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  • Government Revokes Plea Offers In Case Against ‘Professor’ Patrick Moriarty; Prosecution Says It Has Seven Binders Of Evidence, Including Evidence From A ‘Casino’

    Federal prosecutors have revoked plea offers made during discussions with a federal public defender representing AdSurfDaily mainstay “Professor” Patrick Moriarty.

    Moriarty has hired a new attorney, and prosecutors have advised the attorney that they have “voluminous” evidence, including seven 4-inch binders of records.

    Part of the evidence came from records at an unspecified casino, according to court records.

    “Please be advised that any plea offers previously made with the defendant’s former counsel are revoked,” said Rosemary Casey Meyers, the prosecutor handing the case, in a letter to Moriarty’s new attorney.

    Meyers is an assistant U.S. Attorney for the Eastern District of Missouri, where a tax indictment against Moriarty was returned in March by a federal grand jury. The letter means that any offer the government might have made earlier in the case is off the table.

    Other evidence, according to court filings, includes IRS records, bank records, Social Security records, business records and verbal statements by Moriarty. Some 4-inch binders hold 780 sheets of paper.

    Citing his client’s poor health, Moriarty’s new attorney, Lenny Kagan, now has asked for a continuance. The government did not object. Moriarty is scheduled to have cancer surgery this month. The trial had been slotted for next month.

    The prosecution agreed to let Moriarty know if it intended to introduce evidence of other crimes prior to trial, without disclosing if Moriarty was being investigated for other matters unrelated to the tax indictment handed down in March.

    Screen shot: Discovery receipt that shows government has casino records in the case against 'Professor' Patrick Moriarty.
    Screen shot: Discovery receipt that shows government has casino records in the case against 'Professor' Patrick Moriarty.

    Moriarty was charged with filing false income-tax returns for the tax years 2002, 2003, 2004 and 2005. Prosecutors said he underreported his income by an unspecified amount for the tax year 2002; claimed a false deduction of $30,000 for “legal fees” for the tax year 2003; and claimed a false amount of $23,533 withheld for the tax year 2004 and a false amount of $23,433 withheld for the tax year 2005.

    In May, the PatrickPretty.com Blog reported that Moriarty, in 2006, started a nonprofit organization for a Missouri man accused of murdering a woman in cold blood after he had shot a police officer four times.

    The officer and his partner had stopped the man, Bryan Tullock, for running a stop sign in Montgomery City, Mo., on June 2, 2006. As officer Brandon LyBarger, 25, approached Tullock’s car shortly after midnight, Tullock shot him four times with a 9-mm handgun and also opened fire on LyBarger’s partner.

    The second officer, Jarrod Brooks, returned fire, striking Tullock’s Cadillac but not Tullock.

    When officer Brooks called for backup and went to the aid of his downed colleague, Tullock fled, police said. Tullock broke into the home of Heidi Casagrand about a block from the scene of the police shooting.

    He shot and killed Casagrand, 32, and also shot at her husband. Tullock fled the second shooting scene and confronted Ricky Fry, 33. Tullock shot Fry eight times outside of his home, leaving him for dead.

    LyBarger and Fry, who had been hit by a combined total of 12 bullets, survived.

    Tullock was sentenced to life in prison without the opportunity for parole earlier this year. He could have been sentenced to death.

    Moriarty registered the nonprofit for Tullock, the shooter, on Oct. 2, 2006, four months to the day after the rampage. Records suggest that the IRS already was interacting with Moriarty at the time be started the nonprofit.

    Two years later, in October 2008, Moriarty was instrumental in registering another nonprofit in Missouri. Along with members of the Pro-AdSurfDaily Surf’s Up forum, Moriarty started an organization known as ASD Members International (ASDMI), which solicited money to do battle with the government in the civil-forfeiture case against ASD, a Florida company implicated in an alleged $100 million wire-fraud, money-laundering and Ponzi scheme.

    ASDMI promised to litigate against the government even if it was behaving legally. Payments were accepted from at least 176 ASD members, but no litigation was filed.

  • BREAKING NEWS: Receiver In FTC Case Against Parent Company Of Noobing Autosurf Seeks Wholesale Demolition Of Firm; Asks Judge To Approve Plan To Sell Assets — Right Down To Restroom Wastebasket

    Assets of the parent company of an autosurf firm that targeted customers with hearing impairments would be sold at auction — up to and including a stainless-steel wastebasket in the women’s restroom, according to a plan proposed by the receiver in the case against Affiliate Strategies Inc. (ASI) and other companies.

    ASI is the parent company of the Noobing autosurf. U.S. District Judge Julie A. Robinson of the District of Kansas would have to approve the plan submitted by Larry Cook, the court-appointed receiver.

    Screen shot from court filings: Part of the inventory of Affiliate Strategies Inc.
    Screen shot from court filings: Part of the inventory of Affiliate Strategies Inc.

