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  • 9News.com (KUSA/Denver) Reports That Marlyn Hinders, Fugitive In $80 Million Genesis Fund Ponzi Scheme, Has Been Arrested

    Marlyn D. “Milt” Hinders, a Colorado fugitive charged six years ago in the $80 million Genesis Fund Forex Ponzi scheme, has been arrested in Houston, 9News.com (KUSA) is reporting.

    Hinders is 72. He was indicted in May 2005. A federal grand jury that had been impaneled in the Central District of California in 2003 accused him of being “one of the leading promoters and a manager of the Genesis Fund.”

    The Genesis Fund scheme traces its roots at least to 1994 and presaged highly complex international Forex, HYIP and autosurf fraud investigations to come. The Genesis Fund fraud caper started in the United States, but then whisked itself offshore to Costa Rica and other countries when U.S. law enforcement began to close in, first by issuing subpoenas and later by convening a grand jury when evidence disappeared.

    One of the figures in the case was a “co-conspirator lawyer from Costa Rica,” according to the indictment. Another was California attorney Victor Preston, who pleaded guilty in 2009 to defrauding the United States.

    INTERPOL and authorities in Costa Rica assisted in rounding up at least three Genesis Fund defendants who’d ducked out of the United States. Five others were arrested in the United States, prosecutors said.

    Hinders, who allegedly moved to Mexico in 2004 after subpoenas were issued and the grand jury was impaneled, was caught in Houston after a “tip” last month, KUSA reported. It is believed Hinders is the last of the nine defendants in the case to be rounded up.

    Like the now-defunct AdViewGlobal autosurf, the now-defunct Genesis Fund purported to be an offshore “association” outside the reach of U.S. law enforcement, according to records.

    Investigators followed the Genesis Fund paper trail “from the Caribbean to Hong Kong to Costa Rica and numerous other offshore locations,” according to a statement last year.

    When the Genesis Fund Ponzi scheme collapsed, its operators “and their co-conspirators lulled the investors into believing that their investments would be recovered through a new investment plan,” the grand jury charged in an 83-count indictment.

    It is common for investment fraud schemes to suspend payouts and then claim a new program will emerge to replace a failed one.

    “Upon learning of the grand jury investigation, the defendants and their co-conspirators conspired to and did endeavor to obstruct the investigation by restructuring the Genesis Fund as a group of nominee offshore corporations,” the grand jury charged.

    “This signals the new era of solving global financial fraud — the veil of offshore secrecy has been lifted and the IRS will do what is necessary to expand international cooperation to obtain financial evidence,” Victor S O. Song, chief of the IRS Criminal Investigation Unit, said last year.

    Read earlier story on the Genesis Fund.

    Read the Genesis Fund indictment.

  • INCREDIBLE: Texas Forex Fraudster Allegedly Scammed Georgia Attorney Now Jailed In $40 Million Ponzi Scheme; Mark E. Rice Accused By CFTC Of Ripping Off Seminar Swindler Robert P. Copeland

    In a case that could provide even more inspiration for lawyer jokes and black comedy on America’s epidemic of white-collar crime and hucksterism, the CFTC has gone to federal court in Texas to accuse an alleged Forex scammer of defrauding a Georgia attorney now serving a 10-year prison sentence for ripping off senior citizens in a $40 million Ponzi and fraud scheme.

    Mark E. Rice, the alleged Forex fraudster, was not registered with the CFTC “in any capacity,” the agency said. He is accused of ripping off attorney Robert P. Copeland of Marietta, Ga.

    In August 2009, Copeland, whom federal prosecutors said practiced “elder law,” was sentenced to 10 years in federal prison for swindling retirees in a five-year, $40 million Ponzi caper involving bogus real-estate investments and at least 125 victims. Copeland recruited victims at seminars and doled out “commissions” to people who helped him line up business, according to prosecutors.

    U.S. District Judge Lee H. Rosenthal of the Southern District of Texas has frozen the assets of Rice and his company, Financial Robotics Inc. (FinRob) of Houston.

    Copeland surrendered his law license and received the equivalent of a disbarment in June 2009 from the Supreme Court of Georgia, according to records in Georgia.

    Prior to his 2009 conviction for wire fraud in the Ponzi swindle, Copeland plowed $10.4 million into Rice’s alleged Forex swindle — and the money came from Copeland’s investors in the Ponzi scheme for which he was imprisoned, the CFTC alleged.

    Rice, of Sugar Land, Texas, began to pitch Copeland on managed Forex in 2006, prior to the 2009 exposure of the Copeland real-estate Ponzi scheme, according to court records. Rice told Copeland that his investment was “risk free” and “insured against loss,” the CFTC said.

    While soliciting Copeland, Rice told him that he and his firm had developed automated Forex software trading programs that had generated “phenomenal returns” of 30 percent a month while being tested in Europe and the United States and 30-day returns of between 10 percent and 15 percent in actual trading, the CFTC alleged.

