Various claims about Narc That Car "training" have appeared online, as have videos of checks and even the postmarked envelopes in which the checks were enclosed.
Narc That Car, also known as Crowd Sourcing International, did not provide the Better Business Bureau “specific information which would eliminate the BBB’s suspicion of the existence of a pyramid promotional scheme,” the BBB reports on its website.
The BBB has closed its inquiry into Narc, leaving the company’s “F” rating intact and saying Narc also “admitted that they could not substantiate the claim that any major motor manufacturer was a client of Narc Technologies.”
An “F” is the lowest rating on the BBB’s 14-point scale.
Claims appeared online that Narc was working with Ford Motor Co., Nissan Motor Co. and Toyota Motor Co. Narc blamed the claims on affiliates who violated its advertising policies, saying it had a process to weed out false claims, the BBB said.
Although Narc claimed to have hundreds of clients for its database product, the company had not substantiated the claim as of May 25, the BBB said.
Narc, whose Crowd Sourcing International identity often is referred to by the acronym CSI, had been the subject of a BBB inquiry since January. The company purports to be in the business of paying people to record the license-plate numbers of cars for entry in a database used by companies that repossess vehicles.
For its part, Narc says on its website that it is getting a bum deal from the BBB.
“America was founded to create new opportunity,” the company said. “Our government created the Small Business Administration (SBA) to help new businesses. Over 2,000,000 people lost their jobs in 2009. New businesses create jobs. New businesses accounted for 70% of job creation over the last 10 years, stated by President Obama on March 17, 2009. Yet, the BBB penalizes new businesses.”
A video promotion for PPE-Life, which is facing a challenge for allegedly selling unregistered securities in South Carolina, references Warren Buffet. Buffet, the chairman of Berkshire Hathaway, is a legendary stock trader. He is not believed to have any tie to PPE. The reference to Buffet as a "game changer" — and images of a bull and a bear — may make it harder for PPE to argue it is not selling securities as the South Carolina litigation proceeds. A PPE prospect or prosecutor reasonably could ask, "If PPE is not selling an investment, why does a video promo reference Warren Buffet and include images of a bull and bear?" Images of bulls and bears are inexorably linked to the investment business
While securities regulators in South Carolina say a murky business known as PPE-Life recently has been holding recruitment meetings in the state, web records suggest that online recruitment efforts actually got under way months ago in anticipation of the company’s launch.
Efforts to promote PPE appear to have begun in January, at least three months prior to PPE’s corporate registration being recorded in Florida and despite the fact virtually nothing was known about the firm’s business practices and business mix.
At the same time, some promoters of PPE-Life appear to be building downlines by using a video that features narration about celebrated investment strategist Warren Buffet. The video is potentially embarrassing — if not problematic — for PPE because the company is facing a challenge in South Carolina amid allegations it is selling unregistered securities.
Because Buffet — who is not believed to have any tie to PPE — is one of the foremost investment experts in the world, prospects and prosecutors alike reasonably could ask why his name is referenced in promotions for PPE if the company is not in the securities business. They also could ask why his name is referenced at all if Buffet has no tie to PPE.
On Tuesday, the office of South Carolina Attorney General Henry McMaster described PPE-Life as a Florida company reluctant to provide details about its business, including the name of an unspecified “international bank” with which it purportedly is affiliated. McMaster ordered the company to cease and desist from selling securities and collecting money in the state.
Advertisements and web records dating back to January, however, described PPE-Life as the “marketing arm” of an entity known as “PPE Bank International.” No such entity appears to have been registered in Florida, although a corporation named “PPE-Life Inc.” was formally registered on April 29, about three months after recruitment ads referencing both PPE-Life and PPE Bank International began to appear online.
Other online references to PPE describe it as an “Agent with an offshore Lending Institution.”
When John Barter, a PPE officer, was asked at a May 20 recruitment meeting in Sumter, S.C., to identify the bank, Barter allegedly responded that “I am the bank.â€
“Barter did not identify any bank and provided no evidence any such bank existed, but instead asserted, ‘I am the bank,’” according to South Carolina securities regulators.
A domain name — PPELife.com — also was registered in January. The domain redirects to a website that displays a video. A message that reads “PPE Marketing welcomes you!” appears in the upper-right corner of the website, and the video includes images and commentary about NBA legend Michael Jordan and Microsoft Chairman Bill Gates, along with an image of a bull and a bear and narration about Berkshire Hathaway Chairman Warren Buffet.
“Warren Buffet didn’t invent the stock market,” the video’s narrator intoned. “He changed the game of investing.” Gates was described as having changed the game of technology, and Jordan was described as having changed the game of basketball.
It is not believed that Buffet, Gates and Jordan have any tie to PPE.
It is common for multilevel-marketing (MLM) companies and affiliates to use images of celebrities and captains of industry in web promotions — even if the individuals depicted in photographs and mentioned by narrators have no connection to the business opportunities being advertised.
The video appears to be a recruitment video to help participants build downlines in PPE and other programs. Although PPE’s name is not mentioned in the video, it is possible that the references to Buffet and Gates could put PPE in the position of explaining why promoters are spotligting the names of individuals associated with publicly traded companies if PPE is not in the business of selling securities. Meanwhile, the images of bulls and bears are inexorably tied to investment opportunities.
“Ppe life is the marketing arm of ppe bank international. as a result of this marriage, banking has gone mlm!”
The ad further claimed that PPE had chosen a service-provider for a recruitment feeder system.
“what does this mean to you?” the ad asked. “this means that you can receive a paid position in this ground floor global opportunity for only $66 (one-time) not $599 (one-time). for $66 one- time, you will join a group of experienced entrepreneurs in a simple, forced 2×2, three-phase feeder system that will generate a third phase payout of $1,840. $599 of your $1840 will be used to to pay for your independent associate membership in ppe life. as an independent associate of ppe life you will receive: *a mastercard or visa credit card with a $1,000 limit (without a credit check)… *a monthly subscription to ppe lif …”
The final words of the ad appear to have been cut off.
Web records suggest that PPE affiliates are using at least two different feeder companies to build downlines in PPE. The presence of the feeder system suggests PPE’s recruitment efforts may be more widespread than initially believed, crossing both domestic and international borders.
