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  • BULLETIN: Trevor Cook, Minnesota Ponzi Scheme Figure, Pleads Guilty In $190 Million Fraud Case

    BULLETIN: (UPDATED 12:35 P.M. EDT (U.S.A.) Trevor G. Cook, implicated in a $190 million Ponzi scheme that pushed tremendous sums of money all over the world and is believed to have fleeced investors out of at least $139 million, has entered a guilty plea in federal court in Minnesota.

    No sentencing date has been sent.

    Cook, 37, of Apple Valley, faces up to 25 years in federal prison after pleading guilty to mail fraud and tax evasion. Cook has been in jail since January, after a finding he had violated a court order by not cooperating with investigators and continuing to spend investors’ money after he was sued by the SEC and CFTC in November. His plea deal is contingent on assisting the government in unraveling the scheme.

    Criminal charges were filed against Cook last month.

    The guilty plea included acknowledgments by Cook that he lied to investors and was “aided and abetted by others” in a scheme “to defraud no fewer than 1,000 people out of approximately $190 million by purportedly selling investments in a foreign currency trading program,” prosecutors said.

    Cook did not have $4 billion under management, as he told investors, prosecutors said.

    During his plea hearing this morning, Cook admitted that he diverted investors’ money, deceived Swiss regulators when Crown Forex SA was plunging into bankruptcy in 2008, purchased ownership interest in two trading firms with investors’ money, bought property in Panama with investors’ money, bought the Van Dusen mansion in Minneapolis with investors’ money and raided investors’ money to make personal purchases and pay gambling debts.

    “To carry out his scheme, Cook caused false statements to be made to potential investors, including promises that the investment program would generate annual returns of ten to twelve percent, and that trading would present little or no risk to investors’ principal,” prosecutors said. “He also caused material information to be withheld from investors, such as the precarious financial position of Crown Forex, SA” in Switzerland.

    Meanwhile, prosecutors said, Cook “withheld the fact that trading at PFG in Chicago generated losses in excess of $35 million between July 1, 2006, and August 31, 2009.”

    A company with a name confusingly similar to Crown Forex SA was part of the scheme, prosecutors said.

    “In furtherance of the scheme, Cook caused an account to be opened in the name of Crown Forex, LLC, at Associated Bank, which he used for depositing investor funds that he subsequently diverted for his personal use as well as the personal use of others,” prosecutors said. “He also caused statements to be sent to investors that misrepresented the status of their investments. In addition, he caused due-diligence letters to be prepared that falsely represented Oxford Global Advisors as having more than $4 billion in assets under management, and that all accounts were liquid.”

    Prosecutors gave credit for the probe, arrest and conviction to the interagency Financial Fraud Enforcement Task Force. President Obama created the task force in November 2009.

    Assistant U.S. Attorney Frank J. Magill is the lead prosecutor in the criminal aspect of the case.

    In November, the SEC and CFTC sued Cook, along with Pat Kiley. Kiley, 71, formerly hosted a program on Christian radio and is accused civilly of steering people into the international scheme.

    Law enforcement officials and prosecutors in Minnesota say they are battling several Ponzi schemes that have fleeced investors out of hundreds of millions of dollars.

    Last month, FBI Director Robert Mueller III said criminals increasingly were relying on “shell corporations” and hard-to-trace financial-services products to commit fraud on a massive scale.

  • INetGlobal Disputes Government Assertion That Attorney Should Be Disqualified From Case; Says Lawyer Not ‘Necessary Witness’

    Attorney Mark Kallenbach should remain as counsel for INetGlobal because he is not a “necessary witness” as the prosecution claimed last week, an attorney for INetGlobal owner Steve Renner said today.

    Prosecutors moved last week to have Kallenbach disqualified, arguing that he was attempting to be both a lawyer and a witness in the Ponzi scheme case because he had filed an affidavit that outlined what he described as his “investigation” into INetGlobal’s business practices.

    Kallenbach did not enter his notice of appearance as INetGlobal’s attorney until April 5 — 11 calendar days after he filed the affidavit, prosecutors said. They asserted he was attempting to wear two hats in the case, arguing that Kallenbach’s court filings might create a conflict with the Minnesota Rules of Professional Responsibility, a local rule of U.S. District Court in Minnesota and the “Court’s inherent supervisory authority over its bar.”

    Not so, said Renner attorney Jon Hopeman.

    “Mr. Kallenbach is not a necessary witness as required for disqualification by Minnesota Rule of Professional Conduct 3.7,” Hopeman said in a brief today.

    The filing of the affidavit by Kallenbach does not not “give rise to a claim for disqualification, because the Affidavit did not waive the attorney-client privilege,” Hopeman said. “Rather, the Affidavit presents unprivileged facts, and information contained in non-privileged documents or available on public web sites. Nowhere does the Affidavit disclose any attorney-client communication. Further, the Affidavit s disclosure of facts which, of course, are not in themselves privileged, does not waive the attorney-client privilege.”

    Kallenbach’s affidavit, Hopeman said, “presents facts that can be proven in other ways, including through other witnesses, by the introduction of documents, or by reference to publicly available information.

    Hopeman urged the Court to be “mindful of potential for misuse when the Government seeks to classify an attorney as a necessary witness as a crippling litigation strategy.”

    He argued that the government “has not shown the disclosure of any attorney-client communication, and has not come close to meeting its burden of showing a waiver
    of the attorney-client privilege.”

    Kallenbach joined Hopeman in today’s brief.

    Attorney-client privilege also may be an issue in the AdSurfDaily autosurf Ponzi scheme case. In an appeals brief, ASD President Andy Bowdoin, through counsel, referenced two cases filed “under seal.”

    Bowdoin’s brief suggests that prosecutors subpoenaed at least two attorneys involved in the defense of ASD’s assets to appear at a grand-jury proceeding — and that a federal judge ordered the attorneys to appear.

    See story on prosecutors’ motion to disqualify Kallenbach.

  • Another Fraud Case In Minnesota: Renee Marie Brown Accused By SEC Of Starting ‘Sham’ Investment Fund Known As ‘X’

    UPDATED 7:52 A.M. EDT (April 13, U.S.A.) On the very day Tom Petters was sentenced in Minnesota to 50 years in prison for operating a colossal Ponzi scheme, a federal judge froze the assets of Renee Marie Brown after the SEC accused her of ripping off clients by persuading them to invest in a mysterious vehicle known as “Fund X.”

    U.S. District Judge Donovan W. Frank issued a temporary restraining order against Brown and her company, Investors Income Fund X LLC. The order was issued April 8.

