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Author: PatrickPretty.com

  • WANTED: Feds Ask For Assist In Locating Accused Pyramid Schemer Jason P. Unangst; Missing Indictee Listed As ‘Fugitive’ After Hatching Plot To Sell Mobile Homes To Hurricane Victims

    A Pittsburgh-area man indicted in June 2009 is now listed as a fugitive in a pyramid-scheme and money-laundering case, federal prosecutors said.

    Jason P. Unangst, 34, formerly lived in the Pittsburgh suburbs of McCandless Township and Wexford. His last verifiable address was listed as Virginia Beach, Va., prosecutors said.

    He was indicted on charges of defrauding investors of “at least $1,987,060 by devising a scheme to persuade prospective investors to invest money into a purported mobile home venture, which was actually a pyramid scheme,” prosecutors said.

    Part of his sales pitch centered on his purported ability to sell mobile homes in areas of the United States ravaged by hurricanes, thus returning handsome profits to investors who provided cash for the deals, according to the Pittsburgh Tribune-Review.

    Unangst faces a prison term of up to 150 years if captured and convicted on all of the charges. The IRS Criminal Investigations Unit conducted the probe that resulted in the indictment.

    Unangst is a while male, listed as 6 feet tall with brown eyes. Anyone with knowledge of Unangst’s whereabouts is asked to contact IRS‑CI at 412‑395‑6748.

  • UPDATE: Delaware AG Beau Biden Says Credit USA Pyramid Scheme Cost Two State Residents More Than $100,000; Victims Asked To Contact Prosecutors

    The alleged Credit USA Inc. multilevel-marketing (MLM) pyramid scheme cost two Delaware residents more than $100,000, Attorney General Beau Biden said.

    Biden has asked other potential victims to contact his Investor Protection Unit at 302-577-8424.

    A state indictment announced two days ago charged Terrel Alexander, 41, Nicole Alexander, 41, and William Love III, 39, with Racketeering, Conspiracy to Commit Racketeering, Securities Fraud, Theft, Sale of Unregistered Securities and Acting as an Unregistered Broker/Agent.

    Terrel Alexander lists an address in Wilmington, Del. Nicole Alexander, his ex-wife, lists an address in Mount Lauel, N.J., as does Love III.  Although Credit USA was registered in Delaware, the scheme was conducted from headquarters in New Jersey and Pennsylvania, prosecutors said.

    “With [the] indictment we’re holding these defendants accountable for cheating Delawareans out of their money,” Biden said.

    Even as a grand jury in Kent County was handing up the criminal indictments, prosecutors in New Jersey were filing civil allegations against Credit USA for selling unregistered stock and transacting in securities without being registered.

    Delaware prosecutors described each of the defendants as a “principal” of Credit USA. In 2008, the company was named in franchising allegations in Wisconsin amid assertions it offered an investor rights to the entire state for $250,000, including a “non-refundable deposit” of $125,000.

    Credit USA was not authorized to sell franchises in Wisconsin, according to the state Department of Financial Institutions, Division of Securities.

    The Delaware indictment charges that Credit USA purported to offer “credit repair products,” but that the company operated as a “pyramid scheme designed to personally enrich the three defendants.”

    Read information from the FTC on credit-repair scams.

    Supplement your knowledge by reading information from the FTC on mortgage-relief, loan-modification and foreclosure-rescue scams, which sometimes accompany credit-repair schemes.

  • MLM Firm Credit USA Inc. Hammered By State Attorneys General Amid Pyramid Scheme, Securities Allegations; Terrel Alexander, Nicole Alexander, William Love III Indicted

    UPDATED 3:07 P.M. EDT (U.S.A.) State prosecutors in Delaware and New Jersey have lowered the boom on an alleged multilevel-marketing (MLM) pyramid scheme known as Credit USA Inc.

    Credit USA purportedly sold credit-repair and “identity protection” services, and operated the company to enrich three criminal defendants unjustly, prosecutors said.

    Criminal indictments were handed up in Delaware against Terrel Alexander, 41, of Wilmington, Nicole Alexander, 41, and William Love III, 39, of Mount Laurel, N.J. The criminal charges were brought by the office of Delaware Attorney General Beau Biden.

    Among the charges were racketeering, conspiracy to commit racketeering, securities fraud, theft, selling unregistered securities and conducing business as unregistered brokers or agents.

    Meanwhile, New Jersey Attorney General Paula T. Dow sued the company and Terrel and Nicole Alexander amid allegations of selling unregistered stock and transacting in securities without being registered. Nicole Alexander is the ex-wife of Terrel Alexander.

    “We’re taking action on behalf of the investors who suffered losses when these defendants allegedly broke our state securities laws,” Dow said.

    New Jersey officials estimated that “at least 100 investors” paid Credit USA for “shares” in the firm.

    Part of the scheme was to entice prospects to purchase shares priced between $7 and $15 “before the company goes public on the stock exchange,” prosecutors said.

    Credit USA sold at least 28,000 shares of unregistered stock to at least 100 investors who forked over more than $125,000, prosecutors said. The scheme was selling shares as recently as September 2009, according to court filings.

