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  • BREAKING NEWS UPDATE: New Pro Se Motion To Intervene In ASD Case Lists Phone Number Associated With ASD Figure Nate Boyd

    UPDATED 5:16 P.M. EDT (U.S.A.) NOTE: After additional research, the 10-digit number cited below appears not to be a bank-account number. Rather, it appears to be a telephone number associated with Nate Boyd, a former compliance officer for AdSurfDaily. Boyd’s name also has been associated with the AdViewGlobal (AVG) autosurf.

    See the comments thread below.

    Here, our earlier story . . .

    A pro se motion to intervene just docketed in the AdSurfDaily civil-forfeiture case lists an “electronic transfer to” a bank account number (**Update 1:41 P.M. EDT: it’s actually a telephone number**) not listed in government references to accounts held by ASD President Andy Bowdoin.

    The filing lists the email address of nate@asdcashgenerator.com and a second account number that is associated with ASD in court filings. It was not immediately clear why the filing by Robert and Evelyn Gould included the account number not associated with Bowdoin in court filings. (**Update 1:41 P.M. EDT: it’s actually a telephone number**)

    An account number ending with the digits 1028 — an account number not associated with Bowdoin — is included in the Gould filing, along with the words “electronic transfer to” the account. (UPDATE 2:16 P.M. As noted in the 1:41 P.M. update, the 10-digit number is actually a phone number, as opposed to a bank-account number. The phone number is associated with Nate Boyd and a number of work-at-home opportunities.)

    Nate Boyd is a former compliance officer at ASD, members said. It was not immediately clear if the “nate” mentioned listed in the email address is Nate Boyd. (UPDATE 2:16 P.M. The phone number is associated with Nate Boyd.)

    Some ASD members have said some upline sponsors sold “ad-packs” directly to customers, as opposed to directing them to purchase them through ASD. “Ad-packs” then were transferred from the existing stockpiles of upline sponsors using ASD’s in-house system. The practice is problematic because some upline sponsors could have pocketed the cash, instead of transferring it to ASD, thus generating off-the-books cash sales.

    Such transactions could have transferred the burden of paying for ASD “rebates” to the rank-and-file membership, while destroying the reliability of ASD’s records and giving upline sponsors the opportunity to siphon tax-free profits.

    Actions by upline sponsors to sell “ad-packs” directly to customers could be construed as a form of wire fraud and money-laundering.

    Also unclear is why the Gould claim was filed using the same pro se template used by dozens of other ASD members. U.S. District Judge Rosemary Collyer already has rejected dozens of filings that used the same argument in the template.

    Collyer has not ruled on several templated submissions received after her initial ruling weeks ago that the filers had no standing in the case.

    The filing also referenced an account number ending in the digits 3016 that is associated with ASD.

    gouldinterventionsmall

    Federal prosecutors have listed 10 ASD account numbers in court filings, referencing them in the August 2008 forfeiture complaint and again in May 2009, in a proof of service of all defendants in rem. None of the account numbers ended with the digits 1028.

    Unlike previous pro se filings, the Gould motion included a printout of the government’s form for victims of AdSurfDaily, ASD Cash Generator, LaFuenteDinero and Golden Panda Ad Builder. Check marks on the Gould form are next to the names of AdSurfDaily and LaFuenteDinero. The form submitted to the court by the Goulds appears to have been printed out and filled out in longhand.

    The Gould filing suggests that Robert and Evelyn Gould filled out the government form last month, including the bank-account references.

    Despite the fact the government believes ASD engaged in a wire-fraud and money-laundering conspiracy with unnamed co-conspirators while operating as a Ponzi scheme, the Goulds said in the filing that the government owes them $2,000

  • Another Huge Ponzi Scheme Shaping Up In Florida

    (UPDATED 8:54 P.M. EDT U.S.A. See bottom of story.) Amid a rash of bank failures, an unprecedented number of mortgage foreclosures and a string of major fraud investigations, Florida is bracing for yet another spectacular Ponzi scheme probe.

    This one involves the alleged sale of fraudulent structured legal settlements by Fort Lauderdale attorney Scott Rothstein and may involve up to $500 million. Other lawyers in Rothstein’s firm have sued to remove the boss and put the firm in receivership.

    Rothstein, 47, was said to have returned from Morocco yesterday and was meeting with federal investigators. There were concerns that $500 million was deposited in a bank in Canada late last month and went missing, and accompanying concerns that Rothstein had contemplated suicide as the way out.

