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Tag: Andy Bowdoin

  • KABOOM! FTC Says ‘Medical Discount’ Hucksters Used Images Of Obama, Words From Congressional Speech To Fleece Customers; Receiver Already Has Seized Website; Feds, 24 States Launch Fraud Crackdown

    The FTC said today that images of President Obama were used to help a bogus "medical discount plan" trick customers into believing they were purchasing health insurance.

    EDITOR’S NOTE: Some readers will recall that one of the Secret Service’s allegations in the AdSurfDaily Ponzi case is that pitchmen tried to sanitize the scheme by making false claims that ASD President Andy Bowdoin had received an award for business acumen from President George W. Bush and Vice President Dick Cheney.

    Others will recall that Mantria Corp. — implicated in a Ponzi scheme by the SEC — used images of former President Clinton and other world figures to sanitize a “green” energy scheme.

    Now comes word that the FTC has brought a fraud case against a company amid allegations it used images of President Obama, the White House, the U.S. Capitol and lawmakers to sanitize a bogus “medical discount plan”  marketed as health insurance.

    Here, now, the story . . .

    A company that used images of President Obama and the White House — along with logos that resembled the logos of government agencies — has been charged by the Federal Trade Commission with marketing a bogus “medical discount plan” as healthcare insurance.

    At least two other firms and their operators and associates have been charged separately with running discount scams, and a nationwide crackdown involving at least 24 states is under way. The FTC has dubbed the sweep “Operation Health Care Hustle.”

    “With so many Americans struggling to deal with the costs of health care, these medical discount benefit plans sound appealing because they masquerade as health insurance,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “But they are not insurance. They don’t offer the benefits of health insurance, and victims don’t know they’ve been ripped off until after they’ve tried to use the service and paid their bill.”

    The fraud case against Health Care One LLC and associated firms illustrates the dangers not only of promoting scams, but also of of trying to recruit customers into them by implying a product or service is endorsed by the President, members of Congress or the government in general.

    Indeed, Health Care One’s website already has been seized by a court-appointed receiver — and content that once appeared on the site and affiliated sites has vanished. In a remarkable news presentation today, the FTC released a video pitch used by the company.

    Healthcare One LLC used images of the White House while scamming customers, the FTC said.

    The pitch features video of Obama addressing Congress about healthcare issues on Sept. 9, 2009. Heathcare One makes Obama the star of the video, showcasing remarks in which the President stated, “No one should go broke because they get sick.” Vice President Joe Biden and House Speaker Nancy Pelosi are in the background of the video.

    The video then cuts away to a passage in which Obama said, “That is heartbreaking. It is wrong, and no one should be treated that way in the United States of America.”

    The video then quickly cuts away again to an image of the U.S. Capitol. Official-looking logos appear on the screen, along with the words “REGISTRATION NOW OPEN[:] NATIONAL HEALTHCARE DISCOUNT PROGRAM[:] FOR ALL UNINSURED AMERICANS.”

    A narrator simultaneously declares that “registration is now open for a national healthcare discount program.” The narrator — as an image of the White House replaces an image of the Capitol — goes on to say that “Citizens4Healthcare is now authorized to offer you savings of 20 to 60 percent on doctors, hospitals, prescription drugs and more.”

    As the video proceeds, the narrator declares that “there are daily registration limits for this program, so call now for immediate acceptance . . .”

    Healthcare One was specifically charged with claiming it sold health insurance when it did not — and of misleading the public into thinking it was affiliated with the federal government.

    “Defendants’ advertisements lead consumers to reasonably believe that Health Care One’s program is affiliated with, or endorsed or sponsored by, the federal government,” the FTC said.

    “It is not,” the agency said flatly in court filings, accusing the company of selling a scam.

    Read more about “Operation Health Care Hustle.” (Look in the upper-right corner of the screen when you land on the FTC page. You”ll find links to other cases announced today — and also a link to the video cited above.)

  • AdViewGlobal Website Offline; ‘Surfing’ Site With Close ASD Ties Suspended Cashouts A Year Ago

    The website of AdViewGlobal (AVG), an autosurf with close ties to the alleged AdSurfDaily Ponzi scheme, has gone offline.

    Why AVG’s site was offline was not immediately clear. One person told the PP Blog that the site had been “down for days.” AVG’s domain, which lists a registration address in Uruguay and appears to use a dedicated server that resolves to Panama, would not return a ping this morning.

    Aug. 1 was the two-year anniversary of the seizure by the U.S. Secret Service of tens of millions of dollars in the ASD case. AVG, fueled by the participation of ASD members, launched in the aftermath of the ASD seizure and the filing of a racketeering lawsuit against ASD President Andy Bowdoin.

    Promotions for AVG began to appear online less than a month after ASD lost a key court battle in November 2008. In January 2009, AVG graphics were seen on an ASD-controlled website, but AVG denied any ties to ASD. By February 2009, AVG was up an running, and some of the moderators of the Pro-ASD Surf’s Up forum started a forum to promote AVG.

    AVG, whose site remained online after the company suspended payouts in June 2009 and announced it was conducting an audit of itself, perhaps is one of the oddest autosurfs of all time.

    Although AVG denied any ASD ties, the person issuing the denial on behalf of AVG was a former ASD employee. Even while issuing the denial, the former ASD employee confirmed that Gary Talbert, a former ASD executive, was the chief executive officer of AVG.