    Brown, 46, of Golden Valley, was accused of operating a “sham” fund into which investors plowed more than $1.1 million between July 2009 and March 2010.

    “Brown told her investors that Fund X is a ‘bond fund’ with fixed annual returns of 8% or 9%,” the SEC said. “[S]he distributed fictitious ‘returns’ to investors, furthering the fiction that Fund X was a legitimate and successful investment opportunity.”

    But Brown “misappropriated most of the $1.1 million she raised from investors to, among other things, purchase a condominium for herself and build . . . office space for her new business,” the SEC said.

    Investors Income Fund X LLC was registered as a corporation in South Dakota, the SEC said.

    “Unbeknownst to her victims, Fund X is a sham — Brown’s alter ego,” the SEC said.

    The case features allegations of siphoning, forgery, cherry-picking clients of Brown’s former employer and issuing fraudulent “returns” in Bernard Madoff-like fashion. It also occurred against the backdrop of March 17 Congressional testimony by FBI Director Robert Mueller III that U.S. companies increasingly were relying on shell corporations to commit fraud.

    Minnesota Fraud Cases

    In recent months, investigators and prosecutors in Minnesota have opened up a number of major fraud probes. The combined cases are alleged to have drained hundreds of millions of dollars from investors. In some instances, prosecutors and regulators have asserted that companies used multiple names to commit fraud.

    Petters was convicted last week of presiding over that was described as the largest financial-fraud case in Minnesota history: a $3.65 billion Ponzi scheme.

    Petters displayed “stunning criminality,” prosecutors said. One of the victims wrote, “Our society, unfortunately, is becoming plagued with too many people like this, and like Bernard Madoff. Tom Petters needs to learn that there are severe consequences for his incomprehensible behavior.”

    Meanwhile, the SEC, the CFTC, the FBI, prosecutors and a court-appointed receiver are poring over records to reverse-engineer the alleged Trevor Cook/Pat Kiley Ponzi scheme. Court records suggest multiple company names were involved and that the scheme involved at least $190 million and caused investor losses of at least $139 million.

    Money was moved “all over the world,” according to court filings.

    Cook and Kiley were sued by the SEC and the CFTC in November. Cook was charged criminally last month. Prosecutors said he was “aided and abetted by others.” In this document, the National Futures Association, which also filed an action that references Cook, asserted that $75 million from a purported Swiss fund may have been directed at a mysterious investor known only as “Fased.”

    The purported payment occurred while Cook, a Minnesota resident, allegedly was managing money for a Canadian company known as KINGZ Capital Management Corp. KINGZ name also has been linked to an autosurf known as AdViewGlobal (AVG), which had close ties to an autosurf known as AdSurfDaily (ASD).

    On May 4, 2009 — on the same day the Obama administration announced a crackdown on international financial fraud — AVG announced that KINGZ had become its facilitator for international wire transfers. KINGZ denied the assertion, saying it believed it had been targeted in a scam. The company painted the picture that AVG was attempting to route money to itself through a U.S. shell company.

    AVG purportedly operated from Uruguay.

    Florida-based ASD, which members said was popular in Minnesota, was implicated in August 2008 by the Secret Service in a Ponzi scheme. A federal judge has issued orders of forfeiture totaling more than $80 million in the ASD case. ASD used at least three names, according to records: AdSurfDaily, AdSalesDaily, and ASD Cash Generator.

    Prosecutors also linked ASD to at least two other autosurfs: LaFuenteDinero (the “fountain of money”) and Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.

    In February, the U.S. Secret Service alleged that Minnesota resident Steve Renner was operating a Ponzi scheme through a company known as INetGlobal and companies related to the firm. The scheme, the Secret Service said, largely targeted Chinese members who may have little or no facility in English.

    Renner denies the allegations. Prosecutors described the case as a “major fraud and money laundering investigation,” saying INetGlobal came to life during a period in which federal agents were seizing tens of millions of dollars in the ASD case amid Ponzi, wire-fraud and money-laundering assertions.

    An ASD member introduced an undercover Secret Service agent to INetGlobal, the agency said in court filings.

    Other recent fraud cases in Minnesota include the Gerard Cellette Jr. Ponzi case ($53 million); the Charles “Chuck” E. Hays case ($20 million); and the Kalin Thanh Dao case (up to $10 million).

  • Prosecutors Ask Judge For Order To Disqualify INetGlobal Attorney, Saying They May Wish To Cross-Examine Him As Witness In Ponzi Case

    UPDATED 11:31 A.M. EDT (U.S.A.) Federal prosecutors have filed a motion to disqualify attorney Mark Kallenbach as counsel for INetGlobal and related companies, claiming that Kallenbach is attempting to be both a witness in the case and a lawyer for multiple clients involved in a Ponzi scheme, wire fraud and money-laundering probe.

    Kallenbach, prosecutors said, has made himself a subject of cross-examination because of an affidavit he filed last month. They added that wearing two hats in the same case might create a conflict with the Minnesota Rules of Professional Responsibility, a local rule of U.S. District Court in Minnesota and the “Court’s inherent supervisory authority over its bar.”

    “Should Mr. Kallenbach testify, he will be cross-examined,” prosecutors said. “The Court will have to decide whether Mr. Kallenbach’s voluntary assumption of the role of witness works as a waiver of the attorney-client privilege on cross-examination, or whether the government’s cross-examination of Mr. Kallenbach will be limited, in ways it might not be limited if the witness was not counsel to several parties, in order to preserve the privilege.”

    On April 2 — a week ago yesterday — prosecutors said INetGlobal had no attorney of record in the autosurf Ponzi scheme litigation. Kallenbach filed a notice of appearance for the firm and several related companies on Monday, three days after the prosecution’s filing.

    On Wednesday, Kallenbach filed a second affidavit (see subhead below) labeled a supplement to an affidavit he filed March 25.

    Prosecutors responded by saying Kallenbach’s second affidavit “heightens the government’s concern about Mr. Kallenbach attempting to serve as both lawyer and witness” and that he should be disqualified as an attorney for “any of the individuals or companies involved” in the case.

    “This motion is brought because Mr. Kallenbach has made himself a necessary witness in this case,” prosecutors argued. “This is a case in which Mr. Kallenbach conducted his own
    investigation and then voluntarily drew up a lengthy affidavit setting forth his observations.”

    Their claim is based on a 20-page affidavit and 12 additional pages of exhibits Kallenbach filed March 25 — before he entered his notice of appearance as INetGlobal’s attorney in court.

