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  • FBI Makes Ponzi Arrest In California; Peter Jerald Frommer Faces Up To 233 Years Behind Bars If Convicted On All Counts

    UPDATED 5:23 P.M. ET (U.S.A.) A California man has been arrested by the FBI and IRS criminal investigators in an alleged Ponzi scheme involving $12 million.

    Peter Jerald Frommer was taken into custody this morning, after a federal grand jury returned a 17-count indictment yesterday.

    Frommer, 34, formerly of Malibu, was charged with two counts of mail fraud, seven counts of wire fraud, five counts of money laundering and three counts of failing to file federal income-tax returns.

    Prosecutors said he faced a maximum sentence of up to 233 years in prison if convicted on all counts.

    “Frommer operated a bogus investment scheme under the names ‘Cap Exchange’ and ‘Cap X’ that purported to trade in surplus property of defunct companies,” prosecutors said. “[He] told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices.”

    Between January 2004 and August 2006, prosecutors said, Frommer allegedly solicited “at least $12 million from victims by promising ‘guaranteed’ returns of 8 percent to 15 percent during cycles as short as six weeks.”

    Investors were told Frommer would use their money “to buy the distressed assets for Cap X, and then would share profits from the subsequent sales,” prosecutors said.

    “In addition to personal promissory notes, Frommer issued account statements that purported to show returns in the Cap X investment,” prosecutors said.

    More than 50 investors were targeted in the scheme, including residents of California, Oregon, Virginia, Illinois and Massachusetts, prosecutors said.

    Frommer did not purchase distressed assets with the victims’ money, prosecutors said.

    “Instead, [he] allegedly misappropriated this money to maintain his lavish personal lifestyle and to make Ponzi payments to victims, while falsifying Cap X account statements to lull victims into believing that their money was safe and earning high returns,” prosecutors said.

    It has been a busy week for Ponzi prosecutors in California.

    Miguel Salazar, 36, of West Covina, pleaded guilty to mail fraud Tuesday. Prosecutors said Salazar ran a Ponzi scheme “that took nearly $700,000 from victims who thought they were investing in latex gloves, which were portrayed as being in high demand following the 9/11 terrorist attacks.”

    Salazar’s former partner, Carlos Flores, 43, of Lakewood, pleaded guilty to mail fraud in December.

    In other Ponzi news, an auction company is preparing to sell six vehicles linked to the alleged Trevor Cook/Pat Kiley Ponzi and financial-fraud scheme in Minnesota.

    Among the items set to go up for bid Feb. 13 is a 1989 Rolls Royce Silver Spur linked to Cook. The Cook/Kiley scheme is alleged to be a fraud of at least $190 million.

    In Utah, meanwhile, prosecutors said that Jeffrey Lane Mowen — accused in both a Ponzi scheme and a murder-for-hire plot in which potential Ponzi witnesses were to be killed — used Morse code as part of the murder plot.

  • First Narc That Car, Now ‘PlatesRUs’: Promoter Says He Recorded 10 License Plate Numbers In Walmart Parking Lot And Earned A ‘Check’

    Part of the 'PlatesRUs' pitch for Narc That Car.

    Using a domain name similar to the famous ToysRUs brand name, a domain that has branded itself PlatesRUs.biz is promoting the Narc That Car multilevel-marketing program by telling prospects that earning $50 is a simple as going down to the local Walmart parking lot and writing down 10 license-plate numbers of WalMart shoppers.

    The PlatesRUs video pitch is similar to a pitch apparently put out by a separate Narc That Car downline group known as Team Trinity International. The Team Trinity promo included the logos of 30 famous companies, identifying their parking lots as places NarcThatCar members should visit to harvest plate numbers and record them in a database through a website NarcThatCar provides for a $100 start-up fee and a monthly fee of $24.95.

    A narrator in the PlatesRUs video for Narc That Car tells a simple story:

    “I went to Walmart,” he said. “It took me every bit of five minutes to write down 10 tag numbers randomly, go in my back office and log it into the national database through the company, and actually earn a check.”

    By paying Narc That Car the $100 fee, promoters become a “registered information consultant,” the PlatesRUs promoter explained in the video, noting he was “very excited” to have become one. The pitchman added that the program was “tremendously exciting” and “growing like wildfire.”

    No mention was made in the video of any privacy or legal concerns. Like the Team Trinity video, the PlatesRUs video did not instruct members on matters such as whether Narc That Car participants would need permission to enter retailers’ private property for the purposes of harvesting license-plate data from the retailers’ patrons.

    Viewers were given no instruction on what to do if a Walmart shopper — or a shopper at any other prominent business — observed his or her plate number being recorded and objected, perhaps demanding the paper on which the number was recorded so it could be shown to the store manager or even the police. The implication in both videos was that recording license-plate numbers raised no privacy issues at all and was a perfectly acceptable practice — even on private property.

    Like the Team Trinity video and a video put out by Narc That Car, the PlatesRUs video referenced the AMBER Alert program. The U.S. Department of Justice said this week that Narc That Car was not affiliated with AMBER Alert, despite promoters’ repeated claims that Narc That Car was tied to the AMBER Alert system.

    Some Narc That Car promoters have said the FBI and companies such as the Ford Motor Co. endorsed the Narc That Car program.