    Shares were sold in “lots” of 100 to members, associates and “proposed officers” of the MLM firm, prosecutors said.

    “The investors included people who had paid to become ‘members’ of Credit USA and ‘associates,’ members who had paid an additional fee that allowed them to sell Credit USA services to others,” New Jersey officials said.

    “I applaud the coordination among the states to thwart this operation,” said Marc B. Minor, chief of the N.J. Bureau of Securities. “Credit USA’s sale of unregistered stock highlights the public’s need to be more vigilant and to check with the Bureau before investing in order to avoid being victims.”

    Authorities said Credit USA was headquartered at Two Penn Center Plaza in Philadelphia from August 2005 to May 2007. Beginning in June 2007, Credit USA operated at One Cherry Hill, Suite 400, Cherry Hill, New Jersey. The company was registered in Delaware.

    Beau Biden, the Delaware attorney general, is the son of U.S. Vice President Joseph Biden. The younger Biden only recently returned to duty after suffering what was described in May as a minor stroke.

    One of Biden’s first official duties after returning to work was to announce the indictments against the Alexanders and Love III.

    If convicted of all counts in the criminal case, the defendants each face up to 76 years in prison.

  • DEVELOPING STORY: Douglas Ballard, Banker Accused Of Lending Money For Guy Mitchell’s Alleged ‘Private Island In The Bahamas,’ Pleads Guilty; Case Part Of $1 Billion Failure Of Integrity Bank

    A Georgia banker accused of lending a now-accused Florida real-estate fraudster money to buy a “private island” in the Caribbean has pleaded guilty to conspiracy to commit bank fraud and to receive bribes, and to a single count of tax evasion, federal prosecutors said.

    Douglas Ballard, 40, of Atlanta, formerly was the executive vice president in charge of lending at Integrity Bank, a $1 billion institution that collapsed in August 2008 and was taken over by the Federal Deposit Insurance Corp. (FDIC).

    “Among the roots of our nation’s financial crisis were criminal acts by bank insiders and major borrowers that contributed to the failures or bailouts of financial institutions previously believed to be secure,” said U.S. Attorney Sally Quillian Yates of the Nortern District of Georgia.

    Ballard, Mitchell and Joseph Todd Foster, another Integrity vice president, were indicted under seal in April.  Mitchell, 50, of Coral Gables, Fla., is a developer. Foster, 42, of Atlanta, was in charge of risk management at the bank.

    Prosecutors now say Ballard has admitted that he conspired with Mitchell “to receive bribes from Mitchell and to assist Mitchell in receiving millions in loan draws under false pretenses.”

    Ballard, prosecutors said, “admitted in court to receiving over $200,000 in cash and other corrupt payments from Mitchell in exchange for Ballard’s assistance in distributing millions of loan draws.

    “During this same time, Ballard caused Integrity Bank to distribute nearly $20 million in loan proceeds to Mitchell’s personal account, much of which was allegedly used for Mitchell’s personal consumption (including the purchase of a private island in the Bahamas),” prosecutors said.

    About $7 million of the sum was related to draws on a “construction loan relating specifically to supposed construction and renovation at the ‘Casa Madrona,’ a luxury hotel owned by Mitchell in Sausalito, Calif.

    “The indictment alleges that none of this money was used for construction, and in fact no renovations had occurred,” prosecutors said.

    “While Mitchell was spending much of the loan proceeds on himself, the indictment alleges that [he] paid little, if any, of his money back to Integrity to satisfy interest payments,” prosecutors said in May.

    Instead, prosecutors alleged, “Mitchell paid interest on existing loans by taking draws or disbursements from other loans, and continually borrowed more and more money to keep paying the ever-increasing interest payments.”

    For his part, Foster pleaded guilty to securities fraud amid allegations of insider trading.

    Prosecutors said Foster “dumped his shares of Integrity stock based on his knowledge that the bank was facing an increasingly substantial but undisclosed risk that its major customer, Mitchell, would default on over $80 million in outstanding loans.”

    “These officers of Integrity Bank sure weren’t living up to the bank’s name,” Yates said in May, after the April indictments were unsealed. “While the developer was living the good life, even buying a private island with Integrity’s money, and the bank’s senior loan officer was making huge commissions and taking payoffs from the developer, the bank was dying a slow death. The defendants were going to leave the bank’s shareholders and the FDIC holding the bag, but now they are being held accountable.”

    The case was brought as part of the undertakings of President Obama’s Financial Fraud Enforcement Task Force.

    Mitchell paid about $1.5 million for the private island in the Bahamas, prosecutors said.

    “Those who line their pockets with profits of bank fraud schemes should know they will not go undetected and they will be held accountable,” said Reginael McDaniel, special agent in charge of  the IRS Criminal Investigations unit.

    No sentencing dates have been set for Ballard and Foster. Ballard faces up to 10 years in prison and a fine of up to $500,000. Foster faces up to 20 years in prison and a fine of up to $5 million.

    Mitchell has entered a plea of not guilty.

