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  • KABOOM! Money-Services Firm That Turned A Blind Eye To International Scammers Will Forfeit $100 Million After Probe By U.S. Postal Inspection Service

    “MoneyGram knowingly turned a blind eye to scam artists and money launderers who used the company to perpetrate fraudulent schemes targeting the elderly and other vulnerable victims.” — Lanny A. Breuer, Assistant Attorney General, Nov. 9, 2012

    BULLETIN: The price of willful blindness just went up if you’re a money-services business that facilitates international mass-marketing fraud.

    A Dallas-based company that turned a blind eye to scammers using its money-transfer system will forfeit $100 million and has admitted “to criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program,” the U.S. Department of Justice said this morning.

    MoneyGram International Inc. and the Justice Department also have entered into a deferred-prosecution agreement in which the company will adopt “a worldwide anti-fraud and anti-money laundering standard” and implement other changes, the agency said.

    The case against MoneyGram was brought by federal prosecutors in the Middle District of Pennsylvania after a probe by the U.S. Postal Inspection Service.

    MoneyGram’s “broken corporate culture led the company to privilege profits over everything else,” said Lanny A. Breuer, assistant attorney general and head of the Justice Department’s Criminal Division.

    “Thousands of citizens in Pennsylvania and other states suffered heartbreaking financial losses for years because of these international telemarketing schemes which depended on MoneyGram’s facilities to give them an electronic highway to move their illegal profits quickly out of the country,” said U.S. Attorney Peter Smith. “The determined work of U.S. Postal Inspectors and federal prosecutors disrupted and closed that electronic highway, hopefully for good.”

    A top postal inspector said that scammers who took advantage of MoneyGram’s laxity targeted “the most vulnerable in our society.”

    “Businesses are supposed to provide their customers with fair and honest services,” said Karen V. Higgins, inspector in charge of the Philadelphia Division.

    From the Justice Department statement (italics added):

    According to court documents, starting in 2004 and continuing until 2009, MoneyGram violated U.S. law by processing thousands of transactions for MoneyGram agents known to be involved in an international scheme to defraud members of the U.S. public.  MoneyGram profited from the scheme by collecting fees and other revenues on the fraudulent transactions. 

    The scams – which generally targeted the elderly and other vulnerable groups – included posing as victims’ relatives in urgent need of money and falsely promising victims large cash prizes, various high-ticket items for sale over the Internet at deeply discounted prices or employment opportunities as “secret shoppers.”  In each case, the perpetrators required the victims to send them funds through MoneyGram’s money transfer system. 

    Despite thousands of complaints by customers who were victims of fraud, MoneyGram failed to terminate agents that it knew were involved in scams.  As early as 2003, MoneyGram’s fraud department would identify specific MoneyGram agents believed to be involved in fraud schemes and recommended termination of those agents to senior management.  These termination recommendations were rarely accepted because they were not approved by executives in the sales department and, as a result, fraudulent activity grew from 1,575 reported instances of fraud by customers in the United States and Canada in 2004 to 19,614 reported instances in 2008.  Cumulatively, from 2004 through 2009, MoneyGram customers reported instances of fraud totaling at least $100 million.

    “In addition to forfeiting $100 million, which will be used to compensate victims, MoneyGram must for the next five years retain a corporate monitor who will report regularly to the Justice Department,” Breuer said.

  • KGO-TV (ABC7/San Francisco) Has Video Of Americans Pledging Allegiance To ‘Shadow Government’

    This is not the American Flag; it is the flag on display at the October meeting of the purported California Assembly of the Republic for the united States of America. Source: From KGO-TV video.

    Tim Turner, the purported “President” of the “Republic for the united States of America,” is in jail — charged with trying to pay his taxes with “a fictitious $300 million bond and to have assisted others in attempting to pay their taxes with fictitious bonds purporting to be worth amounts ranging from $10 million to $100 billion,” the U.S. Department of Justice said in September.

