Arthur G. Nadel, the Florida fund manager and Ponzi schemer who briefly went on the lam in the weeks after Bernard Madoff’s even-greater caper imploded, has died. Nadel was 80, according to the Federal Bureau of Prisons.
Nadel, sentenced in 2010 to 14 years in an elaborate fraud that operated between 1999 and 2009, died at the Butner Federal Correctional Complex, the same North Carolina facility that houses Madoff.
With America still largely unacquainted with the word “Ponzi” and trying to come to grips in late 2008 and early 2009 with the staggering dollar volume of Madoff’s crime, Nadel went missing from Sarasota.
Like Madoff, he was in his senior years and secretly had been presiding over a long-running, monumental fraud. The ages of the lead figures in the individual schemes and the combined dollar amounts — Madoff’s was in the billions and Nadel’s was in the hundreds of millions — caused investors nationwide to wonder if their trusted brokers and financial advisers were running scams.
Nadel emerged as one of the earliest of the so-called “mini-Madoffs,” as did Tennessee’s Dennis Bolze, who also went missing after the Madoff scheme collapsed. Bolze, then 60, later was arrested in Pennsylvania.
In January 2009, Nadel surrendered to the FBI. Investigators said he caused investors to suffer losses of $162 million.
“Through his massive Ponzi scheme, Arthur Nadel greased his own pockets and financed his lavish lifestyle, using money his clients relied on him to invest,” said U.S. Attorney Preet Bharara of the Southern District of New York, after Nadel was formally sentenced in October 2010. “He cheated his elderly and unwitting victims out of their retirement savings and consigned others to poverty.”
In its story about Nadel’s death, the Sarasota Herald-Tribune quoted Nadel’s former lawyer.
“Dying behind prison walls is a very hard way for anyone to leave this world,” Mark Gombiner told the paper. “Arthur had a troubled life, but he took responsibility for his actions and he faced his punishment with dignity.”
If you’re a fan of “Mad Men,” the award-winning AMC television drama now back on the air after a 17-month absence, you’ve seen the cigarettes, the boozing and the debauchery weekly. (Perhaps not only in the show itself, but also in AMC’s promos for the series, a key element of which is the tagline “DEBAUCHERY IS BACK.”)
“Mad Men” is a carefully crafted period piece about the advertising business as it existed at the fictional, New York-based Sterling Cooper Draper Pryce agency on Madison Avenue in the 1960s. The show is utterly believable: The audience can’t wait to see what the gifted and self-absorbed fools running the shop will do next. It’s a safe bet, though, that whatever they do will involve a vice.
Something reminiscent of “Mad Men” is coming to the Minneapolis/St. Paul region this week. Indeed, the real-life Forex fraud trials of Bo Beckman, Pat Kiley and Gerald Durand are scheduled to get under way Thursday. All three men are figures in Trevor Cook’s $194 million Ponzi caper, believed to be the second greatest financial crime in Minnesota history behind the epic, $3.65 billion fraud of Tom Petters.
Cook, an aficionado of life’s dark alleys, pleaded guilty two years ago and was sentenced to 25 years in federal prison. In a sense, the Cook case demonstrates that debauchery still is practiced in American business, though perhaps a bit less naturally than in the decade depicted in “Mad Men.”
We highly recommend this pretrial summary by the Star Tribune, which reports that the government has referenced booze, drugs, strippers and prostitutes in court filings — and a defense lawyer is worried that prosecutors will put on a “stripper-centric” case.
This will be a familiar refrain to many readers of the PP Blog: In July 2010, the Blog reported that the Financial Industry Regulatory Authority (FINRA) had launched a public-awareness campaign about HYIP fraud. FINRA called the HYIP sphere a “bizarre substratum of the Internet.”
Just a month earlier — in June 2010 — the U.S. Department of Justice pointed to a threat assessment by the International Mass-Marketing Fraud Working Group (IMMFWG) that declared “[t]here are strong indications that the order of magnitude of global mass-marketing fraud losses is in the tens of billions of dollars per year.” (Emphasis added).
