A woman jailed in California on Ponzi scheme charges has been charged in a separate case with stealing from a 90-year-old widow and using some of the money to have a liposuction procedure performed in Mexico.
Redondo Beach police said they were investigating Mariana Montes for a separate crime when they discovered she was running a Ponzi scheme targeting Latin immigrants. The separate crime turned out to be financial abuse of the elderly.
Police described it as a $682,000 fraud case in which it is alleged Montes conned the elderly woman into taking out home-equity loans, refinancing her home three times and making out blank checks that Montes cashed.
The $900,000 home, which had been in the elderly woman’s family for 100 years, had no mortgage before Montes conned the woman, police said. The Daily Breeze newspaper of Torrance, Calif., reported that the woman was forced to sell the home to pay off the bank after Montes scammed her — and that Montes gave some of the money to friends and used some of it to have liposuction.
Montes, 41, ran a fraudulent company known as “Fast Results Investments.†Redondo Beach police said she targeted Latin immigrants in a Ponzi scheme. The preliminary loss was estimated at $500,000 in the Ponzi case, but investigators said the figure could increase.
“[She] used the investors’ money to purchase designer clothing, a new vehicle and to fund her daily activities,†police said.
See our earlier story on Montes.
See the Daily Breeze story about the alleged fleecing of the 90-year-old woman.
A California man who tried to adopt the identity of a deceased classmate from his school days to flee the United States while his Ponzi scheme was unraveling has been sentenced to 159 months in federal prison.
The FBI and the State Department already were aware that John Anthony Miller’s scheme was falling apart when they targeted him in a sting in November 2008.
Miller, who was convicted in 1998 of racketeering “predicated on mail fraud, wire fraud, and securities fraud offenses” was operating a Ponzi scheme a decade later through a company known as JAM Jr. Enterprises of Newport Beach, Calif., according to the criminal complaint in the case. Miller, 52, lived in San Clemente.
Working with an informant, an FBI agent who also was an attorney and a former clerk for a judge on the U.S. Court of Appeals for the Third Circuit, set up a sting operation. Miller’s telephone calls with the informant were recorded as the scheme was collapsing.
Miller sought the informant’s help in obtaining a passport to a country that did not have an extradition treaty with the United States, according to the complaint. Using a story that a family friend knew a corrupt passport official, the informant set up a meeting between Miller and the purportedly corrupt official, who was actually an undercover officer from the U.S. Department of State.
<!–adsensestart–>Miller agreed to pay $20,000 for the passport, with $5,000 paid up front and the balance of $15,000 upon delivery of the passport. Miller paid the undercover officer $5,000 in cash that had been stuffed in an envelope. He then filled out a passport application that used the identity of his deceased classmate, according to the complaint.
Worried about his ability to honor redemption requests in the Ponzi scheme, Miller told the informant that he had been “meditating” since 2007 over whether it was best to “hide out in the United States or abroad” and had contacted at least one other individual about obtaining a “fake identity,” according to the complaint.
By October 2008, according to the complaint, Miller needed between $4 million and $5 million to meet redemption requests and did not have the money. He was worried about “tense” people who could bring him unwanted attention “quick” and wondered how long it would take for the FBI and the SEC to respond to complaints about him if “someone pull[s] the trigger.”
Miller ultimately concluded it was best to flee the country. After using Ponzi proceeds to pay the undercover agent the $5,000 deposit required for the bogus passport in November 2008, Miller was told it would take seven to 10 days for the documents to be prepared. He provided two photographs of himself, and used the name, Social Security number and date of birth of his deceased Catholic school classmate in the application.
FBI agents who had been keeping Miller under surveillance arrested him while he was preparing to flee. He was charged with mail fraud (for bogus statements he sent to investors), bribery, passport fraud and identity fraud. He pleaded guilty last year.
Investors lost more than $15 million in the scheme, which also involved a Miller company known as Forte Financial Partners.
“Miller promised investors ‘guaranteed’ annual returns of between 10 percent and 18 percent per year, telling investors that their money would be invested in foreign currency trading, oil wells, real estate and other vehicles,” prosecutors said.
Some investors raided their IRAs to invest with Miller, who promised better returns, prosecutors said.
After Bernard Madoff’s Ponzi scheme was exposed in December 2008, Beverly Hills hedge-fund manager Bradley L. Ruderman wrote a letter to clients assuring them them their money was safe and deploring Madoff’s “chicanery,” federal prosecutors in the Central District of California said.
“[S]uch disgraceful practices will never happen under my watch,†Ruderman declared in the letter.