    Robinson previously ordered ASI to repatriate to the United States all assets and documents held on foreign soil, and cleared the way for any safe-deposit boxes to be opened and inspected. The judge also ordered assets not to be concealed or dissipated and records not to be destroyed.

    In a coincidence that conjures images of another autosurfing company embroiled in litigation, Cook revealed in the plan that ASI owns a jet-ski. Federal prosecutors said in December that money from Florida-based AdSurfDaily Inc. (ASD) was used to purchase two jet-skis.

    Prosecutors seized ASD’s jet-skis in a forfeiture complaint and may choose to liquidate them later, if court approval is gained.

    Cook’s plan would sell ASI’s jet-ski, a 2005 Yamaha, along with a 2003 Saturn automobile owned by the firm.

    “[Cook] previously determined the Receivership Defendants’ business operations could not be operated legally and profitably,” the receiver’s attorney, Brian M. Holland, said in a court filing.

    The Grant Writer’s Institute — another company affiliated with ASI — was accused in August of charging a 70-year-old Philadelphia man $995 for the names and addresses of three benevolent entities that could help him repair the home he shares with his wife.

    One of the addresses proved to be the address of the Philadelphia Regional Office of the U.S. Department of Housing and Urban Development, which had been misidentified by the Grant Writer’s Institute as a benevolent organization known as “World Changers,” according to court filings.

    In July, ASI, the Grant Writer’s Institute and several affiliated firms and individuals were accused by the FTC and the attorneys general of Kansas, Minnesota and North Carolina of participating in a scheme that promised “guaranteed” grants of $25,000 from economic-stimulus funds provided by the government.

    Brett Blackman, president of Noobing, is the head of ASI.

    In August, Cook advised Robinson that the companies were insolvent and that attorneys had received “thirty two US Mail crates” filled with consumer complaints on a single day.

    Blackman, according to Cook, recently registered several corporations offshore, including Noobing, which was registered on the Caribbean island of Nevis on March 25, 2009; ASI Management Inc., formed in Belize on March 24, 2009; Landmark Publishing Group LLC, formed in Nevis on March 25, 2009; Landmark Publishing LLC, formed in Nevis on March 25, 2009; International Research and Writing Group LLC, formed in Nevis on July 1, 2009; and International Publishing Group LLC, formed in Nevis on July 1, 2009.

    All in all, Cook said, “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.”

  • BREAKING NEWS: Two Dead, Two Listed In Critical Condition, 21 Taken To Hospitals; Troubling Medical Situation Develops At New-Age Retreat In Arizona

    Sweat dome: Photo courtesy of Yavapai County sheriff’s office.
    Sweat dome: Photo courtesy of Yavapai County sheriff’s office.

    UPDATED 7:15 P.M. EDT (U.S.A.) Homicide detectives are investigating a disturbing situation in Arizona in which two people have died and others developed severe medical symptoms after engaging in a group sauna at the Angel Valley Retreat in Sedona.

    Angel Valley promotes “a unique energetic environment to support your journey of self-discovery, healing and realization of your True Self.” The retreat is near the ranch of Sen. John McCain.

    Dwight D’Evelyn, a spokesman for the Yavapai County sheriff’s office, said 64 people were inside a structure known as a “sweat dome” when some of the participants became ill.

    The event was hosted by James Ray, D’Evelyn said.

    James Ray is an author who has appeared on Oprah and Larry King Live, among other programs. Ray was inside the sweat dome when participants were sickened and was interviewed last evening by authorities.

    Ray’s company, James Ray International, provides a release of liability for events that reads in part:

    “I am fully aware and understand that I will be given the opportunity by the Company to
    participate in physical, emotional and other activities during the Event, some of which
    may take place outdoors and/or require the participants to be isolated from one another
    and/or include very loud music.

    “I am fully aware that I may suffer physical, emotional, financial or other injury during any of the Activities and there is and can be no assurance or guarantee regarding my health or safety in connection with my participation in the Activities.”

    Ray’s company expressed condolences today “to those who lost friends and family” and a prayer for “a speedy recovery for those who took ill,” the Associated Press is reporting.

    Few additional details have emerged. At least 21 people were taken to hospitals after being inside the crudely constructed, sauna-like sweat dome at the facility. At least two people have died and three more are reported to be in critical condition.

    Investigators are treating the area as a crime scene, although authorities have not said whether they believe a crime had occurred. The incident began to unfold yesterday and was treated as a hazardous-materials situation.

    Three people were in cardiac arrest when medical crews arrived, according to early reports.

    Fox News initially slugged the story URGENT, and a local ABC affiliate is reporting that the Yavapai County sheriff’s office is in the process of obtaining search warrants.

    D’Evelyn said the agency would hold a news conference tomorrow.

    “Some attendees told detectives they paid up to $9000.00 for their stay and participation in the program” Ray hosted, D’Evelyn said, in a sheriff’s office statement.

    See early coverage at abc15.com.

    See early Fox News coverage.

