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  • SPECIAL REPORT: SMOKING GUN? MoneyMakerGroup Ponzi Forum Post Made During Same Month Grand Jury That Indicted AdSurfDaily’s Andy Bowdoin Convened May Tie AdViewGlobal To International Penny-Stock Scheme And Collapsed Payment Processor In Arizona

    Combined with corporation records and documents such as news releases, this post on the MoneyMakerGroup Ponzi forum raises questions about whether AdViewGlobal, an autosurf with close ties to AdSurfDaily, was part of an elaborate penny-stock scheme and money-laundering conduit that consumed the EWalletPlus payment processor and left AVG members holding the bag.

    EDITOR’S NOTE: Longtime readers of the PP Blog will recall that the purported AdSurfDaily (ASD) spinoff known as AdViewGlobal (AVG) and some of its members engaged in particularly bizarre behavior in May 2009. The absurdities included announcing (and then unannouncing) a puported deal with a new offshore wire facilitator, announcing (and then unannouncing) a new website with purported new services and claiming the upstart company was healthy enough not only to pay out 250 percent matching bonuses to members and 200 percent matching bonuses to recruiters, but also to pay out multilevel downline commissions and purported surfing income of up to 8 percent a day.

    Just two months earlier — in March 2009 — AVG suddenly announced its account at an unspecified bank had been suspended and that its chief executive officer  had resigned. The firm bizarrely added that CEO Gary Talbert would not leave the company altogether. Rather, Talbert would remain in the accounting department.

    Just a month earlier, Talbert, also a former ASD executive, had been introduced in an AVG conference call by Terralynn Hoy, an ASD member and moderator of the pro-ASD Surf’s Up forum and an emerging forum for the AVG autosurf. The introduction occurred in February 2009 after weeks of assertions by AVG that there were no ties between itself and ASD. The introduction was preceded by a bizarre announcement in late January of 2009 by AVG that the appearance of its graphics on an ASD-controlled webroom was an “operational coincidence.” The person making that announcement on AVG’s behalf was Chuck Osmin, a former ASD employee.

    AVG’s websites ultimately disappeared. Members claimed AVG was owned by George and Judy Harris, and at least one of the AVG websites identified  George Harris as an AVG trustee. George Harris, described in court filings as the head of ASD’s purported real-estate division, is the stepson of Andy Bowdoin and the son of Bowdoin’s wife, Edna Faye Bowdoin.

    It later proved to be the case that May 2009 — the same month in which AVG was reimagining itself as one of the world’s leading advertising and communications firms while at once announcing and unannouncing key bits of purported news — was the same month the grand jury that indicted ASD President Andy Bowdoin had convened.

    The PP Blog is reporting today that records strongly suggest AVG was a cog in a larger fraud  — one that somehow married the AVG autosurf to a penny-stock scheme with a purported arm in the “oil” businesses and a branch that owned an Arizona payment processor known as EWalletPlus that later collapsed.

    Here, now, our Special Report . . .

    Is stock manipulation in multiple venues part of the bigger picture of the AdSurfDaily Ponzi scheme? Out of the clear blue sky in the fall of 2008  — as ASD awaited a critical court ruling in the Ponzi forfeiture case against the assets of President Andy Bowdoin — ASD claimed it expected a $200 million revenue infusion from Praebius Communications, a penny-stock firm that did not disclose audited sales figures.

    But the Praebius announcement, which ASD later withdrew without explaining why, may not be the firm’s only tie to a penny-stock company.

    A May 2009 post on the MoneyMakerGroup Ponzi forum is adding to lingering questions about whether AdViewGlobal — an autosurf with close ties to ASD — was part of an elaborate penny-stock scheme and money-laundering conduit  involving multiple companies, domestic and offshore venues and individuals with ties to ASD.

    On May 5, 2009, a MoneyMakerGroup poster who used the handle of “IMCanadian” claimed he (or she) had received autosurfing payouts totaling $1,300 from AdViewGlobal (AVG) on unspecified dates. The payments, according to the post, were routed through SolidTrustPay (STP), a Canadian payment processor.

    The MoneyMakerGroup post potentially provides a glimpse into how fraudulent securities businesses may layer themselves to confuse both investors and authorities. The post cites two different email addresses as the sources of STP payments from the AVG scheme.  Although the email addresses purportedly were used by AVG to cause STP to issue AVG autosurf payouts, neither of the addresses used  a domain name owned by AVG. Instead, they used Yahoo and Gmail addresses.

    AVG, according to records, could have chosen to use email addresses that corresponded to its own domain names. The firm owned at least two namesake domains before it suspended member cashouts in June 2009: ADVGlobal.com and AdViewGlobal.com.

    But relying on free email providers such as Yahoo and Google was not the sole oddity associated with AVG, a firm an early promoter predicted would become a “1 Billion Dollar Company [before the] end of 2009.”

    “Most if not all of your leaders are joining,” the promoter flatly counseled on a forum known as FreeLunchRoom on Dec. 23, 2008, two days before Christmas.

    The MoneyMakerGroup posts that followed cited not only the Yahoo and Gmail payout addresses, but also two different STP usernames from which AVG payouts to “IMCanadian” purportedly originated. Absent in both usernames was any reference to AVG itself.

    Like AVG, ASD also used STP, according to records. In August 2008, the U.S. Secret Service alleged that ASD had wired “several million dollars” to STP just prior to the seizure of tens of millions of dollars from the personal bank accounts of ASD President Andy Bowdoin.