    Florida media is all over the Rothstein story, which is beginning to get national exposure in its early hours.

    Rothstein Rosefeldt and Adler, the law firm, has more than 70 lawyers at offices in Florida, New York and Venezuela, including “distinguished former judges,” according to a lawsuit the firm filed to remove Rothstein.

    The complaint alleged Rothstein had control over financial affairs and silently started what appeared to be a securities business.

    “Some investors allege that Defendant Rothstein may have been fabricating non-existent structured legal settlements for sale to investors,” the firm said in the lawsuit.

    Famed attorney Kendall Coffey is representing the firm in its bid to oust Rothstein, who has a reputation for flashiness and for doling out money to politicians from both parties.

    Coffey, a former U.S. Attorney, represented former U.S. Vice President Al Gore in the disputed 2000 election battle with then Texas-Gov. George W. Bush.

    The Rothstein Rosefeldt and Adler law firm was reported suddenly to have less than $500,000 to operate, and attorneys are working without getting paid.

    A dramatic story is shaping up.

    Attorney Jeff Sonn said his firm is investigation Rothstein.

    “Often these private investment schemes, in which many individuals invest in an unregistered hedge or mutual fund with the intent to share profits are nothing more than unregistered securities, that may not be exempt from state and federal securities laws,” Sonn said.

    “In many instances, promoters claim these are private investments that need not be registered as they are allegedly exempt under Regulation D of the federal securities laws, but often they fail to meet all the exemption requirements, including failure to file a Form D with the SEC. If the securities are not exempt from registration, investors would be able to seek rescision of their investment and to hold all promoters, and possibly others, for the loss,” Sonn continued.

    “I have heard that one of the funds run by Rothstein was named ‘Banyon Capital,’ but I have not yet seen the offering documents.” Sonn said, “My law firm had seen Scott Rothstein living a very large lifestyle, including armed body guards, police protection, very expensive cars, luxury homes, jewelry, donations, and appeared to be something out of a Great Gatsby movie.”

    Read this story in the Miami Herald.

    UPDATE 8:54 P.M. The Palm Beach Post is reporting that the FBI and the IRS are are at the law offices of Rothstein Rosefeldt and Adler tonight.

  • ‘Key Enabler’: Madoff Accountant Pleads Guilty; Faces 114 Years; Forfeits More Than $3.1 Million, Real Estate

    David G. Friehling was one of Bernard Madoff’s “key enablers,” U.S. Attorney Preet Bharara said today after Friehling pleaded guilty to nine criminal charges.

    Friehling, 49, Madoff’s small-shop accountant, faces up to 114 years in prison, but has agreed to cooperate with the government, Bharara said.

    “David Friehling was one of the key enablers of Bernard Madoff’s historic fraud,” Bharara said. “With his guilty plea, Friehling has taken responsibility for his crimes and will now assist us in holding others accountable for their involvement in Madoff’s epic fraud
    against so many victims.”

    Prosecutors announced last week that Friehling was expected to plead guilty to a criminal information that superseded one filed in July. It became official today, with Friehling’s plea to securities fraud, investment adviser fraud, four counts of filing false audit reports with the Securities and Exchange Commission and three counts of obstructing or impeding the administration of the internal revenue laws.

    In essence, Friehling pleaded guilty to rubber-stamping bogus information supplied by Madoff and helping Madoff and unnamed others file false tax returns.

    Prosecutors said he is “subject to mandatory restitution and faces criminal fines up to twice the gross gain or loss derived from the offense.”

    The graphic below is a screen shot of a document provided by Bharara’s office in New York that shows the maximum penalties Friehling faces:

    David Friehling faces these maximum penalties.
    David Friehling faces these maximum penalties.

    Friehling will forfeit $3.18 million, representing “the total amount of compensation he
    received from [Madoff’s securities business] for his accounting and tax services, plus the
    amount that he, his wife, and his children withdrew from their BLMIS investment advisory accounts,” prosecutors said.

    He also agreed to forfeit his interest in certain real estate, “to the extent that those properties constitute, or were derived from, the securities fraud charge to which he pleaded guilty,” prosecutors said.

