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Author: PatrickPretty.com

  • Long Prison Terms Ordered In California Ponzi Scheme Cases In Which Operators Threatened Or Attempted Suicide; Roberto Heckscher Gets 20 Years; Patricia Morgen Gets Nearly 16 Years

    EDITOR’S NOTE: This is a brief on two Ponzi cases in California that led to suicide attempts or threats. Among other things, the case of Roberto Heckscher demonstrates both the danger to life that collapsing Ponzi schemes pose and the fallacy that no Ponzi scheme exists as long as people are getting “paid.” The fallacy routinely is perpetuated on Internet Ponzi boards such as MoneyMakerGroup, TalkGold, ASAMonitor and MyCashForums. Indeed, the Heckscher investment-fraud and Ponzi scheme dates back to at least 1979, perhaps making it the longest-running scheme on the Feds’ radar screens. Meanwhile, the Ponzi case against Patricia Morgen and Chicago Development and Planning also mixes in elements of mortgage fraud. Among other things, the Morgen case demonstrates that Ponzi = Pain. Indeed, Morgen initially fled to Mexico when she came under investigation. She later returned — and threatened to jump from the top of a multistory building in Chicago.

    Two Ponzi schemers whose cases were brought in federal court in Northern California have been sentenced to long prison terms. The unrelated cases of Roberto Heckscher and Patricia Morgen destroy myths, expose secret lives and demonstrate that Ponzi schemes can separate purveyors from their senses.

    Roberto Heckscher, 55, projected himself during the business week as a mild-mannered accountant and strategist who served elderly and middle class clients in the San Francisco area. On weekends, however, he morphed into a Las Vegas gambling “whale” treated to the best amenities by the casinos.

    Heckscher conned family, friends and clients into providing money that purportedly would be used to provide short-term commercial loans to clients. Investors were told they’d earn interest on the loans.

    The scheme, which gathered up to $100 million, dated back to 1979, prosecutors said. At least 292 investors lost a total of at least $52 million in the scheme.

    “For nearly three decades, Roberto Heckscher made his livelihood by stealing the hopes and dreams of the people he knew,” said U.S. Attorney Joseph P. Russoniello.

    Heckscher’s sentence of 20 years for mail fraud “should send a strong message to everyone” that “preying on the trust of hardworking people for personal gain will land you in prison,” Russoniello said.

    But Heckscher almost did not live to see the long-running scheme exposed in the plain light of day. That’s because he tried unsuccessfully to kill himself in June 2009 by overdosing on sleeping pills.

    U.S. District Court Judge Susan Illston handed down the sentence. Heckscher, who owned Irving Bookkeeping & Taxes, was charged criminally and pleaded guilty in October 2009, about four months after he tried to take his own life.

    Patricia Morgen, meanwhile, was sentenced to 15 years and eight months in prison after admitting she created a real-estate Ponzi scheme that solicited investors for Chicago Development and Planning. She also was ordered to pay more than $9 million in restitution. The case has more than 400 victims.

    Investors were promised “substantial, guaranteed return profit payments,” prosecutors said.

    In addition to the real-estate Ponzi scheme, Morgen also engaged in mortgage fraud, prosecutors said.

    “Morgen and a co-defendant submitted fraudulent loan applications to acquire more than 20 properties, most of which were occupied, rent-free, by Chicago Development and Planning employees, including Morgen herself,” prosecutors said.

    Morgen, 63, initially fled to Mexico. She was indicted in November 2008. Although she later returned to the United States, Morgen hid from authorities.

    She was arrested in Chicago in June 2009, after threatening to jump off a multistory building, prosecutors said. Her son, Shalom Gibson, was indicted in Nevada for destroying evidence in the case, and remains at large.

    U.S. District Judge Charles R. Breyer sentenced Morgen, who pleaded guilty in December 2009 to wire fraud, mail fraud, and money-laundering.  Breyer described Morgen as “a very dangerous person,” prosecutors said.

    The sentence “underscores the severity and impact of this sort of crime on our entire community,” said Stephanie Douglas, FBI special agent in charge.

    “Ms. Morgen betrayed the trust of hundreds of investors, injected bad debt into the economy, and fled the country when faced with the prospect of being held accountable for her actions,” Douglas said.

    Greedsters running investment-fraud schemes have plenty to worry about, said an IRS criminal investigator.

    “Your greed will not go undetected and unpunished,” said Scott O’Briant, special agent in charge of the IRS-Criminal Investigation unit.

    In recent weeks, at least three suicide attempts by Ponzi schemers have been outlined in federal cases.

