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Author: PatrickPretty.com

  • ‘SURF, HYIP HELPERS BEWARE: Woman Who Let Richard Piccoli Pull Off Ponzi Scheme Hit With $25 Million Restitution Order; Kathleen Fuoco Pleads Guilty To ‘Misprision Of Felony,’ Faces Prison Time, Fine

    An elderly Ponzi schemer who fleeced Catholic priests, parishioners and senior citizens in a long-running scam in Buffalo was aided by a comparatively youthful assistant who was ordered to make the victims whole, federal prosecutors said today.

    Kathleen Fuoco, 60, of West Seneca, N.Y., pleaded guilty today to misprision of a felony and willful failure to file tax returns while she was helping Richard Piccoli, 83, pull off the scheme.

    Fuoco was hit with a $25 million restitution order — the total of victims’ losses — and also faces a maximum penalty of four years in federal prison and a $250,000 fine. She is cooperating with prosecutors to identify victims and losses, authorities said.

    “Financial fraud is an important priority in my office and the public should know that if you attempt to defraud any hard working citizen or turn a blind eye while someone else is committing fraud, you will be caught and prosecuted to the fullest extent of the law” said U. S. Attorney William J. Hochul of the Western District of New York.

    Known as “Kitty,” Fuoco was “the only employee in the offices of Gen See Capital,” Piccoli’s business, prosecutors said.

    “In her plea, Fuoco admitted that she came to realize that the business was a scam, but still kept working there and failed to notify authorities about the criminal nature of the business,” prosecutors said.

    Misprision of a felony is a crime the government can use to prosecute underlings who engage in willful blindness and participate in an enterprise even when they know it is a fraud.

    As the Fuoco case demonstrates, the penalties can be steep. At age 60, she has been held responsible for making the victims of the fraud whole — and even may serve time in jail.

    Serial promoters and staff members of autosurf Ponzi schemes and HYIP frauds who turn a blind eye potentially are at risk of being charged with misprision of a felony. So are forum operators and shills who flog such programs.

    The Piccoli scheme operated for decades. He was sentenced in October 2009 to 20 years in prison — effectively a life sentence, given his age.

    Here is how “misprision of felony” reads under Section 4 of the U.S. Code:

    “Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.”

    In November, misprision of felony was used in Georgia against Saundra McKinney Pyles, who was accused of concealing a Ponzi scheme operated by her friend, Gary Sheldon Hutcheson. Hutcheson pleaded guilty to mail fraud and money laundering.

    In essence, Pyles was accused of choosing not to report Hutcheson, even though she knew he was operating an investment scheme and committing mail fraud.

    Pyles was sentenced to 14 months in prison, and made equally responsible with Hutcheson to pay $1.6 million in restitution to victims. Hutcheson was sentenced to five years in prison.

    Fuoco is scheduled to be sentenced Oct. 22 by Chief U.S. District Judge William M. Skrenty.

    The Piccoli case featured elements similar to the AdSurfDaily Ponzi case: a senior citizen as the operator, appeals to religion, the sale of unregistered securities, commingling of funds, seized assets and advertising materials that promised a payout.

    After the U.S. Secret Service raided ASD in August 2008, some participants loyal to ASD President Andy Bowdoin started an autosurf known as AdViewGlobal (AVG). Bowdoin was said to have been a silent partner in AVG and to have contributed start-up capital.

  • BULLETIN: SEC Halts Alleged $105 Million Ponzi Scheme Operating ‘Offshore’; Daniel Spitzer Charged In Complex International Fraud Case; Several Agencies Credited With Assisting Probe

    Saying his offshore Ponzi scheme was on the verge of collapse but still collecting money, the SEC has charged a resident of the U.S. Virgin Islands with fraud.

    Several international authorities assisted in the probe, the SEC said.

    Daniel Spitzer, a U.S. citizen who resides in St. Thomas, was charged in the scheme. The SEC said the scheme netted $105 million and roped in 400 investors, dating back “at least” to 2004.

    Spitzer is 51, and “desperate for money” to keep the scheme afloat, the SEC charged, describing him as a “purported fund manager.”

    “Daniel Spitzer ran an elaborate Ponzi scheme that he disguised by moving investor money through a complex network of foreign bank and brokerage accounts,” said Merri Jo Gillette, director of the SEC’s Chicago Regional Office. “He deceived investors into believing that he was using a sophisticated investment strategy that didn’t really exist.”

    In an emergency action in Illinois, the SEC said the scheme was on the verge of collapsing and that Spitzer still was collecting money in March to prevent its collapse. Earlier, Spitzer spent more than $900,000 “in cash at the Wynn Las Vegas Casino,” the agency said.

    “Since at least August 2009 and continuing through to the present, Spitzer has attempted to delay and avoided paying requested investor redemptions,” the SEC charged. “Spitzer is desperate for money and has continued to prey on victims.”

    Spitzer was spending money at the casino in October 2009, even as he was delaying payments to investors, according to court filings.

    Also named defendants in the case were these Spitzer-connected companies: Kenzie Financial Management Inc. of St. Thomas; Kenzie Services LLC of Nevis; Draseena Funds Group Corp., an Illinois corporation with offices in Clearwater, Fla., and Stateline, Nev.; DN Management Co. LLC of Nevada; Aneesard Management LLC, also known as Nerium Management Co. LLC of Nevada; Nerium Management Co. of Illinois; Arrow Fund LLC of Nevada; Arrow Fund II LLC of Nevada; Conservium Fund LLC of Nevada; Nerium Currency Fund LP of Nevada; Senior Strength Q Fund LLC of Nevada; SSecurity Fund LLC of Nevada; Three Oaks Advanced Fund LLC of Nevada; Three Oaks Currency Fund LP of Nevada; Three Oaks Fund 25 LLC of Nevada; Three Oaks Senior Strength Fund LLC of Nevada; and USFirst Fund LLC of Nevada.