  • EDITORIAL: Andy Bowdoin’s ‘Caddyshack’ Problem

    Andy Bowdoin: Be the ball.
    Andy Bowdoin: Be the ball.

    The AdSurfDaily case began in the strangest of ways: Within hours of being notified in August 2008 that his bank accounts would be seized, ASD President Andy Bowdoin recorded a message advising callers to the purported advertising firm that God was on its side.

    Two months earlier, Bowdoin had exhorted an ASD crowd in Las Vegas to imagine becoming wealthy. He used God in his sales pitch. He also urged attendees to plunk down $50,000 to purchase ad-packs because the ceiling on purchases soon would be lowered.

    Thanks to the Chevy Chase movie “Caddyshack” in which the star’s character, Ty Webb, exhorted a charge to “be the ball,” the line had become a metaphor for hucksterism long before Bowdoin took the stage in Las Vegas. Bowdoin reminded the crowd — without telling members he had pleaded guilty a decade prior to felonies in Alabama for fleecing investors — that he had become a “money magnet.”

    Be a money magnet, Bowdoin told the Las Vegas crowd. Be like me.

    Eleven days later, prosecutors said, being a money magnet like Bowdoin resulted in a transaction in which more than $177,000 was removed from AdSurfDaily accounts at Bank of America and placed in a freshly opened account at Capital City Bank in the name of another company. Shortly after that, more than $157,000 of the opening deposit was moved by wire to Citi Mortgage Inc. to retire the mortgage on the home of Bowdoin’s stepson and his wife.

    Prosecutors have not detailed what happened to the remaining balance of nearly $20,000 in the Capital City Bank account. They did, however, outline a string of purchases with other ASD money that resulted in the acquisition of three automobiles, including a $50,000 Lincoln, a Cabana boat, jet skis and marine equipment.

    That’s what being a money magnet meant to Andy Bowdoin.

    It also meant, prosecutors said, that Bowdoin had cheated his own members by placing an ad for a failed, dissolved business in his own advertising rotator so he could collect “rebates” at their expense. It also meant that Bowdoin had paid an employee to surf for his son so the son could profit at the expense of the membership — and that other favored individuals were gifted into the program so they could profit at the expense of the membership.

    We doubt that Chevy Chase would have found Bowdoin’s acts funny. But he might have seized upon them as fodder for the brand of comedy that serves a higher purpose, a purpose of enlightenment.

    “I’m going to give you a little advice,” Ty Webb said in Caddyshack. “There’s a force in the universe that makes things happen. And all you have to do is get in touch with it, stop thinking, let things happen, and be the ball.”

    Bowdoin, whom prosecutors said was at the helm of a $100 million wire-fraud, money-laundering and Ponzi scheme operation, later compared the government’s actions to the 9/11 terrorist attacks that had killed nearly 3,000 people.

    Prosecutors described Bowdoin as the head of a flock who had “followers.” No one was quite sure of what that meant. All of that changed, however, when some ASD members painted the prosecution as “Nazis” and engaged in various petition drives and letter-writing campaigns aimed at providing cover for Bowdoin and destroying the careers of career civil servants — people whose job descriptions include bringing criminals to justice, protecting the U.S. financial infrastructure and safeguarding the life of the President of the United States, the life of the Vice President of the United States, the lives of their families and the lives of former Presidents and visiting heads of state and dignitaries.

    The public at large applauds law enforcement for stopping Ponzi schemes in their tracks before they can mushroom and consume any more wealth. They’ve seen how various men on the stage over the years had exhorted the audience to be a money magnet — and they know how a comedian such as Chevy Chase can reduce hucksterism to its essence:

    “You’re not being the ball, Danny.”

  • Richard M. Harkless, Ponzi Scheme Figure, Sentenced To 100 Years In Prison; Judge Says He Showed No Remorse

    A California man convicted of wire fraud, mail fraud and money-laundering in a $60 million Ponzi scheme has been sentenced to 100 years in prison and ordered to pay nearly $35.5 million in restitution.

    Separately, Richard M. Harkless was ordered to pay $42 million in disgorgement, prejudgment interest and civil penalties in a case brought by the SEC. Three accomplices were ordered to pay assessments totaling $28 million and sentenced to a combined total of up to 18 years in prison.

    The scheme featured payouts to whet the appetites of investors, a program designed to encourage them to “roll over” money to keep it in the system and appeals to get family members and friends involved, prosecutors said.

    Dozens of victims wrote to the judge, requesting a harsh sentence. One of the victims in the case was a 79-year-man who lost $85,000 and now depends on help from a church and a senior center that serves free meals to get by.

    Harkless’ 100-year sentence is believed to be the longest sentence for a white-collar crime ever handed down in the Central District of California, and the judge minced no words in condemning the scheme

    U.S. District Judge Virginia A. Phillips said Harkless had shown no remorse for his crimes, pointing out that he had taken advantage of vulnerable people, some of whom lost their retirement savings and college funds.