    A payment of $200 for AdViewGlobal earnings was received through STP from an STP user who used the acronym “avg” as part of a yahoo.com email address, but did not use an AVG domain, according to the MoneyMakerGroup post. The STP username linked to the AVG payout was “karveck,” not AdViewGlobal or AVG, according to the post.

    An AVG payment for $1,100, meanwhile, had come from an STP member who used the words “tmscorp” and “usa” — along with the abbreviation “llc” as part of a Gmail address, according to the post. The STP username for the payout was “tmscorp,” not AdViewGlobal or AVG, according to the post.

    Ten days after the claims appeared on MoneyMakerGroup, the grand jury that indicted ASD President Andy Bowdoin in the District of Columbia was sworn in, according to records. The swearing in occurred just 11 days after the Obama administration announced a crackdown on offshore fraud schemes. On the same day Obama himself spoke about the crackdown — May 4, 2009 — AVG announced it had secured a new offshore wire facilitator in the aftermath of the purported suspension of AVG’s bank account in March 2009. Research by the PP Blog suggests that AVG sought to route money to itself by using a Florida shell company that had sought the services of an offshore firm later banned by the National Futures Association.

    The seal on the Bowdoin indictment was lifted on Nov. 23, 2010, during a period in which some ASD members were discouraging others from filing remissions claims in the ASD forfeiture case brought by federal prosecutors and the U.S. Secret Service in August 2008.

    Bowdoin was arrested in Florida on Dec. 1, 2010. He faces an upcoming trial on allegations of wire fraud, securities fraud and selling unregistered securities for his operation of ASD. AVG’s name does not appear in the indictment.

    The Operative Word: ‘Murky’

    Much remains murky about the degree of connectivity among ASD, AVG, STP, Karveck, TMS Corp and EWalletPlus. It is known that ASD and AVG had members and promoters in common. Both firms used STP to process payments, but it remains far from clear how many STP accounts the companies and their executives or insiders controlled and how much money generated in the ASD scheme remained in offshore accounts that later could be tapped to channel money to AVG.

    ASD and AVG are known to have turned to members and moderators  of the now-defunct Surf’s Up forum to sanitize the respective schemes.  The surf firms, according to AVG, also shared at least two of the same employees: Chuck Osmin and Gary Talbert.

    Some ASD members have claimed Bowdoin was a silent partner in AVG and fronted the money to acquire EWalletPlus, AVG’s purported in-house payment processor. If the assertion that Bowdoin provided money to buy EWalletPlus is true, it may mean that the deal was heavily layered to shield Bowdoin from being identified as the funding source and that AVG had more than one silent partner.

    Karveck and TMS Corp used multiple versions of their names, a potential indicator of money-laundering — i.e., a bid to dupe banks into warehousing fraud-scheme proceeds. Karveck, for example, has been referred to as just plain Karveck, but also Karveck International. Records show that at least three versions of the TMS Corp. name exist: TMS Corp., TMS Association and TMS Corp. USA LLC.

    TMS Corp. USA LLC is listed in Nevada and Arizona records as using ASD’s address in Quincy, Fla. Its manager is listed as Talbert, the former executive at both ASD and AVG.

    Each of the TMS firms appears to have a tie to EWalletPlus, which once shared the same server in Panama with AVG. Despite serving pages from Panama, AVG purported to be based in Uruguay and to enjoy U.S. Constitutional protections even though it was operating offshore. Making the situation even murkier is that a penny-stock company known as Vana Blue Inc.  claimed in 2008 to own TMS Corp., the parent company of the EWalletPlus web portal, and to have have acquired Karveck International in February 2009.

    The claims came in the form of news releases — and news releases are common tools in penny-stock frauds.

    AVG formally launched in February 2009, a year after VanaBlue claimed ownership in a news release of TMS Corp. and EWalletPlus and months after the seizure of Bowdoin’s assets in August 2008. Prior to the seizure, Bowdoin ventured to Costa Rica and Panama, according to court filings by the Secret Service.

    The purpose of the Bowdoin trip, according to the Secret Service, was to to incorporate ASD Cash Generator — a replacement autosurf for a Bowdoin surf that had collapsed in 2007 —  and an entity known known as La Sorta Trading outside of U.S. jurisdiction. The agency made the claim on Feb. 26, 2009, less than a month after the formal launch of AVG and during the same period in which AVG reportedly had met with a convicted securities felon and announced the formation of a purported offshore “private association.”

    Also in February 2009, Vana Blue declared Karveck International  a “newly acquired asset” that had produced $1.8 million in revenue in January 2009. Karveck was described as a company that “specializes in internet advertising and promotion in a search engine and ad clicking type environment.”

    Mysteriously, however, VanaBlue disowned Karveck International just six months later — in August 2009. What Vana Blue initially had described in February as a completed acquisition of Karveck International was redescribed in August as deal that had fallen through as a result of “further due diligence.”

    “Vana Blue was unable to complete this transaction but is in the final stages of negotiation with an oil company to continue its plans of acquisitions,” Vana Blue claimed on Aug. 17, 2009.

    During the month of August 2009, ASD’s Bowdoin announced in court filings that he was “negotiating” with federal prosecutors. The August 2009 negotiations, which collapsed by mid-September of the same year, marked at least the second time that Bowdoin or his legal team claimed that the ASD patriarch was seeking to find a way to settle the ASD forfeiture case.

    Bowdoin’s negotiations pleading appeared on the docket of U.S. District Judge Rosemary Collyer on Aug. 4, 2009. Thirteen days later — on Aug. 17, 2009 — Vana Blue announced on Business Wire that its acquisition of Karveck International — a deal it described in February 2009 as completed — had fallen through.