McMaster’s office said Tuesday that people who attended a May 20 PPE sit-down meeting in South Carolina were asked to pay $599 as an “initial membership fee†and a $50 per month “maintenance fee†thereafter. Attendees further were advised that returns of “up to $440,000 per year†could be earned through PPE.
Attendees also were told they’d become eligible for loans at a “significant discount†and that funds collected from participants would be used to purchase “debentures earning 40% to 50% interest.â€
People who signed up were told they could earn “1.5% of loan payments on loans made to any members who subsequently join[ed] PPE†and also would receive a “free†credit card with a $1,000 limit, authorities said.
So, you want to use Google’s free Gmail service to pull off a scam? From this day forward you should not be confident that you’re not already caught. The FBI today announced that it set up a sting to nail two people who were trying to sell the quarterly earnings report of Walt Disney Co. before its scheduled release date by communicating with potential buyers through a Gmail account.
Arrested today on federal charges of wire fraud and conspiracy were Bonnie J. Hoxie and Yonnie Sebbag. Hoxie, 33, of Los Angeles, was a Disney administrative assistant and had access to the company’s confidential communications. Sebbag, 29, also of Los Angeles, is a friend of Hoxie’s and used the alias “Jonathan Cyrus.”
The scheme began when Sebbag and Hoxie sent anonymous letters through the U.S. mail to “multiple hedge funds and other investment companies, many of which were located in Manhattan, offering to sell the Inside Information for purposes of illegal insider trading,” authorities said.
FBI agents posing as hedge-fund traders interested in obtaining the information communicated with the scammers, authorities said.
In a separate fraud action by the SEC, the agency said the letters all had Los Angeles postmarks and stated (emphasis added):
Hi, I have access to Disney’s (DIS) quarterly earnings report before its release on 05/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can’t disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is [Actual Gmail Address Email Deleted By PPBlog]. I count on your discretion as you can count on mine. Thank you and I look forward to talking to you.
At least 20 hedge funds, including funds based in several U.S. states and European countries, received the same or substantially the same letter, the SEC said.
The SEC’s filing suggests the scammers were made to believe that the actual undercover agents were worried about the scammers being agents.
“First of all, i am not a fed,” Sebbag allegedly wrote to the undercover agents. “I have no way to prove it at this point but i am not asking you to disclose your identity not i will disclose mine. It is up to you to determine if this is worth the risk as i did. I work for Disney, that is all i can tell you.â€
Sebbag, though, did not work for Disney. He lied about that and relied on the information provided by Hoxie, an actual Disney employee and Sebbag’s co-conspirator, authorities said.
On May 14, the FBI “paid” Sebbag $15,000 for the inside information after meeting him in New York to seal the deal.
“This investigation should serve as a warning, if you’re contemplating acquiring and profiteering from insider information, sometimes the person you’re trying to sell it to is really an undercover FBI agent,” said George Venizelos, acting assistant director-in-charge
of the New York FBI field office.
“What the case also shows is that the FBI’s vigilance is needed to police the small percentage of bad apples who can cause so much damage,” Venizelos said. “The majority behave like the dozens of hedge funds and investment companies that received Hoxie and Sebbag’s offers of insider Disney information: none took the bait, and almost all notified the FBI.”
The SEC’s director of enforcement said the case sends a powerful message.
“Hoxie and Sebbag stole Disney’s confidential pre-release earnings information and put it up for sale,” said Robert Khuzami. “Fortunately, multiple hedge funds reported the illicit scheme, and the SEC and criminal law enforcement authorities acted quickly to stop this brazen attempt to establish an ongoing insider trading business.”
Prosecuutors noted that, after Sebbag received the $15,000, he “further agreed that he would provide similar confidential information in the future in return for a thirty percent share of any profits from the insider-trading scheme.”
It is common for scammers to use free email addresses to cloak their identities.
Credit for the busts was given to the interagency Financial Fraud Enforcement Task Force, which President Obama created in November 2009.
Ponzi forum operator or moderator? Online HYIP aficionado? Think you’re safe pitching fraud schemes because you’re “only” a promoter or forum “expert” and not the operator of the programs?
Have a secret partnership deal with an HYIP fraudster? Using fancy, professional-sounding terms such as “due diligence” in your forum posts? Claiming you’ve done thorough research before recommending an “opportunity.”
Pitching programs that advertise unusually large returns — while at once showcasing your knowledge about investment scams and steering people away from certain programs because they sound too good to be true?
In an action that may send shockwaves across the Web world and Ponzi forums such as ASA Monitor, TalkGold and MoneyMakerGroup, the SEC has gone to federal court and filed an emergency action to halt “a series of fraudulent, unregistered securities offerings” made through Mazu.com.
U.S. District Judge George Caram Steeh of the the Eastern District of Michigan has frozen the assets of Matthew J. Gagnon, 41, of Weslaco, Texas, and Portland, Ore. Gagnon is Mazu.com’s operator.
“From January 2006 through approximately August 2007, Gagnon helped orchestrate a massive Ponzi scheme conducted by Gregory N. McKnight . . . and his company, Legisi Holdings, LLC,” the SEC said.
The Legisi scheme raised about $72.6 million from more than 3,000 investors “by promising returns of upwards of 15% a month,” the SEC said.
“Gagnon promoted Legisi but in doing so misled investors by claiming, among other things, that he had thoroughly researched McKnight and Legisi and had determined Legisi to be a legitimate and safe investment,” the SEC said.
Among other things, the SEC alleged that Gagnon “had no basis for the claims he made about McKnight and Legisi.
“Gagnon also failed to disclose to investors that he was to receive 50% of Legisi’s purported ‘profits’ under his agreement with McKnight,” the SEC said. “Gagnon received a net of approximately $3.8 million in Legisi investor funds from McKnight for his participation in the scheme.”
Then, beginning in August 2007, “Gagnon fraudulently offered and sold securities representing interests in a new company that purportedly was to develop resort properties,” the SEC said.
