls, Cherokee representatives offer investors the opportunity to purchase units in oil and gas wells purportedly owned by Cherokee located on Walters Field in Oklahoma, for $25,000 per unit. In instances where an investor does not want to purchase an entire unit, Cherokee allows the investor to purchase a fraction of a unit. Cherokee representatives tell investors that they will start receiving returns on their investments, paid monthly, within 45 to 60 days of the investment.”

    In June 2009, Labry purchased a database that targets telephone numbers of  “Homeowners Age 60+ with income $100K and up” and “Homeowners Age 60+ with wealth 1 million,” the SEC said.

    Cherokee represented that investors would receive returns of 35 percent a month.

    Although investors did not get paid, the attorney who represented Labry in the California lawsuit filed by investors did — as did a convicted felon, the SEC said.

    The attorney received cashier’s checks totaling $105,000, the SEC said.  The attorney has not been accused of wrongdoing.

    Investigators identified the felon as Gary Maddux, whom the SEC said was convicted of wire fraud and mail fraud in 1998. Maddux received cashier’s checks totaling $221,195, the SEC said.

    Maddux was charged in 1997 with bilking elderly investors in a fraudulent telemarketing scheme known as “Prizewinners.” In the Prizewinners case, people were told they had won a sweepstakes and could collect their winnings for a fee.

    Since December 2008, the SEC said, Labry withdrew at least $268,000 in cash from the Cherokee bank account, as well as $466,283 that was used to purchase cashier’s checks for “various individuals who were not investors.”

    Labry also “made withdrawals totaling $148,126 that were used to purchase cashier’s checks made out to ‘SCS,’ one or more of which he then cashed,” the SEC said.

    When investors questioned why they weren’t getting paid, they were “falsely told by Cherokee agents that oil production is ‘behind’ and that they will receive payment within a certain number of weeks or by a certain date.”

    The payments were not made, the SEC said.