    Just three months ago, the SEC said, Spitzer railroaded an investor for $100,000 by telling the investor the money would be used “in one of Spitzer’s more conservative investment funds.

    “Rather than invest in said fund, in April 2010, Spitzer used this investor’s money to make $9,492 in Ponzi payments to four other investors, transferred $27,102 to the First Bank of Puerto Rico, and paid $26,257 for third party expenses,” the SEC charged.

    Assisting in the probe were the U.S. Commodity Futures Trading Commission, the Irish Financial Regulator, Danish Financial Supervisory Authority, Autorité des marches financier in France, the Ontario Securities Commission and the Financial Intelligence and Investigations Unit Attached to the Royal Anguilla Police Force in Anguilla, the SEC said.

  • BULLETIN: FTC Paints Picture Of Spectacular, International Fraud Involving At Least 16 ‘Sham’ Companies, More Than 100 Bogus Merchant Accounts And 14 ‘Money Mules’; More Than 1.3 Million People Fleeced

    PP BLOG BULLETIN >>> MOVING >>>

    More than 1.3 million debit or credit-card numbers have been compromised in an international micro-payments scheme that resulted in fraudulent charges totaling more than $10 million.

    The money appears to have been whisked offshore to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus, and Kyrgyzstan, the FTC said.

    At the moment, the agency said it believed the fraudsters opened more than 100 bogus merchant accounts, formed 16 “dummy” corporations and relied on a network of 14 “money mules” recruited in a spam campaign to raid the cardholder accounts of small amounts that created a large amount in the end.

    Part of the deception was to create “phony company names” resembling the names of real companies, the FTC said.

    “The FTC believes the defendants may have run credit checks on the identity theft victims first, to be sure they were creditworthy,” the agency said, describing the deception as monumentally elaborate.

    Chillingly, the agency added that the perpetrators “cloaked each fake merchant with a virtual office address near a real merchant’s location, a phone number, a home phone number for the ‘owner,’ a Web site pretending to sell products, a toll-free number consumers could call, and a real company’s tax number found on the Internet.”

    It is likely that the scam was designed to scrape small amounts from cardholders’ accounts to minimize the chance of getting caught and to permit the scammers to stay under the radar and emerge with a huge sum, the FTC said.

    “None of the consumers affected by the scam had contact with any of the defendants. Most consumers either didn’t notice the charges on their bills or didn’t seek chargebacks because of the small amounts — charges ranged from 20 cents to $10,” the FTC said.

    “Consumers who called the toll-free numbers that appeared on their bills either found them disconnected or heard recorded messages instructing them to leave a message, but no calls were returned,” the agency said.

    Each of these companies (below) is a “sham” and has been named a defendant, the FTC said. NOTE: Remember, one of the allegations is that the perpetrators used “phony company names” that resembled the names of real companies. The information below reflects the names of the bogus firms, as reproduced from court records the FTC released today:

    1. API Trade LLC, a Pennsylvania limited liability company incorporated in 2006.
    2. ARA Auto Parts Trading LLC, a limited liability company.
    3. Bend Transfer Services LLC, a Nevada limited liability company incorporated in 2006.
    4. B-Texas European LLC, a Texas limited liability company incorporated in 2006.
    5. CBTC LLC, a Delaware limited liability company incorporated in 2007.
    6. CMG Global LLC, a Pennsylvania limited liability company incorporated in 2006.
    7. Confident Incorporation, a California company incorporated in 2002.
    8. HDPL Trade LLC, a Pennsylvania limited liability company incorporated in 2008.
    9. Hometown Homebuyers LLC, a Texas limited liability company incorporated in 2002.
    10. IAS Group LLC, a California limited liability company incorporated in 2008.
    11. IHC Trade LLC, a New York limited liability company incorporated in 2007.
    12. MZ Services LLC, an Arizona limited liability company incorporated in 2004.
    13. New World Enterprizes LLC, a New Jersey limited liability company incorporated in 2005.
    14. Imports LLC, a Louisiana limited liability company incorporated in 2006.
    15. SMI Imports LLC, a Florida limited liability company incorporated in 2006.
    16. SVT Services LLC, a New York limited liability company incorporated in 2008.

    Also named a defendant is “John Doe,” described as “one or more individuals or entities whose true name and address of residence are unknown to the FTC at this time.”

    How The Scheme Worked (From March Court Filing The FTC Released Today; Italics, Coloring, Indentations Added)

    Defendant(s) Doe have hired under false pretenses a group of at least fourteen individuals in the U.S., referred to here as the “money mules.” Defendant(s) Doe then direct the money mules to form companies and to open one or more U.S. bank accounts in the name of those entities.

    A group of sixteen companies formed by the money mules are named as defendants in this action and will be referred to here as the “Money Cashing Defendants.” In addition to the Money Cashing Defendants, Defendant(s) Doe themselves also have created over a hundred fake companies using false identities. These fictitious companies — some of which purport to be located in [the Northern District of Illinois] — are the “merchants” that place the unauthorized charges on consumers’ accounts.