In this scheme, Gagnon “falsely claimed that the investment was risk-free and ‘SEC compliant,’ and guaranteed a 200% return in 14 months. In reality, however, Gagnon sent the money to a twice-convicted felon, did not register the investment with the SEC, and knew such an outlandish return was impossible,” the SEC said.
Gagnon took in at least $361,865 from 21 investors, the SEC said.
Still unfinished, Gagnon — in April 2009 — began promoting “a fraudulent offering of interests in a purported Forex trading venture,” the SEC said. “Gagnon guaranteed that the venture would generate returns of 2% a month or 30% a year for his investors. Gagnon’s claims were false, and Gagnon had no basis for making the claims.”
Gagnon next turned to another Forex sceme, the SEC said.
From October 2009 to November 2009, Gagnon “offered another purported Forex trading venture in which he claimed to have a trader in Europe who would trade foreign currencies for investors in exchange for 40% of any profits he generated,” the SEC said. “Gagnon removed this offer from his website in November 2009 when he received notice that the SEC had subpoenaed his bank records.”
Despite his knowledge about Ponzi and fraud schemes, Gagnon repeatedly pitched such schemes, the SEC said.
“Gagnon has been unrelenting in his efforts to raise money from the public through
fraudulent, unregistered offerings,” the SEC said. “He remains a danger to the investing public.”
Despite his sales pitches, “Gagnon has never been associated with a registered broker-dealer and has never been registered with the Commission as a broker or dealer or in any other capacity,” the SEC said.
Among the people to whom Gagnon directed money was the late Bryan K. Foster, who was convicted in 1997 of five felony counts of wire fraud and sentenced to 41 months in prison. These convictions were recorded in U.S. District Court in Montana, according to records.
In 2000, Foster was convicted in Colorado of one felony count of wire fraud and sentenced to five years in prison, according to records.
Between July 13, 2007 and September 17, 2007, Gagnon sent at least $800,000 to accounts in the name of Trails Home LLC, which was controlled Foster, the SEC said. Money from the illegal Legisi program was included in the sum transferred to Foster for his purported investment program, the SEC said.
The Legisi Program
In 2005, McKnight was an underemployed General Motors worker living outside Flint, Mich., the SEC said, adding that he had financial problems.
“In December 2005, McKnight began offering and selling interests in a pooled investment program variously called Legisi.com or Legisi,” the SEC said. “McKnight promoted the offering around the globe through an Internet website at www.legisi.com,” promising monthly returns of up to 15 percent.
By February 2006, “McKnight incorporated a shell company called Legisi Holdings, LLC in the bank-secrecy haven of Nevis in the West Indies,” the SEC said.
“McKnight asserted on the Legisi website that the Legisi program was merely a ‘loan program’ through which investors would ‘loan’ money to Legisi and, in return, Legisi would pay investors high rates of interest.
But Legisi actually was “a classic pooled investment vehicle, in which investors invested money into a common venture with the expectation that the money would be used to generate profits, for McKnight and the investors, solely through the efforts of McKnight or others working on his behalf. The Legisi program was a security in the form of an investment contract,” the SEC said.
“The Legisi program was also a massive Ponzi scheme,” the SEC said.
In January 2006, McKnight and Gagnon discussed a deal by which Gagnon would promote Legisi on the Mazu.com website, the SEC said.
“McKnight and Gagnon had known each other for several years after Gagnon recruited McKnight into a multilevel marketing business called ‘Mannatech,’” the SEC said. “McKnight became part of Gagnon’s ‘down line,’ meaning that a portion of McKnight’s commissions from selling Mannatech products went to Gagnon.”
McKnight paid Gagnon “a total of approximately $4,532,512 between January 29, 2006 and April 14, 2008,” the SEC said. “All of the money Gagnon received from McKnight consisted of investor funds. There were no ‘profits’ generated by Legisi.”
Gagnon netted about $3.8 million in the scheme, the SEC said.
“On behalf of McKnight, Gagnon solicited investors around the world through the publicly available Mazu.com website,” the SEC said. “Gagnon wrote and/or reviewed and approved the content of the Mazu website. No valid registration statement was filed or was in effect with the Commission in connection with Gagnon’s offer and sale of Legisi program investment contracts.”
SEC: Forum Moderators Helped Push Ponzi Scheme
“Between approximately January 2006 and August 2007, Mazu employees working on Gagnon’s behalf and at his direction promoted the Legisi program in emails, in Mazu Business Packs and DVDs they sent to investors, and on the Legisi Forum,” the SEC charged.
“The Legisi Forum was an on-line chat room accessible through the Legisi.com website. Several Mazu employees served as ‘moderators’ on the Legisi Forum. Mazu’s support services also included answering questions over the telephone and email,” the SEC said.
Forum shills performed services for Legisi and deflected concerns when CNN carried a negative report on the company, the SEC said.
“The Mazu employees acting as moderators encouraged readers to invest in Legisi, assisted them in transferring money to Legisi, encouraged investors to bring in new investors, and offered investors personal assistance in bringing in referrals,” the SEC said. “They also encouraged investors to keep their monthly earnings with Legisi, rather than withdrawing them, in order to achieve purportedly higher returns. They made sure transfers of money between investors and Legisi went smoothly. The moderators updated investors on changes to the Legisi program like new minimum investment amounts and referral fee rules.
“The moderators made posts on the Legisi Forum to prevent and diffuse investor rumors and concerns,” the SEC continued. “After an article questioning Legisi’s legitimacy appeared on the CNN Money website on May 8, 2007, one moderator wrote, ‘I think it is worth mentioning that the Forum is probably being read by people who are not Legisi members. So let’s not raise red flags to any bulls out there shall we. . .. Of course so far as any discussion on the [CNN Money] article is concerned I’m sure that everyone is aware that Greg went into Legisi knowing the law and planning for this eventuality. So keep a cool head and stop worrying about what you should do.”
No Due Diligence
McKnight was operating a classic Ponzi scheme fueled in part by Gagnon’s cheerleading on Mazu.com, the SEC said.
Despite the relentless hype, Gagnon performed no due diligence and simply fabricated information or passed along claims as though they were factual, the SEC said.
“Gagnon did not obtain or review any of McKnight’s trading records, bank and brokerage account statements, or e-currency account records at any point prior to, or during, Gagnon’s promotion of Legisi,” the SEC charged.