    The PatrickPretty.com Blog contacted Ford and provided a reference to the claim, which purports that Ford and two other prominent car companies “have already given their commitment to NARC. They have signed on as clients and will be there to use the database when it is ready. These companies believe in this idea.”

    Ford did not immediately respond to the inquiry.

    Among the claims online about Narc That Car are that it is helping “The US Dep’t of Homeland Security find terrorists” and that “NARC has integrated with Amber Alert to support and assist them in locating missing and/or abducted children.”

  • Frank Constantino Convicted Of Racketeering-Related Charges In Georgia Securities Fraud Case With Ties To Belize; Victim In $2.7 Million Scheme Was 83-Year-Old Woman

    A Georgia man potentially faces decades in prison after being convicted yesterday of racketeering-related charges.

    Frank Constantino, 65, of Marietta, was a recidivist securities offender previously disciplined in Missouri for a Bahamas-based scheme and also linked to a scheme in Belize, officials said. He now faces up to 95 years in prison after his conviction on charges of fleecing an elderly woman in a $2.7 million scheme.

    Constantino was convicted of violating the Georgia Securities Act, theft and exploitation of an elderly person. Records show he first clashed with Georgia securities regulators in 1997, in a case that featured allegations that he claimed investments in a candy company were guaranteed against loss.

    Prosecutors said Constantino had a history of creating shell companies such as Atrium Secure Annuity, Atrium Global Partners and Atrium Investment Partners to fleece investors.

    Now facing up to 95 years in prison, Constantino already has been in the Cobb County jail for 349 days. He lost a Georgia Supreme Court battle in October in which he sought release pending trial, arguing he was in poor health and not a threat to flee.

    Prosecutors argued he posed a “significant”  flight risk because “he did not own any assets in this country, he owned assets in Belize and Nicaragua, and he traveled to Belize on a regular basis.”

    In rejecting Constantino’s bid to be released pending trial, the Georgia Supreme Court affirmed a lower-court ruling that Constantino “posed a significant risk to flee” in part because of an alleged history of funneling “significant amounts of money to investments in Belize.”

  • Narc That Car ‘Not A Part’ Of Secondary AMBER Alert System; National Center For Missing & Exploited Children Official Says Integrity Of AMBER Alert Name ‘Needs To Be Protected’

    UPDATED 2:39 P.M. ET (U.S.A.) Narc That Car is not affiliated with the AMBER Alert Secondary Distribution Program, an official said yesterday.

    Robert Hoever’s comments followed on the heels of a denial by the Justice Department that Narc That Car was affiliated with the AMBER Alert program — despite repeated claims by Narc That Car promoters that participation in Narc That Car benefited AMBER Alert.

    Hoever, associate director of special projects in the Missing Children’s Division of the National Center for Missing & Exploited Children (NCMEC), manages the Amber Alert Secondary Distribution Program for NCMEC and the Justice Department, and 120 Amber Alert coordinators throughout the United States.

    “Narc that Car is not a part of the AMBER Alert Secondary Distribution Program,” Hoever said.

    Given the inarguably high stakes when a child goes missing, Hoever said it was common for people and organizations to try to get involved and help — “[s]ome by pulling AMBER Alerts off the internet and posting them in various places.”

    But he cautioned that brand dilution and public desensitization can occur when AMBER Alert’s famous name is commercialized.

    “As you might imagine there can be accuracy issues as well as timeliness concerns,” Hoever said. “The integrity of the AMBER Alert program needs to be protected so that we do not over saturate the public, but rather send messages to targeted areas defined by the investigating agency. We do not want to desensitize the public by sending alerts that are commercialized, that do not apply to the recipients, are not completely accurate, or are not timely.”

    Promoters routinely reference AMBER Alert in sales pitches for the Narc That Car multilevel-marketing program, which charges participants a $100 fee up front and a website fee of $24.95 a month to become “independent consultants.”

    Narc That Car’s consultants are instructed to write down the license-plate numbers of 10 automobiles and enter the information into a database Narc That Car maintains. Participants get paid for entering information in the database, and are paid additional commissions if they recruit others into the program and minimum thresholds are met.

    Clients such as major automobile manufacturers, banks, automobile-repossession companies and others are interested in purchasing information from the database for $99, according to Narc That Car.

    Promoters routinely drop the names of AMBER Alert and make references to “law enforcement” in ads for the Narc That Car program, but the company does not publish a list of clients.

    Google search results include references such as this: (Italics/bold added.)

    “This program is supported by all the major vehicle manufactures, FBI, law enforcement and financial institutions to help locate and in some cases reclaim vehicles. Just having an address does not work, people ‘hide’ their vehicles and we provide a pattern of these vehicles movements. We recently allowed the Amber Alert program access to help in their cause when there is a need to track down a vehicle quickly that might be in the National data base.”

    (URL for above still current as of Feb. 4, 2010.)

    Here is another claim (italics/bold added):

    “This is an excellent business opportunity, very very simple, and very lucrative. It is a new business that gathers license plate numbers for various companies.

    Such as:
    *Major Auto Manufactures
    *Private Lien Holders
    * Banks
    *In House Auto Dealers
    *Commercial Vehicle Companies
    *Missing Persons
    *Law Enforcement & Government Agencies
    *Amber Alert

    (URL for above still current as of Feb. 4, 2010)

    Meanwhile, a Google search result includes this claim (italics/bold added):

    “I got my first check from Narc That Car. This is fun and easy, and I’m helping Amber Alerts!”

