PatrickPretty.com

Author: PatrickPretty.com

  • BULLETIN: Alberta Securities Commission Orders $2 Million Penalty Against ‘Lord’ David Greene And John Jenkins In Gold Quest International Ponzi Case

    After determining in January that Gold Quest International (GQI) was a “sham” operating as both a Ponzi and a pyramid scheme, the Alberta Securities Commission (ASC) now has doled out the penalties.

    David Michael Greene, also known as “Lord” David Greene, and John Jenkins were ordered to pay an “administrative penalty” of $2 million, ASC said today. Greene and Jenkins were GQI’s operators, according to the agency.

    Michael McGee, described by ASC as having played “a lesser but still considerable role” in the scheme, was ordered to pay an administrative penalty of $100,000. ASC further determined that McGee claimed that a case against him filed by the U.S. Securities and Exchange Commission had been “dismissed” when it had not.

    In fact, ASC said, the SEC case had resulted in a judgment of more than $8.5 million against McGee, but that the judgment is not being enforced because of McGee’s professed inability to pay.

    If the case involving GQI was not one of the strangest in Canadian history, it almost certainly is one of the strangest in U.S. history.

    Part of the money in the case is tied up in a California homicide investigation in which the operator of the E-Bullion payment processor was charged with murdering his wife.

    During the SEC litigation, the purported “attorney general” of a purported “sovereign” Indian tribe tried unsuccessfully to sue the SEC for the spectacular sum $1.7 trillion, claiming GQI was immune from U.S. securities laws.

    Read this story for more background on GQI.

    Penalties doled out by ASC were less severe on GQI President Delroy Atwood. He was not assessed a financial penalty other than a share of litigation costs of $49,700, but was “prohibited from acting as a director or officer of any issuer for five years,” ASC said.

    Greene and Jenkins were banned from the Alberta capital markets for life.  McGee was banned for 10 years.

    “In the Merits Decision, we found that Greene created Gold-Quest and the Gold-Quest Offering,” ASC said. “Greene and Jenkins ran Gold-Quest’s operations, with some assistance from McGee.

    “Gold-Quest and Greene lured investors by touting investments in the Gold-Quest Offering as safe and secure or guaranteed and by promising 87.5% annual returns,” ASC continued. “These statements about the investments were misrepresentations. The Gold-Quest Offering, purportedly involving investment in foreign currency trading, was in fact a sham.

    “On the evidence, we were satisfied that, during the relevant period, Gold-Quest itself did not open any foreign currency trading account, receive income from any currency trading, have an active currency trading program or any actual currency traders in its employ, or place investors’ money with external foreign currency traders,” ASC said.  “Rather, the evidence was that any foreign currency trading had been done through foreign currency trading accounts opened in the names of Greene and Jenkins, had been minimal and had resulted in heavy losses.”

    The scheme gathered $29 million, ASC said.

  • BULLETIN: Another Ponzi Scheme In South Florida; SEC Alleges $28 Million Fraud Against Trade-LLC

    A Florida company — Trade-LLC — and its operators have been accused of running a $28 million Ponzi scheme that fleeced members of three investment clubs.

    Named defendants by the SEC were Trade-LLC and its managing members, Philip W. Milton and William Center. The scam operated in the Palm Beach Gardens area, and affected more than 800 members of the investment clubs, the SEC said.

    Investors were persuaded to “entrust Trade-LLC with money so that it could trade securities on the clubs’ behalf using its purported proprietary software trading program,” the SEC said.

    “With claims of a sophisticated trading program and extraordinary returns, Milton and Center persuaded the clubs and their members to increasingly invest millions with Trade-LLC,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “They then blatantly lied to the clubs about the returns that were being achieved and hid the clubs’ losses by running a Ponzi scheme.”

    U.S. Attorney General Eric Holder gave a speech in the Palm Beach area in January, warning fraudsters that they were writing their own tickets to jail. Florida has been pounded by both Ponzi schemes and cases of real-estate and mortgage fraud.

    Milton already has agreed to settle the SEC charges against him, the SEC said.

    Trade-LLC will be placed in receivership and also “has also consented to pay a civil money penalty to be determined by the court,” the SEC said. Milton has been ordered to return $2.3 million and pay a civil penalty of $130,000.