    Copeland’s trading with Rice initially started with a $502,000 investment in 2007. Between March 2007 and August 2008, Copeland plowed an additional $9.9 million into the Forex scheme after Rice allegedly told him that Rice was “going to move all of his investments to England, as that market could provide greater returns than the American market,” the CFTC said.

    By September 2008, Rice presented Copeland a “spreadsheet” that showed the value of Copeland’s investment had grown to $15 million — and Copeland contemplated cashing out, the CFTC said.

    But Rice persuaded him that the $15 million would turn into $20 million by January 2009, and Copeland decided not to liquidate his account.

    In November 2008 — just two months after Rice told Copeland that $20 million would be on the table for him in January — Rice told Copeland that “all” of his funds “purportedly” had been lost in trading, the CFTC said.

    Later, in February 2009, Rice told Copeland that the account never had been insured against loss.

    By April 2009, according to records, Copeland’s own Ponzi scheme had come tumbling down — and the SEC was investigating.

    “This case is particularly disturbing because the defendant was a lawyer and many of his victims were senior citizens, some of whom lost their life savings,” said then-U.S. Attorney David E. Nahmias in April 2009. “[Copeland] is now cooperating in the ongoing investigation and in our efforts to recover whatever assets are left, but he will still face the punishment that this devastating crime requires.”

    In August 2009, Copeland was sentenced to 121 months in federal prison.

    The CFTC did not say whether the cooperation Copeland pledged two years ago had resulted in the charges against Rice.

    Whether victims of Copeland’s Ponzi scheme can expect a recovery from assets frozen in the emerging Rice case was not immediately clear. At his August 2009 sentencing, Copeland was ordered to pay about $16.7 million in restitution.

  • BULLETIN: Florida Attorney/CPA Lorn Leitman Sentenced To More Than 17 Years In Ponzi And Fraud Caper; Federal Judge Orders Upward Departure From Sentencing Guidelines, Saying Lawyer Targeted Elderly Investors, Friends And Military Members

    BULLETIN: A 61-year-old Florida attorney and CPA who targeted elderly investors, retirees, friends and members of the military in companion fraud schemes has been sentenced to 210 months in federal prison.

    Although sentencing guidelines suggested that Lorn Leitman would serve a maximum of 151 months, U.S. District Judge Marcia G. Cooke of the Southern District of Florida departed upward from the guidelines, effectively turning what might have been a sentence of 12-plus years into one of more than 17 years.

    Cooke departed from the guidelines after hearing a Leitman victim say “my dreams are dead,” according to the office of U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

    “The court explained that the decision to sentence above the guidelines resulted from the defendant’s conduct preying upon his closest friends, fellow servicemen, the elderly and retirees, and noted that the defendant breached codes of conduct applicable to members of the Florida Bar and certified public accountants,” Ferrer’s office said.

    Leitman’s Ponzi scheme operated for a decade and involved an investment pitch for “phantom residential mortgages,” prosecutors said. A companion scheme in which members of the military were sucked into “predatory and usurious loans” also was part of Leitman’s fraud scheme, according to investigators.

    Ferrer has thrown down the gauntlet to scammers in the Miami region and fraudsters operating offshore while targeting U.S. residents. A special task force operating in the region is specifically targeting investment fraud.

    The Miami region has been plagued by fraud schemes, including the spectacular Ponzi caper involving more than $1 billion pulled off by now-disbarred attorney Scott Rothstein and a $935 million “grocery” Ponzi scheme orchestrated by Nevin Shapiro.

    In January 2010, U.S. Attorney General Eric Holder ventured to South Florida and issued a warning to scammers that the government was serious about putting them in jail.

    “To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned a year and a half ago. “If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

    Prosecutors in various districts across the United States have been targeting attorneys who provide cover to fraud schemes and help white-collar crime and hucksterism flourish.

  • 3 PTA Moms Charged In Alleged California Ponzi Swindle; Suspects Claimed They Had Exclusive Deal To Sell Dairy Products At Disneyland, L.A. County Sheriff’s Department Says

    EDITOR’S NOTE: This is one of those stories of an investor wipeout that may leave you scratching your head and wondering if no person, institution or symbol of America is off-limits in the world of Ponzi criminals.

    For starters,  the scheme allegedly was targeted at least in part at Parent-Teacher Association (PTA) members in the Los Angeles area. If that’s not bad enough, the elementary school whose PTA members were  targeted is named after Neil Armstrong, the first person to set foot on the moon and an American hero.

    And authorities also say the suspects in the alleged scheme also traded on the name of Disneyland to separate victims from their money.

    Three California women, including one who already is in prison, swindled investors in an affinity-fraud Ponzi scheme that gathered $14 million, traded on the name of Disneyland and took advantage of parents whose children attended a school named after an American hero, the Los Angeles County Sheriff’s Department said.

    All three women were “actively” involved in the Parent-Teachers Association (PTA) at Armstrong Elementary School in  Diamond Bar, Calif., the agency said. The school is named after astronaut Neil A. Armstrong, 80, the first man to set foot on the moon. Armstrong, a former Eagle Scout, also is a recipient of the Presidential Medal of Freedom.