  • Irving Stitsky Sentenced To 85 Years In Real-Estate Ponzi Case; Judge Agrees With Prosecution, Calls Stitsky ‘Inveterate Con Man’

    A federal judge has thrown the book at recidivist securities fraudster Irving Stitsky, agreeing with prosecutors that he is an “inveterate con-man” and sentencing him to 85 years in federal prison.

    Separately, a New York state appeals court — acting unanimously — reinstated portions of a civil lawsuit dismissed by a judge in 2008 that alleged a New Jersey law firm aided and abetted Stitsky and others associated with the so-called “Cobalt” family of companies in perpetrating a fraud. In a lawsuit filed in 2007, Avi and Ann Oster accused Lum, Danzis, Drasco & Positan of preparing private placement memoranda (PPM) that did not initially disclose the criminal histories of Stitsky and Mark Shapiro and then backdating a PPM to disclose their histories after the FBI entered the case.

    The firm countered by arguing the plaintiffs had not pleaded their case adequately — an argument the appeals panel now has rejected. The ruling does not mean the law firm has been determined to have engaged in wrongdoing. Rather, it means the state-court lawsuit against it can proceed.

    In the federal criminal case, Stitsky, 55, of Milan, N.Y., also was ordered by U.S. District Judge Kimba Wood to forfeit $23.1 million and make restitution in the amount of $22 million. He was convicted in November, as were Cobalt co-defendants Shapiro and William B. Foster. Shapiro and Foster are scheduled to be sentenced later this month. Shapiro has two previous felony convictions — bank fraud and conspiracy to commit tax fraud — according to records.

    Shapiro, 50, lives in Avon, Conn. Foster, 70, lives in East Hampton, Mass. The Cobalt scheme operated in part from what was described as a telemarketing boiler room in Great Neck, N.Y., that duped investors into believing Cobalt was a prominent investor in Florida real estate.

    “Irving Stitsky is a recidivist fraudster who stole millions of dollars from hundreds of investors through trickery and deceit,” said U.S. Attorney Preet Bharara. “He preyed on vulnerable victims, including widows and retirees, by falsely promising guaranteed returns on their investments in Cobalt’s South Beach, Florida-based real estate scam.”

    Wood said the harsh penalties against Stitsky were warranted because he operated a “vast securities fraud preying on individuals who were, for the most part, not particularly sophisticated in investing,” prosecutors said.

    Stitsky has an extensive criminal history dating back to 1999, according to court filings. The passage below is verbatim from the appeal panel’s decision authored by Justice Sallie Manzanet-Daniels that reinstated portions of the 2007 lawsuit filed against the law firm (italics added):

    In June 2000, Stitsky was indicted for his role in yet another securities manipulation scheme. In August 2001, Stitsky pleaded guilty to criminal charges including conspiracy to commit securities fraud and was sentenced in connection therewith to 21 months imprisonment and a 3-year period of supervised release. In the SEC administrative proceeding against him in that matter, Stitsky was again found to have violated the antifraud provisions of the federal securities laws, ordered to cease and desist from any future securities law violation, and barred from participating in a penny stock offering and associating with a broker or dealer. In August 1999, Stitsky was indicted for conspiracy to commit tax fraud, money laundering and tax fraud. In August 2001, Stitsky pleaded guilty to conspiracy to commit tax fraud. That same month, a criminal information was filed against Stitsky for making false statements, to which he pleaded guilty. In February 2002, Stitsky was sentenced to 33 months in prison and a 3-year period of probation for both matters. In November 2003, Stitsky was indicted yet again for securities fraud, money laundering and conspiracy to commit securities fraud, mail fraud and wire fraud. Stitsky was released from prison in the fall of 2004.

    Meanwhile, the SEC described Stitsky as a serial securities fraudster practiced in the art of operating “boiler rooms” designed to separate investors from their money. He was banned from the securities industry in 1998 for his conduct with New York-based Stratton Oakmont Inc., which the SEC described as “a notorious boiler-room.”

    In writing for the appeals panel that reinstated portions of the civil lawsuit against the attorneys, Manzanet-Daniels did not mince words.

    “To say that defendant attorneys merely furnished legal services to help solicit investments in the Cobalt Multifamily entities, and did not have knowledge of the fraud they helped perpetrate, is drawing distinctions based on gradations of knowledge that are simply not tenable,” she wrote. “This Court cannot and will not endorse what is essentially a ‘see no evil, hear no evil’ approach.

    “There is no principled distinction between this case and those involving auditors alleged to have falsely represented the financial health of companies and otherwise to be derelict in their duties as auditors,” Manzanet-Daniels wrote.

    The law firm previously argued that the plaintiffs had not adequately pleaded their claims. Manzanet-Daniels and the appeals panel disagreed.

    Read the opinion by Manzanet-Daniels.

  • NEWS/NOTES: AdPayDaily Announces Tweak; Data Network Affiliates Asks Members To Participate In Imaginary Relaunch After Lecturing Churches On Their ‘MORAL OBLIGATION’ To Hawk MLM Program

    UPDATED 12:39 P.M. EDT (U.S.A.) An upstart autosurf pushed by members of the alleged AdSurfDaily Ponzi scheme has announced a confusing tweak in a confusing manner.