    In his March 25 affidavit, Kallenbach said he conducted an “investigation” and concluded that “Inter-Mark and its subsidiary iNetGlobal and its other subsidiaries are clean, legitimate and profitable businesses.”

    Kallenbach, in the March 25 affidavit, attacked an affidavit for a search warrant by the U.S. Secret Service and also challenged assertions the government made about V-Local, a company related to INetGlobal.

    Prosecutors argued that the affidavit and conclusions Kallenbach described as “true facts” make him a witness. Some of the information was woven into a memorandum of law filed March 25 by Jon Hopeman on behalf of INetGlobal owner Steve Renner, prosecutors said.

    The prosecution motion was filed by Assistant U.S. Attorney John Docherty, one of the prosecutors who handled the Ponzi case against Tom Petters. Petters was sentenced this week to 50 years in prison for operating a $3.65 billion fraud.

    U.S. Attorney B. Todd Jones of the District of Minnesota approved the filing of the disqualification motion. The main page on Jones’ website lists three major Ponzi probes the office has undertaken in recent months, including the Petters’ case, the case involving Minnesota Ponzi scheme figures Trevor Cook and Pat Kiley, and the investigation into the business practices of Renner at INetGlobal.

    Minnesota’s Ponzi Plague

    Ponzi schemes have plagued Minnesota. The Cook/Kiley case involves at least $190 million and investor losses of at least $139 million, according to court filings.

    Another big case in Minnesota involved Gerard Cellette Jr. Cellette was implicated in a $53 million Ponzi scheme last year by Hennepin County Attorney Mike Freeman.

    Meanwhile, Charles “Chuck” E. Hays pleaded guilty last year to charges in a $20 million Ponzi-scheme case in which the government seized a $3 million yacht.

    Separately, three members of a Minneapolis family were indicted last year on Ponzi and fraud charges. The case became known as the Kalin Thanh Dao case. Dao’s parents also were indicted.

    Dao and her parents pleaded guilty. Prosecutors said money was siphoned from the scheme to pay for gambling in Las Vegas.

    “Investors were promised that their money would be placed in investment programs targeted within specific markets and industries,” prosecutors said. “Investors were also told that Kalin Dao had a ‘partner’ who held a seat on the New York Stock Exchange, had contacts in the emerging Asian markets who had ‘inside’ information, and was associated with various Las Vegas casinos.”

    The Kalin Thanh Dao probe uncovered a web of deceit in which Dao’s father claimed nearly $3 million in losses for businesses owned by his daughter to eliminate his personal tax liabilities, and Dao’s mother claimed to be “single,” the “head of [a] household” — and also claimed a tax exemption for Dao.

    Kalin Thanh Dao was 32 years old and operated at least four companies, prosecutors said.

    “Instead of investing the investors’ funds as promised, Kalin Dao diverted substantial amounts of the funds for her own purposes, including gambling, lulling payments and personal expenses,” prosecutors said. “She also admitted that the fraud was between $2.5 and $7 million.”

    Also on the Ponzi front, AdSurfDaily, a Florida-based company implicated in a massive autosurf Ponzi scheme by the Secret Service in 2008, was popular in Minnesota. Some Minnesota members of ASD were among the staunchest defenders of ASD President Andy Bowdoin.

    The Secret Service referenced the ASD case in filings in the INetGlobal case, saying an undercover agent was introduced to INetGlobal by an ASD member who described the operation as a wink-nod enterprise.

    A federal judge in the District of Columbia has issued three orders of forfeiture totaling more than $80 million in the ASD case. Bowdoin is appealing. His appeal brief cites two other cases filed under seal and suggests that prosecutors subpoenaed at least two attorneys involved in the defense of ASD’s assets to appear at a grand-jury proceeding.

    It is unclear if the attorneys attempted to invoke attorney-client privilege. What is clear is that a federal judge ordered the attorneys to appear and that the order is being challenged in a federal appeals court.

    Kallenbach’s Second Affidavit

    Kallenbach filed a second affidavit April 7. The affidavit asserts that a Renner entity known as V-Media Marketing LLC “borrowed” all of the money that was placed in a bank account at Premier Bank Minnesota in early March, about a week after the Secret Service raid at INetGlobal’s offices in Minneapolis.

    Prosecutors, describing the INetGlobal case as a “major fraud and money laundering investigation,” said $47,400 was deposited into the account.

    “IMC Desperately Needs Working Capital To Pay Its Creditors,” Kallenbach said.

    He also described a webcast he attended April 5 that was “sponsored by one of IMC’s marketing consultants.”

    “At the April 5th Meeting, I learned, amongst other things, that many of iNetGlobal’s new customers have demanded refunds,” Kallenbach said. “The number of customers seeking refunds and the amount of such refunds is unknown. What is known is that as each and every day passes, without iNetGlobal being in business as usual, more of iNetGlobal’s customers will seek refunds.”

    He also asserted that “iNetGlobal’s marketing consultants are clamoring for commission payments that are legitimately due and owing to them,” according to the affidavit. “iNetGlobal has been unable to pay the commissions.”

    Kallenbach’s filing also suggested that, through negotiations, a little more than $1 million has been returned to INetGlobal and that the sum was now considered “unrestricted” cash. The affidavit did not disclose specific details about the negotiations

    In the March 25 affidavit,  Kallenbach argued that INetGlobal had no cash to operate.

    “At the time I signed my March 25, 2010 Declaration, I believed it to be true that iNetGlobal had no unrestricted cash meaning cash available for working capital. I have since learned that as a result of negotiations in which I was involved, on March 22, 2010 iNetGlobal netted approximately $220,000 from the return of restricted cash. As of the time my March 25, 2010 Declaration was prepared, I was unaware that this money had been returned to iNetGlobal.

    “After my Declaration was signed, approximately $795,000 of restricted cash was made available to iNetGlobel for working capital after close of business on March 25, 2010,” Kallenbach said. “As of today [April 7], iNetGlobal’s unrestricted cash is approximately $1,015,000. I arrive at this sum by adding $220,000 and $795,000 to reach $1,015,000.”

    Prosecutors said that, because Kallenbach has become an “essential witness” subject to cross-examination by the prosecution and direct examination by the INetGlobal side, there is a question about “whether Mr. Kallenbach’s clients can be provided constitutionally effective assistance.”

    “The government did not bring this situation about,” prosecutors contended. “[T]he government has not subpoenaed Mr. Kallenbach, or raised questions about whether he, and only he, can testify as to certain facts.

    “This is a case in which Mr. Kallenbach conducted his own investigation and then voluntarily drew up a lengthy affidavit setting forth his observations. Nor may Mr. Kallenbach, at this juncture, announce that he will henceforth act only as an advocate, because the choice to be a witness was made when the affidavit was filed.”

