PatrickPretty.com

Month: April 2010

  • UPDATE: 5 Convictions To Date In Money-Laundering Cases Involving Colombian Drug Operation That Used Same Debit Card As AdSurfDaily Autosurf

    Federal prosecutors have announced five convictions in an international money-laundering case involving drug proceeds and the use of “stored-value” debit cards. (See subhead below.)

    The cases were brought by the Drug Enforcement Administration in 2008 as a result of an undercover operation. The debit cards used in the transactions were provided by Virtual Money Inc., according to court records in Connecticut.

    Records show that Virtual Money, known simply as VM, was the same company that provided debit cards to AdSurfDaily and other autosurf companies. VM’s operator, Robert Hodgins, also was indicted in the drug-related cases and “is being sought by law enforcement,” federal prosecutors said.

    News about the convictions in Connecticut was announced about two weeks after FBI Director Robert Mueller III testified before Congress that “stored value devices” such as reloadable debit cards increasingly were being used to move criminal proceeds through a “shadow banking system” that endangered the United States.

    The PP Blog reported in August 2009 that VM’s name appeared in advertising materials for ASD in 2007. Research showed that VM also provided cards to other autosurfs and HYIPs, including the PhoenixSurf autosurf Ponzi scheme.

    Records suggest that Hodgins or a VM designate attended an ASD function in Orlando in November 2006, about a month after ASD began its rollout.

    During that same year, according to the DEA court filings unsealed in September 2008 after a two-year investigation, VM cards were used in Medellin, Colombia, to withdraw millions of dollars in drug proceeds at ATMs between April and August.

    The drug-related, money-laundering indictments against VM initially were filed under seal in April 2008 and then superseded under seal in June 2008. The documents were made public in September 2008, about a month after the federal seizure of tens of millions of dollars from the personal bank accounts of ASD President Andy Bowdoin, amid Ponzi scheme, wire-fraud, money-laundering and securities allegations in an autosurf case.

    Some ASD members said they observed large sums of cash at ASD “rallies” and suitcases full of cashier’s checks.

    After purportedly operating in the hole throughout much of its existence and allegedly experiencing an unreported theft of $1 million at the hands of “Russian” hackers, ASD suddenly  came into possession of tens of millions of dollars in the first half of 2008, leading to questions about whether it was serving as a front to launder proceeds from criminal organizations.

    References to VM appear in ASD advertising materials dating back to at least February 2007, and other ASD references to VM date back to the fall of 2006, when ASD was just getting off the ground.

    In March 2008, according to records, a DEA informant gave Hodgins $100,000 in undercover funds, saying an uncle needed drug money laundered in the Dominican Republic. Hodgins allegedly agreed to perform the service for a fee of 10 percent of the amount, and the DEA alleged it has audio and photographic evidence of the transaction.

    If the allegations are true, it means the DEA has audio and photographic evidence of the man who provided debit cards to ASD and other surf enterprises accepting money to participate in international drug transactions and international money-laundering.

    Convictions In Drug/Money-Laundering Cases

    On March 30, 13 days after Mueller testified before Congress on the dangers of stored-value devices, Juan Merlano Salazar, 35, of Medellin, Colombia, pleaded guilty in U.S. District Court in Connecticut to 11 counts of money-laundering and one count of conspiracy to commit money laundering.

    Merlano was named in the same indictment that charged VM’s Hodgins and the company itself. Merlano was extradited from Colombia in June 2009, a year after he, Hodgins, VM and seven other defendants were charged in the superseding indictment. Merlano has been detained since his extradition and faces sentencing in June.

    He faces a maximum penalty of 240 years in prison and a maximum fine of $6 million.

    Four other defendants also have pleaded guilty to date to “charges stemming from this conspiracy,” prosecutors said.

    Guilty pleas were entered by Francisco Dario Duque, 49, of Medellin, Colombia; Gonzalo Bueno, 72, of Brooklyn, New York; Juan Chavarriaga, 45, of Fort Lauderdale, Florida, and Jose Manotas, 46, of New York, New York.

    Each of the defendants is detained and awaiting sentencing, prosecutors said.

    “[T]he [drug]organization employed operatives in the United States and funneled millions of dollars in drug proceeds from the U.S. to Medellin, Colombia,” prosecutors said.  “The investigation, which utilized a variety of traditional and sophisticated investigative techniques, including court-authorized interception of international e-mail, disclosed that the money laundering organization used direct deposits of cash into third-party bank accounts, as well as payment of third-party debt obligations to move cash drug proceeds from the New York metropolitan area out of the country.

    “The organization also used ‘stored value cards,’ which function like debit cards and enabled cardholders to deposit U.S. dollars into accounts locally, to be withdrawn later from banks in Medellin as Colombian pesos,” prosecutors said.  “The Government has alleged that the scheme resulted in the laundering of more than $7 million in drug proceeds.”

    Hodgins was president and chief executive officer of VM, a Texas-based business.

    “Hodgins is being sought by law enforcement,” prosecutors said.

    In addition to the DEA, the case is being investigated by the Criminal Investigation Division of the IRS, prosecutors said.

  • FBI Director Again References ‘Shadow Banking System’ In Congressional Testimony; Warns About ‘Homegrown Violent Extremists’ And ‘Lone Actor’ Terrorists

    EDITOR’S NOTE: Still selling autosurfs and HYIPs? Quick! Name your autosurfing neighbor, his or her neighbors, the source of their funding — and describe their intent. Do you even know the names of the program owners, the venues from which they operate and the sources of their funding? How many companies do they own? How many bank accounts do they control? How do they keep their books? Do they truly know their own customers? Has your need to believe you could not possibly be doing business with criminals affected your ability to think things through clearly?

    Getting paid via a debit card or an offshore processor? Ever ask why? Has your “due diligence” ever gone beyond parroting what you’ve been told by others? Have you ever really peeled back layers of the onion, looked for connections to other schemes and performed anything other than cursory research? How many “bad apples” do you think you might find in a barrel of tens of thousands of members, especially if the barrel exists in a business universe already infamous for shadowy practices? Think that some of the participants may live in the dimmest corners of the nation and world and have secret agendas?

    What if their agenda is to do the unthinkable in the United States or elsewhere? What if they’re a “lone wolf” — a lone actor waiting for the perfect time? And what if you’re helping them?