    AVG later went on to form a purported “private association” purportedly based in Uruguay. The surf bizarrely claimed U.S. Constitutional protections despite the competing claim it operated on foreign soil.

    By June 25, 2009, AVG had collapsed — after running a virtually never-ending series of promotions that offered 200 percent bonuses to both existing members and the prospects they recruited. One promoter claimed that $5,000 placed with AVG turned into $15,000 “instantly!”

    The surf later said it was the victim of a $2.7 million theft.

    AVG went offline for a brief period in September 2009 after its domain-name registration expired. Records show that the domain name is valid until Sept. 22, 2010 — more than a month from today’s date.

    Read this story for the names of other autosurfs/HYIPs promoted by ASD members.

    Read this story on AVG threats directed at members and the media after its collapse.

    Read this story on a method an AVG member said would help other members qualify for bonuses. (Make sure you read the comments from readers below the story.)

  • MAXIMUM KABOOM? Woman Found Guilty On 122,000 Counts In Pyramid Case; Tells Psychologist She Could Have Saved Firm Had Government Not Interfered

    Is it the maximum case of Kaboom! — coupled with the maximum case of denial?

    The government of South Africa hit Maritjie Prinsloo with a whopping 122,000 counts of fraud, racketeering and money-laundering in a pyramid-scheme case that involved an estimated $205 million. (R1.5 billion.)

    Prinsloo was found guilty last month. South African media now are reporting that she is blaming the government and an accounting firm for interfering in her business affairs while at once insisting she could have turned things around.

    It was not immediately clear if the filing of 122,000 counts established a record. Prinsloo has been referred to in local reports as the “Pyramid Scheme Queen” and the “Krion swindler.” Members of her family also have been implicated in the scheme.

    It is not unusual for Ponzi and pyramid schemers to blame the government for their legal predicaments and to claim the government made matters worse by taking action to stop a scheme before it could consume even greater sums of money. Online Ponzi forums, for example, are filled with claims that operators can turn things around if given more time, and victims routinely are discouraged, ridiculed and threatened with banishment by operators and their shills for contacting authorities and filing complaints.

    A psychologist told the the Pretoria High Court that Prinsloo believes she did nothing wrong and could have turned around the business had the government not filed charges, according to this account in the Daily Dispatch.

    Prinsloo was charged with more counts than there are seconds in a day (122,000 counts/86,400 seconds in a day). Had she been charged in the United States — and had she not waived the reading of the complaint — the court official tasked with the duty of ticking off the counts would have left voiceless.

    Had the judge ordered one count read per second — and had the employee magically been able to comply with the order — the employee would have consumed 24 straight hours in reading the counts and still been left 35,600 counts short of finishing the job. The job then would have carried over to consume almost 10 straight hours of a second day, at one count per second.

    During the first 24 hours of the reading of the complaint at the impossible rate of one count per second, the world’s population would have increased by about 220,000, according to estimates.

    In the often bizarre and incongruous world of Ponzi and pyramid schemes, the fact that the world’s birth rate exceeds its death rate has been seized upon by some advocates as purported “proof” that it is impossible to operate such schemes and the government therefore cannot “prove” that a Ponzi or pyramid scheme exists.

    Such claims were made by at least one member of AdSurfDaily, which the U.S. Secret Service described as a Ponzi scheme. Some members of ASD defended the firm by claiming that no Ponzi existed and that the government was interfering with commerce.

    ASD President Andy Bowdoin, meanwhile, told members that the government had seized their money. In court filings, however, he told the presiding federal judge that the money belonged to him.

    Prosecutors called Bowdoin “delusional.”

  • REMEMBER PRAEBIUS? Penny-Stock Firm ASD Claimed Would Pump $200 Million Into Its Coffers Was Flogged By California Man In ‘Fraudulent Touting’ Scheme During Month ASD Announced ‘Joint Advertising Venture,’ Records Show

    On Oct. 29, 2008, Andy Bowdoin's AdSurfDaily Inc. announced a purported $200 million joint venture with Praebius Communications. During that same month, Praebius' penny stock was part of a "Fraudulent Touting" scheme operated by Songkram Roy Sahachaisere of Huntington Beach, Calif., the SEC says.

    A California man and his company have been accused by the SEC of running a “Fraudulent Touting” scheme that pumped the penny stock of Praebius Communications, a company the alleged AdSurfDaily Ponzi scheme once claimed would generate $200 million for its coffers through a joint “advertising” venture.

    Charged by the SEC with fraud were Songkram Roy Sahachaisere and InvestSource Inc. of Huntington Beach. The Praebius stock was pumped by Sahachaisere as part of what the SEC described as a “massive” email and newsletter scam.

    “Between January 1, 2008 and March 31, 2009, InvestSource sent nearly 450 email messages to over 24 million recipients,” the SEC charged.

    Praebius was one of seven InvestSource clients whose stock was pumped and dumped to generate illegal profits of more than $276,000, the SEC charged.

    The timing of the alleged touting scheme, according to records, coincided with dates in October 2008 in which ASD, an autosurf company, was announcing a purportedly lucrative  joint venture with Praebius. ASD announced the prospective deal on Oct. 29, 2008. During the same time period, ASD was awaiting a key court ruling on whether it had demonstrated at an evidentiary hearing earlier in October that it was operating lawfully. Using a headline of “ASD-Praebius Venture” on its now-defunct Breaking News website while awaiting the ruling, ASD said it expected to garner revenues of about $200 million “over the first several years” from Praebius.

