Narc That Car has told the Dallas Better Business Bureau that only “1% of total commissions paid out to independent consultants are for the sale of license plate information to third parties,” the BBB said today.
That 1 percent, which Narc That Car referred to as “client share,” is the “only repeatable form of compensation which does not involve the recruitment of others into the opportunity,” the BBB said.
Although the BBB said Narc That Car has provided “some” information since the organization opened an inquiry Jan. 18, the BBB added that it “remains concerned as to whether the business model, in practice, truly provides any significant method of compensation which would not require sponsorship of additional program participants.”
“The BBB warns consumers to be wary of participating in business opportunities that primarily derive compensation through the recruitment of other participants rather than through the sale of a product or service,” the BBB said.
Critics have raised concerns over privacy and the propriety, safety, and legality of Narc That Car, which says it is building a database of license-plate numbers for sale to companies that repossess automobiles.
Longtime MLM aficionados have questioned whether Narc That Car affiliates are selling a product or a business opportunity. The BBB’s interim report — and Narc That Car’s 1 percent assertion — is apt only to fuel the concerns.
UPDATED 11:07 A.M. ET (U.S.A.) One of the undercover Secret Service agents who joined INetGlobal discovered that the company had implemented an “automatic repurchasing” program by default and that the program could not be switched off, thus distancing participants — many of whom may not have understood English — from their money.
Although it is unclear when the automatic-repurchasing program began, it was in operation in the weeks after INetGlobal owner Steve Renner was convicted on Dec. 8, 2009, of four felony counts of income-tax evasion, according to court filings.
Other filings show that another Renner company — Cash Cards International (CCI), a money-transmission business — was upside down by more than $2.5 million when a court-appointed receiver in a Ponzi scheme case sought to convert electronic credits to cash to compensate victims of the scheme.
Beginning on Feb. 1, the Secret Service agent — a woman — repeatedly tried to turn off INetGlobal’s automatic-repurchasing feature, but it “came back on” each time. The agent, who speaks and writes in English, attempted to disable the feature “several times on different days,” failing each and every time, according to an affidavit for a search warrant filed in the case.
INetGlobal had a high concentration of Chinese members who did not speak English, according to the affidavit. How they even could understand the automatic-repurchasing scheme or fully comprehend INetGlobal’s operations and English-language website is far from clear, and has led to questions about whether the company deliberately was targeting members who could not understand what they were purchasing and would have both a language and a geographic disadvantage when seeking explanations or filing complaints with authorities.
The company generated “at least” 87 percent of its revenue from the sale of memberships to members “residing in China,” according to an analysis referenced in the affidavit. The analysis was performed by an unnamed INetGlobal employee.
On Feb. 17, the undercover agent sent an email to INetGlobal customer service, asking if the feature could be turned off.
“Customer service replied in the negative,” the agent said, suggesting that the automatic-repurchasing feature was forcing participants to keep at least 40 percent of their money in the company.
In the affidavit, the Secret Service said a “high level iNetGlobal member” from Nevada was becoming increasingly frustrated by an inability to withdraw funds. The member complained to management that “for over one week [in January] they had been unable to get a money order payment from the company for value they are owed.”
“The victim contacted iNetGlobal’s customer service on several occasions only to get excuses,” the Secret Service said.
Eventually, the victim spoke with former InetGlobal CEO Steven Keough.
Keough, according to the Secret Service, told the victim on Jan. 11 to “cash out” of the system.
“We can’t cash out,” the victim said. “[I]t is not possible, due to mandatory repurchasing built into the system.â€
On the very next day — Jan. 12 — Keough, an attorney and former naval officer, met with the Secret Service. He had contacted federal prosecutors Jan. 8 to express concerns about the company’s business practices. His first contact occurred only two months after he was appointed CEO on Nov. 7, 2009, according to the affidavit.
Steve Renner’s Tax Convictions, Link To Previous Ponzi Scheme
Renner was found guilty Dec. 8 of four felony counts of federal income-tax evasion.
Prosecutors said he “diverted substantial funds” from CCI between 2002 and 2005 to pay his personal living expenses as well as to make personal investments in coins, oil wells, art, stamps, and vintage musical instruments.
CCI, which once served as a money-transmitter for a California Ponzi scheme known as “Learn Waterhouse,” used the same office facility in Minneapolis as INetGlobal, the Secret Service said.
When a court-appointed receiver in the Learn Waterhouse case attempted to get Renner to return money due Ponzi scheme victims, he explained that he could not do so because it had been “invested,” according to the affidavit.
Thomas Lennon, the receiver in the Learn Waterhouse case, met with Renner, who “provided . . . financial statements indicating that the assets of Cash Cards and Renner are insufficient to cover all outstanding vcredit balances and obligations to other creditors.
“Specifically, the statements show that Cash Cards and Renner have assets with an estimated value of $2,946,000 and an outstanding v-credit liability of $5,450,000,” Lennon said in court filings in 2007. “Renner has also informed the Receiver that he is currently being audited by federal and state taxing authorities which may result in large additional liabilities and liens on his property.”