    The FBI has been advising Congress about the nexus between white-collar crime and the potential for terrorism. Some very strange things have been happening in the United States as a result of what FBI Director Robert Mueller III described as the emergence of a “shadow banking system” and an increasing reliance on “shell corporations” to commit crimes and hide from investigators. Some of the crimes have been elaborate, using multiple companies, domestic and offshore venues and selling multiple “services” such as tax-avoidance schemes and “debt-elimination” services.

    Although Mueller did not mention AdSurfDaily and other “autosurf” companies in Congressional testimony yesterday, the Justice Department did outline a separate case against several companies and individuals who offered “services” similar to the “services” offered by some ASD members.

    Longtime PP readers know that ASD and a closely connected autosurf known as AdViewGlobal have been linked to racketeering allegations and tax-avoidance and debt-elimination schemes similar to the cases encapsulated below. Some members of ASD also associated themselves with militia and tax-denial movements, underground “associations” and credit-repair organizations. Some of them associated themselves with wild conspiracy theories — the kind that would cause you to lose friends and cause your family to distance itself from you if you ever associated yourself with the theories.

    Find yourself attacking the messenger or spinning impossible yarns because the truth you fear is just downright uncomfortable and you are not ready to confront it yet? Have you generally supported law enforcement throughout your life — and yet now find yourself condemning the very agencies whose efforts have permitted you to rest comfortably at night since birth? Is it really you constructing a theory that the agents mysteriously somehow had become a sort of hybrid that mixes Nazism and Communism and that the hybrids have made it their business to destroy your entrepreneurial spirit?

    Here, now, a story about a mysterious and perhaps increasingly dangerous world that largely exists outside of public view . . .

    UPDATED 7:49 P.M. EDT (U.S.A.) Returning to a theme voiced last month, FBI Director Robert Mueller III appeared before another Congressional panel yesterday and warned lawmakers about a “shadow banking system” and a troubling increase in certain areas of U.S. white-collar crime, including mortgage fraud, securities fraud and money-laundering.

    Meanwhile, cross-border crime also is producing a dangerous cocktail, Mueller said.

    “[T]he potential for terrorism-related activities associated with criminal enterprises is increasing due to the following: alien smuggling across the southwest border by drug and gang criminal enterprises; Columbian based narco-terrorism groups influencing or associating with traditional drug trafficking organizations; prison gangs being recruited by religious, political, or social extremist groups; and major theft criminal enterprises conducting criminal activities in association with terrorist-related groups or to facilitate funding of terrorist-related groups,” Mueller said.

    “There also remains the ever-present concern that criminal enterprises are, or can, facilitate the smuggling of chemical, biological, radioactive, or nuclear weapons and materials,” he said.

    But Mueller said it would be a mistake to view terrorism as a uniquely international problem and look at it only through the narrow lens of traditional threats and the post-9/11 threat posed by al Qaeda.

    “Homegrown violent extremists also pose a very serious threat,” Mueller told the Senate Committee on Appropriations, Subcommittee on Commerce, Justice, Science, and Related Agencies.

    Beware The ‘Lone Actor’

    “Homegrown violent extremists are not clustered in one geographic area, nor are they confined to any one type of setting — they can appear in cities, smaller towns, and rural parts of the country,” Mueller said. “This diffuse and dynamic threat — which can take the form of a lone actor — is of particular concern.

    “While much of the national attention is focused on the substantial threat posed by international terrorists to the homeland, the United States must also contend with an ongoing threat posed by domestic terrorists based and operating strictly within the United States,” he said. “Domestic terrorists, motivated by a number of political or social issues, continue to use violence and criminal activity to further their agendas.”

    Mueller’s testimony took place against the backdrop of a order by a federal judge in Arkansas that effectively banned a “private banking system” from operating.

    Judge Shutters ‘Private Banking System’

    Wayne Hicks and his company, My Icis Inc., gathered about $100 million between 2003 and 2006 and helped customers avoid taxes by shielding their identities and other financial transactions from the Internal Revenue Service (IRS), the Justice Department said yesterday. Hicks and My Icis consented to an injunction that barred the system from operating.

    Hicks already is serving five years in federal prison after pleading guilty to conspiracy to defraud the United States in a related criminal case. Although the agency did not raise the issue of terrorism yesterday, the case underscores the sensitivity of the United States to banking practices that are hard to monitor and may involve thousands of people whose identities are murky or unknown.

    My Icis “helped customers set up purportedly anonymous bank accounts to hide their identities, income and other financial transactions, including deposits, wire transfers and bill payments,” the Justice Department said. “Hicks admitted in his criminal case that My Icis helped customers ‘get out’ of the traditional banking system and successfully shield their financial transactions from the government, more specifically the IRS, and thereby avoid paying federal income taxes.”

    The scheme was promoted through websites, seminars in Mexico and online newsletters, the Justice Department said.

    To recruit customers, Hicks promoted his banking system at Pinnacle Quest International (PQI) seminars in 2005 in the Mexican resorts of Cancun and Ixtapa, the Justice Department said.

    Eight people associated with PQI were convicted in Florida last month of wire-fraud, money-laundering and tax charges by a federal jury following a weeks-long trial in Pensacola.

    Investigators said PQI, which also was known as Quest International, was operating a “fraudulent tax and debt elimination scheme.” My Icis was one of its vendors, and the PQI scheme crossed U.S. borders and ventured into Panama, a hotbed for financial fraud.

    “PQI was an umbrella organization for numerous vendors of tax and credit card debt elimination scams,” the Justice Department said. “Some of the PQI vendors, such as Southern Oregon Resource Center for Education (SORCE), sold bogus theories and strategies for tax evasion.

    “For fees starting at $10,000, SORCE assisted its customers in the creation of a series of sham business entities in the United States and Panama,” the Justice Department said. “Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a purported ‘reliance defense’ that consisted of a paper trail of frivolous correspondence [that] a client could allegedly use as evidence of good faith if the client were prosecuted.”

    My Icis “operated as a sophisticated, computerized ‘warehouse bank,’” the Justice Department said. “[It] was a single bank account in which customers pooled their money. [My Icis] was promoted to PQI’s clients as a method to hide their assets from the IRS as a result of the pooled nature of the account.”

    The company had 3,000 clients, the Justice Department said of My Icis. PQI, meanwhile, had more than 11,000 members “throughout the United States.”

    Prosecutors established that Arthur Merino, who operated a company known as Financial Solutions and sold a scheme to eliminate credit-card debt, “charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt.

    “The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy,” the Justice Department said.