  • Madoff Accountant Expected To Plead Guilty; Charges Demonstrate One Of The Pickles In Which ASD Finds Itself

    UPDATED 2:03 P.M. EDT (U.S.A.) Prosecutors have advised a federal judge that the government expects David G. Friehling to plead guilty to charges next week.

    Friehling was the small-shop accountant for Bernard L. Madoff Investment Securities.

    The mere fact that Bernard Madoff’s multibillion firm used a small shop that employed a single accountant — Friehling himself — was enough to make some investors pass on Madoff’s offerings while performing due diligence.

    Other investors ignored the incongruity. Madoff’s empire collapsed in December 2008. In July 2009, prosecutors filed a criminal information against Friehling, accusing him of accounting fraud, securities fraud, investment-adviser fraud and making false filings.

    In a letter yesterday to U.S. District Judge Alvin K. Hellerstein, prosecutors said they expected to file a superseding criminal information Nov. 3 and that Friehling will plead guilty and cooperate in the government’s ongoing probe.

    Read the letter.

    Friehling’s experience demonstrates one of the pickles Florida-based AdSurfDaily — itself implicated in an alleged Ponzi scheme — is in.

    A hearing was held at ASD’s request Sept. 30 and Oct. 1 of last year to demonstrate it was not a Ponzi scheme. ASD, however, did not call either an in-house or external accountant to the witness stand to certify its books and financial statement, thus missing a chance to refute the government’s Ponzi claims by producing audited financials that could withstand scrutiny.

    One of the likely reasons is that no accountant would or could certify ASD’s books under oath in a fashion favorable to the company. To have done so would have been to introduce some of the same elements that led to intense scrutiny directed at Friehling and the criminal information against him.

    ASD published no verifiable financial information. There are major doubts that ASD even knew its own bottom line, amid assertions that members siphoned off money before it even arrived at ASD.

    One of the allegations against Friehling is that he verified information for Madoff that simply was not true.

    Among the assertions against Friehling was that he was not truly independent and was auditing a company in which he had a large personal stake — an investment account dating back to the 1980s that showed an equity balance of more than $500,000 each year.

    If ASD employed accountants or bookkeepers who held large numbers of “ad-packs” or were being paid in “ad-packs,” their independence could be challenged.

    Moreover, prosecutors said, Friehling’s purported audits did not comply with Generally Accepted Accounting Standards. Reports did not comply with Generally Accepted Accounting Principles.

    Any accountant who certified information favorable to ASD, which prosecutors allege was insolvent, almost certainly would have been subjected to the same degree of scrutiny that Friehling later encountered in the Madoff case.

  • ‘PRINTER’ PONZI: FBI Says Man Ran $28 Million Scheme Based On Bogus Sales Of High-Speed Commercial Printers

    UPDATED 8:28 P.M. EDT (U.S.A.) Minneapolis/St. Paul has Tom Petters, accused of operating a $3.65 billion Ponzi scheme by deceiving investors into thinking they were financing his company’s purchase of electronics that later would be sold to Wal-Mart and other huge retailers.

    And now Chicago has Matthew Scott, whom investigators described as a sort of Tom Petters on a smaller scale.

    Scott was accused today of telling investors their funds would be used to purchase or finance  the purchase of high-speed commercial printers that would be sold to third-party buyers at a profit. The machines were said to be valued in excess of $100,000, and Scott claimed his mark-up of 20 percent led to big profits, the FBI said.

    Scott, 50, of Elmhust, Ill., was charged with mail fraud. His company, Gelsco, neither purchased nor financed such printers, the FBI said.

    “Instead, Scott allegedly fabricated false purchase orders, invoices, promissory notes and other documents that he provided to investors,” the FBI said.

    The scheme collected at least $28 million between early 2000 and March 2009 before unraveling, the FBI said. At least 60 investors were fleeced. The initial loss estimate was pegged at $4.5 million.

    “Throughout the duration of the alleged scheme, Scott had to continually raise funds from investors to make payments to earlier investors, all of which he concealed and intentionally failed to disclose to new and old investors alike,” the FBI said.

    Scott also duped a bank by submitting fraudulent documents to get a loan about 10 months before the scheme collapsed, the FBI said.

    “In May 2008, Scott obtained a $300,000 bank loan by falsely representing that the loan would be secured by a printer that was being sold to a third party, and by providing fraudulent documents as proof of the purported sale,” the FBI said.