    “Milton and Center used the clubs’ funds to pay themselves salaries of more than $2 million and $1 million, respectively, and to cover more than $1.3 million in business and other unrelated expenses,” the SEC said. “Milton and Center also transferred, without any legitimate basis, over $4.8 million of the clubs’ funds to three Florida companies they controlled.”

    The case against Center remains unresolved.

    Named relief defendants in the case were the three companies controlled by Milton and Center. They were identified by the agency as BD LLC, TWTT-LLC and CMJ Capital LLC. All of the companies have been placed in receivership and have agreed to a settlement and to disgorge ill-gotten gains, according to the SEC.

    Assisting in the probe were the CFTC and the Florida Office of Financial Regulation.

  • UPDATE: Renner Begins Sentence In Tax Case; INetGlobal Operator Housed In Minnesota

    Steve Renner, the operator of the Minneapolis-based INetGlobal autosurf, is an inmate at the Federal Prison Camp (FPC) in Duluth, Minn., according to the Federal Bureau of Prisons (FBP).

    Renner, 55, was sentenced in May to 18 months for income-tax evasion. He was indicted in September 2008 and convicted in December 2009.

    The Duluth FPC is a “minimum security” facility located at the former Duluth Air Force Base. FPCs have “dormitory housing, a relatively low staff-to-inmate ratio, and limited or no perimeter fencing,” according to the FBP. “These institutions are work- and program-oriented; and many are located adjacent to larger institutions or on military bases, where inmates help serve the labor needs of the larger institution or base.”

    Renner was listed last week as in the custody of the U.S. Marshals Service and “in transit” to an unnamed federal facility. For security reasons, there may be lag time between when a federal prisoner is being transported to a facility and when he or she is listed as an inmate at a specific facility.

    As of this morning, Renner was listed as Inmate No. 14166-041 at FPC Duluth. Renner’s conviction occurred prior to allegations by the U.S. Secret Service that he was operating a Ponzi scheme through INetGlobal and related businesses.

    A federal probe into Renner’s business practices continues. He has not been charged with a crime, and has denied wrongdoing.

  • Prosecution, INetGlobal Strike Interim Agreement That Frees Money To Pay Employees, Insurance Under Court Supervision

    UPDATED 6:14 P.M. ET (U.S.A., JAN. 20, 2011.)

    Employees of an Internet company under federal investigation amid allegations it was operating a Ponzi scheme have received some good news: a sum of $125,000 has been released to pay their past-due salaries and $25,000 has been released to pay their past-due healthcare benefits.

    Meanwhile, $200,000 per month will be released to pay the “ordinary and necessary operating expenses” of INetGlobal and affiliated companies as the probe into their business practices continues.

    News for commission-based affiliates of INetGlobal was not good. No money has been released to pay them.

    Dubbed an “interim agreement,” the release of funds was negotiated by attorneys for both INetGlobal and the government. It will be in effect “until such time as the government files an indictment or information containing forfeiture provisions, a civil forfeiture complaint against the funds seized on February 23, 2010 and in later days, or determines that there shall be no prosecution or forfeiture complaint,” according to the terms.

    The agreement does not mean that INetGlobal no longer is in legal jeopardy.

    A separate action against a San Diego property the government alleged was acquired with fraud proceeds has been suspended under the terms of the agreement. The case against the San Diego property has not vanished; under the terms of the agreement, it is being placed on hold “until the related criminal case or investigation is resolved or, in the event that the government determines that there shall be no prosecution, until the government either files a separate civil forfeiture complaint against the funds which were seized on February 23, 2010 and in later days, or determines that there shall be no prosecution or forfeiture complaint.”

    In February, the U.S. Secret Service said it believed INetGlobal operator Steve Renner was running an international Ponzi scheme. About $26 million was seized in the case.

    Companies covered under the agreement include INetGlobal, Inter-Mark Corp. of Nevada,
    Virtual Payments Systems LLC of Wisconsin, V-Media Marketing LLC of Minnesota, Cash Cards International LLC of Minnesota and SMR Investments #1 LLC of Minnesota.

    NOTE IN BOLD ADDED JAN. 20, 2011: An Indianapolis-based company known as Virtual Payment Systems Inc. has contacted the PP Blog to let it know it is not affiliated with the Renner company Virtual Payment Systems LLC of Wisconsin, which is referenced in the paragraph above.

