A man has been jailed for ignoring a court order in a civil case and continuing to operate an envelope-stuffing scheme from the area of Rio Grande, Puerto Rico, the Federal Trade Commission announced Dec. 23.
Zoilo Cruz, also known as Zoilo Cruz Carrion, conducts business as International Marketing and Universal Wealth. The case was brought in San Juan by the FTC in U.S. District Court for the District of Puerto Rico in August 2008.
Because the scheme involved both the Spanish and English languages, a professional translation firm assisted in the probe. The U.S. Postal Inspection Service also assisted because the scheme involved mail.
Among the allegations were that Cruz told prospects that they could make substantial sums of money by stuffing envelopes at home and that his company would provide stamped, addressed envelopes for them to stuff.
Cruz charged a fee of $37 for customers to enter the program, according to court filings.
Customers were deceived into paying the $37 by ads that suggested they could make between $690 and $2,760 a week, according to court filings.
After customers paid the fee, International Marketing sent them a sales pamphlet, titled ‘Incredible Home Mailing Program (IHMP),’” the FTC said. The program was advertised in Spanish, but the pamphlet received by customers was in English-only.
But language was not the only barrier customers encountered, the FTC said.
Only after receiving the pamphlet were customers told that, “instead of receiving
envelopes and payment from International Marketing for stuffing envelopes, consumers must engage in one of two marketing schemes, both of which involve publishing advertisements to sell the IHMP itself,” the FTC said. “In other words, each scheme aims to have consumers publish advertisements to sell the same pamphlet [Cruz] sent them (i.e., the IHMP) to other consumers.”
Investigators said Cruz “kept up the scam despite a December 2008 court order that barred him from deceiving consumers and required him to close the post office boxes he used for taking orders.”
In December 2008, U.S. Senior District Judge Jaime Pieras Jr. enjoined Cruz from breaking the law, finding that he had engaged in false and misleading business practices.
“The pamphlet instructs consumers to advertise a work-at-home opportunity and provides consumers with sample advertisements that contain false and misleading earnings claims,” Pieras ruled.
“[It] also instructs consumers to place a toll-free telephone number in the advertisement to receive inquiries,” Pieras continued. “The pamphlet provides consumers a script to use in recording a voicemail message. The script falsely states that one can earn money for stuffing envelopes and that the consumer leaving the message has been successful in earning money before he or she has earned any money at all.”
As the investigation proceeded, the FTC determined that Cruz had made at least $64,496.51 from the scheme and used an account at Eurobank to deposit the proceeds.
In June 2009, Pieras issued a judgment in the FTC’s favor for that amount, further ordering the restitution “immediately due and payable” from Cruz.
“A federal court has jailed [Cruz],” the FTC said Wednesday.
Here is an ad for the scheme that appeared in a Spanish-language newspaper:
TRABAJE EN CASA – Le dedico mas
tiempo a mis hijos todo los dias!
Gane Dinero extra $500-$1,500.
PO Box 43001 Dept. 486 Rio
Grande PR 00745-6600 o a
internationalmarketing123.com
And here is the English-language translation:
WORK AT HOME – I devote more
time to my children every day!
Earn Extra Money. $500 – $1,500.
PO Box 43001 Dept. 486 Rio
Grande PR 00745-6600 or at
internationalmarketing123.com
The translation service also translated the Spanish-language website to English, according to court filings.
UPDATED 1:25 P.M. ET (U.S.A.) AdViewGlobal-related stories comprised eight of the 10 “Most Popular” posts on the PatrickPretty.com Blog in 2009, as determined by a software scoring system that measures a range of data. The result suggests that readers were intensely interested in coverage of the controversial autosurf.
The finding also suggests that AVG members were worried about the future of AVG and their participation in it. At the same time, the data suggest that AVG members were turning to the PP Blog to monitor AVG developments because they were not satisfied with the information provided by AVG and sought a “Big Picture” analysis, as opposed to relying exclusively on AVG to form their opinions.
AVG-related stories and conversations dominated reader interest, largely beginning in the second quarter of the year. The most popular PP story of 2009 — weighing a range of factors beyond the single metric of post views — was an AVG story published June 3, under the headline, “AdViewGlobal Promoter Says Prospects Can Bypass Company And Purchase Ad-Packs Directly From Sponsors To Ensure They Get Credited With 200 Percent Match Before Deadline.”
The June 3 story, however, was not the PP story that attracted the most readers, using “Single Post Views” as the only factor weighed by the software. That honor, if it can be called that, belonged to a March 24 post titled, “BREAKING NEWS: AVG Loses Banking Privileges.”
The only two posts in the “overall” Top 10 — as weighed by several factors — that were not largely or exclusively about AVG were an April 18 column by guest writer Roxy Lewis and an Aug. 28 article about a claim by the AdVentures4U (ADV4U) autosurf that it was suspending cashouts amid reports that its purported owner, Steve Smith, had been threatened.
Lewis’ column, titled “GUEST COLUMNIST: ‘Shocked’ And ‘Scared’ To See Her Name In Friedman Lawsuit Paperwork; Says She Was Told To ‘Examine Your Finances’; Sees Move By Dallas Lawyer As ‘Intimidation Tactic’ And Says She Won’t ‘Roll Over’ — was the 9th Most Popular post overall, as weighed by several factors.
PatrickPretty.com has published 521 posts in the past year.