    Harkless, 65, caused “every kind of grief and loss imaginable” and demonstrated he “would commit his crimes all over again if given the chance,” Phillips said.

    Harkless operated the MX Factors Ponzi scheme earlier this decade. Prosecutors said he began to hide money offshore when the scheme was on the verge of discovery by authorities.

    “As the scheme began to collapse [in 2004], Harkless diverted millions of dollars of investor money to Belize and Mexico,” said the office of Acting U.S. Attorney George S. Cardona. “In the final months of the scheme, once Harkless knew that he was under investigation by various state regulators, he accelerated his fundraising and accelerated the transfer of funds to his own accounts in Belize.”

    Harkless then fled to Mexico, prosecutors said. He tried to slip back into the United States in 2007, but was arrested by IRS special agents in Phoenix.

    The case featured the combined investigative tools of the Justice Department, the IRS, the SEC, the U.S. Postal Inspection Service and the FBI.

    Harkless “skimmed investor funds to finance a Mexican crab fishing business, pay personal expenses, and fund overseas bank accounts,” the SEC said today, in announcing the sentence.

    Three Harkless accomplices also have been sentenced to federal prison.

    Daniel Berardi, Thomas Hawkesworth and Randall Harding pleaded guilty and received sentences of up to six years each.

    Berardi and Hawkesworth were ordered to pay more than $11 million in disgorgement, prejudgment interest and civil penalties. Harding was ordered to pay more than $17 million.

    Investors in what MX Factors positioned as a government-guaranteed loans program were promised returns of up to 14 percent every 60 to 90 days and encouraged to keep their money in the system by “roll over,” prosecutors said.

    “The vast majority of MX Factors investors were ‘reloaded,’ meaning that they were convinced to invest money more than once,” prosecutors said.

    Much of the evidence in the case would sound like a familiar refrain to readers of autosurf Ponzi boards and surf promoters, although MX Factors was not an autosurf.

    “[S]everal victims testified that Harkless and his co-conspirators encouraged potential investors to try out the MX Factors program, investing in one 60- or 90-day cycle and then withdrawing their money to see if it worked,” prosecutors said.

    “Once victims felt more comfortable with the program, Harkless and his co-conspirators encouraged them to invest even more and to get their families and friends to invest as well,” prosecutors said.

  • BREAKING NEWS: Bowdoin Attorney Says Client ‘Not Happy’; Claims Government’s Position ‘Indefensible’

    UPDATED 4:58 P.M. EDT (U.S.A.) ASD President Andy Bowdoin is “not happy” and recent filings by the prosecution and the U.S. Secret Service are “indefensible,” Bowdoin’s lawyer said in court filings today.

    Charles A. Murray, Bowdoin’s attorney, argued again that Bowdoin had been ill-served by a previous attorney when he agreed to surrender claims to tens of millions of dollars seized in a wire-fraud and Ponzi scheme case last year, adding that the government was attempting “to obfuscate and derogate any and all statements made by Mr. Bowdoin.”

    “It is not difficult to believe that a person placed in Mr. Bowdoin’s position, facing possible jail time at 74 years of age and losing the company he built up, would have put Mr. Bowdoin in a state of mind wherein he agreed to do what his attorney was telling him to do and what the government was urging him to do,” Murray said.

    Bowdoin released his claims to the money in January, withdrawing the claims “with prejudice.” U.S. District Judge Rosemary Collyer granted Bowdoin’s request to release the claims Jan. 22.

    By late February — this time without an attorney — Bowdoin said he had changed his mind about submitting to the forfeiture, and began to file a series of pro se motions to get back in the case.

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

    On Sept. 28, the Secret Service filed a transcript of an audio recording Bowdoin or a person who aided him had posted online the previous week, and prosecutors described the recording as evidence “this con man cannot manage to keep his stories straight.”

    Bowdoin, prosecutors argued, was “delusional.”

    “To this Court, Bowdoin insinuates that he was misled by his former attorney before agreeing to cooperate and to release claims,” prosecutors said Sept. 28. ”To the former members, however, Bowdoin proclaims that ‘after a few months’ of cooperating he became ‘unhappy with [his prior attorneys’] results and decided to stop cooperating because ‘it would not have been beneficial to everyone’ for him to ‘accept a plea deal[.]‘”

    “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,” prosecutors said.

    Murray said the government argued no law and took “great pains to provide the Court with a transcribed telephone call.”

    “[I]t is not surprising that Mr. Bowdoin was unhappy with his former attorney,” Murray said. “It is not surprising that Mr. Bowdoin is angry with the government and his
    attorney. He signs a release of claims, and now the government is pursuing criminal charges.”

    Bowdoin, Murray said, “was doing what he truly must do at this point in time. He must protest his innocence and take the case to trial. The Plaintiff seems particularly intent in trying to persuade this Court that Mr. Bowdoin knew what he was doing and, strangely, should be happy with the position in which he currently finds himself.