Lennon’s name is well-known among victims of financial crimes. He also was the court-appointed receiver in the 12DailyPro autosurf Ponzi scheme.
Repurchasing programs, which autosurf operators employ to minimize the outflow of cash, are one of the oldest tricks in the Ponzi book. “Trainers” for Florida-based AdSurfDaily, implicated in a $100 million Ponzi scheme, routinely pushed a so-called “80-20” program whereby members would remove no more than 20 percent of money they were due and plow 80 percent back into the surf.
In June 2009, AdViewGlobal, an autosurf with close family, management and promotional ties to ASD, announced it was ceasing payouts and making an 80/20 program mandatory should payouts ever resume. AdViewGlobal promptly crashed and burned.
In January, according to the affidavit, Keough told investigators that he could not make sense out of what was going on inside INetGlobal and had observed instances in which Renner appeared to be gaming the payout system.
“Keough said he was concerned that large amounts of money were flowing through bank accounts related to iNetGlobal and that unusual system manipulation was being conducted by . . . Renner,” the Secret Service said. “Keough had recently been fired by Renner. Keough believed he had been fired because he continually questioned iNetGlobal’s business practices.”
On Jan. 20, according to the Secret Service, the agency received information that TCF National Bank was closing the accounts of a Renner entity known as Inter-Mark Corp. after an investigation by the bank led to “suspicions that the activity in the accounts might be money laundering,” according to the affidavit.
“TCF Bank had given notice to Renner that the accounts were going to be closed,” the Secret Service said. It is unclear if Renner ever advised INetGlobal members that the bank had closed the accounts, citing suspicions they were being used to commit crimes.
TCF prepared a cashier’s check for “for a little over $5 million,” presenting it to a Renner employee.
Later that day, the check was deposited into Bremer Bank, which also held Renner-connected accounts, according to the Secret Service.
Balances in Renner-connected accounts began “moving up sharply in August 2008,” the Secret Service said.
August 2008 was the month in which the Secret Service raided the headquarters of ASD — and the month in which Renner’s autosurf was coming onto the stage. Golden Panda Ad Builder, a surf that is part of the ASD litigation, positioned itself as a company that sought to cater to Chinese members.
Golden Panda’s operator — Clarence Busby — was implicated by the SEC in a prime-bank investment scheme in the 1990s, the same sort of scheme that engulfed Learn Waterhouse and later resulted in the determination that Renner’s CCI money-services business was impossibly upside down because he had used customers’ money to make personal purchases.
INetGlobal issued a statement yesterday that acknowledged the Secret Service probe, but did not mention Renner’s tax conviction in December or the trouble he encountered when he could not fund a payment to the Learn Waterhouse receivership estate in the Ponzi case.
“iNetGlobal offices will remain open to provide support to our 1,000’s of customers from around the world,” the company said. “iNetGlobal will continue to provide the level of quality service our customers have come to expect now and into the future.
“We would like to thank all of our Members and Customers for their support and well wishes in this trying time,” the company said.
The court-appointed receiver in the fraud case against the parent company of the Noobing autosurf has asked a federal judge for the authority to add Noobing to the receivership probe.
Larry Cook, the receiver, said that Noobing and 14 other companies under the Affiliate Strategies Inc. (ASI) umbrella have become the subjects of “numerous inquiries” from “tax authorities,” creditors and “former independent contractors.”
Cook did not identify specific parties that made inquiries, but noted that “each of the Subsidiaries used the same post office box as the Receivership Defendants.”
Noobing targeted people with hearing impairments in its promotions. It is known that some Noobing members have contacted the Federal Trade Commission, which is spearheading the ASI probe, along with the attorneys general of Kansas, Minnesota, North Carolina and Illinois.
At least one deaf member of Noobing says she has contacted a sheriff’s department in California about the company.
News that Cook is seeking judicial approval to add Noobing to his receivership probe came on the same day that the U.S. Secret Service said it was conducting an intense probe of INetGlobal, which operated a Minneapolis-based autosurf.
In an application for a search warrant in a Ponzi case against INetGlobal, the Secret Service referenced the AdSurfDaily Ponzi scheme case, saying a member of ASD had attempted to recruit an undercover Secret Service agent into the INetGlobal scheme.
ASD members and members of a closely connected surf known as AdViewGlobal also promoted Noobing, as did INetGlobal members, according to web records.
Steve Renner, the owner of INetGlobal, was convicted in December of four felony counts of income-tax evasion for his conduct with other companies earlier this decade.
Autosurfs are notorious for keeping poor records or no records at all, and autosurf participants are notorious for engineering schemes to milk tax-free income.
Cook said tax reporting is required, and is seeking an order that pertains to Noobing and 14 other ASI umbrella companies. Cook listed Noobing’s name at the top of the list.
“In order to complete the tax reporting requirements and otherwise address the creditors’ and other claims, the Receiver seeks a clear order that he is the Receiver for the Subsidiaries,” Cook said.
And, he added, “Counsel for the [FTC] has reviewed this Motion and concurs.”
ASI and a number of companies were sued last year in a scheme involving government grants. Noobing went offline in the immediate aftermath of the FTC probe.
