BULLETIN: U.S. District Judge Rosemary Collyer has rejected AdSurfDaily President Andy Bowdoin’s sweeping claim that the indictment against him should be dismissed because ASD met none of the three prongs of the “Howey Test” under federal securities laws and a Supreme Court precedent that determines what constitutes an “investment contract.”
Collyer’s refusal to dismiss the indictment may deal a crushing blow to autosurf operators monitoring the ASD case from the murkiest corners of the Internet and hoping that the Howey Test somehow could provide a legal cover to line up suckers and steal millions of dollars from them.
In a pointed, 15-page memo, Collyer walked through all of Bowdoin’s Howey challenges, concluding that a jury reasonably could find that ASD met all three prongs. Specifically, the judge ruled that a jury could find that ASD members were “investing,” that there was a “pooling of investment funds, shared profits, and shared losses” and that “ASD members were paid based on the efforts of others.”
Citing evidence that some ASD members apparently refuse to believe exists despite the fact it is part of the public record of the case, Collyer ruled that part of ASD’s current defense was at odds with statements that appeared on ASD’s own website and in offering materials.
“Based on the allegations set forth in the Indictment, the evidence already before the Court, and the government’s proffers of expected trial evidence, the Court finds that the allegations, if proven, would be sufficient to permit a jury to find that ASD members were investing,” Collyer ruled.
Dozens of ASD members claimed in pro se court filings in 2009 — when the case was in civil court — that “NO EVIDENCE” existed against ASD.
Collyer’s ruling also addressed the subject of payments to members, which ASD called “rebates.”
“Contrary to Mr. Bowdoin’s characterization of the ASD business, ASD’s promise to pay back 125% of the value paid to ASD by an advertiser strongly indicates that the joining of ASD via the purchase of an ‘advertisement’ on the rotator in fact constituted an ‘investment for a financial return,” Collyer ruled.
And, Collyer noted, “these alleged facts smack of an investment.
“Indeed,” she continued, “the government proffers that Mr. Bowdoin awarded ad packages to employees in the way that an employer awards bonuses. It argues that Mr. Bowdoin and the employees of AS[D] treated the ‘ad packages’ as shares from which they could expect to earn returns.”
Collyer cited passages allegedly spoken by Bowdoin himself in offering materials. Meanwhile, she rejected Bowdoin’s claim that the government’s assertion that he was selling “investment contracts” was unconstitutionally vague.
“Mr. Bowdoin’s attack on the facial vagueness of the term ‘investment contract’ as a type of security covered by the Securities Act is without merit,” she ruled. She noted that, despite the fact Bowdoin had argued that ASD met none of the Howey prongs, “Bowdoin did not provide evidence through affidavits or otherwise as to how ASD actually operated — or any other basis — from which the Court could draw legal conclusions on whether ASD operations met the Howey test.”
The prosecution, on the other hand, had supplied actual evidence, had entered it in the record of the case and provided a basis for the court to make preliminary determinations about what a jury potentially could find after considering the evidence, according to the ruling.
Bowdoin’s own words from promos appeared in the ruling. Although he argued to Collyer earlier this year that money sent in by members did not constitute an investment, “[d]irect statements from ASD seemingly contradict this defense,” the judge ruled.
Citing evidence entered by the government, Collyer pointed to a passage on ASD’s own website that said, “[a]dvertisers will be paid rebates until they receive 125% of their ad packages.”
And Collyer noted there is both written and recorded evidence, including at least one email attributed to Bowdoin is which he allgedly wrote, “[l]et’s don’t [sic] use the words investment and returns. Instead, lets [sic] use ad sales and surfing commissions. The Attorney Generals in the U.S. don’t like for us to use these words in our program.”
Prosecutors have argued for nearly three years that ASD engaged in wordplay to skirt securities laws and that Bowdoin was well aware that he was selling securities.
Bowdoin’s “motion to dismiss the Indictment ignores the teaching of the Supreme Court — that courts should examine the substance, not form, of a transaction and evaluate its economic reality,” Collyer ruled.
BULLETIN: Describing the AdSurfDaily Ponzi case as one with a “tortured history” now dating back years, U.S. District Judge Rosemary Collyer of the District of Columbia has refused to transfer the criminal case against ASD President Andy Bowdoin to Florida.
Bowdoin, who lives in Florida, had argued for the transfer more than a month ago, citing his health problems, his wife’s health problems and inconvenience to witnesses as reasons to move the case.
In a 16-page opinion, Collyer said no.
“Mr. Bowdoin’s bald assertions of witness expense and inconvenience fail to counter the presumption that a criminal prosecution should be retained in the district where the indictment was returned, in this case, Washington, D.C.,” Collyer found Wednesday.
And although Collyer expressed sympathy for various medical issues with which Bowdoin’s wife is contending, the case will remain in Washington, the judge ruled.
EDITOR’S NOTE: Lower in this story, the names of AdSurfDaily President Andy Bowdoin and other individuals appear. They are NOT the individuals referenced in the government communiqué described below.
UPDATED 12:50 P.M. ET (U.S.A.) The name of a person known to have used at least two names and to have AdSurfDaily ties appears in a law-enforcement communiqué issued in 2009 by the counter-terrorism arm of a U.S. government agency that employs a method of monitoring both domestic extremists and individuals with known links to international terror groups, the PP Blog has learned.
At least one communication from the person was intercepted by the government and used as part of a raw intelligence report that includes summaries on the actions of dozens of individuals with alleged ties to al-Qaida, Hezbollah or homegrown extremist groups in the United States. The communication does not reference ASD, but includes a reference to a second person known to have an ASD tie.
The sender of the communication was described as a provider of fraudulent documents typically associated with tax schemes operated by antigovernment extremists. Meanwhile, the intended recipient was an individual known to have promoted various forms of financial fraud, including a scheme in which prospects were told they could qualify for Medicaid by hiding assets and making themselves artificially poor.
Medicaid is a federal health-services program for low-income Americans. It is administered by the states.