In publicizing the IMMFWG document, which noted that international scammers use threats and coercive tactics to sustain schemes and chill “uncooperative victims,” the Justice Department alleged that the Pathway to Prosperity (P2P) HYIP scheme had reached into at least 120 countries and gathered $70 million.
P2P was only one of hundreds or even thousands of HYIP scams operating on the Internet.
“Dave,” who preemptively denied JSS Tripler 2 was a Ponzi scheme, now appears to have duped members into performing “tasks” such as making comments on Blogs/websites to dupe prospective purchasers of the sites into believing they’re buying established sites with built-in readership. The theory — apparently — is that “Dave” can monetize the sites, sell them at a handsome profit and use the cash to fund his various investment programs, thus muting the Ponzi critics and taking concerns of illegality off the table.
Some of “Dave’s” members claim they’ve carried out the “tasks” — in effect, to “do what’s best for the ‘program.’” Whether they’re concerned that they’re helping “Dave” scam a new crop of suckers who’d end up with junk websites is unclear.
What is clear is that they want to get paid — and perhaps are willing to say anything while carrying out the “task” of posting comments on Blogs in purported bids to make them more attractive to purchasers.
One bizarre and homophobic “comment” on a purported “Dave” Blog (CarryMyBaby.com) reads as such:
“[W]ell obviuosly [sic] the more sex you have the greater the chances of becoming pregnant unles [sic] you r [sic] one of those queer couples. then no matter what you two do together neither party wll [sic] get pregnant,,,capisce [sic]?”
Meanwhile, a bizarre comment on a purported “Dave” Blog (IBeatForeclosure.com) reads as such:
“its [sic] got be [sic] tough to have to decide if you have to foreclose on your house but the this [sic] mortagage [sic] crisis happened [sic] people had not [sic] choice not [sic] and [sic] easy thing to go through.”
The Blogs appear to be hosted in Utah. Ownership is unclear.
But even with the “tasks,” JSS Tripler 2 payments reportedly have been suspended again, owing to “Dave’s” wedding, the need to accommodate international travelers and a purported script glitch that caused some members to get paid twice.
Some members — including members who previously sold JSS Tripler as a “passive” investment opportunity — now claim that members unwilling to assist Dave in posting fake comments are “lazy.”
On the MoneyMakerGroup Ponzi forum, a “Dave” cheerleader posted a list of 26 websites for JSS Tripler 2 members to visit to post comments.
So, the JSS Tripler 2 “program” includes these elements:
An HYIP scheme that purportedly provided an annualized return of 730 percent and started out by naming itself after an existing scheme that also purported to pay 730 percent a year. (Think FINRA and its memorable “bizarre substratum of the Internet” line in July 2010.)
A preemptive denial that a Ponzi scheme was under way — even as well-known Ponzi forum cheerleaders helped the scheme gain a head of steam. (As part of FINRA’s July 2010 educational campaign on the dangers of HYIP fraud, it issued a public warning about social-networking fraud.)
A purported payment-processor freeze that left members in the lurch for weeks.
Incongruous suggestions that “law enforcement” had failed to act in the best interests of the “program.”
Attempts to chill/ostracize members. (The sort of coercive tactics referenced in the June 2010 IMMFWG document publicized by the U.S. Department of Justice.)
A name change. (Also an element in the AdSurfDaily Ponzi case.)
The launch of companion “programs.” (Another element in the ASD Ponzi case.)
A purported bout with Dengue fever. (Purported illnesses and violent windstorms are longtime HYIP clichés.)
Payment delays blamed on a wedding. (Imagine a legitimate broker/financial adviser telling you that you’d have to wait for the branch manager to return from her honeymoon in Southeast Asia before you could withdraw the sum you need to buy groceries or cough medicine for your children or pay a tuition bill.)
Payment delays blamed on script problems and/or double payments to members. (See this story from our ASD files.)
