The FTC and Florida Attorney General Bill McCollum have charged a Florida company that “touted a phony cure for alcoholism” with false advertising claims, false efficacy claims, false privacy claims, false claims about professional qualifications, unauthorized billing and deceptive trade practices.
Among the allegations in a civil lawsuit against Alcoholism Cure Corp. were that it offered tiered programs depending on the severity of a member’s involvement with alcohol — and if a member wanted to pull out of the program, the company threatened to expose the member’s alcohol dependence publicly.
Alcoholism Cure Corp. also did business as Alcoholism Cure Foundation and used at least two .org websites to sell its program, according to court filings.
Among the other allegations in the case were that the company disclosed health information about its customers to bill collectors, credit-card companies and the Better Business Bureau in a bid by the firm to win cases when customers disputed charges.
The company, which is operated by Robert Douglas Krotzer, also placed restrictions on how clients could cancel.
“Defendants require consumers to submit ‘Proof of Continued Drinking’ to prove that they are not cured,” the FTC and McCollum said in court filings. “Defendants state the submission should include, among other items, notarized notes from the consumer’s doctor and five friends stating that the consumer continues to drink, liquor receipts from the previous two months, and several kinds of laboratory testing.
“Unless consumers meet all the requirements set forth in this paragraph, Defendants deem them ‘cured’ and claim the consumers owe the full cost of the Program, which differs by consumer but generally ranges from $9,000 to more than $20,000,” the complaint alleged.
Litigation threats against customers occurred routinely, according to the complaint.
“Defendants warn consumers that failure to pay the demanded amount could result in litigation and the attendant ‘unwanted publicity,’” the complaint alleged. “In fact, Defendants have filed at least eleven cases in Jacksonville, Florida small claims court against consumers who registered for the ‘Permanent Cure’ Program seeking several thousand dollars each. In the cases, Defendants reveal the consumers’ personal and health information, including the fact they are alcoholics, by not filing the court pleadings in a nonpublic manner.”
Customers were billed when canceling or attempting to cancel the program, according to the complaint.
“Defendants bill consumers’ credit card or PayPal account consecutive times without authorization, often in amounts far exceeding the monthly subscription fee, until the account will no longer accept charges,” the complaint alleged. “When consumers reverse or dispute the unauthorized charges, in numerous instances Defendants disclose consumers’ personal and health information to consumers’ credit card company or to PayPal in an effort to discredit consumers and retain the money obtained as a result of the unauthorized charges.”
The company also disclosed members’ health information to the Better Business Bureau if they lodged a complaint, prosecutors said.
Even bill collectors hired by the company were given access to members’ health information, prosecutors said.
“In some instances, when Defendants have referred a consumer to a debt collection agency for collection, Defendants have disclosed to debt collection agents the personal and health information of all the consumers who have registered for the ‘Permanent Cure’ Program,” the complaint alleged.
“Defendants disclose the information by giving the debt collection agents full access to the unencrypted email account where Defendants store consumers’ personal and health information and instructing the debt collection agents to search through all the consumers’ personal and health information until they find the information related to the particular consumers at issue,” the complaint alleged.
Krotzer, the FTC said, was referred to as “Dr. Doug” — even though he is not a physician.
The program pitched monthly subscriptions for what it dubbed the “Heavy Drinker” program ($59.96 for the first month and $179.96 per month thereafter) or the “Very Heavy Drinker program” ($99.96 for the first month and $269.96 per month thereafter), the FTC said.
Sales totaled at least $693,000 between 2005 and 2009, the FTC said.
Four websites were used to pitch the program: AlcoholismCure.org,
DetoxificationThatWorks.com, Healthy-HighAlcoholSubstitute.com, and
AlcoholFree.org.
The program also was advertised “on online search engines, such as Google and Yahoo; through dissemination of newsletters via email distribution lists; and via individual emails,” the complaint alleged.
“Permanent Cure” relied on “concoctions of dietary supplements such as vitamin C, St. John’s wort, and niacin,” the FTC said.
Search-engine and advertising giant Google has changed it name to “Topeka,” the company said today.
The company did so in tribute to the city of Topeka, Kan. Topeka’s mayor, Bill Bunten, wants to call the city “Google” for a spell.