    With this infrastructure in place, Defendants have proceeded to assess unauthorized charges to consumers’ accounts and to deposit the funds into the U.S. bank accounts of the Money Cashing Defendants. Defendant(s) Doe then direct the money mules to wire the funds to offshore accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus, and Kyrgyzstan, where the funds presumably end up in the hands of the Doe Defendants. In this way, Defendants have essentially stolen over $10 million. More than 1000 consumers have filed complaints with the FTC about these illegal practices.

    The defendants’ assets have been frozen.

    Investigators said the scheme, which had been operating since 2006, relied on stolen records to proliferate. (Citations omitted by PP Blog):

    “In setting up the fake companies, Defendant(s) Doe use names that sound similar to legitimate companies and provide addresses located in the vicinity of the legitimate companies,” the FTC said. “Defendant(s) Doe purchase ‘virtual office addresses through a company that sells business address services. All mail sent to these office addresses is then forwarded to another company that scans the mail and uploads it onto a secure server so that Defendant(s) Doe can view it electronically from any location.

    “The fake companies also use Employer Identification Number (‘EIN’) tax numbers of the legitimate companies. Defendant(s) Doe also create a website for each fake company so that the company appears to credit card processors to be a legitimate online merchant. These web sites appear to only operate for a short period of time, probably just long enough for a credit card processor to . . . perform due diligence on the account application . . . The websites of the fake companies purport to sell some kind of product such as electronics and office supplies. Each fake company also has a toll-free telephone number, as well as a ‘home’ telephone number for the ‘owner’ of the company. The toll-free numbers forward to a cell phone number registered in Belarus.”

  • Two-Thirds Of Poll Respondents Rate Data Network Affiliates’ Pitch A ‘Complete Failure’; Nearly 90 Percent Rate It ‘Poor’ Or Worse

    UPDATED 11:53 A.M. EDT (U.S.A.) The sales pitch of a multilevel-marketing (MLM) company that plucks the heartstrings of members by suggesting it can help law-enforcement and the AMBER Alert program locate abducted children has been rated  a “Complete Failure” by 66 percent of respondents in a PP Blog Poll.

    Meanwhile, 88 percent of respondents rated Data Network Affiliates’ message “Poor” or worse.  Only 12 percent rated the sales pitch either “Good,” “Very good” or “Exceptionally professional.”

    Separately, some DNA members said the firm, which had been barraging them with sales pitches, has been less communicative in recent days. The company has been mysterious from the start, registering its domain name behind a proxy in the Cayman Islands while incongruously suggesting its services could be beneficial to the U.S. government.

    DNA initially explained that its domain was registered privately in the Caymans to prevent management from having to “put up with 100 stupid calls a day.”

    Customer service has been conducted via a free Gmail address for months, although the firm in recent weeks has published a street address in Boca Raton, Fla.

    Fifty votes were cast in the PP Blog Poll, which was unscientific. Despite the low turnout, the poll results suggest that respondents were deeply turned off by the DNA sales pitch — to the point of revulsion. Regardless, 8 percent of respondents rated the pitch an “A,” meaning they viewed at as “Exceptionally professional.”

    Some PP Blog posters have speculated that voters might have rated the pitch “Exceptionally professional” because it deliberately was crafted by MLM hucksters to recruit members into an insidious lead-capture system through which they’d be pitched relentlessly on products other than DNA’s purported database product.

    Under this theory, the pitch was deemed “Exceptionally professional”  because it achieved the dubious purpose of lining up people by the tens of thousands to be fleeced.

    DNA, whose members have claimed Donald Trump and Oprah Winfrey endorse the company even though there is not a shed of evidence that the claim is true, purportedly has attracted more than 130,000 members. It is possible that some or all of the 8 percent of respondents who rated the sales pitch “Exceptionally professional” believe the pitch has merit beyond its ability to suck people into an insidious system.

    The database product purportedly is being built by members who appear in the parking lots of doctors’ offices, churches and giant retailers such as Walmart and Target to write down license-plate numbers or take photos with cell phones or video cameras of license plates for entry in the database.

    One of DNA’s leading pitchmen on conference calls has described the parking lots of medical facilities, places of worship and retail stores as wonderful places to gather data. He further suggested that members should behave in an inconspicuous fashion when gathering the data.

    DNA delayed its launch date twice in February. After its “free” data-collection program purportedly got under way in March, the company quickly began pitching other products to members, including a $127 upgrade that purportedly would improve the ability of “free” members to enter license-plate data into the system.

    The company said its “Pro” data-entry module was better than its “free” module. Prior to the introduction of the “Pro” module, “free” members did not know they would be receiving a data-entry tool the company itself described as a clunker.

    News about the “Pro” module began to spread March 10, only days after DNA told members who listened to an “Oscar” night conference call that the company’s “free” affiliates would “receive the same kind of commitment and respect from our DNA management team” as paid members received.

    DNA said its “Pro” module was part of a Business Benefits Package (BBP).

    “Upon close inspection of the B.B.P. you will find a minimum of 10 times the cost of such package to the end user in value savings and benefits,” DNA said in an email to members. “The two that stand out the most is (sic) the FREE 1000 REWARD DOLLARS with FREE REFILLS and the $402 Travel Agent Value Package for only $49.”

    In recent weeks, DNA mysteriously referred to its BBP package as the “BBB” package. Precisely why DNA would change the acronym of its package to the acronym associated with the Better Business Bureau was unclear.

    “6 OF THE 10 WILL BUY THE B.B.B. AND GET 1 OTHER TO BUY THE B.B.B. WITHIN 24 HOURS,” DNA declared earlier his month.

    Earlier, in April, the company announced that it was in the cell-phone business. The announcement came out of nowhere, and DNA boldly declared, “GAME OVER — WE WIN.”

