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  • Bank Failure Brings 2009 Total To 99; Foreclosures Pile Up In California, Florida; Prosecutors Battle Mortgage Fraudsters And Ponzi Schemers

    Andy Bowdoin
    Andy Bowdoin

    UPDATED 1:33 P.M. EDT (U.S.A.) The failure yesterday of San Joaquin Bank in Bakersfield, Calif., brought the total of bank failures in the United States this year to 99.

    With weeks remaining in the year, it is a virtual certainty that failures will top the 100 mark. Banks have been failing at an average rate of slightly less than 10 per month in 2009. Last year, 25 banks failed in the United States. In 2007, only three banks failed.

    As many as 416 names of other troubled banks appear on a confidential list maintained by the Federal Deposit Insurance Corp. (FDIC). The hemorrhage of bank failures — in large measure caused by a severe recession, consumer and business defaults, a collapse of real-estate prices in many parts of the country, brazen fraud in the mortgage sector and a contraction of development — is not over.

    Although banks and the government are working together to find ways to curb an explosion in the mortgage-foreclosure rate, foreclosures continue to suck wealth from the economy.

    “Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,” said James J. Saccacio, chief executive officer of RealtyTrac.

    RealtyTrac tracks foreclosure activity in the United States. On Oct. 14, the company said foreclosures in the third quarter set a record and were up 23 percent from the total reported in the third quarter of 2008.

    Foreclosure filings, default notices, scheduled auctions and bank repossessions totaled 937,840 in this year’s third quarter, RealtyTrac reported.

    Although foreclosure filings in September totaled 343,638 — a 4 percent decrease from August’s total — the number still represented a 29 percent increase from September 2008.

    September’s monthly total was among the highest figures reported since January 2005, trailing only July and August of this year.

    “REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties,” Saccacio said.

    Florida, California Battered By Foreclosures

    Six states — California, Florida, Arizona, Nevada, Illinois and Michigan — accounted for 62 percent of the foreclosure total in the third quarter, RealtyTrac reported. Foreclosures in the six states totaled 579,541.

    Foreclosures in California totaled 250,054 in the third quarter; Florida posted 156,924 foreclosures, a 23 percent increase from the total reported in the third quarter of 2008.

    Because Florida is an attractive state for retirees — and because those retirees have friends and loved ones in all corners of the United States — the state is an attractive target for scammers.

    Florida also has a large population of immigrants, another attractive target of scammers.

    Agencies Battle Florida Ponzi Fraud

    In the past 72 hours alone, the SEC, the CFTC, the FBI, the U.S. Postal Inspection Service, and federal prosecutors have announced three Florida Ponzi scheme prosecutions, a conviction in a separate Ponzi case — and a conviction in a fraud case in which a Florida man created more than 260 identities on eBay and fleeced customers out of $717,000.

    On the Florida Ponzi front:

    • David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services Inc., MDD Consulting Inc. and Go ! Tourism Inc. were named defendants in emergency actions in U.S. District Court for the Middle District of Florida. Merrick, 61, of Apopka, is accused of operating a $22 million Ponzi scheme with ties to Panama, Mexico, Malaysia, Switzerland and the Netherlands.
    • HomePals Investment Club LLC, HomePals LLC (Home Pals), Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri were charged in South Florida with securities fraud, conspiracy to commit securities fraud, wire fraud and money laundering. The defendants were accused of targeting Haitian-Americans in a $14.3 million Ponzi scheme that promised investment returns of 100 percent every 90 days. The scheme gathered money from as many as 64 “investment clubs,” the SEC said.
    • Sean Healy, 38, of Weston, Fla., was charged in a 55-count indictment unsealed in Pennsylvania with multiple counts of wire fraud, mail fraud, money laundering and obstruction of justice. The Florida-based scheme led to at least $14.6 million in losses in Pennsylvania alone, prosecutors said, adding that Healy purchased “numerous exotic vehicles and sport cars, including a Bentley and several Ferraris, Lamborghinis and Porsches worth over $2.3 million.” Healy also bought a $2.4 million waterfront mansion furnished with more than $2 million of home improvements, plus $1.5 million in men’s and women’s jewelry, prosecutors said.
    • Michael Riolo, 38, of Boca Raton, was sentenced to more than 24 years in prison for bilking investors in a $44 million Ponzi scheme. Prosecutors accused Riolo of cooking the books and sending false statements to investors that reported “consistent trading profits and increasing account balances.” In reality, Riolo “misdirected money he received from some investors to make distributions to other investors who sought to withdraw money from their investment accounts,” prosecutors said.
    • Andy Bowdoin, 74, of Quincy, Fla., continued his efforts to get back into a Ponzi case in which he had already submitted to the forfeiture of tens of millions of dollars seized last year by the U.S. Secret Service in an international wire-fraud and money-laundering probe. Bowdoin, who submitted to the forfeiture in January, fired his attorneys and began to file as his own attorney in February. In April, federal prosecutors announced that Bowdoin had signed a proffer letter in the case prior to acting as his own attorney and acknowledged his company, AdSurfDaily Inc., had been operating illegally. “Mr. Bowdoin also confirmed that the revenue figures of the enterprise were managed to make it appear to prospective members that the enterprise called Ad Surf Daily was a consistently profitable, and brilliant, passive income opportunity,” prosecutors said. Despite his own acknowledgments of illegal conduct, despite the proffer — and despite the fact Bowdoin had asked the court to grant his request to submit to the forfeiture and that the court granted Bowdoin’s request — Bowdoin climbed back on the litigation saddle. “Mr. Bowdoin says that after discussing this case with his supporters, and concluding that they were smarter than his attorneys, he has changed his mind,” prosecutors said.

    Total funds gathered in the alleged Bowdoin, Merrick, Bass, Alabre, Taglieri and Healy Ponzi schemes in Florida are estimated at $156.3 million, during a period in which U.S. banks are failing, the U.S. economy is confronting the worst business conditions since the Great Depression and mortgage foreclosures are piling up across the country, including hard-hit Florida.