The U.S. Secret Service observed Minnesota-based INetGlobal’s operations for weeks in January, dispatched undercover agents to join the autosurf, learned that a bank recently had closed accounts tied to the firm amid money-laundering suspicions — and already had received incriminating information from the firm’s former chief executive officer prior to executing multiple search warrants Tuesday, according to records.
Agents even traveled to a company function in New York, mixed in with the audience and observed INetGlobal owner Steve Renner, according to records. The function was known as “Freedom Conference 2010.â€
Most of the attendees were Chinese, the Secret Service said.
“[C]onference registration took a long time because nobody at the registration desk spoke Chinese, and many of the conference attendees could not make themselves understood in English,” the agency said. “There was an interpreter in the main hall, but Renner often spoke over the interpreter.”
At one point, Renner started a pandemonium by holding up $20 bills, which he began handing out to attendees in exchange for $10 bills, the agency said.
“This caused a crush of people to approach the front of the hall, and Renner eventually needed assistance moving people back,” the Secret Service said. “Renner asked, through an interpreter, how many people in attendance had their own business, and only two raised their hands.”
Steven Keough, a retired naval officer who was INetGlobal’s CEO for only weeks before being fired by Renner, contacted federal prosecutors Jan. 8 to report concerns about Renner and the company, according to court documents.
Meanwhile, the search-warrant application cites the government’s prosecution of assets tied to Florida-based AdSurfDaily and a Jan. 4 order of forfeiture by U.S. District Judge Rosemary Collyer to bolster the case against INetGlobal and related companies. The application also cites the successful prosecution of the 12DailyPro and Phoenix Surf Ponzi schemes by the SEC.
As was the case in the ASD prosecution, the Secret Service raised allegations of Ponzi fraud, wire fraud and money-laundering against INetGlobal, saying the company had grossly overstated its membership numbers, had co-mingled funds and operated the business in slipshod fashion.
Agency Assigns Veteran From ASD Case To INetGlobal Case
At least one of the Secret Service agents involved in the INetGlobal investigation also was involved in the ASD investigation, according to the search-warrant affidavit. Agents located an INetGlobal sales pitch online, and the agent involved in the ASD probe called the INetGlobal member.
Out of the gate, INetGlobal was described by the member as a wink-nod proposition, the Secret Service said — and it turned out that the INetGlobal member also had been an ASD member.
“The member said he had previously been a member of ASD . . . and said, ‘We know what happened there,’” the Secret Service said. “The member said he was reluctant to join iNetGlobal due to it being similar to ASD.
“The member said, ‘we all know what this program is.’ The member said his daughter and wife surfed the websites and the member did not care about the services provided. The member said he just wanted to put his money in and get it out. The member said you convert your earnings to V-cash and then receive payouts by check or through an ATM card you can sign up for. The member said members earn a daily return on their investment but that he was not sure what he exactly earned. The member said he has not been able to figure out the percentage of return due to the convoluted information provided on the iNetGlobal website.”
Regardless of the member’s own concerns about the program, the member nonetheless was eager to recruit the undercover Secret Service agent, according to the affidavit.
“The member pushed [the undercover agent] to join and wanted to conduct a three way call with his sponsor,” the Secret Service said. “The member said bringing in new members under you was the best way to earn maximum returns.”
CEO Met With Secret Service Prior To Raid
Keough’s holds a Bachelor of Science in Chinese from the U.S. Naval Academy at Annapolis, Md.; a Master of Arts in Congressional Studies from the Catholic University of America, Washington, D.C.; and a law degree from Boston College Law School.
After working for INetGlobal for only weeks, Keough said things going on inside the firm made no sense and he had come to believe Renner had hired him as a “good face†for the company, according to the search-warrant application.
Keough told agents he believed Renner fired him for asking too many questions, according to the filings.
“Keough described what he called his first ‘red flags,’ which were the reported size (50,000 members) and purported revenue ($100 million) of iNetGlobal; the complete disarray and disorganization of the businesses; and the seemingly small outside legitimate income,” the Secret Service said. “Keough further stated that the companies’ website never seemed to work properly, making him question what customers who purchased the advertising service alone, without the possibility of rebates, were getting for their money.
“Keough said on occasion he witnessed Renner manually manipulating the iNetGlobal system to pay out percentages that were different, and smaller, from the percentage listed on the iNetGlobal website,” the Secret Service continued. “Keough also wondered how, with so little outside income, the company could pay these outlandish returns. Keough said Renner would explain away his concerns by telling him how beneficial the advertising was and about all the different levels a member could achieve. Keough said, ‘I never really understood how it could work.’
“Renner told him iNetGlobal had 50,000 members, had been in business for 10 years, was debt free, and had made over $100 million in revenue. Keough said he later learned all these facts were ‘lies.’
“Keough further stated that Renner used the misleading information in power point presentations and webinars to recruit others,” the agency said.
Once becoming CEO, “Keough conducted his own internal audit and found, contrary to Renner’s statements, that iNetGlobal had only approximately 30,000 members, iNetGlobal had only been in business for 14 months, there were huge liabilities associated with the members’ ‘investments’ and the company’s estimated revenue was approximately $28 million, not the $100 million in revenue claimed by Renner.