Less than five months later — on April 28, 2009 — the SEC charged Ruderman, 46, with defrauding investors and lying about his Ruderman Capital Partners and Ruderman Capital Partners “A” hedge funds.
Ruderman had falsely told investors that Lowell Milken, chairman of the Milken Family Foundation and Michael Milken’s younger brother, and Larry Ellison, chief executive officer of Oracle Corp., invested with him, the SEC said.
And “Ruderman falsely told investors that the hedge funds had earned positive returns from 15% to 60% per year and had over $800 million in assets,†the SEC said. “In reality, the hedge funds lost money and had less than $650,000 in assets.”
Criminal charges followed in May 2009. In August 2009, Ruderman pleaded guilty to two counts of wire fraud, two counts of investment adviser fraud and one count of not filing a tax return for 2007, a year in which he earned $2 million.
He was sentenced yesterday, and U.S. District Judge John F. Walter admonished Ruderman.
“He stole from individuals he knew for many years, who cared about him, had invited him into their homes and shared meals with him, who had known him since he was a child,” Walter said.
Ruderman family members and friends lost $25 million in the scheme, prosecutors said.
When Ruderman wrote the letter assuring investors he was no Madoff and that their accounts were safe, the judge said, “he was stealing their money.â€
After hearing a statement from a victim that Ruderman was no different than a convenience-store thief or bank robber except he had “committed his crimes with manicured nails, a great tan, wearing an Armani suit and the getaway car was a Porsche that his victims all paid for,†Walter sentenced Ruderman to 121 months in federal prison.
Given the recent “staggering increase†in investor-advisor frauds, Walter said, he wanted to “send a message that these crimes will result in significant prison sentences.â€
FBI agents who reverse-engineered the crime determined Ruderman had lost “$5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.”
Meanwhile, the investigation revealed that Ruderman, like Madoff, had sent investors bogus account statements. At the same time, it revealed he had spent had spent at least “$8.7 million of investor money on personal expenses, including $200,000 each summer for a rented beach house in Malibu, two Porsches, $53,930 on sporting events, $896,000 in credit card charges and $327,000 in cash expenditures.”
Walter ordered Ruderman to pay nearly $26 million in restitution to victims. The FBI and IRS conducted the criminal probe.
Four California residents have been indicted on charges they targeted the Filipino Community of Greater San Diego in a foreclosure-rescue investment scam prosecutors have dubbed the “Apocalypse Trust†and “Amerisian Trust†scheme.
Edmundo Rubi, one of the defendants, was on federal probation for the infamous “Knights Express†Ponzi scheme that fleeced Filipino investors out of $24 million when he started the new scheme, said San Diego County District Attorney Bonnie M. Dumanis.
“Rubi brazenly ignored the conditions of his parole and went right back to committing the same types of crimes,†said Dumanis.
Planning for the new scheme reportedly got under way while Rubi was serving a 70-month-sentence in federal prison for the “Knights Express†Ponzi, which affected at least 425 investors.
Rubi, 52, was on supervised release when arrested in the new scheme.
Also indicted were Joseph Encarnacion, 59, Benjamin Hebron, 51, and Gloria Hebron, 53. The defendants were charged with 54 felony counts, including Conspiracy to Commit Securities Fraud, Securities Fraud, Sale of Unqualified Securities, Grand Theft, Perjury, Foreclosure Consultant Fraud and Rent Skimming.
“Mr. Rubi’s recidivism into this type of crime demonstrates his disregard for engaging in legitimate business practices,” said Keith Slotter, FBI Special Agent-in-Charge.
Investigators said 22 “Apocalypse Trust†and “Amerisian Trust†participants quit-claimed 34 properties into various fraudulent trusts, owned by Rubi and administered by Ben and Gloria Hebron.
Instead of assisting homeowners in foreclosure, the defendants stole their money or did not apply money as advertised, according to the indictment. Rubi lied about his criminal history.
“Rubi and Encarnacion recruited former victims of the ‘Knight Expresss’ Ponzi scheme” into the quit-claim scheme, prosecutors said. The terms of his probation prohibited him from “from having any contact with investors or financial accounts.”
In the Knights Express scheme, investors were told they were investing in a “secret international trading program” in which Federal Reserve notes were purchased and sold at discounted rates, prosecutors said in 2003.
In the “Apocalypse Trust†and “Amerisian Trust†scheme, investors were coerced into signing a “Non-Disclosure & Confidentiality Agreement,” according to the indictment.