A purported duty to post comments on Blogs to drive up their sale value, so the money can be used to fund investment “opportunities.”
BULLETIN:Martin T. Sigillito, the ordained priest, American Anglican Bishop and attorney, has been found guilty of all 20 counts brought against him in a $52 million Ponzi and fraud caper.
A federal jury in St. Louis that deliberated for about six hours found Sigillito guilty of conspiracy, mail fraud, wire fraud and money-laundering, the office of Acting U.S. Attorney David M. Ketchmark said.
Sigillito, 63, of Webster Groves, Mo., was taken into custody immediately after the verdict was returned today and potentially faces decades in prison. Prosecutors described him as the chief conspirator within the so-called British Lending Program (BLP) investment opportunity.
In reality, BLP was a real-estate scheme that had been corrupt for years and duped investors into believing they were making loans for legitimate deals, prosecutors said.
“This massive Ponzi scheme collapsed under its own weight, as such schemes inevitably do, but not before conspirators stole tens of millions of dollars from their unwitting victims in one of the largest fraud schemes in Missouri history,” said Ketchmark.
One investor plowed $15 million into the scheme, prosecutors said.
Coming off a divorce and bankruptcy, Sigillito became temporarily rich through the BLP Ponzi. Prosecutors said he plucked about $6.1 million and began a life of luxury, rubbing elbows at The Racquet Club in St. Louis and at the Boone Valley Golf Club, flying first class, acquiring expensive things and developing expensive tastes.
The enterprise effectively served as a “fee-generating machine” for Sigillito and co-conspirators James Scott Brown, 67, of Leawood, Kan., and Derek J. Smith, 68, of Oxfordshire in the United Kingdom, prosecutors said.
Like Sigillito, Brown was an attorney. Both Brown and Smith pleaded guilty and became witnesses for the government.
URGENT >> BULLETIN >> MOVING: The SEC has gone to federal court in Los Angeles, alleging that a California man was operating a $7.5 million Ponzi scheme targeted at the Persian-Jewish community.
U.S. District Judge Jacqueline H. Nguyen has issued an emergency asset freeze.
Charged in the alleged affinity-fraud caper was Shervin Neman, 30, of the Century City area of Los Angeles. Neman, according to the SEC, formerly was known as Shervin Davatgarzadeh. He presided over an entity known as Neman Financial LP, which the agency described as a “purported hedge fund.”
It was the second major affinity-fraud case announced by the SEC in the past 24 hours. The agency said yesterday that Ephren W. Taylor II, 29, of New York, was operating an $11 million Ponzi scheme targeted at African American church congregations. Taylor was charged in Atlanta.
The Scheme Aimed At The Persian-Jewish Community
“Neman deceived members of his own community to raise money in this fraudulent Ponzi scheme,” said Michele Wein Layne, associate regional director of the SEC’s Los Angeles Office. “By exploiting investors’ trust in him, Neman was continually able to raise more money to pay back existing investors and finance an extravagant lifestyle.”
The Neman Ponzi married a real-estate flipping scheme involving purported foreclosures to purported opportunities to profit from IPOs conducted by Facebook , Groupon, LinkedIn and Angie’s List, the SEC said.
“Although Neman promised investors exorbitant returns resulting from his investing acumen and access to pre-IPO shares of well-known companies, what they actually received was simply other investors’ money in hallmark Ponzi scheme fashion,” the agency said.
Named a relief defendant in the case was Neman’s wife, Cassandra C. Neman, 33. She is not charged with wrongdoing, but the SEC said she received gifts from her husband, including a $60,000 ring, that were paid for from Ponzi proceeds.
Neman’s investors also were paying for his wife’s personal expenses, the SEC said. The Nemans wed in October 2010. The fraud scheme may date back to June 2010. It allegedly raised at least $7.54 million from investors in California, Florida and Texas, the agency said.
More than 99 percent of investors’ funds were directed either to Ponzi payments or to prop up Neman’s tony lifestyle, the SEC said.