Google’s announcement about its name change came one year to the day after it announced the debut of its Gmail Autopilot by Cadie. Cadie purportedly was designed to automatically send the “perfect” response to scammers who spam gmail accounts.
For two years now, Google has timed critical business announcements to coincide with Maddy’s birthday. Maddy’s second birthday is today.
She was born April 1, 2008. April 1, of course, always has been one of the most important dates on the calendar. Maddy’s birth only made the date more important.
Maddy became an international sensation and Google star on Christmas Eve 2008, when she rocketed to the top of search results for the phrase “Maddy Santa world debut” — without the quotes. People the world over clever enough to search under that precise string learned part of the story of Maddy’s first Christmas.
It was kind of Google — and now “Topeka” — to tie its key business decisions to Maddy’s birthday. Maddy also is known the world over as “The Wonder Puppy.” She owns an entire search category under the string, “Maddy The Wonder Puppy” — with the quotes.
Happy Birthday to Maddy — and we wish Google our best with its shift to Topeka!
Supt. Eric Mattson of RCMP's 'K' Division asks victims of an alleged $60 million Ponzi scheme in Canada and the United States to come forward. The number to call is: 403-699-2581
The Royal Canadian Mounted Police (RCMP) have charged three men and a woman in an alleged $60 million Ponzi scheme.
Canada’s famous police agency, known informally as the Mounties, has asked victims to come forward.
Charged in the case were Murray Stark, 73, Robert Fyn, 62, Garth Bailey, 57, and Katherine Rodrique Bailey, 53. Bailey formerly was an attorney who was suspended, according to records. He also has been referenced in U.S. securities litigation. The scheme operated from Alberta, and there may be thousands of victims in the United States and Canada.
A company known as HMS Financial Inc. is at the heart of the scheme, authorities said. Victims and persons with information are asked to call the RCMP Commercial Crime Section at 403-699-2581.
View a YouTube video that includes remarks from Supt. Eric Mattson of RCMP’s “K” Division. The video was produced by the Calgary Herald. Read a story by the Herald.
A federal judge has ordered a Florida man to spend nearly 16 years in prison and pay $16.7 million in restitution for fleecing investors in a Ponzi scheme.
Sean Healy, 39, of Weston, scammed dozens of investors in Pennsylvania. He went on to live in the lap of luxury in Florida, acquiring a $2.4 million waterfront home, a Bentley, several Ferraris, Lamborghinis and Porsches worth more than $2.3 million and jewelry worth $1.5 million.
Meanwhile, Trevor Cook, charged criminally with mail fraud and tax evasion in a separate, $190 million Ponzi case in Minnesota, has struck a deal with prosecutors, the AP is reporting. Details about the deal are unclear, but the AP, citing comments by Bill Mauzy, Cook’s attorney, reported that Cook will plead guilty in the coming weeks.
Healy became infamous in Florida, and was described as a smaller version of former Wall Street titan Bernard Madoff and former Fort Lauderdale attorney Scott Rothstein. He was charged in a 55-count indictment unsealed in Pennsylvania last year with multiple counts of wire fraud, mail fraud, money laundering and obstruction of justice.
Initially Healy tried to sandbag prosecutors by providing “phony bank statements and phony trading records” to thwart a grand-jury probe, but the government didn’t buy it.
“When the authentic records were obtained, they revealed that Healy had simply spent the money on his extravagant lifestyle and used some of it to pay back earlier investors who he defrauded between 2003 and 2008,†prosecutors said.
Healy was sued separately by the SEC and the CFTC, which said he used investor funds to purchase gold bullion and “to lease a luxury suite at Miami’s BankAtlantic Arena.â€
For its part, the SEC said the sky was the limit for Healy.
“Rather than investing the money as he promised, Sean Healy used investor funds to finance an extravagant lifestyle for himself and his family,†the SEC said.
It is not nice to be George Theodule today. For starters, the expensive cars and other luxuries are gone — and now a federal judge has issued orders of disgorgement and penalties totaling more than $5.5 million in a Ponzi scheme case brought by the SEC in 2008.