The PP Blog established the identities of both individuals with ASD ties by examining a variety of public records and other documents.
ASD's Andy Bowdoin
Neither person is in state or federal custody, but it is clear that both the federal and state governments are aware of their activities and have worked to disrupt them. The intended recipient of the communication is in federal custody for a crime unrelated to ASD.
Both individuals with ASD ties have a tie to a third person with ASD links, according to the Blog’s analysis of records.
Owing to the sensitive nature of the communiqué, the Blog is declining to identify the individuals with ASD links and the agency. It also is declining to publish specific details such as quoted material, dates, times, telephone numbers and addresses. The communiqué demonstrates that the United States has identified particular areas in which it believes terrorism could fester and is monitoring oral, electronic and printed communications in a specific context.
The communiqué devotes more than a full page to the topic of the communication intercepted from the individual with ASD ties.
Based on its research, the Blog is reporting today that the person with ASD ties whose communication was intercepted is an American believed to have ties to a network of domestic extremists immersed in a sea of organized corruption. The person has an arrest record for a nonviolent crime, but also has been associated with bids to intimidate people and cause them financial harm. Records show that the person has used at least two names.
News of the disturbing developments comes even as some ASD members are blindly asserting that ASD was a wholesome enterprise and making broad claims that any ties to terrorism have been ruled out. ASD has been implicated in an alleged international Ponzi scheme that gathered at least $110 million.
Despite an alleged concession by ASD President Andy Bowdoin that the company was operating illegally and a new assertion by the government that Bowdoin and unnamed “others” ventured to Costa Rica in the spring to 2008 to get the lay of the land for an upstart “autosurf” enterprise, some members are soliciting funds to challenge a U.S. Secret Service affidavit that led to the seizure of tens of millions of dollars from Bowdoin’s personal bank accounts in August 2008.
Bowdoin’s own bid to challenge the affidavit failed in November 2008, more than two years ago.
In December 2010, federal prosecutors asserted that ASD had the ability to accept money from e-Bullion, a shuttered California payment processor whose operator — James Fayed — has been charged with arranging the contract murder of his wife.
Pamela Fayed, who was stabbed to death in a parking garage, was a potential witness against her husband. James Fayed is believed to have used e-Bullion to facilitate multiple Ponzi schemes, including a scheme hatched by a New York man — Abdul Tawala Ibn Ali Alishtari — who later pleaded guilty to financing terrorism.
Like ASD’s Bowdoin, Ali Alishtari claimed to have received an important award for his business acumen. And Ali Alishtari’s scheme, known as FEDI, was pushed by an individual convicted in a separate Ponzi scheme and sentenced to federal prison. Payments from the scheme were called “rebates,” the same terminology adopted by ASD to describe payments to members.
“In enriching himself, Alishtari displayed a deliberate disregard for the financial and personal security of others,” U.S. Attorney Preet Bharara of the Southern District of New York said in September 2009.
e-Bullion’s name also is referenced in court filings in the Gold Quest International (GQI) Ponzi scheme, which gathered up to $29 million, according to U.S. and Canadian regulators. GQI, which operated from Las Vegas, falsely claimed to be immune to U.S. law and to enjoy purported “sovereignty” extended by a North Dakota “Indian” tribe.
One of the unusual elements of the GQI case was a claim that the purported sovereignty was portable, shielding the purveyors from prosecution anywhere.
A New Plan To Do Battle With The Government
ASD member Todd Disner, one of dozens of unsuccessful pro se litigants in the civil portion of the ASD case in U.S. District Court for the District of Columbia, now wants ASD members to come up with money to fund a lawsuit in Florida that would challenge the U.S. Secret Service affidavit in the District of Columbia that led to the seizure of $80 million in the ASD case, according to a recording of a Feb. 22 conference call.
“We were dragged down the river by our government agents, and the rest is history,” Disner told listeners.
“There might be an opportunity for us to throw a few punches of our own,” Disner said. “We’ve been on the ropes for three years now, and we’d like to start swinging back if we could.”
The opportunity to battle back after a fatiguing and demoralizing three years on the ropes would cost ASD members a combined total of about $10,000, according to people who listened to the call.
After the call, some ASD members received an email that purported that an ASD “terrorism connection has been ruled out.” The email, sent by an ASD member who did not use a full name, did not describe who within the government had ruled out a terrorism link.
Disner, who claimed he was “excited” about the prospect of suing the government to overturn the ASD forfeiture, also claimed he’d been advised on the complex legal issues by Dwight Schwetizer, whom he described as a fellow ASD member, friend and “very accomplished attorney” who is “not practicing law now.”
“They’re just going to try and try to keep that money,” Disner asserted. “They seized the money improperly, and if they release it then everybody’s included.”
The government, however, already has put in place a restitution program that would compensate crime victims from seized funds. An apparent linchpin of the new strategy outlined by Disner is a theory that the government restitution program somehow opens the door for ASD members not only to reverse the judicially declared forfeiture, but also to receive damages for an unwarranted government intrusion. Schweitzer also provided commentary on the call.
For its part, the government says ASD was engaging in felonious wire fraud and securities fraud by disguising itself as an “advertising” business while operating a $110 million Ponzi scheme from Florida that had affected tens of thousands of people globally. Just last week prosecutors advised a federal judge that Bowdoin, who was arrested in December, had ventured to Costa Rica in the spring of 2008 to look for a way to start an offshore Ponzi scheme.
Disner’s conference call was held just a few days after the latest damaging claims against ASD became public. The government filed the new claims against ASD on Feb. 18, the same day it announced a major prosecution against an alleged Costa Rican money-laundering operation that was accused of engaging in international securities fraud and siphoning millions of dollars in penny-stock schemes.
The U.S. government, using its individual agencies and the Financial Fraud Enforcement Task Force created by President Obama in 2009, has been targeting various forms of fraud, including HYIPs, penny-stock capers, Forex schemes, tax schemes and domestic and offshore crime targeted at U.S. citizens.