    SteveRenner.com described the agreement with the prosecution as “an incredible turn of events,” reporting it was “worth millions.” The website also reported that the firm has become “the 1st company ever” targeted in a government investigation to receive money back.

    Prosecutors told the Star Tribune of Minneapolis-St. Paul that the government agreed to the release of funds so employees could get paid. (See link to Star Tribune story below.)

    Payments will be administered under court supervision by a court-appointed attorney, according to the agreement. The agreement calls for the IRS to receive “up to” $650,000 and the Minnesota Department of Revenue to receive “up to” $150,000 for tax payments delayed by the probe. Renner will receive $151,484.75 upon providing “proof that Inter-Mark Corporation and/or V-Media Marketing, LLC and/or Cash Cards International, LLC” owe him that sum.

    Renner, 55, was listed last week as in the custody of the U.S. Marshals Service and “in transit” to a federal detention facility to begin serving an 18-month sentence for income-tax evasion. He was convicted in December 2009 and sentenced in May for actions that occurred prior to the INetGlobal Ponzi scheme investigation.

    Renner-related companies have ties to at least four other Ponzi or investment-fraud cases, according to records.

    Read the Star Tribune story on the interim agreement.

  • U.S., German, British, Canadian Provincial Regulators Cooperate In Probe Of Alleged ‘Oil And Gas’ Fraud Scheme Operating In Florida, Texas And Aruba; SEC Sues Justin Solomon And Affiliated Firms

    A Florida man selling “joint ventures” in oil-and-gas businesses in Texas to overseas clients through corporate arms in the United States and Aruba has been accused of fraud by the SEC.

    Named defendants in the case were Justin Solomon of Deerfield Beach, Fla., and three affiliated companies: Seisma Oil Research LLC of Boca Raton, Fla., Seisma Energy Research AVV and Permian Asset Management AVV of Aruba.

    Seisma Oil Research LLC also is known as Seisma Energy Research LLC, and Seisma Energy Research AVV also is known as Seisma Oil Research AVV, the SEC said.

    The case is notable for reasons beyond fraud allegations and the number of companies with similar-sounding names. Indeed, the SEC said the agency was assisted in the probe by the Financial Services Authority of the United Kingdom, the Federal Financial Supervisory Authority of Germany, the Ontario Securities Commission and the Nova Scotia Securities Commission.

    Also assisting internationally was the London Police Department. On the U.S. domestic front, the Division of Securities of the Florida Office of Financial Regulation also assisted.

    The defendants have consented to a preliminary injunction and to repatriate “any remaining investor assets” to the United States.

    Solomon and the companies raised “at least” $25 million in the scheme by using “high-pressure sales tactics” on “more than 400 non-U.S. investors,” drawing them into the scheme, the SEC said.

    “The ventures were supposed to purchase undivided working interest in oil and gas projects owned and operated by two unrelated Texas companies,” the SEC said.

    Investigators, though, said “Seisma never acquired any working interest for two of the six ventures and has expended only $9.5 million of the funds raised toward acquiring interests on behalf of the ventures.”

    At the same time, the SEC said, “Seisma misrepresented or omitted material facts about the profitability and prospects of the oil and gas opportunities.”

  • BULLETIN: KABOOM x 1,215! Feds Announce ‘Operation Stolen Dreams’ Mortgage-Fraud Sweep; 1,215 Defendants Charged In Largest Mortgage Scammer Takedown In U.S. History

    Attorney General Eric Holder announced the creation of the Financial Fraud Enforcement Task Force last year.

    BULLETIN: UPDATED 1:10 P.M. EDT (U.S.A.) At least 1,215 criminal defendants have been named in “Operation Stolen Dreams,” which U.S. Attorney General Eric Holder described as a “three and a half month takedown of mortgage fraud schemes throughout the country.”

    The mortgage-fraud operation began March 1 and is the largest-such undertaking in U.S. history, Holder said.

    “The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country,” Holder said. “We have seen mortgage fraud take on all shapes and sizes — from schemes that ensnared the elderly to fraudsters who targeted immigrant communities. We have seen cases that have resulted in dozens of foreclosures and millions in losses, as well as fraudsters who have bankrupted entire companies and national lenders who were not playing by the rules.

