PatrickPretty.com

Category: Writing And Branding

  • UNACCEPTABLE: ‘Hopefully One Day He Will Pick The Wrong Target And . . . Someone Will Take A Shotgun To Him,’ Internet Marketer Says About ‘Salty Droid’ Author

    DISCLOSURE: I was a volunteer Moderator at the Warrior Forum (WF) between December 2007 and July 2008. I learned what is best — and worst — about Internet Marketing at the WF. Just as my Mod days were coming to an end, the AdSurfDaily Ponzi scheme case was coming to the fore — and Internet Marketers raced to the forum to “defend” the business.

    UPDATED 11:13 P.M. EDT (U.S.A.) The author of The Salty Droid, a Blog that unapologetically skewers highly questionable Internet Marketing practices and some of the trade’s most visible figures, was made the subject of a death wish Aug. 17 by a poster at the Warrior Forum (WF).

    “Hopefully one day he will pick the wrong target and that someone will take a shotgun to him,” wrote Robert Puddy, a well-known marketer. The post was in response to a poster who apparently committed the high crime of making a favorable comment about The Salty Droid.

    The PP Blog, which itself has been the subject of threats by Internet Marketers, strongly condemns the event at the WF, the actions of Puddy and attempts to chill by force of threat reporters and Bloggers who write about IM-related issues.

    Suggesting a human being should be executed by shotgun for his critical point of view about Internet Marketing is thuggery. That Puddy, who provides Internet Marketing training and is regarded an expert, even could suggest that death was an appropriate penalty for a Blogger who opines that some Internet Marketers engage in anticompetitive and racketeering-like marketing practices is a matter for great introspection.

    So much for having a sense of the moment — or any PR savvy at all.

    A number of Internet Marketers have been implicated in racketeering schemes or found themselves squaring off against racketeering indictments or lawsuits in recent months. Andy Bowdoin of Florida-based AdSurfDaily, for instance, was sued by his own customers for racketeering. One of Bowdoin’s attorneys also was sued for racketeering in the same case, which was placed on hold until the federal Ponzi case against ASD plays out. At least one ASD member was successfully sued for racketeering in Utah for participating in a scheme to place bogus judgments for astronomical amounts against  public officials.

    The ASD member — Curtis Richmond — sat as an “arbitrator” on a bogus panel set up by a bogus “Indian” tribe and signed a bogus “award” for more than $300,000 against a Family Services worker. Not to be outdone, Richmond claimed the federal judge hearing the Utah case owed him $30 million.

    Richmond later claimed the federal judge overseeing the ASD case was guilty of “TREASON.” Dozens of Internet Marketers attempted to intervene in the case, filing pleadings from a kit. The pleadings, including one that claimed the government was guilty of interference with commerce for seizing the proceeds of an alleged crime, were downright bizarre.

    Now, Puddy, an Internet Marketer, opines that death is the answer for what he apparently believes should be the entire industry’s problem with The Salty Droid — as though monolithic thinking is the only option and that any person who believed the author could be right about anything should be shouted down and ridiculed.

    Adopting an ad hominem approach, Puddy, the marketing trainer and expert, called The Salty Droid fan an “idiot” — apparently for suggesting the author even could frame a point worth pondering over.  He then called the Salty Droid author a “disgusting little worm,” opining that the author uses “innuendo and false info to slag off other people.” He did not provide any example or any support material to back up his claim The Salty Droid dispensed innuendo and false info. Puddy concluded his comment with the shotgun remark, later denying he was angry when posting it.

    In a later comment, Puddy claimed he knew of two “people who [received] physical threats of violence [because] of the lies on that blog.

    “In one case,” Puddy claimed, “the [person’s] family was also included in the threat.”

    The Salty Droid (SD) author, who was made aware of Puddy’s remarks when contacted by the PP Blog for comment, said he was not surprised that violence had become part of the discussion.

    “I don’t doubt that the scammers also receive threats from the same type of persons that are threatening me,” SD said. “People can react in scary ways when they find out they’ve been the victim of the long con.”

    Puddy’s incendiary comment was posted Aug. 17 and escaped deletion on the WF for days. The comment finally disappeared either late Saturday or early Sunday. How and why it disappeared were not explained. Comments left by the PP Blog and other posters who challenged Puddy also disappeared.