Beyond that, though, people associated with Theodule — family members, winners in the scheme, employees and attorneys who worked for him while the scheme was ramping up — find themselves battling a blizzard of lawsuits filed by the court-appointed receiver in the case and either going to trial or trying to work out settlements.
Read a Dec. 31 filing by Jonathan E. Perlman, the receiver in the case against Theodule, Creative Capital Consortium LLC, A Creative Capital Concept$ LLC and other entities. The filing shows the type of legal exposure individuals who emerge as Ponzi scheme winners may confront, as well as the litigation individuals who allegedly aid and abet a Ponzi may confront.
Several Theodule employees have taken the 5th Amendment, according to Perlman.
Among his assertions was that more than $24 million in fraudulent transfers occurred during the scheme, which now is estimated to involve more than $60 million.
Earlier estimates in the case put the figure at about $23 million.
Theodule, through a network of “investment clubs,” largely targeted Haitian-Americans, the SEC said. Investors, who were told that some of the company’s profits were set aside to help Haiti and Haitian communities in the United States and Sierra Leone, were promised a 100 percent return on their money within 90 days.
In reality, the SEC said, Theodule lost $18 million trading stocks and options, commingled funds and pitched a purported, self-regulatory agency called Smart Investment Management Services LLC (SIMS).
Investors were told SIMS provided “independent verification of their deposits” and provided an “added measure of safety and security,” the SEC said.
It turned out that SIMS was a private company run by a former Creative Capital employee, the SEC said.
Investors said Theodule portrayed himself as a thoughtful, religious man.
UPDATED 12:28 P.M. EDT (U.S.A.) Sites appear to be back up. They were offline for at least seven hours. Earlier story is below . . .
Widespread maintenance? Moving to a new server? Several domains linked to an entity associated with INetGlobal have gone offline in recent hours and will not resolve. Why the sites are offline was not immediately clear.
The extent of the outage also was unclear. Sites that use a nameserver known as V-Webs.com appear to have been affected. V-Web’s own website will not resolve to a server, and sites at the same IP address in the Minneapolis area also will not resolve.
Attempts to “ping” the domains to determine if they were live resulted in this error message: “Destination host unreachable.”
It is not unusual for servers to have maintenance problems and for websites to go offline. What’s unusual about the current outage is that every URL at V-Webs itself appears to be offline, along with domains that use the V-webs.com nameserver. Customers affected by the outage may not be able to reach V-Webs through its website.
INetGlobal’s domain, meanwhile, is online. The site did not have a message that explained the outage at V-Webs, which it highlights as a service.
Among the domains affected by the outage is CheapClix.net, a Blog that showcases its support for INetGlobal. Other sites affected by the outage include mlm-im.com and homesquadcities.net, both of which are operated by Ken Haugen, who also operates the CheapClix site.
INetGlobal was implicated last month by the U.S. Secret Service in a Ponzi scheme. The company denied the allegations. A company known as V-Webs LLC was registered in 2004, but appears to be an inactive corporation, according to an affidavit filed by the Secret Service last month.
Haugen’s domains are not the only domains affected by the outage. Others affected include BillionaireByThirty.com, RevenueShareForum.com, WithGodItsPossible.com and JanetsMarketingBiz.com, among others.
A site known as Zippe.net in the same IP cluster is producing the same error message when pinged, while also triggering a security warning in search results and the Firefox browser window: “This site may harm your computer.”
Pings to the 207.67.5.19 IP address associated with V-Webs are timing out, meaning a Web browser cannot load the pages.
BULLETIN: Trevor Cook, the reputed head of a $190 million Ponzi scheme in Minnesota, has been charged criminally with mail fraud and income-tax evasion.
Cook, 37, previously had been charged civilly by the SEC and the CFTC. The criminal charges filed today came after a probe by the FBI and the IRS Criminal Investigations Unit, working with the regulatory agencies.
Prosecutors alleged Cook filed a false tax return in 2009, failing to report report taxable income of at least $5.2 million “upon which there was tax due in the amount of at least” $1.8 million, prosecutors said.
Cook was charged via a criminal information, rather than an indictment. Such charging documents sometimes mean a defendant is negotiating with prosecutors.