In some cases, victims have been counted by the tens of thousands — enough to fill the nation’s largest sports stadiums. ASD was purported to have 120,000 members.
Some ASD members have called for a “militia” to storm Washington, D.C. Others have called for a federal prosecutor to be placed in a medieval torture rack. Still others have called for prosecutors and investigators to be charged criminally and sued civilly for their efforts to disrupt what the government has described as a classic Ponzi scheme operated by Bowdoin, a recidivist felon.
BULLETIN:UPDATED 9:29 P.M. ET (U.S.A.) Prosecutors have advised a federal judge that AdSurfDaily President Andy Bowdoin and unnamed “others” traveled to Costa Rica in the spring of 2008 to get the lay of the land for an offshore autosurf that would be “another version” of ASD.
The alleged trip occurred less than two years after the SEC accused 12DailyPro, an autosurf based in North Carolina, of selling unregistered securities in the form of investment contracts, prosecutors said.
The explosive claim Bowdoin ventured offshore to pursue the creation of an ASD satellite may signal that the government views ASD not only as a Ponzi scheme, but as a business that deliberately sought to dial up its efforts to circumvent U.S. laws and create an even greater Ponzi war chest by establishing a footprint outside the United States.
Since at least February 2006, the SEC has described the autosurf business model as anathema and a form of obvious securities fraud. Bowdoin was well aware of the SEC lawsuits and scrutiny domestic autosurfs such as 12DailyPro, PhoenixSurf and CEP had sparked in 2006 and 2007, prosecutors said.
Meanwhile, investigators have evidence that shows ASD’s internal software system described payments to members as “ROI,” an acronym that that means “return on investment,” prosecutors said.
The assertions by prosecutors — if proven true — may undermine ASD’s defense strategy of arguing it was an “advertising” program, not an “investment” program.
Prosecutors did not identify by name the surf allegedly contemplated for Costa Rica. In late 2008 and early 2009, a surf with close ASD ties known as AdViewGlobal (AVG) debuted. The launch occurred about four to five months after the U.S. Secret Service seized $65.8 million from the personal bank accounts of Bowdoin in August 2008.
Bowdoin’s trip to Costa Rica occurred before the ASD seizure, prosecutors said. If true, the claim could be used to prove ASD was seeking an exit plan even before the Secret Service raid. In 2008, prosecutors asserted that Bowdoin had moved millions of dollars offshore and talked about purchasing a home in another country.
AVG purported to operate from Uruguay, but had servers that resolved to Panama. Some ASD members have said Bowdoin was a silent partner in AVG.
Prosecutors described the “ROI” development as just another ASD incongruity, advising U.S. District Judge Rosemary Collyer that Bowdoin was well aware that a serious securities challenge could be made against his firm and chose to ignore the risk and misinform members.
Beginning as early as January 2007, “[O]thers warned Bowdoin that ASD was nothing more than an investment scheme and that the program needed to be changed if it were to operate legally,” prosecutors argued in a brief to Collyer. “Bowdoin did not heed that advice and continued unabated in offering members higher returns than banks or brokerage firms. Moreover, based on his prior criminal experience, Bowdoin was well aware of the securities regulations and knew he was offering a security.”
Any argument that ASD was not offering “investment contracts” as defined under the Howey Test should be dismissed, prosecutors said, arguing that ASD meets all three prongs of the Howey Test.
Bowdoin sought about three weeks ago to have the criminal charges filed against him dismissed, arguing that ASD met none of the three Howey prongs.
Nonsense, prosecutors said.
ASD’s advertising was “merely a cover for Bowdoin’s sale of a get rich quick scheme,” prosecutors said.
And prosecutors also cited other alleged proof that ASD was running an investment program — namely that some employees were being paid in ASD “ad packs.”
“Bowdoin and the employees of ASD treated the ‘ad packages’ as shares from which they could expect to earn returns,” prosecutors argued.
Prosecutors also pointed out a section of ASD’s Terms of Service that stated the firm “will” pay members 125 percent of the money they paid in. At the same time, prosecutors quoted video evidence of Bowdoin wooing members by focusing on ASD as a money-making opportunity.
Bowdoin, prosecutors said, eventually limited the amount of money investors could pay ASD “because he did not want any one member dominating the return pool.”
The prosecution’s assertions occurred against the backdrop of dozens of competing claims by ASD members who filed pro-se pleadings in the civil portion of the case that asserted the government had no “EVIDENCE.”
Members made the claim despite the fact that some of the evidence against ASD had been part of the public record for more than a year at the time the claims were made in 2009.
In a footnote to Collyer, prosecutors said they’d be happy to present the actual video of Bowdoin making various claims instead of simply quoting from a transcript.
“[T]he government’s review of ASD’s bank records revealed that of the approximately $31 million ASD paid out to early members, more than 98% of that money came from monies paid to ASD by other members,” prosecutors said.
Although ASD claimed to have funding sources beyond advertising payments made by members — things such as banner ad sales and ebooks — those outlets provided only de minimis revenue, prosecutors argued.
“Each night, there was nothing more than new members funds to divide among existing members,” prosecutors argued. “Moreover, Bowdoin himself admitted, on video, that members funds are pooled and they will share in the profits and losses equally.
“Specifically, Bowdoin, in the ‘New Member Success Video,’ claimed that “[w]hen sales increase, the rebates increase. When sales decrease the rebates decrease . . .”
“Clearly Bowdoin, through ASD, was pooling all of the member’s funds which allowed him to make the requisite return payments,” prosecutors said.
Prosecutors also argued that the ASD case should remain in Collyer’s courtroom in the District of Columbia. Bowdoin argued that the case should be transferred to Florida, in part because he and many witness live there.
Although prosecutors agreed that many prospective witnesses live in Florida, they argued that witnesses reside in multiple jurisdictions because of the national and international scope of the case.
In addition to Floridians, witnesses the government may present hail from the District of Columbia, North Carolina, Nevada, Oklahoma, Iowa and elsewhere, prosecutors asserted.