A New Jersey woman who told members of the Unification Church that they could turn $3,000 into $6,000 in a year by investing in her real-estate business has been sentenced to 70 months in federal prison.
Marcia Sladich, 51, of Clifton, pleaded guilty to mail fraud in July, admitting to U.S. District Judge Katharine S. Hayden that “she did not make real estate investments, but used new investor money to make principal and interest payments to existing investors and to purchase real estate in Florida and Brazil in her name and in the names of her relatives,” prosecutors said.
Some of Sladich’s victims, however, were disinclined to believe that Sladich had ill intent and advanced an explanation that she had been duped. (See link to “Record” near bottom of story.)
Investigators said Sladich operated a Ponzi scheme between 2004 and 2007, collecting $15 million from investors and paying commissions to people who helped recruit others into the scheme.
Although Sladich did buy real estate with some of the funds, she titled it in her name and the names of family members in the United States and Brazil. She also used investors’ money to pay her mortgage and credit-card bills.
In a separate civil prosecution by the SEC, the agency outlined a series of possible tip-offs in Sladich’s offering materials that perhaps signaled investors that they were not doing business with a professional investment company.
These awkward lines all appeared in the offering materials, according to the SEC:
Sladich allegedly sent $400,000 to Brazil. “[A]ll of the property purchased was titled in the name of Sladich’s relatives, including her mother,” the SEC said.
The scheme began to collapse in early 2007, and Sladich fended off investors by instructing an employee to lie and by encouraging clients to “re-invest” their monthly payouts instead of cashing them out. By July 2007, she changed the rules to forestall disaster, the SEC said.
Sladich’s company — Kay Services LLC — upped the minimum investment in June 2007 from $3,000 to $12,000, and slashed the yearly payout from 100 percent to 50 percent, the SEC said. Recruiting commissions were eliminated.
Even though Sladich knew the scheme was collapsing, she continued to accept money, including $100,000 from one investor and $50,000 from another in September 2007, according to the SEC.
The scheme “finally collapsed” a month later. Investors then received a letter from an attorney that there would be no more payouts beyond principal “[a]s a result of unforeseen financial developments, including but not limited to volatility in real estate and other investment markets,” the SEC said.
Sladich, though, knew she was operating a Ponzi scheme and that the purported real-estate business generated no revenue, the SEC said.
“The October 2007 letter asked investors to execute an agreement, releasing the Defendants from liability in exchange for the return of their principal,” the SEC said. “Some of the investors executed the release but did not get a payment from the Defendants.”
Criminal charges and a guilty plea followed, and Sladich’s sentencing this week set up an interesting dynamic in the court room, according to the Record newspaper.
Now known as the Family Federation for World Peace and Unification, the Unification Church follows the teachings of the Rev. Sun Myung Moon.
UPDATED 8:31 P.M. ET (U.S.A.) Federal prosecutors today asked the Clerk of U.S. District Court for the District of Columbia to enter a default notice for assets seized in the December 2008 forfeiture complaint against AdSurfDaily.
The clerk entered the notice, and the forfeiture of the property is pending. It will be finalized when U.S. District Judge Rosemary Collyer enters a forfeiture order. Collyer issued an order last week for the forfeiture of ASD assets seized in the August 2008 case.
Seized in the December 2008 complaint were the Tallahassee home of George and Judy Harris; a 2008 Honda car registered to the Harrises; a 2009 Lincoln luxury sedan registered to Bowdon/Harris Enterprises; a 2009 Acura registered to Hays Amos, an $800,000 building in Quincy, Fla. paid for in cash; jet skis; a Cabana boat; marine equipment; computers; and $634,266.13 surrendered by Golden Panda Ad Builder.
No claimant ever came forward in the December 2008 case, prosecutors said.
With Collyer’s forfeiture order in the August case, prosecutors now have title to about 99.2 percent of the liquid assets in the overall forfeiture case (August 2008 and December combined). A forfeiture order in the December case, which included only a fraction of the liquid assets, would give them title to 100 percent.
The real-estate, automobiles, computers, boat, jet skis and marine equipment are illiquid assets that must be sold before they can become part of a compensation pool for ASD victims.
Prosecutors alleged that ASD was operating a Ponzi scheme, while selling unregistered securities under the guise of being an “advertising” service and engaging in wire fraud and money-laundering.
UPDATED 5:12 P.M. ET (U.S.A. JAN. 12) So, you want to mislead your clients about your role in your business, rely on the assertions of your business colleague and not perform thorough due diligence and double-check his claims that your investors are making enormous profits? Want to say later — after a Ponzi scheme collapses — that you didn’t know it was a Ponzi scheme?