In the Lewis guest column, the self-described member of the AARP generation told her story about various email interactions concerning her attempt to get a refund for her contribution to ASDMBA, an organization whose de facto head is ASD story mainstay Bob Guenther. Some ASDMBA members complained about obnoxious behavior by Guenther in their interactions with him, saying ASDMBA provided accounting that was less than transparent and bullied members who questioned its operation.
ADV4U’s announcement, meanwhile, put the Ponzi forums in an uproar — and provided yet another compelling example of the “wink-nod” nature of autosurfs. On one hand, people throw money at the surfs to collect surfing “earnings” and sales commissions, and deny they are illegal. On the other hand, they become paranoid when a surf begins to show signs of trouble and then demand refunds or flock to Ponzi forums to complain, even though no autosurf has ever passed the test of time and demonstrated legality and mathematical sustainability.
The story about the ADV4U announcement was the 2nd Most Popular Post, as weighed by several factors. Because ADV4U was known to be popular among members of AVG and AdSurfDaily — and because autosurfs in general are known to have common promoters — the data suggest that many people raced from one autosurf disaster to another in 2009.
In the bizarre world of the autosurf, the people who entice others into joining one disaster after another — and pocket commissions for doing so — are known as the “leaders.”
The Top 10 ‘Overall’ Posts As Measured By A Range Of Factors
Here, in reverse order of popularity, is a list of the Top 10 Overall Posts on the PP Blog since December 2008, as measured by a range of factors, as opposed to the lone one of “Single Post Views.” To give you an idea of how the software works, consider that Tiger Woods may not lead the PGA Tour in all statistical categories, but may be the “overall” statistical leader when a range of variables are considered and averaged. Readers should view these results as a somewhat reliable estimate, as opposed to a scientifically pure one.
**** It is possible that the Bowdoin story now in 11th Place could eke its way into the Top 10 by the end of the year, as it currently is in a virtual tie for the No. 10 spot. Adjustments involving other stories also could occur.
Sampling Of Top 10 Stories Scored By ‘Single Post Views’ Since December 2008
** Four of the other Top 10 stories measured by Post Views since December 2008 were updates instructing readers about our progress in switching to the WordPress publishing platform. It seems readers missed us when we were offline or down for maintenance. :-)
Two Michigan brothers who urged investors in their oil-and-gas Ponzi scheme not to cooperate with the FBI have been sentenced to prison.
Eric Riley Merkle, 55, and Jay Vernon Merkle, 53, both of Williamston, Mich., were sentenced to 10 years in federal prison for conspiracy, securities fraud, mail fraud and wire fraud. They also were ordered to pay their victims nearly $21.6 million in restitution.
U.S. District Judge Robert Holmes Bell said the crime was deplorable because the Merkles traded on faith to recruit church members into their scheme.
Prosecutors said they created a firm known as Platinum Business Industries (PBI), telling investors PBI would use their money to fund oil and gas exploration in Oklahoma. The company advertised returns of 6 percent a month or 300 percent over three to five years.
Despite their claims that the money would be invested in oil and gas exploration, the Merkles instead “put the investors’ money in high-risk schemes unrelated to oil and gas in the United States and overseas, and lost it,” prosecutors said.
A substantial amount of the funds was used “to pay off their previous investors in another oil-and-gas Ponzi scheme involving more than a dozen fraudulent shell corporations,” prosecutors said. “The Merkles perpetuated the illusion that their sham corporations were profitable by using new investors’ funds to pay ‘earnings’ to earlier investors.”
The scheme ensnared more than 600 victims, many of whom lost their life savings, prosecutors said.
Even after state and federal investigators opened a probe into the business affairs of the brothers, the Merkles “continued to raise money under false pretenses,” prosecutors said.
The brothers then blamed the government for their predicament, lying to investors by telling them their money “was being ‘held up’ by U.S. and foreign government agencies,” prosecutors said.
That’s when an already-underhanded scheme turned took a turn for the worse, with the Merkles instructing investors to “wire a total of over $1 million to Nigeria, Ghana, and other countries for ‘fees’ associated with releasing their money,” prosecutors said.
Investors then were urged not to cooperate with the FBI, with the Merkles “suggesting that such cooperation would jeopardize their repayment,” prosecutors said.
“Judge Bell noted that the crime was especially serious in that the Merkle brothers abused their affinity with church members and extended family to gain their confidence,” prosecutors said.
U.S. Attorney Donald A. Davis said the FBI and the U.S. Postal Inspection Service played important roles in the case.
EDITOR’S NOTE: Members of Florida-based AdSurfDaily and a closely connected autosurf firm, AdViewGlobal, purportedly based in Uruguay, may find this story particularly eye-opening.
Play the autosurf or “offshore” HYIP investment games? Buy into the hype that overseas “registration” provides “shelter?” Pose as an “expert” on the Ponzi and HYIP boards and tell your downline members or recruits that new entities you’re promoting learned from the mistakes of companies “stupid” enough to have conducted business from the United States?
Position yourself as uniquely knowledgeable and use phrases such as “due diligence,” perhaps adding that “offshore” programs are “safe” — unlike those U.S.-based programs that are only asking for trouble?
You’re going to need some new lines to disarm the doubting customers you’re trying to recruit into your scams so you can pocket commissions based on their misery.
Indeed, this is a story about a spinoff company that purportedly opened “offshore” after a previous company controlled by the husband of the operator got caught ripping off customers on U.S. domestic soil. Like the U.S.-based company that got caught fleecing clients, the new, “offshore” firm also got caught — and investigators say it was not “offshore” at all.