    UPDATE 2:39 P.M. The screen shot below is a miniaturized version of a logo that appeared today on a site called “FindThatCar.org.” The logo included an appeal to “Help us,” as though it were collecting money for a charity.

  • JUSTICE DEPARTMENT: Amber Alert System ‘No Way’ Affiliated With Narc That Car MLM Program

    Shooting down claims by affiliates of Narc That Car, the U.S. Department of Justice said this morning that the Amber Alert System is in “no way affiliated” with the Narc That Car multilevel-marketing (MLM) program.

    The denial comes on the heels of repeated claims by Narc That Car affiliates that the company, which says it pays “independent consultants” to write down license-plate numbers and enter the information into a database, had ties to law-enforcement agencies and the Amber Alert system.

    Narc That Car is in “no way affiliated with the Amber Alert program,” said Kevin Jenkins, a Justice Department spokesman who works with the component of the agency that coordinates Amber Alert.

    Narc That Car says it sells license-plate numbers to banks and companies in the business of repossessing automobiles, implying that it also has government clients for the license-plate data entered by its affiliates.

    Information on Amber Alerts, which are issued when a child goes missing, scrolls across the bottom of Narc That Car’s website, and affiliates have said the company was started in part to provide information to Amber Alert.

    Amber Alert is referenced in a promotional video put out by Narc That Car. It also is referenced in a video by an apparent Narc That Car downline organization known as Team Trinity International.

    Team Trinity International makes the claim that the Narc That Car program was started “to provide historical location data for lien holders, law enforcement and other entities such as the Amber Alert System.”

    Part of Team Trinity International Narc That Car promotion.

    A Team Trinity video promotion for Narc Thar Car says affiliates should go to the parking lots of famous companies such as McDonald’s, Best Buy, Piggly Wiggly and 27 other famous firms to find a ready supply of license-plate numbers to enter into the company’s database.

    Whether Narc That Car affiliates are required to obtain the permission of companies into whose parking lots affiliates venture to mine license-plate numbers is unclear. Also unclear is whether Narc That Car affiliates are required to obtain the permission of the vehicle owner before recording the license-plate number.

    Another open question is how Narc That Car affiliates are expected to behave if a person who does not want his plate number recorded calls police or an attorney. Yet another open question is how Narc That Car affiliates are expected to behave if a store manager calls police or shoos the affiliate off the premises.

    Jenkins said companies and individuals were not permitted to cite nonexistent Amber Alert ties in advertisements and promotional materials.

  • Video Ad For Narc That Car Claims Program Was Started For Amber Alert System; Prospects Told To Gawk At License Plates At Best Buy, Food Lion, McDonald’s, Others

    A promotional video for a multilevel-marketing (MLM) company that pays members to write down license-plate numbers says the program was started “to provide historical location data for lien holders, law enforcement and other entities such as the Amber Alert System.”

    The video, which appears to be a sales tool for an MLM downline organization known as Team Trinity International, reproduces the logos of 30 famous companies, offering their parking lots as places members of Narc That Car can go to find cars and license plates in plentiful supply to be recorded.

    Segmented by disciplines such as “Retail,” “Grocery Stores” and “Restaurants,” the famous names shown prospects include Best Buy, Kmart, Walgreens, PetSmart, Rite Aid, Bed Bath & Beyond, Food Lion, Kroger, Ralphs, Vons, Piggly Wiggly, Wegmans, Domino’s Pizza, Friday’s, Wendy’s, Red Lobster, Applebee’s, McDonald’s and more.

    It was not clear if the Team Trinity promoter had contacted each of the individual companies to determine if they would approve of Narc That Car members recording the license-plate numbers of their patrons.

    Such actions could lead to both privacy and safety concerns, putting the companies in the awkward position of shooing gawkers and explaining why people carrying pads and pens were continually appearing on private property and writing down plate numbers.

    The video also listed shopping centers, neighborhood businesses, convenience stores, residences and apartment complexes as prime spots to harvest data.

    A promotional video for Narc That Car says license plates can ge found aplenty at these stores.

    In a separate video, Narc That Car said it had recruited “thousands” of “independent consultants”  to write down license-plate numbers and enter the information in a database. Database entries are available to banks, financial companies and firms that specialize in repossessing automobiles, according to the company.

    Web records show that several Narc That Car affiliates are making the claim that law-enforcement agencies and the Amber Alert program have endorsed the company. No testimonials from law enforcement agencies or the Amber Alert program appear on the Narc That Car website, despite promoters’ claims.

    The U.S. Department of Justice did not immediately return a call seeking comment on claims made by Narc That Car promoters. The Justice Department’s Office of Justice is the national Amber Alert coordinator.

    “The AMBER Alert System began in 1996 when Dallas-Fort Worth broadcasters teamed with local police to develop an early warning system to help find abducted children,” the Justice Department said in an FAQ document on the program.

    “AMBER stands for America’s Missing: Broadcast Emergency Response and was created
    as a legacy to 9-year-old Amber Hagerman, who was kidnapped while riding her bicycle
    in Arlington, Texas, and then brutally murdered,” the Justice Department said.