  • Accountant For Ponzi Scheme Suspect Who Shot Himself In Church Lot Indicted In Tennessee; Mark S. Riddle Charged With Defrauding Investors

    EDITOR’S NOTE: The story of the Robert McLean Ponzi scheme is, indeed, a sad one. Litigation that has accompanied the Ponzi provides yet-another example of how fraud schemes can affect the lives of even innocent parties — charities on the receiving end of donations from Ponzi schemers and investors who receive payouts that can be considered “fraudulent conveyances” because they were dealing with a scammer who was taking money from some people and giving it to others to sustain the deception that “real” profits were being recorded.

    McLean’s accountant, Mark S. Riddle, now has been arrested amid allegations that he defrauded investors by misleading them, prosecutors in Tennessee said.

    On Sept. 25, 2007 — one day before he was scheduled to appear at a bankruptcy proceeding to explain how millions of dollars had disappeared from his investment company — Robert McLean’s body was found. He took his own life with a handgun.

    McLean’s fraud scheme, which had operated for at least a dozen years, collapsed two months prior to his suicide, according to court filings.

    The body was found behind the First Christian Church in the small, South Central Tennessee city of Shelbyville. The bankruptcy hearing had been scheduled for the nearby city of Murfreesboro, home of Middle Tennessee State University (MTSU).

    McLean, 60, had given generously to MTSU, his alma mater. His reputation as a philanthropist further was boosted by gifts to the Country Music Hall of Fame, the Cystic Fibrosis Foundation and others, but McLean had a secret.

    That secret, prosecutors said, was that he had been operating a Ponzi scheme that fleeced millions of dollars from investors through purportedly high-yield promissory notes while McLean spent lavishly on cars and homes. Federal agents raided McLean’s business two months prior to his suicide, and creditors and investors sought answers from McLean though the bankruptcy proceeding.

    Bob Waldschmidt, the bankruptcy trustee, said in court filings that McLean had been operating a Ponzi scheme since “at least” 1995. After the Ponzi’s collapse, Waldschmidt went about the distressing business of reverse-engineering the scheme by identifying investors and charities unlucky enough to have received payments from McLean from suspected Ponzi proceeds.

    The payments were treated as “fraudulent conveyances” because McLean was insolvent when making them and simply was relying on money received from later investors to pay earlier ones, according to court filings.

    “From 2002, until the filing of the bankruptcy petition, the Debtor made gifts to various people and institutions . . . which were a conscious effort on the part of the Debtor to improve his image in the Nashville and Murfreesboro communities, such that he could entice new lenders/investors to loan him money in furtherance of his Ponzi scheme,” Waldschmidt said in court filings.

    Dozens of lawsuits were filed. Among the parties sued were McLean family members, investors and nonprofits that had received tainted donations.

    The trustee also sued McLean’s CPA, Mark S. Riddle.

    Riddle now has been charged criminally. He was arrested Wednesday after an investigation by the Rutherford County District Attorney’s office and the office of Tennessee Attorney General Robert E. Cooper Jr.

    “Riddle was indicted on seven separate counts of allegedly defrauding four investors of approximately $668,000 in May of 2007,” prosecutors said. “Among the charges was selling securities without registering with the State.”

  • Prosecutors Release Update To AdSurfDaily Victims, Say Restitution Program Could Be Delayed ‘A Year Or Longer’ Because Of Bowdoin’s Appeals

    Andy Bowdoin

    Fresh from their third win in the AdSurfDaily civil-forfeiture litigation, federal prosecutors now say a restitution program for victims of the autosurf Ponzi scheme could be delayed “a year or longer” depending on appeals filed by ASD President Andy Bowdoin.

    In an update to ASD members on the government’s website for victims, prosecutors did not address an appeal brief filed Monday by Bowdoin that cites a grand-jury investigation and suggests at least two attorneys involved in the defense of ASD-related property were ordered by a federal judge to testify in a case filed under seal.

    The target or targets of the grand-jury probe were not revealed, and the names of the attorneys who provided counsel and were called to testify were not disclosed in Bowdoin’s filing.

    Through a statement posted on the victims’ website, prosecutors said U.S. District Judge Rosemary Collyer had issued three orders of forfeiture that stemmed from the filing of two forfeiture complaints against ASD-connected assets.

    In July 2009, prosecutors said, Collyer issued a forfeiture order of more than $14 million against assets tied to Golden Panda Ad Builder. Golden Panda’s assets were targeted in an August 2008 complaint that also targeted the lion’s share of ASD’s assets.

    Collyer issued a second forfeiture order in January 2010. This one covered a lakefront home and more than $65 million seized from Bowdoin’s 10 bank accounts in the August 2008 complaint.

    Last week, Collyer signed the third forfeiture order in the case. Last week’s order covered more than $634,000 surrendered by Golden Panda in a second case brought against ASD-connected assets in December 2008. The order also covered additional ASD-connected real estate (a building purchased with $800,000 cash and a home whose $157,000 mortgage was retired with ASD-connected cash) seized in the same complaint, along with a 2009 Lincoln automobile;  a 2009 Acura automobile; a 2008 Honda automobile; a 2008 cabana boat (20-foot); a 2008 Mercury speed motor; a 2008 boat trailer; two 2007 Bombardier jet skis; and computers and related equipment.

    Some ASD members derided the boat and jet skis as “water toys” after claims were made that the equipment was purchased to enable members who visited Bowdoin at the lakefront home in Quincy, Fla., to enjoy themselves.

    One of the properties Collyer ordered forfeited last week belonged to George and Judy Harris. George Harris is Bowdoin’s stepson. Prosecutors said more than $157,000 in ASD-connected money was used to retire the mortgage on the Harris home.

    The transaction that led to the retirement of the mortgage occurred within 11 days of the conclusion of a May 31, 2008, ASD “rally” in Las Vegas at which Bowdoin invoked God, saying he was pleased that God had made him a “money magnet.”

    The U.S. Secret Service seized the bulk of Bowdoin’s immediately traceable assets two months after the Las Vegas rally concluded. The probe that led to the seizure began in the opening days of July 2008, a period during which Bowdoin was threatening to sue ASD critics while also collecting huge sums of money at “rallies” held in other cities, including Miami.

    ASD members said some attendees showed up at the rallies with piles of cash and cashier’s checks.

    Some ASD members joined Bowdoin in the threats to sue ASD’s detractors. One ASD member later said he imagined that the theme song from the television program “COPS” would be playing to herald Bowdoin’s court wins.

