PatrickPretty.com

Tag: ASI

  • URGENT >> BULLETIN >> MOVING: Brett Blackman, President Of Collapsed ‘Noobing’ Autosurf, Subjected To $27 Million Judgment In ‘Grants’ Scheme And Banned From Marketing Money-Making ‘Opportunities,’ FTC Says; Blackman Firm Faces Separate $27.2 Million Judgment

    URGENT >> BULLETIN >> MOVING: The price of Brett Blackman’s serial scamming finally has been determined: $54.2 million.

    Blackman, the president of an autosurf known as “Noobing” that targeted people with hearing impairments, has been subjected to a personal judgment of $27 million and banned from marketing money-making “opportunities,” the FTC said.

    Blackman also has been kicked out of the telemarketing business, the agency said.

    Noobing was among a group of companies that operated under the banner of Affiliate Strategies Inc. (ASI), which the FTC and the attorneys general of three states sued in 2009 in an alleged scam that offered “guaranteed” government grants of $25,000.

    ASI has been subjected to a judgment of $27.2 million. It also has been banned from offering money-making “opportunities” and telemarketing, the FTC said.

    Although Noobing was not named in the complaint, the surf collapsed from the strain and got dragged into the ASI mess. Larry Cook, a court-appointed receiver, said in 2009 that Noobing was upside down to the tune of $550,000 when the FTC brought the fraud action against ASI and other defendants.

    Noobing became popular after the seizure of tens of millions of dollars in the AdSurfDaily autosurf case in 2008. ASD members helped popularize the purported “opportunity.” During Cook’s ASI investigation, he determined that U.S.-based Noobing also had an offshore arm on the Caribbean island of Nevis.

    A federal judge ordered all offshore cash repatriated.

    The ASD and ASI cases have strange parallels. Both firms displayed a zeal for religion that incongruously clashed with romantic thoughts about offshore autosurf profits, as though involving people of faith in fraud schemes somehow was consistent with Biblical principles and offshore insolvency somehow was less problematic than insolvency in Florida or Kansas.

    Meanwhile, both firms had acquired jet skis, according to court records. Both firms later lost their water toys through forfeiture or seizure.

    Both Noobing and ASD positioned themselves as victims of an out-of-control government. After shills helped Noobing gain a head of steam on the Ponzi scheme forums — as though the ASD seizure never had occurred — enthusiasts proceeded to engage in spectacular fantasies of building wealth by viewing ads in Noobing’s rotator.

    Those fantasies collapsed when Noobing suddenly slashed payouts, bizarrely citing a purported unclear ruling in the ASD case months after a federal judge said ASD had not demonstrated at an evidentiary hearing that it was not operating as a Ponzi scheme. Noobing’s former wink-nod cheerleaders then advanced a scheme by which they’d file for credit-card chargebacks amid claims Noobing did not perform as advertised.

    Noobing, though, turned the tables by denying refunds and claiming surfing rebates never were guaranteed — a strategy ASD itself allegedly had employed to insulate itself from prosecution for selling unregistered securities. Former Noobing cheerleaders became livid, creating a Ponzi forum PR disaster for the firm.

    Former Noobing cheerleaders wanted their money — and they wanted it right now.

    Noobing’s turning of the tables, however, did not last long. Within months the FTC brought the fraudulent grants case — and what remained of the wreckage of Noobing was consumed in a sea of litigation that had grown to include a fourth state attorney general joining the case against ASI and the other defendants.

    Blackman is unable to pay the $27 million judgment, the FTC said, adding that ASI is unable to pay its $27.2 million judgment.

    In the end, not even Noobing’s offshore plan, Ponzi forum presence and autosurf cash cow were enough to prevent the collapse of the ASI marketing machine because the surf itself was insolvent and the companies were recycling money back and forth.

    “The Receiver’s work over the past three weeks suggests the Defendants’ operations were insolvent on the date [July 24, 2009] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds,” Cook said in a devastating preliminary report in August 2009.

     

  • Forex Ponzi Schemers Who Targeted Deaf Investors Hit With $6.2 Million In Sanctions; ‘Billion Coupons’ Case Drew Comparisons To Defunct Noobing Autosurf

    A Hawaii man and his company were hit with sanctions totaling $6.2 million in a case that alleged they targeted people with hearing impairments in a Forex Ponzi scheme.

    Both the SEC and the CFTC filed actions against Marvin Cooper and his Honolulu-based firm, Billion Coupons Inc. (BCI). The CFTC announced the judgment against Cooper and the company.

    Investigators said Cooper and BCI “solicited funds from deaf American and Japanese individuals for the sole purported purpose of trading forex,” luring them with payout promises of up to 25 percent per month.

    For his part, Cooper took “more than $1.4 million of customer funds for personal use, including for flying lessons and to purchase a $1 million home,” investigators said.