    “Mr. Bowdoin is not happy,” Murray continued. “He did not receive proper counseling. Mr. Bowdoin should have been told from the very beginning that the government was not going to bargain with him. There was no mutual release wherein the government stated ‘no prosecution’ or ‘no jail time.’ There was no mutual release wherein the government stated that it would argue for a reduced sentence. It was all smoke and mirrors, and Mr. Bowdoin’s attorney did nothing to cut threw it.”

    Today’s filing by Murray did not address a veiled reference to the AdViewGlobal autosurf prosecutors made in their Sept 25 filing.

    Read Bowdoin’s response.

    See story on prosecution’s Sept. 25 filing.

    See story on Secret Service filing Sept. 28.

  • TEA LEAVES: AdSurfDaily Case About To Come To A Head?

    EDITOR’S NOTE: Reading the tea leaves in court cases often is an iffy proposition, and there often is no way to know what will happen when. Readers are advised to keep those thoughts in mind when considering the information in this story.

    UPDATED 7:03 P.M. EDT (U.S.A.) Recent court filings suggest — although it is far from clear — that dramatic events could occur soon on at least three fronts in the AdSurfDaily case.

    Consider:

    • The government today added two prosecutors to its roster in the main civil-forfeiture case against tens of millions of dollars and real estate seized in August 2008 from ASD President Andy Bowdoin. Both new members of the team are experienced in criminal prosecutions, including appeals. One of the prosecutors has served in complex cases involving international banking and money-laundering, as well as cases involving the Federal Bureau of Investigation and the Drug Enforcement Administration.
    • A federal judge, noting that no claimants have stepped forward in a second forfeiture case filed in December 2008 and targeted at assets tied to ASD, now has ordered prosecutors to state their intentions by Nov. 6 on how they intend to proceed in the December case. Potential claimants included Bowdoin and his wife, Edna Faye Bowdoin, and her son, George Harris. Judy Harris, the wife of George Harris, also was a potential claimant, as was Hays Amos, a former ASD employee.

    The Harris home in Tallahassee was seized in the December complaint, as was a car registered to George and Judy Harris. Prosecutors said a mortgage of more than $157,000 on the Harris home was retired with illegal proceeds from ASD, adding that Edna Faye Bowdoin and George Harris worked together to establish a bank account into which ASD funds were deposited and quickly wired to a third bank to pay off the mortgage.

    Prosecutors said the account was opened June 10, 2008, at Capital City Bank, less than two weeks after ASD concluded a rally in Las Vegas at which Andy Bowdoin exhorted the crowd to internalize the thought of acquiring large sums of money.

    The account was opened in the name of Bowdoin/Harris Enterprises Inc. and was funded with an opening deposit of $177,900.12 from two ASD accounts at Bank of America.

    Less than two weeks later, the lion’s share of the money was used to retire the mortgage on the Harris home — a home for which the couple has not filed a claim.

    (Emphasis added in the paragraph below.)

    “On or about June 23, 2008, George Harris requested via a telephone call that an electronic wire for $157,216.79 be sent from his Capital City Bank account to Citi Mortgage Inc.,” prosecutors said. “The reference that Mr. Harris provided was ‘REF: PAYOFF JUDY HARRIS #XXXXXX2292.’”

    The clear implication from the language of the complaint was that money from ASD — money prosecutors said Andy Bowdoin had acquired through a wire-fraud and money-laundering scheme — had been used a second time to commit wire fraud, this time by George Harris with help from his mother, Bowdoin’s wife.

    Four members of the Bowdoin/Harris family were involved in one way or another in the transaction, with George Harris becoming a supplemental beneficiary and Judy Harris becoming the final beneficiary. The mortgage on the property was recorded in Leon County, Fla, as paid on July 11, 2008, with the filing of a “satisfaction of mortgage.”

    Another way to look at the transaction is that it put each of the principal members of the Bowdoin/Harris family at great risk of getting arrested and, upon conviction, going to prison.

    George and Judy Harris later emerged as “Trustees”  — and then the purported owners of the AdViewGlobal (AVG) autosurf. Bowdoin was the silent head of AVG, members said.

    AVG purported to he headquartered in Uruguay. It launched in the wake of the filing of both forfeiture complaints, and also the filing of a racketeering lawsuit against Bowdoin and ASD by individual members. The racketeering lawsuit first was filed in November 2008 in Florida — in the immediate aftermath of a major court ruling against ASD in which a federal judge said ASD had not demonstrated it was a legal business and not a Ponzi scheme at an evidentiary hearing last fall.

    Attorneys for the plaintiffs dismissed the case in Florida, and refiled it in the District of Columbia in January 2009. AVG formally launched in February 2009, despite all the litigation that had piled up around Bowdoin and the Bowdoin/Harris family.

    On Sept. 25, prosecutors made a veiled reference to AVG in a court filing in which they accused Bowdoin of trying to lie his way back into the August 2008 civil-forfeiture case after he had already submitted to the forfeiture in January 2009.