Prosecutors said Cook was “aided and abetted by others” in a scheme that fleeced at least 1,000 people “out of at least $190 million by purportedly selling investments in a foreign currency trading program,” prosecutors said.
“In reality,” prosecutors continued, “he was diverting the money provided him for other purposes, including making payments to previous investors; providing funds to Crown Forex, SA, in an effort to deceive Swiss banking regulators; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses, including substantial gambling debts; and acquiring the Van Dusen Mansion in Minneapolis.”
The mansion has been sold by R.J. Zayed, the court-appointed receiver in the civil case. Zayed also has sold large-screen TVs and automobiles linked to the scheme, including a Rolls-Royce.
Prosecutors said the Cook case was being tackled by the Financial Fraud Enforcement Task Force, which President Obama formed late last year.
U.S. Attorney B. Todd Jones of the District of Minnesota made the announcement of the criminal charges against Cook.
Cook has been in jail since January as a result of a contempt of court order in the civil case, which was brought by the SEC and the CFTC.
Former Christian radio host Pat Kiley also was charged in the civil case.
The narrative of the Cook story occasionally has played out like a James Bond movie, with references to a submarine, an island retreat, Faberge eggs and foreign currency purportedly acquired by Cook with fraud proceeds.
A real-estate agent ventured to Cook’s island in Canada during the winter on a snowmobile to get the lay of the land, according to court filings.
An Ohio man who graduated from West Point and earned a law degree in Washington state has been charged in a bizarre Ponzi and investment-fraud scheme that allegedly combined the science of physics with a unique “momentum filter” that purportedly enabled him to predict how the futures market would behave with “an uncanny degree of certainty.â€
Enrique F. Villalba, 47, of Cuyahoga Falls, was charged in the scheme, which was conducted from Beachwood Ohio, prosecutors said.
Villalba is a graduate of the United States Military Academy at West Point and the University of Puget Sound School of Law, prosecutors said. Separately, he was sued by the SEC and the CFTC.
Prosecutors said investors losts millions of dollars in the scheme, and that Villalba used some of the money to fund coffee shops he owns in Hudson and Stow, Ohio. The coffee shops are known as “Rico Latte,” and the investment business was known as “Money Market Alternative LP.”
Villalba called his investment methodology “Money Market Plus,” saying clients could realize long-term gains averaging between 8 percent and 12 percent, prosecutors said. The scheme collapsed last year, after perhaps operating for more than a decade.
“Villalba represented that his knowledge of physics, when combined with his application of a unique ‘momentum filter,’ allowed him to predict with ‘an uncanny degree of certainty’ how the futures market would trend at various times during a given month, thereby allowing him to purchase and sell futures contracts to maximize gains,” prosecutors said.
Investors were told Villalba would place stop orders as a hedge against losses, but he did not place the orders, causing investors to lose “millions of dollars,” prosecutors said.
Money from investors was “converted” by Villalba to fund the coffee shops, buy property in Vermillion, Ohio, and also to make Ponzi payments to clients, prosecutors said.
The scheme netted about $29.7 million, prosecutors said.
“This case serves as an example to the public that the Department of Justice and the Financial Fraud Enforcement Task Force will fight fraud in order to protect the integrity of the financial markets,” said U.S. Attorney Steven M. Dettelbach.
“If you lie to investors, there will be a steep price to pay,” Dettelbach said. “This case resulted from tremendous coordination between the Department of Justice and civil enforcement agencies to protect the rights of investors all over the country.â€
President Obama started the Financial Fraud Enforcement Task Force in November.
A Florida man who spent time in prison for wire fraud and money-laundering in a previous Ponzi scheme embarked on a new scheme after his release, federal prosecutors said.
Within two years of being released from custody in 1996 — and while still on supervised probation — Michael Greenberg, 50, started a new Ponzi and fraud scheme.
The new scheme operated for more than a decade, gathered more than $53 million, fleeced investors and creditors out of more than $24 million and used the names of at least nine different companies, prosecutors said.
Just days ago FBI Director Robert Mueller III warned Congress that white-collar criminals in the United States increasingly were relying on shell corporations to commit crimes and avoid detection.