    In its announcement, AdPayDaily (APD) quoted 12 words from an attorney — and the quotation did not appear to be on the subject of legality. Rather, it appeared to be a general statement that all companies need sales to survive.

    Separately, a multilevel-marketing (MLM) company that claimed churches have a “MORAL OBLIGATION” to tell congregants about its $1,500 mortgage-reduction program that pays commissions 10 levels deep now is asking members to participate in an imaginary relaunch.

    Prospects willing to pay Data Network Affiliates (DNA) a fee to qualify for “Pro” status earn up to a “100% Matching Bonus” in the mortgage-reduction program, DNA said.

    In an email to members, DNA did not explain why it was lecturing churches on their purported moral duty to hawk an MLM program or instruct the churches on how to overcome sales objections if a minister, pastor or priest used a worship service or church facility to preach the gospel of DNA.

    DNA also did not explain if the clergy of non-Christian faiths had the same moral duty to flog a $1,500 MLM program targeted at people who could be on the verge of losing their homes.

    DNA supplemented the email with yet another email, asking members to imagine the company, which launched in March after missing at least two launch dates in February, was only now launching.

    “We are asking and calling on all DNA Leaders to FOCUS ON THE FUTURE… Make believe that July 26th, 2010 is the LAUNCH DATE for DNA…” the company said.

    In an apparent bid to drive home its point that an imaginary launch can be as effective as an actual launch, DNA again has added what it called a “NEW COUNTDOWN CLOCK” to its website.

    “OFFICIAL LAUNCH 7/26/2010,” DNA roared on its site. “Earn Up To $4500 Per Sale. LOCK IN YOUR POSITION NOW.”

    The message may be confusing to website visitors stopping at DNA’s site for the first time because it flatly states a launch is under way despite the fact DNA actually launched in March.

    A graphic that once advertised DNA Cellular, the company’s purported cell-phone arm, has been removed from the main page of the site. In April, DNA declared “GAME OVER — WE WIN” when it announced its purported cell-phone business that hawked a free phone with unlimited talk and text for $10 a month.

    The company later acknowledged that it studied cell-phone pricing only after announcing it had become the world’s pricing leader. It then withdrew the $10 offer, but members continue to promote it.

    In an email yesterday, DNA said it had learned “a lot of NOT TO DO kind of things” since it has been in business. It did not describe what it had learned not to do, choosing instead to inform members that “we have every guest you can have on tonight’s webinar” and urging members to focus on “the area of COMMISSIONS.”

    A previous guest on DNA’s conference calls has suggested that churches were wonderful places for members to record the license-plate numbers of congregants for entry into the company’s purported database. The same guest also recommended that DNA members record plate numbers at doctors’ offices.

    DNA has said its database could be used to locate abducted children.

    APD Tweaks Autosurf Pitch

    Saying it was relying on the advice of counsel, APD has tweaked its offer. In an announcement to members, the upstart surf provided a threadbare quote purportedly from its lawyer to explain the tweak.

    Here are the only words attributed to the attorney:

    “Every company needs new sales for survival and growth of the business.”

    And here is how APD explained the tweak after providing the 12-word quote:

    “To remain active and continue to earn commissions and viewing payments each month, all Reps are required to attract at least one new advertiser who makes a minimum purchase from outside funds of at least $100 or as an alternative an Advertiser/Rep can make a purchase of $100 from outside funds to qualify and remain active,” the company said.

    APD then pitched members on an 80/20 program.

    “[If] a Rep attracts a new advertiser who make (sic) a minimum purchase of $250 or more and the Rep rolls over at least 80% of the funds in their Cash account each month, they will earn a 20% commission for all additional sales in that month,” the company said. “10% of the commission will be paid with the sale and the remaining 10% will be paid on or before the 15th of the following month, assuming you qualify. Failure to qualify for two consecutive months will result in the deactivation of a Reps (sic) account.”

    In the past, private attorneys who have sued autosurfs have described so-called 80/20 or “rollover” programs as an effort to mask the true nature of the programs by minimizing the outflow of cash — in effect, trapping money in the system to achieve the mirage of sustainability.

    When the AdViewGlobal (AVG) autosurf announced a suspension of payouts in June 2009, it said that an 80/20 program would become mandatory if it ever dug itself out of the trench it created. Purported ASD “trainers” routinely promoted an 80/20 program.

    See earlier stories on APD here and here. See earlier story on DNA here.

  • MEMORY LANE: Before DailyProfitPond ‘Surf Tanked In 2008, Operators Warned That ‘Substainability’ Of 12 Percent Daily Payout Was ‘Questionable’

    EDITOR’S NOTE: We were researching an unrelated matter last night, and came across this gem (outlined below). In 2008, a number of autosurfs that became popular in the aftermath of the seizure of tens of millions of dollars from the personal bank accounts of AdSurfDaily President Andy Bowdoin tanked just prior to Christmas. One of them was Daily Profit Pond. The story below illustrates the fractured thinking that dominates the autosurf landscape — and the role promoters and autosurf “experts” play in spreading spectacular frauds virally on the Internet.