    One of the reasons the scam succeeded was that the women gained “the friendship and trust of investors during organized school events and social functions,” investigators said.

    “In order to get money, many of the victims took out second mortgages on their homes, maxed out their credit cards and ‘invested’ their life savings,” investigators said.

    Losses ranged from $5,000 to $208,000, investigators said.

    “The victims were given serialized receipts commonly available in stationary stores,” investigators said.

    Arrested in the alleged caper were Maricela Barajas, 41, and Juliana Menefee, 50. Both women resided in Diamond Bar and are being held in the Los Angeles County Jail. Barajas also is known as Maricela Torres.

    The third suspect — Eva Perez, 51 — already was in custody. Perez previously was arrested for fraud by the Chino Police Department “and is currently incarcerated in the Central California Women’s Facility, California State Prison,” investigators said.

    Perez pleaded guilty last year in San Bernardino County in the same fraud scheme that triggered the Los Angeles County probe and the filing of more charges against her. She was sentenced to 11 years in prison in the San Bernardino case.

    Investors plowed about $14 million into the scheme after being told that the women had an exclusive deal to sell AltaDena Dairy products at Disneyland, Disney Hotels and to small retailers, investigators said.

    About $4 million of the sum was “retained” by the thieving PTA mothers, and about $2.5 million “has not been directly accounted for” and may have been spent on vacations and gambling, investigators said.

    Until its detection, the scheme succeeded in part because the PTA Moms recycled $10 million back to investors, thus creating the impression that the women were at the helm of a successful enterprise, investigators said.

    Investors were told that cash was required to become an investor and that their money was safe and guaranteed. At least some of the more than 40 victims were told they’d receive a return of 100 percent, investigators said.

    As the Ponzi was unraveling and payments stopped, the thieving PTA Moms “organized informational meetings, and attempted to pacify investors by explaining the delays in payment were a result of an internal audit of the business,” investigators said.

    “The victims are mostly typical, hard-working people,” investigators said. “When they were interviewed by sheriff’s detectives, their main reaction was to emotionally describe their embarrassment that they fell for this scheme. They said they saw others making a lot of money and didn’t want to miss out on the opportunity to make a better life for themselves and their families. They are in hopes that people who hear about what happened to them, will look for the warning signs that they ignored, and not have this happen to them. They also made the mistake of investing in people they thought they could trust.”

  • ‘Sovereign Citizen,’ 81, Arrested In Arizona On Federal Charges Of Making False Claims; Marshall Home Hawked ‘Foreclosure Rescue’ Scheme And Sought To Place United States In Bankruptcy, Feds Say

    Marshall Home, 81, charged customers $500 as part of a purported Arizona-based service to halt mortgage-foreclosure proceedings through an entity known as “Individual Rights Party; Mortgage Rescue Service,” federal prosecutors said.

    But his service was a scam in which Home, a Tucson resident and self-described “sovereign citizen,” insisted he had a valid claim of more than $3 billion against the government, prosecutors said.

    Home was arrested Friday on charges of false claims in bankruptcy. Prosecutors said he “filed or caused to be filed 173 false claims” against the United States in bankruptcy court and filed a fraudulent petition on March 16 in Arizona that sought to put the United States itself into involuntary bankruptcy.

    All in all, prosecutors said, Home’s false claims totaled more than $2.5 trillion.

    “The anti-government paranoia of so-called ‘sovereign citizens’ becomes a self-fulfilling prophecy when they use their false claims and fraudulent practices to rip-off others,” said U.S. Attorney Dennis K. Burke.

    Some “sovereign citizens” have been linked to credit-repair schemes and say they do not believe U.S. law applies to them.

    Home became involved in the bankruptcy of Giordano’s, a Chicago pizza chain and eatery. The Chicago Tribune reported last week that a judge tossed Home from the proceeding for being disruptive.

  • DIALING UP THE BIZARRE: Purported Fundraising ‘Army’ Displays Photo Of Accused AdSurfDaily Huckster Andy Bowdoin Smiling Ear To Ear

    Some ASD members say this smiling and vigorous Andy Bowdoin is ready to do battle with the government in a "David vs. Goliath" clash. Bowdoin himself has advised a federal judge that he suffers from various medical maladies, including a lack of quality sleep, and his trial should be moved from the District of Columbia to Florida. The judge denied Bowdoin's bid to move the trial.

    Although AdSurfDaily President Andy Bowdoin has described himself in court filings as an elderly man suffering from diabetes, lack of sleep caused by worrying about his ill wife, hyperlipidemia, coronary heart disease and multiple Transient Ischemic Attacks (ministrokes), some of his supporters apparently disagree with Bowdoin’s assessment of his own medical condition.

    A website with a URL of AndysFundraisingArmy.com has posted a photo of Bowdoin purportedly taken on June 24. The photo shows a vigorous-looking Bowdoin seated in a chair and smiling broadly.

