MAGNIFYING GLASS: Local Cops Alerted Receiver In Cook/Kiley Ponzi Case That Credit Card Was Being Used After Asset Freeze

Player in a Ponzi scheme? If alleged Minnesota schemer Trevor Cook’s experience is any indication, you should expect to be placed under a microscope by local merchants and police if you’re named in a complaint by regulators.

Cub Foods, a Minnesota-based grocery chain, placed Cook under video surveillance when he entered a local store. A loss-prevention specialist cited fears Cook might use the store to purchase gift cards in a scheme to hide assets from investigators.

Meanwhile, the 71-member police department in Eagan, Minn., alerted the court-appointed receiver in the alleged Cook/Pat Kiley scheme that Cook was using a credit card after a federal judge froze his assets, according to court filings.

Cook now is the subject of a contempt hearing. Receiver R.J. Zayed said Cook initially failed to disclose the existence of four credit cards and is not cooperating, and the SEC said U.S. Chief District Judge Michael Davis may have to jail Cook to enable investigators to prevent assets from being dissipated.

Cook had at least one other undisclosed credit card, Zayed said.

“The only reason the fifth card was known to the Receiver was because the Eagan Police Department informed the Receiver of this account after Cook used it to purchase” gift cards, Zayed said.

Zayed said Cook used credit cards after the asset freeze was imposed in November to purchase more than $30,000 in gift cards at Target, Holiday, SuperAmerica, Home Depo, AMC Theater, Regal Cinema, Nordstroms, Cheesecake Factory, Olive Garden, Old Chicago, Ruby Tuesday, Chilis, Applebees, PetSmart and Bath&Body Works.

Cook also purchased “numerous phone cards,” Zayed said.

Although Cook now has turned over the gift cards and the credit cards, he has taken the 5th Amendment in the case. Zayed, though, argued that Cook was using the 5th Amendment in a bid to pick and choose when and how he would cooperate in locating and preserving receivership assets.

“Cook now tells the Court that he will not turn over any additional assets because it would violate his privilege against self-incrimination,” Zayed argued in a brief to Davis. “Cook cannot have it both ways, turning over assets when it benefits him while continuing to hide other assets from the Receiver. Approving Cook’s strategy would make a mockery of the Court’s Orders and runs afoul of basic Fifth Amendment jurisprudence.”

By turning over some assets and testifying to the existence of others, Zayed argued, Cook has waived his 5th Amendment protections.

“Cook voluntarily testified about assets in his possession when he turned over a portion of those assets to the Receiver,” Zayed said. “He did not do this accidentally or out of the goodness of his heart.

“He did it to present himself in the most positive light he could to the Court when he was caught violating the Court’s Orders,” Zayed continued. “Cook also testified with respect to his assets when he provided the Receiver with a laundry list of expenses and asked the Receiver to provide him and his wife with thousands of dollars in monthly living expenses from the Receivership estate to maintain his lifestyle. Having ‘testified about certain assets for his benefit, Cook cannot now shield all other relevant facts on these topics.”

Counting holiday delays and time scheduled for attorneys to file briefs, the Cook contempt proceedings have been under way for more than a month. The SEC and the CFTC sued Cook and Kiley in November, alleging an international Ponzi scheme involving more than $190 million.

In 2006, the National Futures Association (NFA) fined Cook $25,000, saying he had committed a “very serious violation” in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents.

A footnote in NFA’s summary of the case concluded that Cook was operating an unregulated gold and bullion business. The name he chose for the business closely resembled the name of a futures-trading firm, but Cook told NFA that the name was a coincidence.

Read NFA’s summary of the evidence in the Cook case and its decision. Pat Kiley, a former Christian radio host, was among the witnesses called.

Davis may rule on the contempt issues next week.