ASD also had members from at least 18 countries, and conducted “rallies” in Illinois and Minnesota, among other states, prosecutors said.
Read Bowdoin’s claims that the charges against him should be dismissed and that ASD did not meet any of the three Howey Test prongs.
BULLETIN: In an argument that almost certainly will give comfort to operators of some of the most corrupt and insidious businesses on the Internet, AdSurfDaily President Andy Bowdoin has advised a federal judge that his company and business practices are legitimate because they stand up to scrutiny when the “Howey Test” is applied.
Bowdoin, 77, made the argument despite the fact the government claims that he signed a proffer letter at least two years ago in which he acknowledged ASD was operating illegally and that the prosecution’s material allegations were all true. In 2009, Bowdoin acknowledged in his own court filings that he had made statements against his interests over a period of at least four days in the hopes of avoiding a prison sentence by cooperating with investigators.
But Bowdoin now says criminal charges of wire fraud, securities fraud and selling unregistered securities as investment contracts brought against him last year “must” be dismissed. It is believed that hundreds — if not thousands — of autosurfs are operating over the Internet at any given time.
Separately, Bowdoin filed a motion to transfer the case to the Northern District of Florida’s Tallahassee Division from the District of Columbia, saying that trying the case in Florida was the fair and most cost-effective thing to do. The government is expected to oppose Bowdoin’s bid to move the case from Washington to Tallahassee.
U.S. District Judge Rosemary Collyer, who was assigned the civil forfeiture case against Bowdoin’s assets after the U.S. Secret Service raided ASD in August 2008 and ordered $65.8 million found in Bowdoin’s personal bank accounts ceded to the government after nearly a year and a half of litigation, also was assigned the criminal case. Criminal charges against Bowdoin were announced in December 2010.
Although Bowdoin previously claimed Collyer was biased against him and sought unsuccessfully to have her removed from the civil case, he has not raised the issue of bias so far in the criminal case. Instead, he petitioned Collyer for an order that would remove the case from her courtroom and put it in the hands of a federal judge in Florida, arguing that most of the witnesses in the case resided in Florida and that hearing the case in Collyer’s court would force unnecessary costs and transportation burdens on both Bowdoin and witnesses.
An affidavit signed by Bowdoin requesting the transfer was filed yesterday. It appears to have been notarized by Judy Harris of Tallahassee, whom some ASD members said operated the AdViewGlobal (AVG) autosurf with her husband, George Harris. George Harris is the son of Bowdoin’s wife, Edna Faye Bowdoin, and a Tallahassee home owned by the Harrises was seized in an ASD-related forfeiture complaint filed in December 2008.
Both George and Judy Harris benefited from the ASD Ponzi scheme because a $157,000 mortgage on their house was retired with Ponzi proceeds, prosecutors said in December 2008.
The Harrises also received a car valued at nearly $30,000 from the scheme, and the car also was paid for with Ponzi proceeds, prosecutors said.
Florida records show that Judy Harris has been a licensed notary since at least October 2008. Why she would notarize a document for Andy Bowdoin when she, her husband and her mother-in-law were alleged to have been a beneficiaries of the ASD Ponzi scheme was not immediately clear.
AVG, which purported to be headquartered in Uruguay and launched after the seizure of assets linked to Bowdoin and the Harrises, suspended payouts to members in June 2009. The surf blamed members’ greed for its problems. The name of Judy Harris also appears in a document filed in April 2009 with the Florida Department of State that canceled the fictitious registration of AVG, which also was known as the AV Global Association.
Andy Bowdoin’s New Argument
Prosecutors have not responded to Bowdoin’s new assertion filed yesterday that ASD can stand up to Howey Test scrutiny. A blistering response is expected in the days ahead because a ruling in Bowdoin’s favor to dismiss the case or an outright win by Bowdoin at trial could have grave economic and security implications for the United States.
Autosurfs operate in the darkest corners of the Internet, fueled by corrupt promoters and scammers who position them as legitimate “advertising” businesses that share revenue with participants. Untold sums of money — believed to be in the billions of dollars — have disappeared in recent years, and prosecutors say the enterprises operate as virtually pure Ponzi schemes.
Purveyors almost certainly would view any win by Bowdoin as a mandate that legalized Internet-based Ponzi schemes and created a virtual license to collect vast sums of money and simply pocket it by claiming member payouts, which ASD called “rebates,” were not guaranteed.
“[N]o guarantee or promise of any profits, any specific level of rebate payouts, or return on an alleged ‘investment’ occurred during the AdSurfDaily operation,” Bowdoin claimed. He also asserted that the allegations against him were Constitutionally vague and that none of the four civil cases brought against autosurfs — 12DailyPro, PhoenixSurf, CEP Holdings and the forfeiture case against ASD’s assets filed in 2008 — has clarified the legal issues.
“As none of these actions has proceeded to final judgment, no judicial opinion has yet clarified whether payment of membership fees by advertisers into auto-surf businesses constitute unregistered sales of ‘securities,’ as alleged by the government,” Bowdoin claimed.
The criminal charges “must be dismissed because the ad-surf business model employed by AdSurfDaily, Inc. and [Bowdoin’s] related businesses, as alleged in the indictment, cannot constitute an SEC-regulated ‘investment contract’ security as defined under the three-prong test established” by Howey, Bowdoin argued.
The Howey Test is a threshold securities test and litigation benchmark from the 1946 U.S. Supreme Court decision in S.E.C. v. W.J. Howey Co. The decision spoke to the issue of what constitutes an “investment contract.”
Bowdoin now claims the entire case against him is fatally flawed because he never sold investment contracts as defined under Howey.
“[T]he Howey test,” Bowdoin argued, “determines whether a particular instrument or transaction is a prohibited, unregistered ‘investment contract’ by searching for the presence of three factors: ‘(1) the investment of money (2) in a common enterprise (3) with an expectation of profits to be derived solely from the efforts of the promoter or a third party.”