In fact, it was operated right from sunny Florida. Both the domestic company and the “offshore” spinoff walked off with the money, investigators said.
The U.S. Commodity Futures Trading Commission (CFTC) has announced that it worked proactively with Belize, Canada, Switzerland and Israel in a case that resulted in a judgment against a Belize-registered company operating a commodity-options scam from Hollywood, Fla.
The company simply vanished one day, taking clients’ money with it, investigators said.
U.S. District Judge Paul C. Huck of the Southern District of Florida ordered defendants Zurich Futures and Options Inc. and Michele LaBruce — both of Hollywood — to pay more than $5.4 million in restitution and penalties.
Huck gave them 10 days to do so, saying post-judgment interest will begin to accrue on the 11th day.
Specifically, Huck found that Zurich Futures was not headquartered in Switzerland and did not have a satellite office in Toronto, as it had claimed. Rather, the company used a “mail drop” and “virtual offices” to reroute mail and telephone calls to southern Florida.
“At least” 60 individuals sent a total of “at least” $1.45 million to the firm, according to Huck, who entered the findings of fact and conclusions of law when the defendants didn’t even bother to enter a defense.
“Almost all of the Defendants’ customers lost their money trading through Zurich, while Zurich collected at least $1,357,299 in commissions and fees,” Huck said.
Despite a claim that Zurich had been in business for a decade and employed only registered and licensed traders, Zurich had been operating for less than a year and had lied about its credentials, Huck ruled.
In fact, the judge ruled, LaBruce “directed the transfer of funds totaling at least $1,071,199 from Zurich’s bank accounts to herself.”
CFTC minced no words in describing the Zurich Futures scam.
“Zurich was nothing more than a Hollywood, Fla.-based sham operation,” the agency said.
Moreover, the agency added, LaBruce is the wife of Adam Leon, against whom CFTC won a judgment and penalties totaling $2.5 million in a foreign-currency trading scheme known as “Presidential FX Inc.”
The Presidential FX scam was exposed in 2005. Leon was one of seven people charged criminally in September 2008. The others were Phillip Eric Mickelberg, Mitchell Goldberg, Joseph Marchiano, Donnetta Bass, Danielle Williamson, and Melody Marks.
Other companies involved in the Presidential FX scam included Emerging FX; Infinity FX; and Noble4X, federal prosecutors said. All of the companies operated from Hollywood.
During a seven-month stretch between December 2003 and June 2004, CFTC said, 99.1 percent of customers who invested money with Presidential FX lost it.
Presidential FX was charged civilly by CFTC in August 2005. While the case was still in the courts in January 2006, Leon failed to respond to an order compelling discovery and an order to be deposed. The deadline to respond was Jan. 17, 2006. On that very same day, Zurich Futures was incorporated in Belize, according to court records. On the next day, Jan. 18, 2006, LaBruce was appointed “Attorney-in-Fact” for Zurich Futures.
On Feb. 17, 2006, Leon stipulated to default through counsel in the Presidential FX case, meaning he abandoned the case.
Court records suggest Zurich Futures, with Leon’s wife Michele LaBruce in charge, commenced operations in April 2006, just two months after Leon’s default in the Presidential FX case. LaBruce also is named in court documents as a one-time principal in Presidential FX.
CFTC thanked the international regulatory community for assisting in the Zurich Futures probe.
“The CFTC gratefully acknowledges the assistance of the Belize Financial Intelligence Unit, the Ontario Securities Commission, the Swiss Federal Market Supervisory Authority and the Israel Securities Authority in investigating this matter,” CFTC said.
A case in Texas may provide the clearest sign yet that securities fraud in the United States is separating people from their senses — not that law enforcement missed the important clues provided by an earlier case in California in which investors who were purportedly fleeced allegedly posed as federal agents and attempted an armed coup at the company that allegedly ripped them off.
Now comes word that fleeced Texas investor Christine Cayton became so angry at being hoodwinked out of her retirement savings that she got drunk on wine earlier this month, took an unloaded gun to the headquarters of Triton Financial LLC and demanded a refund from Triton principal Kurt B. Barton.
Cayton did not shoot anyone, but was said to be fumbling for bullets in her purse. She was arrested on a felony weapons charge, and since has posted bond. She explained her state of mind to NBC affiliate KXAN. (See KXAN video. )
Triton, according to Sports Illustrated, initially responded to Cayton’s arrest by issuing a brief statement questioning her mental health, but now the SEC and the Texas State Securities Board (TSSB) — both of which had been investigating Triton and Barton — have filed actions that raise troubling concerns about Triton’s corporate mental health and whether professional athletes will push any product for a fee.
First, the answer to the question PP readers may have about why Triton became fodder for a Sports Illustrated story is that Triton used former National Football League players and former Heisman Trophy winners in sales and marketing promotions, and also sponsored a golf event on the PGA Champions Tour.
None of the athletes has been accused of wrongdoing.
Triton appears to have defaulted on its PGA contract during the very first year — at the same time the golf world finds itself suddenly confronting a PR disaster caused by the Tiger Woods scandal and residual fallout from a PR disaster caused by alleged Ponzi schemer Allen Stanford, whose company sponsored a signature PGA Tour event.
Questions about Triton’s corporate mental health came to the fore when investigators discovered the company was promoting investment returns as high as 32 percent and a complex scheme that involved an insurance company, a diverted offering, promissory notes and the unauthorized pooling of funds.
“Since at least 2004, Triton has sponsored more than 40 limited partnerships and limited liability companies, raising over $50 million for these ventures,” the SEC said.