    Vana Blue claimed in the same announcement it was proceeding on a deal for an oil company despite its sudden loss of Karveck International.

    Just days before Bowdoin’s Aug. 4, 2009, confirmation that he again was negotiating with prosecutors, Vana Blue’s website suddenly went missing.

    Earlier this year, a source told the PP Blog that she provided $5,000 to her sponsor — and that the sponsor converted her money to cashier’s checks made payable to TMS Association, one of the “TMS” companies records suggest was tied to both AVG and EWalletPlus. The woman told the Blog that she believed she was a victim of the ASD scheme.

    On Dec. 21 2010, just 20 days after Bowdoin was indicted, an email that appeared to have originated with an AVG member began to circulate among ASD members.

    The email accused members of ASD who were participating in the remissions program established by the Justice Department and the Secret Service of signing their “morals and soul away” and supporting “innocent peoples lives being destroyed.”

    In a possible bid to intimidate ASD members, the email further claimed that an unspecified “back lash” would occur against any ASD member who participated in the claims program.

    Last month ASD members who filed approved claims forms received back 100 percent of the money they had directed at ASD. The remissions payments were funded by money seized by the Secret Service in the ASD Ponzi case.

    Although its is believed the government also has opened a probe into the affairs of AVG, prosecutors have made only veiled references to AVG in court filings in the ASD case.

     

  • BULLETIN: Florida Man, 71, Booked Into Alabama Jail On Theft Charges; James Leonard Craft Is Subject Of Probe By Alabama Securities Commission Into Purported ‘South American’ Railroad Cross Ties; Some Strange Parallels To ASD Case Emerge

    James Leonard Craft booking photo: Source: Etowah County Sheriff's Office.

    BULLETIN: The cavalcade of senior citizens implicated in alleged securities schemes continues. James Leonard Craft has been taken from a jail cell in Florida and placed in one in Alabama to answer felony charges that he was at the helm of a securities swindle.

    Craft, 71, of Milton, Fla., originally was arrested in Florida Sept. 23 on an out-of-state fugitive warrant. He was held at a Santa Rosa County detention facility until yesterday, when he was transported to Etowah County Jail in Alabama to face charges. Bond was set at $30,000, according to records.

    In October 2010, the Alabama Securities Commission (ASC) named Craft in a cease-and-desist order. The agency alleged that Craft, beginning in 2008, was selling unregistered securities for a purported lumber business that produced or sold railroad ties.

    The securities were offered through LLCs known as Universal Wood Products LLC, Century Lumber and Land LLC and Milton Timber LLC, according to the ASC order.

    An Alabama resident told investigators he was introduced to the opportunity by a “business associate and missionary residing in Tennessee,” according to ASC records. Whether ASC suspects affinity fraud was not immediately clear.

    NorthEscambia.com is reporting that Craft was part of an October 2010 ribbon-cutting ceremony for an upstart business that the struggling Florida small town of Century expected would create 500 jobs. Those jobs never materialized, the site reported. More than 3,000 applications for employment were received.

    ASC records claim that at least two Alabama residents were told that the purported lumber firms could make money because Craft and a business partner bought railroad ties in “South America” and sold them to U.S. railroad companies “suffering from a shortage of the lumber product.”

    Alabama investors directed at least $180,000 to a promissory-notes scheme involving Craft, according to ASC.

    Precisely how the Craft case had morphed into a criminal prosecution was not immediately clear today. Etowah County Jail records show that Craft is being held for another “agency,” but the name of the agency was not listed.

    In Alabama, county-level prosecutors and ASC work together on securities cases.

    The emerging Craft case has bizarre coincidences and parallels to the AdSurfDaily case. ASD was operated by Andy Bowdoin, a senior citizen in the small Florida town of Quincy, which is situated in Gadsden County. Craft, himself a senior citizen, also operated from a small town in Florida. By coincidence, the jail in which he’s currently lodged is in Gadsden, Ala.

    Andy and Faye Bowdoin at a July 2008 Chamber of Commerce photo op. The small town of Quincy was pleased that ASD had created jobs, but the ASD story took a sour turn when the U.S. Secret Service accused Andy Bowdoin of operating an international Ponzi swindle a month after this photo was taken. Some ASD employees were getting paid in "ad packs," according to court records.

    In the case of ASD, the Gadsden County Chamber of Commerce announced in 2008 it was pleased that ASD had made its home in Quincy and was creating jobs. The Century Area Chamber of Commerce appears to have felt the same way about the Craft-related  firms. The NorthEscambia.com story linked to above shows a Chamber banner at the Craft ribbon-cutting ceremony. Craft appears in the photo alongside people who appear to be genuinely pleased and proud that a jobs-creator had come to the small town.

    Like Craft, ASD’s Andy Bowdoin was implicated in an Alabama securities swindle. Bowdoin’s Alabama caper occurred in the 1990s, according to records.

     

     

  • UPDATE: ASD Figure Kenneth Wayne Leaming’s Firm Listed As Registered Agent For At Least 73 Firms, Including Companies That Use The Words ‘Homeland Security,’ ‘Federal Asset’ And ‘JP Morgan’

    Kenneth Wayne Leaming, also known as "Kenneth Wayne" and "Keny."

    UPDATED 12:52 P.M. EDT (OCT. 9 U.S.A.) A week ago, some AdSurfDaily members received an email that encouraged them to “name” federal prosecutors, a federal judge and a U.S. Secret Service agent as “thieves” and to file documents at the “county” level identifying the public officials as such.