    He was ordered to pay $3.9 million in restitution to customers and more than $2.3 million in penalties. The company is liable for the same amounts.

    The “Billion Coupons” case drew comparisons to the now-defunct Noobing autosurf, which also targeted the deaf. Noobing became popular in the aftermath of the August 2008 federal seizure of tens of millions of dollars in the AdSurfDaily Ponzi scheme case.

    Despite the federal seizure, some ASD members promoted Noobing. Noobing effectively went bust in July 2009, when the FTC charged its parent company — Affiliate Strategies Inc. — with pushing a scheme that promised “guaranteed” government grants of $25,000 from economic stimulus funds.

    Noobing later was named a receivership defendant in the case. Receiver Larry Cook sold the company’s assets lock, stock and barrel — right down to a lavatory wastebasket. Like ASD, Noobing’s parent firm also owned a jet ski. Cook sold that, too.

    Despite dramatic asset seizures and the federal actions against ASD and Noobing’s parent — and despite previous actions against autosurfs, including 12DailyPro, PhoenixSurf and CEP — some ASD members have continued to promote autosurfs.

    This has occurred against the backdrop of a racketeering lawsuit against ASD President Andy Bowdoin and public filings in which prosecutors claimed Bowdoin had signed a “proffer” letter in the case and met with members of law enforcement over a period of four days in December 2008 and January 2009.

    It also is known that Interpol is seeking the arrest of Robert Hodgins, whose Dallas-based debit-card company, Virtual Money Inc., is alleged to have agreed to launder drug money in the Dominican Republic and assist a Colombian drug operation launder money at ATMs in Medellin.

    ASD members said Hodgins’ company supplied debit cards to AdSurfDaily, and web records suggest that Hodgins or a Virtual Money designate attended an ASD function in the Orlando area in late 2006.

    Even though Bowdoin acknowledged in court filings that he had given information against his interests to the government, some ASD members continue to promote autosurfs and HYIPs. After signing the proffer letter and surrendering his claims to more than $65.8 million seized from his personal bank accounts, Bowdoin later reentered the case as his own attorney.

    One of Bowdoin’s 10 personal bank accounts contained more than $31 million, according to court filings. Another contained more than $23 million. Three other bank accounts contained the exact same amount — a little over $1 million.

    After submitting to the forfeiture in January 2009, Bowdoin fired his attorneys without notice and attempted to reenter the case weeks later as his own attorney. This set in motion a series of bizarre pleadings from Bowdoin, including one in which he claimed he had not been provided “fair notice” of his illegal conduct by the government. ASD members by the dozens then filed their own bizarre, pro se pleadings. U.S. District Judge Rosemary Collyer ruled against each of the filers, saying they had no standing in the case.

    Collyer since has ruled against Bowdoin, awarding title to more than $80 million seized in the case to the government, which said it intends to implement a restitution program. Bowdoin is appealing Collyer’s forfeiture decisions.

    Court filings show that Bowdoin told Collyer the seized money belonged to him. In September 2009, the U.S. Secret Service presented Collyer a transcript of a conference-call recording in which Bowdoin told members the money belonged to them. Although Bowdoin insisted he had big plans for ASD, records show that he let the firm’s registration lapse in the state of Florida — even as he was telling members they should be excited about the company’s future.

    In the recording, Bowdoin claimed his fight against the government was inspired by the compelling personal story of a former Miss America.

  • BULLETIN: Autosurf Biz Takes Another Pounding; Federal Judge Adds Noobing As Receivership Defendant In Fraud Case Against Parent Company; 14 Other Subsidiaries Named

    UPDATED 6:05 P.M. EDT (U.S.A., Jan. 20, 2011.) In yet another case that portends disaster for the so-called “autosurf” industry, a federal judge has ordered the Noobing autosurf to be added as a receivership defendant in a fraud case brought against its parent company.

    The FTC and attorneys general from Minnesota, North Carolina and Kansas brought the case against Noobing’s parent — Affiliate Strategies Inc. (ASI) — in July 2009. Several other companies were named defendants in the case, which alleged the firms participated in a scheme that promised guaranteed government grants from economic-stimulus funds.

    Brett Blackman, ASI’s head, also was president of Noobing, members said. Noobing was not initially named a receivership defendant.

    U.S. District Judge Julie A. Robinson issued an asset freeze Sept. 1, along with stern orders to preserve evidence and repatriate to the United States all assets and documents held on foreign soil. She also broadened the powers of Larry Cook, the court-appointed receiver.

    Through his investigation, Cook determined that Noobing was operating under the umbrella of Apex Holdings International LLC, the same company under which ASI operated. Cook also determined that at least 14 other companies were operating under the Apex Holdings umbrella.

    Noobing, which was registered in the United States, also had an offshoot in Nevis, according to court filings. Noobing targeted people with hearing impairments.