  • Now, A ‘Belgian Royalty’ Ponzi Scheme; SEC Says Guy Albert de Chimay Used Investors’ Funds To Pay Divorce Lawyer, ‘Massive’ Credit-Card Bills, Rent, Payroll

    UPDATED 9:31 A.M. EDT (U.S.A.) Saying Guy Albert de Chimay and his unregistered investment-advisory business “simply stole” clients’ funds while telling investors their money was safe with the “U.S. investment arm of the Chimay royal family of Belgium,” the SEC has gone to court in New York to halt what it described as a massive fraud.

    Separately, Chimay, 47, was arrested in North Carolina after being indicted by prosecutors in New York on charges of forgery and grand larceny. Chimay claims to be a cousin to a Belgian prince, according to court documents.

    In an emergency action, the SEC is seeking to freeze the assets of Chimay and Chimay Capital Management Inc. and obtain an order to repatriate assets to the United States. The SEC has advised a federal judge that Chimay was operating a fraudulent “bridge loan” scheme in which investors were told their money would be used to make loans to creditworthy borrowers locked out of the banking system owing to the “credit crisis.”

    “Chimay used the trappings of royalty to perpetrate the most common of frauds,” said George S. Canellos, director of the SEC’s New York Regional Office. “Chimay blatantly lied to investors about nonexistent investments and then used their money to bankroll his exorbitant personal and business debts.”

    Although the number of victims is not yet known, the scheme netted Chimay and his company at least $6 million. Some of the money instantly was used in “classic Ponzi scheme fashion” and “diverted to payoff disgruntled counterparties in Defendants’ other business ventures,” the SEC charged.

    In some cases, the SEC said, money sent in by investors lured by the promise of an annual return of 12 percent was diverted the very same day it was received.

    On April 21, 2009, a client the SEC described as “Investor A” wired an initial BLF [Bridge Loan Facility] investment of $500,000 to a Chimay-controlled account at Goldman Sachs Execution and Clearing,” the SEC said. “The GSEC account had been opened in March 2009 and contained only $10,000 when Investor A’s funds were deposited. At the time of his investment, Defendants represented to Investor A that the size of the ‘bridge loan’ pool into which he would be depositing his funds was $50 million.

    “On the same day Investor A transmitted his funds to Defendants, the SEC continued, “Chimay instructed his introducing broker to direct GSEC to wire the bulk of Investor A’s investment to three external accounts: (i) $289,000 for “legal fees – re Chimay” to the . . . account of the New York law firm representing Chimay in a divorce proceeding in New York state court; (ii) $61,000 to a TD Bank account maintained by Chimay Capital for purported use as generic ‘working capital’; and (iii) $100,000 to another entity to satisfy Chimay Capital’s unrelated contractual obligation to provide operating capital to the entity.”

    Wanting to invest more with Chimay less than a month later, Investor A wired an additional sum of $170,000 to the GSEC account on May 12, 2009, the SEC said.

    On the very same day, Chimay “directed that $140,000 be wired to a Chimay Capital (Int’l) account at TD Bank,” the SEC said. “Later that day, after the $140,000 had been received at TD Bank, $90,000 of Investor A’s investment were transferred to Chimay’s personal account at TD Bank, where it was thereafter used to subsidize Chimay’s costly personal and living expenses, including his mortgage, car payment, credit card payments, utilities and cash withdrawals.”

    A client described by the SEC as “Investor B” entrusted more money to Chimay than did Investor A, and was fleeced in similar fashion, the SEC said. The agency added that the transaction was routed through Bermuda, and that the Bermuda Monetary Authority had provided assistance in the probe.

    “Investor B invested $2 million in the BLF in October 2008 by wiring his investment to an account at Butterfield Bank in Bermuda,” the SEC said. “Among other things, Investor B’s funds were used to fund a $200,000 personal check made out to Defendant Chimay, which he deposited the same day into his personal checking account at TD Bank.

    “Chimay thereafter used Investor B’s money to make tens of thousands of dollars in rapid fire payments to Chrysler Finance, American Express, Indymac Bank, and Capital One,” the SEC charged. “Investor B’s funds were also used to pay $330,000 to another investment firm to meet Defendants’ contractual agreement to provide operational capital to the firm, and to pay Chimay Capital’s rent and payroll in November 2008.”

    Described as “[o]blivious to the fact that his money had been diverted for improper purposes, and still under the belief that he would receive safe and steady returns of 12%, Investor B entrusted another $2 million to Chimay in January 2009, the SEC said.

    “The day after Investor B wired his second $2 million investment to Butterfield Bank on January 29, 2009, Defendants transferred approximately $1.8 million from the account to another Butterfield account controlled by Chimay. Chimay thereafter immediately used Investor B’s funds to make a payment of $250,000 to his divorce counsel, and to fund the $643,000 redemption of an investor in a Chimay Capital hedge fund.”