    The email led to questions about whether a new campaign to harass officials involved in the ASD Ponzi scheme case was under way.

    Quotations from the email were attributed to “Keny,” the nickname of ASD figure Kenneth Wayne Leaming. (Leaming also is known as “Kenneth Wayne.”) The PP Blog reported Sunday that Leaming — in 2009 — filed involuntary bankruptcy petitions against the Washington State Bar Association and a Franciscan hospital in the state. A judge dismissed both petitions, and enjoined Leaming from filing such documents. A judgment of $2,750 was entered against Leaming in the case in which he claimed the bar association owed him more than $32 billion.

    Leaming has been repeatedly sanctioned in Washington state for filing vexatious liens and court documents, according to records.

    Today the PP Blog is reporting that Leaming’s company — American-International Business Law Inc. — is listed in Washington state records as the registered agent of at least 73 companies. The names of several of the firms use words typically associated with government and banking.

    Examples of these include:

    An inactive corporation known as “Homeland Security Service” whose “trustee” is listed as “Task Force, Civil Rights.” The Anti-Defamation League lists Leaming as a member of the Civil Rights Task Force, a sovereign-citizen group.  After the 9/11 terrorist attacks a decade ago, the U.S. government established the Department of Homeland Security, a cabinet-level agency. The precise type of business in which “Homeland Security Service” engaged is unclear.

    Federal Asset Management Service. This active firm lists Leaming and ASD figure Christian Oesch as trustees, with American-International Business Law Inc. as the registered agent. Oesch was an unsuccesful pro se litigant in the ASD forfeiture case and joined with Leaming in an unsuccessful  bid to sue the United States, apparently for the staggering sum of $29 trillion. The U.S. Court of Federal Claims tossed the lawsuit in December.

    Federal Fleet Management. This inactive corporation appears to be tied to the Civil Rights Task Force and lists American-International Business Law Inc. as its registered agent. The business purpose of Federal Fleet Management was not immediately clear in electronic records.

    Presidential Detail. This active corporation lists Leaming as one of the trustees, along with the Civil Rights Task Force and others. American-International Business Law Inc. is the registered agent. The business purpose of Presidential Detail was not immediately clear in electronic records.

    JP Morgan Holdings. This active corporation, which uses a form of the famous J.P. Morgan brand, lists Leaming and the Civil Rights Task Force among its trustees. American-International Business Law Inc. is the registered agent. The purpose of the firm was not immediately clear.

    JP Morgan. This inactive corporation also uses a form of the famous J.P. Morgan name. Leaming is listed as a trustee, and American-International Business Law Inc. is listed as the registered agent.

    American-International Business Law Inc. appears to be listed as the registered agent for at least 73 firms in Washington state. Another such firm — now inactive — was called “Apprentice Millionaires.” It listed Leaming and the Civil Rights Task Force as trustees.

    There also is a company called “Center For Business and Estate Planning,” with Leaming as the sole trustee and his firm as the registered agent.

    There are dozens of other firms with a Leaming tie, according to records.

    At least two notaries public with ties to Leaming and the ASD case have had their licenses revoked, according to records. In the email some ASD members received last week, they were advised to send a “notary certified copy” of county-level “thieves” claims against public officials to the home address of John G. Roberts Jr., the Chief Justice of the United States.

     

     

  • DURANGO HERALD: Attorney Says His Client Was Ponzi Player Who Tried To ‘Scam The Scammers’; E-Bullion’s Name Surfaces In Illustrative Case Of Frederick H.K. Baker, Who Is Sentenced To Federal Prison

    In July 2010, FINRA memorably described the HYIP sphere as a “bizarre substratum of the Internet.” The regulator warned about “online payment systems” that are used for criminal activity, noting that some fraud purveyors discuss subjects such as how to “build a winning HYIP portfolio” and how “to ‘ride the Ponzi’ and get in and out before a scheme collapses.”

    A case brought by federal prosecutors in Colorado against a Utah man could be an eye-opener for fraudsters and their apologists and shills who engage in bizarre and reckless behavior such as that outlined by FINRA and help fraud schemes proliferate to consume millions of dollars.

    Indeed, the Durango (Colorado) Herald is reporting that Frederick H.K. Baker will be going to federal prison for 41 months (see link at bottom of post). Although FINRA’s 2010 Public Awareness Campaign is not referenced in the story, Baker’s case speaks to a number of the issues FINRA raised more than a year ago.

    Compellingly, even Baker’s attorney conceded that his client thought he could “scam the scammers” by knowingly becoming a Ponzi player and adopting a strategy by which he’d get in early, collect his profits — and then get out, according to the Herald.

    “Baker thought he could make money if he got in early,” the Herald reported. “In effect, he was running a Ponzi scheme to invest in other Ponzi schemes . . .”

    The Herald’s story quotes a federal prosecutor who told a federal judge that Baker’s scheme destroyed families and caused financial and emotional heartache for the victims.

    And it also notes that E-Bullion, the shuttered California payment processor whose operator, James Fayed, was convicted in May of arranging the July 2008 gruesome murder of his wife, was used in the Baker scheme.

    E-Bullion also has been referenced in the AdSurfDaily Ponzi case, the Legisi Ponzi case, the Gold Quest International Ponzi case, the FEDI case and other cases. The most recent reference to E-Bullion in the Legisi case, according to research by the PP Blog, occurred on Sept. 22, 2011 — less than three weeks ago.