    Cook asked Robinson last month to add Noobing and the other companies as receivership defendants after determining “each of the Subsidiaries used the same post office box as the [initial] Receivership Defendants.”

    Moroever, Cook advised Robinson that he had received “receive numerous inquiries from creditors, former independent contractors, and tax authorities for the Subsidiaries.” He further argued that “each of the Subsidiaries was entirely reliant upon the business operations of the [initial] Receivership Defendants.”

    Robinson, saying Cook had shown “good cause,” added Noobing and the others as defendants March 18.

    No party  — including the FTC, the state attorneys general, the initial set of defendants and the new defendants — objected, Robinson noted. In December, Illinois joined the FTC, Minnesota, North Carolina and Kansas in the action.

    On the previous day, March 17, FBI Director Robert Mueller III, without naming names, testified before Congress. Mueller said that “shell corporations” are emerging as a threat to the U.S. banking system because owners were using them “to facilitate the concealing of criminal proceeds” and engage in money-laundering.

    Neither Noobing not its corporate parent has been accused of a crime.

    In February, the U.S. Secret Service alleged in a civil forfeiture complaint that INetGlobal, a company that operates an autosurf, was engaged in money-laundering and wire fraud while operating a Ponzi scheme.

    INetGlobal is operated by Steve Renner, under his “umbrella corporation, InterMark,” the Secret Service alleged. The agency identified what it described as “subsidiaries,” specifically referencing “Virtual Payment Systems [LLC of Wisconsin/Brackets Denoting the LLC Designation added Jan. 20, 2011], V-Media, Cash Cards International, and V-Local,” as well as a company named “INet Global Productions.”

    NOTE IN BOLD ADDED JAN. 20, 2011: An Indianapolis-based company known as Virtual Payment Systems Inc. has contacted the PP Blog to let it know it is not affiliated with the Renner company Virtual Payment Systems LLC of Wisconsin, which is referenced in the paragraph above.

    “The commission by Renner of the federal crimes of wire fraud, in violation of Title 18, United States Code Section 1343, and money laundering, in violation of Title 18, United States Code Section 1957, is essential to the operation of this Ponzi scheme,” the Secret Service alleged.

    In August 2008, the Secret Service said AdSurfDaily, a Florida-based autosurf company, also was engaging in wire fraud and money-laundering while operating a Ponzi scheme.

    U.S. District Judge Rosemary Collyer — on Jan. 4, 2010 — ordered the forfeiture of more than $65.8 million in the personal bank accounts of ASD President Andy Bowdoin. A little more than a month later, on Feb. 23, the Secret Service moved against INetGlobal.

    Records show that ASD’s Bowdoin operated several corporations over the years. In September 2009, the state of Florida revoked the corporate registrations of AdSurfDaily and Bowdoin/Harris Enterprises Inc.

    The revocations occurred just four days after Bowdoin told members he had exciting plans for ASD’s future. Despite his claim, Bowdoin never bothered to submit the paperwork to keep the firm’s registration intact, despite having been given a five-month window to do so.

    In his remarks to members, Bowdoin said the government had seized the assets of ASD members. In his own sworn court filings, however, Bowdoin said the seized assets belonged to him and his company.

    The Secret Service transcribed Bowdoin’s remarks, and presented them to Collyer Sept. 28. Federal prosecutors said Bowdoin’s remarks were evidence that “this con man cannot manage to keep his stories straight.”

    Collyer ordered the ASD asset forfeiture a little more than three months later. In the INetGlobal case, the Secret Service said one of its undercover agents was on the receiving end of a sales pitch from an ASD member who was trying to recruit the agent into INetGlobal.

    Renner’s autosurf  “began operating just weeks after ASD was put out of business by the Secret Service, and this new entity uses the same terminology and business model as ASD,” the agency said in an affidavit for a search warrant.

    At least one of the undercover agents working the INetGlobal case also worked the ASD case, according to court filings. The Secret Service searched the Web for an INetGlobal affiliate site, and the INetGlobal affiliate who pitched the undercover agent also had been an ASD member, according to the affidavit.

    “The member asked if [the undercover agent] was a network marketer,” the Secret Service said. “The member said he had previously been a member of ASD . . . and said, ‘We know what happened there.’

    “The member said he was reluctant to join iNetGlobal due to it being similar to ASD,” the agency continued in the affidavit. “The member said, ‘we all know what this program is.’” The member said his daughter and wife surfed the websites and the member did not care about the services provided. The member said he just wanted to put his money in and get it out. The member said you convert your earnings to V-cash and then receive payouts by check or through an ATM card you can sign up for.”

    Less than a month later, FBI Director Mueller told Congress that “shell corporations” and “stored value” debit devices and “reloadable debit cards” increasingly were being used “to move criminal proceeds.”

    “This has created a ‘shadow’ banking system, allowing criminals to exploit existing vulnerabilities in the reporting requirements that are imposed on financial institutions and international travelers,” Mueller said.