“Specifically,” the agency said, “of the $7.54 million raised from investors since June 2010, Neman has used more than $5.4 million to make Ponzi payments to existing investors, and has spent another nearly$1.6 million to support a lavish lifestyle and maintain the appearance of an upscale
business operation. Due to recent investments from new and existing investors,Neman owes nearly $2.7 million in principal payments alone to his investors.”
Neman filled his personal bank account with investors’ money, the SEC said.
“In most instances, Neman directed investors to wire their funds to a personal bank account held in Neman’s name or to write checks to him personally, which he then deposited into his personal account,” the SEC charged. “Neman commingled investor funds in his personal account.”
As was the case yesterday in the SEC’s allegations against Taylor in the alleged affinty-fraud scheme targeted at Christians, the agency said today that Neman’s fraud involved promissory notes.
Neman was operating a straightforward scam, the SEC said.
“Among other things, Neman used investor funds to pay for his wedding and honeymoon, his wife’s engagement ring, luxury cars, VIP tickets to entertainment venues, jewelry, hotels, and restaurants,” the SEC charged. “Neman also used investor funds to lease and redecorate a new office in an upscale building in the Century City area of Los Angeles, hire two administrative assistants, and pay legal and other professional expenses . . .”
Attorney General Kamala D. Harris at a February news conference on the mortgage crisis in California.
James A. Sweeney II and Patrick M. Ryan — the two men who presided over the Big Co-op Inc. and Ez2Win.biz online pyramid scheme and stock swindle — have been sentenced to a combined 64 years in state prison, California Attorney General Kamala D. Harris announced.
Sweeney, 64, of Afton, Tenn., was sentenced to 33 years.
Ryan, 35, of Canyon Lake, Calif., received a sentence of 31 years.
Big Co-op and its Ez2Win arm purported to be an online shopping hub where consumers could go to purchase goods and services at discounted prices from big-name retailers including, Sears, Target and Macy’s.
Operating as a pyramid scheme and recruitment trap from 2005 to 2006, Big Co-op plucked $1.2 million, prosecutors said. A phony stock offering also was part of the mix, and the fraud soared by about $7 million.
The combined scams were fueled by seminars and netted $8.2 million, prosecutors said. More than 1,000 Californians were lured into the schemes. Filings by the California Department of Corporations painted a picture of affiliates making wild claims to drive business to the purported opportunities.
“With investor cash, Sweeney and Ryan bought homes, country club memberships, several luxury cars, and ran up $30,000 to $50,000 in monthly credit card bills,” prosecutors said. “Investor funds were also used to pay for an elaborate bachelor party in Las Vegas, a $23,000 wedding ring and a $100,000 wedding.”
U.S. District Judge Cecilia M. Altonaga of the Southern District of Florida has dismissed a lawsuit by AdSurfDaily members Dwight Owen Schweitzer and Todd Disner against Rust Consulting Inc., the government-approved claims administrator in the civil portion of the ASD Ponzi case.
The claims by Schweitzer and Disner were hypothetical in nature and “far from the ‘definite and concrete’ dispute required for the maintenance of a declaratory judgment action,” Altonaga ruled.
And Schweitzer and Disner did “not explain how their allegations relate to their declaratory action against Rust,” Altonaga ruled.
“Indeed,” she continued, “the declaration Plaintiffs seek in this action relates to the government’s verified complaint for forfeiture . . . the Court cannot find — nor do Plaintiffs identify — anything in the Complaint indicating what declaration Plaintiffs seek with regard to Rust.”
Schweitzer and Disner sued Rust and the United States in November. A response by the U.S. Department of Justice is expected soon.
Rust moved for dismissal last month, arguing that Schweitzer and Disner were impermissibly seeking to relitigate the forfeiture action against tens of millions of dollars in the personal bank accounts of ASD President Andy Bowdoin.
Those issues already had been decided in the District of Columbia, where the forfeiture case was filed in August 2008, Rust argued.