    The PP Blog, which retained its Warrior Forum membership after giving up a volunteer moderator’s job in July 2008, challenged Puddy on his shotgun comment Saturday. The Blog was not alone in challenging the inflammatory remarks. Indeed, other WF members — including long-standing members — also challenged Puddy. Three WF members thanked the PP Blog in the forum for challenging Puddy’s assertion that The Salty Droid author should have a date with death by shotgun blast.

    At least three WF posters asked Puddy to retract his remarks.

    “I stand by my comments,” Puddy said, suggesting that WF members and others who disagreed with him are “brain dead.”

    By coincidence, “brain dead” was the exact same phrase members of ASD used to describe the federal judge presiding over the Ponzi litigation brought by the U.S. Secret Service in August 2008. The word choice did not go over well in the ASD case, either. Nor did Internet Marketers’ explanation that the case against ASD by the Secret Service and federal prosecutors was the work of “Satan” and the equivalent of the 9/11 terrorist attacks on the United States.

    Saturday,  indeed, was another a dark day for Internet Marketing, which already has a miserable reputation for scamming, turning a blind eye to scammers, advocating on behalf of scammers and closing ranks when one of its own is challenged by prosecutors or web critics.

    Although some Internet Marketers — including members of the Warrior Forum — speak out routinely against scams and shady or illegal marketing practices, they often are derided as jealous “haters,” whiners, malcontents and people who cannot stand “success.”

    SD told the PP Blog that he routinely has been subjected to threats.

    “That happens to me all the time,” SD said.  “They threaten with me with all sorts of horrible atrocities . . . in public and in private. They also talk amongst themselves about the possibility of my death with fondness . . . and regularly . . . this in rooms that contain crazily loyal sycophants/cult followers.”

    That the “conversation” at the WF “so quickly deteriorated to that level says pretty much everything you need to know about this ‘industry,’” the SD said.

    Read a recent post titled “The Internet Marketing Syndicate” on The Salty Droid

  • COMING SOON: Author Of The ‘Salty Droid’ Blog Responds To Menacing Comment Made By Internet Marketer; ‘Shotgun’ Remark On Warrior Forum Seen As ‘Dangerous And Violent’

    Many of our readers know that the PP Blog has been subjected to threats, menacing behavior and cyberstalking. Later tonight, we’ll publish an editorial on a highly disturbing incident that occurred last week at the Warrior Forum (WF).

    The Salty Droid, a Blog that unapologetically skewers highly questionable Internet Marketing practices and some of the trade’s most visible figures, was made the subject of a death wish Aug. 17 at the WF.  The PP Blog strongly condemns the event at the WF, the actions of the Internet Marketer who made the incendiary comment and attempts to chill by force of threat reporters and Bloggers who cover IM-related issues.

    Suggesting a critic should be killed with a shotgun to silence his voice  is thuggery — plain and simple. It should not be tolerated. Period.

    Our editorial will include comments from The Salty Droid author.

    “They threaten with me with all sorts of horrible atrocities,” he said about some Internet marketers, observing that the trade has “crazily loyal sycophants/cult followers.”

  • BULLETIN: FTC Charges Central Coast Nutraceuticals In Acai-Berry Fraud Case That Alleges Overbilling And ‘Fake Endorsements’ From Oprah, Rachel Ray

    This website was part of a $30 million acai-berry scam that offered purported "free trials," overbilled customers repeatedly and fraudulently traded on the names of Oprah Winfrey, Rachel Ray and other celebrities and well-known brands, the FTC alleged.

    UPDATED 4:56 P.M. EDT (U.S.A.) Calling the operations of Arizona-based Central Coast Nutraceuticals Inc. (CCN) and affiliated companies a “$30 million” scam in 2009 alone, the Federal Trade Commission has obtained a court-ordered asset freeze in an acai-berry fraud case.

    Charged along with CCN were Graham D. Gibson, Michael A. McKenzy and four companies that shared the same Phoenix street address : iLife Health and Wellness LLC; Simply Naturals LLC; Health and Beauty Solutions LLC; and Fit for Life LLC.

    The FTC’s case file includes statements from Oprah Winfrey’s Harpo Inc. and author and TV personality Rachel Ray that they never endorsed acai-berry products as the alleged scammers claimed and that their intellectual property was being abused.