“Keough said he was particularly alarmed because he knew Renner and/or representatives of iNetGlobal were using these false statements to promote and market iNetGlobal to would-be members (investors),” the Secret Service said. “Keough believed these false statements caused individuals to invest with iNetGlobal.’
“Keough said he had an iNetGlobal employee conduct an analysis to determine the member liability,” the Secret Service said. “The employee reported back to Keough that at least 87% of the company’s revenue was generated from sale of memberships to members residing in China.”
The search-warrant application also claimed that a company Renner owned provided payment-processing services for a Ponzi scheme called “Learn Waterhouse,” which was smashed by the SEC in 2004.
When a court-appointed receiver asked Renner to turn over funds to the receivership estate by converting electronic credits to cash, it was learned that Renner could not do it because he had “invested” more than $2.5 million in Learn Waterhouse V-Credits on “stamps, coins, Salvador Dali sculptures, autographed letters, guitars and amplifiers, fractional interests in motion picture companies, and fractional interests in oil wells, among other things.
“Additional sums of customers’ money had been spent by Renner personally, including on daily living expenses,” the Secret Service said.
UPDATED 2:59 P.M. ET (U.S.A.) Both sites discussed in story below are back up. . . .
Two websites associated with AdSurfDaily mainstay Bob Guenther are offline. The sites — asdmba.com and jaffapartners.com — both are returning this message:
“OOPS. This site is currently unavailable.” The message includes a prompt for ASDMBA and JaffaPartners to contact the hosting company.
Why the sites are offline is unclear. Both sites were operational yesterday. The registrations for both domains is current, with the ASDMBA site not set to expire until October 2010 and the JaffaPartners site good until December 2011.
Guenther was among more than 30 defendants sued earlier this month by shareholders of Cheyenne Mountain Entertainment (CME), a company that makes computer games.
The defendants are accused in Maricopa County Court in Arizona of RICO violations for “participating in a scheme or artifice to defraudâ€; conversion of assets and refusing to return the assets with an “evil mindâ€; unjust enrichment for “failing to pay†or provide consideration for assets; and fraudulent transfer/conveyance.”
Guenther is on probation in Maricopa County, after pleading guilty to a misdemeanor count of harassment last year in a case that involved his conduct toward CME. He initially was charged with two felonies in the case. Records in the Arizona case point out that Guenther has a previous felony conviction.
He pleaded guilty in the 1990s to a felony count of bank fraud, according to federal records.
ASDMBA solicited contributions from members, saying the organization wanted to protect members’ interests in the AdSurfDaily Ponzi scheme litigation. Some ASDMBA members said they would not have given money to ASDMBA had they known of Guenther’s felony record. Others complained that Guenther did not provide an adequate accounting of how the money ASDMBA collected was spent.
Members said ASDMBA collected tens of thousands of dollars.
UPDATED 10:40 A.M. ET (U.S.A.) Federal and state agents have raided the Minneapolis offices of Inter-Mark Corp., seeking evidence of a Ponzi scheme, the Star Tribune of Minneapolis/St. Paul is reporting.
Inter-Mark Corp. is operated by Steve Renner, who also operates a purported “advertising” service known as INetGlobal. In a scene that resembled the August 2008 raid at the headquarters of Florida-based AdSurfDaily, agents in Minnesota were seen carting boxes of documents and computers.
ASD was implicated in a $100 million Ponzi scheme.
Renner has been under investigation for at least 17 months and likely longer. He was indicted on charges of tax evasion in September 2008, about a month after the ASD raid. He was convicted in December 2009 of evading more than $332,000 in taxes between 2002 and 2005.
Renner, 54, “diverted substantial funds from his business, Cash Cards International (CCI), between 2002 and 2005 to pay his personal living expenses as well as to make personal investments in coins, oil wells, art, stamps, and vintage musical instruments,” prosecutors said in December.
He also used CCI funds to promote his musical band, “Stevie Renner and the Renegades,†prosecutors said.
“From 2001 to 2006, Renner owned CCI, an Internet-based stored-value card and money
transmission business, with locations in Minnesota, South Dakota, and Hawaii,” prosecutors said. “Although he was legally obligated to file federal income tax returns and pay all federal taxes owed, he failed to file his income tax returns with the Internal Revenue Service for tax years 2002 through 2004 until March 5, 2006, the date on which he also filed his 2005 federal income tax return.”
“Tax evasion is not a victimless crime,†said Julio La Rosa of the IRS, upon Renner’s conviction.
“Honest, hardworking taxpayers pay the price when others choose to evade their tax obligations,” La Rosa said. “As this verdict shows, those that cheat will get caught.â€
Renner faces up to 20 years in federal prison in the tax case.
Renner also is associated with a domain known as AdPacs.com, which is throwing a server error. It is believed that AdPacs promoters also promoted the AdViewGlobal (AVG) autosurf, which had close ties to ASD.