    Without doing any checking, members raced to YouTube and Craigslist to announce that DNA was offering an unlimited cell-phone talk and text plan for $10 a month and, for $19.95 a month, was offering unlimited talk, unlimited text and 20 MB of data.

    DNA, which had no experience in the cell-phone business and yet declared it had slayed all competitors, later announced it had not researched pricing prior to announcing the plan.

    “[W]e found that there are no such service plans to be found by any carrier, anywhere on the planet, by any company in the industry,” DNA said in an email to members that un-announced the announcement weeks earlier of the $10 unlimited plan.

    DNA insisted it would have a new plan by May, but May passed without such a plan. The company then said it would have a plan in June. No such plan has emerged.

    A video on YouTube implied that DNA had a branding deal with Apple’s iPhone and that the phone would be called the “DNA iPhone.” The video asserted that DNA is the “ONLY Network Marketing Company With Branded iPhones.”

    Meanwhile, a separate YouTube video implied that DNA not only had an iPhone, but that the iPhone came with a “No Term Contract” for $10 a month.

    “You are Not in Kansas Anymore!” the second video screamed. “This is Global Baby!”

    Apple, which is known to defend its brand and intellectual property vigorously, did not respond to the PP Blog’s request for comment on the claims.

    DNA also has bragged about something called “RETIRE BY CHRISTMAS 2010 with DNA
    in “3″ to “6″ steps . . .” and various guarantees, including a purported “$100,000 DNA Minimum Income Guarantee” and a purported “$1,000,000 DNA Minimum Income Guarantee.”

    It is possible that the purported “income guarantee” exceeds the revenue DNA has posted to date. Like Narc That Car (Crowd Sourcing International), DNA’s purported Dallas-based competitor, the company publishes neither revenue figures nor the names of purported clients of the database product.

    The BBB has raised pyramid concerns about Narc/CSI.

    DNA also has urged members to imagine themselves driving 10,000 miles a year in pursuit of their DNA businesses to qualify for an IRS tax write-off of $5,000.

    In 2009, an MLM company known as YourTravelBiz (YTB) was enjoined in California from making tax claims under the terms of settlement of a pyramid-scheme lawsuit by Attorney General Jerry Brown that ordered the firm to pay $1 million.

    DNA has acknowledged that Phil Piccolo is part of its organization, and web records suggest Piccolo was actively involved in YTB. Separately, Narc That Car President Jacques Johnson was a director in YTB, according to court filings.

  • RECEIVER: Trevor Cook’s Story ‘Does Not Make Sense’; Ponzi Losses Expected To Top $139 Million; America’s Sad, Stunning Ponzi Tale Continues

    One of the Trevor Cook homes. From court filings in the SEC/CFTC case.

    Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme are none too pleased with Cook’s plea deal, which may place a ceiling of 25 years on any prison sentence he receives while tens of millions of dollars remain missing.

    One investor has told the PP Blog that a group of investors is seeking a meeting with prosecutors either to overturn the plea deal or delay Cook’s sentencing until more information becomes known. Cook, 38, is scheduled to be sentenced in Minneapolis July 26, one month from today.

    Cook pleaded guilty in April to mail fraud and tax evasion. Under the terms of the agreement, he is required to cooperate with authorities and R.J. Zayed, the court-appointed receiver, to unravel the scheme. Although Cook has met with both the government and Zayed, investors are concerned that he is incapable of telling the entire truth. Their concerns are based on his history of telling spectacular lies and thumbing his nose at both investors and the court by spending investors’ funds even after his assets were frozen in November 2009.

    Records from the National Futures Association (NFA) show that Cook has a history of scamming. In 2006, NFA fined Cook $25,000, saying he had committed a “very serious violation” in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents. Read more about Cook’s NFA encounter here. Read more on yet-another case in which Cook’s name was referenced by NFA here.

    Before we get into the details of some of recent events in the Cook case, we’d like to provide a short capsule based on court filings. It has become clear that the Cook Ponzi scheme has caused financial pain for hundreds of people, including loved ones, and also has resulted in frustration — some of it of the needless and senseless variety.

    Such frustration surfaces in virtually all Ponzi cases, in part because the crimes can be extraordinarily elaborate even though the basic concept of a Ponzi is simple: tricking people into believing everything is on the up-and-up by using cash from new investors to pay earlier investors or duping people into rolling over their investments instead of taking distributions to keep the cash from drying up — all while the Ponzi schemer siphons funds and glad-hands and back-slaps with investors, politicians, bankers and others to create the illusion of success.

    At the end of the day, however, Ponzis are about people. They cause pain and frustration for every person and institution they touch.

    • Cook’s in-laws, Clifford and Ellen Berg of Apple Valley, Minn., received $948,848.36 from the scheme. Zayed recovered $726,650.38 of that sum, and then effectively sued the Bergs by seeking a court order for the balance of $222,197.98. The SEC, which had named the Bergs relief defendants in the case for receiving ill-gotten gains, backed Zayed in his efforts to recover the balance. Records show that the Bergs raised $194,000 to pay the receivership estate through the sale of two cars, the tapping of an IRA account and by taking out a mortgage on their cabin. They were given credit by the receivership for $13,500 from the sale of another vehicle, but still came up nearly $15,000 short of the sum needed to retire the receivership balance. If the shortage is not paid by Sept. 15, a judgment will be entered against the Bergs, who have retained the right to be treated as victims of their son-in-law and to file a claim for the principal they invested with Cook.
    • Zayed effectively had to sue Wells Fargo by seeking a court order to force it to turn over the relatively small sum of $9,275.22 from Cook’s bank accounts. This document is worth reading because it paints a picture of a receiver — Zayed — encountering frustrating resistance in his bid to round up assets for victims. Although the Cook/Kiley Ponzi is extremely serious business that has altered the lives of more than 1,000 people, the document linked to above is almost dolefully comedic. Zayed eventually had to file a 12-page legal document to force the return of the sum. Just 13 days after Zayed asked a federal judge to order Wells Fargo to return the money, he filed a three-page document advising the judge that the bank finally had turned over the sum — something he’d been trying to get it to do for months.
    • If you’re a victim of a Ponzi scheme or a loved one of a Ponzi schemer — such as Gina Cook, Trevor Cook’s wife — this document shows that your life may start to revolve around attorneys. No matter how you slice it, the result is conflict — legal, emotional or otherwise.