    The FTC’s action may send shockwaves across Internet Marketing slime pits, which routinely trade on celebrity names to sanitize “business opportunities” that imply famous people and entities endorse offers that appear online.

    At the same time, the FTC action may have a chilling effect on online hucksters who make misleading or unproven claims that their products cure anything from cancer to obesity.

    A big part of the scheme centered on bogus “free trial” offers and corrupt billing practices in which “numerous unauthorized charges” were made to customers’ credit-cards and debit cards, the FTC alleged.

    Another part of the scheme centered on false claims that using a product known as AcaiPure “could lead to rapid and substantial weight loss,” the FTC charged.

    “Too many ‘free’ offers come with strings attached,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “In this case, the defendants promised buyers a ‘risk free’ trial and then illegally billed their credit cards again and again — and again.”

    Vladeck said the FTC estimated “that about a million people have fallen victim to this scam,” with the scheme spreading in part owing to the fraudsters’ use of “fake endorsements” from Winfrey and Ray.

    “Ms. Oprah Winfrey has never endorsed or approved AcaiPure,” said Douglas J. Pattison, chief executive officer of Harpo Inc.

    In fact, Pattison said in court filings, Winfrey “has never endorsed any acai berry supplement or acai berry related product by name” and “has never approved or agreed to have her image or name used in conjunction with the sale and marketing of any acai berry related product.”

    Winfrey sued more than 40 companies for trademark infringement last year, amid claims scammers were using her image and brand to fleece the public.

    For her part, Ray said in court filings that she, too, had been victimized by Internet Marketers who used her image and brand to pull off fraud schemes.

    “I did not approve or agree to the use of my name or my image on this website. . . . I have never used, endorsed or approved AcaiPure. I am not associated with nor do I endorse or approve any acai berry product, company or online solicitation of such products, including AcaiPure,” Ray said.

    In another move that may cause great unease in the part of the Internet Marketing landscape that entitles itself to divine testimonials and plant the seed that famous people endorse their fraudulent offers, the FTC included photos of the websites and shared a video that allegedly made fraudulent claims.

    Visit the FTC website to view the video.

  • BULLETIN: Florida-based XM Brands Inc., Kenneth Jacobi Named In North Dakota Cease-And-Desist Order That Alleges Deceptive Trade Practices, Refusal To Cooperate In Probe; Firm Sells Acai Berry, Teeth-Whitening Products

    BULLETIN: (UPDATED 6:10 P.M. EDT (U.S.A.) North Dakota Attorney General Wayne Stenehjem has issued a cease-and-desist order against Kenneth Jacobi and his company, XM Brands Inc., amid allegations of deceptive trade practices in the sale of acai berry and teeth-whitening products on the Internet.

    Jacobi’s enterprises are based in Hollywood, Fla. In the order, North Dakota said it also had “concerns about the safety and efficacy of the products” sold by Jacobi and XM Brands and warned participants in the business not to destroy evidence.

    “Efficacy” means effectiveness.

    “XM Brands’ deceptive marketing practices are a ruse to trick consumers into unwanted or unauthorized purchases,” Stenehjem said. “Making it worse, because consumers often purchase the products via pop-up websites, it is very difficult for them later to locate the website to cancel.”

    The PP Blog visited three websites referenced in the order by their URLs. All three sites — VividWhiteSmiles.com, MyEverBriteSmile.com and DazzlingWhiteSystem.com — were registered behind a proxy. North Dakota investigators said Jacobi and XM Brands “are believed” to own the sites.

    The alleged scheme featured “free trial” or “negative option” marketing practices that tricked consumers and trapped them into making unwanted and unauthorized purchases, investigators said.

    “Consumers unknowingly are enrolled by XM Brands in a membership program with automatic future shipments of products, and XM Brands charges the consumer’s credit card the full price of the product each month until the consumer is eventually able to cancel the enrollment,” Stenehjem said.

    In the order to cease and desist, the state alleged that XM Brands and Jacobi “have refused to provide responses and produce documents” requested by the state after it launched an investigation May 6.

    Parrell Grossman, director of North Dakota’s Consumer Protection division, advised consumers to be on the look out for scammers.