    Mueller did not name any companies in his Congressional testimony.

  • BULLETIN: Receiver In Affiliate Strategies Inc. (ASI) Case Asks Federal Judge To Add Noobing Autosurf To Receivership Probe After Inquiries By ‘Tax Authorities’

    The court-appointed receiver in the fraud case against the parent company of the Noobing autosurf has asked a federal judge for the authority to add Noobing to the receivership probe.

    Larry Cook, the receiver, said that Noobing and 14 other companies under the Affiliate Strategies Inc. (ASI) umbrella have become the subjects of “numerous inquiries” from “tax authorities,”  creditors and “former independent contractors.”

    Cook did not identify specific parties that made inquiries, but noted that “each of the Subsidiaries used the same post office box as the Receivership Defendants.”

    Noobing targeted people with hearing impairments in its promotions. It is known that some Noobing members have contacted the Federal Trade Commission, which is spearheading the ASI probe, along with the attorneys general of Kansas, Minnesota, North Carolina and Illinois.

    At least one deaf member of Noobing says she has contacted a sheriff’s department in California about the company.

    News that Cook is seeking judicial approval to add Noobing to his receivership probe came on the same day that the U.S. Secret Service said it was conducting an intense probe of INetGlobal, which operated a Minneapolis-based autosurf.

    In an application for a search warrant in a Ponzi case against INetGlobal, the Secret Service referenced the AdSurfDaily Ponzi scheme case, saying a member of ASD had attempted to recruit an undercover Secret Service agent into the INetGlobal scheme.

    ASD members and members of a closely connected surf known as AdViewGlobal also promoted Noobing, as did INetGlobal members, according to web records.

    Steve Renner, the owner of INetGlobal, was convicted in December of four felony counts of income-tax evasion for his conduct with other companies earlier this decade.

    Autosurfs are notorious for keeping poor records or no records at all, and autosurf participants are notorious for engineering schemes to milk tax-free income.

    Cook said tax reporting is required, and is seeking an order that pertains to Noobing and 14 other ASI umbrella companies. Cook listed Noobing’s name at the top of the list.

    “In order to complete the tax reporting requirements and otherwise address the creditors’ and other claims, the Receiver seeks a clear order that he is the Receiver for the Subsidiaries,” Cook said.

    And, he added, “Counsel for the [FTC] has reviewed this Motion and concurs.”

    ASI and a number of companies were sued last year in a scheme involving government grants. Noobing went offline in the immediate aftermath of the FTC probe.

  • RECEIVER REPORT: Jet Ski Owned By Noobing Autosurf’s Parent Company Fetches $1,800 At Auction; Office Equipment Fetches $12,500

    A court-appointed receiver has described the accounting records of Affiliate Strategies Inc. (ASI) as a mess, saying “an opinion on the accuracy of these records is not possible without an extensive audit that would require significant additional costs.”

    ASI is the parent company of the Noobing autosurf, which targeted deaf people in sales promotions. ASI and its president, Brett Blackman, were sued by the Federal Trade Commission last year for their alleged roles in a scheme that promised guaranteed government grants of $25,000 from economic-stimulus funds.

    Several other companies and individuals were named in the FTC complaint. Although Noobing was not named in the FTC complaint, receiver Larry Cook examined Noobing’s records last year and made a preliminary determination that it was insolvent. The Noobing website has been offline for months.

    Attorneys general from Kansas, North Carolina, Minnesota and Illinois joined the FTC in the action.

    In October, U.S. District Judge Julie A. Robinson authorized Cook to sell ASI’s assets, including office equipment, a vehicle and a jet ski.

    In a report to Robinson filed last week, Cook said the office equipment fetched $12,500 at auction. Meanwhile, the vehicle — a 2003 Saturn L200 — fetched $2,500. The jet ski — a 2005 Yamaha — brought in $1,800.

    In August 2009, Cook said in a preliminary report to the court that “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.” One of the companies was Noobing, which listed registrations in both the United States and Nevis.

    Kris Rogers, who was the comptroller for ASI and president of an affiliate company known as Custom Accounting Services LLC, told Cook that “the expenses of [the] combined companies have exceeded the revenues since October or November 2008,” according to court filings.

    If Rogers’ assertions are true, it means that both Noobing and ASI — its parent company — were insolvent when the Noobing autosurf was collecting money with the suggestion that participants could earn a return of up to 3 percent a day. Noobing slashed daily payouts in early 2009, an act that caused an uproar on the Ponzi boards.

    Noobing blamed the slashed payout on what it described as an unclear ruling in the AdSurfDaily case. The company did not say why it chose to collect money using a business model that U.S. government has challenged in repeated court cases. After Noobing members complained, the company explained that payouts never were guaranteed.