ASD did not meet any of the three prongs of the Howey Test, Bowdoin argued.
It was not an investment because ASD was an advertising company, not an investment company through which participants placed money at risk in anticipation of profit, Bowdoin argued. Therefore, he asserted, ASD did not meet the first Howey prong.
Meanwhile, Bowdoin argued that ASD did not meet the second prong because participants did not place their money in a “common pool” put at risk in expectation of a profit.
“[T]here was no ‘common enterprise’ at work here,” Bowdoin argued.
And because ASD members had to click on ads and view them to get paid, they performed “actual efforts,” taking the third prong of the Howey Test out of play, Bowdoin claimed.
“Here, the payment of both rebates and referral commissions were directly tied to the actual efforts of the advertisers,” Bowdoin argued.
Prosecutors, though, asserted in the ASD forfeiture case that ASD told investors that rebates “will” be paid until investors received back 100 percent of the money they plowed into the scheme, plus a profit of 25 percent.
Gerald Nehra, an attorney and expert witness for ASD in the forfeiture case, conceded under cross examination in 2008 that the ASD Terms of Service specified that rebates “will” be paid.
Bowdoin’s most recent arguments also put him with odds with dozens of ASD members who claimed in court filings that the government had no “evidence” and no “witnesses.”
In his filings yesterday, Bowdoin said he believed that the “vast majority” of the prosecution’s witnesses resided in Florida. He said he planned to counter them with witnesses of his own — as many as 136 — including George and Judy Harris, Rob Cefail of InTouch Marketing of Clearwater, and Tari Steward, who also provided Clearwater-based marketing services.
At least 56 of ASD’s witnesses were ASD employees, Bowdoin said. The document was notarized by Judy Harris.
Some AdSurfDaily members have received an email that appears to be attributed in part to Sara Mattoon, the embattled autosurf firm’s former spokeswoman. The most recent correspondence fractures facts, suggests the government has no credible witnesses or evidence in its wire-fraud and securities-fraud case against ASD President Andy Bowdoin and implies suggestions given to recipients are a legal “opinion” from a qualified expert.
The date upon which the email was sent was unclear. At least one former ASD member reported receiving a copy of it today.
Like previous emails, the content of the email appears to be a compendium in which Mattoon and perhaps others assembled information and passed it along as though it were fact.
Among the claims are that federal prosecutors are creating victims out of thin air, that the government is engaging in trickery, that a pyramid-scheme case filed against ASD in Florida “was decided in ASD’s” favor, that “the government is in a very bad position to win a jury trial,” that prosecutors have “have no material tangible evidence and no credible witnesses to prove their case” — and that the remissions program is a “scam.”
Contrary to the claims in the email, the pyramid case brought by the state of Florida was not decided in ASD’s favor. The case did not go to trial, and no judge ruled that the government’s case was fatally flawed. Moreover, no judgment was issued in ASD’s favor.
State prosecutors said they dismissed the Florida civil case because two final orders of forfeiture already had been entered by U.S. District Judge Rosemary Collyer in civil litigation in federal court and that victims had a compensation remedy through the federal remissions program.
The deadline for filing a claim through Rust Consulting Inc. — the official claims administrator — is Jan. 19. There have been repeated attempts by some ASD members to discredit Rust, which is under contract with the U.S. government to administer the program.
A list of Florida victims already had been submitted to Rust, Florida prosecutors said. In October 2010, Florida confirmed it had dismissed the state-level pyramid case. Two months later, in December 2010, Bowdoin was charged criminally under federal law with wire fraud, securities fraud and selling unregistered securities. An investigation into his business practices has been under way since July 2008.
Regardless, the most recent email suggests that government evil is afoot.
“And we all need to be very pragmatic about this,” the email read in part, citing a purported “opinion” without providing the source of the opinion. “We purchased advertising legitimately. … Now it’ll be up to a real jury, and if ASD/Andy have lawyers that are even remotely competent, the verdict will be not guilty.”
Bowdoin was arrested Dec. 1. Federal prosecutors accused him of operating a Ponzi scheme that had gathered at least $110 million. Bowdoin, 76, is free on bail.
In the email, the criminal charges against him were pooh-poohed, apparently by the author of the “opinion.”
“But the bottom line on all of this is twofold,” the email read. “First, the government is in a very bad position to win a jury trial – they have no material tangible evidence and no credible witnesses to prove their case. Second – all these ‘scams’ including the Rust group are ploys, most likely instigated by the government to try and turn up ‘witnesses’ who will say they have been victims of investment fraud. But those who will say that can be torn apart by the ‘Terms and Conditions’ they agreed to during Defense cross-examination. The other witnesses – the government agents (or informers) can also be torn apart during cross examination. The vote by the jury must be unanimous in a felony case BEYOND A REASONABLE DOUBT and the government knows that they simply don’t have the evidence or the witnesses to get by that.”
Repeated claims have been made by some ASD members for months that the government lacked both witnesses and evidence. Despite the claims, the government announced last week in court filings that it had gathered at least 500,000 pages of emails and at least 100,000 pages of bank records as part of the probe.
Meanwhile, prosecutors said the U.S. Secret Service had identified at least 40,000 potential ASD victims.
Like a previous email, the most recent email also suggested that ASD members should use the remissions form to claim ASD was not an investment program. Such an approach potentially could result in a situation in which participants disqualified themselves from receiving restitution from assets seized in the case by the U.S. Secret Service.
Prosecutors alleged that ASD was an investment business masked as an advertising company.
Even so, some ASD members are sticking with an assertion that ASD was a legitimate advertising firm.
“If you feel that you want to fill it out, [the claims form] must be mailed to [Rust] by 1/19/11,” the email read. “If you do choose to fill it out, then where your signature would be, you may want to write the words ‘See Addendum.’ Then attach a statement something like this (in your own words):
‘I am very clear that this was not an investment and that I was purchasing advertising. And, since the government shut down my advertising company and I therefore did not get the advertising I paid for, I would like to get my advertising money back from whomever is holding it now.’