    “Teeth whitening, anti-aging, acai berry, and diet pill products lend themselves to deceptive ‘free trial’ or ‘negative option’ marketing techniques,” Grossman said. “Steer clear of deceptive website solicitations and instead talk to your dentist, health care provider, or local health food store about safe and effective solutions.”

    XM Brands is awash in a sea of complaints, North Dakota investigators said.

    “One Better Business Bureau in Florida received over 1,000 complaints against XM Brands last year alone,” Stenehjem’s office said.

    Florida also is investigating XM Brands, according to the website of Attorney General Bill McCollum. The Better Business Bureau of Southeast Florida and the Caribbean says it is compiling information on the firm and has received “numerous” complaints.

    As of today, the BBB website referenced 1,387 complaints against XM Brands.

    Read the cease-and-desist order, which references a number of names that may be associated with Jacobi’s business. The order applies to the businesses and their “officers, directors, owners, agents, servants, employees and representatives.”

    Jacobi and XM Brands are “liable for their own misconduct and/or for directing others to engage in misconduct,” according to the order. The state issued a warning in the order that destruction of evidence or hiding documents and records could result in criminal prosecution.

  • SEC: Oil-And-Gas Scammer Paid Belize Company For Ad That Ran On CNBC, Fox Business News; Offer Proved To Be Fraudulent; Jon C. Ginder Charged In Emergency Action

    A Texas man paid a Belize company to produce ads that ran on CNBC and Fox Business News for his oil-and-gas venture, but the offer proved to be fraudulent and the SEC has filed an emergency court action to stop the scheme, the agency said.

    Jon C. Grinder of Houston used “at least” $210,000 of investor funds to pay the offshore firm to launch the TV ads, which claimed investors could earn annual returns of up to 40 percent from “low risk producing wells.”

    Ginder personally called prospects who responded to the ads. The SEC described the scheme as multilayered, saying Ginder “fraudulently raised approximately $3.5 million from over 50 investors nationwide through three unregistered oil and gas limited partnership offerings.”

    Investors were told their money would be used to purchases leases and renovate existing wells to enhance production, amid claims that “historical oil and gas data” suggested production would surge once the properties were improved.

    The SEC described the claims as “wildly optimistic” and “fraudulent on their face” because “the historical oil and gas production from the partnership leases was very poor” and “many of the wells had no recent production history.”

    In one of the offerings, annual production was estimated at 91,000 barrels even though the wells had produced a total of only 67,000 barrels in the preceding 15 years.

    “There were no reserve reports or any other credible basis upon which he could form a reasonable belief that the wells could be reworked to yield a production rate in a single year that would exceed over 135 percent of the prior combined 15 years[‘] worth of productivity,” the SEC said.

    During the first year of the venture (2008), total production after several wells “purportedly” were reworked topped out at only about 3,522 barrels — a far cry from the projection of 91,000 barrels, the SEC said.

    In 2009, the agency said, production topped out at about 3,986 barrels.

    Ginder continued to raise funds based on the same “false and misleading” projections through March 2010, while also failing to disclose the venture was operating at a loss, the SEC said.

    But production misrepresentations were only part of the scheme, the SEC said.

    Ginder, according to the agency, also used investor funds to provide an unauthorized, interest-free loan of $300,000 to a penny-stock company “founded by his friend and in which Ginder owned stock.”

    The penny-stock firm “failed to repay the loan,” the SEC said.

    Ginder also did not disclose that $800,000 in investor funds were used to purchase leases from a private company he controlled, netting him a cash profit of $700,000 and 10 “partnership units” worth $60,000 each, the agency charged.

    All in all, Ginder netted $1.3 million from self-dealing, the SEC alleged.

    The SEC has asked a federal judge to freeze Ginder’s assets, along with the assets of two related companies: Northamerican Energy Group Inc. (NEG) and Northamerican Energy Group Corp. (NEGC). The agency alleged that the scheme operated between February 2008 and May 2010.

    Read the SEC complaint.

  • DEVELOPING STORY: Online Claims About Acai Berry On FTC’s Radar Screen; Agency To Announce Action Against ‘Internet Marketers’ Next Week In Chicago (Oprah’s City)

    In this YouTube promo for Data Network Affiliates (DNA), the images of Donald Trump and Oprah Winfrey streamed for 10 continuous minutes. There is no evidence that either celebrity endorsed the company. Claims also were made on YouTube that Apple Inc. had a special "branding" relationship with DNA. No evidence to support the claim has surfaced.