    Here, in its entirety, is the Sept 25 reference: (Italics added.)

    “Maybe Bowdoin mistakenly thought that he could con the government into believing that he was just a harmless, foolish old man. Ironically, after telling thousands of investors that he intended to build the world’s preeminent advertising company for them, in order to make them 100,000 millionaires, Bowdoin tries to con this Court, telling it that because he’s 74 and has a heart condition, any incarceration amounts to a death sentence. See Document #132 ¶8. Was he lying then, or now?

    “Or, 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.

    “Or, maybe other attorneys Bowdoin employed, or ASD’s other promoters convinced Bowdoin that if he paid some of the fraud proceeds the government had missed to them (the money laundering as Mr. Murray reports), they could help to circle the wagons or otherwise do a better job than Akerman Senterfitt did when it tried to prove that free advertising was a true profitable sale and not a poorly disguised, and unsustainable, investment opportunity.

    “But what is clear from Bowdoin, himself, is that neither the government, nor Bowdoin’s experienced criminal defense counsel, ever told Bowdoin that it was reasonable for a defendant convicted of operating a $100 million wire fraud scheme to expect probation.”

    Three days later, on Sept. 28, prosecutors returned to court, filing a supplemental brief and a U.S. Secret Service transcript of an audio recording Bowdoin or a person who aided him posted online.

    (Italics added.)

    “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. It is clear that this con man cannot manage to keep his stories straight,” prosecutors said.

    Bowdoin’s claim in the transcript of the audio recording is at odds with his own court filings — filings in which he claims to be the owner of the seized funds. It is clear from the language prosecutors used in their supplemental filing that they now have the option of arguing that Bowdoin’s statement to the membership was tantamount to a confession that he was selling unregistered securities as investment contracts, not advertisements as he had claimed.

    In the hours that followed, some ASD members appeared to suggest in various emails that ASD members should not cooperate if contacted by the Secret Service.

    Given the nature and the content of recent filings from parties on both sides of the case, the ASD prosecution could be building to a crescendo. Prosecutors have many options, and appear to be preparing to use them — up to and including acting on the December forfeiture complaint at the moment that best suits their strategy.

    There could be dramatic developments — and surprises — ahead.

  • Three Men Charged With Exploiting Software Glitch To Make Slot Machine Pay Double; Scheme Netted $430,000

    Washington County District Attorney Steven Toprani called it the largest heist in the three-year history of casino gambling in Pennsylvania and one of the largest thefts from a single machine in U.S. history.

    A grand jury called it conspiracy, receiving stolen property, computer trespassing, lying to investigators and more, and police and gaming officials were investigating to determine if it had spilled over into West Virginia.

    One of the defendants seemed unconcerned, telling a judge he had $400,000 cash to bail himself and one of his co-defendants out of jail, the Pittsburgh Post-Gazette reported.

    Andre Michael Nestor, Kerry Laverde and Patrick Loushil were charged with 367 felonies yesterday in what authorities described as an elaborate scheme in which Nestor posed as a high-roller, Laverde posed as his bodyguard and Loushil distracted casino employees.

    They were not immediately able to post bail, which was set at a combined total of $500,000, about $70,000 more than the amount police said vanished from the casino.

    Laverde, a police officer who once lived in Las Vegas, flashed his badge at The Meadows Racetrack & Casino to build Nestor’s reputation as a man with big money. But Nestor had been jobless and living on Social Security disability income for 15 years, the Post-Gazette reported.

    Regardless, Nestor told the judge at his arraignment that he was flush with cash.

    Working together, the three men initially conned the casino into letting Nestor spin for double stakes. Aware of the machine’s software programming, Nestor then engaged in “a complex series of button presses and screen changes to cause the slot machine to have an error in its programming. This resulted in the machine displaying a false jackpot,” according to the indictment.

    During the next two months, the men exploited the casino’s confidence and the software vulnerability to steal $429,985 from the machine, authorities said.

    Police became wise to the scheme in August and set up a sting, after a state Gaming Control Board agent noticed the unusual activity associated with the machine. Nestor caused this machine to produce four jackpots of more than $20,000 each on Aug. 26 alone, authorities said.

    His highest jackpot during the two-month, 15-visit string to the casino was $40,550 in July. Undercover police staked out the machine and observed Nestor produce a fraudulent jackpot Aug. 31.

    He left the casino in “haste” after trying to collect, when an employee told him there would be a delay in awarding the payout until the machine’s programming could be checked.

    Toprani empaneled a secret grand jury, and the indictment was unsealed yesterday.

    Read an early report in the Pittsburgh Post-Gazette.

  • OBSTRUCTION: Howard Richman Gets 3 Years In Prison For Lying To Federal Judge, SEC; Charge Resulted From False Cancer Claim In Bid To Derail Civil Case

    UPDATED 12:45 A.M. EDT (U.S.A. OCT 6) A former executive at Biopure Corp. has been sentenced to three years in prison for lying to a federal judge and obstructing an SEC investigation by claiming falsely that he was suffering from colon cancer.