    Announcement of prospective $200 million deal with Praebius Communications on ASD’s Breaking News website. The announcement was removed after some members questioned it.

    The SEC now says Sahachaisere and InvestSource were pitching Praebius stock during the same month, declaring their business practices to be “Fraudulent Touting” because they “failed to disclose that they were selling the very securities they were recommending investors buy.”

    Sahachaisere and InvestSource received 4.1 million shares of Praebius stock between Oct. 2, 2008, and Nov. 25, 2008, the SEC charged.

    The scheme involving Praebius netted $49,215 for Sahachaisere and InvestSource, the SEC said.

    Five of the seven stocks — including Praebius — experienced “significant increases in trading volume during InvestSource’s promotions,” the SEC said.

    ASD’s name is not referenced in the SEC complaint, and Praebius was not listed as a defendant in the case. Praebius is referenced in the case as a client that paid InvestSource and Sahachaisere in stock “to provide investor relations services.”

    One of the issues in the ASD Ponzi case was whether the company had revenue streams adequate enough to pay “rebates” to members of 1 percent a day or 365 percent a year for viewing “advertising.” During the evidentiary hearing, ASD never produced audited, certified financial statements to prove it could sustain the rebates. Prosecutors described the company as catastrophically insolvent and reliant on revenue from new members to pay “rebates” to older members in classic Ponzi scheme fashion.

    Less than a month after an evidentiary hearing concluded on Oct. 1, 2008, ASD announced the purported joint venture with Praebius. Critics immediately questioned both the $200 million figure quoted by ASD and the timing of the announcement because Praebius did not publish verifiable financial data and ASD was described by federal prosecutors in the Ponzi scheme case as hopelessly under water.

    Although ASD purported to be a professional communications firm, its announcement of the purported $200 million deal did not quote executives of either ASD or Praebius. The announcement led to questions about why Praebius would knowingly associate its name with a company suspected of operating a massive, international Ponzi scheme while it allegedly also engaged in wire fraud and money-laundering while selling unregistered securities.

    Some ASD critics saw the announcement as a cynical means of instilling hope in ASD members that all was not lost while signaling to a federal judge that ASD had a major, new client that single-handedly could wipe away the firm’s alleged insolvency. Even as critics were voicing concerns that ASD was advancing yet-another story that was too good to be true, members of the now-defunct Pro-ASD Surf’s Up forum were cheerleading ASD’s purported revenue infusion from Praebius.

    Some ASD members sprinted to forums to announce the news, but the information could not be verified. ASD later removed the announcement from its website.

    According to the SEC’s complaint against Sahachaisere and InvestSource, nearly 4.5 million shares of Praebius traded hands between Oct. 7, 2008, and Jan. 27, 2009, generating less than $50,000 in revenue.

    ASD never explained how Praebius, which did not publish verifiable financial data, could generate the $200 million ASD cited in the announcement.

    Less than a month after ASD issued the Praebius announcement, a federal judge ruled ASD had not demonstrated at the evidentiary hearing that it was operating lawfully and was not a Ponzi scheme. By Dec. 19, 2008, federal prosecutors had filed a second forfeiture case against ASD-connected assets, again citing Ponzi allegations.

    Even as prosecutors were filing the second Ponzi complaint, Surf’s Up members were claiming that the government secretly had admitted ASD was not a Ponzi scheme.

    From the SEC "Fraudulent Touting" court case against Songkram Roy Sahachaisere and InvestSource Inc. The highlight in red shows the alleged illegal touting of Praebius stock.

  • MEMORY LANE: Before DailyProfitPond ‘Surf Tanked In 2008, Operators Warned That ‘Substainability’ Of 12 Percent Daily Payout Was ‘Questionable’

    EDITOR’S NOTE: We were researching an unrelated matter last night, and came across this gem (outlined below). In 2008, a number of autosurfs that became popular in the aftermath of the seizure of tens of millions of dollars from the personal bank accounts of AdSurfDaily President Andy Bowdoin tanked just prior to Christmas. One of them was Daily Profit Pond. The story below illustrates the fractured thinking that dominates the autosurf landscape — and the role promoters and autosurf “experts” play in spreading spectacular frauds virally on the Internet.

    As incredible as it sounds, an autosurf Ponzi known as Daily Profit Pond (DPP) said it was a legitimate business but warned prior to its collapse during the 2008 holiday season that its advertised payout rate of 12 percent a day might be unsustainable.

    Why promoters and members even had to ponder whether a Ponzi existed or the sustainability of an enterprise that advertised a 144 percent return in 12 days when there was no verifiable source of revenue beyond members’ funds was left to the imagination.

    But ponder it they did . . .

    In a missive to members, DPP described itself as thoughtful company that had listened to the input of unidentified “leaders” before making a decision to slash the advertised payout rate.

    “A few of our members got scarced (sic) and have contacted us that they want such a fine program like DPP to be here in the long run,” DPP said. “We have listen (sic) to these leaders and have decided to make some changes that will ensure the longterm success of DPP.”

    How did DPP address the sustainability issue?

    “[T]he management of DPP have decided to change the 12% daily plan which pays 144% in 12 days to a more realistic plan of 150% earnings in 30 days.”

    Yep. DPP suggested 144 percent in 12 days was too much, but added that 150 percent in 30 days was “more realistic.” DPP did not explain precisely how it had arrived at the conclusion that its new, 150 percent plan was a winner, but it noted (italics added):

    “The DPP administration are expects (sic) in the digital currency business and advertising business. This is where we intend to invest our members (sic) funds and the profit we generate will be used to substain (sic) our members payouts. This new strategy will enable DPP to be there in the long run when all other sites have closed and vanished into the (sic) thin air.”