    Holder said the defendants caused more than $2.3 billion in losses. “Operation Stolen Dreams” was brought as part of President Obama’s interagency Financial Fraud Enforcement Task Force. The attorney general was joined in the announcement by Sallie Cooper, deputy director of the IRS Criminal Investigation Unit;  Ken Jenkins, special agent in charge of the U.S. Secret Service Criminal Investigative Division;  FTC Commissioner Edith Ramirez; Ken Donohue, inspector general of the U.S. Department of Housing and Urban Development; FBI Director Bob Mueller;  Illinois Attorney General Lisa Madigan;  Chief Postal Inspector Bill Gilligan; and Jim Freis, director of the Treasury Department’s Financial Crimes Enforcement Network.

    Investigators did not limit the operation to criminal cases.

    “[T]he operation involved 191 civil enforcement actions through which more than $147 million has been ordered recovered, with still millions more pending court approval,” Holder said.

    “This represents the largest collective enforcement effort ever brought to bear in confronting mortgage fraud,” he noted. “The success of this operation is a direct result of our unprecedented focus not just on federal criminal cases, but also on civil enforcement, recovering funds for victims and increasing cooperation with state and local partners.”

    Mueller said the FBI was “tracking” fraudsters aggressively.

    “From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” Mueller said. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

    Fraudsters lining their pockets at the expense of others have plenty to worry about, said Donohue.

    “The last several years have seen enormous and damaging developments in the mortgage and housing markets, and the government has stepped in to bolster unstable marketplaces and devastated communities,” Donohue said. “The HUD-OIG, in partnership with other agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance today.”

    Holder, who ventured to Florida in January and warned fraudsters that they were writing their own tickets to jail, also noted that law-enforcement had broken up yet another Ponzi- and affinity-fraud scheme in the state.

    Suspects were arrested in the case yesterday, which targeted Haitian-Americans in South Florida.

    Arrested were Maxo Francois, also known as “Max Francois,” Jean Fritz Montinard, Aiby Pierre-Louis and Maguy Nereus, also known as “Maguy Jean-Louis.”

    The scheme involved businesses known as Focus Development Center Inc. and Focus Financial Group Inc., also known as Focus Financial Associates Inc.

    Investors were promised annual returns of 15 percent, but it was a Ponzi scheme, authorities said.

    The fraudsters used church presentations to pitch the scheme, prosecutors said.

  • KABOOM! KABOOM! KABOOM! KABOOM! KABOOM! 5 Separate Federal Probes Lead To Dozens Of Fraud Arrests In Multiple States; 1 Case Alleges Nearly $2 Billion Scheme

    Lanny Breuer, assistant attorney general and head of the Criminal Division of the U.S. Department of Justice

    BULLETIN: The U.S. government has announced charges against at least 43 defendants in five separate financial-fraud schemes, the largest of which allegedly involved $1.9 billion and contributed to the collapse last year of a bank with 346 branches and a mortage-lending company in Florida.

    Smaller schemes in cases outlined by federal prosecutors today involved tens of millions of dollars, including a New Jersey real-estate Ponzi scheme that netted $45 million, a California mortgage-fraud scheme that netted at least $5.5 million, a second California scheme that netted an unknown amount and another real-estate fraud scheme in New Jersey that netted at least $5.5 million.

    The youngest defendant charged in the cases was 27; the oldest 77.

    Law-enforcement operations were centered in the states of Florida, New Jersey, Virginia and California, and involved multiple agencies working under the umbrella of the Financial Fraud Enforcement Task Force established by President Obama in November.

    Lee Bentley Farkas, former chairman of Taylor, Bean & Whitaker (TBW), was arrested last night in Ocala, Fla. Farkas was named in a 16-count indictment filed in Virginia that accused him of presiding over a $1.9 billion fraud scheme that contributed to the failures last year of Colonial Bank, one of the 50 largest banks in the United States, and TBW, one of the nation’s largest privately held mortgage-lending companies.

    “The fraud alleged here is truly stunning in its scale and complexity,” said Lanny Breuer, head of the Criminal Division of the U.S. Department of Justice.

    “According to the indictment, the fraud began as early as 2002 in an effort to conceal significant TBW operating losses,” Breuer said. “It then evolved over the course of seven years as Mr. Farkas and his co-conspirators sought to misappropriate hundreds of millions of dollars from Colonial Bank and Ocala Funding, a mortgage lending facility that was controlled by TBW and financed by large banks.”