    In October, KGO-TV (ABC7/San Francisco) took a camera to a meeting of the purported California Assembly of the Republic for the united States of America. The meeting was held in Visalia. An I-Team report by the station aired yesterday. It included video taken at the meeting and elsewhere.

    Some attendees of the Visalia meeting pledged allegiance to a flag other than the American Flag and recited an “oath of citizenship” to a country other than the United States, the station reported.

    Purported citizenship papers were symbolically stamped with a thumbprint in red ink to mimic a “blood oath,” the station reported.

    From the KGO-TV report (italics added):

    The group believes an act of Congress in 1871 made the U.S. government a private, for-profit corporation. Members say after that, Congress changed its oath of office and that means the republic can take over.

    Read the report. (The video report is below.)

  • UNBELIEVABLE: Now, A Scam Known As ‘Her Majesty’s Credit Union’ That Duped Investors By Falsely Claiming To Be Insured By Lloyd’s Of London And Backed By The Government, SEC Says

    The SEC’s complaint against “Her Majesty’s Credit Union” lists the URL for the purported CD business. This screen shot by the PP Blog was taken at the URL.

    A scammer known by three names who’d earlier presided over an “insolvent” credit union in Georgia before being forced out of business in eight months went on to start a bogus credit union in the U.S. Virgin Islands, the SEC said.

    The Virgins Islands enterprise was known as “Her Majesty’s Credit Union” (HMCU) and sold bogus CDs, duping investors by trading on the names of Lloyd’s of London and government entities to sanitize the fraud, the SEC said.

    Charged in the alleged $532,000 caper was Stanley B. McDuffie of Denver. McDuffie formerly was known as Stanley Roberson and Stanley Battle, the SEC said.

    “McDuffie and HMCU held out HMCU as a secure, legitimate, regulated credit union, promised to pay above-market interest rates, and assured investors that their deposits were insured by Lloyd’s of London or the U.S. Virgin Islands’ government,” the SEC said. “In reality, HMCU was an unregulated, illegitimate credit union that never held share insurance covering investor deposits, and McDuffie and HMCU misappropriated investors’ funds.”

    The Better Business Bureau record for HMCU notes a 2010 action by the Colorado Division of Securities against “Stanley B. Roberson.”

    Roberson “was sentenced to one year in jail after being found in contempt of a court order,” the BBB reported, citing Colorado authorities. “Mr. Roberson is the chief executive officer of Her Majesty’s Credit Union, a U.S. Virgin Island company with a servicing office in Denver.”

    In 2010, Fred Joseph, the commissioner of Colorado’s Division of Securities, put it this way (italics added):

    Mr. Roberson failed to produce documents pursuant to a lawful subpoena issued to him as part of our investigation of Her Majesty’s Credit Union. The Division of Securities then filed contempt proceedings in Denver District Court to compel production. Since its accounts are not federally insured, we are attempting to determine if Her Majesty’s Credit Union is offering only uninsured deposits or is engaging in the offer and sale of unregistered securities.

    The SEC today charged McDuffie with selling unregistered securities, saying in its complaint that McDuffie “misappropriated the funds for personal and business expenses, causing investors to lose most of their principal, and rendering it impossible for HMCU to make required interest payments.”

    McDuffie also allegedly clammed up to the SEC, the agency said. From the SEC complaint (italics added):

    After a subpoena enforcement action resulted in McDuffie being ordered by the Court to comply with the SEC’s subpoenas, McDuffie refused to testify in the SEC’s investigation, citing his Fifth Amendment privilege against self-incrimination in response to all substantive questions.

    Named a defendant in the SEC’s action against McDuffie was Jilapuhn Inc., the apparent operator through McDuffie of “Her Majesty’s Credit Union.”

    The defunct Georgia credit union was known as the “Jilapuhn Employees Federal Credit Union,” the SEC said.

    “In August 2005, after JEFCU had operated for only eight months, the [National Credit Union Administration] determined that JEFCU was insolvent, and therefore it issued a Notice of Involuntary Liquidation and Revocation of Charter,” the SEC said.