    In 2009, Oprah Winfrey sued more than 40 companies for trademark infringement amid claims they were fleecing the public by implying she endorsed their Acai berry products.

    Winfrey, an American television and business icon, is based in Chicago. Harpo Productions, which produces The Oprah Winfrey Show and The Dr. Oz Show, filed the infringement lawsuit on behalf of Winfrey and Dr. Mehmet Oz, a heart surgeon.

    “Neither Ms. Winfrey nor Dr. Oz has ever sponsored or endorsed any acai, resveratrol or dietary supplement product and cannot vouch for their safety or effectiveness,” Harpo said on the Oprah website last year. “It is our intention to put an end to these companies’ false claims and increasingly deceptive practices.”

    Oz issued a statement last year on the Oprah site, saying scammers were using his name to swindle the public.

    “The companies that are using my name to hawk these products are duping the public,” Oz said. “I do not endorse any of these products. By falsely presenting products as ‘scientifically proven’ and endorsed by well-known figures, these companies do a gross disservice to the public health and could even pose a danger to those who believe their false and unproven claims. I am taking this step in the interest of public safety. I feel compelled to stand up against these companies and their deceitful practices.”

    The Federal Trade Commission announced today that its Chicago office will announce an “action against Internet Marketers of Acai berry weight-loss pills and ‘colon cleansers.’” The FTC announcement is expected Monday.

    It was not immediately clear if the agency’s decision to announce the news in Chicago was a coincidence. What is clear is that Winfrey’s name often is appropriated by scammers or purveyors of questionable “business opportunities” and products and services in a bid to leech off her brand  and drive sales.

    It also is clear that Illinois Attorney General Lisa Madigan is taking action against firms that falsely state or imply their products are endorsed by celebrities. The names of Winfrey and Oz are mentioned in three lawsuits Madigan filed last year.

    Other celebrity names mentioned in the Illinois lawsuits, which alleged deceptive trade practices for the manner in which products were marketed and customers were approached and billed, include Rachel Ray, Gweneth Paltrow, Courtney Love and Eva Longoria-Parker.

    Madigan said scammers linked the names of celebrities to purported deals that involved free trials and claims of weight loss.

    “For thousands of dieters, the quest for a miracle product has become a nightmare,” Madigan said last year. “Far too often, consumers end up losing their money — not  weight — in these deals.”

    The attorney general did not mince words when describing bogus marketing practices.

    “We must hold these Internet scammers accountable for their role in a seedy marketing game that steers unsuspecting consumers to online schemes,” Madigan said. “We also need to send a clear message to other marketers and networks in the business of designing misleading, traffic-enticing schemes.”

    Earlier this year, Winfrey’s image appeared for 10 consecutive minutes in a YouTube video pitch for Data Network Affiliates (DNA), which purports to assist law enforcement in locating abducted children. The image of Donald Trump, another American business and entertainment icon, appeared in the same pitch.

    Other YouTube pitches for DNA implied that the company had a special, cell-phone branding deal with Apple Inc., which brought the world the iPhone.

    Neither the Winfrey organization nor the Trump organization returned calls from the PP Blog earlier this year. Apple also did not return calls.

    It is common for multilevel-marketing (MLM) participants to make fantastic claims about products, including false claims they are endorsed by celebrities and captains of industry.

    The ad for DNA that included Winfrey’s image appeared months after she filed the lawsuit in the Acai berry cases last year. One DNA pitchman said in a conference call earlier this year that the company  had “certain people on speed dial that’s incredible.”

  • BULLETIN: Data Network Affiliates Gets ‘F’ From BBB After Purported Data Firm Did Not Respond To Complaints

    BULLETIN: The Better Business Bureau of Southeast Florida and the Caribbean has given Data Network Affiliates (DNA) an “F” rating after the company failed to respond to complaints.

    DNA, a purported multilevel-marketing (MLM) firm, publishes a street address in Boca Raton, Fla., on its website. The BBB’s file on DNA lists the Boca Raton address.

    DNA now joins Dallas-based Narc That Car, also known as Crowd Sourcing International, in the lineup of purported license plate data gathering firms to have received an “F” from the BBB. The “F” rating is the BBB’s lowest on a 14-step rating scale.