    “WHATCHA GONNA DO WHEN ASD’S ATTORNEYS COME FOR YOU?” the ASD supporter chimed in all-caps on a Pro-ASD forum known as the Ad Surf Zone. “I think we should start collecting ALL the negative types in here so we can FORWARD their posts to the ASD Attorney’s Office after they WIN our case against the U.S. Att Gen!”

    As a show of confidence in the strength of Bowdoin’s case and to rattle forum critics, the 76-word post included 14 exclamation points or question marks — an average of one every 5.4 words.

    Three final orders of forfeiture now have been issued.

    “An appeal from these rulings might affect how fast any of the forfeited funds can be released to fraud victims, which could take a year or longer,” prosecutors said in their update to ASD victims.

  • BULLETIN: Tom Petters, Minnesota Ponzi Scheme Figure, Sentenced To 50 Years In Federal Prison

    BULLETIN: (UPDATED 12:21 P.M. EDT (U.S.A.) Tom Petters, whom federal prosecutors said presided over a $3.65 billion Ponzi scheme, has been sentenced to 50 years in prison.

    The fraud was one of the largest in U.S. history — though still significantly smaller than the Bernard Madoff scheme, estimated to have involved $65 billion.

    Prosecutors had sought a sentence of more than 300 years. Petters’ attorneys countered with an argument that an appropriate sentence was in the range of four years.

    U.S. District Judge Richard Kyle bridged the gap, sentencing Petters to 50 years — 100 years fewer than the sentence Madoff received, but more than 12 times the sentence sought by the defense.

    Minnesota has been plagued by Ponzi schemes and rocked by allegations of Ponzi schemes.

    Three links on the main page of the website of U.S. Attorney B. Todd Jones lead to information about major Ponzi scheme prosecutions or Ponzi investigations undertaken by the office, including the Petters’ case, the case against Trevor Cook and Pat Kiley, and the investigation into the business practices of Steve Renner, who is alleged by prosecutors to have operated an autosurf Ponzi scheme known as INetGlobal.

  • RECEIVER: Cook/Kiley Ponzi ‘Incredible Tragedy’; Some Investors ‘Destitute’; Management So Screwed Up That Historic Van Dusen Mansion Was Not Insured; Assets ‘Sent All Over The World’

    EDITOR’S NOTE: As is the case with other Ponzi schemes, the alleged Trevor Cook/Pat Kiley scheme in Minnesota is proving to be an incredible paper chase that is consuming hundreds of hours of manpower as attorneys, investigators and support staff work to reverse-engineer what authorities say was an epic, international fraud.

    Want to be a Ponzi receiver? Expect to be criticized — and also expect to put in long hours, perhaps for months or even years. It simply is not an easy job, especially if a scheme has fleeced investors by the hundreds or thousands. Simply put, there is no way to make all parties happy. Perhaps all one can hope for is to contain the devastation of a Ponzi scheme.

    This is part of the story of R.J. Zayed, as told through court filings and a statement before Chief U.S. District Judge Michael J. Davis March 29. Zayed is the receiver in the Cook/Kiley case . . .

    Investor losses will be huge in the alleged Trevor Cook/Pat Kiley Ponzi scheme in Minnesota, the court-appointed receiver in the case said.

    Painting a picture that deception was the rule and not the exception in the alleged $190 million fraud, receiver R.J. Zayed said that money was moved “all over the world” and that $139 million of investor funds was “spent or hid.”

    Management of the scheme was so screwed up that Trevor Cook, whom Zayed described as the “architect,” reportedly paid $2.6 million from investors’ resources in 2008 for the historic Van Dusen mansion in Minneapolis — but then did not bother to maintain property insurance or even to maintain the property.

    Zayed’s early findings are alarming, and his statement and reports to Chief U.S. District Judge Michael J. Davis  cannot be ignored. Indeed, Zayed suggested, Cook used investors’ money to buy the mansion, but put the entire purchase price at risk and potentially invited catastrophic downstream liabilities by not insuring the property and letting it fall into a state of disrepair.

    Welcome to the bitter world of the Ponzi. Easy come, easy go.

    Although Cook purchased an island property in Canada for $250,000, a contractor who performed work for Cook has filed a “lien for unpaid work.” The filing of the lien added another layer of complexity to an already-complex case that involves multiple international jurisdictions.

    “We are working to get that issue resolved and clear title to the land,” Zayed said, noting that he has hired lawyers in Canada to help navigate the jurisdictional issues. The receivership estate also is working to convert assets in Panama to cash.

    Cook, 37, was charged criminally with mail fraud and tax evasion March 30. It is believed he may enter a guilty plea during a court appearance April 13.

    The Van Dusen mansion, which was used as a headquarters for the alleged $190 million scheme, quickly became a white elephant to the receivership estate, Zayed said.

    “Ongoing expenses, such as utilities and property maintenance, cost approximately $12,000 per month,” Zayed said. “In addition, we had to obtain property insurance (there was none under Mr. Cook’s management).”

    Moreover, Zayed said, the mansion’s furnace was not working and its security system had been “dismembered.”

    “Numerous individuals had ‘worked,’ lived, and socialized throughout the house,” Zayed said. “The property was littered with trash and paraphernalia from these activities. Evidence had to be preserved and the remainder had to be cleaned out — this was a tremendous task.”

    Spectacular Sums Collected, But No Books Kept

    Cook and Kiley both were charged civilly by the SEC and the CFTC in November. Kiley, 71, is a former host on Christian radio. Cook was a purported money manager.

    “The damage that Trevor Cook and Pat Kiley have done is nothing short of devastating to each of over 1000 investors who trusted and invested their life savings with these individuals,” Zayed said.

    In many cases, individual investors lost their life savings, Zayed said. Some of them had borrowed against the value of their homes.

    “Many of these investors are so destitute that they cannot afford to hire private counsel to represent their interests,” Zayed said.

    He described the scheme as an “incredible tragedy” that has been “nothing short of devastating” to investors, saying he is aware that some people believe the receivership estate has billed “extensive fees and costs.”

    Zayed, though, said he had arranged for discounted billings with key personnel such as attorneys and professional investigators and, in some cases, was relying on recent law-school graduates and criminal-law students to perform work for the estate to contain costs.

    WayPoint Inc., a professional investigations firm whose staff consists of former FBI and IRS agents and a former postal inspector, has performed some work at no charge because it recognizes the grave circumstances confronting Cook/Kiley investors, Zayed said.

    “It is the right thing to do,” Zayed said, quoting Rick Ostrom, one of WayPoint’s principals. Ostrom is well-known in Greater Minneapolis. He spent 26 years with the FBI.