    Howard Richman, 57, also was sentenced to three years’ supervised probation after his release and ordered to pay a $50,000 fine. Richman, who practiced podiatric medicine from 1978 to 1992, forged a letter and an affidavit from his doctor, and lied to his own attorneys by calling the law firm and posing as a third-party physician to pull off the fraud on the court.

    “Richman did not have cancer, and falsely claimed to be terminally ill in order to avoid discovery in the SEC’s case against him and to obtain a favorable settlement,” said the office of Acting U.S. Attorney Michael K. Loucks, in a joint statement with the FBI.

    Prosecutors had argued for a 21-month-sentence for Richman. U.S. District Judge Mark Wolf tacked on 15 more months than the government had sought, sentencing Richman to 36 months.

    Previously, Richman was banned from serving as an officer or director of any public company and ordered to pay a $150,000 civil penalty.

    “As a condition of his supervised release, Richman must enter into a payment plan with the Commission to pay the remainder of his $150,000 civil penalty,” the SEC said today.

    The case began as a claim that Biopure for months had failed to disclose to investors negative information about a synthetic blood product known as Hemopure. In April 2003, the Food and Drug Administration raised “serious concerns” about the product, questioned its safety and barred the company from conducting clinical trials of Hemopure on trauma victims, the SEC said.

    “Biopure, however, issued public statements beginning on August 1, 2003 describing the FDA’s communication as good news, causing its stock price to increase by over 20%,” the SEC said in 2003.

  • U.S. Employment Numbers Worst Since 1983; Social Security Takes A Hit From Discouraged Early Retirees; FDIC Seeks To Recapitalize In Wake Of Nearly 100 Bank Failures In 2009

    When the AdViewGlobal (AVG) autosurf — now failed — was in prelaunch phase in December 2008, it positioned itself as an offshore cure for what ails the U.S. and world economies.

    Less than two years earlier, promoters of the AdSurfDaily autosurf — which has close ties to AVG — implied that the individual surf accounts of ASD members were insured by the FDIC and that ASD provided “shelter” from the FTC and the SEC.

    ASD’s assets were seized by the U.S. Secret Service in August 2008, amid allegations of wire-fraud, money-laundering and selling unregistered securities via a Ponzi scheme. Only months later AVG began its ignoble task of encouraging members to move cash offshore and permit it to be managed by unknowns, thus separating participants from even more wealth.

    The result was a colossal failure AVG announced in June, before it disabled its forum to prevent members from asking uncomfortable questions. AVG even threatened members who shared the news with copyright-infringement lawsuits. Indeed, AVG went from a much ballyhooed cure to a thuggish disease that attacked its own participants in only weeks.

    Neither ASD nor AVG created any new wealth or cured anything. About the only thing the surfs managed to do was siphon wealth from one group and transfer it to another, all during a time a global recession was rearing its ugly head and putting jobs and lifetimes of hard work in harm’s way.

    The U.S. economy shed 263,000 jobs in September, and the unemployment rate edged up to 9.8 percent, the Labor Department said yesterday.

    Unemployment virtually has doubled since December 2007. The number of persons looking for work now totals 15.1 million, and the unemployment rate is the highest since June 1983.

    When discouraged workers and workers who’ve accepted part-time jobs in the absence of full-time employment are factored into the numbers, the so-called “real” unemployment rate is 17 percent. The number could be distorted — meaning the true employment numbers could be masked to a degree — because older workers separated from their jobs have been applying for Social Security, rather than continuing their struggle to find work when the odds are against them.

    The Social Security Administration told Bloomberg News that it had expected an increase of 315,000 applications for the one-year period ending Sept 30, but instead received 465,000, an increase of 150,000 applications.

    Meanwhile, regulators seized three more U.S. banks yesterday, bringing the year-to-date total to 98. Because the FDIC  is close to operating in the red, the agency is in the process of recapitalizing and has proposed a plan that would force banks to pay insurance premiums early to protect customer deposits, rather than pass along the cost of the recapitalization to taxpayers.

    “First and foremost, bank customers should know that their insured deposits have and always will be 100 percent safe, no matter what,” said FDIC Chairman Sheila Bair. “This commitment to depositors is absolute. The decision today (Sept. 29) is really about how and when the industry fulfills its obligation to the insurance fund. It’s clear that the American people would prefer to see an end to policies that look to the federal balance sheet as a remedy for every problem. In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer.”

    At risk, however, are banking profits when the industry already is struggling, but the FDIC insists that “banks overall have enough liquid assets to make the proposed prepayment.”

    U.S. regulators have not confronted a challenge of this magnitude since the late 1980s and early 1990s, when the savings and loan industry recorded 745 failures, in no small part due to fraud, mismanagement and regulatory laxity.

