Missouri Raised ‘Grave Concerns’ Over TelexFree
The staff of the Missouri Public Service Commission raised “grave concerns” that permitting TelexFree’s telecom registration to remain intact in the state could “assist in the perpetuation of a fraud on investors,” records show.
Missouri approved the registration in March 2014. TelexFree applied for it the previous month, according to records.
Those records included a notarized TelexFree affidavit dated Feb. 14 — Valentine’s Day — and signed by “Jim Merrill,” who held the title “Managing Member.” The name and seal of a Massachusetts notary public appear on the document.
Among other things, the document attests that TelexFree is “ready, willing, able, and will comply with all applicable state and federal laws and regulations imposed upon providers of interconnected voice over Internet protocol services.” It also attests that “the Applicant is legally, financially, and technically qualified to provide interconnected voice over Internet protocol services.”
But on April 13, 2014, just weeks after “Jim Merrill” had advised Missouri that TelexFree was “financially” qualified to operate in the state, TelexFree filed for bankruptcy protection in Nevada. (The case since has been moved to Massachusetts.)
In May, Missouri moved to revoke TelexFree’s registration, citing information it had received April 18 from Joseph Isaacs, a TelexFree telecom consultant.
“Mr. Isaacs indicated the affidavit signed by Jim Merrill is not truthful,” a Public Service Commission staffer wrote to the full commission. The staffer recommended revocation of TelexFree’s registration.
Isaacs, according to the staffer’s affidavit, pointed the commission to civil fraud actions against TelexFree filed by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission on April 15, two days after the bankruptcy filing.
By May 9, federal prosecutors had announced the criminal prosecution of TelexFree figures James Merrill and Carlos Wanzeler. The Missouri staffer pointed the commission to a news release by the office of U.S. Attorney Carmen Ortiz on the Merrill/Wanzeler prosecutions for wire-fraud conspiracy.
The Missouri staffer also advised the commission that the FBI and Homeland Security Investigations (HSI), an arm the U.S. Department of Homeland Security, were involved in the TelexFree probe. He also noted that TelexFree itself had acknowledged on its website that service interruptions or discontinuation were possible because “we are not currently in position to support our network.”
The staffer recommended that TelexFree be stripped of its telecom registration. On May 27, the commission gave TelexFree until June 24 to respond to a motion to revoke the registration.
“TELEXFREE did not respond,” the commission said in a July 2 revocation order. The order became effective Aug. 1.
Records in other states show that TelexFree filed a flurry of telecom-registration applications in the weeks leading up to its bankruptcy filing and the exposure of its alleged pyramid- and Ponzi scheme.
Quick note: Received an email that suggests some readers cannot see a new story that was posted at 7:50 p.m. EDT today.. In short, to some readers the story above — “Missouri Raised ‘Grave Concerns’ Over TelexFree” — still appears at the top of the page and appears to be the most recent post. (The “Missouri Raised . . .” story now should be in the second slot.)
This may be a caching issue of some sort. Something similar happened last week.
It is 11:52 p.m. EDT in the United States as I write this. The URL for the new story is this:
https://patrickpretty.com/2014/08/18/bulletin-u-s-telexfree-probe-may-expand-overseas/
If you can’t see it, the story reads:
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BULLETIN: U.S. TelexFree Probe May Expand Overseas
By PatrickPretty.com 7:50 pm Aug 18, 2014
BULLETIN: Federal prosecutors in the United States have informed a federal judge that “evidence underlying this case is closely tied to certain foreign countries, especially Brazil” and that “it is likely that the parties will need to review evidence in foreign countries and arrange for foreign witnesses and/or law enforcement officers to travel to the United States to testify at trial.”
The assertion by U.S. prosecutors is part of a motion to designate TelexFree as a “complex case” that calls for an exception to the Speedy Trial Act, a law that requires an indicted defendant to be tried within 70 days. Former TelexFree executives or managers James Merrill and Carlos Wanzeler were indicted on July 23.
It was unclear whether Merrill, who remains in the United States, would challenge prosecutors on the issue. Wanzeler ducked out of the United States through Canada on April 15, and flew to Brazil on April 17, according to prosecution filings.