    And like an overnight infomercial eager to add a free can of snake oil to the deal, DPP shrieked, “But Wait!” (Italics added):

    “How does this work, you may ask?

    “Henceforeth (sic), Our (sic) members will start earning 150% of their profit spots in 30 days. Ref. commission for upgraded members remains 12% down through 3rd levels (sic). 6% commission on level one, 3% ref commission on level two and three.”

    One promoter cheered DPP’s business acumen.

    “Well, I’m glad to see that someone at Daily Profit Pond is paying attention to the accounting,” he said. “They realize that their liability to their existing members is higher than the cash that is flowing in. You don’t have to be a math expert to realize that when you have more money going out than you have coming in, that you are going to run into cash problems pretty fast.

    “For the people who are upset by this change, I can understand where you are coming from but you have got to look at the alternative.

    “Would you rather keep earning 12% per day of virtual money that you will NEVER receive? Or would you rather earn 5% per day of money that you will actually be able to cash out? The choice is obvious.”

    Records suggest that DPP’s site vanished a week prior to Christmas in 2008. One ad viewed by the PP Blog prior to the collapse of DPP said it was possible to start with $12 and turn it into $12,000.

    Just days earlier DPP had lamented surf sites that vanish into “thin air.”

    Surfs such as DPP and MegaLido, which also went missing prior to the 2008 Holiday season, were particularly noxious. Members of AdSurfDaily and Golden Panda Ad Builder, whose assets were seized by the U.S. Secret Service in August 2008, cynically promoted DPP and MegaLido to other members of ASD, suggesting these miserable enterprises provided a way for people who lost money in ASD and Golden Panda to get it back quickly.

    Good grief: 144 percent in 12 days — later slashed to a “more realistic” 150 percent in 30 days.

    There was an earnings “calculator,” of course.

  • AP: Fraudster’s Self-Styled Litigation Strategy Led To Lengthier Prison Terms For Followers; Neville Solomon Cited UCC, Religious Passages Instead Of Listening To Lawyer

    A 67-year-old fraudster who did not listen to his attorney and embarked on a bizarre legal strategy was sentenced to a longer prison term as a result, the AP is reporting.

    Meanwhile, the AP is reporting that Neville Solomon met several other defendants in jail and shared his strategy, resulting in longer sentences for inmates who followed his advice, which cited the Uniform Commercial Code (UCC) and religious passages.

    One of the prongs of Solomon’s strategy was to repeatedly say, “I accept your offer and return it for value,” according to the AP.

    Read the AP story, which quotes a federal judge as saying a “whole bunch of people wound up in prison for a lot longer time than they should have” as a result of relying on improper defenses. At the same time, the story quotes a federal prosecutor who lamented the “crazy defense ideas out there.”

    Some of the legal notions advanced by Solomon are similar to the notions advanced by AdSurfDaily President Andy Bowdoin.

    Bowdoin, acting has his own attorney, advised a federal judge in 2009 that the mere filing of a pro se court document accomplished his objective of reversing a decision he made to surrender tens of millions of dollars in a Ponzi scheme forfeiture case “as a matter of law.”

    U.S. District Judge Rosemary Collyer disagreed, ordering the forfeiture of more than $65.8 million from Bowdoin’s bank accounts.

    The Solomon strategy also was reminiscent of a legal approach advocated by ASD member Curtis Richmond, a member of a Utah “Indian” tribe a federal judge ruled a complete “sham” in 2008. The “tribe” relied on fraudulent UCC claims in a bid to extort members of law enforcement, according to court filings.

    Elsewhere, a federal judge in Washington state ordered bogus UCC liens filed against government officials to be struck last month.

    Bogus liens filed by Ronald James Davenport of Deer Park sought the spectacular sum of nearly $5.2 billion from each of the officials, including U.S. Attorney James McDevitt of the Eastern District of Washington, an assistant U.S. attorney, a court clerk and an IRS agent, according to court records.

    Prosecutors described Davenport as a “tax defier.” Davenport has described himself in court filings as a “sovereign.”

    Davenport now has been charged criminally with filing false liens. If convicted, he faces up to 40 years in prison.

    In February, a federal jury found Solomon guilty of money laundering. Prosecutors said he and an associate, Frederick W. Keiser Jr. of Minot, N.D., “promoted a scheme to fraudulently obtain money from potential investors by inducing them to wire money to a company called MidChina Capital Management” in Las Vegas.

    “The phony investment promoted by Solomon and Keiser involved a fictitious bank trading or bank guarantee program in which bank instruments were to be obtained,” prosecutors said. “Solomon and Keiser convinced their victims that the bank instruments would generate exorbitant yields which would be used to fund other income-generating projects for MidChina, which in turn would result in investors gaining enormous returns.”

    Solomon now has been sentenced to 86 months in federal prison and ordered to forfeit $2,043,235 — the proceeds of the fraud scheme.

    “The sentence received by Mr. Solomon shows that investors who get defrauded like this will sit quietly waiting for their great returns for only so long,” said Assistant U.S. Attorney Brett Shasky. “If the promised return isn’t forthcoming and the investment isn’t returned, they will be heard. Persons choosing to promote such schemes should beware. The day will come when the price they pay for their greed will be great.”