    The Narc That Car business is simple, the company says.

    “Narc a Few Cars,” the company instructs in a video. “Teach Others How to Narc Cars.”

    NarcThatCar does not list the names of any clients on its website. Nor does the company disclose information on how many database clients it has and how many of them are paying fees to receive a report on a target vehicle.

    License-plate consultants are required to act in a “lawful, ethical and moral manner” and perform “with honesty and integrity,” NarcThatCar says, noting it provides instruction on federal and state privacy laws and “fundamental training on the the proper way to gather information.”

    The Dallas branch of the Better Business Bureau says that it contacted Narc That Car Jan. 18 “to request that it substantiate some claims made in its advertising.”

    Narc That Car responded to the inquiry, and the matter was “still pending” as of Feb. 2, the BBB said on its website.

    The Team Trinity International promo is hosted on Blinkweb, a company that provides free hosting space and web-page creation tools.

  • BULLETIN: Another Florida Fraud Case; SEC Charges 4 In Alleged ‘Children’s Book’ Scheme Known As ‘Winning Kids’; Attorney General Introduced Task Force In Area Three Weeks Ago

    UPDATED 5:18 P.M. ET (U.S.A.) A Florida company and four individuals have been charged with securities fraud by the SEC, amid allegations they fleeced investors in a children’s book company known as “Winning Kids.”

    Charged in the case were Winning Kids Inc. of Palm Beach Gardens, Fla; Christian Hainsworth, Winning Kids’ chief executive officer and founder; and sales agents Robert Comiskey, Edward Tamimi and Victor Selenow. The SEC alleged the defendants sold unregistered securities to as many as 190 investors, raising $1.9 million in the scheme.

    The litigation is centered in Palm Beach County, an area U.S. Attorney General Eric Holder visited three weeks ago to discuss the Obama administration’s Interagency Financial Fraud Enforcement Task Force.

    Hainsworth was accused of receiving $541,000 over the course of the unregistered offering, “through checks he issued to himself and his wife and ATM withdrawals,” the SEC said.

    Meanwhile, Comiskey, Tamimi, and Selenow received about “$322,000 of the offering proceeds as selling commissions,” the SEC said.

    Hainsworth, Tamimi and Selenow had previous run-ins with regulators, the SEC said.

    “In 1995, the Kansas Securities Commission entered a consent order against Hainsworth to cease offering to sell unregistered securities in that state,” the SEC said.

    Hainsworth was also a subject of the South Dakota cease-and-desist order earlier this year, stemming from the business practices of Winning Kids, according to records.

    Tamimi, 33, of Palm Beach Gardens, was filed $5,000 by the National Futures Association (NFA) in 2006 “for making misleading sales solicitations and using high-pressure sales tactics,” the SEC said.

    He received $194,250 in sales commissions from Winning Kids between May 2007 and September 2008, the SEC said.

    Selenow, 48, of Royal Palm Beach, was charged with securities violations by the SEC in 2002 and ordered to disgorge $30,000. The 2002 case involved a company known as “The Gaming Factory Inc.,” according to records.

    In 1995, according to records, the NFA fined Selenow $50,000 “for making misleading sales solicitations and using high-pressure sales tactics,” the SEC said.

    Selenow received $41,500 in Winning Kids’ commissions between April and December of 2007, the SEC said.

    Comiskey, 62,of Palm Beach Gardens, received $86,975 in Winning Kids’ sales commissions between April 2007 and September 2008, the SEC said.

    Holder spoke in South Florida Jan. 8, saying the area was altogether too familiar with financial fraud and using an event at the Forum Club of the Palm Beaches to spotlight the Interagency Financial Fraud Enforcement Task Force.

    Only three weeks after Holder left, the SEC filed the Winning Kids’ action. The litigation once again puts Palm Beach County in an unwanted spotlight. It is the home of each of the Winning Kids’ defendants and the same county in which Holder spoke, describing the area as “Ground Zero” of financial fraud.

    Each of the defendants was familiar with securities laws and held various securities licenses over the years, the SEC said.

    “Winning Kids marketed its securities offerings primarily through a radio advertisement Hainsworth placed on a station covering New York, New Jersey, and Connecticut,” the SEC said. “The ad provided a toll-free number for interested investors to call. Hainsworth hired Comiskey, Tamimi, Selenow, and other sales agents to speak with potential investors.”

    Prospects were told “that Winning Kids was a “dividend yielding investment” to be paid out on a quarterly basis,” the SEC said.

    Lies were part of the scheme, the SEC alleged.

    “The sales agents told investors they were vice presidents of Winning Kids, and Hainsworth provided them with business cards stating that,” the SEC said.

    In reality, however, the SEC said, “they were independent contractors that received commissions based on the sale of Winning Kids securities.”

    Sales agents were paid “cash commissions of 15 to 20 percent of each sale they made,” the SEC said. “In addition, Selenow received for a few months 5 percent of the sales proceeds the other sales agents raised.”

    Hainsworth, the SEC said, “paid the entire 20 percent at the time the sales agent made each sale.”

    Hype also was part of the scheme, the SEC charged.