    With the Riolo conviction added to the estimate, the number totals $200.3 million. The estimate does not reflect the massive, $65 billion Ponzi fraud of Bernad Madoff, who wiped out clients in Florida and elsewhere. Nor does it take into account allegations that Arthur Nadel, another man implicated in a large-scale fraud in Florida, may be responsible for tens — if not hundreds — of millions of dollars of Ponzi pain.

    “During these tough economic times, it is more important than ever that those who lie to and steal from the investing public be held accountable for their misconduct,” said Jeffrey H. Sloman, Acting U.S. Attorney for the Southern District of Florida, commenting on the 24-year prison sentence Riolo received.

    “The United States Attorney’s Office will continue to investigate and prosecute those who perpetrate these large-scale fraud schemes,” Sloman said.

  • INCREDIBLE: Yet Another Florida Man Indicted In Alleged Ponzi Scheme; Prosecutors Say Sean Healy Of Weston Bought A Bentley And ‘Several Ferraris’

    There has been nonstop news about Florida Ponzi schemes in the past 48 hours. Several indictments have been announced, the latest involving Sean Healy of Weston.

    Healy, 38, was charged in a 55-count indictment unsealed in Pennsylvania with multiple counts of wire fraud, mail fraud, money laundering and obstruction of justice.

    Prosecutors said Healy “spent the money to fund a lavish lifestyle.”

    Purchases included “numerous exotic vehicles and sport cars, including a Bentley and several Ferraris, Lamborghinis and Porsches worth over $2.3 million,” prosecutors said.

    Obstruction of justice was charged because Healy thwarted a grand jury by providing “phony bank statements and phony trading records, indicating that the Pennsylvania investor’s money was used for legitimate trading activity in stocks and commodities,” prosecutors said.

    “When the authentic records were obtained, they revealed that Healy had simply spent the money on his extravagant lifestyle and used some of it to pay back earlier investors who he defrauded between 2003 and 2008,” prosecutors said.

    The grand-jury probe began in March, after an investor who had been scammed in Pennsylvania sued Healy and his wife, Shalese Rania Healy, in U.S. District Court in the Southern District of Florida, alleging that Pennsylvania investors had lost $14.6 million with Healy between April 2008 and February 2009.

    In July, the SEC and CFTC sued Healy in a case that alleged massive fraud. Also named in the complaints was Healy’s company, Sand Dollar Investing Partners LLC. Healy’s wife was named a relief defendant, meaning investigators believed she had received ill-gotten gains from the scheme.

    CFTC said investor funds also were used to purchase gold bullion and “to lease a luxury suite at Miami’s BankAtlantic Arena.”

    The sky was the limit, said an SEC official.

    “Rather than investing the money as he promised, Sean Healy used investor funds to finance an extravagant lifestyle for himself and his family,” said Antonia Chion, associate director of the SEC’s Division of Enforcement.

    The July complaint by the SEC also alleged that Healy provided false information to the U.S. Attorney’s Office for the Middle District of Pennsylvania, which brought the obstruction charges and the other charges. The indictment was unsealed yesterday in Harrisburg, Pa.

    Dennis Pfannenschmidt, U.S. Attorney for the Middle District of Pennsylvania, cataloged the spectacular purchases Healy allegedly made with investors’ funds.

    In addition to the automobles, Healy also bought a $2.4 million waterfront mansion furnished with more than $2 million of home improvements, plus $1.5 million in men’s and women’s jewelry, Pfannenschmidt’s office said.

  • BREAKING NEWS: Michael Riolo Sentenced To More Than 24 Years In Prison For Bilking Clients In Florida Ponzi Scheme That Collapsed After Nine Years

    To many residents of Florida, Michael Riolo was their Bernard Madoff.

    Riolo, 38, of Boca Raton, was sentenced to more than 24 years in prison (293 months) today for bilking investors in a $44 million Ponzi scheme. The scheme began in 1999 and collapsed in 2008.

    “During these tough economic times, it is more important than ever that those who lie to and steal from the investing public be held accountable for their misconduct,” said Jeffrey H. Sloman, Acting U.S. Attorney for the Southern District of Florida. “The United States Attorney’s Office will continue to investigate and prosecute those who perpetrate these large-scale fraud schemes.”

    Riolo’s sentence was imposed by U.S. District Judge Kenneth A. Marra.

    Police officers were among victims of Sterling Wentworth Currency Group Inc. and LaSalle International Clearing Corp., Riolo’s companies.

    “From August 1999 to December 2008, Riolo caused more than 80 investors to invest approximately $44 million, based on materially false statements and omissions of material facts,” prosecutors said today.

    Like Madoff, Riolo cooked the books.

    “To encourage participating investors to keep their investments with the defendant, he would prepare and distribute to investors monthly profit and loss statements that falsely reported consistent trading profits and increasing account balances,” prosecutors said.

    “In furtherance of the scheme, Riolo misdirected money he received from some investors to make distributions to other investors who sought to withdraw money from their investment accounts.”

    Riolo took money from new investors to pay old ones in classic Ponzi fashion, prosecutors said.

    “[He] disbursed more than $29.5 million to investors as a purported return of principal and profits, when in fact, most of the returns paid by the defendant to the investors came directly from new investment monies, not profits,” prosecutors said.

    Investigators have exposed two significant Ponzi schemes in Florida in the past 48 hours alone. The alleged schemes occurred on the heels of Madoff’s massive, $65 million Ponzi fraud, and allegations that Florida residents Arthur Nadel and Andy Bowdoin has schemed hundreds of millions of dollars from investors in Ponzi frauds.

    Read story about another Florida Ponzi case Sloman’s office is prosecuting.

    Read story about yet another Florida Ponzi scheme exposed in the past 48 hours.

    Florida’s real-estate market has been battered by the recession. The state has one of the highest mortgage-foreclosure rates in the United States, and some counties have high concentrations of residents vulnerable to scams, including senior citizens and immigrant populations.

    Despite the fact senior citizens are vulnerable to Ponzi schemes, some members of the Pro-AdSurfDaily Surf’s Up forum discussed a plan to ask AARP, an association that advocates for seniors, to advocate on behalf of ASD.