An entity known as Triton Insurance issued a Confidential Investment Memorandum (CIM) that outlined a $12 million offering of 240 investor units at $50,000 per unit. The offering pertained to yet another Triton company — Triton Holdings — whose purpose “was to acquire and turn around underperforming insurance companies,” the SEC said.
Triton identified National States Insurance Co. (NSIC) as a company it intended to acquire through the offering, the SEC said.
But unbeknown to Triton Insurance investors, “Barton had put the NSIC acquisition on indefinite hold around October 2008” and Triton “did not return the funds raised to investors or hold them for future acquisitions.
“Instead, Barton and Triton Insurance misapplied the funds to pay the expenses and obligations of Triton and its affiliates,” the SEC said.
Proceeds gathered from investors for the NSIC acquisition were combined with proceeds from other Triton entities and promissory notes to acquire a Nebraska company known as Axis Capital, an equipment-leasing firm, contrary to the purpose of the Triton Insurance offering, the SEC said.
“After the Axis acquisition, Defendants continued to sell Triton Insurance investor units, raising over $2 million, using the Original CIM,” the SEC said. “The CIM nowhere disclosed the Axis purchase, but instead described only the NSIC acquisition. Investors also were not told that Triton continued to divert offering proceeds.”
One former NFL player purportedly sent an email “to numerous NFL alumni ‘updating’ them on Triton’s activities and touting Triton’s returns on its investments,” the SEC said in fraud allegations filed against Triton and Barton yesterday.
The word “Ponzi” has not been used yet, but some of the behavior attributed to Triton by the SEC and the TSSB is creating plenty of bad press for the NFL and the PGA Tour.
Professional sports has been no stranger to headlines about financial fraud in recent months. In November, former Denver Broncos quarterback John Elway, a member of the Pro Football Hall of Fame, got some embarrassing ink for speaking at events hosted by Speed of Wealth LLC, which was implicated in an alleged $30 million Ponzi scheme.
In February, PGA Tour Commissioner Tim Finchem found himself in the position of having to tackle his first sudden PR nightmare of the year: the Ponzi allegations against Allen Stanford, sponsor of the Stanford St. Jude Championship, which raises millions of dollars for the St Jude Children’s Research Hospital in Memphis.
Stanford is jailed in Texas, awaiting trial. So ruinous was Stanford’s name — and so important was the tournament to the hospital, the Memphis region in general and the PGA’s rich history — that the PGA Tour proceeded with the event despite having no title sponsor.
After Triton got up a head of PR steam by recruiting famous football players such as Tony Dorsett, Jeff Blake, Ty Detmer and Chris Weinke as pitchmen, providers of testimonials or employees, it then expanded into sponsoring a PGA Champions Tour event in Texas, sucking the golf world into its alleged scheme.
Sports Illustrated broke the Triton story in March, but it gained little media attention elsewhere. Yesterday, however, both the SEC and the TSSB announced dramatic legal actions — and those actions put both the NFL and the Champions Tour in the difficult position of seeing their famous brands associated with a large-scale fraud scheme.
These are some trying times for the legal profession. Disbarred Florida attorney Scott Rothstein is implicated in an alleged $1.2 billion Ponzi fraud in which prosecutors said attorneys from his shuttered, 70-attorney firm in Fort Lauderdale were getting paid from Ponzi proceeds that flowed from bogus “settlements” in cases involving sexual harassment or sexual infidelity.
And now a federal jury in Virginia has found former attorney Troy A. Titus, 43, guilty of running a real-estate Ponzi scheme and other fraud schemes that fleeced clients out of more than $7 million.
Titus was found guilty of 33 charges. He faces up to 590 years in prison. Sentencing is scheduled April 15 before U.S. District Judge Raymond A. Jackson.
“[A] jury found Troy Titus stole millions from people who trusted him to protect their investments,†said U.S. Attorney Neil H. MacBride of the Eastern District of Virginia. “[His] conviction is a testament to the ability of our law enforcement partners to tackle complicated investment and mortgage fraud cases. Especially in the light of the recent economic crisis, we are even more determined to work together to aggressively fight financial fraud in this district.â€
A veteran FBI agent said enough is enough.
“[W]e will continue to target those who, motivated by greed, prey on honest investors and damage our country’s financial confidence,” said A.J. Turner, special-agent-in-charge of the FBI’s Norfolk field office.
Titus’ law license was revoked by the Virginia State Bar in 2005 after an investigation revealed a continuing pattern of writing bad checks for tremendous sums. Between November 2002 and May 2005, according to records, Sun Trust Bank and Monarch Bank notified both Titus and the Virginia Bar about 15 overdrafts on accounts Titus had the responsibility of maintaining.
The Virginia Bar, which initially gave Titus an opportunity to right the ship after he explained that his accounting systems lacked controls and that he had taken corrective measures and hired a CPA, later determined he had engaged in a continuing pattern of “ethical misconduct” when more bad checks surfaced.
Even after the CPA produced evidence and showed Titus in August 2004 that statements reflected that a key Titus account had a balance of $2.177 million, that checks totaling $4.746 million had been written on the account and that the account had an adjusted negative balance of $2.569 million, Titus pooh-poohed the situation and continued to overdraft the account by tremendous sums.
Titus eventually was charged criminally. In March 2009, a superseding indictment was issued by a grand jury, accusing Titus of dozens of counts of fraud, including Ponzi fraud.