    Winning Kids’ pitch included claims the company “was starting an acceleration phase of extraordinary growth,” the SEC said. “In reality, Winning Kids generated almost no revenue from the sale of its books or any other product from 2004 through 2008. In addition, Winning Kids spent most of 2007 redesigning the books rather than trying to actively sell them.

    “Furthermore,” the SEC said, “Winning Kids did not actively try to sell its books for most of 2008.”

    Winning Kids suggested in offering materials that “for each $10,000 [customers] invested, they could expect to get back $30,000 a year — in other words, a 300 percent annual return,” the SEC said.

    Winning Kids based is assertions on unrealistic projections, while also misleading investors on how the company would use their money, the SEC said.

    Although Private Placement Memoranda “represented that 90 percent of the offering
    proceeds would be used for product development, manufacturing, advertising, marketing, and working capital,” the SEC said, “Hainsworth and the sales agents received at least 40 percent of the $1.9 million Winning Kids raised.”

    Winning Kids and Hainsworth have consented to the entry of a final judgment that permanently enjoins them from committing or aiding and abetting future violations of the above provisions, and orders them to pay disgorgement of ill-gotten gains and a civil penalty.

    Winning Kids and Hainsworth neither admitted nor denied the SEC allegations, in consenting to the judgment.

  • FBI: Investigators ‘Wrapping Up’ Decade-Long Probe Into ‘Pump And Dump’ Penny-Stock Schemes That Caused ‘Hundreds Of Millions’ In Losses

    Source: FBI

    UPDATED 2:46 P.M. ET (U.S.A.) And to think a cheerleader for AdSurfDaily once boasted online that Megalido was “offshore” and therefore safe from government meddling, after earlier suggesting that ASD members who did not support the company after Ponzi allegations surfaced perhaps would get dragged off in handcuffs while supporters remained free.

    To further chill ASD defectors, the cheerleader even shared his version of lyrics from the television program “COPS.”

    “Bad Boys, Bad Boys, Whatcha Gonna Do?” he chanted on the now-defunct AdSurfZone forum, a predecessor site to the Pro-ASD Surf’s Up forum. “Whatcha Gonna Do>WHEN<THEY COME FOR YOU ?!!!”

    Could an adult be so out of touch he actually believed law enforcement did not have a clue about how fraudsters operate and had no experience at all investigating intricate and elaborate crimes that touched all 50 U.S. states, Canada, the Caribbean and other parts of the world?

    The plain answer is yes.

    Even as the apologist chanted, however, the FBI was in the seventh year of one of the most intricate and exhaustive probes in its history, a history that dates back to 1908.

    Now the FBI, which has 456 satellite offices in the United States and 60 offices overseas, says it is “wrapping up” a penny-stock investigation “that was so massive it took the better part of a decade to unravel.”

    Operation “Shore Shells” included probes into 40 separate schemes and, to date, has resulted in 40 convictions, the agency said. The FBI and partner agencies chose the “Shore Shells” name because the probe originated on New Jersey’s Atlantic coast and involved “fake” companies or “shell” firms.

    Targeted in the probe were CEOs, stock brokers, CPAs, financial advisers and attorneys who conspired to pump up the price of penny stocks with bogus news releases, false postings on Internet forums and fraudulent information delivered in newsletters, the FBI said.

    Perhaps the most notable conviction to date was that of Robert P. Gordon, 57, of
    St. Petersburg, Fla. Gordon was sentenced in New Jersey to 20 years in prison, after a jury found him guilty of conspiracy to commit securities and wire fraud and conspiracy to commit money-laundering.

    Investors lost $15 million in the pump-and-dump scheme, which included company names such as TeleServices Internet Group Inc. (TSIG) and Phoenix Information Systems Inc.

    “Gordon and several of his co-conspirators executed fraudulent agreements between TSIG and offshore entities, which they secretly controlled,” prosecutors said. “Typically, the offshore entities were located in the Cayman Islands.”

    The elaborate scheme involved fraudulent consulting agreements with other entities, and co-conspirators “caused millions of shares of the TSIG stock to be issued in the name of the entities,” prosecutors said. The conspirators attempted to skirt securities laws, and
    fraudulently received shares that were laundered in Canada and the United States.

    “Afterward, the ill-gotten proceeds were often laundered by wire transferring those funds from the brokerage accounts to an attorney trust account located in Denver and then dispersed to the co-conspirators,” prosecutors said.

    Investors dump their life savings into pump-and-dump schemes, which deliberately are designed to be elaborate to line the pockets of insiders.

    Now the FBI has disclosed some details about the victims — the people the AdSurfZone poster would have ASD members believe were the “Bad Boys” for not cheerleading for the international scammers.

    Here, according to the FBI, are some victims’ stories in brief:

    • A man suffering from multiple sclerosis. His stockbroker liquidated the man’s pension and IRA, “and left him nearly penniless.”
    • A woman who invested her savings and pension. She also took out a second mortgage to bolster her stake, and “lost everything.”
    • A husband and wife who both developed dementia during the probe. FBI agents spent hours with the victims and their family members at a nursing home, while also meeting with the victims’ accountants to reverse-engineer their losses.
    • A physician from a “prestigious hospital.” The doctor “began suffering from severe depression after learning of the scam and became unable to work.”

    As operation “Shore Shells” expanded, it grew to include more than 100 seizure and forfeitures actions totaling more than “$70 million in cash, artwork, jewelry, homes, cars, and other valuables.”