  • ASDMBA Website Offline; Registration Lapsed Yesterday

    UPDATED 9:23 P.M. EDT (U.S.A.) The ASDMBA website appears to be back online. Our earlier story is below . . .

    The website of the ASD Members Business Association — asdmba.com — is offline. ASDMBA’s domain registration appears to have expired yesterday, and the site now resolves to a GoDaddy.com page that displays ads.

    Bob Guenther, ASDMBA’s de facto head, came under fire this year, after some members said Guenther did not provide transparent accounting on how the entity spent money it collected to litigate on behalf of members of AdSurfDaily Inc.

    Guenther, 61, recently said the group intended to ramp up efforts to get refunds for members of Florida-based ASD and Georgia-based Golden Panda Ad Builder Inc., two autosurf implicated in an alleged $100 million Ponzi scheme.

    “So now it is time to round up all the troops again and get ready to try and ‘GO GET THE MONEY,’” Guenther said.

    Guenther has been highly critical of the Justice Department, lecturing a federal prosecutor in an email and saying he planned to rely on unnamed “political connections” to embarrass the government.

    See an Sept. 30 story.

    Se an Oct. 1 story.

  • BREAKING NEWS: Water Toy Does Not Survive: Federal Judge Approves Liquidation Plan That Demolishes Parent Company Of Noobing Autosurf; Jet Ski, Car, Computers, Furniture — Even A Wastebasket Ordered Sold

    Noobing pitched itself to deaf people on YouTube.
    Noobing pitched itself to deaf people on YouTube.

    A federal judge has given the go-ahead to a court-appointed receiver to sell the assets of Affiliate Strategies Inc. (ASI), the parent company of the Noobing autosurf.

    U.S. District Judge Julie A. Robinson of the District of Kansas approved the plan submitted by receiver Larry Cook. The plan authorizes Cook to sell the assets in auction lots — right down to a stainless-steel wastebasket in the women’s restroom.

    Robinson’s order permits Cook to sell ASI’s jet-ski, a 2005 Yamaha, along with a 2003 Saturn automobile owned by the firm.

    “[Cook] previously determined the Receivership Defendants’ business operations could not be operated legally and profitably,” the receiver’s attorney, Brian M. Holland, said in a court filing.

    AdSurfDaily, a Florida company implicated in an alleged $100 million Ponzi scheme, used money to purchase two jet skis, federal prosecutors said.

    ASI’s furnishings, furniture, computer equipment, servers and related equipment all will go. Included in the equipment are the Compaq 6820 notebook computer used by ASI/Noobing President Brett Blackman, and the Lenovo SL500 notebook computer used by Noobing programmer Mike Reed, according to court filings.

    Neither Noobing nor Reed was named a defendant in the July action filed by the Federal Trade Commission and the attorneys general of Kansas, Minnesota and North Carolina. Noobing’s website, however, went offline in the wake of the action against ASI and several affiliated firms and individuals, including Blackman.

    One of the affiliated companies — the Grant Writer’s Institute — was alleged to have sold a fraudulent program that offered “guaranteed” government grants from economic stimulus funds. Separately, Cook said his preliminary investigation revealed that a 70-year-old Philadelphia man had been charged $995 for the names and addresses of three benevolent entities that could help him repair the aging home he shared with his wife.

    Noobing targeted deaf people in promotions. Although the Noobing surf was not named a defendant in the FTC action, Cook’s preliminary assessment revealed Noobing had gathered $590,000 in revenue last year and more than $541,000 this year.

    Cook estimated that the surf was in the hole nearly $550,000 since last year.

    Noobing participants became furious in February, when the surf slashed daily payouts to a fraction of 1 percent after paying up to 3 percent earlier.

    Some members said Noobing should provide refunds, but Reed said on the ASA forum that no refunds would be granted because the company never guaranteed a return. Regardless, some participants said they’d get their money back by filing chargebacks with credit-card companies.

    Critics said the practice was contemptible, pointing out the wink-nod nature of autosurfs and the stress it puts on banks. On one hand, participants are happy to accept Ponzi payouts from the surfs. On the other, in order to perform a chargeback, they claim surfs failed to deliver the “advertising” they paid for when a surf slashes payouts.

    Such an approach costs banks time and money. Some veteran autosurf pushers who position themselves as experts recommend the chargeback approach, in effect using banks to guarantee “advertising” purchases from the surfs even if surfs that slash payouts or suspend them still are displaying ads.