    An attorney for two individuals claimed in court filings that his clients had used E-Bullion when investing with Legisi and were out $92,094.11. The attorney noted that their claims to a share of proceeds from the receivership estate have been rejected. Other filings list the reason for the rejection as inadequate documentation of the investment. The operators of fraud schemes such as Legisi are infamous for keeping poor records and not entering information in books, a sad reality that can lead to a result of victims of fraud schemes not receiving compensation from restitution pools.

    Read the Baker story in the Durango Herald. The story is compelling because it points out that Ponzi players have more to lose than just money. Baker, according to the story, is now facing some harsh realities and coming to grips with what his descent into the Ponzi darkness truly has cost him and his family.

     

  • URGENT >> BULLETIN >> MOVING: Feds Make 3 Arrests In New York In Alleged ‘Green’ Ponzi Caper; SEC Files Emergency Parallel Action To Halt Alleged $26 Million Swindle Over Which Convicted Felon Presided With Alleged Help From Attorney

    URGENT >> BULLETIN >> MOVING: A bizarre case featuring spectacular allegations of Ponzi fraud coupled with verbal strong-arming of victims is unfolding in New York. Three people have been arrested by federal agents, and the SEC has filed an emergency action in federal court to halt what it described as a “green-product themed Ponzi scheme” involving stone pavers imported from Australia.

    Arrested by federal agents were Eric Aronson, 43, of Syosset, N.Y.; Vincent Buonauro Jr., 40, of West Islip, N.Y.; and Robert Kondratick, 41, of  Syosset. All three men are executives of a Long Island group of firms known as “PermaPave Companies,” investigators said.

    Kondratick is Aronson’s brother-in-law, investigators said.

    Aronson is a convicted felon who used proceeds from the emerging scheme to pay restitution to victims of a scheme to which “he pleaded guilty to conducting in 2000” and was sentenced to 40 months in prison, the SEC said.

    The allegation against Aronson that he used fraud proceeds from a new scam to pay restitution to victims of a previous swindle marked the second time today that the SEC made such a claim. This morning, the SEC accused Roger D. Shearer, who is implicated in a separate New York scam, of doing the same thing.

    And a separate allegation in the Aronson complaint against an attorney marked the second time today that a member of the bar had been accused of helping fleece investors. In the SEC’s Aronson complaint, attorney Fredric Aaron, 47, of Port Washington, N.Y., is accused of helping Aronson and other co-defendants dupe investors.

    “Aaron drafted the agreements used to defraud investors, participated in the solicitations conducted by Aronson, repeated during his extensive dealings with investors many of the misleading statements made by Aronson, and developed strategies for concealing the fraud,” the SEC charged.

    Earlier today, the SEC accused Miami attorney Stewart A. Merkin of aiding the alleged Shearer fraud.

    In the case against Aronson, Buonauro, Kondratick, Aaron and the PermaPave firms, the SEC said  140 individuals from the construction and landscaping trades became investors between 2006 and 2010 and were bilked out of $26 million.

    “Aronson and his associates operated the PermaPave Companies as a classic Ponzi scheme,” said George S. Canellos, director of the SEC’s New York Regional Office. “They created the façade of a profitable business, promised investors extraordinary rates of return, and used much of their investors’ money to fund their own lavish lifestyle.”

    Aronson, Buonauro and Kondratick “used new investments to make payments to earlier investors and then siphoned off much of the rest for themselves, buying luxury cars, gambling trips to Las Vegas, and jewelry,” the SEC charged.

    U.S. District Judge Jed S. Rakoff  froze the assets of the defendants and eight relief defendants.

    “Investors were told that PermaPave Companies had a tremendous backlog of orders for pavers imported from Australia, which could be sold in the U.S. at a substantial mark-up, yielding monthly returns to investors of 7.8% to 33%,” the SEC said. “In reality, the complaint states that there was little demand for the product, and the cost of the pavers far exceeded the revenue from sales.”

    Moreover, the SEC said, Aronson tried to turn the table on investors by accusing them of felonies when they asked for their money.

    “Aronson accused them of committing a felony by lending the PermaPave Companies money at the interest rates he promised them, which he suddenly claimed were usurious,” the SEC charged. “Aronson and . . . Aaron then allegedly made false statements to persuade investors to convert their securities into ones that deferred payments owed them for several years.”

    Most of the investors “had little or no prior investment experience” and were told that “they were purchasing high-yield instruments that were free of risk,” the SEC charged.

    “The PermaPave Entities operated from the same offices, shared the same employees, commingled assets, and purported to sell PermaPave pavers, which are squares comprised of small rocks glued together that purportedly assist with storm drainage,” the SEC charged.

    Of the $26 million raised in the scheme, only $600,000 was used to purchase pavers, the SEC charged.

    Read the SEC complaint.

     

  • 2 X BIZARRE: (1) SEC Says New York Man Used Proceeds From Unregistered Offering To Pay Restitution In Criminal Case; (2) Feds Say Philly Man Illegally Used Investor’s Funds To Pay For ‘Joy To The World’ Gala And Make Purported ‘Gold’ Purchase In West Africa

    EDITOR’S NOTE: If you’ve been wondering whether there was any ceiling to the bizarre nature of securities-fraud cases as the white-collar fraud epidemic continues, it perhaps is best to stop wondering now . . .

    A New York man has been accused by the SEC of using the proceeds of an unregistered offering for StratoComm Corp. to pay restitution owed in a previous criminal case.

    Roger D. Shearer, StratoComm’s chief executive officer, was sued Tuesday by the SEC in federal court in Albany, N.Y.

    Meanwhile, StratoComm’s outside counsel has been accused in Miami by the SEC of securities fraud amid allegations he knew StratoComm was under investigation but disclaimed knowledge of the probe in letters designed to ensure the firm’s stock would continue to be quoted on the Pink Sheets.