    As incredible as it sounds, an autosurf Ponzi known as Daily Profit Pond (DPP) said it was a legitimate business but warned prior to its collapse during the 2008 holiday season that its advertised payout rate of 12 percent a day might be unsustainable.

    Why promoters and members even had to ponder whether a Ponzi existed or the sustainability of an enterprise that advertised a 144 percent return in 12 days when there was no verifiable source of revenue beyond members’ funds was left to the imagination.

    But ponder it they did . . .

    In a missive to members, DPP described itself as thoughtful company that had listened to the input of unidentified “leaders” before making a decision to slash the advertised payout rate.

    “A few of our members got scarced (sic) and have contacted us that they want such a fine program like DPP to be here in the long run,” DPP said. “We have listen (sic) to these leaders and have decided to make some changes that will ensure the longterm success of DPP.”

    How did DPP address the sustainability issue?

    “[T]he management of DPP have decided to change the 12% daily plan which pays 144% in 12 days to a more realistic plan of 150% earnings in 30 days.”

    Yep. DPP suggested 144 percent in 12 days was too much, but added that 150 percent in 30 days was “more realistic.” DPP did not explain precisely how it had arrived at the conclusion that its new, 150 percent plan was a winner, but it noted (italics added):

    “The DPP administration are expects (sic) in the digital currency business and advertising business. This is where we intend to invest our members (sic) funds and the profit we generate will be used to substain (sic) our members payouts. This new strategy will enable DPP to be there in the long run when all other sites have closed and vanished into the (sic) thin air.”

    And like an overnight infomercial eager to add a free can of snake oil to the deal, DPP shrieked, “But Wait!” (Italics added):

    “How does this work, you may ask?

    “Henceforeth (sic), Our (sic) members will start earning 150% of their profit spots in 30 days. Ref. commission for upgraded members remains 12% down through 3rd levels (sic). 6% commission on level one, 3% ref commission on level two and three.”

    One promoter cheered DPP’s business acumen.

    “Well, I’m glad to see that someone at Daily Profit Pond is paying attention to the accounting,” he said. “They realize that their liability to their existing members is higher than the cash that is flowing in. You don’t have to be a math expert to realize that when you have more money going out than you have coming in, that you are going to run into cash problems pretty fast.

    “For the people who are upset by this change, I can understand where you are coming from but you have got to look at the alternative.

    “Would you rather keep earning 12% per day of virtual money that you will NEVER receive? Or would you rather earn 5% per day of money that you will actually be able to cash out? The choice is obvious.”

    Records suggest that DPP’s site vanished a week prior to Christmas in 2008. One ad viewed by the PP Blog prior to the collapse of DPP said it was possible to start with $12 and turn it into $12,000.

    Just days earlier DPP had lamented surf sites that vanish into “thin air.”

    Surfs such as DPP and MegaLido, which also went missing prior to the 2008 Holiday season, were particularly noxious. Members of AdSurfDaily and Golden Panda Ad Builder, whose assets were seized by the U.S. Secret Service in August 2008, cynically promoted DPP and MegaLido to other members of ASD, suggesting these miserable enterprises provided a way for people who lost money in ASD and Golden Panda to get it back quickly.

    Good grief: 144 percent in 12 days — later slashed to a “more realistic” 150 percent in 30 days.

    There was an earnings “calculator,” of course.

  • AP: Fraudster’s Self-Styled Litigation Strategy Led To Lengthier Prison Terms For Followers; Neville Solomon Cited UCC, Religious Passages Instead Of Listening To Lawyer

    A 67-year-old fraudster who did not listen to his attorney and embarked on a bizarre legal strategy was sentenced to a longer prison term as a result, the AP is reporting.

    Meanwhile, the AP is reporting that Neville Solomon met several other defendants in jail and shared his strategy, resulting in longer sentences for inmates who followed his advice, which cited the Uniform Commercial Code (UCC) and religious passages.

    One of the prongs of Solomon’s strategy was to repeatedly say, “I accept your offer and return it for value,” according to the AP.

    Read the AP story, which quotes a federal judge as saying a “whole bunch of people wound up in prison for a lot longer time than they should have” as a result of relying on improper defenses. At the same time, the story quotes a federal prosecutor who lamented the “crazy defense ideas out there.”

    Some of the legal notions advanced by Solomon are similar to the notions advanced by AdSurfDaily President Andy Bowdoin.

    Bowdoin, acting has his own attorney, advised a federal judge in 2009 that the mere filing of a pro se court document accomplished his objective of reversing a decision he made to surrender tens of millions of dollars in a Ponzi scheme forfeiture case “as a matter of law.”

    U.S. District Judge Rosemary Collyer disagreed, ordering the forfeiture of more than $65.8 million from Bowdoin’s bank accounts.