Affiliates of Steve Renner's AdPacs.com pushed AdViewGlobal just prior to its February 2009 launch. This screen shot of search result that appeared online more than a year ago lists the name of Juan Fernandez, the CEO of AdSurfDaily. ASD is implicated in a $100 million Ponzi scheme. AVG launched AFTER the federal seizure of tens of millions of dollars in the ASD case. Like ASD President Andy Bowdoin, Fernandez took the 5th Amendment at an evidentiary hearing in September 2008. Now, Renner's company is the subject of a major federal probe. ASD sold "ad-packs." AVG referred to its version of "ad-packs" as "viewer impressions" after the phrase "ad-packs' became radioactive.
As was the case with the ASD raid in Florida, local media caught the events at Renner’s office yesterday on video. Minnesota has been plagued by Ponzi schemes. Some ASD members from Minnesota have been among the loudest advocates for ASD President Andy Bowdoin.
The Minnesota Financial Crimes Task Force assisted in the raid.
Earlier this month, the Secret Service announced the formation of an Electronic Crimes Task Force (ECTF) based in Memphis. The agency also has ECTFs in St. Louis, Kansas City, New Orleans and Europe.
“One of the top priorities for the Secret Service continues to be combating the computer
related crimes perpetrated by domestic and international criminals that target the U.S.
financial infrastructure,†said Secret Service Director Mark Sullivan.
“The Secret Service, in conjunction with its many law enforcement partners across the United States and around the world, continues to successfully combat these crimes by working closely with experts from all affected sectors to constantly refresh and adapt our investigative methodologies.â€
Robert Guenther and a woman referenced as “Jane Doe” are listed as defendants in a shareholder lawsuit filed Feb. 2 in Arizona by investors in Cheyenne Mountain Games (CMG) and Cheyenne Mountain Entertainment (CME).
Guenther is the de facto head of the ASD Members Business Association (ASDMBA), an entity that came to life in the aftermath of the federal seizure of tens of millions of dollars from AdSurfDaily and a related company, Golden Panda Ad Builder. ASDMBA collected contributions from ASD members, saying it sought to protect their interests in the ASD litigation.
Some ASDMBA members complained that its operations were less than transparent and that Guenther did not provide adequate accounting of how more than $100,000 collected through individual contributions was spent.
Also named a defendant in the Arizona lawsuit was Jaffa Partners, a Texas entity with which Guenther is associated. The plaintiffs said they believed “Jane Doe” was Guenther’s wife. They are among more than 30 defendants listed in the case, which centers on alleged misconduct by Gary Whiting, a CME executive.
Guenther, “Jane Doe,” Jaffa and the other defendants are accused of RICO violations for “participating in a scheme or artifice to defraud”; conversion of assets and refusing to return the assets with an “evil mind”; unjust enrichment for “failing to pay” or provide consideration for assets; and fraudulent transfer/conveyance “with the actual intent to hinder, delay, or defraud.”
CME and CMG are involved in the development of an online game known as “Stargate Resistance.” CME has declared bankruptcy amid a sea of allegations of mismanagement and financial manipulations by Whiting and financial manipulations by others that harmed shareholders, according to court filings.
“Whiting has used CME and CMG as though they were his own piggy bank,” the shareholders alleged.
Among the allegations are that CME stopped paying employees and that Whiting instructed company officers to stop paying payroll taxes, racking up more than $1.5 million in unpaid taxes. More than $3.8 million on other bills also were not paid, according to the shareholders.
Whiting’s actions threatened the release of Stargate Resistance and the viability of the company itself, according to the shareholders.
Side deals kept from shareholders diluted the value of shares, the plaintiffs claimed. They also claimed Whiting may have caused “listening devices” to be planted in CME’s offices in Arizona and telephone calls of key employees to be recorded without their knowledge or consent.
In the ASD case, federal prosecutors alleged that the Florida-based company was a Ponzi scheme. After the seizure of ASD’s assets in August 2008, Guenther solicited contributions for ASDMBA.
Some ASDMBA members demanded their money back, criticizing Guenther for rude and obnoxious behavior and claiming they had received nothing in return for their contributions. They also complained that Guenther did not disclose that he had a felony conviction for bank fraud.
Guenther dismissed his critics as “left wing liberal no balled people,” calling one an “ignorant mouthy broad.” He also claimed ASDMBA was instrumental in returning money to ASD victims, saying the group retrieved funds for retired and active-duty police officers in Texas and California, and for a “high profile Dallas Cowboy†executive.
ASDMBA’s website urged association members to make an ASD’s promoter’s life “miserable” until he returned funds due another member.
Prosecutors filed a two forfeiture complaints against ASD and Golden Panda’s assets, saying they were in the process of establishing a compensation pool for ASD victims.
Guenther’s name is not listed in court filings as a person empowered to return assets to ASD victims.
Read the Arizona lawsuit filed by CME shareholders in which Guenther was named a defendant. The principal plaintiffs on behalf of shareholders are Keith Deering, Mark Renberg and Chris Lombardo, according to the verified complaint.
AdSurfDaily President Andy Bowdoin's threats to sue critics backfired, exposing the company to even more scrutiny.
EDITOR’S NOTE: Repping for Data Network Affiliates or Narc That Car, two companies in the business of recording license-plate data? Here are some things you might want to consider . . .