    The website features a second photo of Bowdoin wearing a business suit, smiling at the camera and taking care of paperwork.  A claim is made on the website that “over 88% of the members surveyed said that once Andy wins his court case and ASD is found to not be a Ponzi Scheme, they would want to immediately continue with their Ad Surf Daily business, because it is a proven, popular and successful way to advertise and build a great income with the ASD home business opportunity.”

    What’s needed to get ASD restarted on a date uncertain — presumably with Bowdoin at the helm — is a $500,000 “minimum requirement” to pay for lawyers, according to the fundraising website. The website appears to have been registered using an address of a Florida law firm that is not the same firm associated with either of Bowdoin’s current civil and criminal attorneys.

    Precisely who registered the site is unclear. The name on the domain registration is “Andys Defense Fund.”

    And the fundraising website also makes other broad claims, including a claim that a survey sample of 140 ASD members can be reliably applied to a group of 123,000 ASD members as a whole.

    “[P]er standard and accepted industry guidelines, public opinion surveying of 140 members of a large group of members that all share a common interest or purpose, of any size, even in the millions, will give an excellent cross section of the opinions and viewpoints of the entire group,” the fundraising site claims while asking ASD members to prepare to fork over a donation.

    Among the claims below a subhead of “MORE GOOD NEWS” is that “A Recent Survey of ASD Members Proves that the Vast Majority of You Want to Join Andy’s Fundraising Army.”

    The fundraising site, however, does not describe the characteristics of the 140 ASD members purportedly sampled. Nor does it define what specific surveying “standard” it applied or define the source of the purported “industry guidelines.”

    Any claim that a small sampling result culled from individual ASD members can be applied to a much larger group is dubious, if not reckless. The fundraising site did not define any variables in the purported sample — for instance, whether the sample was top-heavy with members inclined to disbelieve the government’s take on events for personal or political reasons or out of fear they could become implicated in the ASD probe, whether the sample consisted of people who made money or lost money in ASD, the amount made or lost and the amount directed at ASD, whether members had large downlines, midsized downlines or small downlines and the degree to which downline members were affected by ASD developments and whether survey respondents had filed claims for restitution that the government announced more than two years ago would be paid from funds seized from Bowdoin’s personal bank accounts.

    One of the accounts contained more than $31 million; another contained more than $23 million, and Bowdoin’s accounts contained more than $65.8 million in the aggregate, according to court filings. Bowdoin also allegedly moved “several million” dollars offshore prior to the August 2008 seizure of funds in his identified U.S. bank accounts. Meanwhile, ASD was alleged to have about $1 million in an account on the Caribbean island nation of Antigua in an account under a different name, according to court filings.

    Although the fundraising site also claims Bowdoin “never backed down” in his battle against the government and “has always kept on fighting,” federal prosecutors said in 2009 that Bowdoin had signed a proffer letter in the case and acknowledged the government’s material allegations were all true.

    Bowdoin’s own court filings show that he met with federal prosecutors over a period of at least four days, provided information against his interests and sought to cooperate because cooperation possibly could keep him out of jail.

    Meanwhile, the fundraising site claims that Bowdoin lost his fight over the seized money “due to the lone decision made by that one single Civil Court Judge,” but it does not reveal that Bowdoin also lost two forfeiture appeals and that the U.S. Court of Appeals for the District of Columbia circuit upheld the rulings made by U.S. District Judge Rosemary M. Collyer.

    At the same time, the fundraising site claims that ASD members who send in $50 or a smaller sum to fund a legal war chest “can finally have a strong fighting chance to get their advertising money returned to them.”

    But the fundraising site does not reveal that the government already has set up a restitution program and that prosecutors alleged that ASD was an investment program disguised as an “advertising” program — one consisting of multiple illegal parts and one that Bowdoin and others were maneuvering to move offshore before it popped up on the radar of U.S. regulatory and law-enforcement agencies.

    Nor did the fundraising site reveal that the government has alleged that ASD had “special” members and that at least some of the special members were participants in a previous autosurf fraud scheme.

  • Missouri-Based ‘Trainer’ For Florida-Based AdSurfDaily Was Head Of Purported ‘Religious’ Nonprofit Firm In Oregon; State Dissolved Firm Over Which Erma ‘Web-Room Lady’ Seabaugh Presided; Address For ‘Carpe Diem’ Was A Mail Drop

    Missouri-based Erma Seabaugh, known among members of Florida-based AdSurfDaily as a company trainer and the "Web Room Lady," was the president of Carpe Diem, a purported "religious" entity in Oregon.

    On Jan. 16, 2008, the state of Oregon recorded the business registration of an entity known as “Carpe Diem,” a purported “religious” nonprofit firm. AdSurfDaily figure Erma Seabaugh of Cape Girardeau, Mo., was listed as Carpe Diem’s president and secretary. ASD members described Seabaugh as a “trainer” for the Florida-based autosurf firm whose operator, Thomas A. “Andy” Bowdoin, 76, is under federal indictment for wire fraud, securities fraud and selling unregistered securities.