    The real “Bad Boys” have been ordered to pay more than $130 million in restitution.

    “We expect millions more to be forfeited and repaid to the victims,” the FBI said. “We spent years interviewing more than 600 mainly elderly victims, painstakingly documenting their sometimes heartbreaking losses.”

    Others convicted in operation “Shore Shells” include Gary Brown, 61, of Sarasota, Fla.; Joseph Morgan, of St. Pete Beach, Fla.; and Gary Brown, also of Florida, for their roles in a scheme involving a company known as Skylynx Communications.

    Brown pleaded guilty to conspiracy to commit securities fraud, wire fraud, and money laundering. His sentencing is set for for May 7.

    “At his plea hearing, Brown admitted that beginning in May 2002 and continuing through October 2005, he operated a sophisticated scheme, involving more than five co-conspirators, which used deceptive and manipulative practices in connection with the fraudulent issuance, purchase, and re-sale of shares of stock of Skylynx Communications,” prosecutors said.

    More than 50 Skylynx investors were defrauded. Brown admitted that he conspired with Morgan, who already has been sentenced to two years in prison, and McPhee, whose sentencing is pending, prosecutors said.

    Brown agreed to forfeit about $650,000, as part of his plea.

    Read more about operation “Shore Shells” and pump-and-dump schemes.

  • POSTAL INSPECTORS: Ponzi Scheme Targeted Filipino Community In New York; Razel Canedo Arrested In Atlantic City In ‘Nanny’ Ponzi Scheme

    EDITOR’S NOTE: If you’re keeping a “Bubba Blue” notebook on the ways to have a Ponzi scheme as opposed to having shrimp, here’s one you might want to list: an alleged “Nanny” Ponzi scheme.

    In yet another case that couples Ponzi and affinity fraud, Razel Canedo was charged with targeting Filipino immigrants in Greater New York City in an alleged $1 million scheme that sold promissory notes by suggesting the proceeds would be used to pay expenses of nannies and nurses from the Philippines who wanted to work in the United States.

    The scheme also used religious references, prosecutors said.

    Canedo, 41, was charged with mail fraud and wire fraud. She was arrested in Atlantic City. Investigators said she used the aliases of “Razel Torres” and “Razel Agravante,” while operating companies known as “Lady of Lourdes” and “K&K Nannies.”

    But Candeo did not invest the victims’ money in Lady of Lourdes or K&K Nannies, prosecutors said. Instead, she put the “bulk” of it in “overseas bank accounts or deposited it into domestic accounts and withdrew it as cash.”

    “Ponzi schemes often target religious or ethnic groups to defraud them of their hard earned money,” said Ronald J. Verrochio, inspector-in-charge, U.S. Postal Inspection Service. “Working with the U.S. Attorney’s Office and the community, the Postal Inspectors will combat these frauds to protect everyone in our community from falling victim.”

    As often is the case in Ponzi schemes, investors were promised huge returns.

    “Candeo told investors that they would earn a return on their investment of anywhere from 3 percent per month to 50 percent per year,” prosecutors said. “[She] told victims that the money invested in Lady of Lourdes would be used to pay for training, immigration expenses, and placement services for nurses from the Phillipines who wanted to work in the United States, and that the money invested in K&K Nannies would be used to pay for similar services for aspiring nannies.”

    U.S. Attorney Preet Bharara said the scheme was reprehensible.

    “Razel Canedo preyed on members of the Filipino-American community who invested their hard-earned money into what they later learned was merely Canedo’s bank accounts,” Bharara said. “We will continue to work with our partners at the U.S. Postal Inspection
    Service to pursue financial fraud and vindicate its victims.”

    Some investors’ received payouts to sustain the deception, and others received checks that bounced, prosecutors said.

    In recent affinity-fraud cases, former Christian Radio host Pat Kiley was implicated by the SEC and the CFTC in an alleged $190 million fraud in Minnesota. Also charged in the case was Trevor Cook.

    Milton Retana of Huntington Park, Calif., was convicted in a Ponzi scheme that targeted Latinos. Investigators found $3.2 million in cash in the back of a religious bookstore owned by Retana’s wife.

    Meanwhile, John Farahi, a host on Persian-language radio in Greater Los Angeles, was charged by the SEC of operating a financial scheme targeted at Iranian-Americans.

    Investors were told they were investing in FDIC-insured certificates of deposit, government bonds or corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP).

    Elsewhere, Gregg T. Rennie pleaded guilty in U.S. District Court in Massachusetts to 13 counts of securities fraud and one count of wire fraud. He potentially faces decades in prison and fines in the millions of dollars.

    Rennie hosted a radio show known as “Your Money” and targeted Christian listeners, prosecutors said.

  • NarcThatCar: Site Operates As MLM, Says Members Earn By Writing Down License-Plate Numbers; Links Itself To Amber Alert Program

    NarcThatCar wants you to pay it $100 up front. For that fee, you become a “consultant” qualified to write down the license-plate numbers of 10 cars per month, input the information into a database and earn multilevel commissions by recruiting. After you pay the $100, you’re then charged $24.95 a month for a website, according to Narc That Car.