  • BULLETIN: Jared Lee Loughner Sentenced To Life In Federal Prison For Shootings That Claimed Lives Of Federal Judge, 5 Others — And Seriously Wounded Rep. Gabby Giffords

    Jared Lee Loughner, the Arizona man who advanced conspiracy theories and babbled about gold and currency prior to opening fire at a Saturday morning constituents’ event sponsored by former U.S. Rep. Gabrielle Giffords in Tucson, has been sentenced to life in federal prison.

    A news conference with federal prosecutors in the office of U.S. Attorney John S. Leonardo is under way in Arizona. (More details later.)

    Loughner’s murderous assault in January 2011 claimed the lives of U.S. District Judge John Roll and five others, including a nine-year-old girl, three senior citizens in their seventies and a 30-year-old Congressional aide engaged to be married. Rep. Giffords was shot in the head and nearly died. Her district director, Ron Barber, also was seriously injured. Barber later replaced Giffords, who still is recovering from her wounds and is living a life turned upside down, in Congress.

    The incident sparked a national outrage. President Obama issued a special statement from the White House and flew to Arizona, assuming the role of comforter-in-chief to a community overcome by grief.

    “I plead the Fifth,” Loughner reportedly said after being subdued by heroic bystanders and taken into police custody.

    Just last week, Barber attended an event to honor Christina-Taylor Green, the nine-year-old killed in the attack.

  • Barack Obama Reelected; Gov. Romney Gracious In Defeat

    A Tweet last night from the President of the United States. Source: https://twitter.com/BarackObama/status/266031293945503744/photo/1

    Barack Obama defeated Gov. Mitt Romney in the U.S. Presidential election yesterday. Romney, a prominent businessman and the former Massachusetts governor, first conceded the election in a private phone call with Obama — and then appeared before Romney partisans early this morning to thank them for their commitment to his candidacy and to concede publicly.

    “I have just called President Obama to congratulate him on his victory,” Romney said. “His supporters and his campaign also deserve congratulations. I wish all of them well, but particularly the president, the first lady and their daughters.

    “This is a time of great challenges for America, and I pray that the president will be successful in guiding our nation,” Romney said from Boston.

    A short time later, the President appeared on a stage in Chicago with the First Lady of the United States and their children.

    “I just spoke with Gov. Romney and I congratulated him and [GOP Vice Presidential Nominee] Paul Ryan on a hard-fought campaign,” the President said. “We may have battled fiercely, but it’s only because we love this country deeply and we care so strongly about its future. From George to Lenore to their son Mitt, the Romney family has chosen to give back to America through public service and that is the legacy that we honor and applaud tonight. In the weeks ahead, I also look forward to sitting down with Gov. Romney to talk about where we can work together to move this country forward.”

    George Romney is the governor’s late father; Lenore is his late mother. George, a business executive, served as Michigan’s governor between January 1963 and January 1969. He also served as U.S. Secretary of Housing and Urban Development. Lenore served as Michigan’s first lady during her husband’s governorship and ran unsuccessfully for the U.S. Senate in 1970. The Romney family tradition of public service has endured for 50 years — through both wins and losses in the political arena.

    The PP Blog congratulates President Obama and his family. And the Blog congratulates Gov. Romney and his family.

    President Obama, who was elected to his first term in November 2008 and was inaugurated in January 2009, will begin his second term on Jan. 20, 2013.

     

     

  • BULLETIN: British Ponzi Schemer Sentenced To 13 Years In Prison; Judge Cites Nicholas David Andrew Levene’s ‘Rank Dishonesty,’ Prosecutors Say

    BULLETIN: Nicholas David Andrew Levene, the 48-year-old London stockbroker and Ponzi schemer, has been sentenced to 13 years in prison, the Serious Fraud Office announced.

    His Honor Judge Beddoe ordered the sentence after Levene was convicted in September of 12 counts of fraud, one count of false accounting and one count of obtaining a money transfer by deception, the SFO announced.

    “It was a fraud from the outset, where countless lies were told,” the judge remarked at sentencing, according to the SFO. “It was rank dishonesty. There were separate acts of individual moments of betrayal.”