“Sign it and send it in with the forms supplied by Rust,” the email advised recipients.
At the same time, the email solicited prayers and cautioned against working with AnShell Financial Services, a company that says it is helping some ASD members fill out the remissions form for a fee.
Rust, the official claims administrator, has specifically disclaimed any affiliation with AnShell and has urged caution in dealing with the firm, which is approved neither by Rust nor the government.
Some ASD members appear to be as paranoid about the work AnShell is doing for certain members as they are about the government and Rust.
“The form you received from Sheldon Drobny, CPA/AnShell Financial Services is someone who was retained by a group of ASD/Golden Panda members to get their money back from the government,” the most recent email read. “This is the company that is holding the conference calls. If you feel you want to participate, be careful here also. Use the same attitude there: you didn’t make an investment; you purchased advertising. There is danger that this could be used against ASD also. Pray about it and decide for yourself if you want to participate.”
The email ended by citing the name “Sara” as the sender.
“That’s all I have for now,” the email concluded. “I am still very swamped caring for my husband and I am not a lawyer so I can’t really advise you further and answer any questions. Hope this is helpful. I still haven’t been able to process all the emails I received from ASD members in the Fall of 2009, giving me their change of e-address, so please pass it on to all ASD members you know. God’s Blessings, Sara.”
UPDATED 12:04 P.M. ET (U.S.A.) In court filings this week in the AdSurfDaily autosurf Ponzi scheme case, federal prosecutors in the District of Columbia revealed a series of jaw-dropping numbers. The biggest of these is 500,000 — the number of pages of emails gleaned so far in the investigation, which began in July 2008.
Because prosecutors put the qualifier “at least” on the already-staggering number, it is clear the number actually could increase. Each of the pages is subject to the discovery process, meaning that attorneys from both sides and perhaps the court itself faces the monumental challenge of sifting through at least half a million pages of scheme-related correspondence.
Other big numbers in the alleged $110 million ASD Ponzi include 100,000, the number of pages of bank records, and 5,000, the number of pages of documents that emerged after the U.S. Secret Service searched ASD’s office in Quincy, Fla., and the home of company president Andy Bowdoin.
To date, investigators have identified 40,000 potential ASD victims. This number also could grow because there is reason to believe that “there may be members who provided funds to ASD but whose information ASD did not enter into its database,” according to prosecutors.
ASD’s database included information on 97,000 members. Some participants have claimed ASD actually had 120,000 members. Regardless of the final number that emerges, ASD created victims by the tens of thousands, including victims who do not live in the United States, prosecutors said.
The import — and the danger of these numbers — is that ASD is only one autosurf. There may be hundreds if not thousands of autosurfs operating in the world at any one time, along with hundreds or thousands of HYIPs. Like other autosurfs and HYIPs, ASD was promoted on Ponzi forums such as TalkGold, MoneyMakerGroup and ASA Monitor. The Ponzi pitchmen love American money, and commission-grubbing American salespeople and serial promoters who play dumb to line their pockets at the expense of their fellow countrymen specialize in spreading the misery globally.
In May, the PP Blog reported on criminal charges filed against Nicholas Smirnow, the alleged operator of the Pathway to Prosperity (P2P) Ponzi and HYIP scheme. The numbers that have emerged from that alleged scheme are equally stunning: $70 million fleeced from 40,000 victims in 120 countries from “all of the permanently inhabited continents of the world,” according to the U.S. Postal Inspection Service.
The criminal complaint filed against Smirnow specifically references the TalkGold, MoneyMakerGroup and ASA Monitor Ponzi forums — the same forums from which ASD and countless other schemes have been promoted.
Legisi, yet another alleged scheme pitched at the forums, also produced some big numbers. Among them are $72.6 million fleeced from at least 3,000 victims. Matthew Gagnon, one Legisi pitchman, netted $3.8 million alone from the scheme, according to the SEC.
So, in just the three alleged schemes referenced in this column — ASD, P2P and Legisi — the numbers shape up like this: at least $252.6 million gathered from at least 83,000 victims. If the P2P and Legisi cases are shaping up like the ASD case from the standpoint of paper production, investigators, attorneys from both sides and the courts may have to go through more than a million pages of documents and corresponding bank records to make sense of it all.
Meanwhile, the wink-nod, serial promoters continue to ply their trade on the Ponzi boards — all while the U.S. and world economies are trying to navigate the choppiest waters since the Great Depression. While the serial promoters are lining their pockets at the expense of Moms and Pops from virtually every corner of the earth, they are anticipating the danger signs consistent with the implosion of their currently favorite Ponzi — and they are preparing their next round of lies to protect their illicit profit pipeline and explain away the problems that inevitably will emerge.
Some of the professional criminals will tell their marks that it is their duty to be patient when Ponzi payments slow down. They’ll add that problems affect all enterprises regardless of size, and that it’s not unusual for payment bottlenecks to occur. They’ll explain that it likely is a problem with software or the need to acquire a new server to accommodate traffic. After all, they’ll say, “growing pains” are something to celebrate because they signal the success of the enterprise.
And the serial criminals also will talk about a doubting recruit’s duty to be loyal to the enterprise. After all, they’ll explain, the company is doing the right thing by acquiring the equipment and manpower needed to streamline operations and thus return to a normal payout schedule.
While the professional Ponzi criminals are explaining all of this, investors will become further separated from their money before the final round of excuse-making begins. Investors will be cautioned not to contact the authorities and told not to contact the payment processors. After all, the serial pitchmen will explain, if the authorities seize the cash or if the payment processors freeze the accounts, no one will get paid.
When the scheme ultimately collapses, some of the serial criminals will shrug their shoulders and feign surprise. They’ll explain why they had every reason to believe that this one was different, that they’d been assured by the Christian operator it was different. No matter, they’ll say, perhaps positioning themselves as people of faith. Recruits who invested more than they could afford to lose have only themselves to blame, they’ll claim. (This is if they call it “investing” at all; many serial criminals avoid that word like the plague. After all of these years and all of this Bible-thumping, they still apparently believe that it’s possible to skirt securities laws by avoiding the word “investment” and calling it something else.)