    Other investors identified by the SEC with a letter of the alphabet suffered similar fates, the agency said.

    One of the investors — “Investor D” — became worried, and asked Chimay to provide proof the money had been invested as advertised, the SEC said.

    “In order to reassure Investor D that Defendants had ample liquidity, and that Investor
    D’s BLF investment was safe, on October 5, 2009, Chimay provided Investor D with a bank
    account statement from Butterfield Bank purporting to show liquid assets of approximately $14 million,” the SEC said.

    “The Butterfield statement was fraudulent; the actual account balance was zero,” the agency said.

    In reverse-engineering Chimay’s dealings with Investor D, the agency discovered that nearly all of the $1 million investment made in August 2009 had been misappropriated, the SEC said.

    “Defendants misappropriated Investor D’s funds by, among other things, using them to make a $500,000 payment to a third party that had loaned Defendants approximately $1.4 million in July 2009 to purchase shares in a technology company,” the SEC said. “Defendants also misappropriated Investor D’s funds to make a $339,000 payment to the firm that had served as the custodian of the Spartan Mullen funds, which Defendants claimed to have liquidated in March 2009.”

    In July 2009, Chimay and his company claimed to have $200 million under management and to have served as custodian for the Bermuda-based Spartan Mullen Chimay funds, which the SEC described as “now-defunct hedge funds.”

  • UPDATE: PP Blog Stories Lost In Migration To New Hosting Platform Retrieved; Some Problems Related To Platform Migration Still Unresolved

    Dear Readers,

    As we noted here, our migration to a new hosting platform — undertaken by our hosting company on Friday — resulted in some problems.

    In the hours after the migration, we were unable to retrieve data on posts between June 2 and June 11 that somehow went missing. We reassembled data on these posts this morning and re-posted them manually.

    Although we have re-published the posts, they are not at their original URLs. At the moment, it is unclear if and when a fix will be provided that returns the posts to their original URLs. We are expecting that the host will  restore the database to its former state through an automated process.

    Here are a few things you should know:

    • Those of you who subscribe to our email feed may receive content that you’ve already viewed because we republished the lost posts at different URLs. We expect that this will happen just once — tonight — but cannot rule out that it will happen again if the database is restored to its former state.
    • Some database “clutter” — strange-looking symbols, etc. — may appear in the republished posts. We sought to edit out the clutter during the republishing phase, but there was a lot of it.
    • The act of republishing the posts brought with it certain issues that could be confusing. For example, the posts may use words such as “today” or “Wednesday” or “tomorrow,” but because the republication date lists today’s date, the references could be confusing.
    • We thought it best to republish the posts, and will add a note to them that asks readers to check this thread for an explanation on why the posts might not reflect current events.
    • It is possible that the republished posts as they currently appear are not the final versions that appeared when they were published originally. We had to examine many pages of data to republish the posts. It is possible that we missed the “final update.” For example, if we published a post on a Tuesday, learned more information on Wednesday, and added an “UPDATE” line and additional details to the post, it is possible that the republished post does not include this information.

    Meanwhile, our Contact Form — which also was affected by the migration — still is not working. At the same time, our ability to retrieve email has been affected to a degree. For now, we are unable to retrieve email through our normal means, and are relying on a secondary retrieval system.

    It appears as though we’ll be able to resume a normal publishing schedule, now that we’ve manually restored the “lost” stories. There are still some glitches, however.

    Comments that once appeared below the stories when they were published at their original URLs remain in the database. We likely will not seek to restore them to place them below the new URLs because the process will be too time-consuming. It is our hope that all the original URLs of the stories and the comments will be restored in the coming days.

    We regret the inconvenience this has caused readers and posters, and we apologize for that inconvenience. The problems started Friday evening and basically knocked us offline for several hours.

    We have been able to make some manual “repairs,” but still do not have the functionality we enjoyed prior to the migration.

    Patrick

  • Affiliate Links Show That Surf’s Up Mod And ASD Members Hold High Positions In Upstart Surf: Things To Consider If You Are Tempted To Join AdPayDaily

    Alfred E. Neuman: From Wikipedia.

    Dear Readers,

    We have received a few inquiries about a new surfing program called AdPayDaily (APD). Our initial take is that the program is a dressed-up version of AdSurfDaily, AdViewGlobal, BizAdSplash and AdGateWorld and that the operators are persuaded they’ve found a word combination and legal structure that will neutralize critics and law enforcement should concerns about the sale of unregistered securities and a Ponzi and pyramid scheme be raised.