    Here is the bank-failure list so far in 2009:

  • Guenther Softens Comment That ‘Sheriff Joe’ Arpaio Was Soft On Crime; Says Recent Email Lecturing Veteran Federal Prosecutor Was Sent At Behest Of Crime Victims

    AdSurfDaily mainstay Bob Guenther backed away overnight from a comment that suggested an Arizona county sheriff known for instituting chain gangs and outfitting prisoners in pink underwear was soft on crime.

    Sheriff Joe Arpaio of Maricopa County would be Guenther’s jailer if he is convicted and sentenced to prison in the county. Guenther, 61, is accused of two felonies in Maricopa County by the Mesa Police Department, which said  he repeatedly violated a court order not to harass a gaming company with which he has a dispute.

    Guenther complained early Wednesday that an individual he described as a criminal “is still walking the streets, still taking in millions of investors money, still hiding assets, right there under Sheriff Joe’s nose..”

    Overnight, however, Guenther softened his remarks about Arpaio.

    “I made no disparaging comments regarding Sheriff Joe,” Guenther said. “Mesa, AZ is just in his jurisdiction.”

    Guenther, who pleaded guilty to felony bank fraud in 1994, did not back away from claims that he would use unspecified “political connections” to embarrass the U.S. Department of Justice, which he suggests has ignored leads he provided and conducted an incompetent investigation in the AdSurfDaily wire-fraud, money-laundering and Ponzi scheme case.

    He complained that Senior Trial Attorney William Cowden had not returned more that 50 emails he had sent. Federal prosecutors, however, are under no obligation to return emails, and the ASD case is an investigation in progress.

    On Monday, for example, the U.S. Secret Service filed a new document in the case — the transcript of an audio recording ASD President Andy Bowdoin made earlier this month. Bowdoin has suggested in court filings that he was indicted under seal in May. Prosecutors revealed in April that Bowdoin had signed a proffer letter in the case.

    Guenther’s most recent email to Cowden had a condescending tone, including a passage that began, “How about this one Bill, just as a freebie.”

    The email lectured the prosecutor, an expert in forfeiture law and part of the prosecution team that gained a conviction against the e-Gold payment processor last year for facilitating money-laundering.

    ASD once used e-Gold as its payment processor.

    “I will not sit on this anymore, you are going in circles . . . ” Guenther said in his email to Cowden. “You have my number and my email..”

    In April, on this Blog, Guenther reproduced an email he had received from Cowden in February. In his one-sentence response to Guenther, the prosecutor noted that he earlier had explained that the case was the Justice Department’s to handle and that it would proceed as it saw fit.

    “As I have said before, we intend to use forfeited assets (upon liquidation) to compensate Ponzi victims,” Cowden said.

    Guenther reproduced the same information on the ASDMBA website, but continues to suggest Cowden has a duty to reply to all of his emails and perhaps even reveal the government’s prosecution strategy.

    Guenther is the de facto head of the ASD Members Business Association (ASDMBA), which has come under fire for collecting money from ASD members to establish legal representation but not providing straightforward accounting on how the money was spent.

    At the same time, Guenther also has asserted that, through his efforts, money that had been directed at Golden Panda by active-duty police officers and retirees from Texas and California was intercepted and returned to the police groups before it could become part of a victims’ compensation pool prosecutors said they sought to establish.

    Cowden referenced the pool in his February response to Guenther’s email.

    Meanwhile, Guenther also says that money others directed at Golden Panda — including money from a “high profile Dallas Cowboy executive” — was intercepted and returned to contributors before it could become part of a victims’ pool.

    Overnight, Guenther explained that his most recent email to Cowden was sent at the behest of “concerned” crime victims.

    “My letter to William Cowden was requested by several concerned groups of victims,” Guenther said. “Over 300 ASD and Panda victims, most of whom have given Andy [Bowdoin]/ASD or [Golden] Panda over $5000. Another particular group of over 400 people, represented by four Atlanta area men gave [Golden Panda Ad Builder President Clarence] Busby over $1.8Million, none of which was earned through ASD, so there is no link between the two.”

    Prosecutors, however, filed an “all funds” forfeiture complaint last August that targeted assets of both ASD and Golden Panda in the same proceeding. The government has established ties between the firms, and one of the pro se filers in the case — Joyce Haws — has been identified as a rally coordinator for ASD and a founder of Golden Panda.

    Busby identified Haws as one of 34 Golden Panda founders in court filings.

    Meanwhile, Guenther implied in his email that ASDMBA soon would become active again, in part because the government was botching the case. He predicted that the Rev. Al Sharpton and the Rev. Jesse Jackson would become advocates for victims who attended “a very high-profile African-American church in Atlanta.”

    “When this comes out, and it will, this very, very high profile church will call on the likes of Jesse Jackson and Al Sharpton to assist in getting their money back,” Guenther said. “They have asked me to help.”

    Rather than be passive, ASDMBA would be aggressive, Guenther said.

    “So now it is time to round up all the troops again and get ready to try and “GO GET THE MONEY”..