    Levene “used investors’ monies to finance a lavish personal lifestyle,” case manager Jonathan Midgley said. The scheme operated between January 2005 and October 2009, gathering more than £250 million from investors.

    Losses, according to the SFO, were estimated at more than £32 million — about $51 million (U.S.).

    Read the SFO statement.

    Read a story in The Independent, which reports Levene ripped off some “high-fliers.”

  • DEVELOPING STORY: Zeek Winners Begin To Receive Subpoenas

    Alleged Ponzi scheme Zeek Rewards wrapped itself in the American flag and symbols such as the American penny coin to attract business. The purported “opportunity”  has created problems for hundreds of thousands of members in the United States and other countries.

    The PP Blog has received a report that some members of Zeek have received subpoenas issued by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. The SEC alleged in August that Zeek was a $600 million Ponzi and pyramid scheme operated by Paul R. Burks and Rex Venture Group LLC.

    Receiver Kenneth B. Bell said earlier this week that a first round of about 1,200 subpoenas would be issued to “affiliates who profited most from ZeekRewards.”

    Early details are sketchy about precisely what information the subpoenas demand. Bell wrote on the receivership website that recipients “are required to fully respond to the subpoena.

    “If you do not have possession, custody or control of any of the documents requested simply say so in responding to the subpoena. However, you are required to make a full reasonable effort to locate all documents requested, including electronic documents and email,” Bell wrote.

    The issuance of the subpoenas demonstrates that online HYIPs dressed up as multilevel-marketing “programs” can — at a minimum — create civil exposure for participants. Profits received from such schemes are viewed as ill-gotten gains subject to clawback.

    In an Oct. 8 court filing, Bell advised Senior U.S. District Judge Graham C. Mullen that he planned to pursue Zeek winners and others through common-law and and clawback claims “under applicable fraudulent transfer statutes.”

    In addition to Zeek winners, potential clawback targets include Zeek officers, employees and professionals who benefited from the scheme, according to Bell’s Oct. 8 filing. As many as 100,000 people potentially received ill-gotten gains from Zeek, while about 800,000 Zeek members experienced losses.

    Zeek wrapped itself in the American flag while pitching its offer globally, claiming among other things that winners of its Zeekler auctions for sums of U.S. cash would be paid through offshore payment processors. North Carolina-based Zeek has never explained the striking incongruity of auctioning U.S. cash and offering to deliver it via payment processors linked to fraud scheme after fraud scheme promoted on Ponzi scheme forums such as TalkGold and MoneyMakerGroup.

    Auctions for cash mysteriously went missing from Zeek in June. On Aug. 4, 13 days before the SEC filed an emergency action to halt the alleged Zeek Ponzi scheme, the company publicly complained about “North Carolina Credit Unions” that were warning customers about Zeek.

    On June 5, the company bizarrely planted the seed that, if Zeek instructed members to change their preference in dispensing toilet paper, they should do it to demonstrate how coachable they are. Just days earlier — on May 28, Memorial Day — the company claimed it was closing two U.S. bank accounts and urged members to cash commission checks by June 1 or they would bounce.

    Zeek’s auction arm was known as Zeekler and was married to Zeek Rewards, the MLM side of the business. The SEC said in August that Zeek commingled funds and that Burks “unilaterally and arbitrarily” determined Zeek’s daily dividend rate so that it averaged “approximately 1.5% per day, giving investors the false impression that the business is profitable.”

    In 2008 and 2009, the U.S. Secret Service made similar allegations against AdSurfDaily and operator Andy Bowdoin. Bowdoin, 77, was charged criminally in December 2010. He pleaded guilty to a Ponzi-related charge of wire fraud in May 2012. Bowdoin was sentenced in August 2012 to 78 months in federal prison.

    ASD operated as an “autosurf” HYIP that planted the seed that members would receive a return of 1 percent a day.

    Precisely how many Zeek members live outside the United States and benefited from the scheme is unclear. In July, the PP Blog reported that a Zeek-related article carried on Google News claimed that Zeek had 100,000 members in Brazil alone.