    The pro se notions advanced by Solomon also are reminiscent of approaches used by defendants in the infamous 3 Hebrew Boys Ponzi scheme in South Carolina. They’re also similar to notions advanced in the Gold Quest International (GQI) Ponzi and securities-fraud case in Nevada.

  • IT’S OFFICIAL: One Of Andy Bowdoin’s Lawyers Confirmed As U.S. Attorney; Another Tabbed As Federal Magistrate Judge; Firm Put In Charge Of Unraveling Wayne McLeod Ponzi Scheme

    Andy Bowdoin

    It’s enough to fuel the AdSurfDaily conspiracy theorists for years: Pamela Marsh, who represented ASD President Andy Bowdoin in a pyramid-scheme case in state court in Florida, has been confirmed by the U.S. Senate as the new U.S. Attorney for the Northern District of Florida.

    Meanwhile, Jonathan Goodman, one of the attorneys who represented Bowdoin in the Ponzi-scheme forfeiture case filed in U.S. District Court for the District of Columbia, has been appointed a federal Magistrate Judge in U.S. District Court for the Southern District of Florida.

    At the same time, an attorney for Akerman Senterfitt — the firm that employed both Marsh and Goodman — has been appointed to unravel the alleged K. Wayne McLeod Ponzi scheme that targeted members of law enforcement.

    Akerman Senterfitt’s Michael I. Goldberg already has begun his duties as receiver in the McLeod/Federal Employee Benefits Group case.

    President Obama appointed Marsh U.S. Attorney in April. She was confirmed by the Senate June 22.

    “Pam’s deep understanding of the law and commitment to excellence and ethics in her work made her a strong asset to the firm and she is the perfect choice to lead this important office,” said Andrew Smulian, chairman and chief executive officer of Akerman Senterfitt. “Pam has had great success in both the public and private sector and I am confident she will bring these impressive talents to her new role. We are particularly proud that Pam continues the tradition of Akerman attorneys who have made a special commitment to public service.”

    Marsh and Goodman have considerable experience as both prosecutors and defense attorneys.

    Bowdoin, 75, went on to fire an unclear number of attorneys representing him in state or federal court in ASD-related litigation, citing alleged incompetence and a conspiracy theory that his lawyers were only “looking out for the best interest of the government.”

    In 2008, federal prosecutors claimed Bowdoin had “followers.” In September 2009, they claimed he was “delusional.”

    Court records suggest Bowdoin withheld key information from both his attorneys and ASD members. While claiming in court that ASD was broke and could not pay its rent, Bowdoin did not disclose that ASD had $1 million in an offshore account under a different name, federal prosecutors said.

    He also claimed that “Ponzi” allegations against the company in Florida had been dropped, but the office of Florida Attorney General Bill McCollum pointed out that Bowdoin had never been accused by the state of operating a Ponzi scheme. The state brought pyramid allegations against the company.

    Despite federal allegations that Bowdoin was using an appeal to religion and operating a $100 million Ponzi scheme through 10 bank accounts in his personal name and that ASD was buying real estate, cars, jet skis, a boat and marine equipment with criminal proceeds, followers by the thousands initially lined up to support him.

    Some of his supporters said they associated themselves with a theory that the U.S. Congress met in secret session during the 1990s — a decade in which Bowdoin pleaded guilty to fleecing Alabama investors in a securities scheme — to pass secret legislation in anticipation of a visit by reptilian aliens.

    Some supporters also said they believed President Kennedy was assassinated in 1963 because he was about to expose a banking conspiracy.

    Eventually dozens of pro se litigants attempted to intervene in a forfeiture case brought by the U.S. Secret Service in August 2008. Some of them advanced a theory that prosecutors and judges were conspiring against Bowdoin.

    Others claimed the government had neither evidence nor witnesses, claims that were publicly refuted in court filings even before the claims were made. At least one ASD member sought unsuccessfully to force the ouster of U.S. District Judge Rosemary Collyer, claiming she was conspiring with another federal judge to deny justice to ASD members and operating a “kangaroo court.”

    The same member — Curtis Richmond — also sought unsuccessfully in 2008 to oust a federal judge in a separate case by claiming the judge owed him $30 million.

    Bowdoin himself also tried unsuccessfully to oust Collyer. One of his supporters falsely claimed the government had invested the seized funds and recorded a profit of more than $1 billion.

    In September 2009, Bowdoin claimed that his battle against the government was inspired by a former Miss America. He previously claimed the raid on ASD was the equivalent of the 9/11 terrorist attacks that killed nearly 3,000 people, and described the Secret Service and prosecutors as “Satan.”

  • California Man, 72, Sentenced To 110 Months For HYIP Rip-Off; Richard M. Hersch Also Ordered To Pay ‘At Least’ $9.2 Million In Restitution

    First, Richard M. Hersch, 72, told investors they’d earn up to 6 percent a week by plowing money into his company, All States ATM Inc.

    He then explained the company had “contracts” with major horse-racing tracks in California and elsewhere to operate Automated Teller Machines (ATMs) on the “back side” of the tracks.

    Ordinary horse-racing fans could not use the ATMs, according to Hersch, because the “backside” was off-limits to the general public and situated for the convenience of racetrack employees, horse owners, horse trainers and others — his own, highly profitable niche.

    Hersch then made the investments appear to be even more lucrative by explaining “the racetracks allowed him to operate a check-cashing or loan service on the back side of the track for the exclusive use of those with access to that area,” prosecutors said.