From a prosecution filing today (italics added):
Relief from the requirements of the Speedy Trial Act is needed to allow the parties enough time to produce and examine discovery and evidence in this case and to prepare for trial. In the event of trial, substantial lead time will be required to secure the attendance of foreign witnesses, including the permission of host countries and travel. The ends of justice served by relief from Speedy Trial Act requirements in this case outweigh the best interests of the public and the defendant in a speedy trial; failure to grant relief may deny the parties the time needed for effective trial preparation, taking into account the exercise of due diligence, and may result in a miscarriage of justice.
U.S. prosecutors asserted today that they had seized 400 terabytes of data “spanning 46 servers.” Meanwhile, prosecutors said they’d “seized about 26 separate computers from TelexFree’s headquarters – all containing independent drives that are not networked to the servers described above – as well as about three other computers obtained via grand jury subpoena.”
At the same time, prosecutors said the U.S. government had “also issued approximately 185 grand jury subpoenas in the course of its investigation so far, nearly all for large productions of business records, including from multiple banks, brokerage houses, and payment processing services. The government is in the process of scanning the seized documents and, along with the subpoenaed materials, compiling a single database for production to the defense.”
NOTE: Our thanks to the ASD Updates Blog.
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Patrick
My google translator did not help. not understand the soul of the post, the information, the significance of this
If you’re talking about this post — “Missouri Raised ‘Grave Concerns’ Over TelexFree” — the overall contextual gist is this:
* TelexFree needed to register as a telecom firm. In order to do that, it needed to assure various states (including Missouri) that it had the financial capability to provide the service and customer service for it.
* TelexFree, using sworn statements that sometimes included financial reports, started to do this at least by Feb. 14, 2014. This POTENTIALLY means that TelexFree had been operating illegally in multiple states prior to the filing of the applications.
* Something seems to have happened at TelexFree between Feb. 14 and March 9, the date its new compensation plan was imposed, that seriously spooked TelexFree. One one hand, it was telling telecom regulators that it was financially solvent and stable; on the other hand, it was enacting a new compensation plan that led to serious questions about its solvency and stability.
* TelexFree appears to have told financial stories that were in conflict with one another. (The Massachusetts Securities Division spoke to this in its April 15 action.)
https://patrickpretty.com/2014/04/15/urgent-bulletin-moving-massachusetts-securities-division-says-telexfree-is-billion-dollar-ponzi-and-pyramid-scheme-that-targeted-brazilian-community/
* TelexFree filed for bankruptcy on April 13 — after assuring various states for at least two months that it was financially solvent and stable.
* Former TelexFree interim CFO Joe Craft now says he concluded TelexFree was a Ponzi scheme selling unregistered securities in “approximately March” 2014.
https://patrickpretty.com/2014/08/07/urgent-bulletin-moving-telexfree-was-ponzi-scheme-selling-unregistered-securities-accused-former-interim-cfo-says/
This would have been AFTER certain financial reports had been filed by TelexFree, purportedly via Merrill. Craft now says he had been “misinformed about the company’s activities and material information was withheld by company officers.”
https://patrickpretty.com/2014/08/07/urgent-bulletin-moving-telexfree-was-ponzi-scheme-selling-unregistered-securities-accused-former-interim-cfo-says/
Craft also says he “compiled an unaudited, informal financial statement” that was filed with the Massachusetts Securities Division in 2013. But the statement, he says, was “based entirely on information provided by corporate officers.”
Merrill and Wanzeler were the company officers.
Meanwhile, Craft says he “relied on the advice of the defendant enterprises’ counsel in all material respects.”
Precisely who the “counsel” was is unclear.
Gerald Nehra was a lawyer for TelexFree. In one of the adversary actions in bankruptcy court, Craft asserted attorney/client privilege about 31 times concerning allegations against Nehra.
To condense it all to its essence, it appears as though the MSD, the SEC and the U.S. Feds suspect a large fraud that temporarily hid smaller frauds.
Patrick
The problem here, is, of course, Joe Craft, as CFO, is a company officer.