    Can Cook Be Trusted In Any Context?

    As noted above, some investors fear that Cook is incapable of telling the full truth. There is fear that he has stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

    International litigation can be an extremely complex thing. The Cook case, according to Zayed, has required the notarization of documents “under the Hague Convention standards.”

  • UPDATE: Ponzi Suspect Found Dead Tuesday Conducted Benefits/Planning Seminars For FBI, IRS, Secret Service, Others; July Pitch Was Scheduled For Federal Law Enforcement Training Center In Georgia

    UPDATED 5:31 P.M. EDT (U.S.A.) A company operated by a man found dead Tuesday in Florida from an apparent self-inflicted gunshot wound was scheduled to conduct a seminar for government workers July 2 at the Federal Law Enforcement Training Center (FLETC) in Glynco, Ga., according to the firm’s website.

    FLETC is operated by the Department of Homeland Security and serves as an interagency law-enforcement training organization for 88 federal agencies.

    Kenneth Wayne McLeod was 48 when he died Tuesday. The SEC said his Jacksonville company, Federal Employee Benefits Group Inc. (FEBG), was paid “up to” $15,000 by government agencies for seminars conducted by McLeod.

    The SEC now says McLeod was operating a Ponzi scheme dating back to at least 1988. The scheme was alleged to have fetched “at least” $34 million, and the SEC’s top official in Miami said McLeod might have destroyed the savings of federal employees who entrusted him.

    “The victims gave years of public service and McLeod stole their futures,” said Eric I. Bustillo, Director of the SEC Miami Regional Office.

    In the early hours after the scheme was exposed, the extent of losses was unclear. What is clear is that FEBG used its website to boast about its federal contacts, while using what appeared to be clipart files to drive home the company’s message of “Professionalism, Experience, Integrity.”

    What appears to be clipart of two businessmen holding briefcases and shaking hands in front of a globe appears on the website. An image of an attractive woman from an apparent clipart file also appears on the site, as do other elements of apparent clipart. The site appears to use other static elements associated with earlier web technology. The site also appears to use older technology in its contact form, which publishes live links to email addresses of employees.

    Also on the site is a link to the U.S. Office of Personnel Management from which visitors can download forms. Another link on the site purports to link to the domain SEBG.US, but the site was throwing a server error at the time of this posting. Records suggest the SEBG site was live Wednesday, and that SEBG stands for State Employees Benefits Group. Archives show the SEBG site featured keywords such as “retirement system, florida retirement system, state retirement systems, public employees, state employees, municipal employees, law enforcement, police officers, sheriff s office, benefits analysis, financial planning” and more.

    For its part, the FEBG site touted trust.

    “Through dedication and commitment to our core values of Professionalism, Experience and Integrity, FEBG holds all associates and subsidiaries responsible to vigilance, service and honor for each of our clients’ individual needs and planning strategies,” the company proclaimed on the website.

    “It is our mission to educate and maximize the financial well being of all Federal employees,” the company said. “Contact us to discuss scheduling a training workshop or speak with one of our leading financial planners.”

    The website also published a schedule of its seminars. If the schedule is accurate, FEBG completed a seminar for U.S. Immigration and Custom Enforcement (ICE) at the FLETC facility in Georgia June 8 — 14 days prior to McLeod’s death. Another ICE seminar is listed for July 2 at the same FLETC facility.

    Seminars for the Federal Air Marshals Service (FAMS) were scheduled July 7-9 in Miami. Dual seminars were scheduled for July 21 — one at the Georgia FLETC facility for ICE, and another in San Antonio for “SSA – OIG,” which stands for Social Security Administration, Office of the Inspector General.

    Seminar schedules dating back to 2006 appear on the site, featuring names such as the FBI, WIFLE (Women in Federal Law Enforcement), the DEA, the IRS, the U.S. Census Bureau, USSS (United States Secret Service), the U.S. Forest Service, USPS (United States Postal Service), ATF (the Bureau of Alcohol, Tobacco, Firearms and Explosives), NAADHS (National Association of African-Americans in the Department of Homeland Security, US Bankruptcy Court and US District Court, the Federal Public Defenders Office, the National Park Service, the US Fish & Wildlife Service, NABNA (National Association of Black Narcotics Agents), DCIS (Defense Criminal Investigative Service), NCIS (Naval Criminal Investigative Service) and others.

    It was not immediately clear if members of each of the agencies or employee associations invested in the alleged scheme. Also unclear was the total exposure of investors to losses.

    See earlier story.

  • BULLETIN: Another Florida Ponzi Scheme: SEC Sues Estate Of Dead Man, Saying Kenneth Wayne McLeod And His Companies Ripped Off Members Of ‘Law Enforcement’ And Operated Ponzi Scheme For Decades

    BULLETIN: The SEC has gone to court in Florida to obtain emergency relief against two companies and their late owner, alleging that Kenneth Wayne McLeod targeted government employees and members of law enforcement to invest in a government bond fund that did not exist.