    To further disarm skeptical prospects, “Hersch claimed that he had 160 employees and hundreds of ATMs and that his company was in its eighth year of business,” prosecutors said.

    But the tracks Hersch said used his ATM and check-cashing business “reported having no contracts with him or All States ATM to provide financial services of any sort,” prosecutors said.

    Hersch was charged with mail fraud and structuring, and was arrested last year by the FBI and IRS. Investigators determined he had coaxed more than 150 people to invest about $25 million in his company.

    He pleaded guilty in November and was sentenced yesterday, acknowledging he operated an HYIP fraud and conspired with others to structure 15 transactions totaling $141,500 to evade currency-reporting requirements. Prosecutors said he and co-conspirators withdrew cash from a bank account in amounts between $9,000 and $9,500 because they knew that withdrawals of cash over $10,000 triggered the reporting requirements.

    U.S. District Judge John A. Houston sentenced Hersch to 110 months in federal prison and to pay “at least” $9.2 million in restitution.

    “[Hersch’s] sentencing should remind the public of the financial perils associated with high yield investment fraud scams,” said Keith Slotter, FBI special agent in charge.

    HYIP schemers will get caught, a veteran IRS investigators warned.

    “Currency-report information filed by banks and financial institutions provides a paper trail, or roadmap, for investigations of financial crimes and illegal activities, including tax evasion, embezzlement, and money laundering,” said Leslie P. DeMarco, special agent in charge of the IRS Criminal Investigation unit in the agency’s Los Angeles Field Office.

    “Individuals who deliberately break down cash withdrawals into amounts less that $10,000, so as not to trigger a bank’s reporting requirement, are committing a financial crime,” said DeMarco. “In this investigation, IRS special agents used their financial expertise to uncover Mr. Hersch’s intentionally structured cash withdrawals, designed to hide his investment fraud scheme.”

    U.S. Attorney Laura E. Duffy of the Southern District of California said Hersch’s sentence sent a message to financial fraudsters who are duping investors.

    “[The] sentence demonstrates our commitment to investigating and prosecuting those individuals who prey upon innocent victims in our community through fraudulent investment schemes,” Duffy said.

    Hersch now joins the ranks of Bernard Madoff, 71, (New York/Florida); Richard Piccoli, 83, (New York); Andy Bowdoin, 75, (Florida); Julia Ann Schmidt, 68, (Texas); Judith Zabalaoui, 71, (Louisiana); Arthur Nadel, 77, (Florida/NewYork); Ronald Keith Owens, 73, (Texas); James Blackman Roberts, 71, (Arkansas); Larry Atkins, 65, (North Dakota), Richard Taft Johnson, 67, (Michigan), Maxwell B. Smith, 69, (New Jersey) and others as senior citizens implicated in large financial frauds.

  • ‘SURF, HYIP HELPERS BEWARE: Woman Who Let Richard Piccoli Pull Off Ponzi Scheme Hit With $25 Million Restitution Order; Kathleen Fuoco Pleads Guilty To ‘Misprision Of Felony,’ Faces Prison Time, Fine

    An elderly Ponzi schemer who fleeced Catholic priests, parishioners and senior citizens in a long-running scam in Buffalo was aided by a comparatively youthful assistant who was ordered to make the victims whole, federal prosecutors said today.

    Kathleen Fuoco, 60, of West Seneca, N.Y., pleaded guilty today to misprision of a felony and willful failure to file tax returns while she was helping Richard Piccoli, 83, pull off the scheme.

    Fuoco was hit with a $25 million restitution order — the total of victims’ losses — and also faces a maximum penalty of four years in federal prison and a $250,000 fine. She is cooperating with prosecutors to identify victims and losses, authorities said.

    “Financial fraud is an important priority in my office and the public should know that if you attempt to defraud any hard working citizen or turn a blind eye while someone else is committing fraud, you will be caught and prosecuted to the fullest extent of the law” said U. S. Attorney William J. Hochul of the Western District of New York.

    Known as “Kitty,” Fuoco was “the only employee in the offices of Gen See Capital,” Piccoli’s business, prosecutors said.

    “In her plea, Fuoco admitted that she came to realize that the business was a scam, but still kept working there and failed to notify authorities about the criminal nature of the business,” prosecutors said.

    Misprision of a felony is a crime the government can use to prosecute underlings who engage in willful blindness and participate in an enterprise even when they know it is a fraud.

    As the Fuoco case demonstrates, the penalties can be steep. At age 60, she has been held responsible for making the victims of the fraud whole — and even may serve time in jail.

    Serial promoters and staff members of autosurf Ponzi schemes and HYIP frauds who turn a blind eye potentially are at risk of being charged with misprision of a felony. So are forum operators and shills who flog such programs.

    The Piccoli scheme operated for decades. He was sentenced in October 2009 to 20 years in prison — effectively a life sentence, given his age.

    Here is how “misprision of felony” reads under Section 4 of the U.S. Code:

    “Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.”

    In November, misprision of felony was used in Georgia against Saundra McKinney Pyles, who was accused of concealing a Ponzi scheme operated by her friend, Gary Sheldon Hutcheson. Hutcheson pleaded guilty to mail fraud and money laundering.

    In essence, Pyles was accused of choosing not to report Hutcheson, even though she knew he was operating an investment scheme and committing mail fraud.

    Pyles was sentenced to 14 months in prison, and made equally responsible with Hutcheson to pay $1.6 million in restitution to victims. Hutcheson was sentenced to five years in prison.