    Convicted in the PQI case were Claudia Constance Hirmer and Mark Steven Hirmer of Niceville, Fla. They were found guilty of conspiracy to defraud the United States, conspiracy to commit wire fraud, conspiracy to commit money laundering and tax evasion.

    Eugene “Gino” Joseph Casternovia of Ashland, Ore., Arnold Ray Manansala of Renton, Wash., Dover Eugene Perry of Renton, Wash., and Michael Guy Leonard of Troy, N.Y., were convicted of conspiracy to defraud the United States, conspiracy to commit wire fraud and conspiracy to commit money laundering.

    Meanwhile, Mark Daniel Leitner of Fairport, N.Y., and Merino, who lives in Renton, Wash., were convicted of conspiracy to defraud the United States and conspiracy to commit wire fraud.

    “The use of abusive trust schemes and fraudulent debt elimination tactics intended to conceal income from the IRS isn’t tax planning; it’s criminal activity,” said Victor S.O. Song, chief of the IRS Criminal Investigation division. “There is no secret formula that can eliminate a person’s tax obligations.”

  • A SILENT DEATH? Did GoldenPandaAdZone Forum For Autosurf Shills Follow Surf’s Up Into The Electronic Graveyard?

    Has the Golden Panda Ad Zone forum, which was renamed the Online Success Zone after federal agents seized tens of millions of dollars from AdSurfDaily and Golden Panda Ad Builder in 2008, followed the Pro-AdSurfDaily Surf’s Up forum into the dust?

    The website URL — http://goldenpandaadzone.ning.com — now is returning the same error message Surf’s Up produced when it went missing early this year. Other failed autosurf forums on ning.com have generated the same error message.

    It was not immediately clear how long the Golden Panda Ad Zone forum has been offline. The forum was a meeting place at which promoters shilled for autosurf programs, cash-gifting schemes and other questionable “business opportunities” such as recyclers.

    It is believed that every single autosurf program pitched on the Golden Panda Ad Zone Forum collapsed or is in the process of failing, giving the forum an unblemished record for failure. In recent weeks, the forum was used to promote MLM programs such as Narc That Car and Data Network Affiliates.

    In one memorable video, the forum pitched multiple surf programs that reportedly collapsed this year or last after the spectacular seizures in the ASD case. These included — but are not limited to — Biz Ad Splash, AdGateWorld and Daily Profit Pond.

    Biz Ad Splash purportedly was operated by Clarence Busby, who presided over the collection of more than $14 million before it was seized in the ASD case and an untold sum with Biz Ad Splash. AdGateWorld, meanwhile, collapsed after collecting an untold sum and purportedly being sold to buyers in the “Middle East.”

    Daily Profit Pond, which suddenly went missing just prior to Christmas in 2008 after collecting an untold sum, also was said to have collapsed.

    In AdGateWorld’s earliest days, the acronym “ASD” appeared in its Terms of Service, which suggested the surf simply copied and pasted terms from one program to another.

    The Golden Panda Ad Zone forum also was notable for promoting MegaLido, another program that resulted in a spectacular flameout prior to the 2008 Holiday Season, and a host of cash-gifting schemes promoted as “Pay It Forward.”

    “Pay It Forward” is a promotional scheme by which members sign up under each others links as a means of assuring they can build downlines or establish relationships with like-minded participants.

    Autosurf programs that pay a lower daily rate “normally have sustainability,” a forum pitchman counseled prospects in a video. He cited no authority for the claim, but noted that 7 percent to 14 percent a week was a “really, really good” return that no bank could match.

    “I can assure you [of] that,” the pitchman said, noting that higher return-on-investment surf programs “just tend to go away quicker.”

    MegaLido, he explained, might have been a clunker because its advertised payout rate of about 13 percent a day perhaps made it unsustainable. How a program that paid a lower rate of say, 1 percent a day or 365 percent a year, could be any more sustainable without being a Ponzi scheme never was explained.

    Like their brick-and mortar cousins, autosurf Ponzi schemes are not sustainable. They sustain themselves temporarily only through the use of smoke-and-mirrors, paying old members with money from new members to create the mirage of sustainability and performing other sleight-of-hand such as “80/20” programs to minimize cash outflow. Ponzi scheme operators typically siphon funds paid by investors, which is a form of theft. Prosecutors view the money as proceeds of a crime.

    Like the Surf’s Up forum — but to a lesser degree — the Golden Panda Ad Zone forum became an outlet for members to complain about how the government views the autosurf “industry.” Some members complained openly, if not bitterly, about perceived “slow” refunds as a result of the seizure of assets connected to ASD and Golden Panda.

    Those assets were seized amid wire-fraud, money-laundering and Ponzi scheme allegations — but members continued to push surf programs even after the seizure, while still complaining about “slow” refunds.

    The complaints continued even after the government explained it had not perfected title to the seized assets because of court challenges by Andy Bowdoin. Although the government now holds title to the assets, an appeal filed by Bowdoin in one of the forfeiture cases — and the prospect of a Bowdoin appeal being filed in a second case — means that restitution could be delayed even longer, prosecutors said.

    Some Golden Panda Ad Zone members positioned new surf programs as a means by which ASD and Golden Panda members could recover losses. Like Surf’s Up, entire threads went missing at the Golden Panda Ad Zone forum.

    One thread that went missing pertained to a surf program purportedly operated by ASD Chief Executive Officer Juan Fernandez after the ASD seizure. Some Golden Panda Ad Zone members  used religion in their sales pitches.

    Religion also was an element in ASD pitches. ASD President Andy Bowdoin told a crowd assembled at a company “rally” in Las Vegas that he thanked God for making him a “money magnet.”

    Prosecutors said Bowdoin family members and at least one insider embarked on a spending spree less than two weeks after the Las Vegas rally concluded on May 31, 2008, purchasing cars, jet skis, a boat and haul equipment — and retiring the $157,000 mortgage on the Tallahassee home of George and Judy Harris.

    George Harris is Bowdoin’s stepson. Members later said he was the co-owner of the AdViewGlobal (AVG)  autosurf, which crashed and burned in June 2009, after launching in the aftermath of the ASD seizure and in the weeks after a key court ruling went against ASD.

    Some members of the Golden Panda Ad Zone also pitched AVG, despite everything that had happened to ASD, Golden Panda and a related surf known as LaFuenteDinero. There were reports later that at least $2.7 million was stolen from AVG, but the reports have not been confirmed.