Then they’ll unapologetically move on to the next scam. After all, they’ll explain, they have a right to make a living. Some of them will explain that the government, which refuses to see the beauty of the autosurf and HYIP models, is to blame. Along the way they’ll create some clone promoters, and the clones will multiply. The clones will add to the purported, pro-Bible (and antigovernment chorus) — and before long, investigators trying to reverse-engineer a single case will be sifting through 500,000 pages of emails, 100,000 pages of bank records and 5,000 pages of records created as the result of the execution of a search warrant or as a result of actual documents seized.
Agents then will begin the mind-numbing and time-consuming process of identifying victims by the tens of thousands.
Some of the victims will lose their homes because they borrowed against their equity to take advantage of “bonus” ad packs and to maximize their “earnings” through “compounding.” Others will have lost savings set aside to educate their children. Still others will have lost their life savings and money set aside for retirement.
Many of the people who created all the pain will sprint back to the Ponzi forums — and the government will be left to clean up the colossal mess. The Ponzi pitchfest is in constant motion as property values decline in neighborhood after neighborhood, driven by the foreclosures glut. The Stepfords among the promoters will write their Congressman or Senator or perhaps the Inspector General at the Justice Department.
They’ll more or less say that it would be in the interests of America if the Congressman or Senator or Inspector General would see fit to fire all the prosecutors and agents who made these unseemly events occur.
And then they’ll gather up their lists of suckers and try to recruit them into yet-another MLM, autosurf or HYIP nightmare. This they will call “freedom.” Some of them will be angry. Some of them will write rambling diatribes on forums. Invective will be part of the diatribes. Some of them will call public officials “Nazis” and “Socialists,” perhaps even in the same fractured paragraph. Some of them even will try to sue the government or have the prosecutors and judges charged with crimes. They’ll talk about “treason” and high crimes against the Constitution.
What they will never do is make any sense.
It is impossible to imagine that any government agency has the resources to take down all of the corrupt MLMs, autosurfs and HYIPs. But one can imagine a systematic process by which the government identifies the serial promoters and plans a litigation strategy from which will emerge the “shot heard round the world” of corrupt online investment “opportunities.”
That day cannot come soon enough — and the numbers demand it: more than $250 million gathered from victims of just the three alleged schemes referenced on this page, perhaps 1 million or more emails and other documents produced by the investigations, at least 83,000 victims from virtually all corners of the earth, an untold number of agents/investigators from multiple government entities forced to sift though monumental piles of evidence.
It is clear that wealth is being drained by the billions. It is equally clear that vast sums of money have gone missing in the Age of Terrorism.
Clearest of all, however, is that the corrupt MLMs, autosurfs and HYIPs cannot thrive without their greedy and dangerous promoters — and that highly public lawsuits and early morning raids designed to hold the wink-nod Ponzi pitchmen accountable would send an unmistakable message that pain is in your future if you promote these criminally toxic businesses. Serial promoters deserve the same treatment as mid-level drug dealers.
No economy can thrive if a single case among thousands of potential cases is producing 500,000 pages of emails and creating 40,000 victims while consuming tens of millions of dollars — and if “shell companies,” the “shadow banking system” and wink-nod, serial promoters are driving the wanton criminality and letting the cancers metastasize globally.
Here’s hoping such an operation aimed specifically at corrupt MLMs, autosurfs and HYIPs already is under way.
BULLETIN: Federal prosecutors now say that a Florida company whose operator is accused of running an international Ponzi scheme may have defrauded 40,000 or more victims and may not have entered all the names of people who gave it money into the firm’s database.
Andy Bowdoin, the president of AdSurfDaily, was indicted last month on charges of wire fraud, securities fraud and selling unregistered securities. Prosecutors now have revealed in court filings that the U.S. Secret Service seized ASD’s database during the probe, which began in July 2008.
ASD’s database contains 97,000 names, including the names of members who joined for free, prosecutors said in a motion that asks U.S. District Judge Rosemary Collyer to approve a plan by which websites would be used to help locate additional victims and keep victims in general informed about developments in the case.
“The government is not certain that this list is a complete list of all people who provided money to ASD and who potentially lost their money,” prosecutors said. “It appears from the investigation that there may be members who provided funds to ASD but whose information ASD did not enter into its database.”
Some ASD members claimed the company had as many as 120,000 members.
To date, prosecutors said they had identified “approximately 40,000 known potential victims.” The victims’ list includes “individuals who contacted the U.S. Attorney’s Office directly and identified themselves as losing money in their ASD investment, members who agents identified as potentially losing money with ASD and Golden Panda Ad Builder members.”
Golden Panda was the purported “Chinese” option for ASD members. It was operated by Clarence Busby of Georgia, according to court filings.
Bowdoin, prosecutors said in their motion, was operating ASD “essentially as his own piggy-bank.”
Beyond that, prosecutors said, “as far as the Government is aware, there is no available accurate compilation” of all individuals or entities that lost money in the scheme.
All victims have the right to be “reasonably heard” and to be kept up to date on proceedings, but the sheer number of ASD victims and a lack of records makes it “impracticable to give individualized notice to each potential victim.
A web-based system of notification through email and a government site and the remissions site set up by Rust Consulting Inc. of Minnesota will help victims stay informed of their rights, prosecutors said in their motion to Collyer.
“In light of the fact that Bowdoin operated an Internet based scheme, it is reasonable to assume that victims will have access to the internet and will be able to easily access information on the government’s website,” prosecutors said. “Moreover, the government will include on the remission website a link to the U.S. Attorney’s Office’s website for victims seeking information about public proceedings in the criminal case.
“The Government respectfully submits that the proposed notice procedure is reasonable to give effect to the rights of the potential victims in this case, and requests that the Court enter the proposed order,” prosecutors said.