In dismissing the claims by Schweitzer and Disner against Rust, Altonaga ruled that the Schweitzer/Disner complaint had presented a “conjectural, hypothetical, or contingent” controversy as it pertained to Rust.
The onetime commander of the California National Guard base in Los Alamitos has pleaded guilty to mail fraud in a Ponzi scheme that defrauded 28 investors of $2.7 million, federal prosecutors said.
Ret. Col. Timothy Melvin Murphy, 70, of Orange, ran his investment scam through an entity known as Capital Investors Inc., also of Orange, the office of U.S. Attorney André Birotte Jr. of the Central District of California said.
In pleading guilty yesterday, Murphy admitted that he made materially false promises to clients, offered fraudulent investment opportunities to certain of his clients, and that he created and used a variety of false documents to execute the scheme,” prosecutors said.
The FBI investigated the case.
As the probe unfolded, investigators discovered that Murphy sometimes offered “guaranteed” returns, misdirected investors’ money and “created false account statements to mislead his clients into thinking that their money was properly invested and generating the promised income.”
But the former officer “did not use the clients’ investment funds as he promised he would — an investors got plucked for $2.7 million, prosecutors said.
Sentencing before U.S. District Judge David O. Carter is preliminarily set for June 25. Murphy faces up to 20 years in federal prison, a substantial fine, a restitution order and supervised probation after getting out of jail, prosecutors said.
Murphy now joins a growing list of convicted or accused Ponzi schemers in their senior years.
In Rhode Island yesterday, Martin B. Feibish, 81, of Providence, pleaded guilty to mail fraud in an alleged Ponzi swindle that lasted 10 years and plucked $5 million from a single victim.
The Orange County Register is reporting that prosecutors believe Murphy’s scam in California began as early as 2001.
Federal prosecutors in Rhode Island said the Feibish scheme also dated back to 2001.
BULLETIN: (UPDATED 4:14 P.M. EDT U.S.A. APRIL 14) The CFTC has gone to federal court in Idaho, alleging that Brad Lee Demuzio of Chubbuck was running a Forex Ponzi scheme that tanked.
Unable to make payouts, Demuzio “fabricated a letter purporting to be from the CFTC and bearing the fraudulently copied signature of a CFTC officer, which falsely represented that the company’s funds had been frozen in connection with a purported CFTC investigation,” the CFTC charged.
But Demuzio didn’t stop there, the agency charged.
“The complaint also alleges that Demuzio subsequently fabricated a second letter fraudulently providing an update as to the status of the purported investigation as well as a third document purporting to be a dismissal of the investigation and bearing the fraudulently copied signature of an Administrative Law Judge,” the agency charged.
Meanwhile, the CFTC alleged, the official seal of the Commission was used in the bid to cover up the fraud and Demuzio “attempted to pass these documents off to investors as official Commission documents.”
Chubbuck now has been indicted on five counts of wire fraud, the CFTC said, noting that the FBI was involved in the probe.
“On or about January 13, 2012, Demuzio confessed to an agent of the Federal Bureau of Investigation that he had knowingly made false statements to investors and fabricated Commission documents,” the CFTC said.
The scheme, which operated through an entity known as Demuzio Capital Management (DCM) and netted $1.8 million, began to unravel during the summer of 2011, when certain investors told Demuzio they wanted their capital outlays and purported profits back, the CFTC said.
Checks were issued to investors in August 2011, but the checks bounced, the CFTC said.
By Aug. 5, Demuzio said he could not pay because “the Commission had frozen DCM’s funds in the course of an investigation,” the agency said.
As part of the scheme, Demuzio manufactured a document addressed to himself, with a CFTC official as the purported sender.
This document falsely stated in part that “the CFTC has opened an investigation into your activities. This investigation requires the temporary freezing of your current assets. The investigation along with the freezing of your assets is intended to be temporary.”
By October, the CFTC alleged, Demuzio had manufactured another letter to himself that purportedly had originated at the agency, thanked him for his cooperation and suggested that a decision would be forthcoming.