    After AVG announced a suspension of cashouts last summer and exercised its version of a “rebates aren’t guaranteed” clause, the surf said that, if the program restarted, an “80/20” program would become mandatory.

    AVG pitchmen started out by saying the surf paid about 1 percent a day — or 365 percent a year — an amount the Golden Panda Ad Zone pitchman described as reasonable and sustainable for  autosurfs in general.

    The claims were made despite the fact that prosecutors had laid out a case against ASD that its 1 percent daily payout rate was unsustainable and that the surf was insolvent.

  • Trevor Cook’s Plea Agreement Requires Cooperation With Government, Receiver To Recover Assets; Polygraph Exam May Be Used If He Ducks Disclosure Requirements

    Convicted Ponzi schemer Trevor Cook’s plea agreement requires him to take a lie-detector test “if requested” by prosecutors to determine “whether he has truthfully disclosed the existence of all of his assets and the use of the fraud proceeds.”

    Meanwhile, the nine-page agreement requires Cook to cooperate with the government and R.J. Zayed, the court-appointed receiver in the $190 million Ponzi scheme and fraud case, to recover assets.

    Cook’s lack of cooperation with investigators and Zayed is what landed him in jail in January, after a federal judge found him in contempt of court. Now facing the possibility of 25 years in prison — or longer, if his plea deal collapses as a result of noncooperation — Cook is required to “fully and completely disclose to the United States Attorney’s Office the existence and location of any assets in which he has any right, title, or interest and the manner in which the fraud proceeds were used.”

    Cook, 37, also waived his right to appeal his sentence — unless the judge in the case sentences him to more than 25 years.

    “This plea agreement is binding on the parties, but it does not bind the Court.” prosecutors said. “The parties understand that the Sentencing Guidelines are advisory and their application is a matter that falls solely within the Court’s discretion. The Court may make its own determination regarding the applicable guideline factors and the applicable criminal history category. The Court may also depart from the applicable guidelines.”

    As a small carrot to Cook, prosecutors agreed not to object if Cook’s sentencing judge gives him credit for the time he already has served since Chief U.S. District Judge Michael Davis ordered him jailed in January.

    Davis is hearing the civil cases filed by the SEC and CFTC in November. He will not be the sentencing judge in the criminal case, which was filed last month. That duty falls to U.S. District Judge James Rosenbaum.

    Rosenbaum let it be known yesterday that Cook’s days of stonewalling investigators were over.

    The Star Tribune newspaper of Minneapolis/St. Paul quoted Rosenbaum as saying he’d reject the plea bargain if Cook tried to snooker the government.

    Among the allegations against Cook was that he spent investors’ money to pay gambling debts. Rosenbaum, according to the Star Tribune, admonished Cook that he’d better keep his end of the deal or else.

    “That’s not a threat. That’s not a promise,” the newspaper quoted Rosenbaum as saying. “That’s like saying it’s raining outside — it’s a fact.”

    Read Cook’s plea deal.

  • Ponzi Guilty Pleas In New York, Tennessee; New Ponzi Case Filed By CFTC In Florida; Relief Defendant Misspelled Its Own Company Name

    EDITOR’S NOTE: There was significant action in Ponzi cases today. Earlier we reported on the guilty plea of Trevor Cook in Minnesota and the issuance of a bench warrant in South Carolina for Michael Derrick Peninger. The brief below summarizes action in the Ponzi and affinity-fraud case case of Steven Byers in New York, the Ponzi case of Barron A. Mathis in Tennessee, and new allegations of a Forex Ponzi scheme against Claudio Aliaga in Florida.

    New York: Steven Byers, 47, of Oak Brook, Ill., pleaded guilty today to felony counts of conspiracy and wire fraud in a Ponzi case said to involve $255 million. U.S. District Judge Denny Chin, who sentenced Bernard Madoff to 150 years in prison, is the presiding judge in the case. Byers will be sentenced in September. He faces a maximum of 25 years in prison.

    Byers was the former president and chief executive officer WexTrust Capital LLC, a private-equity firm. Orthodox Jews were targeted in the scheme, which involved real estate and specialty finance.

    “From at least 2003, Byers and others raised money from investors pursuant to private placement offerings and then used material amounts of that money for other purposes, and did not disclose their diversion of funds to investors,” prosecutors said. “In one such private placement, Byers and others raised approximately $9.2 million in investor funds by representing that the funds would be used to purchase and operate seven commercial properties that were leased to the United States General Services Administration (GSA).

    “According to the GSA private placement memorandum issued to investors by WexTrust Capital,” prosecutors said, “the $9.2 million raised from investors, together with a mortgage of approximately $21 million, would be used to purchase the seven GSA properties and cover related acquisition expenses.

    “The seven GSA properties, however, were never purchased. Instead, virtually all of the funds raised from investors to purchase the properties were diverted by Byers and others to other purposes, but investors were never informed that the funds were used for any purpose other than to purchase and operate the seven GSA properties. Byers and others later agreed to make up a story that they would then tell the GSA investors regarding what happened to their investment,” prosecutors said.

    The guilty plea was entered as a result of a plea deal with prosecutors. Byers “agreed to forfeit $9.2 million and is subject to mandatory restitution and faces criminal fines up to twice the gross gain or loss derived from the offense,” prosecutors said.

    Tennessee: In Nashville, Barron A. Mathis, 29, pleaded guilty to wire fraud. He formerly was vice president and portfolio manager for J.C. Reed & Co., a failed financial services company headquartered in Franklin.

    Mathis sold his Ponzi and fraud scheme to friends, acquaintances and clients, collecting $11 million in the process, prosecutors said. Most of the investors were elderly, inexperienced traders.

    “Cases like these are egregious examples of predators who target vulnerable and innocent victims through false and fraudulent business practices,” said U. S. Attorney Edward M. Yarbrough. “By his own admission, Mathis encouraged people to invest by falsely promising security, growth and inflated returns on their money, but instead the investors lost their savings as part of an elaborate fraud scheme.”

    U.S. District Judge Robert L. Echols will sentence Mathis. A sentencing date has not been set.

    Florida: Claudio Aliaga, of Davie, has been charged civilly by the CFTC with operating a commodity-pool and Forex Ponzi scheme that gathered $4.5 million.

    Also charged was Aliaga’s company, CMA Capital Management LLC of Miami Lakes.