    The ASA forum is a popular site among autosurf enthusiasts. Critics call it a Ponzi board for both autosurfs and HYIPs.

    Noobing blamed its decision to slash payouts on uncertainty in the ASD case.

    “If there is a bad guy in this whole story, it’s the government!” Reed exclaimed on the ASA forum in February. “Let’s get mad at them! How can sharing our revenue to help control costs for legitimate advertisers be a bad thing? How can keeping $90+ million dollars to protect the people who worked with ASD be a fair result? It’s madness!!! Our government is the bad guy here, not Noobing.

    “Let’s get mad at the source of this challenge!” Reed railed. “Call your congressman, send letters, speak publicly!!”

    Some ASD promoters pushed Noobing after the U.S. Secret Service seized tens of millions of dollars from ASD last year in a wire-fraud, money-laundering and Ponzi scheme probe.

    Cook said the case against ASI and co-defendants was going to take some time to unwind because of thousands of intercompany transactions and the fact that some of the entities had registered as corporations offshore.

    “Of immediate concern is the large distributions and salary paid to defendant Brett Black[man] since 2008,” Cook advised Robinson in a preliminary report. “Per the QuickBooks accounting records, Blackman received $841,545 of distributions from Apex Holdings International, LLC in 2008 and made a net contribution of $491,559 into Affiliate Strategies, Inc. ($581,388 of contributions and $89,829 of distributions) for a total net distribution of $349,986, in addition to salary payments of $118,049.

    “In 2009,” Cook continued, “Blackman has received $253,506 of distributions from Apex Holdings International, LLC and has made a net contribution of $113,000 into Affiliate Strategies, Inc. ($349,000 of contributions and $226,000 of distributions). The total net distributions and salary to Blackman for 2008 and 2009 is approximately $490,000.”

    Cook said his assessment was ongoing. He reported that some of the accounts involved in the investigation had chargeback rates of as high as 77 percent, meaning that better than three of four customers who made credit-card charges requested refunds.

    Blackman, according to Cook, recently registered several corporations offshore, including Noobing; ASI Management Inc., formed in Belize on March 24, 2009; Landmark Publishing Group LLC, formed in Nevis on March 25, 2009; Landmark Publishing LLC, formed in Nevis on March 25, 2009; International Research and Writing Group LLC, formed in Nevis on July 1, 2009; and International Publishing Group LLC, formed in Nevis on July 1, 2009.

    All in all, Cook said, “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.”

    Robinson previously ordered all offshore assets to be repatriated.

  • BREAKING NEWS: Montana Forges Partial Settlement In Case That Alleged Ponzi Schemer Took $100,000 From Investment Client, Paid Earlier Client $50,000, Paid Lawyer $25,000 And Pocketed $25,000; Major State Investigation Remains Open

    Monica Lindeen, Montana Commissioner of Securities and Insurance
    Monica Lindeen, Montana Commissioner of Securities and Insurance

    UPDATED 9:28 P.M. EDT (U.S.A.) Donald Chouinard urged clients in Montana and Idaho to invest in what they thought was a “day-trading program,” authorities said.

    In one case, he allegedly persuaded a client to borrow a large sum to enter the program. The case is remarkable in the sense that one of its specific allegations provides a perfect illustration of how victims get suckered and how Ponzi schemes work.

    In a single transaction with an investor, all of the investor’s funds allegedly were consumed immediately, leaving the investor with nothing, authorities said.

    “Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a high return in 30 days,” investigators said. “Instead of investing the $100,000 in the ‘day-trading’ program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account, and gave the other $25,000 to his attorney.”

    Montana Commissioner of Securities and Insurance Monica Lindeen announced a partial settlement today that calls for LPL Financial Corp. to pay nearly $1.3 million in restitution and a fine of $150,000 for failing to supervise Chouinard.

    LPL formerly employed Chouinard, who also is associated with two other firms. The settlement with LPL, which neither admitted nor denied wrongdoing, applies only to LPL and does not affect separate actions involving Chouinard and the other firms, DC Wealth Management Inc. and DC Associates Inc.

    “Too many hard working Montanans lost their savings due to the actions of Mr. Chouinard, but today we started the process of recovering those losses,” said Lindeen. “This settlement is the result of both efficient and effective enforcement work by this agency and a willingness by LPL Financial Corporation to arrive at a solution that addresses the needs of its clients. We are very pleased with this result.”