“Throughout the time that Gagnon promoted Legisi, he simultaneously warned readers about a type of fraud referred to as a high yield investment program. High yield investment programs, commonly called ‘HYIPs,’ typically involve off-shore companies promising very high rates of interest generated by investment in foreign currencies and a variety of other vehicles, along with repeated hyping of the legitimacy of the program,” the SEC said.
Gagnon understood the HYIP fraud universe, but nevertheless pitched Legisi, which had promoted an unusually high rate of return and had other markers of the exact kind of scam Mazu.com warned about on its website, the SEC said.
“From at least April 2006 through at least May 2007 Gagnon provided on the Mazu website an accurate description of a HYIP by stating that they (emphasis added by PP Blog):
collect funds from lenders as investment capital or deposits and promise a return that is usually extremely high in exchange for ‘borrowing your money.’ The result? Generally after a period of time you are free to withdraw your capital and or your profits, or you can ‘reinvest’ them to earn additional profits. In theory, the compounding can create a crazy return on investment given time . . .
* * * * * *
Sadly, most HYIPs are offshore fronts that don’t lie within U.S. jurisdiction and you have no recourse when they steal your money. Most HYIPs realize this and they bank on it! They’ve got you right where they want you. Most also allude to making their profit in legitimate investment vehicles when in reality, you have no idea where they’re making their profit.
And Gagnon also warned readers about Ponzi schemes.
“On the Mazu website between at least April 2006 and May 2007, Gagnon accurately described a Ponzi scheme as an ‘investment program touting huge returns in a short period of time. Any returns someone sees are paid out of monies gathered from the investors. No real product, investment, or business takes place,’” the SEC said.
The Legisi Ponzi began to unravel by September 2007, its decay brought about in part by “the federal seizure of an e-currency provider that was holding $1.8 million for McKnight,” the SEC said.
Gagnon then “attempted to extort money from McKnight,” the SEC said.
“On September 9, 2007, Gagnon informed McKnight that he was ending the partnership between Legisi and Mazu,” the SEC said. “Gagnon offered McKnight a choice: send Gagnon and several of Gagnon’s associates approximately $2.5 million, tell the Legisi members that Gagnon was starting a real estate fund, and that Mazu and Legisi were parting amicably, or Gagnon would email the entire Legisi membership and tell them ‘the truth’ about McKnight’s fraud.”
A mysterious, upstart company registered as a corporation in Ocala, Fla., has been ordered by the attorney general of South Carolina to stop selling securities and collecting money in the state.
Attorney General Henry McMaster ordered the company — PPE-Life Inc. (PPE) — to “cease and desist” after the state’s Securities Division opened a probe May 14 amid reports the company was holding recruitment meetings in Sumter, S.C. Sumter, a military town, is home to Shaw Air Force Base.
PPE held a meeting at a hotel about 5 miles away from the base May 20, according to records. It was unclear if members of the military were in attendance, but South Carolina has had a problem with fraud schemes targeted at military members and churchgoers.
Two PPE representatives were named in the cease-and-desist order: John Barter, who is listed as an officer of the firm in Florida records, and Rick Crocker. Barter’s address was listed as Ocala, and Crocker’s was listed as Wilmington, N.C.
Investigators said people who attended the May 20 meeting were told that PPE was the marketing arm of an unspecified “international bank.” When asked to identify the bank, Barter allegedly responded that “I am the bank.”
Attendees also were kept in the dark about other details, which were dismissed as unimportant for the purposes of the meeting.
Barter and Crocker “refused to respond to questions from attendees regarding the method by which PPE would make money or extend loans, or the products that PPE would invest in,” authorities said.
The purpose of the meeting was to “sign up.” Details would be “sorted out at a later time,” authorities said attendees were told.
Attendees were asked to pay $599 as an “initial membership fee” and a $50 per month “maintenance fee” thereafter and advised that returns of “up to $440,000 per year” could be earned through PPE. Â Attendees further were told they’d become eligible for loans at a “significant discount” and that funds collected from participants would be used to purchase “debentures earning 40% to 50% interest.”
People who signed up were told they could earn “1.5% of loan payments on loans made to any members who subsequently join[ed] PPE” and also would receive a “free” credit card with a $1,000 limit, authorities said.
Meanwhile, attendees were told that PPE had spent “at least $1.5 million to ensure that the federal government would not shut down PPE” and that “older” members would benefit as “new members were recruited,” authorities said.
At the May 20 meeting, someone raised a concern that the government could shut down the program, authorities said.
In response to the concern, Barter said, “the Feds love us,” authorities said.
They added that attendees were told that meetings had been held in Sumter for “at least six weeks.”
Neither Barter nor Crocker is licensed to sell securities in South Carolina, authorties said.
An email DataNetworkAffiliates’ (DNA) members received today led with a pitch that participating in DNA could result in large tax deductions for mileage.
DNA purports to be in the business of paying members to record license-plate numbers for entry in a database that would be potentially useful to law enforcement and the AMBER Alert program for abducted children. The company also purports to be in the cell-phone business and other businesses such as juices and magnetic sleep systems.
Today’s email to affiliates suggested that people who racked up mileage while recording plate numbers for DNA could qualify for large, business-related tax write-offs.
“Did you know about your DNA Tax Benefits . . .” the DNA pitch began. “Imagine driving 10,000 miles for your DNA Business = up to a $5,000 Tax Deduction… “IRS Announces 2010 Standard Mileage Rates” IR-2009-111, Dec. 3, 2009… and this is just one of many…”
DNA did not explain what “one of many” meant. The line that trailed off with the ellipses, however, was in the context of tax deductions. The headline on the email was titled, “DNA = FREE = A Great Opportunity with Great Tax Benefits.”
DNA then published snippets from an IRS news release with a Washington dateline. Because DNA’s email included only snippets of the IRS release — and because DNA added commentary to the email and appears not to have distinguished its words from the words of the IRS — members could become confused about whether the IRS was talking or whether DNA was talking.
DNA’s email instructed members to “[c]heck with your accountant to find out what you DNA Business will allow you to legally write off . . .”