    Named relief defendants were Aliaga’s wife, Betty Aliaga, and a company known as CMA Global Investement (sic) Fund LLC. The CFTC noted that the company misspelled its own name and “received funds as a result of defendants’ fraudulent conduct.”

    U.S. District Judge Marcia G. Cooke ordered an asset freeze.

  • Federal Judge Dispatches U.S. Marshals To Arrest Convicted Ponzi Schemer; Michael Derrick Peninger Did Not Show Up At Sentencing Court In South Carolina

    UPDATED 5:45 P.M. EDT (U.S.A.) A federal judge has issued a bench warrant for Michael Derrick Peninger after Peninger did not show up for sentencing yesterday in a $7 million, Ponzi-scheme case in South Carolina.

    Peninger, 50, of Charleston, was convicted in October of eight counts of mail fraud and one count of making a false statement to an FBI agent, the CFTC said.

    The Post and Courier newspaper of Charleston is reporting that prosecutors argued last fall that Peninger should have been kept in jail upon conviction because he posed a flight risk.

    Peninger was released until his sentencing date after his 72-year-old mother appealed to U.S. District Judge P. Michael Duffy to permit her son to leave jail to assist with the care of her husband, who has Alzheimer’s disease.

    Duffy permitted Peninger to assist his mother and stepfather, ordering him to wear an ankle monitor. The judge now has dispatched the U.S. Marshals Service to locate and arrest Peninger, the Post and Courier is reporting.

    Just days ago a judgment of more than $3.9 million was placed against Peninger in a fraud case brought by the CFTC in 2008. The judgment was ordered by U.S. District Judge C. Weston Houck.

    Peninger was charged criminally in January 2009. Prosecutors said he operated three companies: Cooper River Group Inc., CSA Trading Group Inc., and Daniel Island Builders LLC.

    “[A]t least 20 investors provided Peninger and others with funds to invest on their behalf, but . . . Peninger and others misappropriated the money to pay personal expenses, to pay employees, to fund unauthorized business ventures, and to pay previous investors in a manner akin to a Ponzi scheme,” prosecutors said.

    Peninger faced a maximum penalty of nearly two decades in prison.

    South Carolina has had some unusual Ponzi cases, including the curious case of the “3 Hebrew Boys.”

    In that case, convicted Ponzi schemer Joseph B. Brunson of Hopkins declared himself “sovereign” and therefore immune from U.S. law. The claim was reminiscent of claims made by Curtis Richmond, a mainstay, pro se litigant in the AdSurfDaily Ponzi scheme case.

    In the 3 Hebrew Boys case, Brunson declared that former U.S. Attorney Walt Wilkens was guilty of treason, insurrection and conspiracy to overthrow the U.S. government in his successful efforts to prosecute Brunson.

    Richmond argued in the ASD case that U.S. District Judge Rosemary Collyer was guilty of treason.

  • BULLETIN: Trevor Cook, Minnesota Ponzi Scheme Figure, Pleads Guilty In $190 Million Fraud Case

    BULLETIN: (UPDATED 12:35 P.M. EDT (U.S.A.) Trevor G. Cook, implicated in a $190 million Ponzi scheme that pushed tremendous sums of money all over the world and is believed to have fleeced investors out of at least $139 million, has entered a guilty plea in federal court in Minnesota.

    No sentencing date has been sent.

    Cook, 37, of Apple Valley, faces up to 25 years in federal prison after pleading guilty to mail fraud and tax evasion. Cook has been in jail since January, after a finding he had violated a court order by not cooperating with investigators and continuing to spend investors’ money after he was sued by the SEC and CFTC in November. His plea deal is contingent on assisting the government in unraveling the scheme.

    Criminal charges were filed against Cook last month.

    The guilty plea included acknowledgments by Cook that he lied to investors and was “aided and abetted by others” in a scheme “to defraud no fewer than 1,000 people out of approximately $190 million by purportedly selling investments in a foreign currency trading program,” prosecutors said.

    Cook did not have $4 billion under management, as he told investors, prosecutors said.

    During his plea hearing this morning, Cook admitted that he diverted investors’ money, deceived Swiss regulators when Crown Forex SA was plunging into bankruptcy in 2008, purchased ownership interest in two trading firms with investors’ money, bought property in Panama with investors’ money, bought the Van Dusen mansion in Minneapolis with investors’ money and raided investors’ money to make personal purchases and pay gambling debts.

    “To carry out his scheme, Cook caused false statements to be made to potential investors, including promises that the investment program would generate annual returns of ten to twelve percent, and that trading would present little or no risk to investors’ principal,” prosecutors said. “He also caused material information to be withheld from investors, such as the precarious financial position of Crown Forex, SA” in Switzerland.

    Meanwhile, prosecutors said, Cook “withheld the fact that trading at PFG in Chicago generated losses in excess of $35 million between July 1, 2006, and August 31, 2009.”

    A company with a name confusingly similar to Crown Forex SA was part of the scheme, prosecutors said.

    “In furtherance of the scheme, Cook caused an account to be opened in the name of Crown Forex, LLC, at Associated Bank, which he used for depositing investor funds that he subsequently diverted for his personal use as well as the personal use of others,” prosecutors said. “He also caused statements to be sent to investors that misrepresented the status of their investments. In addition, he caused due-diligence letters to be prepared that falsely represented Oxford Global Advisors as having more than $4 billion in assets under management, and that all accounts were liquid.”

    Prosecutors gave credit for the probe, arrest and conviction to the interagency Financial Fraud Enforcement Task Force. President Obama created the task force in November 2009.

    Assistant U.S. Attorney Frank J. Magill is the lead prosecutor in the criminal aspect of the case.

    In November, the SEC and CFTC sued Cook, along with Pat Kiley. Kiley, 71, formerly hosted a program on Christian radio and is accused civilly of steering people into the international scheme.

    Law enforcement officials and prosecutors in Minnesota say they are battling several Ponzi schemes that have fleeced investors out of hundreds of millions of dollars.

    Last month, FBI Director Robert Mueller III said criminals increasingly were relying on “shell corporations” and hard-to-trace financial-services products to commit fraud on a massive scale.

  • INetGlobal Disputes Government Assertion That Attorney Should Be Disqualified From Case; Says Lawyer Not ‘Necessary Witness’

    Attorney Mark Kallenbach should remain as counsel for INetGlobal because he is not a “necessary witness” as the prosecution claimed last week, an attorney for INetGlobal owner Steve Renner said today.