    Attorney Stewart A. Merkin was sued by the SEC on Monday.

    In a separate, unrelated case, a suburban Philadelphia man has been arrested on charges he solicited $4 million from an investor and “misappropriated at least half of it,” federal prosecutors in New York said.

    Charged criminally with wire fraud in the case was Tyrone L. Gilliams Jr. Gilliams owned a company known as TL Gilliams LLC, prosecutors said.

    Prosecutors said Gilliams’ victim believed the money would be used for investments in “treasury strips” — securities derived from U.S. treasury bonds.

    Gilliams, however, peeled off more than $2 million, using at least $1.3 million of it to fund a black-tie gala at the Ritz Carlton hotel in Philadelphia last year. The event was dubbed the “Joy to the World” festival. Another Joy to the World event was held in the Bahamas, prosecutors said.

    “His charade was funded by money he allegedly stole from an unwitting investor,” said U.S. Attorney Preet Bharara of the Southern District of New York.

    Another $450,000 of the $4 million was used “to refund a deposit from a prior investor,” and more than $200,000 went to a real estate title company, prosecutors said.

    Smaller sums went for other “improper purchases,” and Gilliams “wired approximately $1.6 million to Ghana, for what he has since claimed was an investment in gold,” prosecutors said.

    “Gilliams misrepresented to an investor how solicited funds would be used,” said FBI Assistant Director-in-Charge Janice K. Fedarcyk.

    In the civil case against Shearer and StratoComm, the SEC alleged that StratoComm, acting at Shearer’s direction and with the assistance of former StratoComm executive Craig Danzig, “issued and distributed public statements falsely portraying the company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa.”

    But the firm “had no product and no revenue,” the SEC charged, alleging that “Shearer and Danzig sold investors approximately $3 million worth of StratoComm stock in unregistered transactions.

    “Shearer used much of that money for his own purposes, including paying a substantial part of the restitution he owed in connection with his guilty plea in a prior criminal proceeding,” the SEC said.

    Merkin, StratoComm’s counsel, wrote “four attorney representation letters for posting on the website of Pink Sheets LLC and its successor, Pink OTC Markets, Inc.,” the SEC said. “In those letters Merkin disclaimed knowledge of any investigation into possible violations of the securities laws by StratoComm or any of its officers or directors. However, the SEC’s complaint also alleges that Merkin was representing StratoComm and several individuals in connection with the SEC’s investigation at the time.

    “Nevertheless, in order that StratoComm’s shares would continue to be quoted, the SEC’s complaint alleges that Merkin falsely stated that to his knowledge StatoComm was not under investigation,” the SEC said.

     

  • BULLETIN: 77-Year-Old Ponzi Enabler And His 40-Year-Old Son Who Helped Confuse Investors In Nevin Shapiro’s $930 Million ‘Grocery’ Ponzi Sentenced To Federal Prison; Roberto And Alejandro Torres Also Hit With $82 Million Restitution Order

    BULLETIN: Yesterday a federal judge in Michigan sentenced 75-year-old Ponzi schemer Edward May to 16 years in federal prison for pulling off a $350 million fraud.

    Today in New Jersey — in a separate case — a 77-year-old Ponzi enabler and his Ponzi-enabling, 40-year-old son were sentenced to combined prison terms of just shy of eight years for helping make Nevin Shapiro’s $930 million swindle possible.

    It could have been worse, but the pair later helped unmask the caper they once enabled.

    U.S. District Judge Susan D. Wigenton imposed a 48-month sentence on Roberto Torres, who will not leave prison until he is at least 81. Torres’ son, Alejandro Torres, was imposed a slightly lower sentence: 46 months. Both father and son also were hit with an $82 million restitution order. The elder Torres once resided in Lighthouse Point, Fla., but now lives in New York. His son lives in Boca Raton, Fla.

    When the Torreses will begin serving their terms was not immediately clear.

    Shapiro, 42, formerly of Miami Beach,  is serving a 20-year-term and is liable with Roberto and Alejandro Torres in the restitution order. Both father and son pleaded guilty to a single count of securities fraud. Shapiro pleaded guilty last year to one count of securities fraud and one count of money laundering.

    Roberto Torres was the chief financial officer of  Capitol Investments USA Inc., Shapiro’s phony “grocery” arbitrage business. Alejandro Torres was an accountant at the firm, which hatched a four-year-long scheme beginning in 2005 to siphon money from investors by cooking the books.

    Father and son “admitted to creating, or directing others to create, fraudulent documents which falsely touted the profitability of Capitol’s fictitious grocery diversion business,” the office of U.S. Attorney Paul J. Fishman of the District of New Jersey said today. “The Torreses admitted that those documents included: profit and loss figures fraudulently representing that Capitol’s wholesale grocery business was generating tens of millions of dollars in annual sales; personal and business tax returns for Shapiro and Capitol also fraudulently reflecting those sales; and numerous invoices fraudulently reflecting transactions between Capitol and other companies in the wholesale grocery business.”

    The Shapiro Ponzi, which was based in South Florida, toppled in January 2009, prosecutors said.

    Sydney Jack Williams, 63, of Naples, Fla., faces sentencing in January on charges he was Shapiro’s top recruiter and did not report $12 million in commissions.