The U.S. Secret Service led the investigation, which is centered in Pinellas County, Fla. Greenberg has been charged with wire fraud.
One of his companies existed for “no other purpose than to defraud banks and the U.S. Small Business Administration,” the Secret Service said. The agency described several of the companies as operating “on paper.”
In 1992, Greenberg was sentenced to 46 months in federal prison after being convicted of operating a Ponzi scheme that fleeced his own father out of more than $1 million. Other investors also lost money in the scheme, according to records.
After being released from prison, Greenberg started a company named Pure Class Inc., according to the Secret Service complaint. The business involved the need for an automobile-dealer’s license, something that might be a tall order for a convicted felon to obtain.
Greenberg “hid behind a proxy in both forming the corporation and in obtaining the license,” the Secret Service said.
‘[A]ll business done with Pure Class from its inception was based on a fraud at its inception,” the Secret Service said.
Because of the corporate deception and the proxy, the Secret Service said, persons conducting due diligence on the company would have been shielded from discovering Greenberg’s felony conviction and facts to help them make informed investment and business decisions.
The agency painted a picture of an elaborate deception, alleging that Greenberg assumed the identity of a third person to trick at least one victim and created a bogus email account to correspond with the victim, as though Greenberg were a third party who could verify details about the business.
Greenberg also assumed the identities of his parents to get a loan and created “sham” corporations to keep investors from learning the truth about his business operations, the Secret Service said.
He is accused of creating false tax returns in his parents’ names, forging their signatures on a loan deal, stealing a notary stamp, affixing the stamp to the forged documents, and then forging the name of the notary.
Greenberg formed at least nine different corporations or business names to pull off the scheme, according to the Secret Service. He is accused of fleecing at least 30 investors and banks, and also is accused of swindling the U.S. Small Business Administration.
Among the victims were a real-estate developer and a law firm whose office manager invested the company’s line of credit of $119,000 in the scheme, according to the complaint.
Based on Greenberg’s fraud — and elaborate measures to cover it — he duped the Small Business Administration into backing $1.5 million in loans — loans that were acquired at least in part because Greenberg forged his wife’s signature on documents, according to the complaint.
A Florida man who operated a previous scam has been banned for life from the telemarketing business after state and federal authorities and the Better Business Bureau worked together to expose the operation, the Federal Trade Commission said.
“The FTC received invaluable assistance in this matter from the U.S. Postal Inspection Service, the University of Central Florida Police Department, Largo Police Department, and the Better Business Bureau of West Florida, Inc.,” the FTC said.
James Nicholson, who operated a company known as Group One Network and offered a “Credit Line Gold Card,” was sued by the FTC amid allegations the company charged an up-front fee for a “supposed, general-use credit card,” the agency said.
The card scored an “F” from the BBB — the organization’s lowest-possible rating on a 14-step scale.
It turned out that the card was no general-use card at all; rather, it was a card that only permitted customers to spend money at websites associated with Nicholson.
“Telemarketers working for Nicholson’s chief company, Group One Network, also claimed that consumers would get access to a significant line of credit that could be used for cash advances, and that their payment histories would be reported to the three major credit bureaus,” the FTC said. “In reality, consumers who paid the fee received an online shopping card they could only use to buy products from Group One’s Web sites, they could not get cash advances, and their credit histories were never reported to the credit bureaus.”
Nicholson also participated in a bogus “advance-fee interest-rate reduction/debt negotiation program,” the FTC said.
His recent run-in with law enforcement was not his first. In 1995, Nicholson pleaded guilty to wire fraud in a telemarketing scheme.
Nicholson now has been banned for life from telemarketing. In a settlement with the FTC, Nicholson gave up a 31-foot power boat, a Nissan Pathfinder, and jewelry and art valued at more than $10,000. He also is on the receiving end of a judgment for $17.2 million, which has been suspended because Nicholson and co-defendants are unable to pay.
Denying it was a Ponzi scheme, INetGlobal says a federal judge should release about $25 million, business records and computer equipment seized in an investigation by the U.S. Secret Service last month because the property was “unlawfully seized.”