    “WayPoint has been instrumental in cost containment,” Zayed said. “For example, to effectuate a proper distribution plan, the Receiver has to have as complete a list as possible of all investors who have lost money in this scam. Approximately 580 investors have registered claims with the Receiver — this is about half of the individuals who are believed to have invested with the Defendants.

    “In an effort to identify the remaining individuals in the most cost-effective manner possible, WayPoint interviewed and engaged local criminal-law students to review Defendants’ investor files to create a list that is complete and as accurate as possible,” Zayed continued. “These students reviewed 75 boxes of investor files and are in the process of updating the investor database with the information they reviewed. This work was performed at no cost to the Receivership, except that we paid for these students to park downtown while they worked at the U.S. Attorney’s Office.”

    Moreover, Zayed said his own firm, Carlson, Caspers, Vandenburgh & Lindquist (CCVL), cut its billing rate by 15 percent. The firm’s CFO has been working as a “de facto CFO” for the estate “without a single of her many hours billed.”

    Meanwhile, Zayed said, the “entire administrative staff of CCVL has also worked on behalf of the Receivership, often with late hours at the expense to their family and home lives, without billing a single hour.”

    At the same time, the firm’s technical staff also contributed to the Receivership, constructing a separate part of the firm computer infrastructure to handle the tremendous volume of electronic documentation that the Receivership has collected and created.”

    ‘Complicated Web’ Of Deceit

    Management of the Cook/Kiley entities was an unqualified disaster, Zayed said.

    “[T]he scope and depth of this fraud are so severe . . .  that the recovery in this case will be nowhere near the loss,” Zayed said. “The Defendants’ construction of this Ponzi scheme and their maintenance of the fraud lured investors into a scheme that produced a complicated web through which assets were sent all over the world.”

    Although investors filed lawsuits last summer and the SEC and the CFTC launched probes that resulted in the filing of the civil charges, the scheme continued to consume investors’ money even after the allegations were filed, Zayed said.

    “Trevor Cook was spending tens of thousands of dollars to buy gift cards around the city for his own personal gain,” Zayed said. He added that the receivership estate, the SEC, the CFTC and federal prosecutors in Minnesota worked to preserve assets and that the consequence to Cook was that he was jailed in January for not cooperating.

    “Suffice it to say that there was no legitimate book keeping of the Defendants and Relief Defendants,” Zayed said. “There were no accounting systems in place, or even a general ledger.”

    Read Zayed’s full statement.

  • Government Scores Clean Sweep In ASD Forfeiture Litigation, But That May Not Be The Biggest News: Is A Separate Legal Drama Playing Out In Background?

    Andy Bowdoin

    UPDATED 11:57 A.M. EDT (U.S.A.) Federal prosecutors have won the second forfeiture case against assets tied to Florida-based AdSurfDaily, meaning the government now holds title to 100 percent of the money and assets seized in the autosurf Ponzi scheme, wire fraud and money-laundering investigation.

    U.S. District Judge Rosemary Collyer issued a final order of forfeiture March 30 in a case brought in December 2008. On Jan. 4, Collyer issued a final order of forfeiture in a case brought in August 2008. The government now has control over more than $80 million seized in the cases, along with real estate, cars, marine equipment, computers and other property.

    But that may not be the big news.

    Grand Jury Probe

    Indeed, the big news may be that a hidden legal drama is playing out behind the scenes. Appeal documents filed by attorneys for ASD President Andy Bowdoin in the August 2008 case reference two separate matters filed “under seal” and say that attorneys for unnamed “defendants” were called to testify before a grand jury.

    The filings suggest — but do not state plainly — that prosecutors subpoenaed at least two attorneys involved in the defense of ASD-related property to testify and that a federal judge ordered the attorneys to comply.

    Charles A. Murray, an attorney for ASD President Andy Bowdoin, referenced two sealed court cases when informing the appeals court about litigation “related” to ASD.

    “Only one case related to this matter is currently pending before this Court, an interlocutory appeal alleging that the court below erred in ordering the defendant’s attorneys to testify before a grand jury,” Murray wrote.

    Murray identified the case as “Grand Jury Subpoena, Case No. 09-3118 (Under Seal).”

    “This related appeal arose from an ongoing grand jury investigation, In re: Possible Violations of Title 18, United States Code, Sections 1341, 1343, and 1349, Misc. No. 09-270 (Under Seal),” Murray wrote.

    The sections of federal law cited in Murray’s appeal brief pertain to mail-fraud, wire-fraud and conspiracy statutes. The attorneys are not named, and the brief does not identify the targets of the grand-jury probe.

    Details Unclear

    Why the attorneys were called to testify is unclear. Also unclear are the identities of the attorneys’ clients, the nature of the information the government sought from the attorneys, whether the attorneys sought to invoke attorney-client privilege and whether they actually testified before the interlocutory appeal filed under seal was brought.

    An interlocutory appeal is an appeal to a higher court of a ruling by a lower court that is made before the trial in the lower court has concluded.

    Such appeals, which higher courts are reluctant to entertain, may be filed when a party believes a lower court’s ruling is severely prejudicial and turns to an appeals court to stop it in its tracks, instead of following the customary procedure of waiting for the case to conclude before filing an appeal.

    Racketeering Case Cited

    Murray also identified as a “related” matter a racketeering lawsuit filed against Bowdoin and ASD attorney Robert Garner by three ASD members in January 2009. The racketeering lawsuit, which alleges ASD was a criminal enterprise as defined under federal statutes, has been placed on hold until issues in the federal case are resolved.

    In June 2009, attorneys for the parties suing Bowdoin and Garner referenced the AdViewGlobal (AVG) autosurf, an entity with close ties to ASD. In September 2009, federal prosecutors made a veiled reference to AVG in a filing that suggested that Bowdoin and family members initially planned to “move to another country and profit from a knock-off autosurf program that Bowdoin funded and helped to start.”

    The assets seized in the December 2008 forfeiture case identified Bowdoin family members as beneficiaries of ASD’s illegal conduct. Members of AVG later identified George and Judy Harris as AVG’s owners, with Bowdoin as a silent partner.

    George Harris is the son of Bowdoin’s wife, Edna Faye Bowdoin, who also was named in the December 2008 complaint as a beneficiary of ASD’s illegal conduct.

    AVG crashed and burned in June 2009, taking an unknown sum of money paid by members with it by exercising its version of a “rebates aren’t guaranteed” clause. There were reports that $2.7 million was stolen from AVG, which purportedly operated from Uruguay.