Here is the full IRS news release from Dec. 3 (italics added):
IR-2009-111, Dec. 3, 2009
WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
* 50 cents per mile for business miles driven
* 16.5 cents per mile driven for medical or moving purposes
* 14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.
Here is the portion of the email concerning tax write-offs DNA sent today (italics added):
WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
* 50 cents per mile for business miles driven
* 16.5 cents per mile driven for medical or moving purposes
* 14 cents per mile driven in service of charitable organizations
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Check with your accountant to find out what you DNA Business will allow you to legally write off…
DNA spent the balance of the email on topics such as a “Travel Agent Package,” a “Back Relief System,” a “Foot Insole System,” cell phones, juices and other offerings.
“CHECK OUT YOUR BACK OFFICE YOU CAN BUY $59.95 DNA MAGNETIC PRODUCTS FOR $19.95 AND THEY ARE CHEAPER BY THE DNA DOZEN . . .” DNA said. “BUY THE BACK RELIEF SYSTEM TODAY IT IS A GREAT DNA PRODUCT TO DEMONSTRATE . . .
“I”N FACT YOU SHOULD BUY A DOZEN . . . GIVE THEM TO TEN FRIENDS OR 5 COUPLES TO TRY . . . THEY WILL MOST LIKELY BUY THEM AND . . . SIGN UP FOR FREE & START SELLING THEM . . .”
DNA did not explain how it had arrived at the conclusion that people shown the products “most likely” will buy them.
DNA, which uses a domain registered in the Cayman Islands and conducts customer service with a free gmail address, also did not say why it chose to highlight the tax advantages of repping for the company over the advantages of any actual product offered by the firm.
The DNA program — and also a similar program operated by a company known as Narc That Car and Crowd Sourcing International — potentially could lead to tax challenges by the United States because of claims made by promoters and the nature of the business itself.
Both DNA and Narc purport to pay members to record license-plate numbers. Both firms are multilevel-marketing (MLM) programs and have encouraged participants to write down plate numbers or record them on cell-phone cameras at retail outlets such as Walmart, Target, Giant Eagle and others.
Promoters also have been encouraged to record plate numbers at places such as churches and doctors’ offices.
The approach has led to questions about whether members would engage in tax abuses such as claiming trips to the grocery store and places of worship as deductible business miles because they recorded plate numbers while in parking lots. Because members have been encouraged to use cell phones and cameras to record plate numbers, a second tier of potential tax abuse could open up, with members trying to write off the costs in whole or in part of any item that had even a tenuous link to the purported business of recording plate numbers.
There also are questions about whether DNA and Narc members could engage in grandiose frauds such as attending a funeral thousands of miles away and seeking to deduct the trip as a business expense because plate numbers were recorded at the destination site.
Neither DNA nor Narc publish the names of purported clients of the database products. Affiliates have published purported “training” videos on YouTube that encouraged prospects to record plate numbers virtually anywhere. Some of the videos have suggested that members should behave inconspicuously while recording numbers — for example, driving to the parking lot of a retailer and remaining in the car while recording the plate numbers.
Details about the propriety, safety and legality of the DNA and Narc programs have been given short-shrift in the purported training videos. It is known that members of an alleged Ponzi scheme known as AdSurfDaily have promoted DNA and Narc, and ASD has been linked to people who participate in tax schemes.
Parts of DNA’s email today that did not deal with taxes appeared to have been copied from earlier emails and pasted into today’s email. DNA, for example, said today it was “CELEBRATING 69 DAYS IN BUSINESS . . .”
Earlier emails made the same claim about a celebration for 69 days in business. DNA also celebrated a “Two Month Anniversary.”
By now you’ve likely heard about Data Network Affiliates, a multilevel-marketing (MLM) company that launched by telling prospects it was in the business of recording license-plate numbers useful for the AMBER Alert program and then morphed virtually overnight into a purported cell-phone business.
“GAME OVER — WE WIN,” DNA told members in a message that offered unlimited cell-phone service for $10 a month. Within three weeks, however, DNA acknowledged that it could not offer such pricing. In an email to members, the company conceded that its earlier message announcing that it had conquered the cell-phone business within days of entering it was a mistake.
For good measure, DNA blamed an ambitious reseller for making it believe it could offer unlimited service for $10 a month, while also revealing it hadn’t researched cell-phone pricing structures prior to announcing it had conquered the trade.
Today the PP Blog is publishing a new poll that asks readers to rate DNA’s sales pitches. Some readers may wish to search the PP site before responding to the poll. The search function is in the upper-right corner of the Blog.
Today is May 25, 2010. As of the publication of this post, the poll is in the right sidebar, and also enclosed within the post.
UPDATED 10:17 A.M. EDT (May 25, U.S.A.) It has been another nasty day for the HYIP and autosurf “industries” and their apologists. Investigators have charged two Mexican nationals with operating a Ponzi scheme on U.S. soil. The alleged scheme, which used names such as New Golden Investment Group LLC (NGI), NGI Group LLC, New Golden Management, New Golden Entertainment LLC, Grupo NGI International Inc. and NGI International Inc., targeted Latinos in Greater Los Angeles, authorities said.
Charged by the CFTC is the case were the companies and their operators, Ruben Gonzalez of West Covina, Calif., and Jose C. Naranjo of La Mirada, Calif. Both men are Mexican nationals. Their ages were not immediately known. Gonzalez was jailed in October on immigration charges, authorities said.
Gonzalez also has been indicted on criminal charges of mail fraud and wire fraud, the CFTC said.
The alleged NGI scheme has ties to other fraud schemes, including the Traders International Return Network (TIRN) scheme and the alleged Finanzas Forex scheme, authorities said. Criminal charges have flowed from the TIRN scheme, and the Finanzas Forex scheme — allegedly part of an international scheme known as Evolution Market Group (EMG) — has resulted in allegations that proceeds from the EMG scheme found their way into bank accounts seized by the U.S. Drug Enforcement Administration in a narcotics investigation in Arizona.
Meanwhile, the TIRN scheme, which operated from Florida and claimed a presence in Panama, also has a tie to the alleged INetGlobal autosurf Ponzi scheme. Both TIRN and INetGlobal used the same debit-card company to pay members, according to court filings.