    An issue that potentially could emerge in the coming weeks is whether the receiver will be successful in seeking clawbacks from non-U.S. members of Zeek who received more from the scheme than they put in. How many Zeek members fit the profile is not yet known.

    HYIPs that operate across borders on the Internet introduce the specter of international red tape and also potentially bring language barriers into play. In the days after the SEC brought the Zeek case, some purported international members of Zeek effectively thumbed their noses at the United States and Zeek victims, crowing on Ponzi-scheme forums that they’d keep their Zeek money no matter what.

     

  • Jury Returns Verdicts Against Purported Texas ‘Sovereign Citizen’ In Less Than 3 Hours; Patrick Cody Morgan Potentially Faces Decades In Jail After Conspiracy And Bank-Fraud Convictions In Condo Swindle

    Purported “sovereign citizen” Patrick Cody Morgan has been convicted of conspiracy and nine counts of bank fraud, prosecutors in the Southern District of Texas said.

    Morgan, 45, resides in Alvin. His trial lasted two days, and a jury returned the verdicts after deliberating for less than three hours, prosecutors said.

    The Morgan scam involved repeated bids to scam residential mortgage lenders and FDIC-insured banks between 2004 and 2007, prosecutors said.

    As part of a real-estate loans scam, “Morgan would locate condominium units in the Houston area from a builder or developer,” prosecutors said.

    After that, he “set up trust accounts with names similar to the condominiums” and coconspirators recruited straw buyers to get bank loans, prosecutors said.

    The properties then ended up in foreclosure, causing losses of more than $20 million, prosecutors said.

    From a statement by the office of U.S. Attorney Kenneth Magidson (italics added):

    Morgan chose to represent himself at trial, but the court appointed counsel to be available if Morgan had questions or needed assistance. Morgan responded to inquiries by the judge, throughout various hearings, with arguments that he was not subject to the jurisdiction or laws of the United States. Testimony in trial revealed these actions are part of the sovereign citizen movement.?

    Five Houston residents previously pleaded guilty to conspiracy in the scheme: John Elias, 44; Reginald Anderson, 41; Viktor Ly, 43; Minh Vu, 41; and Christopher Pearson, 34. They are scheduled to be sentenced in January.

    Morgan’s sentencing is scheduled for Feb. 4, with U.S. District Judge Lynn N. Hughes presiding. Morgan potentially faces decades in prison.

    Though initially freed on bond after he was charged, Morgan’s pretrial release was revoked “after the court found he had violated a condition of his release by failing to appear for his court setting,” prosecutors said.

  • UPDATE: Judge Grants Zeek Receiver’s Request To Treat Preliminary Liquidation Plan As Ponzi Case’s First Status Report

    Senior U.S. District Judge Graham C. Mullen has granted the request of the receiver in the Zeek Rewards Ponzi scheme case to treat the preliminary liquidation plan filed Oct. 8 as the first status report in the case.

    Receiver Kenneth B. Bell said earlier this week in court filings that the request, if granted, would save money. Mullen approved the request in an order today.

    The development means that Bell, who is in the process of issuing subpoenas to a first round of about 1,200 Zeek members believed to have been the biggest winners, will not be required to file another status report until the end of January.

    Potentially “thousands” of subpoenas to other Zeek members who took out more than they put in will follow the first round of 1,200, Bell said in a statement Oct. 30. (See Oct. 31 PP Blog story.)

    The SEC has described Zeek as a $600 million Ponzi- and pyramid scheme. Among other things, status reports inform judges about efforts to recover fraud proceeds and return them to victims. In the Zeek case, status reports from the receiver are due within 30 days of the close of a calendar quarter.

    See Bell’s Oct. 8 preliminary liquidation plan. (Courtesy of ASDUpdates Blog.)

    In September, the SEC said its Zeek probe was ongoing.

     

  • 76-Year-Old Texas Scammer Who Ran Ponzi Scheme While Awaiting Trial In Earlier Fraud Case Sentenced To 10 Years In Federal Prison

    First, Robert Hague-Rogers, 76, of Frisco, Texas, stole funds from pension plans, prosecutors said.