    Farkas and unnamed coconspirators compounded the fraud by asking for bailout funds from the federal Troubled Asset Relief Program (TARP), prosecutors said.

    “That [TARP] application included materially false information, and no TARP funds were released,” said Breuer.

    The case was brought by the office of U.S. Attorney Neil MacBride of the Eastern District of Virginia.

    “Taxpayers have paid a hefty price for the crimes related to the current financial crisis, and investors in Colonial and Ocala Funding were among those directly affected by this conspiracy,” said MacBride.

    Neil Barofsky, the Special Inspector General of the TARP program (SIGTARP), said the banking scheme was unprecedented.

    “Due to the efforts of SIGTARP agents, our law-enforcement partners, and the SEC, this scheme was stopped dead in its tracks, taxpayers were protected, and Lee Farkas has joined the growing list of financial industry executives who have been charged with TARP-related frauds,” Barofsky said.

    In one of the separate alleged schemes in New Jersey, 28 people were charged. (See link below to read the names of the defendants in the cases, which involve at least $5.5 million.)

    “These cases demonstrate just how pervasive the mortgage fraud problem is in New Jersey,” said U.S. Attorney Paul J. Fishman.  “Mortgage fraud is not limited to people who steal millions at a time.  It is more insidious.  It is more pernicious.  And it is more prevalent. Mortgage fraud is often done at a retail level, and involves many different people playing many different roles.  No matter what your role, if you participate in this kind of scheme, you will be held accountable.”

    Among the 28 defendants are 12 real estate agents, four investors, four mortgage consultants, three individuals who allegedly created fraudulent documents, two accountants, a real-estate appraiser, a bank employee and a mortgage broker.

    A veteran FBI agent described the New Jersey cases as a battle in an ongoing war against fraud.

    “Today’s arrests do not signify the culmination of a single investigation, but rather serve as notice that law enforcement is aggressively pursuing mortgage fraud schemes in New Jersey,” said Michael B. Ward, special agent in charge.

    In the second New Jersey case, Antoinette Hodgson, 58, of Montclair, was arrested on charges of operating a $45 million Ponzi scheme involving false tales of property-flipping. (See earlier story.)

    Meanwhile, 13 people were charged in a California real-estate fraud cases. U.S. Attorney Benjamin B. Wagner announced the indictments of Hoda Samuel, 58, of Elk Grove, Calif.; Connie Devers, 40, of Elk Grove; Dana Faulkner, 43, of Oakland; Charles Robert Maness, 32, of Elk Grove; Tracy Painter, 50, of Lodi, Calif.; Sean Patrick Gjerde, 34, of Elk Grove; Ronald Burris, 36, of Elk Grove; Ygnacia Bradford, 34, of Oakland; Nicole Dawson, 40, of Oakland; and Daniel Harrison, 40, of San Diego.

    Gjerde is an attorney;  Samuel a licensed real estate broker and the head of Liberty Real Estate and Investment Co. and Liberty Mortgage Co. of Elk Grove .

    “From April 2006 through February 2007, Liberty was involved in approximately 30 residential real estate transactions in which the mortgage lenders were given false information as to the income of the purchasers and/or the value of the homes being purchased,” prosecutors said.

    “At least 28 of the properties have since gone into foreclosure, resulting in a loss to lenders of over $ 5.5 million,” prosecutors said.

    Also in California, Eric Ray Hernandez, 34, Monica Marie Hernandez, 29, and Evelyn Brigget Sanchez, 27 were indicted in a mortgage-fraud case. Each of the defendants lists an address in Bakersfield.

    Link to names of New Jersey defendants.

  • New Jersey Woman Charged In Alleged $45 Million Ponzi Scheme; Antoinette Hodgson Faces Decades In Prison If Convicted

    A New Jersey woman was arrested this morning on charges she fleeced more than 20 Greater New York investors by engineering  a $45 million Ponzi scheme involving purported real- estate flips, the FBI said.

    Antoinette Hodgson, 58, of Montclair, New Jersey, was accused of conspiracy and wire fraud amid allegations she recruited clients by telling them they were investing in her real-estate business, which purportedly acquired residential properties and then resold them at a profit or rented them before being sold at a profit.