Gonzalez and Naranjo gathered $3.65 million in the NGI scheme beginning in August 2008, dumping at least $100,000 into TIRN and $290,000 into Finanzas Forex, the CFTC said. All of the money appears to have been misappropriated, with Gonzalez transferring “at least” $260,000 from NGI member funds to his personal bank account and Naranjo transferring “at least” $267,000 from NGI member funds to his personal bank account.
About $62,000 transferred into Naranjo’s bank account was withdrawn in cash, the CFTC said.
The men “used investor funds to purchase a Mercedes-Benz, airline tickets, various other retail items and to make payments on a home,” the CFTC said.
It is possible that as much as $1 million was directed at Finanzas Forex, the CFTC said.
Gonzalez and Naranjo tricked investors by making them believe NGI was a real commodities-trading business.
“Gonzalez, Naranjo and NGI falsely presented NGI as a successful trading company by displaying trading software on NGI’s office computers to make it appear to customers and prospective customers that NGI was engaged in electronic commodity futures trading,” the CFTC said.
In reality, “NGI did not trade commodity futures for customers and did not make any of their advertised profits. Instead, Gonzalez and Naranjo allegedly ran a Ponzi scheme using new investor money to pay purported profits to existing investors,” the CFTC said.
Part of the NGI sales pitch was similar to the sales pitch of yet another Ponzi scheme: the Learn Waterhouse scheme, which operated from California and also has a tie to INetGlobal, according to court records.
INetGlobal operator Steve Renner provided payment-processing services for the Learn Waterhouse Ponzi scheme through an entity known as Cash Cards International, according to court records.
Learn Waterhouse talked about purported investments in “gold” in Mexico. According to the CFTC complaint in the NGI case, NGI did the same thing, falsely claiming to customers that “they would double their money within a year in oil, gold, silver and other commodities.”
NGI stopped making payments to investors in about June 2009, the CFTC said. At least 165 investors were affected.
Gonzalez and Naranjo told customers that the payments stopped because a bank in Mexico was holding the funds and refused to release them. The men then told investors to have patience because a new deal involving oil was on the horizon and that investors who left their money with NGI son would have “huge” profits, the CFTC said.
Investors were encouraged to fund accounts with money from credit cards or retirement savings, the CFTC said.
NGI had been operating since about August 2008, according to records. That’s the same month INetGlobal was coming onto the autosurf stage, and AdSurfDaily was exiting the stage.
The U.S. Secret Service said it believed both INetGlobal and AdSurfDaily were operating Ponzi schemes.
In a fast-moving news day on the fraud front, the SEC has accused two men and their Florida company of orchestrating a real-estate “promissory note” Ponzi scheme.
Separately, the Financial Fraud Enforcement Task Force announced the guilty plea of a California attorney in a real-estate swindle, plus the indictments of seven other people in separate cases of mortgage fraud in California.
In the SEC case, the agency accused Edward A. Allen and David L. Olson of Lakeland, Fla., and their company A&O Investments LLC, of conducting a fraudulent, unregistered offer and sale of approximately $14.8 million in securities.
Although Allen and Olson allegedly pulled off the swindle in Florida, the case was brought in the Northern District of Ohio because part of the scheme operated in the Youngstown-area community of Boardman.
“Allen and Olson’s representations about their use of offering proceeds, the collateral securing the investments, and the success of the investments were all false,” the SEC charged.
Allen is 42; Olson is 59. Their scheme affected at least 100 investors in at least nine states, the SEC said.
“As part of their money raising tactics, Allen and Olson convinced some of their investors to take out home equity loans so that they could invest the proceeds in the A&O promissory notes,” the SEC charged. “They persuaded other investors to refinance their home mortgages to interest-only loans with lower monthly payments so that they could invest the excess cash from the new interest-only mortgages in the promissory notes.”
SEC: Investors Lulled By ‘Interest’ Payments
It was yet-another case in which investors were lulled into a false sense of security because they were receiving payments even as a Ponzi scheme was occurring, the SEC said.
“A&O made monthly ‘interest’ payments to the investors through approximately March 2008,” the SEC charged. “The regularity of the ‘interest’ payments led several investors to invest more money and caused others to encourage their family and friends to invest.
“In approximately March 2008, A&O stopped making regular monthly ‘interest’ payments to most of the existing investors and investors began requesting the return of their investments. At that time, Allen and Olson admitted to A&O’s employees that they did not have enough money to make A&O’s March payroll. However, they continued to solicit investors and raised an additional $2.2 million from March through December 2008, some of which was used for payroll.”
Allen and Olson also used about $2.2 million to pay personal expenses for themselves and their family members, about $3 million to pay A&O employees and other independent contractors, about $1 million to acquire, rehabilitate, and furnish a lavish office building from which they conducted A&O’s activities, and about $506,000 for other A&O-related operating expenses.
Investors were left in the dark about how the men and the company were conducting business, the SEC said. The agency added that the deception ran wide and deep.
“In addition, Allen and Olson also made payments for multiple start-up companies that Allen and Olson formed and controlled which were not involved with real estate,” the SEC said. “These companies had names such as Geriatric Care Partners, LLC, and Cornerstone International Ministries, Inc. Allen and Olson transferred approximately $959,000 of investor funds to those entities and used the vast majority of the funds for purposes unrelated to A&O’s real estate business.”
California Mortgage Fraud
Anthony G. Symmes, 59, of Paradise, has agreed to plead guilty to money-laundering and conspiracy to commit mail fraud for his role in a mortgage swindle and assist the government in an ongoing probe into the affairs of Garret G. Gililland.
Gililland is under indictment in the Eastern District of California for mortgage fraud. He was extradited from Spain and jailed while awaiting trial.
Symmes is an attorney, a CPA and a builder in the Chico area. The scheme involved the fraudulent sales of 62 houses. Symmes already has deposited $4 million for restitution, the Task Force said.
The Symmes’ case started as a state investigation by a local district attorney and morphed into a federal probe as the local DA discovered more and more fraud, the Task Force said.
“Greedy, crooked developers, appraisers, mortgage brokers, and others contributed significantly to the great mortgage meltdown of the past two years,” said Butte County District Attorney Mike Ramsey.
