PatrickPretty.com

Category: Ad Surf Daily

  • ‘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.

  • 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.

  • 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.

  • 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.

  • 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.

  • 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.

  • Pathway To Prosperity Case A Subject Of Discussion In Washington’s Highest Power Corridors; Website Of U.S. Attorney General Includes Link To Case Info As Part Of ‘Mass-Marketing Fraud’ Educational Campaign

    From the June 2010 International Mass-Marketing Fraud Working Group report.

    In November 2009, President Obama formed the interagency Financial Fraud Enforcement Task Force (FFETF). By January, U.S. Attorney General Eric Holder, who answers to Obama,  publicly warned fraudsters that “if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

    It now turns out that the investigation into the business practices of Nicholas Smirnow and unnamed co-conspirators in an alleged $70 million, HYIP Ponzi scheme known as Pathway To Prosperity (P2P) was undertaken by elements of the FFETF.

    It further turns out the the U.S. Department of Justice — under Holder’s command — is using the P2P probe and the criminal charges it led to against Smirnow to educate the public on a global scale about “mass-marketing fraud.”

    The P2P case was mentioned prominently in a news release yesterday by the Justice Department to publicize international, cooperative efforts among seven governments to curb the proliferation of fraud that occurs on the Internet, over the telephone, through the mails, through group meetings and through other forms of mass communication.

    Last week, federal prosecutors thanked the Rotterdam-Rijnmond Regional Police in Rotterdam in the Netherlands, Filipino authorities, and the Ontario Securities Commission in Canada for assisting in the P2P probe.

    Meanwhile, an entity known as the International Mass-Marketing Fraud Working Group (IMMFWG) has released a “threat assessment” to provide governments and the public with a current assessment of the nature and scope of the threat that mass-marketing fraud poses around the world.

    IMMFWG’s participating countries include the United States, Australia, Belgium, Canada, the Netherlands, Nigeria and the United Kingdom, as well as Europol, the European police agency.

    “The IMMFWG seeks to facilitate the multinational exchange of information and intelligence, the coordination of cross-border operations to detect, disrupt, and apprehend mass-marketing fraud, and the enhancement of public-awareness and public-education measures concerning international mass-marketing fraud schemes,” the group said.

    In the Justice Department news release yesterday to publicize IMMFWG’s threat assessment, prosecutors pointedly referenced the P2P case.

    “Last week the U.S. Attorney’s Office for the Southern District of Illinois charged an individual for allegedly engaging in an international Ponzi scheme that was operated through a website,” the Justice Department said. “The scheme allegedly resulted in a total of $70 million in losses to more than 40,000 investors in more than 120 countries.”

    The news release included a link to information on the P2P case, and the letterhead in the document featured the logos of both the Justice Department and the Task Force Obama created in November.

    Despite very public warnings from Holder that the United States is serious about sending financial fraudsters to jail and a declaration in the complaint against P2P’s Smirnow that “[a] large percentage, if not all, HYIPs, are Ponzi schemes,” members of Ponzi-pushing forums such as ASA Monitor, MoneyMakerGroup, TalkGold and MyCashForums are still out in full force to push Ponzi schemes on the U.S. and world public.

    For its part, IMMFWG said in its threat assessment yesterday that “[t]here are strong indications that the order of magnitude of global mass-marketing fraud losses is in the tens of billions of dollars per year.”

    IMMFWG also said “[m]ass-marketing fraud has gradually transformed from a predominantly North American crime problem into a pervasive global criminal threat.”

    “For some victims,” IMMFWG said, “the risks extend well beyond loss of personal savings or funds to include physical threats or risks, loss of their homes, depression, and even contemplated, attempted, or actual suicide.”

    IMMFWG noted that “[l]arge-scale criminal mass-marketing fraud operations are present in multiple countries in most regions of the world” and that “similarities between such operations include targeting victims in other countries, foreign outsourcing of operations, and involvement of organized criminal enterprises.”

    Read the Justice Department news release that references P2P in the context of IMMFWG’s global effort to educate the public about mass-marketing fraud and the hideous economic and social consequences of such fraud.

    Read IMMFWG’s threat assessment as published by the interagency Financial Fraud Enforcement Task Force.