    In fact, according authorities, Hodgson spent “hundreds of thousands of dollars at casinos in Atlantic City and Las Vegas,” gave “tens of thousands of dollars” to family and friends and used investors funds to buy a Dunkin Donuts franchise in Arizona for $700,000.

    Of the $45 million she gathered in the scheme, only $6 million went toward residential real estate. Most of the money was used immediately to repay investors in “classic” Ponzi fashion, authorities said.

    “Antoinette Hodgson allegedly has already proved she’s a lousy gambler by losing the investor’s money in the casinos,” said George Venizelos, acting FBI special agent in charge. “She has now gambled with her future and faces serious charges for a plot of her own making.”

    U.S. Attorney Preet Bharara, who put his Complex Frauds Unit on the case,  warned investors that high-dollar scammers are on the prowl for their cash.

    “What Antoinette Hodgson allegedly promised to investors seemed too good to be true and that’s because it was,” said Bharara. “This case is a further reminder that whether the real estate market is up or down, innocent investors can be and will be targeted by unscrupulous fraudsters.”

    Prosecutors encouraged victims and witnesses to come forward by contacting Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York. Olsen-Clancy can be reached at (866) 874-8900 or via email at Wendy.Olsen@usdoj.gov.

    Here is the website for victims and witnesses:

    http://www.usdoj.gov/usao/nys/victimwitness.html

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

    “The FBI will continue to seek out those who engage in all types of fraudulent real estate deals, bringing about certain justice for them and clearing a path for those who work hard to uphold the standards of our justice system,” Venizelos said.

    Fraudsters “in every sector of our nation’s economy” are being pursued for prosecution, Bharara said.

  • INetGlobal Operator Steve Renner In Custody Of U.S. Marshals Service To Begin Sentence In Tax Case

    Steve Renner

    Steve Renner is in the custody of the U.S. Marshals Service, the agency said this afternoon.

    Renner, 55, was the operator of the INetGlobal autosurf. He was convicted of income-tax evasion in December 2009. On May 5, he was sentenced by U.S. District Judge Donovan Frank to 18 months in prison, although Renner was not immediately jailed after sentencing and was given permission to report on a date uncertain.

    His prison term appears now to have begun.

    Renner is listed by the Federal Bureau of Prisons as “in transit” to a federal detention facility. The name and location of the facility were not immediately clear, and the Marshals Service said it could not provide any additional details.

    INetGlobal continues to be under investigation by the U.S. Secret Service amid allegations Renner was operating an autosurf Ponzi scheme. Renner’s tax case was separate from the INetGlobal probe.

    Renner was indicted on the tax charges in September 2008, about a month after the Secret Service raided the Florida headquarters of AdSurfDaily, another alleged autosurf Ponzi scheme.

  • INetGlobal Enters Objection To Magistrate Judge’s Ruling Permitting Government To Approach ‘Current And Former’ Employees In Ponzi Probe

    Steve Renner

    The investigation into the business practices of INetGlobal is turning into a legal slog reminiscent of the AdSurfDaily autosurf Ponzi scheme case.

    In April, attorney Paul Engh filed a motion, saying he represented INetGlobal employees. Among other things, Engh sought an order that effectively would have blocked the U.S. Secret Service from interviewing the employees, as the agency’s Ponzi probe into the company moved forward.

    Engh asserted that, by contacting employees on a cold-call basis, the government was  conducting the investigation “on some federalist notion of superiority or entitled sense of un-accountability.”

    Prosecutors shot back in May, claiming INetGlobal was trying to derail the probe.

    “Mr. Engh indicates that he ‘was hired’ to represent these employees, but refrains from indicating who it was who hired him,” prosecutors said. They added that “many of [Engh’s] purported clients seem to have never spoken with him.”

    On May 28, U.S. Magistrate Judge Franklin L. Noel issued an order that required Engh to compile  “a complete list of the names of current and former Inter-Mark and iNetGlobal employees whom he purports to represent” and permitted the government to continue to contact both current and former employees.

    “Before interviewing current and former employees of Inter-Mark and iNetGlobal, law enforcement shall first ask each individual if he or she is represented by an attorney,” Noel wrote in the order.