    Fuoco is scheduled to be sentenced Oct. 22 by Chief U.S. District Judge William M. Skrenty.

    The Piccoli case featured elements similar to the AdSurfDaily Ponzi case: a senior citizen as the operator, appeals to religion, the sale of unregistered securities, commingling of funds, seized assets and advertising materials that promised a payout.

    After the U.S. Secret Service raided ASD in August 2008, some participants loyal to ASD President Andy Bowdoin started an autosurf known as AdViewGlobal (AVG). Bowdoin was said to have been a silent partner in AVG and to have contributed start-up capital.

  • RECEIVER: Trevor Cook’s Story ‘Does Not Make Sense’; Ponzi Losses Expected To Top $139 Million; America’s Sad, Stunning Ponzi Tale Continues

    One of the Trevor Cook homes. From court filings in the SEC/CFTC case.

    Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme are none too pleased with Cook’s plea deal, which may place a ceiling of 25 years on any prison sentence he receives while tens of millions of dollars remain missing.

    One investor has told the PP Blog that a group of investors is seeking a meeting with prosecutors either to overturn the plea deal or delay Cook’s sentencing until more information becomes known. Cook, 38, is scheduled to be sentenced in Minneapolis July 26, one month from today.

    Cook pleaded guilty in April to mail fraud and tax evasion. Under the terms of the agreement, he is required to cooperate with authorities and R.J. Zayed, the court-appointed receiver, to unravel the scheme. Although Cook has met with both the government and Zayed, investors are concerned that he is incapable of telling the entire truth. Their concerns are based on his history of telling spectacular lies and thumbing his nose at both investors and the court by spending investors’ funds even after his assets were frozen in November 2009.

    Records from the National Futures Association (NFA) show that Cook has a history of scamming. In 2006, NFA fined Cook $25,000, saying he had committed a “very serious violation” in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents. Read more about Cook’s NFA encounter here. Read more on yet-another case in which Cook’s name was referenced by NFA here.

    Before we get into the details of some of recent events in the Cook case, we’d like to provide a short capsule based on court filings. It has become clear that the Cook Ponzi scheme has caused financial pain for hundreds of people, including loved ones, and also has resulted in frustration — some of it of the needless and senseless variety.

    Such frustration surfaces in virtually all Ponzi cases, in part because the crimes can be extraordinarily elaborate even though the basic concept of a Ponzi is simple: tricking people into believing everything is on the up-and-up by using cash from new investors to pay earlier investors or duping people into rolling over their investments instead of taking distributions to keep the cash from drying up — all while the Ponzi schemer siphons funds and glad-hands and back-slaps with investors, politicians, bankers and others to create the illusion of success.

    At the end of the day, however, Ponzis are about people. They cause pain and frustration for every person and institution they touch.

    • Cook’s in-laws, Clifford and Ellen Berg of Apple Valley, Minn., received $948,848.36 from the scheme. Zayed recovered $726,650.38 of that sum, and then effectively sued the Bergs by seeking a court order for the balance of $222,197.98. The SEC, which had named the Bergs relief defendants in the case for receiving ill-gotten gains, backed Zayed in his efforts to recover the balance. Records show that the Bergs raised $194,000 to pay the receivership estate through the sale of two cars, the tapping of an IRA account and by taking out a mortgage on their cabin. They were given credit by the receivership for $13,500 from the sale of another vehicle, but still came up nearly $15,000 short of the sum needed to retire the receivership balance. If the shortage is not paid by Sept. 15, a judgment will be entered against the Bergs, who have retained the right to be treated as victims of their son-in-law and to file a claim for the principal they invested with Cook.
    • Zayed effectively had to sue Wells Fargo by seeking a court order to force it to turn over the relatively small sum of $9,275.22 from Cook’s bank accounts. This document is worth reading because it paints a picture of a receiver — Zayed — encountering frustrating resistance in his bid to round up assets for victims. Although the Cook/Kiley Ponzi is extremely serious business that has altered the lives of more than 1,000 people, the document linked to above is almost dolefully comedic. Zayed eventually had to file a 12-page legal document to force the return of the sum. Just 13 days after Zayed asked a federal judge to order Wells Fargo to return the money, he filed a three-page document advising the judge that the bank finally had turned over the sum — something he’d been trying to get it to do for months.
    • If you’re a victim of a Ponzi scheme or a loved one of a Ponzi schemer — such as Gina Cook, Trevor Cook’s wife — this document shows that your life may start to revolve around attorneys. No matter how you slice it, the result is conflict — legal, emotional or otherwise.

    Can Cook Be Trusted In Any Context?

    As noted above, some investors fear that Cook is incapable of telling the full truth. There is fear that he has stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

    International litigation can be an extremely complex thing. The Cook case, according to Zayed, has required the notarization of documents “under the Hague Convention standards.”

  • SHADES OF AVG: Upstart AdPayDaily ‘Surf Scolds Members For Not Understanding The ‘Program’ After Pumping Bonuses For Weeks

    Ponzi, wire fraud and money-laundering allegations against AdSurfDaily and President Andy Bowdoin — and the bizarre conduct of a spinoff surf known as AdViewGlobal — have made it harder for upstart surfs to gain traction. ASD's brand is radioactive, even in the strange universe of the so-called autosurf "industry." Surfs also are having a harder time gaining a following because the U.S. Secret Service has revealed in court filings that it is using undercover agents in its autosurf investigations.