    Separately, bizarre events at DNA continue to occur. Earlier this year, DNA purported to be in the business of gathering license-plate numbers to assist law enforcement in locating abducted children. In a conference call, a DNA pitchman criticized the AMBER Alert program, claiming it had a bloated budget. The same pitchman recommended that members gather license-plate data at “churches” and “doctors’ offices,” triggering concerns that DNA’s business model could lead to untenable invasions of privacy.

    It is far from clear that DNA has any capacity to help law enforcement locate missing kids. The company’s domain name is registered in the Cayman Islands. Earlier this year, DNA claimed the offshore address was arranged through a domain registrar so company executives would not have to put up with “stupid” calls.

    DNA later declared itself the world’s low-price leader in the cell-phone business, before acknowledging that it had not studied pricing before announcing it could offer an “unlimited” plan for $10 a month, including a free phone.

    DNA later said it also had ventured into the businesses of selling a purported spray to be applied to license plates that would prevent motorists from getting tickets if they ran a red light at an intersection equipped with a camera — all while purporting to support law enforcement.

    The company also announced it had ventured into the mortgage-reduction business, claiming churches had the “MORAL OBLIGATION” to support the program.

    In July, DNA asked existing members to pretend the company had not launched in March, asking them to “Make believe that July 26th, 2010 is the LAUNCH DATE for DNA…”

    DNA than rescheduled the make-believe launch to Aug. 9. It is unclear if the imaginary launch occurred as advertised.  A countdown timer set for Aug. 23 now appears on the website.

    Meanwhile, the company appears to have renamed its Business Benefit Package, which once used the acronym BBP, to the BBB. BBB is the acronym used by the Better Business Bureau.

    DNA regularly employs capital letters to stress sales points in pitches to members.

    “Please attend our next WEBINAR it will CHANGE YOUR LIFE,” DNA said in a recent email, which also included a pitch for products described as the “DNA Photo Blocker & The DNA $5.95 TELE-FAX BOX.”

    It was not immediately clear if the product advertised as “DNA Photo Blocker” was the same product previously advertised as “DNA Protective Spray.”

    Visit the BBB site.

  • ‘Con Artists’ Who Ran Domain-Renewal Scam Hit With $4.2 Million Judgment; Thousands Of Website Owners Tricked Into Paying Bogus Bills, FTC Says

    Thousands of U.S. consumers, businesses and nonprofits were tricked into paying “bogus bills” for the renewal of their website domains by “con artists” in Canada, the FTC said.

    A federal judge now has issued judgments of more than $4.2 million against the accused scammers. In the cases of three defendants, the judgment was suspended based on their inability to pay. A fourth defendant, Steven E. Dale, was ordered to pay the full amount of $4.2 million.

    The sum is “immediately due and payable,” ruled U.S. District Judge Robert M. Dow Jr.

    Consumers were led to believe they would lose their website addresses unless they paid invoices, which proved to be bogus. Another part of the scheme featured a claim that a “Search Optimization” service would “direct mass traffic” to consumers’ sites and that a “proven search engine listing service” would help consumers gain “a substantial increase in traffic,” the FTC said.

    “[M]ost consumers who paid the defendants’ invoices did not receive any domain name registration services,” the FTC said, adding that the “search optimization” service “did not result in increased traffic to the consumers’ Web sites.”

    Read the announcement from the FTC.

  • EXPLOSIVE REVELATION: FBI, IRS Find More Than $400,000 In Stashed Loot In Trevor Cook Ponzi Case, Including More Than $200,000 In $100 Bills, Gold Coins, Watches, Baseball Cards

    Part of the loot the FBI and the IRS found under the alleged control of Graham Cook on July 23.

    Trevor Cook’s brother was hiding more than $400,000 in cash and valuables from a $190 million Ponzi scheme, according to an extraordinary statement by the court-appointed receiver in the case.

    The loot was found July 23 — after Trevor Cook, whose plea agreement in the case required him to submit to a lie-detector test if requested by the government — “flubbed” the test, according to the Star Tribune of Minneapolis/St. Paul.

    Graham Cook, Trevor Cook’s brother, has not been charged in the case. But the revelation that proceeds from the scheme allegedly were under his control and concealed for months from investigators and two federal judges presiding over elements of the case raise troubling, new questions about Trevor Cook’s capacity to tell the truth in any context and whether Cook and others had stashed money elsewhere.