    Among AVG’s most noteworthy promoters were former ASD members, including some of the moderators of the now-defunct Pro-ASD Surf’s Up forum. Surf’s Up suddenly went missing in the earliest days of 2010.

    Bowdoin, 75, has been portrayed by prosecutors as “delusional.” He pleaded guilty in Alabama during the 1990s to felony securities charges, according to court records. A decade later, he associated with Clarence Busby, the operator of Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.

    Bowdoin and Busby, according to court filings by Busby, talked about forming Golden Panda in April 2008 while on a “relaxing fishing trip” to a Georgia lake.

    Busby, identified by the title “Rev.” at least 120 times in autosurf-related litigation, was implicated by the SEC in three prime-bank schemes in the 1990s, according to records. Golden Panda has ceded more than $14.6 million to the government in the ASD case, including $646,266.13 formally ordered forfeited by Collyer last week, and more than $14 million Collyer ordered forfeited in July 2009.

    In his court filings, Busby said he didn’t know Bowdoin “had prior run ins with the law” and had been arrested in Alabama for defrauding investors.

    Busby did not say if he told his fishing partner about his own run-ins with the law: The SEC said Busby defrauded investors in the 1990s “by offering and selling investment
    contracts in connection with three different prime bank schemes.”

    “Using misrepresentations and omissions in each of the three schemes, Busby raised money for purported programs in ‘prime bank’ notes by fraudulently representing to investors that the investments were risk-free and that the ventures would pay returns ranging from 750% to 10,000%. In total, Busby raised nearly $1 million from more than 70 investors. None of the investors earned the exorbitant returns promised by Busby,” the SEC said.

    Busby went on to operate an autosurf known as Biz Ad Splash, which also crashed and burned, reportedly taking members’ money with it. All of the notable autosurfs that dominated the stage in the aftermath of the ASD seizure — MegaLido, AdGateWorld, BAS, Ad-Ventures4U, Noobing and others — have now either died or are in a serious state of decay.

    Last month, the U.S. Secret Service, which conducted the probes into ASD, Golden Panda and LaFuenteDinero, asserted that INetGlobal, a company operated by Steve Renner, was operating an autosurf Ponzi scheme and targeting Chinese participants.

    The IRS is involved in both the ASD case and the INetGlobal case, according to court filings.

    Steve Renner was convicted of income-tax evasion in December 2009. Federal prosecutors described the INetGlobal case last week as a “major fraud and money laundering investigation.”

    Renner has denied the government’s allegations.

    Bowdoin now says he is appealing the forfeiture order issued by Collyer last week in the December 2008 case. If Bowdoin does appeal the order, it will be his second appeal. He also is appealing the forfeiture order in the August 2008 case.

  • REPORT: AdSurfDaily Mainstay ‘Professor’ Patrick Moriarty Sentenced To Year In Federal Prison In Tax Case; Claimed To Be Tax ‘Specialist’ Also Skilled In ‘Karma Restoration’

    “Professor” Patrick Moriarty, a mainstay in the AdSurfDaily Ponzi scheme story, has been sentenced to a year in federal prison for filing a false tax return, according to KMOX.com.

    Details about the sentencing were not immediately available.

    Moriarty, 62, pleaded guilty in January to filing a false return for the year 2003. Prosecutors said he caused a tax loss of $135,697.

    He initially was charged with filing false returns for the years 2002, 2003, 2004 and 2005, but pleaded guilty to a single count. Prosecutors alleged that he claimed a false deduction of $30,000 for “legal fees” for the tax year 2003 and claimed a false amount of $23,533 withheld for the tax year 2004 and a false amount of $23,433 withheld for the tax year 2005.

    After the August 2008 federal seizure of tens of millions of dollars from the bank accounts of ASD President Andy Bowdoin amid wire-fraud and money-laundering allegations, Moriarty fashioned a theory that the government was interfering with commerce.

    Moriarty also espoused the legal theories of Curtis Richmond, another mainstay in the ASD story. Richmond, a pro se litigant in the ASD case, was a member of a sham Utah “Indian” tribe known for filing vexatious litigation, including litigation that resulted in a successful counter-suit brought by Utah public officials under federal racketeering statutes.

    The “tribe” derisively became known as the “Arby’s Indians” because it held a meeting in an Arby’s restaurant in Provo, Utah, in 2003. The “tribe” used the address of a Utah doughnut shop as the address of its “Supreme Court,” and once issued “bench warrants” for the arrests of sitting judges and litigation opponents in legitimate courts.

    Although not a lawyer, Richmond holds the unusual distinction of having been banned from the practice of law in Colorado. In the ASD case, he accused a federal judge of “TREASON” and of operating a “Kangaroo Court,” accused another federal judge of operating a “Kangaroo Court” — and accused federal prosecutors of theft.

    Moriarty, along with other ASD members and members of the Pro-ASD Surf’s Up forum, started a nonprofit entity dubbed ASD Members International (ASDMI). One of ASDMI’s claims was that it would litigate against the government in the ASD case — even if the government was acting lawfully.

    ASDMI, which was formed in 2008 and collected contributions from at least 167 ASD members, never brought any litigation and quickly dissolved.

    Moriarty and Surf’s Up later spearheaded an effort to get the U.S. Senate to investigate the ASD prosecutors. Moriarty and Surf’s Up members also participated in a certified-mail campaign in which — as Moriarty described it — more than 50 “individual and notarized DEMAND[S] FOR LEGAL EVIDENCE” were sent to two federal prosecutors and a U.S. Secret Service agent.

    In 2006, Moriarty formed a nonprofit for a Missouri man accused (now convicted) of breaking into a woman’s home and shooting her to death in cold blood. Moments earlier, the man had shot a police officer four times. Moments later, he shot another man eight times.

    The shootings occurred on June 2, 2006. Moriarty started the nonprofit on Oct. 2, four months to the day after the rampage.

    Moriarty also claimed to be a minister and “Tax Return Specialist” who also is skilled in “Karma Restoration.”

    Read the Moriarty story on KMOX.com.

  • PROSECUTION: Renner Has No Standing To Contest Corporate Seizures In INetGlobal Case; ‘Major’ Fraud And Money-Laundering Probe Under Way; IRS Involved; No Media ‘Leak’ Occurred

    Steve Renner has no standing to contest the seizure of “the vast majority”  of the money and assets in the INetGlobal autosurf Ponzi case because the seized property was owned by corporations, not Renner, federal prosecutors said.

    Only $151,100 of the $26 million seized in the case came from accounts in Renner’s name, prosecutors said, arguing that bids to release the money were premature and that only an attorney for Renner — and not the companies — has filed a notice of appearance in the case.