    AVG, BAS and AGW were positioned by former ASD members as offshore “clones” of ASD. APD, like ASD, appears to be operating in the domestic United States.

    In our view, APD’s presentation raises numerous red flags. At a minimum, it is starting out as an MLM absurdity, if not a potential monstrosity. To get a flavor of the absurdity, imagine that Walmart was clueless enough to start an autosurf and provide a corporate-approved greeter who says, “Welcome to Walmart Pay Daily. We count all the money out of sight in the back room at midnight to determine how much you get, and keep 50 percent of the cash for ourselves. Don’t worry. We have excellent lawyers, and we’ve instructed the money-counter not to rip you off.”

    That’s effectively what APD is saying.

    Another red flag is the fax number listed on a document APD refers to on its website as “Ad Pay Daily’s Conference Registration Form For July 30th and 31st 2010.” The fax number is listed online as a number used by a Kansas real-estate flipping company billed as National Flips. Like APD, the National Flips domain registration is hidden behind a proxy, although the website says this: “To learn how to become a Hard Money Lender and earn 30+% per annum, call [a telephone number] . . .”

    Meanwhile, the invitation for the APD conference that uses the National Flips fax number says this — not once, but twice: “Any person who does not provide photographic proof of identity will not be permitted to attend this event, so don’t forget your photo ID.”

    Why a photo ID would be required to attend a sales pitch for an advertising company is left to the imagination. Undercover Secret Service agents have been known to attend such functions, however.

    Virtually every autosurf that has come along has used strange approaches or applied language tweaks designed to skirt securities laws, disarm critics and sanitize the “opportunities” for prospects. Serial autosurf promoters are infamous for telling prospects that a particular surf has found the magic pill that makes everything legal. Historically they rely on the surf operators to provide a legal cover. When things go south, they claim no one can blame them for promoting the schemes. After all, they relied on the assertions of the operators that everything was above-board and legal. They have been disingenuous in the same way that Alfred E. Neuman, Mad magazine’s fictional mascot, was disingenuous.

    “What, me worry?”

    Worry, however, appears to be front-and-center at APD, which is preemptively denying in multiple places that it is a Ponzi scheme. This strikes us as a big red flag. There are others.

    ASD, Surf’s Up Members Become APD Players

    During its early research into APD, the PP Blog has determined that a number of members of the alleged AdSurfDaily autosurf Ponzi scheme have high positions in the APD venture. Some of the former ASD members hold more than one position in the top 80 positions in APD, including a former Surf’s Up Mod who appears to hold positions 76 and 77. It is possible that another Surf’s Up Mod also is high up in the pecking order of APD affiliates at No. 56.

    The Blog determined the names of APD promoters by researching the method by which APD creates affiliate links. At least one ASD member who made himself part of the ASD Ponzi litigation by submitting pro se pleadings holds positions 9 and 10 in APD, according to the affiliate links.

    Surf promoters are not fond of pointing out the pain of previous prosecutions of autosurfs and the time-consuming and expensive litigation involving both the government and court-appointed receivers that may occur when a surf collapses. It is not uncommon for millions of dollars to go missing in a surf.

    ASD’s Andy Bowdoin has told members that he has spent more than $1 million in his legal defense. Nothing (other than GIGO passed along by promoters) suggests Bowdoin was a man of means prior to the Secret Service raid on ASD’s headquarters in August 2008. His money for his defense appears to have come from ASD members. On a side note, Bowdoin tried to persuade members in September 2009 that the million dollars he dropped to keep himself out of prison was for their benefit. At the same time, he claimed his fight with the government was inspired by a former Miss America.

    ASD gathered at least $65.8 million. When the sum seized in the Golden Panda Ad Builder action, which is part of the ASD litigation, is factored in, the number surges to more than $80 million. That’s a big number, of course — one that shows why others want to start surfs and just tweak and tweak and tweak in search of the elusive magic pill.

    APD’s website was registered on Nov. 18, 2008. That’s just one day before U.S. District Judge Rosemary Collyer ruled that ASD had not demonstrated it was a lawful business and not a Ponzi scheme. APD’s domain-registration date also coincides with a string of registration dates by the so-called ASD clones:

    • Aug. 18, 2008: Domain name for AdGateWorld registered. (About two weeks after the ASD raid by the U.S. Secret Service, which is working in concert with the IRS and federal prosecutors.)
    • Sept. 22, 2008: Domain name for AdViewGlobal registered. (AVG had very close ties to ASD.)
    • Nov. 7, 2008: Domain name for BizAdSplash registered. (ASD and Golden Panda figure Clarence Busby purportedly was both the “chief consultant” and owner of BAS.)