    Prosecutors moved last week to have Kallenbach disqualified, arguing that he was attempting to be both a lawyer and a witness in the Ponzi scheme case because he had filed an affidavit that outlined what he described as his “investigation” into INetGlobal’s business practices.

    Kallenbach did not enter his notice of appearance as INetGlobal’s attorney until April 5 — 11 calendar days after he filed the affidavit, prosecutors said. They asserted he was attempting to wear two hats in the case, arguing that Kallenbach’s court filings might create a conflict with the Minnesota Rules of Professional Responsibility, a local rule of U.S. District Court in Minnesota and the “Court’s inherent supervisory authority over its bar.”

    Not so, said Renner attorney Jon Hopeman.

    “Mr. Kallenbach is not a necessary witness as required for disqualification by Minnesota Rule of Professional Conduct 3.7,” Hopeman said in a brief today.

    The filing of the affidavit by Kallenbach does not not “give rise to a claim for disqualification, because the Affidavit did not waive the attorney-client privilege,” Hopeman said. “Rather, the Affidavit presents unprivileged facts, and information contained in non-privileged documents or available on public web sites. Nowhere does the Affidavit disclose any attorney-client communication. Further, the Affidavit s disclosure of facts which, of course, are not in themselves privileged, does not waive the attorney-client privilege.”

    Kallenbach’s affidavit, Hopeman said, “presents facts that can be proven in other ways, including through other witnesses, by the introduction of documents, or by reference to publicly available information.

    Hopeman urged the Court to be “mindful of potential for misuse when the Government seeks to classify an attorney as a necessary witness as a crippling litigation strategy.”

    He argued that the government “has not shown the disclosure of any attorney-client communication, and has not come close to meeting its burden of showing a waiver
    of the attorney-client privilege.”

    Kallenbach joined Hopeman in today’s brief.

    Attorney-client privilege also may be an issue in the AdSurfDaily autosurf Ponzi scheme case. In an appeals brief, ASD President Andy Bowdoin, through counsel, referenced two cases filed “under seal.”

    Bowdoin’s brief suggests that prosecutors subpoenaed at least two attorneys involved in the defense of ASD’s assets to appear at a grand-jury proceeding — and that a federal judge ordered the attorneys to appear.

    See story on prosecutors’ motion to disqualify Kallenbach.

  • Another Fraud Case In Minnesota: Renee Marie Brown Accused By SEC Of Starting ‘Sham’ Investment Fund Known As ‘X’

    UPDATED 7:52 A.M. EDT (April 13, U.S.A.) On the very day Tom Petters was sentenced in Minnesota to 50 years in prison for operating a colossal Ponzi scheme, a federal judge froze the assets of Renee Marie Brown after the SEC accused her of ripping off clients by persuading them to invest in a mysterious vehicle known as “Fund X.”

    U.S. District Judge Donovan W. Frank issued a temporary restraining order against Brown and her company, Investors Income Fund X LLC. The order was issued April 8.

    Brown, 46, of Golden Valley, was accused of operating a “sham” fund into which investors plowed more than $1.1 million between July 2009 and March 2010.

    “Brown told her investors that Fund X is a ‘bond fund’ with fixed annual returns of 8% or 9%,” the SEC said. “[S]he distributed fictitious ‘returns’ to investors, furthering the fiction that Fund X was a legitimate and successful investment opportunity.”

    But Brown “misappropriated most of the $1.1 million she raised from investors to, among other things, purchase a condominium for herself and build . . . office space for her new business,” the SEC said.

    Investors Income Fund X LLC was registered as a corporation in South Dakota, the SEC said.

    “Unbeknownst to her victims, Fund X is a sham — Brown’s alter ego,” the SEC said.

    The case features allegations of siphoning, forgery, cherry-picking clients of Brown’s former employer and issuing fraudulent “returns” in Bernard Madoff-like fashion. It also occurred against the backdrop of March 17 Congressional testimony by FBI Director Robert Mueller III that U.S. companies increasingly were relying on shell corporations to commit fraud.

    Minnesota Fraud Cases

    In recent months, investigators and prosecutors in Minnesota have opened up a number of major fraud probes. The combined cases are alleged to have drained hundreds of millions of dollars from investors. In some instances, prosecutors and regulators have asserted that companies used multiple names to commit fraud.

    Petters was convicted last week of presiding over that was described as the largest financial-fraud case in Minnesota history: a $3.65 billion Ponzi scheme.

    Petters displayed “stunning criminality,” prosecutors said. One of the victims wrote, “Our society, unfortunately, is becoming plagued with too many people like this, and like Bernard Madoff. Tom Petters needs to learn that there are severe consequences for his incomprehensible behavior.”

    Meanwhile, the SEC, the CFTC, the FBI, prosecutors and a court-appointed receiver are poring over records to reverse-engineer the alleged Trevor Cook/Pat Kiley Ponzi scheme. Court records suggest multiple company names were involved and that the scheme involved at least $190 million and caused investor losses of at least $139 million.

    Money was moved “all over the world,” according to court filings.

    Cook and Kiley were sued by the SEC and the CFTC in November. Cook was charged criminally last month. Prosecutors said he was “aided and abetted by others.” In this document, the National Futures Association, which also filed an action that references Cook, asserted that $75 million from a purported Swiss fund may have been directed at a mysterious investor known only as “Fased.”

    The purported payment occurred while Cook, a Minnesota resident, allegedly was managing money for a Canadian company known as KINGZ Capital Management Corp. KINGZ name also has been linked to an autosurf known as AdViewGlobal (AVG), which had close ties to an autosurf known as AdSurfDaily (ASD).

    On May 4, 2009 — on the same day the Obama administration announced a crackdown on international financial fraud — AVG announced that KINGZ had become its facilitator for international wire transfers. KINGZ denied the assertion, saying it believed it had been targeted in a scam. The company painted the picture that AVG was attempting to route money to itself through a U.S. shell company.

    AVG purportedly operated from Uruguay.

    Florida-based ASD, which members said was popular in Minnesota, was implicated in August 2008 by the Secret Service in a Ponzi scheme. A federal judge has issued orders of forfeiture totaling more than $80 million in the ASD case. ASD used at least three names, according to records: AdSurfDaily, AdSalesDaily, and ASD Cash Generator.

    Prosecutors also linked ASD to at least two other autosurfs: LaFuenteDinero (the “fountain of money”) and Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.