“Greed led this formerly well-respected Chico developer down a path to his downfall and the destruction of a number of neighborhoods populated by good folks who have found their homes devalued by the empty foreclosures on their block,” Ramsey said. “Once we discovered the complex, fraudulent scheme hatched here we began an extensive investigation. When we found the tentacles of this corrupt organization stretched beyond Butte County, we reached out to our federal partners for help. We are most gratified with the assistance and cooperation that has lead to the justice we see this day.â€
Federal agencies are attacking mortgage fraudsters aggressively, said U.S. Attorney Benjamin B. Wagner of the Eastern District of California.
Schemers Causing Collapse Of Home Prices
“The various schemes reflected in the cases announced today illustrate the many varieties of mortgage fraud,” Wagner said. “These types of crimes have a broad impact on our communities, not only weakening financial institutions and devastating individual victims of the fraud schemes, but also driving down the value of many families’ primary asset, their home. Rooting out and prosecuting fraudsters in the mortgage and real estate industries is an extremely high priority for the U.S. Department of Justice. We are working on other mortgage fraud investigations here in the Eastern District of California, and there will be more to come.â€
Tax criminals participating in mortgage fraud also will be weeded out, one of the region’s top tax investigators said.
From 2006 through 2008, Symmes sold Gililland and Gililland’s associates 62 houses at artificially inflated prices, prosecutors said.
“These fraudulent purchases were financed by mortgage lenders in the total amount of approximately $21 million,” prosecutors said. “Symmes wrote checks back to Gililland and his associates totaling approximately $2.5 million. These price rebates from Symmes were concealed from the lenders. To date, dozens of Symmes’s homes have been foreclosed or short-sold. Losses realized to date total almost $5 million and are expected to climb. Due to the volume of the artificially inflated prices on homes in Chico, Symmes and Gililland were able to create artificially high comparable sales that appraisers relied upon, affecting the overall new-home market in the Chico area.”
Indicted in separate cases in Sacramento County were Lawrence Davis, 26, and Joel Clark, 27, both formerly of Sacramento and currently living in Las Vegas, and Eric Mortenson, 28, of Sacramento.
The indictments were unsealed this morning after Clark and Mortenson were arrested by FBI and IRS agents in Sacramento and Las Vegas. The indictment charges them with conspiracy to commit wire fraud and wire fraud in connection with an alleged property-flipping scheme in the Sacramento County area.
The federal case evolved from a state probe by the California Department of Real Estate, the Task Force said.
Meanwhile, in Shasta County, Jeremiah Andrew Martin, 32, of San Antonio, Darrin Arthur Johnston, 45, of Redding, Todd Allen Smith, 47, of Redding, and Cheryl Ann Hitomi Peterson, 47, of Redding, were indicted yesterday by a federal grand jury.
The indictment was unsealed this morning when the defendants were arrested by FBI and IRS agents in Shasta County. All four defendants were charged with conspiracy to commit mail fraud, mail fraud and money laundering in connection with an alleged fraudulent foreclosure rescue scheme.
Assisting in the case are the FBI and the IRS, the Task Force said.
Calling it an “unprecedented partnership” brought about by a financial-fraud problem that is national in scope, federal and state officials today announced the creation of the Virginia Financial and Securities Fraud Task Force.
The Virginia Task Force, which is part of President Obama’s interagency Financial Fraud Enforcement Task Force, brings together criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia.
“It has become all too clear that the complex financial crimes we confront are national in scope,†said U.S. Attorney Neil H. MacBride of the Eastern District of Virginia. “They require criminal and civil authorities across the country to utilize every tool at their disposal to ensure that the guilty are held accountable. The Eastern District of Virginia has the legal authority to bring cases here with national significance, regardless of where the fraud occurs.â€
Virginia’s Eastern District encompasses nearly 5 million residents in cities such as Alexandria, Richmond, Norfolk, Newport News and other communities.
Financial crime is jumping across local and state borders, a top SEC official said.
“Financial fraud schemes can be sophisticated, difficult to detect, and span multiple jurisdictions,†said Robert Khuzami, director of the SEC’s Division of Enforcement. “Opportunities to coordinate civil and criminal law enforcement efforts, such as those provided by this task force, are vital to combating financial fraud.â€
America’s economic future must be safeguarded, a veteran investigator said.
“Financial fraud is a threat to economic integrity and can harm individual investors,†said Stephen Obie, acting director of enforcement for the CFTC.
A centerpiece of the strategy is “to root out unscrupulous financial activity and protect market participants,†Obie said.
Virginia’s attorney general agreed.
“This partnership presents a tremendous opportunity to share information and resources among the experts in order to prosecute and deter fraud perpetrated against our citizens,†said Attorney General Ken Cuccinelli. “The efficiencies of state and federal cooperation and of law enforcement working together should not only prove more helpful in protecting consumers, but it should also save the taxpayers money.â€
Another part of the strategy is to create a force-multiplier to weed out fraudsters and send a message that they’ll get caught, a veteran FBI agent said.
“Large-scale financial crimes are on the rise and as such law enforcement agencies are working together to become force-multipliers in investigative and prosecutorial efforts,†said FBI Special Agent in Charge Michael Morehart. “The Richmond Division of the FBI welcomes the opportunity to work with our partners on this task force to demonstrate a commitment of aggressive investigative efforts and discourage criminal activity.â€
The top postal official in North Carolina’s largest city said he’s on board the effort.
“The Postal Inspection Service embraces the formation of the Virginia Financial and Securities Fraud Task Force,†said Postal Inspector in Charge Keith Fixel of the Charlotte Division. “This partnership with other state and federal agencies will enhance our ability to thoroughly investigate mail fraud and other financial related crimes that involve the nation’s mail system and ensure public trust in the mail.â€
Tax criminals and money-launderers also will be targeted, said the chief tax-fraud investigator in the District of Columbia.
“Financial-fraud crimes create huge losses of tax revenue,” said C. Andre’ Martin, special agent in charge of the IRS Criminal Investigations Division. “This type of fraud threatens the integrity of our tax system and erodes the financial health of our communities. IRS-Criminal Investigation is proud to be part of a formidable law enforcement team that is focused on investigating these fraud schemes and we will continue our efforts to investigate the tax-evasion and money-laundering aspects of these types of crimes.”