    The Oregon registration of Carpe Diem coincides with a period in which ASD allegedly was ratcheting up the criminality to drive more business to its $110 million Ponzi scheme — first by introducing a companion “Spanish” autosurf known as LaFuenteDinero and later by launching a “Chinese” surf known as Golden Panda Ad Builder and producing a video in which an attorney who appeared with Bowdoin preemptively denied ASD was operating a Ponzi scheme, according to federal court filings.

    As an ASD trainer and a person with “privileges within the ASD computer database system to post and remove ‘ad packages’ from individuals’ accounts,” Seabaugh was positioned to benefit from ASD’s crimes and engage in crimes of her own, according to federal court filings.

    The filings raise the possibility that Seabaugh was seeking to disguise personal income as the proceeds of a purported religious entity and use ASD itself to launder money or hide income.

    Prosecutors said in December that it appeared as though Seabaugh “was selling her own investment ‘ad packs’ to clients and representing herself as ASD.” The Cape Girardeau, Mo., address for Carpe Diem in Oregon records is associated with a firm that provides mailbox and parcel services.

    Oregon dissolved Carpe Diem’s registration in March 2010, about 26 months after the entity was registered in the state.

    Just weeks prior to the January 2008 creation of Carpe Diem — on Nov. 11, 2007, Dec. 9, 2007 and Dec. 19, 2007 — Seabaugh opened three separate ASD accounts. Each of the accounts used a variation of the Carpe Diem name: Carpe Diem, Carpe Diem2 and Carpe Diem3, according to federal prosecutors in the District of Columbia.

    The presence of a form of the Carpe Diem name in three ASD accounts leads to a question about whether Seabaugh or others were seeking to structure transactions to avoid tax-reporting requirements or to minimize the risk that a bank might begin to ask uncomfortable questions.

    Seabaugh used the Carpe Diem account to sponsor “48 additional investors into the ASD investment scheme,” federal prosecutors said in a forfeiture complaint filed on Dec. 17, 2010, about 16 days after Bowdoin was arrested in Florida.

    Known as ASD’s “Web Room Lady,” Seabaugh withdrew $107,997 from the Carpe Diem account “through checks that issued from ASD,” according to the complaint. The account was funded with “ad packs” that “originated” at LaFuenteDinero, the “Spanish” version of ASD.

    It also was funded with $10,510 that originated at e-Bullion, which prosecutors described as an online digital currency.

    Two of Seabaugh’s Carpe Diem accounts — Carpe Diem2 and Carpe Diem3 — were used to promote an apparent “pyramid scheme” known as StreamlineGold.net, according to the forfeiture complaint. Although Seabaugh appears not to have made a withdrawal from the Carpe Diem3 account, she withdrew $83,994 from the Carpe Diem2 account, which also had been opened with a transfer of “ad packs” from LaFuenteDinero, according to the forfeiture complaint.

    LaFuenteDinero means the “fountain of money.” Different email addresses were used to open each of the Carpe Diem accounts, according to the forfeiture complaint.

    In addition, Seabaugh used an address with the letters “ASD” and the word “admin” included among the characters comprising a free gmail address, according to the forfeiture complaint.

    E-bullion operator James Fayed was convicted in May of arranging the contract murder of his estranged wife, Pamela Fayed, a potential witness against him on matters pertaining to fraud. James Fayed faces the death penalty for the slaying.

    Investigators have linked e-Bullion to multiple Ponzi schemes.

    At least $10,510 flowed from E-Bullion to ASD through Seabaugh’s Carpe Diem account prior to the gruesome slashing murder of Pamela Fayed in a California parking garage on July 28, 2008.

    About four days later — on Aug. 1, 2008 — the U.S. Secret Service seized tens of millions of dollars in the personal bank accounts of ASD’s Bowdoin. Seabaugh has not been charged with a crime, but agents seized at least $153,087 from bank accounts linked to Carpe Diem and Seabaugh, according to court filings.

  • Government Sues Washington State Man Once Imprisoned For Possessing Explosive Device; John Lloyd Kirk Now Accused Of Pushing ‘Redemption’ Tax Scam; Anti-Defamation League’s Brief On Kirk Is On Same Webpage As Brief On AdSurfDaily Figure Kenneth Wayne Leaming

    A Washington state man sentenced in the 1990s to 46 months in federal prison for possessing a pipe bomb now has become the subject of a tax investigation.

    A civil case filed Thursday in Seattle against John Lloyd Kirk accuses him of pushing a “redemption” tax scheme. At least 31 of Kirk’s customers sought fraudulent tax refunds totaling about $8 million, the Justice Department said.

    Kirk, 70, of Des Moines, Wash., has been identified by the Anti-Defamation League (ADL) as a “sovereign citizen” and member of an extremist group known as the “Little Shell Pembina Band.”