Those dogs won’t hunt, the SEC said today. A year after the alleged $350 million-plus Arthur Nadel Ponzi scheme collapsed, the agency has charged a father-and-son investment team — Neil and Christopher Moody of Sarasota, Fla. — with civil securities fraud for claiming they were managing hedge funds when the funds actually were being managed by Nadel, an attorney who was disbarred in the 1980s for using client funds to pay off loan sharks.
“The Moodys led investors to believe that they were faithfully managing funds invested with them,” said Glenn S. Gordon, associate director of the SEC’s Miami Regional Office. “Instead, they abdicated their responsibilities to investors and ignored warning signs that should have alerted them to the fraud that was occurring all around them.”
Neil Moody is 71; Christopher Moody is 35. They operated three hedge funds — Valhalla Investment Partners LP, Viking IRA Fund LLC and Viking Fund LLC. — all of which collapsed with the collapse of Nadel’s operation. The SEC said today that it is seeking the return of $42 million in ill-gotten gains from the Moodys.
The Moodys distributed offering materials, account statements and newsletters to investors that misrepresented the hedge funds’ historical investment returns and overstated their asset values by as much as $160 million, the SEC charged.
“[They] based their materials on grossly overstated performance numbers that Nadel created and provided to them, the SEC said. “The Moodys failed to independently verify the accuracy of the figures despite multiple red flags, and relied exclusively on Nadel’s inaccurate information when communicating with investors.”
Christopher Moody’s attorney said his client is working to help recover assets.
“The SEC’s complaint does not allege that Chris Moody knowingly intended to harm investors,” said Jeffrey L. Cox. “The complaint alleges recklessness which Mr. Moody neither admits nor denies. Mr. Moody has cooperated from the outset with the receiver in the recovery of assets and will continue to do so.â€
The SEC alleged that the Moodys lied about their roles in managing the assets of the three hedge funds by claiming that they controlled all of the investment and trading decisions.
“In truth,” the SEC said, “under an arrangement that the Moodys had with Nadel, [Nadel] controlled nearly all of the funds’ investment and trading activities with no meaningful supervision or oversight by the Moodys.”
NOTE: The next several paragraphs are taken verbatim from the SEC’s complaint against the Moodys. We added the italics.
“During the relevant time period, the Moodys also recklessly relied on false information Nadel gave them to misrepresent the value of the Moody Funds’ assets in account statements provided to investors and in verbal communications with investors.
“For example, one investor from Virginia who invested in Valhalla Investment Partners received a statement for October 2008 indicating his investment was valued at $1,170,363.92, and a November 2008 statement indicating his investment was valued at $1,176,848.66. These statements were false because the total value of the entire Valhalla Investment Partners’ holdings was only $9,425.66 at the end of both months.
“Another investor who invested in the Viking IRA Fund received a statement for
November 2008 indicating his investment was valued at $1,327,660.50. This statement was false because the total value of the entire Viking IRA Fund’s holdings was $629,728.01 at the end of November 2008.
“Finally, another investor who invested in the Viking Fund received a statement for November 2008 indicating her investment was valued at $651,327.18. This statement was false because the total value of the entire Viking Fund’s holdings was only $30,929.70 at the end of November 2008.
“At the time the Court appointed the Receiver in mid-January 2009, the account values for the Moody Funds were as follows: (a) Viking IRA Fund – securities worth $2,923.58 and cash of $77,025.20; (b) Viking Fund – securities worth $917.70 and cash of $65,708.33; and (c) Valhalla Investment Partners – securities worth $4,413.66 and cash of $16,158.05.
Investigators said the Moodys did virtually no checking to protect investors from getting fleeced out of millions of dollars
“The offering materials represented that the funds generated investment returns ranging from 10% to 46% between 2002 and 2008, the SEC said in the complaint against the Moodys. “These claimed returns were utterly bogus because the Moody Funds actually lost significant sums of money during those years.
“The Defendants relied exclusively upon Nadel’s fictitious performance information when they represented to prospective investors the yearly historical returns of the Moody Funds,” the SEC said. “However, they failed to verify the accuracy of the information although they had ready access to documents and information that would have revealed that Nadel’s information was false.”
NOTE: The next several paragraphs are taken from the SEC’s complaint against the Moodys. We have added the italics.
“While claiming to actively manage and oversee the assets of the Moody Funds, the Moodys, in fact, relied exclusively on Nadel’s fictitious information when they provided the bogus account statements and baseless offering materials to investors. They failed to take any adequate measures to ensure the account statements and offering materials were accurate, and ignored several red flags that should have alerted them that Nadel was engaged in a massive fraud.