    Some members of AdSurfDaily and Golden Panda Ad Builder now are promoting the NarcThatCar program, which says clients such as major automobile manufacturers, companies that have private liens against cars, banks, car dealerships that do their own in-house financing and commercial vehicle companies are interested in purchasing information from the database.

    If the repo man, for example, is looking for a car and the owner is hiding it, NarcThatCar — relying on the input of its team of license-plate gawkers — will sell him a database entry on reported sightings of the car for $99 — and even provide a map of the reported sightings.

    The repo man also has the option of offering a “finders fee for information which leads to the location of your collateral,” Narc That Car says. “This option sometimes helps the process along.”

    NarcThatCar labels its license-plate gawkers “independent consultants.” It appears as though any independent consultant hit by a car or otherwise injured while while gawking at license plates and recording their numbers would need to rely on his or her own insurance.

    The NarcThatCar website does not explain how consultants should proceed if, say, a local merchant calls the police to complain that a strange person appears to be walking around the parking lot and writing down license-plate numbers.

    Who else can use the Narc That Car database?

    “Law-enforcement agencies, government agencies, missing persons and the Amber Alert program,” Narc That Car says in a video to recruit prospects.

    Information on Amber Alerts, which are issued when a child goes missing, scrolls across the bottom of the NarcThatCar website.

    The U.S. Department of Justice, which celebrated the 14th anniversary of the Amber Alert program Jan. 13 and maintains an official website on the program, did not immediately return a call seeking comment on the NarcThatCar program.

    NarcThatCar does not list the names of any clients on its website. Nor does the company disclose information on how many database clients it has and how many of them are paying fees to receive a report on a target vehicle. Also unclear is whether Narc That Car imposes a fee if the government or the Amber Alert program wanted to use its database.

    Narc That Car, however, does disclose that it has rounded up “thousands” of consultants to write down license plate numbers, enter the information in a database and potentially earn MLM commissions at least five levels deep.

    The business is simple, Narc That Car explains.

    “Narc a Few Cars,” the company says. “Teach Others How to Narc Cars.”

    The company says members are required to act in a “lawful, ethical and moral manner” and perform “with honesty and integrity.” NarcThatCar adds that it provides instruction on federal and state privacy laws and “fundamental training on the the proper way to gather information.”

    On “the online success zone,” a forum once known as “The Golden Panda Ad Zone,” a Narc That Car sponsor is promoting the program in a thread titled, “ANYONE CAN DO THIS…write down 10 license plates a month get paid.”

    The Amber Alert program is referenced in the first sentence (18th word) of the Narc That Car pitch.

    “A company out of Dallas needs to grow a data base of license plates to use for Amber Alerts and other reasons,” the pitch begins.

  • GNI BECOMES THIS YEAR’S ASD: Autosurf/HYIP Pimps Continue To Cheerlead Ponzi Schemes As Bank Failures Pile Up In The United States

    A year ago, members of AdViewGlobal and AdSurfDaily asked Sen. Patrick Leahy, chairmain of the Senate Judiciary Committee, to endorse Ponzi schemes and investigate the prosecutors in the ASD case. This year, members of the failed Gold Nugget Invest (GNI) HYIP are doing most of the early season cheerleading for reprehensible "programs," while sabotaging debate in the ranks and continuing to argue there is something noble about fraud schemes. Fifteen U.S. banks failed while GNI members were singing the praises of the HYIP in the opening days of 2010. GNI tanked earlier this month. Thirteen U.S. banks failed while AVG/ASD members were conducting a letter-writing campaign to Leahy in the opening days of 2009.

    The new year is starting out like the year that just passed. Banks are failing, unemployment is high, money is not trickling down to small businesses that need capital to expand and create new jobs — and the Ponzi pimps are still putting lipstick on pigs, pushing autosurfs and HYIPs and cheerleading for them even when they fail.

    Gold Nugget Invest (GNI) quickly has become this year’s equivalent of last year’s early season favorite, AdSurfDaily (ASD), among the apologists. As was the case a year ago with ASD, the GNI faithful and delusional members of the failed HYIP have emerged to lead the cheers, make the excuses, confuse the issues, sabotage legitimate discussions and set the stage for even more people to lose tremendous sums of money to practiced online schemers.

    Web records suggest that at least 57 percent of funds directed at GNI originated in the United States, and there are claims that GNI had 11,000 members. GNI tanked earlier this month, directly on the heels of an HYIP known as “Cash Tanker,” which used images of Jesus Christ in its marketing materials.

    Yes, even an HYIP that called itself Cash Tanker and used a revered figure as though he were just another hamburger salesman on TV was able to collect untold sums from investors by relying on HYIP cheerleaders to spread the gospel of robbing Peter to pay Paul.

    First, a brief look at the banking environment.

    Five U.S. banks failed Friday, bringing the year-to-date total to 15. That’s ahead of last year’s pace. Through Feb. 14, 2009, 13 U.S. banks had failed. Twenty-five failed in all of 2008, and only three failed in 2007.

    By the time the banking bloodletting had ended in 2009, a total of 140 banks had failed. With 15 failures already this year, the United States is on pace to record 180 in 2010. The FDIC insurance fund fell into the red last year under the weight of the failures, and the agency is replenishing the fund by requiring banks to prepay fees for insurance.