    Kenneth Wayne Leaming, an emerging figure in the AdSurfDaily Ponzi scheme story, also has been identified by ADL as a sovereign citizen and member of the Little Shell Pembina Band. Leaming lists an address in Spanaway, Wash. In 2010, he sought unsuccessfully to sue the United States for the apparent sum of more than $29 TRILLION for its actions in the ASD case. The sum sought in the lawsuit was more than twice the U.S. Gross Domestic Product in 2009.

    ASD President Andy Bowdoin was indicted last year on charges of wire fraud, securities fraud and selling unregistered securities. ASD is known to have sovereign citizens and tax-deniers in its ranks, and Bowdoin was accused of operating a Ponzi scheme that gathered at least $110 million.

    Leaming’s history also includes the filing of bogus liens against government officials and a Franciscan hospital in Washington state, according to records. Like Kirk, he has purported to practice tribal law.

    An ADL website publishes brief profiles of both Leaming and Kirk on the same page.

    The Justice Department’s lawsuit against Kirk does not reference ASD. Kirk was accused of hatching a redemption scheme individually and through two entities: Indian Nations Advocate Law Office and The Kirk of Yahh Hava.

    “Kirk purports to be a member of good standing of the Tulalip Tribal Bar and allowed to
    practice law before its tribal court although he is not an attorney,” the Justice Department alleged.

    In a redemption scheme, customers typically are told that the government maintains “secret” accounts for U.S. citizens and that the accounts contain vast sums of money that can be accessed and used to retire debts. Another form of the redemption theory holds that individuals can “draw” on their secret accounts with the U.S. Treasury to pay their tax bills and qualify for spectacular refunds.

    “Kirk’s scheme is part of a ongoing trend amongst tax protestors to file frivolous tax returns and Forms 1099-OID (or to claim false OID income) with the IRS and courts in an attempt to escape their federal tax obligations and steal from the U.S. Treasury,” the Justice Department said.

    “At his 1099 OID seminars, Kirk advises his customers that they can draw on a secret account with the United States Treasury to pay their debts,” the Justice Department alleged. “He further advises his customers to file bogus tax returns with fraudulent Forms 1099-OID to draw on this secret account that the Treasury supposedly maintains for each person. Accordingly, he advises his customers to file false Forms 1099-OID and tax returns seeking tax refunds for amounts equal to the amounts of their mortgages, car loans, credit card debts, and other debts as well as any interest incurred on those obligations.”

    Kirk advised one of his customers to file fraudulent paperwork to receive a tax refund of more than $130,000. In another case, a customer of Kirk’s received a fraudulent refund of more than $700,000. At least 31 Kirk customers filed for fraudulent refunds totaling approximately $8 million, the Justice Department said.

    The National Consortium for the Study of Terrorism and Responses to Terrorism (START), a terrorism research group based at the University of Maryland, identified Kirk as a member of the Washington state “Freemen.” ADL, meanwhile, reported that Kirk was a friend of infamous Montana Freeman LeRoy Schweitzer.

  • June Ends With MULTIPLE Fraud Filings By CFTC; Air-Traffic Controllers Who Allegedly Solicited Colleagues Into Fraud Scheme Charged In Georgia; Investigators Link Georgia Scheme To Alleged Botfly Caper In Florida, Saying Federal Aviation Administration Employees Became Investors

    EDITOR’S NOTE: The disturbing information that follows this intro is presented largely in capsule form, with links to CFTC charging documents in three new cases. Perhaps the most notable case in this summary is the one filed in Georgia. As things stand, it demonstrates:

    Interconnectivity: Ties between and among scams and scammers are common in the fraud universe, contributing to a condition the PP Blog has described as “fraud creep.” The CFTC says two of the defendants charged in the Georgia case were investors in Botfly LLC, an alleged Ponzi scheme that operated internationally from Florida. The Botfly case is just plain creepy. Elements of it are reminiscent of the AdSurfDaily case. ASD, too, was based in Florida.

    Familiarity/Affinity: Two of the Georgia defendants are employees of the U.S. government — specifically air-traffic controllers employed by the Federal Aviation Administration (FAA). Based on court filings, it appears as though the FAA employees were moonlighting as Forex managers and that other FAA employees got sucked into one or more scams.

    Vulnerability: Can anybody be truly safe in this unprecedented era of white-collar crime and rampant hucksterism? Government employees allegedly got sucked into a Ponzi caper operated by Kenneth “Wayne” McLeod, a Florida man who reportedly killed himself last year after the SEC opened a probe. If the allegations by the CFTC in the Georgia case are true, it may mean that other government workers saw their wealth eviscerated in a fraud scheme. It is unclear if retirement savings were plowed into the alleged Georgia scam. What is clear, however, is that the U.S. government now has at least two cases on its books in which it is alleged that federal workers were drafted into fraud schemes by individuals either employed by the government or paid by the government.

    We are presenting summaries because the information is voluminous. Here, now, the capsules . . .

    In an extraordinary series of actions on the Ponzi and fraud front, the CFTC has closed out the month of June by filings fraud cases in federal courts in Georgia, Colorado and Nebraska.