“For example, the Moodys never reviewed the Moody Funds’ securities account statements to verify the accuracy of the information Nadel was providing.
“In addition, they allowed Nadel to provide investment advice to the Moody Funds even though he repeatedly threatened to stop providing investment advice if the Moodys insisted on auditing the funds.
“The Moodys furthermore allowed Nadel to exercise sole control over the Moody Funds’ securities accounts and account statements even after he refused to provide the statements to the Moodys accountant.
“Despite knowledge of these facts, the Moodys never audited or examined the Moody Funds’ securities accounts. Nor did they review the monthly securities account statements, or implement any policies or procedures to monitor Nadel’s control of the Moody Funds’ assets. To the contrary, they allowed Nadel to exercise complete control of the Moody Funds’ assets and trading activities without any meaningful oversight or supervision.”
The SEC’s actions against the Moodys occurred just three days after U.S. Attorney General Eric Holder gave a major speech in Florida on the Obama administration’s Interagency Financial Fraud Enforcement Task Force. The Justice Department and the SEC are among the agencies assigned to the Task Force, which is designed to coordinate the government’s response to fraud schemes that are plaguing the United States.
Florida — perhaps more than any other state — has been plagued by financial fraud. In Sarasota alone, three major Ponzi scheme investigations are under way.
Nadel, who was arrested last year after fleeing Sarasota, is jailed in New York. His trial is scheduled for April. Investigators say he employed an unlicensed accountant and simply made up numbers out of then air to keep the Ponzi scheme afloat.
When investors requested redemptions late last year, Nadel fled.
While Nadel was operating the fraud, “the Moody’s received management and performance fees from the Moody Funds totaling approximately $42 million,” the SEC said.
In addition to the SEC’s actions, the Moodys have been sued by investors.
The Moodys have not been charged criminally. Without admitting or denying the allegations in the SEC civil complaint today, they consented to permanent injunctions against future securities fraud violations and agreed to an order that will bar them for five years from associating with any investment adviser.
UPDATED 7:03 P.M. ET (U.S.A. JAN. 12) A Beverly Hills radio host pitched his fraud scheme in Persian and targeted Iranian-Americans in Greater Los Angeles, the SEC said today.
Client funds were used to build a mansion for John Farahi, 52, and and his wife, Gissou Rastegar Farahi, 50, the agency said. Client funds also were transferred to the Farahi Family Trust. John Farahi hosts the daily radio program.
Named defendants in the case were the Farahis, Beverly Hills-based NewPoint Financial Services Inc. and Elaheh Amouei, 54. The SEC identified Amouei as NewPoint’s controller and the “personal bookkeeper” of the Farahis.
A company named Triple “J” Plus LLC operated by John Farahi was named a relief defendant. John and Gissou Farahi have control over the Triple “J” bank accounts, the SEC said.
“They lured victims with false promises of investment safety while secretly enriching themselves and diverting investor funds for their personal use,†said Rosalind R. Tyson, director of the SEC’s Los Angeles Regional Office.
All of the defendants’ assets have been frozen in the case, which includes allegations that clients 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).
TARP is the $700-billion program operated by the Treasury Department to shore up banks.
“The vast majority of the money raised was transferred to accounts held by Defendants John and Gissou Farahi,” the SEC said in its complaint. “John and Gissou Farahi, in tum, used the investor funds to, among other things, construct a multi-million dollar personal residence in Beverly Hills, California and to engage in risky options futures trading in the stock market in which . . . John and Gissou Farahi lost more than $18 million in 2008 and the beginning of 2009.”
Investors were asked to invest in the debentures by the Farahis and/or Elaheh Amouei, NewPoint’s controller, after making an appointment to discuss investment opportunities offered by NewPoint, the SEC said.
Since at least 2003, NewPoint has sold more than $20 million worth of debentures to more than 100 investors. Clients were told their investments were low-risk, the SEC said.
At some point, NewPoint prepared Private Placement Memoranda (PPM) literature describing the opportunity as high risk, but most investors said they never received the material, the SEC said. Investors also did not know that they were making loans to John Farahi.
“[N]ot only did Defendants John and Gissou Farahi and/or Defendant Amouei fail to provide the PPMs to most investors, it appears that they only added the disclosure regarding loans to Defendant John Farahi in 2009, after the offering ceased, the SEC said.
“[T]he vast majority of the money raised was actually transferred to accounts controlled by the Farahis, including an account at relief defendant Triple ‘J,’” the SEC said.