    AARP later joined with Florida Attorney General Bill McCollum in an effort to strengthen securities laws in the state.

  • BREAKING NEWS: Bowdoin’s Attorney Files Motion To Permit New Attorney To Appear In DC Federal Court

    UPDATED 7:51 P.M. EDT (U.S.A.) An attorney for AdSurfDaily President Andy Bowdoin has filed a motion to permit another attorney to appear in U.S. District Court for the District of Columbia, the venue of the civil-forfeiture complaint against ASD’s assets.

    The attorney was identified as Michael R.N. McDonnell of Naples, Fla.

    Murray’s motion was dated Oct. 1. An accompanying affidavit from McDonnell was dated Sept. 30. Ironically the dates on the documents coincided with the one-year anniversary of the dates upon which an evidentiary hearing was conducted at ASD’s request last year.

    Why the documents dated Sept. 30 and Oct. 1 of this year appeared on the docket only today was not immediately clear.

    On Nov. 19, 2008, U.S. District Judge Rosemary Collyer ruled that ASD had not demonstrated at the hearing that it was a lawful business and not a Ponzi scheme.

    Bowdoin submitted to the forfeiture on advice of counsel in January 2009, and then emerged as a pro se litigant in February, saying he’d changed his mind and wanted to rescind his decision to forfeit tens of millions of dollars.

    In July, Collyer ordered Murray, who had become Bowdoin’s paid counsel, to follow-up on motions filed in May. Collyer initially gave the Bowdoin side until Aug. 7 to file arguments. She extended the deadline until Aug. 28 — and then again until Sept. 14 — after Murray advised her Bowdoin was negotiating with prosecutors.

    Bowdoin met the Sept. 14 filing deadline on the last possible day. On Sept. 15, he filed a corrected affidavit. His initial affidavit appeared to have lines and an entire paragraph missing.

    The Sept 15 filing had 23 paragraphs, as opposed to the previous day’s 22. The Sept. 14 filing jumped from paragraph 3 to 5, skipping paragraph 4. Meanwhile, it also had two paragraph 16s, one apparently complete and one apparently incomplete.

    In a brief filed Sept. 14 by Murray, there was a reference to Bowdoin having found the fees accepted by defense counsel Steven Dobson “astonishing.” The reference cited was paragraph 17 from Bowdoin’s affidavit, but the word “astonishing” did not appear in paragraph 17 — or elsewhere in the document.

    Bowdoin’s Sept 15 corrected affidavit also did not include the word “astonishing” — in paragraph 17 or elsewhere.

    On Sept. 28, the U.S. Secret Service filed a transcription of a recording Bowdoin had made earlier in September. The recording was posted online.

    In a Sept. 28 filing that accompanied the Secret Service transcript of the recording, prosecutors said Bowdoin was “delusional.”

    Prosecutors argued that Bowdoin had told Collyer one story and members another to explain events, calling the recording evidence that “this con man cannot manage to keep his stories straight.”

    “Remarkably, Bowdoin even suggests to those members participating in the conference call that the money taken from his bank accounts and, supposedly, never constituting an investment, belongs, not to Bowdoin, but to the membership.”

    On Sept. 25, prosecutors said Bowdoin was trying to lie his way back into the case and that Murray was engaging in “fantasy.”

    Prosecutors’ Sept. 25 filing was blistering, and included a veiled reference to the AdViewGlobal autosurf.

    “[I]t 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,” prosecutors said Sept. 25. “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.”

    Murray, prosecutors asserted, had filed motions at odds with Bowdoin’s claims.

    “Mr. Murray’s apparent suggestion that Bowdoin made a mistake because he was ‘hoodwinked’ by his prior defense counsel is belied by Bowdoin’s own affidavits,” prosecutors said.

    Bowdoin agreed in January to submit to the forfeiture. In February, he began to file pro se motions in a bid to rescind his decision to forfeit tens of millions of dollars seized by the Secret Service in August 2008.

    In March, on the Pro-ASD Surf’s Up forum, Bowdoin explained in a letter to members that he had made the shift from paid attorneys to acting as his own attorney after consulting with a “group” of ASD members.

    “We will be filing papers in the next couple of weeks that should really get their attention,” Bowdoin said, chiding prosecutors in the letter.

    Murray, who became Bowdoin’s attorney after Bowdoin had filed several pro se motions, contends Bowdoin received poor advice from Dobson, a paid attorney previously employed by Bowdoin.

    Prosecutors disagreed.

    “Mr. Murray’s new accusations are, in any event, utterly inconsistent with Bowdoin’s own affidavit testimony,” prosecutors said.

    “Mr. Murray’s manufactured effort to fault Bowdoin’s prior counsel for Bowdoin’s decision to cooperate and his revised decision to profess ‘my belief in my innocence’ is laughable,” prosecutors said. “Bowdoin knew he should expect no leniency unless he stopped pretending that he honestly earned the millions of dollars that the government recovered from his bank accounts in 2008.”

    In April, prosecutors said Bowdoin had signed a proffer letter in the case and acknowledged ASD was operating illegally.

    Murray, however, says Bowdoin believes he is innocent.

    Read Murray’s motion.

    Read Bowdoin’s Sept. 14 affidavit.

    Read Bowdoin’s Sept. 15 affidavit.

    Read the motion from Murray that accompanied Bowdoin’s Sept. 14 affidavit.

    Read an Oct. 8 motion by Murray in response to prosecutors’ Sept. 28 motion.

  • Florida Man Who Created 260 eBay Accounts Convicted In Elaborate Scam That Bilked $717,000 From Customers

    The spread of online commerce has been accompanied by a spread of elaborate frauds — some of which have gathered tens of millions of dollars.

    Accompanying the fraud have been stares of disbelief. Not all of the stares have been directed at the fraudsters themselves. Indeed, thousands and thousands of people globally at any point in time simply refuse to believe they’ve been scammed — perhaps owing to embarrassment.

    Some of them point the finger of blame at law-enforcement agencies that take actions against the cyberspace scammers.

    Online fraud can be particularly elaborate. It often takes advantage of brand names people trust. In the alleged AdSurfDaily Ponzi scheme in Florida, for example, prosecutors say Google’s name was used by ASD promoters as a means of instilling trust in customers.