Among other things, the bogus October letter asserted that “This letter is being sent to express our appreciation to you for your cooperation during the investigation . . . We are also writing to confirm to you that a letter of resolution will be sent to you no later than Friday October 14, 2011.”
By Oct. 11, a third bogus document surfaced. This one was styled “Order of Dismissal” and purported “to have been signed by a Commission Administrative Law Judge,” the agency said.
This document, the CFTC alleged, included this false statement:
“At the parties’ request, the complaint is DISMISSED with prejudice and this proceeding is TERMINATED in its entirety. IT IS SO ORDERED.”
Demuzio confessed to the FBI in a signed statement, the CFTC said.
“The first and most important mistake that I have made has been to lie to each of these individuals, all of whom are close friends and family,” the confession read in part, according to the CFTC. “I have lied to them about the money we made and how we made it.”
And Demuzio further confessed in his statement that he had “engaged in a series of lies that culminated in my making letter [sic] from the cftc showing that I could not return their money because of an investigation,” the CFTC said.
“Ephren Taylor professed to be in the business of socially-conscious investing. Instead, he was in the business of promoting Ephren Taylor. He preyed upon investors’ faith and their desire to help others, convincing them that they could earn healthy returns while also helping their communities.” — David Woodcock, director of the SEC’s Fort Worth Regional Office, April 12, 2012
Ephren W. Taylor II: From: YouTube
URGENT >> BULLETIN >> MOVING: The SEC has gone to federal court in Atlanta, alleging that well-known speaker Ephren W. Taylor II was at the helm of an $11 million Ponzi scheme targeting African American church congregations through two investment “programs” offered by City Capital Corp.
Taylor is 29, the son of a minister. Taylor last was known to be living in New York, but [h]is current whereabouts are unknown,” the agency alleged.
“He failed to respond to a number of Commission investigative subpoenas, including a subpoena requiring his appearance for testimony,” the agency advised a federal judge in a complaint filed in Atlanta.
Former City Capital COO Wendy Jean Connor, 43, of metropolitan Raleigh, N.C., also was charged in the alleged caper. The agency said that she pocketed “hundreds of thousands of dollars” in salary and commissions that came from money investors plowed into the Ponzi, which was at least in part a promissory-notes scam married to a “sweepstakes machine” business and other purported businesses.
Taylor “secretly” funded his wife’s singing career with Ponzi money and “diverted hundreds of thousands of dollars to publishing and promoting his books” and “hiring consultants to refine his public image,” the SEC charged.
The scheme was multifaceted and occurred across multiple jurisdictions, with Taylor focusing on African Americans, denigrating traditional investment options and encouraging his audience to plow money from their Individual Retirement Accounts into his schemes, the agency charged.
The ‘Building Wealth Tour’
“Taylor conducted a multi-city ‘Building Wealth Tour,’ on which he spoke to church congregations — including Atlanta’s New Birth Church — or at wealth management seminars featuring other speakers,” the agency charged. “Taylor promoted the Building Wealth Tour on his personal website, through City Capital press releases, and in conjunction with the churches and civic groups that hosted him. Taylor heavily emphasized his Christian background . . . and, indeed, was at times referred to as ‘Minister Taylor.’
“He also touted his ‘socially conscious’ investment focus and successful entrepreneurial history,” the agency continued. “Taylor devoted considerable time to denigrating traditional investment vehicles, such as CDs, mutual funds and the stock market, labeling them as ‘foolish’ and ‘money losers.’”
One of his scam websites was styled SweepstakesIncome.com, the agency alleged, further alleging that the purported investment opportunity was positioned as the “brainchild of self-made millionaire Ephren Taylor.”
Part of the pitch “featured Taylor’s lengthy dissertation about ‘How You Can Create a Zero-Maintenance, Residual Income Using the Sweepstakes Empire!’” the agency alleged.