    Noobing became popular after the August 2008 seizure of tens of millions of dollars from Florida-based ASD amid Ponzi scheme allegations. After the FTC and the attorneys general took the action against ASI and other defendants in the alleged grants scheme, Cook made a preliminary determination that Noobing was nearly $550,000 in the hole.

    When the financial records of the ASI-affiliated records were examined as a whole in Cook’s preliminary analysis last year, he found that “over twenty-five thousand accounting
    transactions, including several thousand intercompany transfers” had oocuured.

    “The transfers between the various LLCs make it difficult to sort out the net result and profits or losses sustained by each LLC,” Cook said.

    “The Receiver’s work over the past three weeks,” Cook said in August 2009, “suggests the Defendants’ operations were insolvent on the date [July 24] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds.”

  • North Carolina Man Adds To List Of Alleged Schemers Who Bought Jet Skis With Fraud Proceeds; J.V. Huffman Jr. Also Faces Trial On Weapons Charge

    J.V. Huffman Jr. Source: Catawba Country Sheriff's Office

    It’s not as though alleged fraudster J.V. Huffman Jr. did not have the expensive cars and real estate often associated with Ponzi schemes or financial frauds.

    Huffman, jailed awaiting trial in North Carolina on Ponzi and weapons charges, had plenty of those, according to William Walt Pettit, the court-appointed receiver. He had an Aston Martin ($100,000+), three Mercedes (nearly $180,000 combined), and a Prevost motor home (insured against loss for $825,000) , for example. And Huffman had at least 14 parcels or properties, including a $765,000 property in North Carolina and multiple interests in time-shares at Walt Disney World in Orlando.

    But Huffman also had jet skis, which oddly seem to have become a signature purchase among operators of alleged Ponzi schemes or financial frauds. Disbarred Florida attorney Scott Rothstein, implicated in an alleged $1.2 billion Ponzi scheme, had jet skis.

    Affiliate Strategies Inc., a Kansas company under whose umbrella the shuttered Noobing autosurf fell, had a jet ski. ASI is among a number of companies sued by the Federal Trade Commission and the attorneys general of four states for operating a grant-writing scheme.

    Florida-based AdSurfDaily, whose president is implicated by the U.S. Secret Service in a $100 million Ponzi scheme, also had jet skis — two of them. Andy Bowdoin told his members that the jet skis (and a lakefront home) were for their benefit, but the statement was met with anger, the jet skis and Bowdoin’s other marine equipment dismissed derisively as “water toys.”

    Huffman’s next court appearance in North Carolina has been delayed until Jan. 25. He also faces a civil prosecution by the SEC, which said his Ponzi scheme began in 1991 and operated for 17 years before collapsing.

    The weapons charge was added when guards found a razor blade hidden in Huffman’s Bible in his jail cell. Prosecutors said the alleged financial scheme largely was targeted at Lutherans.

    SEC investigators said Huffman and his company — Biltmore Financial Group — gathered as much as $25 million from 500 investors. At first, Huffman told investors he operated a mutual fund.

    After the 9/11 terrorist attacks and the ensuing volatility in financial markets, Huffman changed his story, telling investors that he pooled funds to purchase and sell safe mortgages that had strong equity positions and were insured, the SEC said.

    “Contrary to his representations, Huffman and Biltmore did not invest the funds as represented,” the SEC said. “Instead, Huffman spent investor funds to subsidize his lavish lifestyle. Returns to investors were paid from money invested by new investors. The purported insurance protecting the investments did not exist and much of the principal has been dissipated or used to purchase real estate for Huffman and/or his wife, expensive automobiles or other luxuries.”

    In another claim reminiscent of the AdSurfDaily case, the SEC said Huffman dropped famous acronyms such as “FDIC” to get people to invest with him.

    North Carolina Secretary of State Elaine F. Marshall is spearheading the criminal prosecution.

    “People who are knowledgeable in the investment industry came to us saying that the
    promises being made sounded ‘too good to be true,’” she said, after agents arrested Huffman in November 2008. “In most cases, when an investment sounds too good to be true, it usually is.”

  • BREAKING NEWS: Water Toy Does Not Survive: Federal Judge Approves Liquidation Plan That Demolishes Parent Company Of Noobing Autosurf; Jet Ski, Car, Computers, Furniture — Even A Wastebasket Ordered Sold

    Noobing pitched itself to deaf people on YouTube.
    Noobing pitched itself to deaf people on YouTube.

    A federal judge has given the go-ahead to a court-appointed receiver to sell the assets of Affiliate Strategies Inc. (ASI), the parent company of the Noobing autosurf.

    U.S. District Judge Julie A. Robinson of the District of Kansas approved the plan submitted by receiver Larry Cook. The plan authorizes Cook to sell the assets in auction lots — right down to a stainless-steel wastebasket in the women’s restroom.

    Robinson’s order permits Cook to sell ASI’s jet-ski, a 2005 Yamaha, along with a 2003 Saturn automobile owned by the firm.