    AdPayDaily (APD), an upstart surfing company whose membership includes participants in the alleged AdSurfDaily Ponzi scheme and the failed AdViewGlobal (AVG) autosurf, is lecturing members on proper behavior.

    AVG, which had close ties to ASD, became infamous for scolding members

    In an unsigned post on its free WordPress Blog, APD, which does not disclose its ownership and registered its domain behind a proxy while plying participants with bonuses and asking them to recruit prospects willing to fork over $300, told members they needed to get a grip on the “program.”

    The Blog post is dated June 21. During the very same week a year ago, the AVG autosurf was in its death throes. News about AVG’s suspension of payouts amid a bonus flap was announced one year ago today. AVG had close ties to ASD. ASD’s offices in Quincy, Fla., were raided by the U.S. Secret Service on Aug. 5, 2008, amid allegations of wire fraud, money-laundering, selling unregistered securities and operating a Ponzi scheme.

    Like its predecessors ASD and AVG, APD has been flogging bonus programs for weeks, including a “Special Memorial Day Weekend Promotion” in which members were offered a “200% Ad Point bonus on all purchases, with outside funds, of $500 to $2,500.” By June 8, APD was hawking “an exciting New APD promotion.”

    Reps who recruited “at least” three new advertisers willing to plunk down $300 were offered “a 200% Ad Point Bonus on the new advertisers [sic] sales,” plus a “200% Ad Point bonus on their own purchases.”

    It its June 21 Blog post, authored after the bonuses were advertised, APD explained the bonus offerings in hard-to-decipher language.

    “Reps who are also Advertisers, [sic] are required to qualify for Bonus Ad Points they receive when they make a purchase as an Advertiser,” APD said in the Blog post. “For example, if you are a Rep and you make a $1,000 purchase as an Advertiser, as a Rep you are required to make a new sale or sales that equal or exceed the number of Bonus Ad Points you received when you made the purchase.

    “In this example,” the post continued, “you must make a new sale or sales that equal or exceed $1,000 and up to 50% or $500 of those new sales can come from your Cash Account. If you choose to use your Cash Account to purchase additional advertising, to qualify for the Bonus Ad Points, you must make that purchase within 30 days of your advertising purchase. Reps will have a total of 50 days to make the required sale, as long as they have used their Cash Account to purchase additional advertising within 30 days. Otherwise, the Bonus Ad Points will expire and be deducted from their Ad Point account.”

    APD, in AVG-like fashion, then scolded members in bold type.

    “The purpose of the qualification is to prevent Reps, who are also Advertisers, from only purchasing advertising to earn two times the cost of their advertising,” the company said in the Blog post. “This type of behavior is a money game and that is not acceptable behavior or the intent of the APD program.”

    Perhaps adding even more confusion, APD noted, “Referring Reps who made the sale will still receive the commission but the Bonus Ad Points they received for unqualified sales will be deducted from the Referring Reps [sic] account when it is determined that the Rep they referred did not qualify for the bonus Ad Points.”

    Revisiting AdViewGlobal

    Plied with a virtually endless series of bonus programs and claims that $5,000 spent on advertising with AVG turned into $15,000 “instantly,” members sent untold sums believed to have totaled in the millions of dollars to the surf.

    AVG launched in early February 2009. In late January, the surf denied it had any affiliation with ASD after AVG’s graphics appeared in a webroom controlled by ASD. The AVG graphic listed the company’s address as 13 S Calhoun Street, Quincy, FL 32351 — ASD’s address.

    The appearance of the graphic was explained away as an “operational coincidence.” Incredibly, the AVG spokesman who explained that the company had no affiliation with ASD was a former ASD employee who testified on the company’s behalf at at evidentiary hearing in 2008.

    Equally incredibly, the spokesman explained that Gary Talbert, an executive at ASD who filed a sworn affidavit on ASD’s behalf in the court case, was AVG’s chief executive officer — all while insisting the two companies were not affiliated.

    In March, AVG incongruously announced that Talbert had resigned as CEO but would remain in the “accounting” department — a strange place for a former CEO to land. The company also announced that its bank account had been “suspended,” but continued to pitch bonus programs relentlessly.

    AVG, which purported to be headquartered in Uruguay while also citing U.S. Constitutional protections, then became the center of a firestorm. An affiliate used a forum set up by some moderators of the now-defunct, pro-ASD Surf’s Up forum to explain a complex method by which AVG prospects could pay sponsors for “page impressions” (ad-packs) to qualify for bonuses.

    Under the method, prospects would make a private agreement with sponsors to pay the sponsors and make AVG the final recipient of the money. Sponsors would deposit the money in their individual bank accounts. The sponsors then would send the sum via wire or overnight mail to an offshore payment processor, and then wait for the sum to be credited to the sponsor’s account at the processor.

    Once the sponsor’s account was credited by the processor, the sponsor would instruct the processor to send the sum to AVG. Because the sum somehow had to get back in the hands of the prospect after its hemispheric trip, the sponsor would apply the funds to his AVG account and then use AVG’s internal system to get the money or the value thereof to the real customer, the prospect, for the purchase of page impressions and to qualify for a whopping 250 percent bonus.

    Some AVG members described the convoluted, multistep process as a helpful sponsor going the extra mile for a prospect. Others called it an invitation to be indicted for wire fraud, money-laundering, tax evasion and securities fraud.

    AVG crashed and burned a year ago today, suspending payouts and threatening members and the media with lawsuits for sharing the news.

    See earlier story on APD.