    Trevor Cook was jailed in January by Chief U.S. District Judge Michael J. Davis for concealing assets and spending money frozen by court order on Nov. 23, 2009. Davis, who is presiding over the civil elements of the case filed by the SEC and the CFTC, said the government had established that Cook had violated the court order.

    Another part of the loot.

    At the time, Cook made a technical argument that he had not been properly served in the case at the Van Dusen mansion in Minneapolis on Nov. 24 and thus was not bound to follow the order, a position that gave short shrift to the hundreds of victims in the case, some of whom had been rendered destitute.

    Victims complained that Cook was thumbing his nose at both the court and investors. Cook also asserted his 5th Amendment right against self-incrimination, which caused victims to wonder what else he could be hiding.

    Davis did not buy any of Cook’s story, and jailed him.

    “[C]opies of said Orders were shown to Cook, and the relevant portions of the Orders were explained to him by the Receiver” on Nov. 24, 2009, Davis ruled. Regardless, Cook later used frozen assets to purchase $7,510 in gift cards from Cub Foods and $16,000 in gift cards from Target.

    “Given the amount of investor money at issue, and Cook’s repeated violations of the Asset Freeze Orders, the Court finds that the appropriate remedy for the contempt finding in this case is to incarcerate Cook until such time as he purges such contempt.”

    Jail was an appropriate remedy for Cook, even in a civil case, a top SEC official said at the time.

    Sports collectibles, such as this baseball card of Minnesota Twins' immortal Kirby Puckett, also were part of the stash.

    “Mr. Cook has elected to disregard the court’s orders and will now be a guest of the federal correctional system until he mends his ways,” said Merri Jo Gillette, director of the SEC’s Chicago Regional Office.

    In March, while Cook was jailed in the civil case, prosecutors charged him criminally with mail fraud and tax evasion, opening up a new round of litigation over which U.S. District Judge James M. Rosenbaum is presiding.

    Cook pleaded guilty to the criminal charges in April. His plea required him to take a lie-detector test “if requested” by prosecutors to determine “whether he has truthfully disclosed the existence of all of his assets and the use of the fraud proceeds.”

    It is believed the test was administered in mid-July, prior to Cook’s scheduled sentencing date of July 26. Sentencing has been postponed until Aug. 24, and Rosenbaum may have to determine whether Cook once again has thumbed his nose at the court, prosecutors, victims and the receiver in a bid to prevent the discovery of funds that could be used to make the victims as whole as possible.

    The discovery of the funds also raises questions about whether Cook failed to disclose the whereabouts of assets in a bid not to implicate others in the scheme.

    The stash also included Rolex and other expensive watches.

    Cook’s plea agreement also required him to to “fully and completely disclose to the United States Attorney’s Office the existence and location of any assets in which he has any right, title, or interest and the manner in which the fraud proceeds were used.”

    Prior even to Cook’s polygraph exam, R.J. Zayed, the court-appointed receiver, raised questions about Cook’s cooperation and level of truthfulness. The plea agreement, as written, conceived a 25-year sentence for Cook, although prosecutors said Rosenbaum had the final say.

    Victims fretted that Cook, who is in his late thirties, could emerge from prison as a relatively young man in his early sixties and have access to money that had been hidden from the court, investigators and the receiver.

    Zayed now says that federal prosecutors, the FBI and the IRS found the hidden loot July 23.

    Seized from Graham Cook were “$202,600.00 in cash, 2891 gold and silver coins, 27 watches, some sports memorabilia cards and other personal property belonging to the Receivership,” Zayed said yesterday.

    “A rough estimate of the value of the coins is approximately $200,000.00 to $225,000.00,” Zayed said.

    Read the Star Tribune story.

    Read this PP Blog story from April in which victims said they believed Cook was lying about the whereabouts of assets.

    Read this June PP Blog story in which Cook victims said they sought a meeting with prosecutors to delay Cook’s sentencing until more facts emerged. Victims said they feared he stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

    Read this July 12 PP Blog story in which a source told the PP Blog that Cook would be subjected to a lie-detector test.

    Read Zayed’s remarkable statement and see photos of the loot.