    Georgia Case

    Charged civilly with fraud and misappropriation in the Georgia case were Louis J. Giddens Jr. of Fayetteville, Ga., and Anthony W. Dutton of Peachtree City, Ga. Giddens and Dutton are air-traffic controllers, the CFTC said.

    Also charged in the Georgia case was Michael Gomez of Valrico, Fla. Gomez is a commodity trader, the CFTC said.

    The men are charged with operating a Forex fraud scheme that gathered about $1.4 million and involved at least four companies: Currency Management Group LLC, Pinnacle Capital Partners LLC, Pinnacle Trade Group LLC and Elyon LLC.

    Giddens, the CFTC said, was an air-traffic controller in Atlanta. In “late 2008,” according to the CFTC, he learned about Botfly LLC, a Florida Forex company that offered investors a return of 10 percent a month.

    After meeting with a “principal” of Botfly, Giddens became a Botfly investor and solicited fellow Federal Aviation Administration (FAA) employees in Georgia to become Botfly investors, the CFTC charged.

    Dutton, Giddens’ fellow air-traffic controller, became a Botfly investor, the CFTC said. So did other FAA employees.

    In April 2010, the state of Florida charged Botfly in a Ponzi case and froze its assets.

    Giddens and Dutton used essentially the same business model as Botfly, and started their own pooled Foex business, using their unregistered companies to do so, the CFTC charged.

    Eventually, Gomez, who also was unregistered, became part of the mix, the CFTC charged.

    Investors plowed $1.4 million into the fraud scheme, the CFTC charged.

    Read the Georgia charging document.

    Colorado Case

    Shawon McClung of Denver and Flint-McClung Capital LLC (FMC) of Englewood, Colo., have been charged civilly with fraud and misappropriation in an alleged $1.9 million Forex Ponzi scheme.

    The scheme operated in part through a website, and McClung positioned himself and the company as “sophisticated” players with a cash reserve of nearly $100 million.

    Investors were told their funds were “guaranteed” against loss, the CFTC charged.

    Prospects were lured “with the prospect of quickly making large profits with returns such as 50 percent in thirty days or 15 percent per month for six months,” the CFTC charged.

    McClung “has never been registered” with the CFTC, the agency charged, adding the FMC also “has never been registered.”

    Read the Colorado charging document.

    Nebraska Case

    Grace Elizabeth Reisinger of Grand Island, Neb., and ROF Consulting LLC (ROF) have been charged civilly with operating a fraudulent commodity pool scheme known as NCCN LLC (NCCN), the CFTC said.

    The unregistered scheme gathered about $4 million and falsely claimed registration exemptions, the CFTC said.

    Read the Nebraska complaint.

  • URGENT >> BULLETIN >> MOVING: Paranoia-Maker: FBI Undercover Sting In Florida Leads To Criminal, Civil Charges Against 5 In Alleged Penny-Stock Capers; Agents Established ‘Phony’ Consulting Company

    URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.

    The sting featured a phony “consulting” company created by the FBI, authorities said. News about the make-believe consultancy followed on the heels of news last month that U.S. investigators had created a “payment processor” as part of a different probe into illegal gambling.

    Charged criminally in today’s undercover cases were Brian Gibson, 63, of Coconut Creek, Fla; Donald W. Klein, 40, of Frisco, Texas; Douglas Newton, 66, of Rancho Mirage, Calif; Charles Fuentes, 66, of Dana Point, Calif; and Thomas Schroepfer, 54, of Las Vegas. Schroepfer also is known as Thomas Schroepfer Baetsen.

    The men and several companies also were charged civilly by the SEC in what the agency described as a coordinated law-enforcement assault against microcap hucksters.

    “Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement.

    The Miami region’s top federal prosecutor, meanwhile, said the cases evolved from the Southern District of Florida’s ongoing Securities and Investment Fraud Initiative, a task force aimed at criminals and fraudsters operating in the region.

    “The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” said Wifredo A. Ferrer.

    Undercover FBI agents posed as scammers and set up a phony “consulting” business as part of the probe, the SEC said.

    “The defendants charged today were intent on making profits for themselves while defrauding others,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

    Newton, the SEC said, was chief executive officer of Real American Brands Inc., now known as Real American Capital Corp. He was accused of paying kickbacks to a “purported employee pension fund trustee” to buy more than 6.2 million shares of restricted Real American Brands stock.

    He further was accused of trying to conceal the kickbacks through a “consulting” firm.

    However, the trustee Newton believed to be corrupt actually was “a fictitious person,” the SEC said. Meanwhile, “the trustee’s business associate who helped arrange the deal was an undercover FBI agent,” and the consulting company was a “phony” one created by the FBI, the SEC added.

    Klein was the president and chief executive officer of KCM Holdings Corp. He is accused of engaging in two restricted stock transactions and one market transaction involving KCM Holdings’ stock.