    The Solomon strategy also was reminiscent of a legal approach advocated by ASD member Curtis Richmond, a member of a Utah “Indian” tribe a federal judge ruled a complete “sham” in 2008. The “tribe” relied on fraudulent UCC claims in a bid to extort members of law enforcement, according to court filings.

    Elsewhere, a federal judge in Washington state ordered bogus UCC liens filed against government officials to be struck last month.

    Bogus liens filed by Ronald James Davenport of Deer Park sought the spectacular sum of nearly $5.2 billion from each of the officials, including U.S. Attorney James McDevitt of the Eastern District of Washington, an assistant U.S. attorney, a court clerk and an IRS agent, according to court records.

    Prosecutors described Davenport as a “tax defier.” Davenport has described himself in court filings as a “sovereign.”

    Davenport now has been charged criminally with filing false liens. If convicted, he faces up to 40 years in prison.

    In February, a federal jury found Solomon guilty of money laundering. Prosecutors said he and an associate, Frederick W. Keiser Jr. of Minot, N.D., “promoted a scheme to fraudulently obtain money from potential investors by inducing them to wire money to a company called MidChina Capital Management” in Las Vegas.

    “The phony investment promoted by Solomon and Keiser involved a fictitious bank trading or bank guarantee program in which bank instruments were to be obtained,” prosecutors said. “Solomon and Keiser convinced their victims that the bank instruments would generate exorbitant yields which would be used to fund other income-generating projects for MidChina, which in turn would result in investors gaining enormous returns.”

    Solomon now has been sentenced to 86 months in federal prison and ordered to forfeit $2,043,235 — the proceeds of the fraud scheme.

    “The sentence received by Mr. Solomon shows that investors who get defrauded like this will sit quietly waiting for their great returns for only so long,” said Assistant U.S. Attorney Brett Shasky. “If the promised return isn’t forthcoming and the investment isn’t returned, they will be heard. Persons choosing to promote such schemes should beware. The day will come when the price they pay for their greed will be great.”

    The pro se notions advanced by Solomon also are reminiscent of approaches used by defendants in the infamous 3 Hebrew Boys Ponzi scheme in South Carolina. They’re also similar to notions advanced in the Gold Quest International (GQI) Ponzi and securities-fraud case in Nevada.

  • DATA NETWORK AFFILIATES: Churches Have ‘MORAL OBLIGATION’ To Pitch Members On Firm’s ‘Mortgage Reduction’ Program; Purported Data And Cell-Phone Firm Venturing Into Foreclosure-Rescue And ‘Resort’ Businesses

    A multilevel-marketing (MLM) company that positioned itself as a firm that collected data that could be used by law enforcement and the AMBER Alert program to rescue abducted children — and later declared itself the world champion of cell-phone pricing — may be entering the foreclosure-rescue and real-estate businesses, members said.

    News about the purported moves of Data Network Affiliates (DNA) follows on the heels of federal sweeps in which 1,215 defendants were charged criminally in real-estate fraud cases and the FTC banned more than a dozen companies from selling mortgage-relief services.

    One of the firms charged by the FTC was assessed an $11.4 million fine when it was found to be in contempt of court for violating previous sanctions, the FTC said.

    In the FTC cases, enrollees in the purported mortgage-relief programs were charged “up-front fees and made false promises that they could get their loans modified or prevent foreclosure,” the agency said.

    DNA has advised members that it intends to charge a fee of $1,500 and that some affiliates can earn commissions by recruiting hard-hit homeowners into a program known as “DNA Mortgage Reduction.”

    In an email to members, DNA suggested that churches were an excellent place from which to recruit members into the mortgage-reduction program (italics and bold added):

    “DNA Mortgage Reduction is a SUPER BIG HIT… Sorry only for USA Properties for now… Even the smallest package upon the $1500 payment once we know the person has a case… (remember it is 100% free to see if a person qualifies for the program)… Pays a MINIMUM to ALL Affiliates $100 1st level; $5 on levels 2 to 9; and $50 on level 10… Plus the PROS earn up to 100% Matching Bonus…

    “REMEMBER that is the smallest package for homes up to $125,000… There are so many Million Dollar homes out there that qualify and for them the fee is less than ONE MORTGAGE PAYMENT… We estimate that DNA will have tens of thousands of home owners who will purchase this package once they find out they qualify for such… THE SAD NOTE IS: that 9 out of 10 people who do qualify don’t even know this service exist… THAT IS WHERE YOU COME IN… Our DNA Vendor is even offering incentives of $1,000 to $10,000 CASH BONUSES to DNA Affiliates who personally reach multiple sale quantities within a 90 day period…

    “THINK OF ALL THE CHURCHES… They have a MORAL OBLIGATION to let their Church Members know about this DNA OFFER… There are Churches that could turn in 100 to 1000 applications in 30 days… ALWAYS REMEMBER IT IS 100% FREE TO FIND OUT IF YOU HAVE A CASE… Statistics say that 85% of all mortgages written from 1996 to 2006 will qualify…”

    How DNA arrived at the conclusion its $1,500 mortgage-reduction program was a “SUPER BIG HIT” when it appears to be only days old was unclear. Also unclear are how DNA arrived at the conclusion that churches have a “MORAL OBLIGATION” to point members to DNA, how DNA arrived at its estimate that “tens of thousands of home owners” will purchase its package and the source of the “statistics” DNA used when advertising that “85%” of mortgages written between 1996 and 2006 “will qualify.” The name of DNA’s “vendor” also was unclear.