“Titus approached clients or seminar participants and induced them into investing money with him to purchase and rehabilitate real estate, promising to return the money at a later date with a high rate of interest,” prosecutors said. “However, Titus obtained many of the real properties involved through fraud or transferring the properties into trusts controlled by him. Instead of using the funds as promised, Titus directed the investment income toward paying business or personal expenses, backfill investment losses, and at times to make token payments or repay previous investors.”
The disgraced lawyer also took advantage of “elderly or incapacitated clients who provided him with income intended to be held in trust and took steps to conceal those uses from those who inquired about the management of the trust,” prosecutors said.
Trial evidence and testimony “showed that Titus failed to make payments for the trust clients’ basic medical and housing needs,” prosecutors said. “Titus engaged in a similar scheme to defraud involving real estate closing funds he held in trust.”
Both state and federal prosecutors in Michigan have been attacking Ponzi schemers and affinity fraudsters. Yesterday the office of Michigan Attorney General Mike Cox charged three men with racketeering for their roles in an alleged time-share Ponzi scheme targeted at senior citizens.
In a separate Michigan case, federal prosecutors have announced the guilty plea of Richard Taft Johnson, 67, of Orchard Lake. Johnson is a member of an ever-lengthening list of senior citizens implicated in Ponzi schemes. The list includes names such as Bernard Madoff, 71, (New York/Florida); Richard Piccoli, 83, (New York); Andy Bowdoin, 75, (Florida); Julia Ann Schmidt, 68, (Texas); Judith Zabalaoui, 71, (Louisiana); Arthur Nadel, 77, (Florida/NewYork); Ronald Keith Owens, 73, (Texas); James Blackman Roberts, 71, (Arkansas); and Larry Atkins, 65, (North Dakota).
Johnson pleaded guilty to mail fraud for devising a Ponzi scheme known as the “American Charitable Program,†which led investors to believe “investments would benefit
charitable organizations such as universities or other educational institutions,” prosecutors said.
But the purported charitable program was a fraud that promised returns of 10 percent per quarter — and the fraud was magnified by bogus “periodic statements showing the purported increasing value of their investment accounts,” prosecutors said.
“This was an insidious Ponzi scheme because investors were told it was a safe, secure investment that would ultimately help charities,” said U.S. Attorney Terrence Berg of the Eastern District of Michigan.
“Like most Ponzi schemes, it went undetected for a number of years, allowing some investors to reap a profit on their investments, and encouraging others to invest,” Berg said.
He added that Ponzi perpetrators often recruit others to spread the word about exciting investment programs, which later prove to be Ponzi schemes that cause embarrassment and ill-will among family and friends.
“It can be very disturbing for a victim to discover that he has innocently caused friends or relatives financial ruin,” Berg said. “In the end, a number of the [Johnson] investors, some quite elderly, lost everything because their monies were used to keep the scheme going until the inevitable collapse.”
The Johnson probe is ongoing, despite the plea. “In the course of this investigation, we will be attempting to help ascertain what, if anything, the victims’ might be able to salvage of their financial worth,” Berg said.
Assisting in the probe are the FBI, the State of Michigan Office of Financial Insurance Regulation and the State of Florida Division of Insurance Fraud. Berg said the agencies have “worked very hard to investigate and compile the information about Mr. Johnson’s fraudulent activities.â€
Johnson faces up to 20 years in prison and a fine of up to $250,000. He conducted business in Bloomfield Hills, Mich., as Investor Planning Services.
“As in all Ponzi schemes, Mr. Johnson would pay out earlier investors, or investors who demanded a return of their money, with newer investors’ monies,” prosecutors said. “But he also diverted significant funds to his personal use.”
Three Michigan men were arrested for racketeering today for their local roles in an alleged national Ponzi scheme that targeted senior citizens.
Robert Valeri Sr., 59, of South Lyon, Robert Antonio Valeri Jr., 32, of Canton, and Jeffrey Ron Mitchell, 39, of Walled Lake, were accused of cheating 125 Michigan seniors out of their life savings in a time-share Ponzi scheme.
“[They] allegedly participated with Indiana resident and scam mastermind Michael Kelly in a massive Ponzi scheme, selling time shares in the form of an unregistered security called a ‘Universal Lease’ through a company called Resort Holdings International,” prosecutors said.
The case was brought by Michigan Attorney General Mike Cox, whose office recently has brought racketeering charges in two other fraud or Ponzi scheme cases.
“Our parents and grandparents spent their lives working hard to provide for their families and to build the Michigan we enjoy today,” said Cox. “They deserve to know that their investments are being made safely and that those who would steal from them are being held accountable.”
From left: Robert Valeri Sr., Robert Antonio Valeri, Jr., Jeffrey Ron Mitchell
Investigators said the alleged Resort Holdings International scheme “took in an estimated $350 million nationwide and as much as $9 million in Michigan. It imploded due to deliberate overselling of shares in the Universal Lease program, leaving investors with empty pockets and broken promises.”
Valeri Sr., Valeri Jr. and Mitchell were charged with Conducting Criminal Enterprise (Racketeering), a felony punishable by up to 20 years in prison and/or a fine of up to $100,000. In addition, they were charged with Conspiracy to Sell an Unregistered Security, a felony punishable by up to 10 years in prison and/or a $10,000 fine.
Mitchell and Valeri Sr. also were charged with Selling an Unregistered Security and Omitting to Disclose Material Information during the Sale of a Security, both felonies punishable by up to 10 years in prison and/or a $25,000 fine.