    APD’s domain was registered just 11 days after the BAS domain was registered and only a couple of weeks before ASD declared that the now-defunct Surf’s Up forum was its official organ for ASD news. Surf’s Up became infamous for shilling for Bowdoin, fracturing the facts of the ASD wire-fraud and money-laundering case and misinforming members.

    Each of the surfs in the bullet points above failed spectacularly. Each of them blamed members for their problems. Each of them had promoters and members in common with ASD. Each of them also offered various “bonuses” to join — something APD is doing at the moment.

  • BULLETIN: SEC Accuses Four Canadian Businessmen, Two Florida Attorneys Of Perpetrating $300 Million Ponzi Scheme

    Question: What’s the second-largest Ponzi scheme in the news in South Florida this week?

    Answer: The alleged $300 million Ponzi scheme perpetrated by Milowe Allen Brost, Gary Allen Sorenson and Bradley Dean Regier of Calgary; Ward K. Capstick, a Canadian citizen who lives in Snohomish, Wash; Larry Lee Adair of Fort Lauderdale, Fla., and Martin M. Werner of Boca Raton, Fla.

    Adair, 62, is a Florida attorney who served as president of Syndicated Gold Depository Inc. (SGD), one of the companies implicated in the alleged scheme. Adair was SGD’s president between December 2001 and at least December 2003, and “continued to act in furtherance of the scheme through at least March 2007,” the SEC said.

    He is accused of using his trust account to manage “the flow of investors’ funds” to Sorenson.

    Despite the alleged dollar volume of $300 million in the scheme, it was only the second largest Ponzi case in the news in South Florida this week. Scott Rothstein, also a Fort Lauderdale attorney, was sentenced to 50 years in prison for his Ponzi scheme yesterday.

    It has been an embarrassing week for the legal community in Florida.

    Werner, 53, also is a Florida attorney. He became SGD’s president in 2007 and is accused of being present at meetings in which “the insiders discussed and implemented the scheme,” the SEC charged.

    The SEC announced the spectacular civil allegations against the six men today. Also named defendants in the complaint were four companies: SGD, Merendon Mining Corp. Ltd., Merendon Mining (Nevada) Inc., and the Institute for Financial Learning Group of Companies Inc.

    Brost, 56, and Sorenson, 66, are the principal defendants. Capstick, 44, was accused of being a so-called “structurist” who recruited other structurists to pitch the allegedly bogus offerings.

    Regier, 40, was a bookkeeper and accountant for a Brost-created marketing entity, the SEC said.

    Sorenson’s wife and daughter were named relief defendants, meaning the SEC believes they were on the receiving end of ill-gotten gains from the scheme.

    The scheme began in 1999, the SEC said.

    “Brost and Sorenson orchestrated a complex, far-reaching fraud disguised by a labyrinth of companies and foreign bank accounts they used to hide their misconduct from investors and law enforcement,” said Donald M. Hoerl, director of the SEC’s Denver Regional Office.

    “Unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson,” the SEC said. “Investor funds were often transferred multiple times through numerous bank accounts held as far away as Asia, Europe and South America, and then ultimately used to make ‘interest payments’ to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme.”

    Investor money “whirled through accounts located in the U.S. and Canada as well as the Bahamas, Belize, Bermuda, Ecuador, Honduras, Malaysia, Panama, Peru, Portugal, and Venezuela,” the SEC said. “Brost and Sorenson diverted investor funds for their personal benefit, using millions of dollars to purchase and renovate extravagant homes, ranches, and recreational vehicles. Sorenson also purchased and outfitted a luxury fishing resort in South America.”

    More than 3,000 investors were fleeced in the scheme, the SEC said.

    On two occasions in recent months, FBI Director Robert Mueller has warned Congress about the emergence of shell companies as outlets to perpetrate fraud.

    Read the SEC complaint.

    Read a brief story from December 2009 that references allegations against Brost and Sorenson in Canada.

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.

  • Ponzi Operator D.J. Harriett Pleads Guilty; Tells Judge He Attempted Suicide During Scheme’s Collapse And Also Is Suffering From Cancer

    David J. Harriett

    An Ohio man who fleeced more than 200 people in a $7 million Ponzi scheme tried to commit suicide in November when the scheme was collapsing and also is suffering from pancreatic cancer, the Warren Tribune-Chronicle is reporting.

    The story of David J. Harriett demonstrates the enormous emotional pressure on both perpetrators and victims in Ponzi cases.

    Separately, WYTV, the ABC outlet in Youngstown, is reporting that Harriett has advised a federal judge that he has only months to live.