    McLeod, 48, was found dead Tuesday in Jacksonville’s Mandarin Park. Local media outlets are reporting that the death is believed to be a suicide, but the SEC described the death only as “sudden.”

    In a dramatic emergency action, the SEC has sued McLeod’s estate and both of his businesses: Federal Employee Benefits Group Inc. (FEBG), a consulting firm, and F&S Asset Management Group Inc., a registered investment-advisory firm.

    U.S. District Judge Federico A. Moreno has frozen the assets of McLeod and the companies. The SEC said it was unclear who even was running the firms in the wake of McLeod’s death.

    Among the astonishing allegations was that McLeod had been operating a Ponzi scheme since at least 1988 and that the colossal fraud gathered “at least” $34 million from 260 investors across the country.

    “McLeod victimized law enforcement agents and other government employees who dedicated their lives to the service of this country,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “The victims gave years of public service and McLeod stole their futures.”

    McLeod conducted investment seminars “at government agencies nationwide” to lure clients, the SEC said. The agencies paid “up to” $15,000 each for these seminars,” and FEBG held itself out as “dedicated to the complex issues surrounding special group employees, including Law Enforcement Officers, Firefighters and Air Traffic Controllers,”the SEC charged in the complaint.

    At least one investor was told the purported bond program was a special fund for family and friends, and families of “fallen agents,” the SEC charged.

    If the allegations are true, it means that McLeod was selling a Ponzi scheme dressed up as a secure retirement plan backed by government bonds right inside government offices — while earning a fee to make the pitch and plucking heartstrings by referring to people who had lost their lives in the line of duty.

  • SHADES OF AVG: Upstart AdPayDaily ‘Surf Scolds Members For Not Understanding The ‘Program’ After Pumping Bonuses For Weeks

    Ponzi, wire fraud and money-laundering allegations against AdSurfDaily and President Andy Bowdoin — and the bizarre conduct of a spinoff surf known as AdViewGlobal — have made it harder for upstart surfs to gain traction. ASD's brand is radioactive, even in the strange universe of the so-called autosurf "industry." Surfs also are having a harder time gaining a following because the U.S. Secret Service has revealed in court filings that it is using undercover agents in its autosurf investigations.

    AdPayDaily (APD), an upstart surfing company whose membership includes participants in the alleged AdSurfDaily Ponzi scheme and the failed AdViewGlobal (AVG) autosurf, is lecturing members on proper behavior.

    AVG, which had close ties to ASD, became infamous for scolding members

    In an unsigned post on its free WordPress Blog, APD, which does not disclose its ownership and registered its domain behind a proxy while plying participants with bonuses and asking them to recruit prospects willing to fork over $300, told members they needed to get a grip on the “program.”

    The Blog post is dated June 21. During the very same week a year ago, the AVG autosurf was in its death throes. News about AVG’s suspension of payouts amid a bonus flap was announced one year ago today. AVG had close ties to ASD. ASD’s offices in Quincy, Fla., were raided by the U.S. Secret Service on Aug. 5, 2008, amid allegations of wire fraud, money-laundering, selling unregistered securities and operating a Ponzi scheme.

    Like its predecessors ASD and AVG, APD has been flogging bonus programs for weeks, including a “Special Memorial Day Weekend Promotion” in which members were offered a “200% Ad Point bonus on all purchases, with outside funds, of $500 to $2,500.” By June 8, APD was hawking “an exciting New APD promotion.”

    Reps who recruited “at least” three new advertisers willing to plunk down $300 were offered “a 200% Ad Point Bonus on the new advertisers [sic] sales,” plus a “200% Ad Point bonus on their own purchases.”

    It its June 21 Blog post, authored after the bonuses were advertised, APD explained the bonus offerings in hard-to-decipher language.

    “Reps who are also Advertisers, [sic] are required to qualify for Bonus Ad Points they receive when they make a purchase as an Advertiser,” APD said in the Blog post. “For example, if you are a Rep and you make a $1,000 purchase as an Advertiser, as a Rep you are required to make a new sale or sales that equal or exceed the number of Bonus Ad Points you received when you made the purchase.

    “In this example,” the post continued, “you must make a new sale or sales that equal or exceed $1,000 and up to 50% or $500 of those new sales can come from your Cash Account. If you choose to use your Cash Account to purchase additional advertising, to qualify for the Bonus Ad Points, you must make that purchase within 30 days of your advertising purchase. Reps will have a total of 50 days to make the required sale, as long as they have used their Cash Account to purchase additional advertising within 30 days. Otherwise, the Bonus Ad Points will expire and be deducted from their Ad Point account.”

    APD, in AVG-like fashion, then scolded members in bold type.

    “The purpose of the qualification is to prevent Reps, who are also Advertisers, from only purchasing advertising to earn two times the cost of their advertising,” the company said in the Blog post. “This type of behavior is a money game and that is not acceptable behavior or the intent of the APD program.”

    Perhaps adding even more confusion, APD noted, “Referring Reps who made the sale will still receive the commission but the Bonus Ad Points they received for unqualified sales will be deducted from the Referring Reps [sic] account when it is determined that the Rep they referred did not qualify for the bonus Ad Points.”

    Revisiting AdViewGlobal

    Plied with a virtually endless series of bonus programs and claims that $5,000 spent on advertising with AVG turned into $15,000 “instantly,” members sent untold sums believed to have totaled in the millions of dollars to the surf.