    Names of other famous companies also were used by ASD promoters — names such as Kodak, Starbucks, Quiznos Sub, Callaway Golf, Macy’s, Toshiba, NBC, Farmers Insurance, USA Today, Priceline.com and more.

    Today comes word that a Florida man has been convicted in a scheme carried out on eBay, one of the most famous websites and brands in the world.

    Nilton Rossoni, 50, of Hallandale Beach, Fla., faces up to 20 years in prison.

    How elaborate was the scheme?

    Prosecutors said Rossoni created “more than 260 different eBay accounts” using aliases “or the real names and address of unsuspecting individuals.”

    Rossoni gathered money for more than 5,500 items but never shipped them. He netted $717,000 over time, prosecutors said. Rossoni averaged about $130 per fraudulent sale.

    Here is a breakdown of some of the listings:

    • Textbooks.
    • Computer flash drives.
    • Rotisserie grills.
    • Tools.
    • Sporting equipment.
    • DVD collections.
    • Airline tickets.
    • Saddles.
    • Saddlebags.
    • Designer luggage.
    • Appliances.
    • Metal detectors.

    “When the auction ended, the winning bidders were notified to send payment to the defendant at a private mail box,” prosecutors said today.

    “Customers of eBay sent payment to the defendant at 59 different private mailboxes opened in names of multiple aliases during the course of the scheme,” they continued. “Once the defendant received payment from the eBay auction winner, the funds were deposited in bank accounts under the control of the defendant, but in the name of a nominee entity or person.”

  • BREAKING NEWS: SEC Attacks ANOTHER Alleged Florida Ponzi And Affinity-Fraud Scheme; FBI Investigating Amid Report Indictments Alleging Securities Fraud, Wire Fraud, Money-Laundering And Conspiracy Have Been Unsealed

    UPDATED 2:03 P.M. EDT (U.S.A.) The Securites and Exchange Commission — which announced yesterday that it had broken up a $22 million Ponzi scheme in Florida — announced today that it was working with the FBI to break up yet another Ponzi scheme in the Sunshine State.

    The newest scheme was targeted at Haitian-Americans who were promised investment returns of 100 percent every 90 days, the SEC said.

    It was not immediately clear when the criminal indictments would become available for public viewing, but the SEC said the indictments were unsealed this morning in Florida.

    Charged civilly by the SEC were HomePals Investment Club LLC and HomePals LLC (Home Pals), and their principals, Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri.

    Bass, Alabre and Taglieri are charged criminally with securities fraud, conspiracy to commit securities fraud, wire fraud and money laundering, the SEC said.

    “The extraordinary promises made by these three men spread by word of mouth throughout a close-knit community,” said Glenn Gordon, associate director of the SEC’s Miami Regional Office. “Bass presented himself as a master trader of stock options and commodities, when in reality he was a master of deceit.”

    Victims resided primarily in South Florida, the SEC said.

    At least $14.3 million was raised in the scheme, which gathered money from as many as 64 “investment clubs,” the SEC said.

    “By the end of December 2008, HomePals had only $7,300 left and stopped making payments to investors,” the SEC alleged.

    On its website, Home Pals claimed “[i]nvestments of $25,000 or more earn higher interest rates.”

    “The defendants claimed they were able to generate such spectacular returns through Bass’ purported successful trading of stock options and commodities,” the SEC alleged.

    “[I]n reality, Bass traded no more than $1.2 million of the $14.3 million raised, generated trading losses of 19 percent, and . . . HomePals used the bulk of the investor funds to repay earlier investors in typical Ponzi scheme fashion.”

    Bass, Alabre and Taglieri misappropriated at least $668,000 of investor funds for personal use, the SEC said.

    The defendants told one lie after another, the SEC said. Among the lies was that investors were protected by a $25 million insurance policy.

    Another lie was that returns were guaranteed, the SEC said.

    Yet another — allegedly told by Bass and Taglieri — was that that Taglieri was HomePals’ attorney.

    “This representation was false because Taglieri is not an attorney,” the SEC said.

    Home Pals advised website viewers that the company was “honest” and adhered to “uncompromising ethics.”

    “We guarantee realistic, honest financial strategies that achieves results. We will lead you on a course to financial freedom. Our years of experience and notable expertise ensure that your financial future is in good hands,” Home Pals said.

    “Our consistent track record of uncompromising ethics instills confidence and trust,” Home Pals told viewers.

    The SEC saw things differently.

    “Bass and Alabre used at least $380,000 to pay for a house where they both resided until recently,” the SEC alleged. “Bass misappropriated an additional $28,000 for himself, part of which he used to purchase an automobile.

    “HomePals also distributed approximately $28,000 to Alabre as ‘compensation,’” the SEC continued. “Additionally, Taglieri received an undisclosed salary of $8,000 per month, and diverted $85,000 of investor funds to pay his overdue child support obligations.”

    Read the SEC complaint.

    Read story from yesterday on another alleged Florida Ponzi scheme.

  • BREAKING NEWS: SEC, CFTC Seek To Smash Alleged Florida-Based Ponzi Scheme With Ties To Panama; David F. Merrick Charged With Unlawfully Acting As Investment Adviser And Operating An Unregistered Foreign Investment Firm From Inside The United States

    UPDATED 12:39 A.M. EDT (OCT. 16 U.S.A.) In twin actions that may send shockwaves across the offshore autosurfing “industry,” the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission have gone to court to stop an alleged Florida-based Ponzi scheme that claimed a presence in Panama.

    Today’s announced actions by the SEC and CFTC expose the vulnerability of autosurfs that register as corporations offshore and arrange web-hosting overseas, but do not comply with securities laws of the United States and foreign countries in which they have a paper footprint or are not regulated in the foreign countries.

    The moves also demonstrate that U.S. securities regulators — no matter where a company arranges webhosting — intend to treat American owners who flout laws as issuers of unregistered securities, unregistered investment advisers and operators of unregistered foreign investment companies from inside the United States

    Named defendants in emergency actions filed yesterday in U.S. District Court for the Middle District of Florida were David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services Inc., MDD Consulting Inc. and Go ! Tourism Inc.