Beginning roughly in June 2009, the SEC said, John Farahi and Amouei “made further misrepresentations to investors in an effort to lull them into keeping their money with NewPoint.
“Investors have allegedly been told that their money is safe and that they are guaranteed to get the entirety of their investment back — despite the fact that NewPoint lacks sufficient funds to make all investors whole,” the SEC said. “John Farahi has also paid back some investors on a selective basis while failing to return money to other investors who have asked for a return of their investment.”
Amouei, accordring to the SEC, “falsely told some of the investors who have not received a return of their investment that NewPoint was unable to return their money because the Commission has frozen NewPoint’s financial accounts.”
The NewPoint case in California became the second fraud case since November in which a radio show allegedly was used to pitch a fraudulent investment program.
Christian radio host Pat Kiley of Minnesota was accused by the SEC and the CFTC in November of promoting a $190 million Ponzi scheme with Trevor Cook, who reportedly used some of the proceeds to buy a submarine to access a private island he bought in Canada.
A court-appointed receiver has described the accounting records of Affiliate Strategies Inc. (ASI) as a mess, saying “an opinion on the accuracy of these records is not possible without an extensive audit that would require significant additional costs.”
ASI is the parent company of the Noobing autosurf, which targeted deaf people in sales promotions. ASI and its president, Brett Blackman, were sued by the Federal Trade Commission last year for their alleged roles in a scheme that promised guaranteed government grants of $25,000 from economic-stimulus funds.
Several other companies and individuals were named in the FTC complaint. Although Noobing was not named in the FTC complaint, receiver Larry Cook examined Noobing’s records last year and made a preliminary determination that it was insolvent. The Noobing website has been offline for months.
Attorneys general from Kansas, North Carolina, Minnesota and Illinois joined the FTC in the action.
In October, U.S. District Judge Julie A. Robinson authorized Cook to sell ASI’s assets, including office equipment, a vehicle and a jet ski.
In a report to Robinson filed last week, Cook said the office equipment fetched $12,500 at auction. Meanwhile, the vehicle — a 2003 Saturn L200 — fetched $2,500. The jet ski — a 2005 Yamaha — brought in $1,800.
In August 2009, Cook said in a preliminary report to the court that “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.” One of the companies was Noobing, which listed registrations in both the United States and Nevis.
Kris Rogers, who was the comptroller for ASI and president of an affiliate company known as Custom Accounting Services LLC, told Cook that “the expenses of [the] combined companies have exceeded the revenues since October or November 2008,” according to court filings.
If Rogers’ assertions are true, it means that both Noobing and ASI — its parent company — were insolvent when the Noobing autosurf was collecting money with the suggestion that participants could earn a return of up to 3 percent a day. Noobing slashed daily payouts in early 2009, an act that caused an uproar on the Ponzi boards.
Noobing blamed the slashed payout on what it described as an unclear ruling in the AdSurfDaily case. The company did not say why it chose to collect money using a business model that U.S. government has challenged in repeated court cases. After Noobing members complained, the company explained that payouts never were guaranteed.
Noobing became popular after the August 2008 seizure of tens of millions of dollars from Florida-based ASD amid Ponzi scheme allegations. After the FTC and the attorneys general took the action against ASI and other defendants in the alleged grants scheme, Cook made a preliminary determination that Noobing was nearly $550,000 in the hole.
When the financial records of the ASI-affiliated records were examined as a whole in Cook’s preliminary analysis last year, he found that “over twenty-five thousand accounting
transactions, including several thousand intercompany transfers” had oocuured.
“The transfers between the various LLCs make it difficult to sort out the net result and profits or losses sustained by each LLC,” Cook said.
“The Receiver’s work over the past three weeks,” Cook said in August 2009, “suggests the Defendants’ operations were insolvent on the date [July 24] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds.â€
EDITOR’S NOTE: This story is about the “Most Interesting ASD Figure” poll conducted by the PP Blog. It also includes data from court files that suggest federal prosecutors have won court battles that have secured control over more than 99 percent (99.2 percent) of the liquid assets available in the ASD/Golden Panda civil-forfeiture cases — with less than 1 percent (0.8 percent) of the remaining liquid assets still tied up in litigation.
Here, now, the story . . .
UPDATED 7:40 A.M. ET (U.S.A.) It is said — perhaps apocryphally — that Groucho Marx once entered a Groucho Marx look-alike contest and finished third.
A similar fate almost befell AdSurfDaily President Andy Bowdoin, one of seven choices in our poll that asked readers to select the “Most Interesting Figure In The Alleged AdSurfDaily Ponzi Scheme Story.”