Meanwhile, INetGlobal has accused its former chief executive officer — whom it describes as a “informant” who lied to the Secret Service — of hatching a plot to extort $500,000 from the company about seven weeks prior to the Feb. 23 raid.
Steven Keough, the former CEO, could not be reached for comment on this story.
INetGlobal also accused the Secret Service of lying.
At the same time, the company said it was part of a family of companies that are “clean, legitimate and profitable businesses,” and it accused the government of leaking the search-warrant affidavit in the case to the media, specifically citing the PP Blog.
INetGlobal and its operator, Steve Renner, are represented by Jon Hopeman. No criminal charges have been filed against Renner or the company.
A spokeswoman for U.S. Attorney B. Todd Jones declined to comment on INetGlobal’s court filings, saying that prosecutors would litigate the case in court and not in the media.
Also filing papers for INetGlobal in the case was attorney Mark J. Kallenbach.
Government Did Not Contact PP Blog; PP Blog Did Not Contact Government
“None of the information we published was obtained as a result of the government or an agent contacting the Blog and providing information for a story,” the PP Blog said. “Nor did the Blog contact the government or an agent to obtain the information.”
An exhibit the company produced for U.S. District Judge Donovan Frank reproduced a story the Blog published at 1:41 a.m. (ET) Feb. 25. The story was based on the Secret Service affidavit, which the Blog obtained from a government website open to any person with an Internet connection.
In its court filings, INetGlobal complained that its attorneys did not get a copy of the affidavit until Feb. 26.
“As of February 25, 2010, I had tried to get a copy of the affidavit,” Kallenbach wrote. “I was informed by the U.S. Attorney’s Office it was sealed. I was not provided a copy until February 26, 2010 at 1:57 p.m., 36 hours after the press had it. Someone leaked the affidavit to the press.”
The PP Blog was the first news outlet to publish information from the affidavit.
No member of government contacted the Blog though any means to arrange for access — exclusive or otherwise — to the material. Nor did the Blog contact any member of government to seek access — exclusive or otherwise — to the material. The Blog obtained the affidavit through the normal course of its reporting.
A Fiery Defense
Attorneys for Renner, INetGlobal and Inter-Mark Corp., the parent company of INetGlobal, appear ready to come out firing.
Among the documents the attorneys plan to present to Frank is a copy of an email dated Jan. 6 from Steven Keough, the former CEO, to attorney Aaron Hall of Minneapolis.
Keough, according to the email, said he was declining to accept a severance proposal offered by the company.
“If your client, Mr. Renner, is serious about resolving this quickly and amicably, then the minimum acceptable severance payment amount must be $500,000 — payable immediately,” the email read. “This reflects the promised signing bonus of $212,000 and promised one year salary of $288,000.”
The email suggested Keough was set on the amount of $500,000 and unwilling to negotiate. Keough proposed that Hall schedule a meeting at a place convenient for Hall on Jan. 8.
“Come with a check and signable documents to the meeting location,” the email read. “After noon on Friday all bets are off as to how this matter will be handled.”
The email was signed “Thank you,” followed by the word “Regards.” Keough’s name appeared below the closing.
INetGlobal argued that the email was evidence of an extortion plot.
“On January 6, 2010, Mr. Keough attempted to extort over $500,000 from iNetGlobal,” Kallenbach argued in a brief. “He demanded payment of the money by 5:00 p.m. that day or all bets are off. According to the Secret Service’s affidavit, Keough contacted the government in this matter for the first time on January 8, 2010.”
Why Kallenbach referenced the time of 5 p.m. — and not noon, as the email referenced — was not immediately clear. Also unclear was the amount INetGlobal offered in the severance package that Keough purportedly rejected.
Whether Keough could argue the amount was too small and did not reflect his understanding of how he would be compensated should be be terminated or choose to leave the company was unclear.
In the Secret Service affidavit, Keough, an attorney and former naval officer, was portrayed as having asserted he was fired for asking too many questions and had come to believe InetGlobal owner Steve Renner had hired him to be a “good face” for the company.
Kallenbach, whose brief said Keough had been fired Jan. 5 — the day before Keough sent the email to Hall — claimed Keough had been fired for cause.