    U.S. District Judge Gregory Presnell entered orders freezing the assets of the defendants and ordering them to repatriate assets to the United States.

    Merrick, 61, lives in Apopka, Fla. On its website, TIRN lists the corporate address of Edificio Advanced 099-Piso 13, Calle Ricardo Arias, Panamá City, República de Panamá.

    “TIRN has been soliciting U.S. residents, and directing them to deposit their funds in U.S. bank accounts,” CFTC said.

    Entities Merrick controls operated a Ponzi scheme that gathered at least $22 million, the SEC said. For its part, CFTC charged Merrick and TIRN with solicitation fraud, accusing them of misappropriating customer funds totaling at least $16.4 million.

    At least $3.7 million in customer funds were diverted to pay Merrick’s personal expenses and “to pay credit cards debts of MS and GTT Services,” the SEC said.

    Millions of dollars were diverted to a firm that provides debit cards — another allegation that may cause autosurf participants to lose sleep.

    “[A]t least $8.8 million was transferred to Anres Technologies Corporation, a privately owned company that issues pre-paid debit cards,” the SEC charged.

    “Merrick and TIRN falsely represented that investors requesting a withdrawal of funds would receive a debit card loaded with their initial investment and return on their investments, when, in fact, the money loaded on the cards was money from other investors,” the SEC alleged.

    Debit cards have become increasingly popular among autosurf operators. Today’s announced actions by the SEC and CFTC, however, demonstrate that regulators are viewing the money placed on cards as money taken from Peter to pay Paul.

    Millions of dollars were moved across borders, the SEC said.

    “[A]t least $2.3 million of investor funds were transferred to accounts in Panama, Mexico, Malaysia, Switzerland and the Netherlands,” the SEC said.

    Although TIRN purported to engage in forex trading and was not an autosurf, the allegations could send a chill across the so-called “offshore” surfing industry.

    TIRN, whose servers appear to resolve to Malaysia, is a registered corporation in Panama. But the Panama National Securities Commission issued a warning that TIRN “is not authorized to act as a financial intermediary for securities and investments and that the [Panama Commission] does not supervise or regulate it,” CFTC said.

    See the TIRN warning by the Panama National Securities Commission, which says TIRN “has not been issued any kind of license.”

    AdViewGlobal (AVG), a surf with close ties to Florida-based AdSurfDaily, is among a number of surfs that use servers that resolve to Panama. Others include BizAdSplash, which says its chief consultant is Clarence Bubsy.

    Busby was the president of Golden Panda Ad Builder, whose assets were seized in August 2008 by the U.S. Secret Service as part of the investigation into ASD and ASD President Andy Bowdoin.

    Another surf company with servers in Panama is the now-defunct AdGateWorld.

    Merrick was charged by the SEC with acting as an unregistered investment adviser and operating an unregistered foreign investment company from inside the United States.

    “From at least July 2008 and continuing through at least October 2009, Merrick and TIRN have raised more than $22 million from approximately 2,500 investors through the fraudulent offer and sale of unregistered securities, in the form of investment contracts in TIRN,” the SEC charged.

    “TIRN instructs investors to deposit funds into bank accounts in the names of MS and GTT, entities controlled by Merrick, and falsely states it will invest these funds in securities and other investments such as stocks and bonds. In fact, Merrick then transfers these funds to other entities he controls, including MDD and Go Tourism, and to himself, colleagues and/or entities under these individuals’ direct control, for their own benefit. Merrick has also used investors’ funds to repay other investors. None of the investors’ funds are invested in any securities or other investments described on the TIRN website,” the SEC said.

  • EDITORIAL: Our Best Wishes To ‘Gomer Pyle,’ AUSA

    William R. Cowden is the man some supporters of AdSurfDaily Inc. love to hate.

    Cowden’s middle name is “Rakestraw.” Such a name posed an altogether too enticing opportunity for one ASD apologist. The apologist opined that Cowden, a federal prosecutor acting on behalf of victims of an alleged $100 million Ponzi scheme, should be placed in a medieval torture “rack” and that ASD members should draw “straws” to determine who got the honor of turning the screw.

    It was only a hint of the deeply troubling excess that would follow.

    After an evidentiary hearing last fall requested by ASD to to explain its business model and to ask for emergency release of funds seized by the U.S. Secret Service in August 2008, Cowden was derided by ASD’s apologists as a hapless, clueless “Gomer Pyle.”

    It didn’t matter that ASD President Andy Bowdoin had entered guilty pleas to felony charges of securities fraud in Alabama a decade previously, the apologists explained. Nor did it matter that Bowdoin’s business partner had been implicated in a securities scheme of his very own in the 1990s.

    What mattered, the apologists explained, was that Bowdoin was a fine “Christian” man who’d invented a miraculous business system for people of faith.

    Cowden, they insisted, didn’t understand technology or the business model. When Andy Bowdoin took the 5th Amendment at the evidentiary hearing, one of his apologists explained that he was “too honest” to testify.

    Another Christian apologist — in a hail of fire and brimstone — called for God to strike the prosecutors dead. Yet another described Cowden as a “Nazi.”

    During the time  ASD’s apologists were deriding Cowden as “Gomer Pyle,” they described Bowdoin’s attorneys as the “Perry Mason” team.

    Perry had reduced Gomer’s case to rubble, the apologists claimed. For good measure, one of them later added that U.S. District Judge Rosemary Collyer would have to be “brain dead” or “taking a payoff” if she ruled against ASD.

    Earlier, Collyer had been made the subject of a prayer chain that admonished God to intervene so she would do the right thing — namely, rule in ASD’s favor.