    DNA, which is believed to have no ability to help either law enforcement or the AMBER Alert system and no capacity to deliver cell-phone service despite YouTube claims it had a branding deal with Apple’s IPhone and could offer “unlimited” service for $10 a month  — also recently has pitched members on an “opportunity” called the “DNA Resorts Program,” members said.

    The program also has been referred to by DNA as the “DNA SPA & Resort” program,  which purportedly features a “No Interest Easy 24 Month Payment Plan” of $625 a month. DNA is soliciting members to spend $14,995 on the resorts program, suggesting that some prospects will put the entire amount on a credit card.

    Meanwhile, in an earlier pitch for the purported mortgage-reduction program, DNA suggested applications would be vetted to determine if “Mortgage Compliance Violations” had occurred. (Italics added.)

    “Are you a Victim of Deceptive Predatory Lending Practices?

    “Is your Value of your home UPSIDEDOWN?

    “Find out if you may be a Victim of Mortgage Compliance Violations involving Predatory, Deceptive, Discriminatory and Unfair Lending and Servicing Practices. These Unfair Lending Practices have placed thousands of HOMEOWNERS all over the United States into Non-Affordable Mortgage Programs.”

    DNA, whose domain registration data is hidden behind a proxy in the Cayman Islands but lists a street address in Boca Raton, Fla., on its website, may be venturing into even choppier waters with its mortgage and resort pitches.

    “The possibility of losing your home to foreclosure can be terrifying,” the FTC says. “The reality that scam artists are preying on the vulnerability of desperate homeowners is equally frightening. Many so-called foreclosure rescue companies or foreclosure assistance firms claim they can help you save your home. Some are brazen enough to offer a money-back guarantee. Unfortunately, once most of these foreclosure fraudsters take your money, you lose your home, too.”

    Read details about recent mortgage-relief scams targeted by the FTC.

    DNA says it is promoting its mortgage-reduction and resort programs in a webinar and that it believes “9 out of 10 people who attend this upcoming DNA Webinar will say ‘YES’ to DNA.”

    The “one” who says no will be offered the “FREE DNA PSYCHIATRIC DISCOUNT PLAN,” DNA said in an email to members.

  • Atlanta Journal Constitution: 3 Floridians Charged In Alleged $425 Million ‘Yellow Pages’ Directory Scam; Separate Research Shows Brother Of 1 Of The Defendants Is International Fugitive

    WANTED BY U.S. POSTAL INSPECTION SERVICE: Charles Robert Smith

    The Atlanta Journal Constitution and the Florida Times Union are reporting that three Jacksonville-area residents have been charged in an alleged $425 million fraud scheme involving mass solicitations for the renewal of dubious “Yellow Pages” listings.

    Separately, the brother of one of the defendants is listed as an international fugitive by the U.S. Postal Inspection Service in his own alleged Yellow Pages scheme.

    Charged in federal court in Atlanta were Mark Stuart Smith, Christopher Jon Gregory and Marian Phelan. The defendants were associated with a company known as United Directories, the newspapers reported.

    Smith’s brother, Charles Smith, was indicted last year in Atlanta on similar charges, the Times Union reported. The U.S. Postal Inspection Service (USPIS) has published a “Wanted” poster on Charles Smith, whose full name is Charles Robert Smith. Charles Smith also uses the alias of  Joseph Austin Smith, according to the USPIS.

    Charles Smith, according to the USPIS, is believed to have passports and Florida driver’s licenses in both names. He is described as an international fugitive possibly living in Tanzania, and is believed to travel extensively in Europe and Africa.

    Postal inspectors and state attorneys general have battled several variants of Yellow Pages scams over the years. Charles Smith, according to records, has been implicated in such scams for at least two decades.

    The Federal Trade Commission, among other agencies, has issued warnings about Yellow Pages scams. So has the state of North Dakota.

    Selling “Yellow Pages” listings on the Internet to create the impression that customers have purchased an ad in well-known, local print publications is one variant of the scam.

    Another variant is to send businesses a bogus bill for “Yellow Pages” listings. Because firms frequently purchase such listings and associate the “walking fingers” logo with legitimate print and online publishers, they often pay the bill without looking.

    Yet another variant of the scam is to send what appears to be a small “refund” check to businesses for overpayment of a “Yellow Pages” bill. When recipients endorse the checks, they actually are entering into a contract and agreeing to be automatically billed for advertising purchases.

    On May 26, 2009, the PP Blog reported that the AdViewGlobal (AVG) autosurf, which had close ties to the alleged AdSurfDaily Ponzi scheme operated from Florida, appeared to be in the process of launching a purported Yellow Pages directory service. Whether AVG planned to offer the purported service independently or through a partnership with a vendor was unclear.