    “If the individual responds that he or she is not represented by counsel, the interview may proceed,” Noel continued. “If, however, the individual indicates that he or she is represented by an attorney, law enforcement shall ask that individual for the name of his or her lawyer; at that time, questioning must immediately cease until such a time as the Government’s attorney obtains the consent of the lawyer named, whether Mr. Engh or otherwise, to communicate with the individual ‘about the subject of the representation.’”

    Last week, Engh filed an “appeal from the order,” saying the judge is misinterpreting the law and that INetGlobal employees are entitled to protection from “isolated and surprise contact” by the government.

    In February, the U.S. Secret Service said it believed INetGlobal operator Steve Renner was running an international Ponzi scheme through his affiliated companies that largely targeted Chinese members, including members from Mainland China. No criminal charges have been filed, but the government has seized about $26 million in the case, alleging wire fraud and money-laundering.

    Prosecutors later filed filed a forfeiture complaint against a San Diego property allegedly acquired for $595,000 by Inter-Mark in August 2009 with criminal proceeds from a Ponzi, wire-fraud and money-laundering scheme.

    Inter-Mark is INetGlobal’s Las Vegas-based parent company. INetGlobal operates from Minneapolis. Renner has denied wrongdoing.

    Donald Allen

    In late April, Donald W.R. Allen II, a former Renner employee, said he’d been contacted by the Secret Service and was cooperating in the probe “100 percent.”

    Allen complained that the company had blocked access to a public-affairs Blog he published and that he was being punished by the firm “for coming forward to answer ANY questions the Government has regarding iNetGlobal.”

    Renner then got a restraining order against Allen, asserting that Allen tried to extort $100,000 from the company and had engaged in a pattern of abusive behavior, including raising “havoc” with employees, threatening “to destroy him and his family,” posting libelous and defamatory material on the Internet and engaging in verbal harassment.

    Allen also was accused to taking pictures of Renner’s offices and employees without their consent.

    “[Allen] has attempted to extort $100,000 from Petitioner’s businesses [and] if not paid will go to the FBI and Secret Service,” Renner asserted.

    Allen denied Renner’s claims, saying Renner had made similar extortion claims against Steven Keough, INetGlobal’s former chief executive officer and potentially the government’s star witness in the case.

    Ponzi litigation against assets tied to AdSurfDaily has been under way for nearly two years. The government has been awarded title to tens of millions of dollars seized in the ASD case, but ASD President Andy Bowdoin has filed an appeal.

  • Richard Elkinson Ordered To Pay $29 Million In Ponzi Case; 77-Year-Schemer Still Jailed After Arrest At Mississippi Casino In January

    A 77-year-old man who fleeced clients by telling them he brokered contracts for a Japanese company that provided uniforms for the Winter Olympics, the Pan American games and the government has been ordered to pay $29 million in a civil case brought by the SEC.

    Richard Elkinson is jailed in Massachusetts after being arrested at a Mississippi casino in January. He is facing charges that effectively could lead to a life sentence, if convicted.

    Elkinson’s case drew headlines at the beginning of the year, after both state and federal investigators worked over the Christmas holiday in 2009 to expose the $28 million Ponzi scheme, according to records.

    “The investors received promissory notes signed by Elkinson, with terms that generally required payment within 300 to 330 days and with an interest rate that ranged from 9% to 13%,” the SEC said.  “Elkinson had no relationship with a Japanese uniform manufacturer, and there were no contracts to purchase uniforms.”

    It is possible that the scheme operated for at least 20 years before flaming out just prior to Christmas last year.

    The FBI was working the case on Christmas Eve, according to the criminal complaint. After securing purchase orders claiming the states of Connecticut and Georgia were among Elkinson’s customers, an agent called the phone numbers on the purported purchase orders.

    “In each instance, I encountered ‘disconnected’ messages,” the agent said.

    The investigation also revealed that Elkinson had an affinity for Las Vegas and claimed to have credit lines of $25,000 each at the Venetian, MGM Grand and Caesars Palace casinos.

    Elkinson, 76, of Framingham, was charged criminally with mail fraud. The Securities Division of the Massachusetts Secretary of State also is investigating Elkinson.

    Records in Las Vegas casinos show that Elkinson had “conducted a total of more than $3.7 million in transactions over $10,000″ since 1998, prosecutors said. The Ponzi scheme began to collapse last year, and Elkinson missed a meeting with investors in December, and stopped answering his phone.

    See earlier story.