  • CLOAK-BUSTING RULING IN SCAM LAND: Court Records Show SEC Served Subpoena On Google Aimed At Unmasking Identity Of Possible Touter In ‘Pump And Dump’ Probe Into Price Of Jammin Java Corp. Stock; ‘John Doe’ Moved To Quash, But Judge Says No

    A judge yesterday upheld the SEC’s ability to investigate potential fraud schemes by issuing administrative subpoenas to vendors whose services potentially are being used to help scammers cloak themselves while they harvest illegal profits. The ruling is apt to cause great unease in the corners of the Internet occupied by murky HYIP, autosurf and pump-and-dump hucksters because it reinforces the principle that anonymous fraudsters cannot shield themselves from prosecution by citing their First Amendment right to free speech while they’re picking the pockets of their marks.

    The case speaks to the issues about whether federal agencies that suspect wrongdoing can turn to third parties — in this case, Google — to determine the identities of anonymous posters on the Internet and whether the posters can quash subpoenas by arguing that disclosure of their personal information is a violation of their right to anonymous free speech under the First Amendment.

    In the case, the SEC said it had reason to believe that an anonymous poster using a Google gmail address was participating as a touter in a pump-and-dump scheme designed to harvest illicit profits by driving up the price of Jammin Java Corp. stock.

    The SEC issued a subpoena to Google under the Electronic Communications Privacy Act (ECPA), which requires “a provider of electronic communication service or remote computing device” to “disclose to a governmental entity the (A) name; (B) address; (C) local and long distance telephone connection records, or records of session times and durations; (D) length of service . . . and types of service utilized; (E) telephone or instrument number or other subscriber number or identity . . .; and (F) means and source of payment for such service, of a subscriber when the governmental entity uses an[] administrative subpoena authorized by Federal or State statute. . . .”

    Google notified the gmail user that it had been served with a subpoena. The user, in turn, hired counsel to quash the subpoena and block his identity from being disclosed to the SEC. The user identified himself as “John Doe” in the filings. A judge yesterday sided with the SEC, ruling that the subpoena “is explicitly permitted by the ECPA, and does not implicate First Amendment concerns.”

    In outlining the ruling, U.S. Magistrate Judge Nandor J. Vadas of the Northern District of California said that “Congress granted the SEC the authority to investigate potential violations of securities laws. In issuing the SEC Order and proceeding to investigate the Jammin Java stock fluctuations, the SEC is fulfilling its Congressional mandate.”

    In addition, Vadas ruled that the SEC “has followed the procedural requirements for serving an administrative subpoena.” Meanwhile, he ruled that an argument John Doe made that “the SEC has not sufficiently established the relevance of his email address to the investigation” failed because the agency made a showing under penalty of perjury that it “has obtained information indicating that the email address `[deleted]@gmail.com’ potentially belongs to a touter in the `pump and dump’ scheme.”

    “In addition,” the judge ruled, “during the hearing, counsel for the SEC testified that the SEC had investigated web-sites where the touts had appeared and tracked the email addresses of individuals who had participated in setting up those web-sites.”

    John Doe’s gmail address “was involved in setting up the web-sites and/or setting up email blasts that contained touts for Jammin Java,” according to court filings.

    John Doe “contends he has used the email address at issue to participate in anonymous political speech,” Vadas said in the ruling. “[John Doe] has a First Amendment right to participate in anonymous speech, political or otherwise, in online fora. However, at least in the context of valid government investigations, courts repeatedly have concluded that identifying information is not subject to First Amendment (or Fourth Amendment) protection.”

    For its part, Jammin Java has acknowledged that an SEC probe into its stock price is under way, but expressly denied the firm played any role in a manipulation scheme.

    “In May 2011, Jammin became aware that unauthorized internet stock promoters were promoting short term investments in the company’s stock in ‘stock reports’ and on their websites. As stated in Jammin’s May 6, 2011 Form 8-K, Jammin has no knowledge of, or affiliation with, these stock promoters,” the company said. “As a result, neither Jammin, nor anyone affiliated with the company, authorized, paid for or approved any stock report, advertisement or promotion of the company’s stock. Any information regarding Jammin that is authorized by the company and approved for public distribution will be issued by Jammin itself through periodic filings with the SEC and/or through an authorized press release.”

    Jammin Java said it was cooperating with the SEC.

    “We have fully cooperated with the SEC investigation and hope to see any wrongdoers identified and prosecuted to the fullest extent of the law,” Jammin Java Chairman Rohan Marley said last month.

  • BULLETIN: Senior Ponzi Schemer Edward May, 75, Sentenced To 16 Years In Federal Prison; $350 Million Ponzi Swindle Called Largest In Eastern Michigan History

    BULLETIN: Edward May, 75, effectively has been sentenced to life in prison for orchestrating an elaborate Ponzi scheme that gathered about $350 million and fleeced 1,200 people. Many of his victims were fellow senior citizens, although May also altered the lives of younger victims.

    Prosecutors described the May Ponzi as the largest in the history of the Eastern Michigan District.

    U.S. District Judge Arthur Tarnow sentenced May today to 16 years after May’s April guilty plea to 59 counts of mail fraud. Prosecutors said May established as many as 150 LLCs to pull off the scheme, which operated for a decade. The SEC sued May in 2007.

    One of May’s victims told prosecutors that he considered suicide after being bilked by May.

    “Complex fraud schemes like this one rob investors of their savings and erode public confidence in legitimate investments,” said U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan. “This loss of public confidence in investment opportunities, in turn, depresses our economy. By prosecuting those who commit fraud, we hope to deter others from committing similar crimes.”

    May falsely traded on the name of Hilton Hotel Corp.,  MGM-Mirage Resorts Inc., the MGM Grand Hotel, Motel 6, the Tropicana Resort Casino and the Sheraton Hotels chain as part of the fraud, according to court filings. He also claimed that he was supplying telecommunications services through a purported “Norwegian” company.