    Harriett, 60, of Warren, pleaded guilty to mail fraud in the scheme yesterday in Cleveland. The case against him was brought last month as part of President Obama’s Financial Fraud Enforcement Task Force, U.S. Attorney Steven M. Dettelbach said.

    “These types of financial frauds, in which people portray themselves as legitimate investors but simply take their clients’ money, are a serious problem and we will continue to prosecute them vigorously,” Dettelbach said.

    Sentencing is scheduled for Aug. 18. Harriett faces a maximum of 78 months behind bars.

    Demonstrating the investing public’s discontent with Ponzi schemers, some of Harriett’s fleeced clients yesterday fretted that he might not live long enough for justice to be served. Harriett, whose website noted that he had gone on a Caribbean cruise in December 2008 in the months prior to the scheme’s collapse, is free on bond pending sentencing.

    Harriett admitted yesterday that he told investors he was a project manager for the construction of franchise restaurants for McDonald’s and Pioneer Chicken and that investors who helped him build the restaurants were given promissory notes that guaranteed the return of their investments with interest.

    His claims were false, the FBI said. No such construction contracts existed, and Harriett was using money from new investors to pay old investors in a Ponzi scheme.

    See our earlier report.

    Read the story in the Tribune-Chronicle.

    Read the report by WYTV. (NOTE: If you visit the WYTV site, a video accompanying the report is in the upper-right corner of the page. The video shows the types of emotions that Ponzi victims express.)

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.

  • FTC Issues Warning On Oil-Spill Schemers; Be On The Look Out For Insurance, Contracting, Jobs And Charity Scammers

    As the attention of the United States and much of the world is riveted on the oil gusher in the Gulf of Mexico, the Federal Trade Commission is warning consumers that schemers will try to take advantage of the environmental disaster to lines their own pockets.

    “It’s no secret that scam artists follow the headlines, and the daily news of the oil spill in the Gulf of Mexico is no exception,” the FTC said today. “[I]t’s likely that scammers will use e-mails, websites, door-to-door collections, flyers, mailings and telephone calls to make contact and solicit money.

    “Some may claim they’re raising money for environmental causes or offer fraudulent services like remediation services related to the oil spill,” the FTC warned. “Others may claim they can expedite loss claims for a fee. Still others may knock on your door and talk about placing booms or checking for oil on your property. Chances are they’re trying to gain your trust to get inside your home or get access to your personal information.”

    Many scams cropped up after Hurricane Katrina in August 2005, the agency said.

    Oil-spill-related scams could included solicitations for donations to bogus charities that use “copy-cat names to cash in on the reputations of older, more established charities,” the FTC said.

    Use the Better Business Bureau’s website to check out a charity and do other research, the FTC advised.

    “Rather than clicking on a link to a purported website, verify the legitimacy of a nonprofit organization by using search engines and other online resources to confirm the group’s existence, history, mission and nonprofit status,” the FTC advised. “To ensure your contributions are received and used for the purposes you intend, contribute directly to organizations you know rather than relying on other people to make a donation on your behalf. If you get pressure to make a contribution, look for another charity. Reputable charities don’t use those kinds of tactics.”

    Job-scammers also could surface in the Gulf region or elsewhere, the FTC cautioned.

    “Avoid any job or volunteer opportunities that require you to pay a fee before the job begins,” the agency said.

    Because of frauds associated with Hurricane Katrina, the U.S. government formed the National Center for Disaster Fraud (NCDF).

    “The NCDF was originally established by the Department of Justice to investigate, prosecute, and deter fraud in the wake of Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region,” the FTC said. “Its mission has expanded to include suspected fraud from any natural or man-made disaster.”

    If you suspect someone is trying to pull off a scam related to the oil spill, the FTC recommends that you contact NCDF by phone at 1-866-720-5721; by email at email: disaster@leo.gov; or by fax at 225-334-4707.

    Read the FTC’s full warning.

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.

  • BULLETIN: Ponzi Swindler And Racketeer Scott Rothstein Sentenced To 50 Years In Federal Prison For $1.2 Billion Scam; Schemer Forged Judges’ Signatures, Threatened Reporter

    BULLETIN: Scott Rothstein, the disbarred Florida lawyer who sold interests in nonexistent legal settlements, forged the signatures of federal judges on court documents to hoodwink investors and keep money flowing to his $1.2 billion Ponzi scheme and threatened to sue a reporter asking tough questions, has been sentenced to 50 years in federal prison.

    Rothstein, one day shy of his 48th birthday, was sentenced by U.S. District Judge James Cohn.