    “Klein and the company paid kickbacks to an undercover FBI agent who portrayed himself as a business associate of a corrupt trustee of an employee pension fund, in exchange for the fund’s purchase of 2.5 million shares of restricted KCM Holdings stock,” the SEC said. “Klein attempted to conceal the kickbacks through a consulting agreement with a phony company that would receive the kickbacks. In another scheme, Klein bribed a purported corrupt stockbroker (actually an undercover FBI agent) to purchase KCM Holdings stock in the open market for brokerage clients with discretionary accounts.”

    Thomas Schroepfer was president and president of of SmokeFree Innotec Inc. He, too, got caught in the sting, the SEC said.

    For his part, Fuentes was a promoter of SmokeFree’s stock, and “paid kickbacks to an undercover FBI agent, posing as the business associate of a corrupt employee pension fund trustee, in exchange for the fund’s purchase of 400,000 shares of restricted SmokeFree stock,” the SEC said.

    Schroepfer, the SEC said, “attempted to conceal the kickbacks through a consulting agreement with a phony company created to receive the kickbacks.

    “In addition, SmokeFree issued shares of its stock to a cooperating witness for acting as a middleman in the scheme,” the SEC said.

    Gibson “created a now-defunct website, Roaringpennystocks.com, to promote shares of Xtreme Motorsports International Inc., as part of a planned pump-and-dump scheme,” the SEC charged.

    He is accused of touting Xtreme Motorsports “by blasting a series of e-mails to potential investors” and posting “false testimonials on the site from purported investors raving about their success in following the website’s stock picks,” the SEC said.

    In a separate case in Maryland last month, prosecutors announced that federal agents had created a “payment processor” to infiltrate illegal gambling operations.

    The name of the Feds’ “payment processor” was Linwood Payment Solutions — and its website now serves this message:

    “Linwood Payment Solutions is a Department of Homeland Security Undercover Business set up to identify and prosecute companies accepting and paying out funds for U.S. customers who gamble online illegally.”

    In response to a white-collar fraud epidemic involving huge sums of money and fraudsters and criminals operating both domestically and internationally, U.S. agencies, including the Secret Service, ICE and others, have been employing techniques once largely reserved for organized-crime probes.

  • Man Who Fled To Philippines After Bizop Scam Was Exposed By Postal Inspectors Sentenced To 125 Months In Federal Prison; Robert Nicol Bilked More Than $5 Million In Utah-Based Fraud Ventures

    A man who ran a Utah-based fraud scheme has been sentenced by a federal judge in Florida to 125 months behind bars.

    Robert Nicol initially fled to a remote section of the Philippines after the U.S. Postal Inspection Service executed a search warrant in an investigation of Gold Star Vending Inc. in 2007. But authorities tracked him down, and the Philippine government deported Nicol to the United States in 2010 to face justice, federal prosecutors said.

    “This defendant used his business opportunity scam to target those trying to make an honest living, and then fled to the Philippines when his fraud was discovered,” said Tony West, assistant Attorney General for the Civil Division of the U.S. Department of Justice. “As this stiff sentence demonstrates, we will see to it that fraudsters who cheat others to make a quick buck cannot escape justice.”

    In addition to sentencing Nicol to more than 10 years in prison, U.S. District Judge Patricia A. Seitz ordered him to pay more than $5.2 million in restitution to customers he scammed through Gold Star Vending and an entity known as Table Top Vending Inc.

    Customers believed they were buying everything they needed to run coin-operated games businesses successfully in places such as restaurants, but Nicol had lined up shills to sing the praises of the venture and purchasers lost millions of dollars, prosecutors said.

    “Fraudsters can run but they cannot hide,” said Henry Gutierrez, Miami’s U.S. Postal Inspector in charge. “Robert Nicol joins a growing number of business opportunity defendants the U.S. Postal Inspection Service, along with prosecutors, have brought to justice after being apprehended in other countries.”

    More than 100 bizop fraudsters in South Florida have been convicted and sentenced in recent years, noted U.S. Attorney Wifredo Ferrer, the Miami region’s top federal prosecutor.

    “Fraudulent telemarketers must realize that all financial fraud will be prosecuted vigorously,” Ferrer said.

    Utah also has been plagued by fraud schemes, perhaps especially investment-fraud and Ponzi schemes with a companion element of affinity fraud. The FBI said last year that various recent scams in the state had cost residents an estimated $1.4 billion and that the agency had identified at least 370 “potential perpetrators.”

    Two others implicated in Nicol’s Utah-based vending scam also were sentenced to hefty terms in federal prison.

    Seth Lehrenbaum, who provided shilling services for Nichol, received a sentence of 78 months. Meanwhile, Charles Nicol, Robert Nicol’s son and a pitchman for the scam, received a sentence of 41 months.

    In a separate case, the Salt Lake Tribune reported yesterday that Utah resident Wayne R. Ogden, who’d been charged, convicted,  jailed and paroled in a fraud scheme in the 1990s involving $7 million, now has been charged in an alleged $29 million caper.