    Among the assertions against Chouinard are that he operated a Ponzi scheme, engaged in securities fraud, traded in the investors’ accounts without authorization, forged signatures to authorize certain trades and failed to provide investors with statements or tax documents for their “day-trading” investments.

    At the same time, investigators assert that Chouinard “routinely informed the investors about the values of their investments orally or via email,” but misrepresented the values — “in one case by as much as 10,000 [percent].”

  • BREAKING NEWS: California Man Expected To Enter Guilty Plea In Ponzi And Affinity-Fraud Scam; Kenneth Kenitzer May Face Up To 30 Years In Prison; Case Features Charge That A Vigilante Tried To Shake Down Business To Get Refunds For Investors

    UPDATED 6:51 P.M. EDT (U.S.A.) Kenneth Kenitzer of Pleasanton has become the most recent senior citizen to face significant jail time for his actions in a Ponzi and affinity fraud scheme. The California Ponzi fleeced investors and churchgoers out of at least $40 million, authorities said.

    Kenitzer, 66, is expected to plead guilty “in the near future”  to wire fraud and money-laundering for his role in the alleged Equity Investment Management and Trading Inc. (EIMT) scheme, federal prosecutors said.

    He faces up to 30 years in prison, but reportedly has agreed to cooperate with prosecutors, according to the Pleasanton Weekly News.

    Anthony Vassallo, a business partner of Kenitzer, was arrested in the case in March. Kenitzer was named in a civil complaint filed by the SEC, but was not immediately charged criminally.

    Vassallo is 29.

    Alleged Vigilante Seeking Refunds For Investors Charged

    The EIMT case is notable for a reason that went beyond allegations of Ponzi and affinity fraud: an alleged shakedown attempt by a vigilante group to retrieve money for victims.

    On March 18,  federal prosecutors filed charges against Michael David Sanders, also known as David Dennis Sanders, for posing as a federal agent and “attempting to extort monies in connection with recovering funds for EIMT,” the SEC said.

    Sanders, 41, of Fair Oaks, Calif., was charged with conspiracy, impersonating a federal agent and attempted extortion. The FBI described the alleged crime as an attempted shakedown after Sanders and others tried to force their will on two businessmen involved with EIMT.

    “Upon entering the office suite, Sanders and several others displayed guns and handcuffs on their belts and wore bulletproof vests, radio earpieces, and badges on chains around their necks,” the FBI said in March.

    “During the meeting, Sanders and the others with him falsely identified themselves as agents with the FBI, SEC, and the Attorney General and told the businessmen that ‘you can tell us to leave the office, but if we leave, you are leaving with us in handcuffs,’” the FBI said.

    “When asked for their names and law enforcement credentials, Sanders and the others told the attendees to shut up and not ask questions. During the meeting, one of the individuals working with Sanders spoke into his earpiece stating that ‘one of the units’ was ‘in place’ at the one of the businessmen’s personal residence where he lived with his wife and young child.

    “Sanders and the others told the attendees that they had until noon on Monday, March 9, 2009, to wire $378,300.16 to a bank account at Patelco Credit Union in the name of the ‘Spirit Foundation,’” the FBI continued. “Sanders threatened the individuals with ‘search and arrest warrants’ if they did not comply with the request.”

    Three others later were charged in the alleged extortion scheme: Craig Anderson, 39, of Chicago; Cassandra Moore, 26, of Beverly Hills, Calif.; and Sean Smartt, 41, of Sacramento,Calif.

    Read statement by U.S. Attorney Lawrence G. Brown of the Eastern District of California.

    Read the SEC complaint against Kenitzer, Vassallo and EIMT.

  • Will Donald Trump Regret Linkage Of Name To MLM?

    EDITOR’S NOTE: This story was prompted by a post we saw on Scam.com. The “lede” is deliberately buried in this article in favor of some background information.

    During the 1990s, I was sitting at home one evening just minding my own business. Back in those days I routinely had staggered newspaper deadlines beginning at 7 p.m. and lasting perhaps through 9 p.m. I often covered an event for more than one publication. I was tasked with the duty to write unique stories for each publisher from the same fact set.

    If I’d spent the day covering a murder trial, for example, I could not submit duplicate stories to the publishers. They wanted individual stories tailored to their readership — stories that required me to present the information in the in-house styles of the publications. One of my key responsibilities was to write different “ledes” for the stories, an opening sentence or paragraph unique to the audiences and designed to grab readers’ attention and not let go.