The trio was arraigned in 19th District Court before Judge Richard Wygonik. Bond was set at $25,000. A court date is set for March 19.
Investigators said the men targeted “senior citizens and retirees with marketing efforts that illegally promoted the lease as a safe investment opportunity with the promise of large monetary returns.
“While seniors purchasing the lease were allegedly given the option to use the vacation property during specified times over a 25-year term, they were also given the option of having a purported third-party management company arrange for the rental of the unit during the same time period for a guaranteed 9 percent return — whether the unit was rented or not.
“They were encouraged to elect the latter option and everyone who purchased the lease did,” prosecutors said. “In reality, Kelly also controlled the third-party management company.”
Kelly, 60, a citizen of the United States, Mexico and Belize, was charged criminally three years ago today for his role in the alleged scheme. Additional criminal charges were filed against him in 2008, and he also has been charged civilly by the SEC. He is jailed, awaiting trial.
Michigan residents who believe they or a family member may have given funds to Mitchell, Valeri, Sr., Valeri Jr. or Kelly are asked to contact Cox’s office at 313-456-0180.
Federal prosecutors have seized an estimated $160 million to $175 million in property in the Kelly case, Cox’s office said.
On Dec. 3, in a separate Ponzi case, Rita Gosselin of Grosse Ile, Mich., was arrested by investigators from the Southgate Police Department and Cox’s office. Gosselin was charged with racketeering in an alleged real-estate Ponzi scheme.
In an alleged fraud scheme that targeted churches, Cox’s office brought racketeering charges against Michael J. Morris and William T. Perkins on Oct. 5.
A claim was made yesterday in a now-deleted Surf’s Up post that AdSurfDaily President Andy Bowdoin “would not sell us out and he has stood his ground firm since August of 2008.”
It was a lie by Bowdoin through a shill. The source to prove the lie is Bowdoin himself. Bowdoin has acknowledged in his own court filings that he previously was “cooperating” with prosecutors and investigators so he “could possibly avoid a prison sentence.”
Bowdoin, in fact, advised a federal judge in his own sworn court filings that one of his meetings with the government “lasted three days.” Another meeting lasted at least one day. Bowdoin advised U.S. District Judge Rosemary Collyer that he had “revealed significant information against my interest.”
The meetings were held in December 2008 and January 2009. Bowdoin’s affidavit implies that the December meeting was the one that lasted three days. So, Andy Bowdoin met with the government for a period of at least four days and revealed “significant information” against his interests and presumably the interests of others — and now Bowdoin, through his Surf’s Up shills, is trying to tell the membership that “he has stood his ground firm since August of 2008.”
It was all there in black and white at Surf’s Up yesterday — until it was deleted, of course.
There was no mention of the proof to the contrary: Bowdoin’s sworn affidavit.
Two Whoppers Since September
This was the second time since late September that Bowdoin has lied to the membership. During a Sept. 21 conference call, Bowdoin told listeners that the tens of millions of dollars seized in the wire-fraud, money-laundering, securities-fraud and Ponzi scheme case belonged to the members. The U.S. Secret Service listened to this call, transcribed it and presented it to the judge.
The trouble with Bowdoin’s claim that the money belonged to members is that he told Collyer in three sworn documents he signed on Aug. 13, 2008, that the money belonged to him and his companies.
Bowdoin now is trying to have Collyer disqualified from the case. It is not the first time an effort evolved to force Collyer to step down. Curtis Richmond, an ASD member who has declared himself a “sovereign” being in other cases and has attempted to have judges and litigation opponents jailed, also tried.
A Devil In The Details
Here is how Bowdoin, the purported “Christian,” sought to rally members in August 2008:
“This is an attack of Satan because we were helping tens of thousands of people around the world,” members quoted Bowdoin as saying in describing the forfeiture case. “But we are more than over-comers, and we get our strength from God. And with God all things are possible. And we’re on our way to a miracle folks. I believe beyond a shadow of a doubt that we’ll be back in business, stronger than ever. It’ll take all the doubts away from all these people about being a Ponzi, because it’ll be proven that we are NOT a ponzi.”
Of course, the same Andy Bowdoin solicited testimonials from the membership to assist in his battle to retain his money before all of the facts of the case were in. Thousands of trusting members — many of whom identify themselves as Christians and have described Bowdoin as a grandfatherly Christian — provided testimonials.
Only later did they find out that Bowdoin was “advertising” a failed, dissolved business in his own rotator to qualify for “rebates” and that Bowdoin had told the Secret Service that ASD had $1 million in a bank on the Caribbean island nation of Antigua in an account under a different name.
Let’s walk that one back: ASD, a purported “advertising” business, was so effective that even a company that no longer exists could make money. Prosecutors later said that Bowdoin paid an an employee to surf for Bowdoin’s son, so the son could make money.
Bowdoin apparently forgot to tell his own attorneys about the Antigua money. Prosecutors reminded him of it, though, after Bowdoin filed for emergency release of $2 million in seized funds, saying ASD could not pay its rent or hosting bills.
On or about June 10, 2008, less than two weeks after a May 31 ASD “rally” concluded in Las Vegas with Bowdoin talking about his relationship with God, Bowdoin’s wife and her son, George Harris, used money from two ASD Bank of America accounts and opened an account at a separate bank.
More than $157,000 of the opening deposit was used to pay off the mortgage on the Harris home in Tallahassee. In the following days, ASD money was used to buy jet skis, a Cabana boat, marine equipment and two automobiles, according to prosecutors.