    AVG launched in early February 2009. In late January, the surf denied it had any affiliation with ASD after AVG’s graphics appeared in a webroom controlled by ASD. The AVG graphic listed the company’s address as 13 S Calhoun Street, Quincy, FL 32351 — ASD’s address.

    The appearance of the graphic was explained away as an “operational coincidence.” Incredibly, the AVG spokesman who explained that the company had no affiliation with ASD was a former ASD employee who testified on the company’s behalf at at evidentiary hearing in 2008.

    Equally incredibly, the spokesman explained that Gary Talbert, an executive at ASD who filed a sworn affidavit on ASD’s behalf in the court case, was AVG’s chief executive officer — all while insisting the two companies were not affiliated.

    In March, AVG incongruously announced that Talbert had resigned as CEO but would remain in the “accounting” department — a strange place for a former CEO to land. The company also announced that its bank account had been “suspended,” but continued to pitch bonus programs relentlessly.

    AVG, which purported to be headquartered in Uruguay while also citing U.S. Constitutional protections, then became the center of a firestorm. An affiliate used a forum set up by some moderators of the now-defunct, pro-ASD Surf’s Up forum to explain a complex method by which AVG prospects could pay sponsors for “page impressions” (ad-packs) to qualify for bonuses.

    Under the method, prospects would make a private agreement with sponsors to pay the sponsors and make AVG the final recipient of the money. Sponsors would deposit the money in their individual bank accounts. The sponsors then would send the sum via wire or overnight mail to an offshore payment processor, and then wait for the sum to be credited to the sponsor’s account at the processor.

    Once the sponsor’s account was credited by the processor, the sponsor would instruct the processor to send the sum to AVG. Because the sum somehow had to get back in the hands of the prospect after its hemispheric trip, the sponsor would apply the funds to his AVG account and then use AVG’s internal system to get the money or the value thereof to the real customer, the prospect, for the purchase of page impressions and to qualify for a whopping 250 percent bonus.

    Some AVG members described the convoluted, multistep process as a helpful sponsor going the extra mile for a prospect. Others called it an invitation to be indicted for wire fraud, money-laundering, tax evasion and securities fraud.

    AVG crashed and burned a year ago today, suspending payouts and threatening members and the media with lawsuits for sharing the news.

    See earlier story on APD.

  • Postal Inspectors, IRS Say Canadian Promoted ‘Series’ Of HYIP Frauds; Randi A. Bochinski Arrested In British Columbia, Faces U.S. Indictment

    Still promoting HYIP frauds on the Ponzi boards and elsewhere?

    A Canadian citizen was arrested in British Columbia June 3 and now has been indicted in the United States on charges of wire fraud, mail fraud and money-laundering, authorities said.

    Randi A. Bochinski, 46, of Kelowna, B.C., potentially faces decades in prison and huge fines if convicted.

    A company known as Carlant Holdings Ltd. was “among other schemes” Bochinski promoted, federal prosecutors said.

    The case was investigated by the U.S. Postal Inspection Service and the IRS Criminal Investigations Division, and will be prosecuted by the Economic Crimes Unit of U.S. Attorney Carmen M. Ortiz in Boston.

    Bochinski “promoted a series of high-yield investment programs, whereby he promised investors significant returns on their investments within a short amount of time,” prosecutors said.

    “[A]mong other schemes, Bochinski solicited investors to invest in” Carlant by stating “they would receive returns of 8-10 times their investment within 90 days,” prosecutors said, adding that neither the purported returns nor the purported payout timeline ever materialized.

    Investors were told their money would remain in an escrow account, but Bochinski “transferred the investments out of the escrow account without notifying the investors,” prosecutors said.

    “To date, only small portions of the initial investment have been returned to the investors, none of it was returned within 90 days, and the promised returns have been non-existent,” prosecutors said.

    Bochinski “also promoted several other fraudulent investments to investors throughout the country and used funds invested by newer investors to make payments to previous investors,” prosecutors said.

  • FOX 5 ATLANTA: Narc That Car President, Director Involved In Previous Pyramid Schemes; Separately, Math Expert Says License-Plate Location System ‘Like Finding A Needle In A Haystack’

    A Georgia State University mathematics professor consulted by Fox News 5 in Atlanta said Narc's purported data-driven location system was like finding a needle in a haystack.

    The Fox 5 News “I-Team” in Atlanta has returned to the subjects of pyramid schemes and Narc That Car, also known as Crowd Sourcing International. (See video and link below.)

    During tonight’s principal newscast, veteran investigative reporter Dana Fowle reported that Narc President Jacques Johnson was a manager in YourTravelBiz (YTB), which was sued in 2008 by California Attorney General Jerry Brown for operating a pyramid scheme.

    Meanwhile, Fox 5  reported that Narc Director Norman Pearah, who owns the building in which the firm’s offices are located, was charged in Louisiana in the 1980s with running an “endless chain” pyramid scheme.

    Records reviewed by the PP Blog show that the California case against YTB was settled with a stipulated judgment that ordered the company to pay $1 million. Records also show that YTB sought an injunction in federal court against Johnson amid allegations he violated a “director’s agreement,” solicited members to move from YTB while still a director and violated a “non-compete” agreement after leaving YTB.

    Johnson “hung up” on Fowle when she contacted him for comment, the station reported.

    Separately, the station reported that it consulted with Yichuan Zhao, a mathematics professor at Georgia State University, about Narc’s license-plate data claims.

    The professor, who appeared on camera with a chart and graphs, observed that the math of Narc was “like finding a needle in a haystack.”