But in the final days of the poll, Bowdoin, who had trailed early and was in second place at various times, eked out a win over eventual second-pace finisher Bob Guenther and the five other poll subjects.
Voting was light with only 53 votes cast, and the sample was not scientifically meaningful. The results, however, at least suggest that readers interested in ASD consider Bowdoin the star of his own story — a story that began in August 2008, when the U.S. Secret Service seized tens of millions of dollars from 10 Bowdoin bank accounts.
ASD was a Florida-based Ponzi scheme that had engaged in wire fraud, money-laundering and the sale of unregistered securities, federal prosecutors said. Just last week prosecutors scored a big win, when a federal judge issued a final order of forfeiture in the August 2008 civil forfeiture case, granting the government title to more than $65.8 million seized from Bowdoin accounts.
In July, the judge issued an order granting the government title to more than $14 million seized from the bank accounts of Golden Panda Ad Builder, whose assets were seized as part of the ASD civil-forfeiture case. A second civil-forfeiture case — filed in December 2008 against ASD/Golden Panda-connected assets — appears to be nearly resolved. The December case involves only a fraction of the money seized in the overall case.
To date, prosecutors have scored wins that secured more than $79.88 million — more than 99 percent of the available cash pool (liquid assets) in both cases, with less than 1 percent of the pool still in litigation. The total pool of liquid assets in both cases amounts to about $80.52 million, according to court records. A prosecution win of the fraction of 1 percent remaining to be secured is a virtual certainty. Neither the ASD side nor the Golden Panda side has secured any financial wins. Golden Panda quit trying shortly after the August 2008 case was brought.
Here is a way to look at the pool from both cases as a fraction. Of the $80.52 million available, prosecutors have control over $79.88 million: 79.88/80.52 — or 99.2 percent. If the prosecutors gain control over more than $600,000 remaining in litigation, they will have gained control over 100 percent of the available pool.
The current cash pool does not count illiquid assets such as real estate, a Cabana boat, automobiles, jet skis and marine equipment that must be sold before it can be converted to cash and added to the pool.
A big wild card is whether Bowdoin, who initially submitted to the forfeiture in January 2009 under advice from paid counsel but attempted to reassert his claims in February 2009 as a pro se litigant, will appeal. U.S. District Judge Rosemary Collyer ruled in November 2009 that Bowdoin no longer has standing in the August 2008 case. Bowdoin never established standing in the December 2008 case.
Bowdoin, 75, captured 36 percent of the vote in the “Most Interesting” poll; Guenther, 62, a government critic who led the poll at times, finished second, capturing 32 percent of the vote.
Guenther is the de facto head of the ASD Members Business Association (ASDMBA). He emerged as a harsh critic of the manner in which prosecutors have handled the case, claiming he planned to rely on “political connections” to embarrass the Justice Department.
“Soon, very soon, I am going to call on some political connections, and I am going to share everything I knew then, know now and everything I tried to provide you with,†Guenther said in an email last year to one of the prosecutors.
Among Guenther’s assertions were that the government ignored leads he provided and that a prosecutor did not return more than 50 emails he had sent. Guenther pleaded guilty to a count of bank fraud in the 1990s in a case in which 10 other counts were withdrawn in a plea deal. Some ASDMBA members said they would not have contributed to the organization, which gathered money with the aim of protecting members’ interests in the ASD case, had they known Guenther had a felony record.
Some ASDMBA members have complained that Guenther did not provide transparent accounting of how the organization spent its money. Guenther said ASDMBA’s accounting was transparent, describing his critics as uninformed whiners and liberals.
Finishing third in the poll were the “Surf’s Up Mods.” Surf’s Up was a Pro-ASD forum that suddenly went missing nine days ago, about two weeks after Bowdoin reportedly made an appeal through a third party for members to search for videos of ASD “rallies.”
“Andy [Bowdoin] wants to know if any of you took Videos and/or Audios of ‘him’ speaking at any of the ASD Rallies,†according to a Dec. 21 post on Surf’s Up. The post cited a third-party email.
“The government is stating that Andy said certain things during the rallies and Andy is confident that he did not, but he does not have the proof without being able to provide the video/audio footage.
“Please share this message with your entire organization so that we can get it out to the masses yet today hopefully to see if someone has the supporting evidence for Andy,†the post urged. “If any of you DO have the video footage (or audio recording) then transfer it to DVD and and contact Catherine Parker at [email address deleted].â€
The post did not specify precisely what video evidence Bowdoin hoped to obtain from members. In the August 2008 forfeiture complaint, prosecutors entered an exhibit that included a members’ transcription of remarks Bowdoin allegedly had made at a July 2008 rally in Miami.