Priming The Ponzi
To prop up the multifaceted Ponzi, the SEC alleged, investors were encouraged to “roll their notes over” for another year or longer — with corresponding promises that delaying redemptions would “increase the rate of return,” the SEC charged.
“The roll-over solicitations typically touted the supposed ‘great things — usually of a socially conscious nature — City Capital was doing with the investor’s money, which were all untrue,” the SEC charged. “Investors who renewed were issued new promissory notes with the new term and interest rate. Any investor who resisted was subjected to an endless cycle of unreturned phone calls and emails, empty promises of imminent action, and claims that the investor had in fact already agreed to roll over his note. To the extent investors survived this gauntlet to still insist on repayment, any funds they received invariably came from new investor money.”
Undisclosed Risks
Meanwhile, the SEC alleged today that schemes involving sweepstakes machines already were on the radar of law enforcement even as Taylor dialed up his efforts to get investors to send him money.
“Offering materials stressed that the sweepstakes machines did not involve gambling, comparing them to McDonald’s ‘Monopoly’ prize game,” the SEC charged. “Investors were not told about the risks of illegality of the machines, or that several law enforcement agencies had taken action against City Capital’s and other parlors.”
Investors paid up to $4,497 per machine, amid claims City Capital had purchased and established several ‘internet cafes’ featuring the machines,” the SEC alleged.
City Capital paid employees a commission of 10 percent for selling the machines, and Taylor and Connor were paid “overriding commissions of 10% per machine,” the SEC charged.
All in all, the sale of sweepstakes machines raised at least $4 million from more than 250 investors, the agency charged.
Returns From ‘Thin Air’
In April 2010, the SEC charged, “City Capital’s bookkeeper alerted Taylor and Connor to the weak performance of the company’s recently acquired North Carolina and Texas parlors, explaining that the locations each suffered a loss after deducting operating expenses.
“Rather than tell investors assigned to machines in those locations that they would get no distributions — perhaps to avoid an investor backlash — Taylor and Connor instructed the bookkeeper to pay simulated returns essentially pulled from thin air,” the SEC continued.
“The bookkeeper had to divert funds received from new sweepstakes machine investors — and from investors’ funds in other City Capital ventures — to make these payments,” the agency charged. “As the parlors continued to lose money over the ensuing months, Taylor and Connor instructed the bookkeeper to continue making these simulated payments, telling her simply to make the same payment ‘as last month.’ These payments ended after August 2010, when City Capital ran out of money.”
BULLETIN: An 81-year-old Rhode Island man ran a “self-contained” Ponzi scheme between 2001 and 2011 and defrauded a Florida investor out of $5 million, federal prosecutors said.
Martin B. Feibish of Providence now joins a list of senior-citizen Ponzi swindlers. He pleased guilty today to one count of mail fraud and one count of filing a false tax return.
Feibish, described by the office of U.S. Attorney Peter F. Neronha as an insurance agent, investment broker and creator of two investment companies, potentially faces 23 years in federal prison. Sentencing has been scheduled for June 29.
Creating “false and fictitious investment schemes” were part of the scam, with Feibish falsely representing that some payments the victim received were “returns on the investor’s investments,” prosecutors said.
In reality, prosecutors said, “the funds he provided to the investor were actually the result of a ‘Ponzi Scheme’ he perpetrated with the investor’s own money.”
State records in Rhode Island show that the Department of Business Regulation brought Feibish up on civil charges last year amid assertions he possibly was running a “selling away” scam in which he was hawking investment products not held by the brokerage firm and/or selling products without its knowledge.
When confronted on Feb. 23, 2011, Feibish allegedly told a colleague he had created a bogus investment vehicle known as “MegaTrust,” describing it as a fraudulent mortgage-backed securities product.
The investor allegedly had a net worth of $6 million when she began to do business with Feibish.
Feibish, according to the allegations, kept the investor’s records in a “three-inch thick file” that he produced from “under his desk” when questioned. The huckster allegedly admitted he had forged documents and stolen the investor’s money, blaming his conduct on a gambling problem.