Flash forward two months to August 2008 — and Bowdoin’s remarks that ASD had been on the receiving end of an attack from “Satan.”
“[O]n Friday August 1st we had a 9/11 but it was about 30 times worse,” ASD members quoted Bowdoin as saying on Aug. 12, 2008.
On the very next day, Aug. 13, Bowdoin signed the sworn affidavits saying the ASD money belonged to him and his companies.
Bowdoin did not mention the cars, the jet skis, the boat, the marine equipment and the paid-off Harris mortgage at the time. He did not tell members that he was paying an employee to surf for his son. His core message was to inundate the offices of investigators and lawmakers with letters that told the recipients what a poor job they are doing, how unfair they are being, that people are hurting because of the actions prosecutors had taken the previous week in freezing certain ASD assets.
Only 15 days prior to Bowdoin’s invocation of “Satan” on Aug. 12, 2008, ASD money was used to purchase a Lincoln luxury sedan for $48,244.03. About 16 days after Bowdoin invoked Satan and compared the Secret Service to the 9/11 terrorists, Bowdoin sent a check for $100 to his victims in an Alabama securities scheme a decade earlier.
At the time, the victims were owed about $45,000, about $3,244 less than the purchase price of the Lincoln.
God As A Stage Prop
Yesterday will go down in history as one of the oddest days in ASD’s odd history. Bowdoin, through a shill, told the troops he was still fighting the good fight. The Surf’s Up missive implored members to “get a little excited folks!â€
“Andy explained a few things to me of which I cannot share them all, but I can say that the government attorney’s ‘have’ finally admitted to some things that are totally in our (ASD) favor,†the email from the shill claimed.
Bowdoin, according to the email, just knew ASD would be back better than ever. The email did not reference a fresh ruling from Collyer that Bowdoin no longer even had standing in the forfeiture case.
In fact, the email treated the membership as simpletons. It did not acknowledge the proffer letter Bowdoin had signed in the case, his meetings with prosecutors in which he provided information against his interests, his acknowledgments that ASD was operating illegally, his cooperation with the government, his decision to submit to the forfeiture in January 2009 to maximize his chances of avoiding prison time.
What the email did was insist that Bowdoin had stood “firm” since August 2008, despite the overwhelming proof to the contrary. Indeed, the same man who invoked “Satan” and the 9/11 terrorists to destroy the reputation of the agency that guards the Treasury and the life of the President of the United States — the same man who tried to destroy the reputation of his defense counsel — is the same man who now is trying to have a federal judge removed from the case.
Collyer can’t be fair, Bowdoin says — and he apparently says it with a straight face, just as he did when he said this on May 31, 2008, in Las Vegas:
“We need to have an attitude of gratitude with God.
“And I always say, ‘Thank you, God, for developing me into a money magnet.’ And I see myself as a money magnet in attracting money and, I say, attracting large sums of money.â€
Only 11 days later, the money was deposited to pay off the Harris mortgage.
UPDATED 5:34 P.M. ET (U.S.A.) In a development reminiscent of a claim made more than a year ago on the Pro-AdSurfDaily Surf’s Up forum that prosecutors had acknowledged behind closed doors that ASD was not a Ponzi scheme and refused to admit it publicly because of embarrassment, a new email missive surfaced today that suggested Bowdoin was on the verge of winning the forfeiture case.
Like previous unsubstantiated claims that the government was losing the case, today’s email was published on the Surf’s Up forum. Threadbare of supporting details, the email cited a third-party conversation with Bowdoin and implored ASD members to “get a little excited folks!”
“Andy explained a few things to me of which I cannot share them all, but I can say that the government attorney’s ‘have’ finally admitted to some things that are totally in our (ASD) favor,” the email claimed.
No mention was made as to what the government purportedly admitted that was helpful to ASD’s case. The email was posted a short time after news broke that U.S. District Judge Rosemary Collyer refused to step down from the ASD forfeiture case.
Collyer’s refusal came in response to a Dec. 17 motion filed by Bowdoin to disqualify her, but Collyer said Bowdoin no longer had standing in the case to make any additional claims or to reassert old claims.
Today’s Surf’s Up email did not address the judge’s fresh ruling, which was docketed only hours before the new round of unsubstantiated claims was made in the email published on Surf’s Up.
“Andy said that in cases such as the ASD one the government usually pushes so hard until they get a plea deal. He said that this happens 98% of the time,” today’s email claimed. “But, Andy would not sell us out and he has stood his ground firm since August of 2008 and because of that things are starting to turn around for ASD. This is something the government did not expect.”
Prosecutors called Bowdoin “delusional” in September 2009, asserting he was telling members one story and Collyer another. They asserted in earlier filings that he has “followers.”
Despite repeated claims on Surf’s Up beginning in the fall of 2008 that prosecutors had admitted ASD was not a Ponzi scheme, no such proof ever has surfaced. In fact, in December 2008, prosecutors filed a second forfeiture complaint against assets tied to the firm, again alleging that ASD was a Ponzi scheme.
Even though Surf’s Up claimed the government had admitted ASD was not a Ponzi scheme, no attorney for ASD ever argued a similar claim in court — in either the December 2008 or August 2008 forfeiture cases against the firm. There is not a single entry in the public record of the case that the government ever acknowledged ASD was not a Ponzi scheme.