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

    AdSurfDaily, a Florida company implicated in an alleged $100 million Ponzi scheme, used money to purchase two jet skis, federal prosecutors said.

    ASI’s furnishings, furniture, computer equipment, servers and related equipment all will go. Included in the equipment are the Compaq 6820 notebook computer used by ASI/Noobing President Brett Blackman, and the Lenovo SL500 notebook computer used by Noobing programmer Mike Reed, according to court filings.

    Neither Noobing nor Reed was named a defendant in the July action filed by the Federal Trade Commission and the attorneys general of Kansas, Minnesota and North Carolina. Noobing’s website, however, went offline in the wake of the action against ASI and several affiliated firms and individuals, including Blackman.

    One of the affiliated companies — the Grant Writer’s Institute — was alleged to have sold a fraudulent program that offered “guaranteed” government grants from economic stimulus funds. Separately, Cook said his preliminary investigation revealed that a 70-year-old Philadelphia man had been charged $995 for the names and addresses of three benevolent entities that could help him repair the aging home he shared with his wife.

    Noobing targeted deaf people in promotions. Although the Noobing surf was not named a defendant in the FTC action, Cook’s preliminary assessment revealed Noobing had gathered $590,000 in revenue last year and more than $541,000 this year.

    Cook estimated that the surf was in the hole nearly $550,000 since last year.

    Noobing participants became furious in February, when the surf slashed daily payouts to a fraction of 1 percent after paying up to 3 percent earlier.

    Some members said Noobing should provide refunds, but Reed said on the ASA forum that no refunds would be granted because the company never guaranteed a return. Regardless, some participants said they’d get their money back by filing chargebacks with credit-card companies.

    Critics said the practice was contemptible, pointing out the wink-nod nature of autosurfs and the stress it puts on banks. On one hand, participants are happy to accept Ponzi payouts from the surfs. On the other, in order to perform a chargeback, they claim surfs failed to deliver the “advertising” they paid for when a surf slashes payouts.

    Such an approach costs banks time and money. Some veteran autosurf pushers who position themselves as experts recommend the chargeback approach, in effect using banks to guarantee “advertising” purchases from the surfs even if surfs that slash payouts or suspend them still are displaying ads.

    The ASA forum is a popular site among autosurf enthusiasts. Critics call it a Ponzi board for both autosurfs and HYIPs.

    Noobing blamed its decision to slash payouts on uncertainty in the ASD case.

    “If there is a bad guy in this whole story, it’s the government!” Reed exclaimed on the ASA forum in February. “Let’s get mad at them! How can sharing our revenue to help control costs for legitimate advertisers be a bad thing? How can keeping $90+ million dollars to protect the people who worked with ASD be a fair result? It’s madness!!! Our government is the bad guy here, not Noobing.

    “Let’s get mad at the source of this challenge!” Reed railed. “Call your congressman, send letters, speak publicly!!”

    Some ASD promoters pushed Noobing after the U.S. Secret Service seized tens of millions of dollars from ASD last year in a wire-fraud, money-laundering and Ponzi scheme probe.

    Cook said the case against ASI and co-defendants was going to take some time to unwind because of thousands of intercompany transactions and the fact that some of the entities had registered as corporations offshore.

    “Of immediate concern is the large distributions and salary paid to defendant Brett Black[man] since 2008,” Cook advised Robinson in a preliminary report. “Per the QuickBooks accounting records, Blackman received $841,545 of distributions from Apex Holdings International, LLC in 2008 and made a net contribution of $491,559 into Affiliate Strategies, Inc. ($581,388 of contributions and $89,829 of distributions) for a total net distribution of $349,986, in addition to salary payments of $118,049.

    “In 2009,” Cook continued, “Blackman has received $253,506 of distributions from Apex Holdings International, LLC and has made a net contribution of $113,000 into Affiliate Strategies, Inc. ($349,000 of contributions and $226,000 of distributions). The total net distributions and salary to Blackman for 2008 and 2009 is approximately $490,000.”

    Cook said his assessment was ongoing. He reported that some of the accounts involved in the investigation had chargeback rates of as high as 77 percent, meaning that better than three of four customers who made credit-card charges requested refunds.

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

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

    Robinson previously ordered all offshore assets to be repatriated.

  • LETTER TO READERS: Senior Citizens, The Culture Of Ponzi Schemes — And America’s Longing For A Return To The Age Of ‘Blue Light’ Specials, The Age Of Innocence

    Dear Readers,

    From time to time I publish a post in letter form. This usually happens when a post in story, editorial or essay form does not seem appropriate. This is one of those times.

    Honestly, just how strange could things get in Ponzi Land?

    Ponzi Land, which relatively few people outside of law enforcement even knew existed a year ago,  suddenly and notoriously is populated by senior citizens — and not only as victims, but also as perpetrators.  So much of it seems upside down, a world that challenges assumptions.