    Here is how a Mod who related one-sided reports to members of the Pro-ASD Surf’s Up forum assessed the performance of ASD’s witnesses and attorneys from both sides at the conclusion of the evidentiary hearing:

    [ASD] Witnesses:
    Bob Grayson – Excellent
    Gerald Nehra – Excellent
    Chuck Osmin -Excellent
    ASD Legal Team – Excellent

    US Attorney – Cowden – Not so much.
    Witnesses for the Prosecution: … … … Zero –
    Victims prior to 8/01/08:… … … Zero

    Collyer ruled Nov. 19 that ASD had not demonstrated at the hearing that it was a legal business and not a Ponzi scheme. She chastised ASD’s expert witness — an MLM attorney who had been paid a retainer of $24,000 and opined that ASD was not a Ponzi scheme — for relying on one-sided information from ASD and not performing a thorough analysis of ASD’s business operations before arriving at his opinion.

    ASD did not produce an audited balance sheet at the hearing, thus failing to dent the prosecution’s claim the company was insolvent and using money from new members to pay old ones in a shell game.

    No release of funds would be forthcoming, Collyer said.  Her ruling can be summarized in two words:

    Gomer won.

    After ASD suffered the stinging blow, Bowdoin apologists who once gleefully described his attorneys as the “Perry Mason” team and their performance as “Excellent” apparently decided they’d been too generous in their praise.

    The apologists ignored the fact that Andy Bowdoin had more than two months to produce an audited balance sheet and failed to do so. They also ignored the fact that Bowdoin had failed to provide documentation to his own lawyers when requested to do so and that testimony at the hearing was contradicted by information on ASD’s own website.

    Under a theory that emerged later, both Bowdoin’s attorneys and the prosecution were worthy of condemnation. The only people who could be trusted were among a “group” of ASD members with whom Bowdoin consulted in private. Members of the “group” advised Bowdoin to become his own lawyer.

    “The group said that my attorneys had taken the wrong approach,” Bowdoin said. “The group was very confident that they could help because the government had broken so many laws and had violated our rights as citizens of the United States.”

    This year and last, dozens of advocates for ASD wrote letters to the Inspector General at the U.S. Department of Justice to have Cowden and his then-boss — former U.S. Attorney Jeffrey A. Taylor — investigated and perhaps even fired. One Bowdoin apologist said Cowden would be lucky to find work in a fast-food restaurant after ASD members were done destroying his legal career.

    Some ASD apologists also wrote letters to Sen. Patrick Leahy, chairman of the Senate Judiciary Committee.

    Thirteen U.S. banks failed during the period in which ASD’s apologists were composing those letters and Leahy’s staff was fielding them in the opening days of the year. That number now has increased to 98, with weeks remaining in 2009. There were three bank failures in all of 2007.

    The ASD case, of course, is about keeping banks clean and safe from those who would pollute them with dirty money gathered in domestic and international fraud schemes.

    To describe the smear campaign by some ASD members against Cowden as unjustified does not do it justice. It was insidious, plain and simple. Later, Cowden was attacked by Curtis Richmond , a man hailed a “hero” on the Surf’s Up forum, the site from which the torture rack was proposed.

    Richmond, who once declared that he was immune from U.S. law because he was a “sovereign” being, accused Cowden, Taylor and Collyer of a money grab.

    “The U.S. Atty. and/or U.S. Judge Had No Authority or Jurisdiction to Steal Most of the $93 million of ASD Member Ownership Interest,” Richmond said, using his trademark mix of uppercase and lowercase letters. “All of the ASD Members had a Constitutional Right to Make A Contract With ASD and None of the ASD Members had a Contract With the U.S. Government.”

    Richmond, who has a contempt conviction for threatening federal judges in a separate case and holds the distinction of having been banned from the practice of law in Colorado even though he is not an attorney, advanced his theory of the ASD case:

    “Since the U.S. Atty. could not present any court order giving him Authority to Seize the $40 million of Cashier Checks and deposit them in an Account Of His Choosing, he is Guilty of Misappropriation of Funds [at] a minimum and very possibly Embezzlement,” Richmond claimed.

    Richmond also claimed he had “irrefutable” evidence against the prosecutors and suggested Collyer was conspiring with another federal judge and the government to deny justice to ASD members.

    “This was accomplished by sending by Return Receipt with a ‘Demand For Legal Evidence Affidavit’ to William Cowden, Assist. U.S. Atty., Jeffrey Taylor, U.S. Atty., and Roy Dotson, Special Agent, U.S. Secret Service[,] giving them 7 Days to present Legal Evidence that the Statements Made in the Demand For Legal Evidence[,] including the Listed Constitutional Rights, WERE FALSE,” Richmond claimed.

    “The Demand for Legal Evidence [was] part of Notarized Affidavits and clearly stated “Your Silence will be an Admission that you do not have the Legal Evidence,” he said.

    Cowden, Taylor and Dotson knowingly and willingly defaulted on his demands “because they had no Legal Evidence or believed they were above the law,” Richmond said. “Attorneys & Judges Are Not Above The Law. A Lawful Default Is a Lawful Default.”

    In short, Richmond’s theory of the ASD case is that you can demand a litigation result from federal judges and federal prosecutors by stating what you’d like to see occur, putting a letter containing the demand in the mail, giving the recipients a few days to submit to the demand — and then claim they’ve broken the law by not playing the game you brought to their doors.

    It was not the first time he had played the game. Richmond was among a group of litigants from a sham Utah “Indian” tribe sued for racketeering and ordered last year to pay damages for their conduct, which targeted judges, prosecutors, police officers — and even a family-services worker — in a scheme to place enormous financial judgments against them.

    Acting as an “arbitrator” for a sham company, Richmond signed a fraudulent award against the family-services worker for more than $300,000. The “tribe” placed a sham judgment for $250 million against a county prosecutor. Richmond claimed the federal judge hearing the case owed him $30 million, and the tribe drew up fraudulent arrest warrants against two other judges and Richmond’s litigation opponents in a banking case.

    The tribe fabricated a “Supreme Court,” which used the address of a Utah doughnut shop,  and tried unsuccessfully to force the U.S. Marshals Service to serve fraudulent court documents that called for the imprisonment of judges and Richmond’s opponents.

    After Richmond began to file pro se pleadings in the ASD case in February, others followed, including ASD President Andy Bowdoin, who had fired his attorneys after consulting with the “group” of members. Bowdoin’s pro se pleadings were not as far out as Richmond’s, which is not to say they were grounded on terra firma.