    With great fanfare in May 2009, AVG announced that it was launching a new website and offering a new suite of purported services. The launch ultimately failed — but not before AVG had published a “walking fingers” logo to which the acronym “AVGA” had been added.

    Read the early story on the charges against Mark Stuart Smith, Christopher Jon Gregory and Marian Phelan in the Atlanta Journal Constitution.

    Read the story in the Florida Times Union.

    Visit the USPIS website to view the “Wanted” poster of Charles Robert Smith.

    Search for “Smith” in this USPIS document to get additional background.

    In the alleged Charles Smith scheme, “More than 10,000 victims lost an estimated $10 million,” USPIS said. Some of the money allegedly ended up in a Swiss bank account.

    During the course of the Charles Smith probe, “[i]nspectors and agents also found documents indicating that Charles Robert Smith was trying to liquidate funds in a brokerage account and several other bank accounts by purchasing one-ounce gold coins from dealers across the United States,” USPIS said.

    “Charles Smith had also recently placed a $42,000 deposit on a $1.2 million jet from Epic Air in Las Vegas, Nevada. Inspectors used information from the documents to obtain seizure warrants for the following items: – $323,793 from a brokerage account at Investscape. – 690 one-ounce American Eagle gold coins valued at $293,940. – 545 one-ounce Austrian Philharmonic gold coins valued at $228,900. – $42,000 down payment for the purchase of the jet, which had been converted into $30,000 worth of airplane parts and $12,000 in cash.”

  • MYSTERIOUS: WebsiteTester.Biz Getting Stranger By The Moment; Apparent Parent Company Of Website Now Advertising ‘Job’ Opportunities

    Alpha Market Research, the apparent, Nevada-based parent company of a website known as WebsiteTester.biz, now is advertising “job” openings  on its Twitter site.

    The domain ownership of both Alpha Market and Website Tester is hidden behind a proxy, and both sites appear to be hosted on the same server. Alpha Market has been issuing news releases on PRLog.org, a free PR site, for weeks.

    A Twitter site bearing Alpha Market’s name began to promote “Amazing new job opportunities” today.

    “We are looking for Country Managers and Affiliate Management Consultants,” the Twitter site claimed.

    A link from the Twitter site encourages visitors to “Apply now!” Some of the information presented includes fractured and overblown syntax that suggests the words were written by an individual or individuals who speak English as a second language or a native speaker of English who favors flowery, overbearing prose and does not have command of the language.

    Website Tester has been promoted on Ponzi boards such as Talk Gold, ASA Monitor, MoneyMakerGroup and the Online Success Zone. The search-engine penetration of the purported “opportunity” is nothing short of remarkable.

    Here is a snippet from the Alpha Market website (italics added):

    “Today, the clarity, the functionality and a fast and simple navigation decide if a company is successful on the internet. Providers without the right ‘internet tools’ have visibly less success even though their products/services might be identical to their successful competitior.

    “Therefore the internet user is placed at a crucial position; he alone decides if a website can succeed or fail on the market.

    “For that reason, Alpha Market Research (AMR) offers from September 2010 and on, a very special service: Thousands of neutral users are going to test (in a few days) the web site of a company and assure, through their feedback, that the internet presence can be optimized where necessary, before expensive publicity adjustments are made in vain.”

    Visitors are encouraged to “Apply now!

    “To be able to cope with all the orders from companies in timely manner AMR is looking for people, who want to work part time as website testers. There is no previous knowledge necessary; the workload is between 1 and 10 hours per week, depending on to how many fields of interest the applicant has inscribed,” the company says.

    Job openings are listed for “Website Tester,” along with “Country Manager / State Manager and “Affiliate Management Consultant.”

    For the position of Website tester, Alpha Market says this (italics added to snippet):

    “The position as a website tester is perfect for any person over the age of 16 who uses the internet from time to time.

    “Your job is to go to the websites of our clients and to fill out a short survey about that website. The compensation for this position is determined by the quality and quantity of your completed surveys. You are paid in money and/or vouchers that are in the range of $15 – $25 US/hr.”

    For the position of Country Manager / State Manager, Alpha Market says this (italics added to snippet):

    “As a Country or State Manager, your job would be to respond to all company inquiries in your country/state and to cultivate new business wherever possible in your territory.

    “In addition, it would be your responsibility to screen the actual website test very carefully, to insure that the use of words/phrases/text blocks/etc. ‘make sense’ in your native language so that all the chosen website testers can easily understand and read the instructions/the survey questions/etc., and complete their job quickly and easily.”

    Meanwhile, for the position of “Affiliate Management Consultant,” Alpha Market says this (italics added to snippet):

    “We are also creating an Affiliate Marketing Program for our company clients and as an Affiliate Management Consultant, your clients will be the companies that want to increase their business. You will show them how we can help them acquire more customers as we offer our website testers an additional source of income by promoting their products/services on a commission basis.

    “We will need a very select group (maybe 50 – 100 worldwide) of Affiliate Management Consultants.”

    See earlier story.