    Getting it right the first time — which is to say, “grabbing” readers, including all the key facts and adopting the “voice” of the newspapers throughout the story — was my responsbility. Not doing it meant I’d spend the evening fielding calls from editors to fill in details, instead of enjoying the time with my girlfriend. She didn’t like it when editors called and perhaps disrupted the movie we were watching.

    I didn’t like it, either. So, I worked hard to ensure I’d lighten the work load on my editors, while lightening the load on myself and freeing up time to kick back.

    Editors, though, were not the only ones who called — and this brings us back to something that happened one night when I was just kicking back at home after finishing my work day.

    People occasionally would call me with news tips from the mundane to the incendiary and all places in between. On this particular evening I got a call on what I’d initially thought might be one of those “in between” things, but it was worth checking out immediately because the unemployed woman who called me was really worked up.

    I agreed to meet her in a hotel lobby to listen to her story. I soon discovered she wasn’t the only person worked up in the lobby of this hotel, which was situated in a county experiencing high joblessness and economic decay because manufacturing had gone into the tank locally.

    “What’s going on?” I asked.

    Some of the most forlorn-looking people you’d ever want to see quickly told me they’d been duped into attending a job “interview” by a prospective employer that had placed an ad and created the expectation it would hire workers for jobs that paid $30 an hour.

    Naturally the employer had no trouble filling the room in a town experiencing hardship.

    Before long, though, the event turned into a grimace-fest. Attendees thought the advertiser was recruiting them to work at a hospital after they received training in an emerging science that had something to do with making sure healthcare ecosystems were maintained.

    In reality, it was a pitch for an MLM of some sort that apparently specialized in sucking dust from the atmosphere of homes across America to keep the owners safe from microscopic allergens and pathogens that silently were killing them.

    Yes, the promoter had come to the struggling town to try to recruit a team of vacuum-cleaner salespeople. The sky was the limit.

    Except it wasn’t.

    The attendees told the promoter it wasn’t — in no uncertain terms. Later I covered a similar incident involving hearing aids at the same hotel. The key, from the promoters’ perspective, was to draw a crowd by using words to trigger emotions and plant a false idea, and then try to sell the desperate few who remained on the dream of MLM riches.

    Need and greed. Marry the two  — and return in your fancy car to your fashionable home in time to set sail in your fancy boat. When you need to replenish cash, take out another ad to sell a vacuum cleaner by calling it an ecology system. Replace the money you spent on cocktails and martinis and restocking the bar on your boat, and then head back to your fashionable home in your fancy car to set sail again on your fancy boat.

    And this brings us to Donald Trump, whom MLMers say has lent his name to a business opportunity.

    Someone posted about it on Scam.com, pointing out that MLM purveyors were pushing it on craigslist by referring to Trump as a “Billionaire, Real Estate Developer from NYC” who is “Opening a New Metabolic Testing Company” near Atlanta.

    Let’s hope the “Metabolic Testing Company” being pitched on craigslist in Atlanta by referencing Trump without mentioning his name is not the equivalent of the ecologically pleasing vacuum cleaner pitched to people who thought they were going to get an exciting, new career in the healthcare field in America’s Rust Belt.

    I’m not hopeful: The craigslist ad suggests compensation of “$30 to $50 per hour.”

    The post at scam.com appears not to link to a working craigslist URL.  Here is the the link I believe to be correct.

    Sorry about burying the “lede.”

  • OCT. 28 PONZI NEWS AND NOTES: Tom Petters Trial To Open; Employee Of Sir Allen Stanford Purportedly Criticized, Ostracized, Fired For Being Too Honest

    NEWS: In the world of high finance, Tom Petters was Bernard Madoff before Bernard Madoff was Bernard Madoff — at least with respect to shocking headlines about Ponzi schemes.

    Jury selection is under way in Minnesota in the Petters case. The allegations that Petters presided over a $3.65 billion Ponzi were unfathomable in September 2008. The allegations dwarfed the August 2008 assertions by the U.S. Secret Service that Florida pitchman Andy Bowdoin of AdSurfDaily Inc. had operated a then-unfathomable $100 million Ponzi scheme.

    But with Madoff’s overnight ascent to the stratosphere of infamy in December 2008 amid allegations that he had operated a $50 billion Ponzi scheme, Petters faded from the headlines.