    Bowdoin rewrote the facts of a civil case against money and property seized from him, declaring himself a “defendant” in a quasi-criminal case and saying his paid attorneys had been incompetent. Bowdoin later publicly smeared one of his attorneys.

    Prosecutors now say Bowdoin, who apparently forgot he’d told the Secret Service that ASD had $1 million in a bank on the Caribbean island nation of Antigua before later claiming ASD needed emergency funds to operate, is “delusional.”

    Bowdoin, a defendant in a separate racketeering lawsuit to which he never has responded, claims a former Miss America is one of the inspirations behind his renewed litigation efforts against the government. He’d press on, he said, because Miss America didn’t give up after being denied the title in four previous bids to earn the crown.

    She finally won in her fifth attempt, Bowdoin explained to ASD members.

    He also explained that he was trying to get the government to return money the Secret Service seized from members, even though he always has maintained in court filings that the seized money belonged to him.

    By August, dozens of pro se litigants who sought to paint the prosecution as an unwanted Orwellian Big Brother had joined in the fray. An ASD upline shared a litigation template in which names were swapped in and out. Filers claimed they had been victimized by the government, not ASD.

    Cowden’s name was misspelled as “Crowden” in each of the fill-in-the-blank claims that began to flood the courthouse in August. They were still coming in last week, despite the fact Collyer already had denied the argument contained in the litigation template.

    With a new administration now in power in Washington, new U.S. Attorneys are being appointed and some assistant U.S. Attorneys (AUSAs) are leaving government service.

    There are reports today that William Cowden, AUSA, has left the Justice Department to join the private sector. We wish him the best in his pursuits  — and propose a special honor for his exceptional service to the victims of AdSurfDaily.

    We were unable to determine immediately if “Gomer Pyle” had a middle name on either The Andy Griffith Show or a spinoff, Gomer Pyle, USMC.

    Regardless, it would be nice — if only for today — if the thousands of ASD victims Cowden so capably represented would honor his government service by ascribing the middle initial “R” to the name of the character played by Jim Nabors.

    “Gomer Rakestraw Pyle” has a nice ring to it. “Gomer R. Pyle.”

    No one should be confused: Adding Rakestraw to the noble name of Gomer Pyle is a gesture of high esteem for William Cowden, who has been vilified, ridiculed and scorned by people who said nothing when it was suggested that he be placed in a rack, that straws be drawn and that a winner be declared to carry out the medieval torture.

    Delusional does not begin to describe this behavior. Some of the apologists appear to be constitutionally incapable of accepting the premise that Andy Bowdoin involved them in a criminal enterprise. At the same time, they have displayed the ceaseless constitutional capability of conflating one reality after another to provide cover for a fraudster and to smear one of the career prosecutors trying to bring him to justice.

    In the end, Bowdoin’s apologists could not even get their insults to make sense. Gomer Pyle, USMC, indeed, was a very good man — one held in the highest esteem.

    To the ASD critics of William Cowden, AUSA, we say, Honi soit qui mal y pense.

    And to William Cowden we ascribe the highest titular honor — “Gomer Pyle, AUSA” — and pay our highest regard:  Shazam!

    May there be many more Gomer Pyles at the Department of Justice in the years ahead.

    You see, “Gomer Pyle, USMC”  went off the air as a prime-time TV show in 1969. But the character of Gomer Pyle went on to become synonymous with virtue, a trait sorely lacking among Andy Bowdoin’s apologists.

    In 2001, 32 years after the fictional Private First Class Gomer Pyle left prime time, the real U.S. Marine Corps promoted him to lance corporal. In 2007, Gen. John F. Goodman, commander of the real U.S. Marine Corps Forces in the Pacific, promoted the fictional Gomer Pyle to full corporal.

    Real Marines stood at attention during the ceremony. Gomer Pyle was lauded for honesty, loyalty and devotion to duty.

    You have done well and were in good company, Mr. Cowden.

  • Street Address Of ASD Site That Made Odd Claims Before Vanishing Tied To Major Insurance-Fraud Investigation

    The street address listed for the domain ASD2Day.com appears in Florida records as the address of a woman charged with patient brokering and solicitation in a major insurance-fraud sting.

    Records show that a woman named Barbara Cruz was charged with four felony counts of insurance fraud in 2000. The name Barbara Cruz was listed as the name of the registered owner of the ASD2Day site, which now is offline.

    The Florida Insurance Commission described the case as a complex probe that involved staged automobile accidents, false Personal Injury Protection (PIP) claims against insurance companies and “runners” hired by unscrupulous medical clinics to recruit people involved in accidents — real or staged — into the insurance scam.

    Bill Nelson, Florida’s insurance commissioner when the sting was conducted, said the scheme was sucking wealth from Florida’s economy.

    “Our investigators estimate that more than half of the auto insurance PIP claims in the Miami area are fraudulent,” Nelson said, in 2000. “So far, we’ve identified at least $10 million that these suspects alone allegedly bilked from insurers at the expense of consumers throughout Florida.”

    Nelson, who served as a payload specialist on the space shuttle Columbia in 1986, previously was a member of the U.S. House and is now a U.S. Senator.

    Barbara Cruz was among a group of 51 people in the Greater Miami area in south Florida to be charged after a year-long investigation by the Insurance Commission. Docket entries show a person by the same name with the same birth date was charged in a case slugged “ANIMAL/FIGHT/OWN/SEL” in 1989.

    How the case involving animals was disposed is unclear. A docket entry is marked “NO ACTION” and the file location is marked “DESTROYED.” The insurance charges are marked “NOLLE PROS,” which suggests the case ultimately was dropped.

    ASD2Day.com appeared online in August, taking a Pro-AdSurfDaily point of view. ASD was implicated by the U.S. Secret Service in a $100 million Ponzi and fraud scheme in August 2008.

    Among the claims on the site was a puzzling assertion that U.S. District Judge Rosemary Collyer was on an Aug. 28, 2009 deadline “to determine if the US Attorney General’s case against ASD should move forward.”

    Collyer was on no such deadline.

    See earlier story.