In April 2009, prosecutors said Bowdoin signed a proffer letter in the case and had acknowledged the material allegations against ASD were “all true.” Bowdoin had at least two meetings with prosecutors over a period of at least four days last winter, and admitted ASD was operating illegally, according to court filings.
In September 2009, Bowdoin said in his own court filings that he had admitted “significant information against my interest.”
Today’s email urged ASD members to search for videos that might have been taken at ASDÂ functions, suggesting the videos could be used to prove the prosecution is lying.
“The reason Andy was calling was to get some help from the members. So, here it is…
“Andy wants to know if any of you took Videos and/or Audios of ‘him’ speaking at any of the ASD Rallies,” the email said. “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 email 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].”
In August, some of Bowdoin’s supporters claimed that Collyer had ordered the prosecution to prove by Aug. 28 that ASD was a Ponzi scheme or dismiss the charges. A similar claim was made in April.
Collyer has never issued such an order.
Today’s email asked ASD members to send warm thoughts to Bowdoin and his wife, Edna Faye Bowdoin. Edna Faye Bowdoin and her son, George Harris, were named beneficiaries of ASD’s illegal conduct in the December 2008 prosecution filing.
Prosecutors alleged that Edna Faye Bowdoin and Harris used money from two ASD Bank of America accounts in June 2008 to open an account at a third bank into which more than $177,000 in illegal proceeds was deposited. Of that sum, more than $157,000 was transferred by wire to yet another bank and used to pay off the mortgage on the Harris home in Tallahassee.
Bowdoin described George Harris as head of ASD’s real-estate division, according to court filings. He also talked about establishing a business presence in South America. Only months later, the AdViewGlobal autosurf was born, purportedly operated from Uruguay and owned by George Harris and his wife, Judy Harris.
‘I asked Andy how Faye was doing and he was quiet for a moment and then said she is not doing so good,” today’s email said. “She is in a very severe depression and has been for quite some time ever since this whole debacle started.
“So, I have a personal favor to ask of you all. Can you take a few minutes to send her a card or a nice note at the very least to let her know that the members are still thinking about her and Andy?” the email urged.
Some ASD members immediately questioned why Bowdoin himself had not sent the email and instead relied on a third-party communication to ask for a favor. At the same time, members questioned what had become of Sara Mattoon, reportedly ASD’s official spokeswoman.
Prosecutors also made a veiled reference to the AVG autosurf in a September filing. In June, RICO attorneys suing Bowdoin for racketeering made a direct reference to AVG.
In the prosecution’s September 2009 filing, the government suggested an AVG prosecution could be in the offing.
“ . . . it may be the case that Bowdoin never intended to plead guilty when he agreed to debrief, and was just buying time while searching for a different exit strategy that failed to materialize. Maybe Bowdoin thought that before the government brought its charges he (like some of his family members) could move to another country and profit from a knock-off autosurf program that Bowdoin funded and helped to start,” prosecutors said.
AdSurfDaily President Andy Bowdoin has filed a motion to disqualify U.S. District Judge Rosemary Collyer from hearing the civil-forfeiture case against tens of millions of dollars seized from ASD last year.
Collyer reponded by issuing an order in which she refused to disqualify herself. Collyer said Bowdoin no longer had standing in the case.
“If Mr. Bowdoin is displeased with a ruling of the Court, he has a right to appeal,” Collyer said. “If Mr. Bowdoin wishes to file a complaint against the Court for perceived judicial misconduct, he may address such complaint to Mark J. Langer, Clerk of Court, U.S. Court of Appeals for the District of Columbia Circuit.”
Bowdoin’s motion was filed Dec. 17 — the same date ASD members said they received what purported to be an emailed Christmas greeting from ASD and Bowdoin. The email suggested Bowdoin planned to continue his legal fight and that 2010 would be the year ASD would prove it was not a Ponzi scheme after having failed to do so either in 2008 or 2009.
In September, prosecutors said Bowdoin was “delusional.”
In an affidavit in support of the disqualification motion, Bowdoin claimed Collyer had a “deep seated animosity” toward him and that the judge “has a personal bias and predudice” against him.
Among Bowdoin’s assertions in the sworn affidavit was that an order Collyer issued last month proved she was biased against him.
“The Honorable Judge Collyer evidenced personal bias and prejudgment, stating that if I were found eventually guilty of the criminal charges now being investigated by a grand jury, but upon which no indictment has yet been issued, Bowdoin ‘will face a term of incarceration for sure,” Bowdoin said.
Charles A. Murray, a Bowdoin attorney, filed the disqualification motion.
“Judge Collyer has, prior to trial on the merits on potential criminal charges, already foreclosed the possibility of parole, or probation, evidencing precisely . . . ‘a deep-seated favoritism or antagonism’ which renders ‘fair judgment impossible,’” Murray argued.
Collyer, though, said she was not stepping down.
Noting that Bowdoin formally withdrew his claims to the seized funds in January 2009 and then attempted to reassert the claims a month later, Collyer said she ruled in November 2009 that she was not going to reverse herself and permit Bowdoin to reaasert his claims.
“[O]n November 10, 2009, finding that he knowingly and voluntarily released his claims with respect to Defendant properties, the Court denied his motion to renew those claims,” Collyer said. “Thus, Mr. Bowdoin is no longer a party to this action. The Court therefore will deny Mr. Bowdoin’s motion for disqualification due to lack of standing.”
A man has been jailed for ignoring a court order in a civil case and continuing to operate an envelope-stuffing scheme from the area of Rio Grande, Puerto Rico, the Federal Trade Commission announced Dec. 23.