Similar accommodations have been made in other securities-fraud cases, including the Bernard Madoff case, prosecutors said.
EDITOR’S NOTE: Blogger Chuck Miller, who posts on the website of the Albany (N.Y.) Times Union, has a post today on the unique circumstances under which he became a self-described “mark” for an MLM pitch nearly 20 years ago. Seems Miller’s MLM memories linger after nearly two decades. (You’ll learn why by clicking on the link to Miller’s column at the bottom of this post.)
First, though, some introductory remarks are in order . . .
McKelvy is a defendant in the Mantria/Speed of Wealth case, which the SEC filed in November 2009. Just days after the case was filed, McGaw began to receive a steady stream of email from McKelvy, who had a $30 million Ponzi scheme case hanging over his head and still was pitching offers for MLMs.
“How the heck can I help you become financially independent if you do not take the action steps that I recommend to you?” McKelvy memorably nudged the columnist just days after the SEC announced its intent to sue McKelvy back to the Stone Age.
Of course, untold numbers of Stepfordian members of Florida-based AdSurfDaily continued to pump autosurf MLMs — even after ASD President Andy Bowdoin had tens of millions of dollars seized from his personal bank accounts and was accused by some of his own members of racketeering.
Accused Ponzi swindler Andy Bowdoin of Florida-based AdSurfDaily has been granted an extra two weeks to argue that the criminal case against him should be transferred from U.S. District Court for the District of Columbia.
Through his attorneys, Bowdoin informed U.S. District Judge Rosemary Collyer on Jan. 3 that he intends to file a Rule 21 motion to transfer his trial to another federal court. Under Rule 21, a defendant can argue that he cannot receive a fair and impartial trial in a specific district. Meanwhile, a defendant can argue that the trial should be moved for the convenience of the parties and witnesses.
It was not immediately clear if prosecutors would oppose the motion. Bowdoin initially was ordered by a federal magistrate judge to file his motion within two weeks of his Dec. 17 arraignment in Washington. Collyer now has granted Bowdoin’s request for an extension to file. The new deadline is Jan. 18.
In December 2009, Bowdoin sought to have Collyer removed from the civil-forfeiture case in which the U.S. Secret Service seized tens of millions of dollars from his personal bank accounts. Collyer refused to step down. In January 2010, she decreed the money forfeited to the U.S. government, which has established a process through which ASD victims can file a claim for a share of the seized proceeds.
In an affidavit in support of his 2009 disqualification motion, Bowdoin claimed Collyer had a “deep seated animosity” toward him and that the judge “has a personal bias and prejudice” against him.
Ironically, Bowdoin’s motion to disqualify Collyer in the civil case was docketed on Dec. 17, 2009. Exactly one year to the day later — on Dec. 17, 2010 — Bowdoin made his first appearance in the criminal case in the District of Columbia. Federal agents arrested Bowdoin in Florida on Dec. 1, 2010, after an indictment from a grand jury that began meeting in May 2009 was unsealed.
Collyer did not preside over Bowdoin’s initial appearance in Washington, but has been assigned the criminal case. She issued her first ruling yesterday: a minute order that granted Bowdoin’s request for the two-week extension to file his Rule 21 motion.
ASD member Curtis Richmond, who emerged as a figure in the civil litigation after filing pro se pleadings that accused Collyer and Chief U.S. District Judge Royce Lamberth of operating a “Kangaroo Court,” also sought unsuccessfully to have Collyer removed from the case in 2009.
Richmond has been linked to a sham Utah “Indian” tribe that once sought unsuccessfully to have a federal judge removed from a different case on the eve of trial by claiming the judge owed Richmond $30 million.
Andy and Faye Bowdoin posed for a picture with a Gadsden County (Fla.) Chamber of Commerce official in 2008. Andy Bowdoin later was accused of operating a massive Ponzi scheme. In a separate case in Georgia this week, Cynthia O'Tyson was sentenced to 60 years in prison for a scheme in which she reportedly used contacts at her church and the local Chamber of Commerce to give her scheme an air of legitimacy.
A Georgia woman with a history of stealing and being placed on probation after serving short stints in custody now has been sentenced to 60 years in prison.
Cynthia O’Tyson’s sentencing was captured in Superior Court by WRDW-TV, the CBS affiliate in Augusta. The station led its 5 p.m. and 6 p.m. newscasts yesterday with reports about the sentencing, noting that O’Tyson had scammed friends and members of her own family and community into believing she was a supplier of discount electronics.
Meanwhile, the Augusta Chronicle reported that O’Tyson even had scammed the families of local officials and used members of her church and the Columbia County Chamber of Commerce to give the scheme an air of legitimacy.
The O’Tyson scheme was reminiscent of the alleged AdSurfDaily Ponzi scheme in Florida. Federal prosecutors said ASD President Andy Bowdoin traded on religion. On July 2, 2008, Bowdoin, who was implicated in securities swindles in Alabama during the 1990s and also had a business partner implicated in a separate swindle during the 1990s, addressed the Gadsden County Chamber of Commerce.
Initially pleased that ASD, which positioned itself as a jobs-creator and economic turbine, had chosen the struggling small town of Quincy, Fla., as its home, the Chamber touted ASD and the company.
But the Chamber later called the FBI when questions were raised about Bowdoin’s purported “advertising” firm, according to federal court records. The U.S. Secret Service later described ASD as a massive Ponzi scheme that had gathered at least $110 million. Bowdoin described himself as a “money magnet” and asked members to imagine ASD profits just “flowing” to them after purchasing “ad packs” from the company and committing themselves to have an “attitude of gratitude” with God.
O’Tyson’s scheme also was reminiscent of the much-larger scheme operated in Minnesota by convicted Ponzi swindler Tom Petters. Petters’ investors believed he sold discount merchandise to Big Box retailers.
Although Petters’ crime was much larger than O’Tyson’s merchandise scam, he was sentenced to 10 years fewer than the Georgia woman. O’Tyson called her bogus company “Wholesale Liquidators.”