“Mr. Keough was terminated because within a month or so after being hired in late October of 2009, Mr. Keough made no progress in understanding the business, did not fit in with IMC’s rank and file, was unwilling to work with IMC’s board of directors, and attempted to take over IMC’s business from Mr. Steven Renner,” the brief argued.
Secret Service Accused Of Lying
Hopeman asserted in his brief that the Secret Service affidavit contained “intentional and reckless falsehoods” that undermined the probable cause to search.
“In this case, the entire premise of the search warrant affidavit is that little advertising was sold, little was used, and there were no legitimate advertisers,” Hopeman argued. “The search warrant affidavit states that the advertisements ranged from other multi-level marketing sites to affiliate programs, non-English websites, and even iNetGlobal’s home page . . .
“It concluded, without support, that there were ‘few legitimate advertisers,’” Hopeman argued.
At the same time, Hopeman argued that the Secret Service also omitted facts from the affidavit that were favorable to Renner.
“Keough appeared on the company’s website as of January 5, 2010 stating that he intended to recruit new customers from all around the world,” Hopeman asserted. “These are not the same words that Keough spoke to the agents days later when he claimed that the entire business was fraudulent. The agents knew this fact because it is posted on the website, which they studied. This fact if included in the affidavit would have cast substantial doubt on the credibility of the informant, who provided the principal basis for probable cause.”
Hopeman also said the Secret Service painted an unfair picture of how Renner behaved at a January INetGlobal gathering in New York. The Secret Service, which had at least two undercover agents in the room, said Renner often spoke over an interpreter even though many of the attendees had little facility in English, started a pandemonium by handing out $20 bills in exchange for $10 bills, and told at least two different stories about INetGlobal’s revenue figures.
“A viewing of the tapes show that Mr. Renner was very candid about the nature of the business,” Hopeman argued. “During these same presentations, he informed those assembled that this was not an investment, and that one could not earn money by doing nothing. He also explained the internet services that he was selling and made it clear that web hosting, domain registration, and advertising, were his products.”
In previous autosurf prosecutions, the government has argued that surf operators attempt to mask investment programs by calling them something else. Prosecutors in the AdSurfDaily Ponzi case, for example, said that the ASD program was an investment program disguised as an “advertising” program.
It is not uncommon for autosurfs to instruct members to avoid using certain words, including the words “investment” or “investing.” Some autosurf members have scolded others for using the word “investment,” which prosecutors have painted as evidence of the wink-nod nature of autosurfs.
In the ASD case, which was filed in August 2008, the Secret Service described a member speaking to an undercover agent, instructing the agent to be careful not to use certain words.
“Don’t call it investing, you know what I mean, we can get in trouble if we say that, we have to be careful,” the agency quoted an ASD member as saying.
The agency, which asserted in its affidavit in the INetGlobal case that an ASD member tried to recruit an undercover agent to join Renner’s surf, said the ASD member demonstrated the wink-nod nature of the autosurf business.
“The [ASD] member said he had previously been a member of ASD . . . and said, ‘We know what happened there,’” the Secret Service alleged in the INetGlobal affidavit. “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.”
Hopeman, though, said the Secret Service was wrong.
“On February 23, 2010, the United States Secret Service strapped on its guns and raid jackets, searched the premises of Mr. Renner s business, took all of its documents and computers, seized over $25 million in cash belonging to the business and its customers, put 75 people out of work, and seized the money for their paychecks and their children s health insurance,” Hopeman argued. “The sealed affidavit was leaked to the press. This was not a cocaine cartel. It was not a mafia front. It was a legitimate business.”
In the ASD case, prosecutors argued that an ASD filing to counter the government’s Ponzi assertions was”full of sound and fury, [but] signifying nothing.â€
How the prosecution intends to respond to INetGlobal’s arguments is unclear.
Hopeman was the attorney for Tom Petters, implicated in a masssive Ponzi scheme in 2008. Petters was convicted in December.
The FTC and Florida Attorney General Bill McCollum have charged a Florida company that “touted a phony cure for alcoholism” with false advertising claims, false efficacy claims, false privacy claims, false claims about professional qualifications, unauthorized billing and deceptive trade practices.