    Are we entering a sort of awkward cross between a Lewis Carroll-like world and an Orwellian world, a world in which illogic passes for logic and, because news travels so quickly on the Internet and because negatives get spun so furiously as positives these days, bizarre crime gets positioned or explained away as a new form of nobility?

    Let’s take a look at today’s news on Ponzi schemes.

    Before we begin, did you notice the phrasing in the sentence above — today’s news on Ponzi schemes? Ponzi schemes are breaking out like Blue Light Specials broke out at the Kmart of my youth. Men and women whose hair is blue or tinting toward blue are running Ponzis — instead of doing recon in the aisles and waiting for the famous voice to intone, “Attention Kmart shoppers.”

    It used to be that you made money by not spending it or shopping patiently and even furiously for the best possible deal, perhaps especially if you were a senior.

    Allegations now have emerged that Julia Ann Schmidt, the 68-year-old alleged Ponzi schemer from Texas, posed as an investment adviser using the name of Fortis Investments, a famous European brand with U.S. reach.

    Schmidt allegedly said she was working for a man named  “Jack Layne” — and when investors became skeptical, she hired a man to pretend to be “Jack Layne Jr.,” saying “Jack Layne” had died.

    The case is new, and few facts have emerged. But the allegations read as though Schmidt knew she was about to get caught, and called a meeting of investors, telling them that she was rolling over their investments into an insurance annuity. She allegedly brought the man pretending to be “Jack Layne Jr.” to the meeting, telling investors their money was safe because “Jack Layne Jr.” was handling “all the investor accounts through a local Waco law firm.”

    To add a false air of nobility to the alleged scheme, senior-citizen Schmidt put on a show for investors, prosecutors said.

    “In order to falsely lend credibility to the annuity transfer, [Schmidt] completed an application for her and her husband for the transfer of a non-existent sum of $500,000 from Fortis Investments to Life Insurance Company of the Southwest,” prosecutors said.

    For good measure, Schmidt “provided the false address for ‘Jack Layne’ and Fortis Investments where the annuity contracts and authorizations were to be mailed,” prosecutors said.

    The investment firm’s address proved to be a vacant parcel of land.

    So, if we’re reading this correctly, the alleged Schmidt plot involved:

    • A Ponzi scheme Schmidt pulled off by posing as an investment adviser for a prominent company that did not have a clue who she was.
    • Schmidt’s knowledge that her story and the scheme were collapsing.
    • An attempt by Schmidt to create plausible deniability by introducing “Jack Layne Jr.” and explaining that “Jack Layne” had died.
    • An attempt by Schmidt to sanitize the fraud and calm fears by explaining that “Jack Layne Jr.” was working with a “law firm.”
    • A subplot in which Schmidt further hoped to calm fears by creating nobility where none existed, saying investment accounts were being rolled over into an insurance annuity.
    • A false demonstration of nobility in which Schmidt pretended she was rolling over $500,000 into an insurance annuity.
    • Schmidt’s use of U.S. mail  in furtherance of a bizarre scheme to create nobility where none existed.

    Kmart, which dialed down Blue Light specials in the 1990s but still brings them back from time to time, needs to make them a fixture in stores again.

    Right away.

    Here is more news involving alleged senior Ponzi schemers or proven senior Ponzi schemers:

    In Buffalo, N.Y., Richard Piccoli, 83 — yes, 83 — was sentenced to 20 years in prison for recruiting Catholics and senior citizens into a Ponzi scheme he’d been operating since 1975. He’d managed to fleece investors out of as much as $25 million, leading to “devastating” consequences for the victims, prosecutors said.

    One of his victims said Piccoli had tried to turn the world upside down, putting on an air of nobility and youthful vigor when he was selling the scheme, but expecting the dignity and respect normally accorded a frail, 83-year-old man after the scheme was exposed.

    “He wanted to reverse his age when he wanted us as victims,” a woman told WGRZ-TV. “And now, he’s like, saying just the opposite: ‘Oh, I’m too old to be punished.’ So, you know, he worked his age in his own favor.”

    Piccoli ultimately cooperated with investigators — in no small part because the evidence was overwhelming. Authorities had cataloged ads he had placed in Catholic newspapers and publications. The ads, which promised a payout, specifically targeted seniors and people of faith.

    An undercover agent from the U.S. Postal Inspection Service, which had worked with the IRS to target Piccoli in a sting, posed as a man seeking to invest money for his aging mother.

    Piccoli, always looking for senior-citizen marks even in his 80s and trading for decades on the noble names of Catholic priests and churches, was happy to oblige.

    The churches were getting a 3 percent return on investments in safe institutions. Piccoli told them he could get 7 percent and provided a guarantee, reportedly even saying the investments were tax-free. This was music to the ears of churches and parishioners who’d watched a consolidation of Catholic entities across the United States that had resulted in the closure of schools and churches, owing to a lack of resources.