    Bowdoin would have faded, too, except he could not stop doing things such as comparing the Secret Service and federal prosecutors to the 9/11 terrorists; taking the 5th Amendment at a hearing his company requested to present evidence that it was not a Ponzi scheme, even as his supporters agreed he was “too honest” to testify; announcing a $200 million deal with a penny-stock company few people ever had heard of (while the penny-stock firm continued its practice of not publishing verifiable financial information and Bowdoin was awaiting a ruling on whether unaudited financial information he had supplied the court was reliable enough to make the Ponzi allegations go away); trying to sell members of AdSurfDaily VOIP telephone service after the Ponzi ruling went against him; negotiating with federal prosecutors; submitting to the forfeiture less than a month after prosecutors filed a second forfeiture complaint that asserted his wife and family had benefited from the illegal actions of his company and that Bowdoin had not reported a purported theft of $1 million by “Russian” hackers to authorities; and trying to get back in the case about six weeks later by saying he’d changed his mind, fired his attorneys and now was relying on a mysterious “group” of amateur attorneys to help him do his legal bidding.

    Not even Petters, who owned Polaroid and operated what prosecutors described as a multibillion-dollar Ponzi scheme involving a separate electronics company, could top Bowdoin in terms of relentless strangeness.

    Petters, however, easily topped Bowdoin in terms of the size of the alleged Ponzi he operated. And now the Petters trial is set to begin. One of the expected defenses in the case is a Bowdoin-like assertion that his hands were clean.

    Will it fly with jurors?

    Read pretrial Petters’ coverage by Reuters.

    Read this column by Jon Tevlin in the Star Tribune of Minneapolis/St. Paul. It includes comments from Barry Minkow, whose life once took a Ponzi turn.

    NOTE: Sir Allen Stanford now is accused of running a Ponzi that was larger than even the alleged Petters’ Ponzi. Stanford’s alleged crimes also are dwarfed by the Madoff Ponzi.

    Stanford was regarded as a sort of king of Caribbean banking, perhaps particularly on the island nation of Antigua.

    Federal prosecutors say ASD’s Bowdoin told the Secret Service that the company had $1 million in an account under a different name on Antigua. The claim was strange, considering that Bowdoin had told members in 2007 that he could not pay them because his purported advertising company had become insolvent after it overpaid members and was looted by the previously mentioned “Russian” hackers.

    The claim became Ãœber Strange in 2008, when Bowdoin asked a federal judge to free up $2 million from the tens of millions of dollars seized because ASD could not pay its hosting bill or rent or employees and had no money to implement a compliance plan — while apparently forgetting he had told the Secret Service about the $1 million on deposit in Antigua.

    Some of Bowdoin’s friends and employees remained staunch allies, always willing to support the company, call the prosecutors Nazis, diss doubters and even work for free to demonstrate their loyalty to the boss.

    An employee of Allen Stanford had a different idea about how to behave when a company’s words could not be reconciled with its actions.

    Charles Satterfield, an investment adviser, couldn’t make sense of things in the months after he joined Stanford Financial Group in 2005 as managing director of fixed income.

    Stanford stressed sales of its CD, regardless of the profiles of its customers. Old ladies were to be sold CDs. Young mothers were to be sold CDs. All people in between were to be sold CDs — at the virtual exclusion of all other financial products that perhaps were better suited for the unique situations of individual customers.

    On a business trip? Sell the CD. Sitting down with Grandpa or Junior? Sell the CD.

    When Satterfield asked his bosses to reduce their instructions to writing, he was fired the next day.

    He told the Financial Industry Regulatory Authority (FINRA) in 2007 that some strange things were going on inside Stanford Financial Group. The company said no — that Satterfield had gotten it all wrong, that he was incompetent and disgruntled.

    Satterfield was described as disloyal, incapable of recognizing that tremendous growth at companies causes problems and that the problems sort themselves out in the end.

    The experience of Charles Satterfield at Stanford will sound like a familiar refrain to many people who have followed the AdSurfDaily saga and observed a pattern of dissing critics as though they were simpletons, marginalizing their voices and authoring ad hominem attacks — before ostracizing them completely and banning them to the hinterlands.

    Read this column on Charles Satterfield by Al Lewis of Dow Jones Newswires, as it appears in the Denver Post. It is an eye-opener.