    His lawyer had sought a 30-year sentence. Prosecutors recommended 40 years, based on Rothstein’s post-arrest cooperation. Rothstein faced a maximum sentence of 100 years.

    By comparison, infamous Wall Street swindler Bernard Madoff was sentenced to 150 years for his $65 billion fraud. Tom Petters, who hatched a massive Ponzi scheme involving bogus sales of merchandise to prominent retailers, was sentenced to 50 years for his $3.65 billion fraud.

    Guessing the length of Rothstein’s sentence had become sport on the Internet, with people from all over the world advancing their notions.

    In the end, Cohn said Rothstein, who also threatened to sue at least one reporter who was in the process of exposing the fraud, deserved 50 years. The scheme destroyed the Rothstein Rosenfeldt Adler law firm in Fort Lauderdale and has subjected multiple people to investigation, indictments and lawsuits.

    Rothstein pleaded for mercy, saying he was a “changed man” who had contemplated suicide while operating the scheme but ultimately returned from Morocco to face the charges and assist prosecutors in their efforts to untangle the colossal mess.

    The elaborate Ponzi fraud included bogus legal settlements, forged court documents, fraudulent promissory notes, fraudulent campaign donations and gratuities paid to “high ranking members of police agencies,” prosecutors said.

    Rothstein forfeited $1.2 billion, 24 pieces of real estate, luxury cars such as Bugattis, Rolls-Royces and Cadillacs, yachts, shares in businesses and more.

    Here are snippets from Rothstein’s letter to Cohn that asked for fairness and mercy (italics added):

  • SEC: Texas ‘Man Of God’ Ran Nigerian ‘Oil Tanker’ Scheme On Elderly Christians Who Believe He’ll Still Deliver; One Widow May Be Out More Than $1 Million

    EDITOR’S NOTE: The allegations against Samuel O. LeMaire are alarming. The case against him may prove to be one that demonstrates how vulnerable people of faith may be to affinity fraud while at once demonstrating how victims don’t want to believe they’ve been fleeced by a con artist even when the evidence is overwhelming.

    As many as 50 people have been fleeced in an international scheme in which they were told their investment money would be used in part to help needy children in Nigeria, the SEC said.

    Samuel O. LeMaire, a Nigerian living in Texas since the 1980s, told elderly Christians he was starting a “foundation” to help the children and that profits would come as soon as he raised enough money to pay taxes on crude oil from tankers situated “overseas,” the SEC said.

    The agency is treating the action against LeMaire as a case of “religious affinity fraud” because he positioned himself as a “minister” and “Man of God,” targeted investors who had no knowledge of the oil business and repeatedly asked them to give him money to finance the offloading of the oil to make profit distributions possible.

    No investors received any profits, the SEC said.

    Investigators said they believed there was no oil at all, despite the names of LeMaire’s companies — Petrogas Overseas Trading LP and Petroenergy Inc. — and despite LeMaire’s claims he was a former oil executive in Nigeria and well-connected in the oil business.

    LeMaire’s scheme had been operating for “at least” two years, and he was collecting money up until the bitter end by telling investors he needed to raise $90,000 to pay “excise taxes” on the oil before profits could be distributed, the SEC said.

    At various times, LeMaire told investors the deal was “done or almost done, the funds were in transit, the funds were in a bank account ready to be wired, or any number of similar stories,” the SEC said.

    In truth, “LeMaire used investor funds to finance his own lavish lifestyle and support friends and family in the U.S. and abroad,” the SEC said. Investor funds were used for travel and entertainment and to purchase clothing, jewelry and meals in high-end restaurants.

    When issued a subpoena, LeMaire asserted his 5th Amendment right not to incriminate himself and declined to answer questions about Petrogas, the SEC said.

    Investors were promised returns ranging from 300 percent to 1,000 percent, the SEC said, alleging that the scheme raised at least $2.3 million since 2007.

    “The mindset of all Petrogas investors was, and still is, that God wanted them to invest with LeMaire, and that ‘it will all work out in the end,’” the SEC said.

  • BULLETIN: Ponzi Suspect Alan Todd May, On Lam From Dallas And Wanted By U.S. Secret Service, Captured In San Francisco

    BULLETIN: Ponzi suspect Alan Todd May of Dallas has been captured by the U.S. Marshals Service in San Francisco.

    May, 45, was wanted by the U.S. Secret Service. In March, the SEC accused May of running an oil-and-gas Ponzi scheme through companies variously known as Prosper Oil & Gas Inc. and Prosper Energy Inc.

    May, who has a long criminal record and was described by the SEC as a “felon,” assumed “multiple identities to evade apprehension,” according to U.S. Marshal Federico Rocha.