    In February, the U.S. Secret Service alleged that Minnesota resident Steve Renner was operating a Ponzi scheme through a company known as INetGlobal and companies related to the firm. The scheme, the Secret Service said, largely targeted Chinese members who may have little or no facility in English.

    Renner denies the allegations. Prosecutors described the case as a “major fraud and money laundering investigation,” saying INetGlobal came to life during a period in which federal agents were seizing tens of millions of dollars in the ASD case amid Ponzi, wire-fraud and money-laundering assertions.

    An ASD member introduced an undercover Secret Service agent to INetGlobal, the agency said in court filings.

    Other recent fraud cases in Minnesota include the Gerard Cellette Jr. Ponzi case ($53 million); the Charles “Chuck” E. Hays case ($20 million); and the Kalin Thanh Dao case (up to $10 million).

  • Prosecutors Ask Judge For Order To Disqualify INetGlobal Attorney, Saying They May Wish To Cross-Examine Him As Witness In Ponzi Case

    UPDATED 11:31 A.M. EDT (U.S.A.) Federal prosecutors have filed a motion to disqualify attorney Mark Kallenbach as counsel for INetGlobal and related companies, claiming that Kallenbach is attempting to be both a witness in the case and a lawyer for multiple clients involved in a Ponzi scheme, wire fraud and money-laundering probe.

    Kallenbach, prosecutors said, has made himself a subject of cross-examination because of an affidavit he filed last month. They added that wearing two hats in the same case might create a conflict with the Minnesota Rules of Professional Responsibility, a local rule of U.S. District Court in Minnesota and the “Court’s inherent supervisory authority over its bar.”

    “Should Mr. Kallenbach testify, he will be cross-examined,” prosecutors said. “The Court will have to decide whether Mr. Kallenbach’s voluntary assumption of the role of witness works as a waiver of the attorney-client privilege on cross-examination, or whether the government’s cross-examination of Mr. Kallenbach will be limited, in ways it might not be limited if the witness was not counsel to several parties, in order to preserve the privilege.”

    On April 2 — a week ago yesterday — prosecutors said INetGlobal had no attorney of record in the autosurf Ponzi scheme litigation. Kallenbach filed a notice of appearance for the firm and several related companies on Monday, three days after the prosecution’s filing.

    On Wednesday, Kallenbach filed a second affidavit (see subhead below) labeled a supplement to an affidavit he filed March 25.

    Prosecutors responded by saying Kallenbach’s second affidavit “heightens the government’s concern about Mr. Kallenbach attempting to serve as both lawyer and witness” and that he should be disqualified as an attorney for “any of the individuals or companies involved” in the case.

    “This motion is brought because Mr. Kallenbach has made himself a necessary witness in this case,” prosecutors argued. “This is a case in which Mr. Kallenbach conducted his own
    investigation and then voluntarily drew up a lengthy affidavit setting forth his observations.”

    Their claim is based on a 20-page affidavit and 12 additional pages of exhibits Kallenbach filed March 25 — before he entered his notice of appearance as INetGlobal’s attorney in court.

    In his March 25 affidavit, Kallenbach said he conducted an “investigation” and concluded that “Inter-Mark and its subsidiary iNetGlobal and its other subsidiaries are clean, legitimate and profitable businesses.”

    Kallenbach, in the March 25 affidavit, attacked an affidavit for a search warrant by the U.S. Secret Service and also challenged assertions the government made about V-Local, a company related to INetGlobal.

    Prosecutors argued that the affidavit and conclusions Kallenbach described as “true facts” make him a witness. Some of the information was woven into a memorandum of law filed March 25 by Jon Hopeman on behalf of INetGlobal owner Steve Renner, prosecutors said.

    The prosecution motion was filed by Assistant U.S. Attorney John Docherty, one of the prosecutors who handled the Ponzi case against Tom Petters. Petters was sentenced this week to 50 years in prison for operating a $3.65 billion fraud.

    U.S. Attorney B. Todd Jones of the District of Minnesota approved the filing of the disqualification motion. The main page on Jones’ website lists three major Ponzi probes the office has undertaken in recent months, including the Petters’ case, the case involving Minnesota Ponzi scheme figures Trevor Cook and Pat Kiley, and the investigation into the business practices of Renner at INetGlobal.

    Minnesota’s Ponzi Plague

    Ponzi schemes have plagued Minnesota. The Cook/Kiley case involves at least $190 million and investor losses of at least $139 million, according to court filings.

    Another big case in Minnesota involved Gerard Cellette Jr. Cellette was implicated in a $53 million Ponzi scheme last year by Hennepin County Attorney Mike Freeman.

    Meanwhile, Charles “Chuck” E. Hays pleaded guilty last year to charges in a $20 million Ponzi-scheme case in which the government seized a $3 million yacht.

    Separately, three members of a Minneapolis family were indicted last year on Ponzi and fraud charges. The case became known as the Kalin Thanh Dao case. Dao’s parents also were indicted.

    Dao and her parents pleaded guilty. Prosecutors said money was siphoned from the scheme to pay for gambling in Las Vegas.

    “Investors were promised that their money would be placed in investment programs targeted within specific markets and industries,” prosecutors said. “Investors were also told that Kalin Dao had a ‘partner’ who held a seat on the New York Stock Exchange, had contacts in the emerging Asian markets who had ‘inside’ information, and was associated with various Las Vegas casinos.”

    The Kalin Thanh Dao probe uncovered a web of deceit in which Dao’s father claimed nearly $3 million in losses for businesses owned by his daughter to eliminate his personal tax liabilities, and Dao’s mother claimed to be “single,” the “head of [a] household” — and also claimed a tax exemption for Dao.

    Kalin Thanh Dao was 32 years old and operated at least four companies, prosecutors said.

    “Instead of investing the investors’ funds as promised, Kalin Dao diverted substantial amounts of the funds for her own purposes, including gambling, lulling payments and personal expenses,” prosecutors said. “She also admitted that the fraud was between $2.5 and $7 million.”

    Also on the Ponzi front, AdSurfDaily, a Florida-based company implicated in a massive autosurf Ponzi scheme by the Secret Service in 2008, was popular in Minnesota. Some Minnesota members of ASD were among the staunchest defenders of ASD President Andy Bowdoin.

    The Secret Service referenced the ASD case in filings in the INetGlobal case, saying an undercover agent was introduced to INetGlobal by an ASD member who described the operation as a wink-nod enterprise.