    Narc has said its system could help recover abducted children. Although promoters claimed the firm was affiliated with the AMBER Alert program, the U.S. Department of Justice denied in February that the program had any affiliation with Narc. So did the National Center for Missing & Exploited Children, which administers the secondary AMBER Alert program for the Justice Department.

    Fox 5 also aired a Narc report during last night’s newscast. Last night’s report revisited the station’s previous reports on Narc, which featured the use of a hidden camera.

    See tonight’s Fox 5 report below:

    Visit the Fox 5 website.

  • ASD-LIKE LITIGATION PLAYBOOK BACKFIRES: Washington State Man Indicted For Placing Fraudulent Liens Against Prosecutors, IRS Agent; Ronald James Davenport Faces Decades In Prison If Convicted

    EDITOR’S NOTE: This is a post in which the introduction is longer than the actual story (below). The story demonstrates the dangers of jumping on bandwagons before giving them careful thought.

    Longtime readers of the PP Blog will recall our coverage of Curtis Richmond, “Professor” Patrick Moriarty and ASD Members International (ASDMI). Each was a mainstay in the AdSurfDaily autosurf Ponzi scheme case.

    Richmond, a member of a sham Utah “Indian” tribe, was sued successfully in 2008 under federal racketeering statutes for being part of a group that placed enormous financial judgments against Utah public officials in performance of their duties. The judgments were bogus. Richmond and other members of the sham tribe were ordered to pay damages and penalties totaling more than $108,000.

    Richmond has described himself in court filings as a “sovereign” being answerable only to Jesus Christ.

    Moriarty, now in federal prison in Missouri after pleading guilty in January to filing a false tax return, advocated Richmond’s legal theories in the ASD case. Among other things, Moriarty, who claimed to be skilled in the art of “karma restoration” and once sold fake academic degrees on eBay by explaining they were gag gifts, was part of a group — ASDMI — whose membership roster consisted of members of the now-defunct Surf’s Up forum.

    ASDMI came out of the gate by announcing a scorched-earth legal campaign against the government for its seizure of tens of millions of dollars in the ASD case. At least two federal prosecutors and at least one Secret Service agent became targets of a hectoring campaign that involved the use of certified mail. Surf’s Up championed the campaign, which was designed to demand a litigation result from the government by trapping the recipients of the certified mail into a contract to which they never agreed. The approach, which also was used by the sham Utah tribe in litigation separate from the ASD case, sometimes is known as “paper terrorism” or “mailbox arbitration.”

    Surf’s Up also championed a secondary campaign to write letters to Sen. Patrick Leahy, chairman of the Senate Judiciary Committee. Surf’s Up described the ASD case as a legal “travesty that was committed against the 100,000-plus members of ASD by US attorneys Jeffrey Taylor and William Cowden.”

    Richmond, fresh from his RICO rebuke in “Indian”-related litigation in Utah, then became a mainstay in the ASD case. He filed a series of pro-se pleadings accusing U.S. District Judge Rosemary Collyer and the prosecutors of crimes and threatening prosecution and lawsuits under federal racketeering statutes.

    Some ASD members cheered the filings. Richmond was dubbed a “hero” on Surf’s Up, and also on a forum some of the Surf’s Up Mods established to promote the AdViewGlobal (AVG) autosurf, which had close ASD ties. One of Richmond’s motions claimed that actions by Collyer, a court clerk and two prosecutors prevented an ASD member named Alana Holsted from “Collecting on an Entry of Default Affidavit for $30 million for each Defendant.” In the Utah “Indian” case, Richmond tried to force the federal judge presiding over the litigation to step down by claiming the judge owed him $30 million.

    It is believed that bogus payment claims against Collyer, the prosecutors and the court clerk by some pro-se litigants in the ASD case totaled at least $120 million. It is unclear if overt steps were taken to formalize the purported judgments by filing liens against the judge, the clerk and the prosecutors.

    Previously Richmond had been linked to a scheme to imprison federal judges and litigation opponents and had been declared in contempt of court in California for threatening and trying to intimidate judges.

    Although the story about Ronald James Davenport is not related to the ASD case, it demonstrates the risk of some of the approaches advocated by Richmond, Moriarty and ASDMI — and it shows the utter madness of the advocacy of the Surf’s Up forum. It was the type of advocacy that can land followers in prison for decades.

    Here, now, a brief on Ronald James Davenport . . .

    A Washington state man faces up to 40 years in prison if convicted on charges of filing fraudulent liens against a U.S. Attorney and other government officials, the U.S. Department of Justice said.

    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.”

    In a civil case that preceded the criminal indictment against Davenport, Senior U.S. District Judge Justin L. Quackenbush ruled last month that the liens “were filed to retaliate against the officers for their good-faith efforts to enforce the tax laws against Mr. Davenport.”

    Quackenbush struck the liens, which were filed in the form of UCC Financing Statements with the Washington State Department of Licensing, according to records. The liens not only were fraudulent, but also contained “sensitive personal information” that violated privacy laws, the judge ruled.

    Davenport also filed instruments dubbed “Notice[s] of Claim of Maritime Lien” with the Spokane County Auditor’s Office, according to records. Those, too, were struck.

    The government sued Davenport civilly in 2008 “to collect delinquent income taxes,” prosecutors said.

    Records show that Davenport responded by filing liens against the officials.

    “The indictment alleges that in retaliation for attempting to collect the delinquent taxes, Davenport made a series of fraudulent claims in December 2009,” prosecutors said.

    “Davenport filed liens against the property of these government officials, falsely claiming that each of them owed Davenport $5,184,000,000,” the Justice Department said.