State securities regulators have a key role on the Task Force.
“The State Corporation Commission [SCC] looks forward to working with our state and federal partners to enhance our ability to enforce the provisions of Virginia law governing the financial services industry, assist investors who have lost their money, and enhance the integrity of markets by targeting and eliminating financial and securities fraud,†said Philip R. “Duke†de Haas, SCC deputy general counsel—Financial Services.
Officials said the Task Force will build on successes such as the prosecution of Edward Okun, sentenced to 100 years in prison for a $132 million fraud scheme.
In cases in which it is appropriate for civil regulators to share information with criminal investigators, such information will be shared, officials said.
The task force “is focused on facilitating the exchange of information on specific investigations,” officials said. “The independent legal responsibilities of each task member may limit the ability to share information; however, the task force members are committed to conduct parallel investigations and share as much information as they are allowed so every member may benefit from the different tools and resources each agency can provide.
President Obama formed the interagency Financial Fraud Task Force in November.
A YouTube video pitch for DataNetwork affiliates claims the company is offering a branded iPhone.
Have DataNetworkAffiliates and its multilevel-marketing sales force finally gone too far?
Oprah Winfrey and Donald Trump now have company on the list of famous names DNA promoters claim have ties to the firm — and this time the name is bigger and has even deeper pockets than Oprah or The Donald: Apple Inc., the inventive, Steve Jobs-led electronics behemoth that brought the world the Macintosh, the iPod, the iPad, iTunes and the iPhone.
A video on YouTube asserts that DNA is offering a branded iPhone dubbed the “DNA iPhone.” Meanwhile, the video asserts that DNA is the “ONLY Network Marketing Company With Branded iPhones.”
Video asserts that DNA is the "ONLY Network Marketing Company With Branded iPhones."
The video provides no substantiation of the claims and does not show such a branded iPhone. Regardless, a URL at the YouTube site encourages viewers to register for DNA and “JOIN A FREE BUSINESS AND MAKE INCREDIBLE RESIDUAL INCOME.”
It is far from clear that DNA has any business relationship at all with Apple, despite the claim it was selling DNA-branded iPhones. A separate YouTube video that appears to have been posted by another DNA member implies that DNA not only has an iPhone, but that the iPhone comes with a “No Term Contract” for $10 a month.
“You are Not in Kansas Anymore!” the second video screams. “This is Global Baby!”
Apple, which is known to defend its brand and intellectual property vigorously, did not respond immediately to the PP Blog’s request for comment. It
A second video implies the iPhone comes with a price tag of only $10 a month with no contract
is not believed that DNA, which uses a domain registered in the Cayman Islands and has conducted customer service for months with a free gmail address, has any licensing agreement with Apple for cell-phone marketing, pricing or the use of Apple’s intellectual property.
Images of iPhones, however, appear in the YouTube promotions and on DNA’s website. A picture of an iPhone G3 and other phones is featured prominently on the DNA site, below a headline of “Introducing UNLIMITED Talk, UNLIMITED Text with UNLIMITED Data Plans: DNA Cellular Begins Full Service May 2010.”
Neither Winfrey nor Trump’s organizations responded to requests for comment from the PP Blog when contacted in February to determine if either celebrity had endorsed DNA or authorized their images to be used in promotions for DNA. Images of Winfrey and Trump appeared for 10 continuous minutes in a YouTube video for DNA.
One DNA promoter claimed during a conference call earlier this year that the company had “certain people on speed dial that’s incredible.â€
Apple was made aware of the DNA iPhone claim on YouTube by both email and telephone earlier today.
The iPhone claim in the DNA promos is included among a series of claims — all of which raise questions about licensure, the use of trademarks and other intellectual property and the often seedy or disingenuous practices of multilevel-marketing (MLM) companies and affiliates who attempt to attach their names to famous entities and individuals to create legitimacy by osmosis.
DNA, which has been in business for only months, did not even start out in the cell-phone trade. Rather, the company told members that it was in the business of recording license-plate numbers for entry in a database that potentially could be helpful to law enforcement and the AMBER Alert program.
Claims that DNA could help the U.S. government and law enforcement locate abducted children were made despite the fact the company uses a domain registered offshore and conducts support through gmail, apparently by using an autoresponder.
In a bizarre response to concerns about the Cayman Islands domain, the company said it had chosen “privacy†protection on the domain for $5 “to prevent management from having to “put up with 100 stupid calls a day,†a member told the PP Blog.
Virtually overnight the company morphed into a purported cell-phone business, declaring “GAME OVER – WE WIN” and bragging “DNA goes CELLBALISTIC with TALK & TEXT Unlimited $10 Monthly with FREE PHONE . . . D.N.A. HITS 100,000 SIGN UPS in 60 DAYS . . . D.N.A. GOES CELLBALISTIC WORLD – WIDE . . . A TEN BY TEN EQUALS MORE MONEY THAN YOU CAN SPEND . . . If you thought finding ten people to write down 20 plates was easy . . . wait until you offer TALK and TEXT UNLIMITED FOR $10 A MONTH WITH FREE PHONE.”
DNA plants the seed on its own website that the iPhone is in its product lineup.
Within three weeks of making the claim that it had conquered the cell-phone business, DNA admitted it could not offer unlimited talk and text with a free phone for $10 a month. Incredibly, the company said it researched pricing only after announcing the $10 plan.
DNA then sent members a pitch for a product known as the “DNA Sleep System,” offering “50% off” a purported price of nearly $2,000.
“This sleep system has 400% Deeper Penetration than it’s predecessor with new ‘Three Dimensional Magnetic Fields’ The First of Its Kind with Patented Technology!†DNA said.
“The D.N.A. OUTFRONT Magnetic Sleep System is 400% more powerful than anything currently in the marketplace. Out of everything under the D.N.A. Opportunity this is one of the most exciting and more profitable items which will be listed with DNA CONNECTS.â€
Members of DNA continue to promote the $10 plan and to make liberal use of the names of famous people and products across the web.