  • SEC: Felons, Recidivists Pushed ‘Green’ Energy Securities Swindle Through California ‘Boiler Room’; 6 People Charged In $11 Million Fraud Case

    About 200 investors turned over $11 million to a boiler-room operation selling investments in a purported “green” energy company, the SEC said.

    The alleged swindle in which Kensington Resources Inc. sold unregistered shares of American Environmental Energy Inc. (AEEI) was pulled off by a convicted felon with the help of a recidivist securities offender, the SEC alleged.

    Also charged in the case was yet-another convicted felon who was sentenced to federal prison more than a decade ago for telemarketing fraud, along with yet-another recidivist securities fraudster sued by the SEC in in 1998, according to records.

    All in all, the SEC charged six people in the alleged boiler-room caper:

    • Joseph Rudolph Porche, 51, of Aliso Viejo, Calif. Porche, one of two alleged ringleaders and the former chief executive officer of Kensington, pleaded guilty in 2001 to four counts of mail fraud and was sentenced to 37 months in prison, the SEC said. Federal records show he was released from prison in 2003.
    • Larry Ray Crowder, 53, of Newport Coast, Calif. Also named a ringleader by the SEC, Crowder is Kensington’s former president. Crowder was charged by the SEC in 1998 with raising at least $15.7 million from more than 600 investors in an oil-and-gas venture. The oil-and-gas scheme involved misrepresentations in the sale of limited partnerships, the SEC said.
    • Gary Kennan Juncker, 47, of Rancho Santa Margarita, Calif. Juncker is a former senior vice president at Kensington. In 1998, according to records, Juncker was convicted on four counts of mail fraud in a telemarketing scheme and was sentenced to 30 months in prison. Federal records show he was released from prison in 2000.
    • Dale Jay Engelhardt, 46, of San Clemente, Calif. Engelhardt, a former member of Kensington’s sales staff, was one of Crowder’s co-defendants in the 1998 swindle, the SEC said.
    • Konrad Christian Kafarski, 40, of Trabuco Canyon, Calif. Kafarski is the former senior vice president of business development at Kensington.
    • Carlton Ladell Williams, 51, of Coto de Caza, Calif. Williams is a former senior vice president at Kensington.

    “Most of the funds raised were kept by Porche and Crowder to fund their lavish lifestyles and only $315,000 of the $11 million raised went to AEEI,” the SEC alleged.

    AEEI was a penny stock. The 1998 case in which Crowder and Englehardt were charged involved a company that went by the acronym “EEI,” which stood for “Environmental Energy Inc.,” according to the SEC.

  • BULLETIN: Montana Declares ACN Inc. A ‘Pyramid Scheme’; Cease-And-Desist Order Issued Amid Allegations Deck Is Stacked Against MLM Participants

    BULLETIN: ACN Inc., a North Carolina-based multilevel-marketing company that bills itself “The World’s Largest Direct Seller of Telecommunication Services,” has been accused by the state of Montana of operating a pyramid scheme.

    Monica J. Lindeen, Montana’s Commissioner of Securities and Insurance, has issued a cease-and-desist order against ACN and a Notice of Proposed Agency Action.

    “Pyramid schemes are immensely profitable to a few individuals at the top and a complete loss for almost everyone else,” Lindeen said. “The actions against ACN and its officers seek to shut down the company’s alleged unlawful operation before more people lose their hard-earned money.”

    Also named in the actions were Gregory Provenzano, Robert Stevanovski, Anthony Cupisz and Michael Cupisz, all officers and founders of ACN, according to Lindeen’s office.

    “[A]n overwhelming portion of revenues earned by ACN representatives was derived from participants who must personally buy a telephone service that does not work in many parts of Montana to become managers or recruit new participants into the program,” Lindeen’s office said.

    Investigators said the odds of making any money in ACN were overwhelmingly against participants.

    “In 2008, ACN recruited 91 Montana participants who paid approximately $61,741.69 to be a part of the program,” Lindeen’s office said. “Only two of the participants made any money, with one participant making $696 and the other making $700.”

    In the whole of 2009, according to investigators, Montana-based reps paid ACN nearly $239,000 to be a part of the program. The money came from more than 300 participants.

    “ACN’s records indicate a mere $896.86 was paid out in compensation to these participants,” Lindeen’s office said.