    Meanwhile, in its response to Renner’s motion last week to challenge the seizure on Constitutional grounds and have $25 million returned, the prosecution said yesterday that his bid was a “thinly veiled attempt to force the government to reveal facts relating to an on-going criminal investigation.”

    A “major fraud and money laundering investigation is under way bearing serious criminal consequences,” prosecutors said.

    The government probe, which prosecutors now say includes the IRS, is in its early stages. Investigators to date have filed neither a civil forfeiture complaint nor criminal charges that seek the forfeiture of the funds, “and much of the evidence has only recently been seized and is needed for the investigation,” prosecutors said.

    “If the seized evidence is returned, it will not be available for the ongoing investigation,” prosecutors argued.

    Moreover, they argued, “If the Court orders the return of the seized funds, the money will be spent, and will be unavailable for future return to victims” should the government prevail.

    Prosecutors made similar arguments in the AdSurfDaily autosurf prosecution — and the arguments prevailed. In filings yesterday, the government once again cited the successful ASD prosecution, along with the successful prosecutions of the 12DailyPro and PhoenixSurf autosurfs.

    “iNetGlobal is not a one-of-a-kind scam, nor is it the first of its kind,” prosecutors said yesterday.

    Steve Renner was convicted on four felony counts of income-tax evasion in December, and is awaiting sentencing in the tax case.

    No ‘Leak’ Occurred: Gov’t Acknowledges Timing ‘Error’ In Posting Of Affidavit

    Prosecutors denied an assertion by Renner last week that the government had leaked the search-warrant affidavit in the INetGlobal case to the media.

    Under a bold subhead titled “The ‘Leak,’” prosecutors said the claim the document was leaked “is false, and has no bearing on the issues presented in this motion.”

    They added that the posting of the document on the government website was intended as a means of informing victims and witnesses efficiently, while trying to avoid a circumstance that occurred in the AdSurfDaily case: switchboards in prosecutors’ offices becoming inundated with telephone calls from people seeking information.

    Prosecutors said the government had explained its point of view to INetGlobal on Feb. 26, almost a month prior to Renner’s “leaking” claim filed last week. Renner’s claim specifically cited the PP Blog.

    “[T]he U.S. Attorney’s Office had planned, once the search and seizure warrants in this case were filed with the clerk’s office, to post a link to the affidavit on the website of the U.S. Attorney’s Office,” prosecutors said. “The U.S. Attorney’s Office for the District of Columbia was inundated with calls following their execution of warrants in the AdSurf Daily case, and the U.S. Attorney’s Office in Minnesota hoped to avoid this by efficiently getting information to victims, witnesses, and other interested parties by referring them to the affidavit.”

    “Through an error, an employee of the U.S. Attorney’s Office’s Community Relations Division mistakenly believed that the time had come to post the affidavit when it had not,” prosecutors said. “The affidavit was posted on the late afternoon or early evening of February 24th, and was taken down the following morning when the error came to light.

    “During the night, apparently, a single blogger found the affidavit and wrote a story about it,” prosecutors continued. “That story is reprinted in Mr. Renner’s motion papers. As noted, all of this was explained to Counsel immediately after the fact, and Counsel did not raise the issue of the premature release of the affidavit again until this motion was filed.”

    IRS Enters INetGlobal Probe

    Filings by the prosecution yesterday confirmed that the IRS has entered the case. An affidavit by an IRS criminal investigator asserts that an entity known as VMedia Marketing LLC opened a checking account at Premier Bank Minnesota on March 1, six days after the Secret Service executed search warrants in the INetGlobal case.

    “Steven M. Renner reserved sole signature authority on the account upon inception,” the IRS agent said. “On or about March 6, 2010, Matthew D. Renner was added to have signature authority on the account.”

    Matthew Renner is Steve Renner’s son. He has not been accused of wrongdoing.

    A total of $47,400 was deposited in the account, the IRS agent said. He listed the names of sources of the deposits. Two individuals with Chinese names wired individual deposits of $7,400 and $8,500 into the account.

    “Official checks” drawn on Wells Fargo bank and totaling $16,500 also were deposited in the account. These checks were made out to “V-Media or U-Media,” the IRS agent said.

    Meanwhile, the agent said, “a check made payable to Steve Renner in the amount of $15,000.00 from The Toronto-Dominion Bank was also deposited into the account.”

    At least 23 withdrawals were made from the account, the IRS agent said. He noted that the majority of these checks have either ‘week 3/1 – 3/5″ or ‘3/1 – 3/5 written on the memo line. In addition, one check was made payable to MEDA (Metropolitan Economic Development Assoc.) in the amount of $2,000.00. The memo section of the check made payable to MEDA stated ‘250 SECOND AVE #106A RENT.’”

    That address was one of the business addresses searched by the Secret Service Feb. 23.

    Prosecutors, saying Renner made “sweeping” assertions last week that he had no cash to pay employees, argued that the investigation by the IRS agent into the Premier Bank Minnesota account opened after the raid suggested otherwise.

    “Renner subsequently wrote 23 checks that appear to be payroll checks, plus a check for the rent on Suite 106A, 250 Second Avenue,” prosecutors said.

    Because the $15,000 deposit drawn on Toronto-Dominion bank was held until March 19, “several” withdrawals by check initially were returned to Premier Bank Minnesota, the IRS agent said.

    “Later on, Steven Renner came into Premier Bank Minnesota and had cashier’s checks issued to the same names indicated on the checks that had previously been returned to the bank,” the IRS agent said. “On or about March 23, 2010, the above indicated account was closed.”

    INetGlobal disclosed “none of this” in its arguments last week to release funds, prosecutors said.

    Moreover, prosecutors said the government “is attempting to work with the company” on the issue of payroll.

    Prosecution: INetGlobal ‘Omitted’ Names Of Employees

    “[T]here is concern that the company continues to have access to unseized funds with which to make payroll,” prosecutors said. “In addition, the first list of employees submitted to the government omitted several names of people the Secret Service had identified as employees of the company during the execution of the search warrants on February 23, 2010. A request that this issue be addressed elicited a response that was confusing; the government requested clarification and is awaiting a response.”

    Meanwhile, prosecutors claimed that Renner had placed “factual inaccuracies” in the record of the case, arguing that Renner’s claim that the seizure was “unreasonable” and that the Secret Service allegedly told “intentional and reckless falsehoods” in securing the warrant could not stand up to judicial scrutiny.

    “Such is the unsurprising reaction of a company accused of running a Ponzi scheme,” prosecutors said.