    Hague-Rogers operated Dallas-based HR Financial Services and HR Sales and Marketing, both of which were in the insurance business, prosecutors said. In February 2011, he was indicted on charges of directing “money transfers and cash withdrawals from and between himself and the benefit plan for his and his family’s personal benefit,” prosecutors said.

    He also “directed the preparation of documents purportedly legitimizing the transfers of such funds,” prosecutors said.

    While Hague-Rogers was on pretrial release two months after his indictment, investigators discovered he had hatched a Ponzi scheme in which “unauthorized loans” were taken against employer-sponsored health plans, prosecutors said.

    The money in the follow-up scam was used “to repay investors holding promissory notes with interest as high as 15%,” prosecutors said.  “[Hague-Rogers] would then move funds between the various plans and investors’ accounts, while paying himself and his family for personal expenses such as mortgages, life insurance policies and property taxes.”

    By April 18, 2011, the government had gained an asset freeze against Hague-Rogers. Three months later — in July 2011 — a federal grand jury returned a superseding indictment that charged him with wire fraud and healthcare fraud. In April 2012, he pleaded guilty to one count of conspiracy to commit theft or embezzlement from an employee benefit plan and one count of conspiracy to commit healthcare fraud, prosecutors said.

    U.S. District Judge Sam A. Lindsay now has sentenced Hague-Rogers to 10 years in federal prison and to forfeit more than $9.3 million.

    “I hope that this sentencing sends a clear message to all who hold an office of trust, or operate or administer employee benefit plans, that the Department of Labor is committed to vigorously pursuing those who abuse their positions and use trust funds for personal gain,” said Mark Alder, director of the Employee Benefits Security Administration’s Dallas Regional Office.

    The criminal case was brought by prosecutors in the office of U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.

    “This sentence should serve as an example of the consequences one will pay when people abuse the trust that has been placed in them and embezzle funds entrusted to their care,” said Saldaña.

     

  • SEC Issues Investor Alert: ‘Be On The Lookout For Investment Scams Related To Hurricane Sandy,’ Agency Says

    Hurricane Sandy pounded New Jersey, New York and other parts of the eastern United States this week. The New York Daily News, via the Associated Press, reported today that the storm’s death toll has reached 74 in the United States.  Reuters is reporting the death toll in “North America” has reached “at least 82.” The storm also reportedly killed at least 69 people in the Caribbean.

    In some areas, the storm knocked out power, heat, phone service, public transportation and gas stations — services that affect the lives of millions of people. It also caused devastating floods and fires. Some people do not have homes or businesses to go back to, and businesses that provide vital services to neighborhoods may be closed or inaccessible.

    Looting has occurred in some areas, and now the SEC is warning about flood-related theft of a different stripe: Scammers lining up to steal insurance proceeds from those left with little or nothing in Sandy’s wake — and investment-fraud schemes, Ponzi schemes and spam capers designed to separate people from their money whether they are storm victims or not.

    From an Investor Alert by the SEC today (italics added):

    Hurricanes, floods, oil spills, and other disasters often give rise to investment scams. These scams can take many forms, including promoters touting companies purportedly involved in cleanup efforts, trading programs that falsely guarantee high returns, and classic Ponzi schemes where new investors’ money is used to pay money promised to earlier investors. Some scams are circulated through spam email, promising high returns for small, thinly-traded companies that supposedly will reap huge profits from recovery and cleanup efforts. For example, the SEC brought a number of enforcement actions against individuals and companies who made false and misleading statements about alleged business opportunities in light of the damage caused by Hurricane Katrina. Some of those cases involved pump-and-dump scams where fraudsters use fake “news” to pump up the stock price of small companies so they can sell shares they own at artificially high prices. We also heard about fraudsters targeting individuals receiving compensation from insurance companies. Individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams related to Hurricane Sandy.

    Read the full Investor Alert, issued by the SEC’s Office of Investor Education and Advocacy.