UPDATED 2:21 P.M. ET (March 5, U.S.A.) Data Network Affiliates (DNA) and Narc That Car (NTC) both say they are soliciting members to record the license-plate numbers of cars for entry in a database. Both are multilevel-marketing (MLM) companies. Both have become the subject of scrutiny by web critics who have raised issues of propriety, safety, legality and privacy.
Both companies should thank their lucky stars that the criticism, so far, largely has been contained to the web.
Last week, Dean Blechman, the chief executive officer of DNA, came out firing against the critics. Painting with a brush that was almost unimaginably wide, Blechman suggested the company is monitoring “everyone that’s a distraction out there and anyone that’s printing stuff on the Internet or anywhere†and perhaps preparing to sue. (Emphasis added.)
Yes, a company whose members say is in the business of establishing a database so customers can monitor cars as they move from Walmart to a “doctor’s office” to other locations (including churches) now says it is monitoring “everyone” and “anyone” who poses a “distraction.”
“I’ll tell you one thing,†Blechman warned in an audio recording posted on DNA’s website, which lists an address in the Cayman Islands. “They better be very, very careful of what they write . . . [b]ecause I have every intention of policing and pursuing every legal ramification . . . against anybody that’s reporting any information inaccurate to try to tear down what I’m trying to build here.†(Emphasis added.)
So, a company with a domain that uses a Cayman Islands address and does not say where its corporate offices are located — and a company that does not have a working Contact Form on its website and, according to members, is in the business of recording license-plate numbers in the United States in the parking lots of retailers such as Walmart and Target, supermarkets, churches and doctors’ offices — is sending a clear message to critics.
Blechman’s remarks also might have the effect of chilling DNA affiliates. Some are apt to interpret his comments as a warning that they’d best raise no questions about the company if they’re writing about it in Blog posts or in emails sent to prospects. Customers of DNA and Narc That Car are ill-served by sponsors who might be inclined to write reviews that are anything less than flattering because such reviews might upset management of the companies.
DNA’s own pitchmen have identified Walmart, Target, supermarket parking lots, parking lots at churches and doctors’ offices and “anywhere” cars are parked in a group as the sources of license-plate numbers.
One of the pitchmen who introduced Blechman in the recording in which Blechman warned critics was the same pitchman who told listeners in a previous call that the company envisioned an America in which DNA members would record the plate number of a hypothetical “red corvette” parked at Walmart, and then record the plate number again an hour later at a “doctor’s office” — and then record it again three hours later when it was parked elsewhere.
Blechman said nothing about the pitchman’s comments in the recording in which he threatened critics. Nor did he address a DNA video promotion by the company’s top affiliate that suggested DNA members should behave “inconspicuously” while snapping photographs of “cars” and plate numbers at Walmart on their iPhones, Blackberrys and notepad computers.
Whether affiliates need the permission of retailers, patrons, clergy, worshipers, physicians, patients or any party is left to the imagination. How the company can prevent abuses also is left to the imagination.
Instead of addressing the criticism, Dean Blechman turned his focus on the critics, thus creating the appearance that the company has no problem with its members taking photos of cars and license plates at Walmart, at places of worship and at doctors’ offices.
Until Blechman speaks on these issues publicly in a news conference or addresses them in an official news release available to the media and DNA members, it is not unreasonable for Americans to believe that, if they are seeking the private counsel of clergy, their license-plate number may be recorded while they’re inside their place of worship pouring out their souls — and the number will be entered in a database used to track the movement of vehicles.
And it’s not unreasonable for Americans to believe their plate number will be recorded while they’re inside the office of their physician, surgeon, psychiatrist, psychologist, attorney or other professional.
What’s more, it’s not unreasonable for Americans to believe their plate number will be recorded wherever they do their shopping or reading, including retail outlets large and small, libraries and shops that sell adult videos and magazines.
Blechman needs to speak to these issues before the MLM program launches March 1. And he needs to make it plain whether he approves of the practice of writing down plate numbers (or recording them on video) where Americans shop, worship, receive medical and legal advice and spend their casual time.
How does DNA plan to guard against invasions of privacy? How can it prevent database customers from abusing data it provides?
DNA’s own pitchman offered up the possibility that the company wanted to create records of the movement of automobiles and offer that information for sale to database customers. If this is so — and if you don’t want anyone to know you’re seeking the counsel of clergy, a medical professional or a legal professional — you should know that DNA appears to be building a database that will record various sightings of your license plate.
If you owe money to a finance company and are having money problems, the repo man very well might learn you are seeking the counsel of your clergyman or even your therapist. The repo man will get the addresses. He will know if your car was parked at the office of a psychologist or a heart surgeon, a rabbi or a priest, the public library or the adult bookstore, the City Hall building or the casino, the curb in front of your house or the curb in front of friend’s house.
If your name is Daisy, if you’ve recently had heart-bypass surgery and fell into clinical depression and are having trouble paying your bills because you aren’t healthy enough to return to work or you’ve been laid off, the repo man might be able to tell his client:
“Hey, Daisy’s car was parked in a surgeon’s parking lot. Then it was spotted in her shrink’s parking lot. Then it moved to a credit counselor’s parking lot. Then she visited her daughter. Then she visited the Catholic parish down the street from her house.