In the exhibit, Bowdoin identified George and Judy Harris as ASD employees, without telling members Harris was his stepson and that Judy Harris — the wife of George — also was a member of the Bowdoin family. Bowdoin described George Harris as head of ASD’s real-estate division, and Judy Harris as a clerical employee.
Prosecutors later said that George Harris and his mother — Edna Faye Bowdoin, Andy Bowdoin’s wife — used more than $177,000 in illegal proceeds from two ASD accounts at Bank of America and opened an account at a third bank. The account was opened on June 10, 2008, less than two weeks after an ASD “rally” had concluded in Las Vegas.
Before June had come to an end, prosecutors said, George Harris used more than $157,000 of the opening deposit to pay off the mortgage on the Tallahassee home he shared with his wife. The transaction was completed via wire transfer, with George Harris making the request over the telephone, prosecutors said.
George and Judy Harris and Edna Faye Bowdoin were identified in the December 2008 forfeiture complaint as beneficiaries of ASD’s illegal conduct. The AdViewGlobal (AVG) autosurf, which launched after the seizure of ASD’s assets, later identified George and Judy Harris as AVG’s owners. Prosecutors seized the Harris home in the December 2008 forfeiture complaint, and neither George nor Judy Harris filed a claim to the home.
Some ASD members said Bowdoin was the silent head of AVG. Surf’s Up received ASD’s official endorsement on Nov. 27, 2008, eight days after a key court ruling went against ASD. AVG emerged in the days ahead as an autosurf purportedly headquartered in Uruguay, and some of the Surf’s Up Mods peeled off and started a forum to promote AVG.
Surf’s Up, whose members reportedly sent brownies and delicious baked goods to Bowdoin after he was implicated in the alleged Ponzi scheme and declared he was “too honest” to testify after Bowdoin had taken the 5th Amendment in the forfeiture case, received 17 percent of the vote in the “Most Interesting Figure” poll.
Finishing in fourth place, with 8 percent of the vote, were the “Conspiracy Theorists” — those ASD members who speculated that President Kennedy was assassinated because he planned to expose a banking conspiracy and that President George W. Bush planned the 9/11 terrorist attacks. Some of the “Conspiracy Theorists” also claimed that the United States passed secret legislation in the 1990s in anticipation of a visit by reptilian aliens.
Curtis Richmond, described by Surf’s Up as a “hero,” finished with “Professor” Patrick Moriarty in a tie for fifth in the poll. Each gleaned 4 percent of the vote. Richmond is associated with the so-called “Arby’s Indians,” a tribe ruled a “complete sham” by a federal judge in a case in Utah.
The “tribe” got its derisive name because it held a meeting in an Arby’s restaurant in 2003. Members also established a sham “Supreme Court” at the address of a doughnut shop in Vernal, Utah, and also established a sham “arbitration” service that it used to pester public officials with spectacular claims that they had defaulted on contracts.
At least two people who used the services of the tribe’s bogus “arbitration” panel were sentenced for federal prison for tax crimes.
One of them was Bruce Robert Travis. Among other things, Travis is the self-published author of “My Past Life As Jesus†and “The Messiah For Hire.â€
Travis, associated with tax denier Royal Lamarr Hardy, now reportedly is working on a book in which he’ll describe what it’s like to be Jesus behind bars.
“Tribe” members, including Richmond, were ordered in 2008 to pay more than $108,000 in damages in a racketeering lawsuit brought by the public officials. Richmond later emerged as a pro-se litigant in the ASD case, cheered on by Surf’s Up. Richmond attempted to have U.S. District Judge Rosemary Collyer disqualified from the ASD case — something Bowdoin himself later tried to do.
Moriarty, who was indicted in March 2009 for filing false tax returns, now has entered a guilty plea in the tax case. He was a co-founder of — along with members of Surf’s Up — of ASD Members International (ASDMI).
ASDMI promised to litigate against the government for its actions in the ASD case, even if the government was behaving legally. Moriarty, cheered on by Surf’s Up, was part of a letter-writing campaign to Sen. Patrick Leahy, chairman of the Senate Judiciary Committee. The campaign was aimed at getting the Senate to investigate the ASD prosecutors.
Finishing last in the poll was “joe,” who received no votes. “joe” purported to be a Vietnam POW and a staunch advocate for autosurf Ponzi schemes.