    May pitched his scheme in ads in the Wall Street Journal, Barron’s, the Oklahoman, the Jewish Voice, the Abilene Reporter and on eBay, the SEC said in March.

    Records show that May was arrested 13 times between 1983 to 2002 for crimes such as theft, theft by check and credit card abuse. He also had been apprehended for probation violations and failure to appear in court.

    “These arrests resulted in at least 14 convictions, with dispositions ranging from probation to 20-years’ imprisonment,” the SEC said. “Most recently, he was released from prison in or about 2007.”

    In his latest scheme, the SEC said, May sold royalty interests in wells in to at least 99 investors, advertising returns of up to 38 percent.

    “May or other Prosper employees used investor funds for various lavish personal expenses, including approximately $611,000 for vehicle purchases and expenses (including purchases by May of a Ferrari, a BMW and a Mercedes), $400,000 in credit card payments, $430,000 for meals, entertainment and retail purchases, $324,000 in travel expenses, and $89,000 in cash withdrawals,” the SEC said in March.

    “In addition, during the scheme, May and Prosper acquired multiple houses and condominiums, including homes in Dallas, each valued at approximately $1.5 million. May also caused $611,000 in investor funds to be transferred to his personal bank accounts,” the SEC said.

    The Marshals Service said the scheme may involve $7 million.

    Records suggest May was booked into the Glenn E. Dyer Detention Facility in Alameda County without bail.

    “This arrest was a result of the combined efforts of the Dallas Fort Worth Fugitive Apprehension Strike Team, U.S. Secret Service and the Northern District of California Fugitive Task Force,” the Marshals Service said.

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.

  • Head Of Justice Department’s Criminal Division Announces Guilty Plea Of Texas Man In Commodities Ponzi Case; Multiagency Crackdown Against Scammers Continues

    In yet another sign that U.S. policy is to turn up the heat on Ponzi and HYIP purveyors, the head of the Justice Department’s Criminal Division announced the guilty plea of a Texas man accused both criminally and civilly of running a Forex HYIP and Ponzi scheme.

    Ray M. White, 51, of Mansfield, faces up to 10 years in federal prison after pleading guilty yesterday to a criminal count of commodities fraud. The announcement was made by Assistant Attorney General Lanny A. Breuer, who was appointed to the post by President Obama in 2009.

    White also faces civil prosecutions by the SEC and CFTC.

    Breuer was joined in the announcement by U.S. Attorney James T. Jacks of the Northern District of Texas. Multiple news releases by the government yesterday in the White case referenced President Obama’s Financial Fraud Enforcement Task Force.

    The Obama administration has made Ponzi- and financial-fraud busting one of its top priorities. Ponzi schemes have drained tens of billions of dollars from the economy during a period in which the United States and much of the world are trying to rebound from a growth-killing recession.

    In January, U.S. Attorney General Eric Holder announced that fraudsters were writing their own tickets to jail.

    “White admitted that in July 2008 he contracted with an investor to sell $50,000 in commodities through CRW Management LP,” the Justice Department said. “[F]rom July 2008 until January 2009, he knowingly and willfully cheated and defrauded, made false statements to, and deceived the investor by making several misrepresentations in connection with the contract to sell commodities.”

    The scheme featured a claim “to the investor that his funds would be used to trade off-exchange foreign currency contracts and that CRW averaged 7 percent per week returns through off-exchange foreign currency trading,” the Justice Department said.

    Like many Ponzi schemes, “White provided written account statements showing purported returns, and represented to this investor that CRW would maintain separate bank accounts for each investor,” the Justice Department said. “White admitted that in fact, these account statements were false and that he did not maintain separate bank accounts for the investors.”

    Prosecutors said “the vast majority of the funds were never used to trade off-exchange foreign currency.”

    White, in fact, lost money in his trading scheme, despite his 7- percent- per-week profits claim, prosecutors said.

    White solicited at least $10.9 million from late 2006 until March 2009 from more than 250 investors,  according to the SEC and CFTC.

    “White used at most $93,900 of the $10.9 million he raised to trade in the foreign currency market,” prosecutors said. “The remaining approximately $10.8 million was either misappropriated or returned to CRW customers as part of the Ponzi scheme.”

    Prosecutors were quick to point out that White’s Ponzi meant pain for his family and others.

    “White used the funds to finance his son’s car-racing career, to purchase a company called Hurricane Motorsports LLC, in Arlington, Texas, and to purchase a home and other real property,” prosecutors said.

    He faces a maximum prison sentence of 10 years and a maximum fine of $1 million. U.S. District Judge Barbara M.G. Lynn is scheduled to sentence White on Sept. 17.

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.