    In an often-heard refrain in the Ponzi world, May went into excuse-making mode when his caper collapsed, claiming payments to investors were delayed because of the company’s growing pains.

  • BULLETIN: California Woman Pleads Guilty In ‘Christian Rock Concerts’ Ponzi Scheme; Recidivist Swindler Lauren Baumann Used Money From Latest Scam To Pay $10,000-A-Month Mansion Rent, Prosecutors Say

    BULLETIN: A California woman has pleaded guilty to wire fraud in a Ponzi scheme in which investors were falsely told their money was being used to fund “Christian rock concerts” and to flip real estate at a profit.

    Lauren Baumann, 43, of Downey, was a recidivist  huckster who failed to disclose she’d been sued for fraud by the SEC in 1998 and convicted in Texas of securities fraud in 1999 in a criminal case that evolved from the SEC probe. The 1990s-era caper gathered about $5 million, and the scam targeted at Christian music fans that would follow later netted about $1 million.

    Investors in the rock-concert scam were told their money would be used to finance “battle of the bands” events that would feature “Christian rock bands and other music groups that would generate profits from ticket sales and company sponsorships,” the office of U.S. Attorney André Birotte Jr. of the Central District of California said this afternoon.

    The scheme operated through a company known as Stewardship Estates LLC, prosecutors said.

    “Baumann also used investor funds to pay approximately $10,000 a month to rent a historic mansion in Downey and to pay private school tuition for her children, among other personal expenses,” prosecutors said.

    Although some of the investors got paid, the money they received was Ponzi proceeds. All in all, the scam sucked in more than two dozen investors and caused at least $560,000 in losses, prosecutors said.

    Baumann faces up to 20 years in federal prison. She is scheduled to be sentenced by U.S. District Judge Josephine S. Tucker on Dec. 12. The FBI handled the criminal probe in Baumann’s latest swindle.

  • UPDATE: Federal Prosecutors Have ‘No Comment’ On ASD-Related Email That Encouraged Members To Identify Public Officials As ‘Thieves’ And Send ‘Certified’ Copy Of Theft Claims To Home Of U.S. Chief Justice

    ASD President Andy Bowdoin

    UPDATED TO ADD COMMENT FROM U.S. MARSHALS SERVICE AT 3:21 P.M. EDT (U.S.A.) Federal prosecutors in the District of Columbia this morning declined to comment on an email received Saturday by some AdSurfDaily members that encouraged them to file documents at the “county” level and “name” federal officials as “thieves.”

    Prosecutors also declined to comment on whether the government had beefed up security for judges and prosecutors in response to strange developments in the ASD case. On Saturday, some ASD members received an email that encouraged them to send a “notary certified copy” of theft claims they file in their home counties against federal officials to the home address of U.S. Chief Justice John Roberts.

    “No comment,” the office of U.S. Attorney Ronald C. Machen Jr. said.

    The U.S. Marshals Service, which provides security for the U.S. court system, said this afternoon that “it is the policy of the U.S. Marshals Service not to comment on or confirm ongoing judicial threat investigations.”

    The PP Blog reported yesterday that ASD figure Kenneth Wayne Leaming, a reputed “sovereign citizen” who sometimes goes by the names of “Kenneth Wayne” and “Keny,” filed involuntary bankruptcy petitions in 2009 against the Washington State Bar Association and a Franciscan hospital in Washington state.

    Leaming’s combined claims totaled more than $41 billion. He was permanently enjoined “forever from filing a bankruptcy petition or any other pleadings before this court without the advance leave from one of the bankruptcy judges of this court,” according to federal records.

    “Keny” has been cited by ASD members as the author of a November 2010 “legal opinion” and as the author of Saturday’s email that provided guidance to ASD members. The ASD case had been marked by strange events since the U.S. Secret Service seized tens of millions of dollars in a Ponzi scheme probe in August 2008.

    In November 2010, Cornell University Law School, Justia.com and Oyez.org removed the online profiles of Leaming after questions were raised about whether he was a licensed attorney.

    In the profiles, Leaming had been listed as an attorney who advertised a fee structure of up to $250 an hour from Spanaway, Wash.

    Leaming was the subject of a letter sent in 2005 by the Practice of Law Board of the State of Washington. The Law Board made a determination in December 2005 that Leaming’s conduct in cases it was investigating “constitutes the unauthorized practice of law.”

    In one case, the Law Board said, a notary public accused Leaming of coercing her into “notarizing documents that resulted in the loss of her notary license.”

    Leaming became a figure in the ASD case in 2010 after he was denied leave to file documents in the civil portion of the ASD case and later joined with ASD figure Christian Oesch, an unsuccessful pro se litigant in the case, to sue the United States — apparently for the staggering sume of more than $29 trillion.

    Civil judgments against money and property seized by the Secret Service in the ASD case were entered in the government’s favor in 2009 and 2010, and the prosecutors returned $55 million to about 8,400 ASD members last week through a process known as remission.

    There were repeated efforts by some ASD members to discourage others for filing for remissions.

    Bowdoin claimed last week — prior to Saturday’s email attributed to “Keny” — that the government “forced [ASD] members to sign the untrue statement to get a refund of their monies.”

    Bowdoin’s email followed on the heels of an email by an ASD member named “Sara” that claimed to provide “insider information” that a government plot was under way.

    Since at least July, Bowdoin has been soliciting ASD members to pay for his criminal defense on charges of wire fraud, securities fraud and selling unregistered securities.