    A federal judge in the District of Columbia has issued three orders of forfeiture totaling more than $80 million in the ASD case. Bowdoin is appealing. His appeal brief cites two other cases filed under seal and suggests that prosecutors subpoenaed at least two attorneys involved in the defense of ASD’s assets to appear at a grand-jury proceeding.

    It is unclear if the attorneys attempted to invoke attorney-client privilege. What is clear is that a federal judge ordered the attorneys to appear and that the order is being challenged in a federal appeals court.

    Kallenbach’s Second Affidavit

    Kallenbach filed a second affidavit April 7. The affidavit asserts that a Renner entity known as V-Media Marketing LLC “borrowed” all of the money that was placed in a bank account at Premier Bank Minnesota in early March, about a week after the Secret Service raid at INetGlobal’s offices in Minneapolis.

    Prosecutors, describing the INetGlobal case as a “major fraud and money laundering investigation,” said $47,400 was deposited into the account.

    “IMC Desperately Needs Working Capital To Pay Its Creditors,” Kallenbach said.

    He also described a webcast he attended April 5 that was “sponsored by one of IMC’s marketing consultants.”

    “At the April 5th Meeting, I learned, amongst other things, that many of iNetGlobal’s new customers have demanded refunds,” Kallenbach said. “The number of customers seeking refunds and the amount of such refunds is unknown. What is known is that as each and every day passes, without iNetGlobal being in business as usual, more of iNetGlobal’s customers will seek refunds.”

    He also asserted that “iNetGlobal’s marketing consultants are clamoring for commission payments that are legitimately due and owing to them,” according to the affidavit. “iNetGlobal has been unable to pay the commissions.”

    Kallenbach’s filing also suggested that, through negotiations, a little more than $1 million has been returned to INetGlobal and that the sum was now considered “unrestricted” cash. The affidavit did not disclose specific details about the negotiations

    In the March 25 affidavit,  Kallenbach argued that INetGlobal had no cash to operate.

    “At the time I signed my March 25, 2010 Declaration, I believed it to be true that iNetGlobal had no unrestricted cash meaning cash available for working capital. I have since learned that as a result of negotiations in which I was involved, on March 22, 2010 iNetGlobal netted approximately $220,000 from the return of restricted cash. As of the time my March 25, 2010 Declaration was prepared, I was unaware that this money had been returned to iNetGlobal.

    “After my Declaration was signed, approximately $795,000 of restricted cash was made available to iNetGlobel for working capital after close of business on March 25, 2010,” Kallenbach said. “As of today [April 7], iNetGlobal’s unrestricted cash is approximately $1,015,000. I arrive at this sum by adding $220,000 and $795,000 to reach $1,015,000.”

    Prosecutors said that, because Kallenbach has become an “essential witness” subject to cross-examination by the prosecution and direct examination by the INetGlobal side, there is a question about “whether Mr. Kallenbach’s clients can be provided constitutionally effective assistance.”

    “The government did not bring this situation about,” prosecutors contended. “[T]he government has not subpoenaed Mr. Kallenbach, or raised questions about whether he, and only he, can testify as to certain facts.

    “This is a case in which Mr. Kallenbach conducted his own investigation and then voluntarily drew up a lengthy affidavit setting forth his observations. Nor may Mr. Kallenbach, at this juncture, announce that he will henceforth act only as an advocate, because the choice to be a witness was made when the affidavit was filed.”

  • Accountant For Ponzi Scheme Suspect Who Shot Himself In Church Lot Indicted In Tennessee; Mark S. Riddle Charged With Defrauding Investors

    EDITOR’S NOTE: The story of the Robert McLean Ponzi scheme is, indeed, a sad one. Litigation that has accompanied the Ponzi provides yet-another example of how fraud schemes can affect the lives of even innocent parties — charities on the receiving end of donations from Ponzi schemers and investors who receive payouts that can be considered “fraudulent conveyances” because they were dealing with a scammer who was taking money from some people and giving it to others to sustain the deception that “real” profits were being recorded.

    McLean’s accountant, Mark S. Riddle, now has been arrested amid allegations that he defrauded investors by misleading them, prosecutors in Tennessee said.

    On Sept. 25, 2007 — one day before he was scheduled to appear at a bankruptcy proceeding to explain how millions of dollars had disappeared from his investment company — Robert McLean’s body was found. He took his own life with a handgun.

    McLean’s fraud scheme, which had operated for at least a dozen years, collapsed two months prior to his suicide, according to court filings.

    The body was found behind the First Christian Church in the small, South Central Tennessee city of Shelbyville. The bankruptcy hearing had been scheduled for the nearby city of Murfreesboro, home of Middle Tennessee State University (MTSU).

    McLean, 60, had given generously to MTSU, his alma mater. His reputation as a philanthropist further was boosted by gifts to the Country Music Hall of Fame, the Cystic Fibrosis Foundation and others, but McLean had a secret.

    That secret, prosecutors said, was that he had been operating a Ponzi scheme that fleeced millions of dollars from investors through purportedly high-yield promissory notes while McLean spent lavishly on cars and homes. Federal agents raided McLean’s business two months prior to his suicide, and creditors and investors sought answers from McLean though the bankruptcy proceeding.

    Bob Waldschmidt, the bankruptcy trustee, said in court filings that McLean had been operating a Ponzi scheme since “at least” 1995. After the Ponzi’s collapse, Waldschmidt went about the distressing business of reverse-engineering the scheme by identifying investors and charities unlucky enough to have received payments from McLean from suspected Ponzi proceeds.

    The payments were treated as “fraudulent conveyances” because McLean was insolvent when making them and simply was relying on money received from later investors to pay earlier ones, according to court filings.

    “From 2002, until the filing of the bankruptcy petition, the Debtor made gifts to various people and institutions . . . which were a conscious effort on the part of the Debtor to improve his image in the Nashville and Murfreesboro communities, such that he could entice new lenders/investors to loan him money in furtherance of his Ponzi scheme,” Waldschmidt said in court filings.

    Dozens of lawsuits were filed. Among the parties sued were McLean family members, investors and nonprofits that had received tainted donations.

    The trustee also sued McLean’s CPA, Mark S. Riddle.

    Riddle now has been charged criminally. He was arrested Wednesday after an investigation by the Rutherford County District Attorney’s office and the office of Tennessee Attorney General Robert E. Cooper Jr.

    “Riddle was indicted on seven separate counts of allegedly defrauding four investors of approximately $668,000 in May of 2007,” prosecutors said. “Among the charges was selling securities without registering with the State.”