“You won’t believe where the next sighting was. The Salvation Army soup kitchen! Daisy is broke — and she’s a nutcase to boot!”
And what if the availability of the info is not limited to the repo man or finance companies? The United States could become a country of paid snoopers who recruit other paid snoopers.
Blechman’s response was to threaten to sue critics. One of the pitchmen who introduced Blechman said the company had recruited 37,000 members in just a few weeks. The database product is not yet available, but the manpower to populate it is — and members by the thousands are being urged to write down plate numbers.
Some members already have a supply on hand: NTC launched before DNA, which Blechman described as his “unbelievable vision.” From appearances, it looks as though NTC had the vision first — and DNA now is in position to benefit from plate numbers submitted by NTC members.
Leading with an elbow normally is frowned upon in business and often leads to even more intense scrutiny. Ask AdSurfDaily President Andy Bowdoin, who announced that the company had amassed a giant money pot to punish critics.
Here, according to federal court filings, is what Bowdoin told ASD members at a company rally in Miami on July 12, 2008:
“These people that are making these slanderous remarks, they are going to continue these slanderous remarks in a court of law defending about a 30 to 40 million dollar slander lawsuit. Now, we’re ready to do battle with anybody. We have a legal fund set up. Right now we have about $750,000 in that legal fund. So we’re ready to get everything started and get the ball rolling.” (Emphasis added.)
Yes, Andy Bowdoin publicly threatened to sue critics. He, too, painted with a wide brush, saying his warning applied to “anybody.”
Less than a month later, the U.S. Secret Service raided ASD. Prosecutors said the company was operating a $100 million Ponzi scheme and engaging in wire fraud and money-laundering.
Bowdoin’s lack of PR skills later contributed to other nightmares for members. Bowdoin, for example, described the Secret Service seizure of his assets as an attack by “Satan.” And he compared the government’s actions to the 9/11 terrorist attacks that killed nearly 3,000 people.
He later said his fight against the government was inspired by a former Miss America.
The concerns about the propriety, privacy, safety and legality of both DNA and NTC are real. The BBB of Dallas and the district attorney of Henderson County, Texas, have opened inquiries into NTC.
Because DNA is competing in the same arena as NTC, it is not unreasonable to ask the same sort of questions.
Dean Blechman is a longtime businessman. He could learn a few things from the PR mistakes of Andy Bowdoin, one of which was to attack the critics before addressing the issues and making the company’s operations crystal clear and transparent to thousands of affiliates and members of the public.
Video cameras? Cell phone cameras? Notepad computers? Pens and pads?
Professional complexes? Walmart? Target? Adult bookstores? Libraries? Church parking lots? Doctors’ offices?
Trading off a popular phrase, Kerry John O’Neill’s “pay-it-forward” scheme has landed him in trouble with Canadian securities regulators, wiped him out financially and implicated an associate who helped him sell the scheme.
O’Neill even named his scheme the “Pay It Forward Program” (PIF), according to the British Columbia Securities Commission (BCSC), which accused him of collecting $9.6 million from 943 investors by telling them they could expect returns ranging from 100 percent to 300 percent in 90 days.
“Pay it forward” is a marketing buzzword phrase. The phrase often is associated with autosurf, cash-gifting and MLM schemes that recruit affiliates. The “pay-it-forward” sales approach has emerged as a potential marker of a financial fraud.
Broke and living in public housing, O’Neill now has become the subject of an investigation by the Alberta Securities Commission (ASC). Like BCSC, ASC is seeking sanctions against O’Neill, who was banned in September 2009 from the securities business in British Columbia.
BCSC accused O’Neill of selling unregistered securities as investment contracts. Although Pay It Forward was not an autosurf, similar prosecutions have been brought against autosurf operators in the United States.
“Between November 2005 and December 2006, O’Neill solicited investors to join the PIF Program and enter into investment contracts (the PIF Securities) with him,” BCSC said. “No prospectus was ever filed for the PIF Securities and none of the exemptions under the Securities Act . . . applied to their distribution. O’Neill was not registered under the Act when he distributed the PIF Securities.”
Banned along with O’Neill by BCSC was Renee Marie Helmig, also known as Nisha Helmig.
Helmig, of North Vancouver, admitted she “used false information provided by O’Neill to make misrepresentations to investors and potential investors to convince them to invest in Pay it Forward,” according to BCSC.
O’Neill’s particular brand of “pay-it-forward” involved a scheme by which investors were told that “their funds would be used to buy and sell distressed merchandise,” BCSC said.
Here is how money invested in the scheme was distributed, according to BCSC:
$6.4 million to pay amounts owed to other investors.
$1.1 million to purchase merchandise.
$213,000 for “other investment opportunities.”
$56,000 for O’Neill’s personal expenses.
The remainder was used for “expenses related to the distressed merchandise business,” BCSC said.