    A Year Ago

    Most notable among the Ponzi pimps a year ago at this time were the promoters of ASD and its offshoot, the AdViewGlobal (AVG) autosurf. They hailed AVG as a cure for what ailed the U.S. economy, even though ASD had been implicated in a wire-fraud, money-laundering, securities fraud and Ponzi scheme that resulted in the federal seizure of tens of millions of dollars.

    AdViewGlobal, which tanked in June 2009, formally launched a year ago this week. It was pushed by ASD members who positioned AVG as an “offshore” alternative.

    Almost a year ago, the Pro-ASD Surf’s Up forum led a campaign to Sen. Patrick Leahy that sought the Senate’s endorsement of Ponzi schemes — it seems incredible, but it’s true — and also sought to have the Senate investigate the prosecutors and agents who were investigating the alleged ASD Ponzi scheme.

    Incredibly, last year’s Surf’s Up campaign, which piggybacked off a campaign by ASD mainstay “Professor” Patrick Moriarty, came to the fore during a time in which 13 U.S. banks were failing  in the opening days of the year; the Bernard Madoff Ponzi scheme ($65 billion) was still a fresh news item; the Tom Petters’ Ponzi scheme ($3.65 billion) was in the news; the alleged Allen Stanford Ponzi scheme ($8 billion) was in the news; the alleged Arthur Nadel Ponzi scheme ($350 million/$400 million) was in the news; the alleged Paul Greenwood/Stephen Walsh financial scheme ($553 million) was in the news; and the alleged Nicholas Cosmo Ponzi scheme ($370 million) was in the news. There were others, of course.

    At the same time the events cited in the paragraph above were making fresh news, autosurfs and HYIPs also were falling like dominos and taking investors’ money with them. Notable among them were MegaLido, Noobing, Frogress, Daily Profit Pond, Premium Ads Club and Aggero Investment. All of them were pushed by promoters who also were pushing AVG (and had pushed ASD).

    Some of the promoters simultaneously tried to sanitize the “industry” through the letter-writing campaign to Leahy, asserting, for example, that the schemes actually were legitimate opportunities and that the government did not understand the technology or the math behind the schemes.

    Despite the headlines of spectacular Ponzi fraud in the mainstream press, despite the fact that it was impossible to miss news about Ponzi schemes unless you lived a life of blissful ignorance or had chosen to be willfully blind, despite the fact that sites such as Scam.com and WorldLawDirect and the PP Blog had published tons of information on autosurf and HYIP Ponzi schemes, despite the fact that the U.S. and other governments had published warnings about the frauds and had filed both civil and criminal cases against the fraudsters, despite the fact that no autosurf or HYIP ever has stood the test of time and survived, the schemers closed ranks and continued to shill and shill and shill and shill.

    They’re still shilling a year later.

    GNI Becomes The New ASD In Opening Days Of 2010

    This year’s early season ASD is GNI. Instead of writing letters to Leahy, though, some of the apologists are saying that the HYIP critics and doubters in the GNI ranks should quit complaining and starting donating money to Haiti earthquake relief. As was the case with ASD, all of the cheerleading is occurring blindly. Not a shred of evidence has emerged that anything about GNI was real.

    And instead of Madoff, Nadel, Cosmo, Stanford and the other Ponzi notables cited above being the preeminent contextual backdrop a year after the Surf’s Up campaign, figures such these have replaced them: alleged Ponzi schemers Trevor Cook and Christian radio host Pat Kiley ($190 million); proven Ponzi schemer Scott Rothstein ($1.2 billion); proven Ponzi schemer Milton Retana ($62 million/$3.2 million in cash found in back of religious bookstore);  proven Ponzi schemer Gold Quest International (about $29 million; ruled a Ponzi and a pyramid scheme by Canadian authorities); proven Ponzi schemer and former Christian clergyman Brian David Anderson ($4 million, link to Flat Electronic Data Interchange (FEDI), whose operator, Abdul Tawala Ibn Ali Alishtari, also known as “Michael Mixon,” was convicted in September 2009 of financing terror and fleecing investors in the FEDI scheme); alleged Ponzi schemer Arthur Leroy Heffelfinger ($2.02 million, including alleged theft from woman in 90s with dementia): alleged Ponzi schemer Mariana Montes (at least $682,000 in combo Ponzi and fraud case, including alleged theft from 90-year-old widow); proven schemer John Anthony Miller ($15 million, tried to flee United States by using identity of deceased Catholic school classmate); proven schemer Bradley L. Ruderman ($25 million, mostly from family and friends); alleged schemer Edmundo Rubi (operated $24 million “Knights Express” Ponzi scheme earlier in decade, sentenced to prison, emerged from jail with new scheme targeting original customers); proven Ponzi schemer Marcia Sladich ($15 million, scheme targeted churchgoers); alleged Ponzi schemer Steve Salutric (at least $1.8 million, including more than $400,000 from 96-year-old widow with dementia).

    There are others, of course, and the names constantly change. What hasn’t changed is that the autosurf and HYIP shills continue to shill and shill and shill, even as one bank after another is failing and one Ponzi schemer after another is making one headline after another.

    We can’t think of anything that matches the level of disconnect or demonstrates the same level of greed and wanton criminality — not even Rothstein’s Bugatti and collection of other fine automobiles purchased with Ponzi proceeds.

    And not even Cook’s alleged submarine.