  • Site That Used ASD’s Name And Made Odd Claims While Bowdoin Was Negotiating With Prosecutors Goes Offline

    A website known as ASD2Day.com that was registered Aug 19 in the name of a Florida woman now is throwing a server error and appears to be offline.

    ASD President Andy Bowdoin was in negotiations with federal prosecutors when the ASD2Day domain name was registered, and some ASD members were participating in a PR campaign that positioned themselves and Bowdoin as victims of a government prosecution run amok.

    Among the claims on the site was a puzzling assertion that U.S. District Judge Rosemary Collyer was on an Aug. 28 deadline “to determine if the US Attorney General’s case against ASD should move forward.”

    Collyer was on no such deadline, and the prosecution’s case was not teetering on the edge of disaster. At the time, Bowdoin was the subject of an order from Collyer to follow-up on pleadings he had made earlier in the case. On July 24, Collyer, noting that neither Bowdoin nor his attorney had followed up on pleadings made in May, ordered them to respond by Aug. 7.  That deadline, which applied to Bowdoin, later was extended to Aug. 28 — and then until Sept. 14 — when Bowdoin’s attorney notified the court that Bowdoin was negotiating with prosecutors.

    The ASD2Day site featured Pro-ASD content by an unnamed writer and a headline titled “Inside Information.” It described ASD’s “business concept” as a “proven reality” and used meta descriptions such as “Picture of a Flight Simulator Plane, to give an emotional feel.”

    ASD2Day.com claimed, among other things, that ASD could not be a Ponzi scheme because the script employed by the autosurfing firm could not be programmed to permit a Ponzi scheme to occur.

    Using overblown, confusing reasoning and language, the site claimed:

    “As we all know, ASD has been ruled for an irrelevant acquisition of `PONZI SCHEME OR PYRAMID` ruling. ASD Utilized a well known Traffic Exchange Script in the Online Marketing industry. The Script was named Pats Pro. I myself am a Programmer as well. I have worked with this script before to develop websites and add-ons. By the pure mechanics or functions in the Pats Pro system, there is no function of, that such can be ruled ponzi or pyramid. The PATS PRO system does not work as Ponzi, the written code in the software has no leads to such acquisition either.”

    Although the language appeared to be an attempt to suggest that ASD President Andy Bowdoin could not be guilty of operating a Ponzi because the script did not support a Ponzi model, federal prosecutors always have argued that the internal actions of ASD and Bowdoin — not the actions of a script — resulted in criminal instances of wire fraud and money-laundering.

    The writer did not say how the script would protect Bowdoin and ASD from another core allegation in the case: that ASD was engaging in the sale of unregistered securities, meaning the company was selling investment contracts and operating as an unregistered issuer and dealer of securities.

    Meanwhile, the site claimed that “The well known Internet Giant `Google` Ad sense service is not all that different from the ASD Advertising System (Pats Pro).”

    Many ASD supporters have argued that Google and ASD employed a similar business model, but have never explained why Google founders Sergey Brin and Larry Page — both of whom have personal fortunes estimated at $15.3 billion by Forbes magazine and are tied for 11th spot on the list of the richest Americans — never plunked down $100 for a script that would permit Google to do things like ASD.

    Why the ASD2Day site now is offline is unclear. The site included at least two calls to action: “Defend Our Business, Defend Our Rights!” and “ASD2DAY · For a Free Country.”

    Among the featured links were:

    • Join our stand
    • Learn about Defending ASD
    • Meet the team

    A subhead prompt instructed members to “Find out the Truth” and to “Read Articles, comment [on] them and learn the truth the US goverment doesn’t want you to hear..” The site also included a link to a Meebo chatroom.

    The chatroom link still is accessible:

    http://widget-cdn.meebo.com/mcr.swf?id=ySKbgEjiEw&eurl=

    Two links are visible in the chatroom. One is a link to a failed organization known as ASD Members International (ASDMI), which was formed in October 2008 by members of the Pro-ASD Surf’s Up forum.

    Another link is to a URL for a business owned by “Professor” Patrick Moriarty, now under indictment for tax fraud. Moriarty was a founder of ASDMI.

  • EDITORIAL: An Odd Week For America

    Last week was an odd one for millions of Americans. President Obama was announced the winner of the Nobel Peace Prize, and no one really knew what to do.

    The Peace Prize is the big one, the Nobel people remember for generations. But Obama has been in office only months, and the Nobel committee more than hinted he’d been named the Peace Prize recipient because of idealistic speeches, not because he’d been able to implement his ideas.

    Obama seemed almost embarrassed by the prized accolade. It instantly created a political problem for him. Opponents were quick to seize on the point he had been in office only nine months and has had trouble implementing his domestic plans, let alone his grander vision for the world.

    It was easy — and arguably even justified, given the names of recent Peace Prize recipients and the committee’s inclination to politicize the award — to view any world figure who opposed the policies of former President George W. Bush as worthy of the Prize.

    Bash Bush. Get a Nobel.

    Even people who support Obama were baffled by the selection. The award is too serious, of course, to spark a ticker-tape parade to honor the recipient. But Obama’s allies in the Congress and in the voting pool were not able even to puff out their chests in a convincing way. It was hard to call the award a win for America, no matter how one views the President.

    And this brings us to this week’s issue of Time magazine, which features one of the most thought-provoking columns we have ever read. Before we describe what the column is about, perhaps we should take a moment to explain why we’ve spent some time today to write about politics when this Blog normally writes about crime.

    It’s because the Time magazine column challenges people to think and to question their views — something we try to do around here. No, we’re not Time. We’re a small Blog in an ocean of Blogs. Even so, we try to provide readers with some brain fodder and always are pleased when they respond with posts that help us shape our thinking, even if their posts don’t help us change our mind about the issues we write about.

    The Time column by David Von Drehle poses a question we never before had contemplated:

    Should the Nobel Peace Prize be awarded to nuclear weapons?

    Von Drehle says yes — and he makes a thought-provoking argument. Noodle it if you have the chance.

    http://www.time.com/time/nation/article/0,8599,1929553,00.html?xid=rss-fullnation-yahoo