Tag: affinity fraud

EDITOR’S NOTE: Simply put, the World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid scheme of James Bunchan and Seng Tan was one of the ugliest — if not the ugliest — in U.S. history. Bunchan eventually was implicated in a a murder-for-hire plot in which 12 witnesses and a federal prosecutor in Massachusetts were discussed as targets.

Bunchan was convicted in both the pyramid case and the murder-for-hire case, which was brought separately. He was sentenced to a combined 60 years in federal prison, sentences upheld by the U.S. Court of Appeals.

Tan was sentenced to 20 years for her role in the WMDS/1UOL pyramid scheme, which also was a Ponzi scheme. The U.S. Court of Appeals for the First Circuit now has upheld that conviction. The opinion of the panel was written by Circuit Judge Ojetta Rogeriee Thompson in exceptionally straightforward language apt to put readers “right there.”

A link to the full opinion appears at the bottom of this story . . .

“She usually made quite an entrance, showing up in a chauffeur-driven Mercedes . . . Tan’s pitch was quite attractive. She and Bunchan were millionaires, she said, and the ‘gods’ had sent her to make ‘the Cambodian people’ millionaires too.” — First Circuit Judge Ojetta Rogeriee Thompson, writing for the court and denying the appeal of Seng Tang in the WMDS/1UOL pyramid-scheme case, March 23, 2012

An affinity fraudster who ran a $20 million pyramid scheme with her husband has lost her bid to overturn her conviction and 20-year prison sentence.

Writing for the U.S. Court of Appeals for the First Circuit, Judge Ojetta Rogeriee Thompson laid out the thinking of a three-judge panel that denied the appeal of Seng Tan, who ran the fraud scheme with James Bunchan.

Using exceptionally straightforward language in the 17-page opinion, Thompson recounted the nature of the pyramid case. The opinion began with a subhead titled “SETTING THE STAGE.”

“A federal jury convicted James Bunchan and Seng Tan, a husband and wife team, of numerous mail-fraud, money-laundering, and conspiracy crimes committed in furtherance of a classic pyramid scheme that swindled some 500 people out of roughly $20,000,000 in the early to mid-2000s,” the opinion began. “Fellow scammer Christian Rochon pled guilty to similar charges on the first day of trial, and his testimony in the prosecution’s case helped seal the couple’s fate.”

Thompson next described the venture, below a subhead titled “THE SCHEME.”

“Bunchan founded and owned two self-styled multi-level marketing (MLM) companies — World Marketing Direct Selling (WMDS) and Oneuniverseonline (1UOL) — that supposedly made a mint selling health and dietary supplements. In a legit MLM venture — think Avon, Mary Kay, Amway (companies Tan had worked for) — each person who joins the sales force also becomes a recruiter who brings in other persons underneath her. But the venture survives by making money off of product sales, not off of new recruits.

“Not so with WMDS and 1UOL,” Thompson continued. “Neither sold much of anything, and both raised gobs of money almost exclusively by recruiting new investors, also called members.”

“Here,” Thompson continued, “is how it all worked.” (Italics added.)

Bunchan tasked Tan with drumming up new members, something she was born to do, apparently. Both she and Bunchan are Cambodian émigrés. And they focused their recruitment efforts primarily on Cambodians living here, many of whom were first-generation Cambodian-Americans who had limited educations and spoke little English. As “CEO Executive National Marketing Director,” Tan ran informational seminars for potential investors, meeting them at hotels, their homes, and elsewhere. She usually made quite an entrance, showing up in a chauffeur-driven Mercedes. And she spoke to the attendees in their native language (Khmer), stressing their common background too (including their shared experiences living in Cambodia during the murderous reign of the Khmer Rouge).

Tan’s pitch was quite attractive. She and Bunchan were millionaires, she said, and the “gods” had sent her to make “the Cambodian people” millionaires too. She bragged about how profitable both companies were thanks to high product sales, which earned members at the “Distributor” level fantastic sales commissions. But a member did not have to sell a single item to make money, she explained. For a lump-sum payment of $26,347.86, an investor could skip the Distributor level, become a “Director I,” and get an immediate “bonus” of $2,797, plus $300 every month for the rest of her life, her children’s lives, their children’s lives, and so on. Promotional pamphlets also promised investors that if they recruited more members and kicked in more money (any where from $130,000-$160,000), they could become “Gold Directors” and earn even higher never-ending monthly payouts (something like $2,500 a month). And Tan urged persons short on cash to take out second mortgages or home-equity loans or to borrow money from their retirement accounts to finance their investments, and more than 150 people did. She even had members sign forms so that the loan proceeds would be wired directly to WMDS or 1UOL.

When prospective investors asked her point-blank whether they had to sell company merchandise to get money, Tan answered no. She and Bunchan reduced their promises to writing, with Tan even signing letters guaranteeing monthly returns basically forever.

In words that could describe many corrupt ventures, Thompson noted that the “scheme started out swimmingly.

“WMDS and 1UOL used newly-invested money to trick old investors into thinking that the good times were here to stay,” Thompson wrote.  “Not knowing any better, members were ecstatic. Bunchan and Tan were too, obviously. And with cash pouring in, the pair used the companies’ coffers as their own personal piggy bank.”

The Beginning Of The End — And A ‘Hurricane’ Explanation

It frequently is the case in the universes of corrupt “opportunites,” including HYIPS, that the weather gets blamed when payment problems develop — so much so, that explanations involving high winds have become an investment-fraud cliché.

Such was the case in the WMDS/1UOL scam.

“[Tan] started having trouble signing up new investors,” Thompson wrote. “So WMDS and 1UOL stopped mailing out the monthly checks. Members revolted, naturally. Tan tried to quell the uprising, blaming the ‘delay’ on banking glitches caused by Hurricane Katrina and telling members that they would get their checks soon — out-and-out lies, the record reveals.”

Even more fraud clichés came into play, including thefts from family members to prop up the scheme, the continued gathering of funds while the enterprise was tanking and the issuance of selective payouts to calm nervous investors and sustain the deception.

“Worse still,” Thompson wrote, “after getting an earful from irate investors, Tan flew to Minnesota and raked in hundreds of thousands of dollars — bilking her son-in-law out of $150,000 and his friend out of $300,000 — making the same false promises of unending returns she had made before. And she herself decided which lucky member would get a check from the new money — an ill-conceived stopgap measure, it turns out.”

The ruling also includes a footnote that speaks to yet-another investment-fraud cliché: the appointment of a “name-only” executive to become the face of an enterprise. This was the alleged role of Rochon, the purported “president.”

“A high-school graduate, Rochon became president (in name only, though) for one reason, and one reason only: Bunchan wanted an ‘American face’ for his companies, and his neighbor Rochon (a Caucasian of Canadian decent) apparently fit the bill,” the footnote reads. “And after renting Rochon a suit jacket and taking him to a professional photographer, Bunchan had Rochon’s photo plastered all over the companies’ promotional pamphlets.”

Read the ruling and the dissection of the legal issues here.