“[M]ost investors did not earn any return on their investments, but rather lost some or all of their investment capital,” BCSC said. “[T]he payments O’Neill made to investors did not come from profits he made from buying and selling distressed merchandise. Instead, O’Neill paid investors with other investors’ funds.”
“O’Neill has been unemployed since the PIF Program ended” in April 2007, BCSC said. “He lives in subsidized housing and his only income is a monthly disability benefit.”
A Florida man implicated in a pump-and-dump scheme tied to a Ponzi- and affinity-fraud scheme has been convicted and faces decades in federal prison.
Michael J. Muzio, 46, of Tampa, was convicted on six counts of securities fraud, two counts of substantive wire fraud, two counts of lying to the SEC and the FBI and one count of conspiring to commit wire fraud.
Muzio’s pump-and-dump scheme is linked to the alleged Home Pals Investment Club Ponzi and affinity-fraud scheme involving Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri.
Bass, Alabre and Taglieri were accused civilly and criminally of targeting Haitian-Americans in a $14.3 million scheme.
Alabre, 33, of Miramar, Fla., and Taglieri, 39, of Jupiter, Fla., already have pleaded guilty to criminal charges, which were brought in October 2009. Bass and Alabre were accused by the SEC of fooling investors by saying Taglieri was Home Pals’ attorney, but Taglieri is not an attorney, according to records.
Muzio defrauded Haitian-American and other investors in South Florida and elsewhere “by manipulating” the stock price of International Business Ventures Group (IBVG), a Florida shell company “with no assets and virtually no business activities,” prosecutors said.
IBVG purportedly was operated from Palm Beach Gardens. Last month, U.S. Attorney General Eric Holder described the Palm Beach area as the “ground zero” of financial fraud. Holder ventured to Palm Beach to make a speech and introduce the Obama administration’s Financial Fraud Enforcement Task Force.
The manipulation scheme was carried out through “coordinated stock purchases and sales designed to artificially impact share prices,” the FBI said.
“To induce investors to purchase the stock, [Muzio] created a false impression that an active market for the stock existed by engaging in illegal ‘wash trades’ in which he simultaneously entered buy orders through one brokerage account under his control and offsetting sell orders at the same price through another brokerage account under his control.
“These trades had no real economic effect, but the defendant’s brokers unwittingly reported the trading activity and potential investors who saw the online reports were misled into believing that the stock was actively traded at the quoted prices,” the FBI said.
As often is the case in pump-and-dump schemes, Muzio “issued false and misleading press releases” claiming that the company had profitable business dealings.
Muzio claimed IBVG “had deals to provide and offer prepaid debit cards in Haiti,” as well as prepaid calling cards and “exclusive rights to market prepaid electric meters in Haiti,” the FBI said.
“Investors were offered the chance to purchase free-trading shares of stock, but then received certificates for restricted shares which could not be traded and ultimately proved to be worthless,” the FBI said.
Home Pals advised website viewers that the company was “honest†and adhered to “uncompromising ethics,†the SEC said.
The Texas State Securities Board and the district attorney's office of Collin County, Texas, prosecuted Edward Digges Jr. A jury imposed a 99-year-prison sentence.
A Texas jury has thrown the book at Edward S. Digges Jr., sentencing the Collin County man to 99 years in prison for fleecing 130 investors in a securities-fraud and Ponzi scheme.
Digges, 63, formerly was an attorney in Annapolis, Md. He was disbarred in an overbilling scheme, convicted of mail fraud in 1990 and spent two years in federal prison. After his release from prison, he continued to clash with law-enforcement agencies, including the SEC, regulators in Maryland, Ohio and Pennsylvania, and the Texas State Securities Board (TSSB).
Most of Digges’ victims were “elderly,” prosecutors said.
The 99-year sentenced imposed in Texas evolved from Digges’ operation of an entity known as the Millennium Terminal Investment Program, which sold securities that purportedly generated profits from point-of-sale terminals used by merchants to process credit and debit transactions.
In truth, investigators said, Millennium operated in the red out of the gate, was in deep “financial turmoil” not disclosed to investors, was making payments to old investors with money from new investors and lied about having a “reserve fund” to shore up the program.
Digges collected at least $10 million in the scheme by promising investors annual returns of 12 percent, prosecutors said.
“Edward Digges has a long history of defrauding some of our most vulnerable citizens, and this sentence ensures he will never again do so,†said Texas Securities Commissioner Denise Voigt Crawford.
She noted that victims will not be made whole.
“The conviction will not return money to investors,” she said. “This case highlights the importance of checking the background of any financial professional you choose to do business with, and the importance of obtaining full disclosure before investing.â€
Digges deliberately targeted senior citizens in newspaper ads, prosecutors said. At the same time, he did not disclose his criminal conviction and did not tell clients about a $3.6 million civil judgment against him in the overbilling case.
TSSB and the district attorney’s office of Collin County prosecuted Digges on the criminal charges. Collin County is a suburban county in the Dallas/Fort Worth metropolitan area.
SEC civil charges against Digges were brought in Florida.
Narc That Car has told the Dallas Better Business Bureau that only “1% of total commissions paid out to independent consultants are for the sale of license plate information to third parties,” the BBB said today.