    “During one taped conversation, Piccoli promised the investigator ‘we can make a hell of a profit,’ and boasted that his list of clients included at least 50 priests,” The Buffalo News reported.

    Piccoli’s attorney asked for a sentence of six years. A federal judge said such a light sentence would not reflect the severity of a crime that involved tens of millions of dollars and as many as 500 victims over the years, and sent Piccoli to prison for 20 years — effectively a life sentence.

    In the end, justice was served, including justice for a 79-year-old man Piccoli had fleeced. The man said he suffered a heart attack after news of Piccoli’s arrest broke last winter. Authorities, acting swiftly after Piccoli’s name had been brought to their attention and an investigation began, recognized almost instantly that he had been operating a Ponzi scheme for decades.

    They froze the crime in its tracks, trapping $6 million that still remained. Piccoli had gathered at least $500,000 in November 2008 alone, and at least $16 million since 2007, depositing the money and writing checks to earlier investors as money came in from new investors. He promised a payout of between 7.1 percent and 8.3 percent, but had been insolvent for years — and owed unsuspecting clients up to $25 million.

    Piccoli’s attorney — doing what attorneys are paid to do — pointed out that Piccoli had cooperated after getting caught, a sort of last shot at nobility. The attorney criticized neither the judge who sentenced his elderly client to 20 years nor the prosecutors who brought the case.

    Judith Zabalaoui, 71, was accused in February of swindling Greater New Orleans investors out of more than $3.2 million in an elaborate Ponzi fraud in which she set up fake companies, pretended to have employees and called her mailboxes at UPS stores “suites” to trick clients into thinking they were dealing with real firms. In August, she was sentenced to eight years in prison.

    Zabalaoui became emotional in the courtroom at her sentencing, explaining that she had committed crimes because she wanted her family to live well and had a predisposition for over-protecting her loved ones.

    Her victims cried — not for her, but for themselves.

    Elsewhere, in reports about the Bernard Madoff Ponzi scheme published yesterday, Madoff was said to have sponsored cocaine parties at his securities company.

    Madoff, 71, was sentenced in June to 150 years in prison. His Ponzi wiped out personal, charitable and corporate fortunes. An attorney with whom Madoff granted a prison interview — the same attorney now is suing Madoff and others — said Madoff  “spends time” in prison with a Mafia crime boss and a convicted spy. The attorney claimed Madoff enjoys pizza cooked by a child molester.

    Madoff told the FBI he had acted alone in the $65 billion swindle. No one believes that, not the FBI, not the attorney who is suing him.

    Bernard Madoff was not the sort of customer who performed recon in the aisles at Kmart and spent extra time in the store, hoping to be there when the famous Blue Light flashed.

    Regardless, Kmart can’t bring back the Blue Light Special for Americans of average or noble means fast enough. America needs the Blue Light Special, if for no other reason than to signal that Lewis Carroll and George Orwell wrote fiction, that the world is not upside down, that the Age of Innocence has returned.

    Let’s just hope it’s not the Age of Innocence described in Edith Wharton’s Pulitzer Prize-winning novel — and that an age of innocence truly once existed and is worth going back to to seek a cure for what ails us now.

    Patrick

    P.S. You’ve noticed, of course, that it has become increasingly fashionable to claim nobility and to blame the government if you get named in a Ponzi prosecution or a prosecution that alleges fraud in general. We have been reporting on the fraud allegations against Affiliate Strategies Inc. (ASI), the umbrella company under which the Noobing autosurf set up shop. Noobing targeted deaf people.

    On Sept. 4, an unnamed party issued a news release with this bold headline:

    “FTC on Rampage! Are they really out to help the Consumers or out to raise money?”

    Among the assertions in the news release, which apparently was a third-party bid to position ASI and other companies as noble enterprises, was this:

    “During our investigation of the tactics used by the FTC we wanted to see how the process was done to protect the consumer and the procedures they had to follow to prove that consumers were being harmed. To our amazement the FTC does not have to follow the law of the Constitution, and there is no Due process given to those that they claim are harming the public.”

    The claim was made despite the fact the civil prosecution against ASI is occurring in a federal court under the watchful eye of a federal judge to ensure fairness for all parties — alleged perpetrators and alleged victims.

    Federal investigators were described in the news release as “The “NEW AGED MAFIA.” The FTC was described as extorting “money from companies all across the country” in a bid to raise money “for the states that join them in the law suits.”

    In late August, the court-appointed receiver in the case against ASI said an affiliated company named a defendant in the prosecution charged a 70-year-old Philadelphia man on Social Security $995 for the names and addresses of three entities that possibly could help him secure a grant to repair his deteriorating home.

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

    The companies named defendants in the FTC lawsuit were insolvent “and had less than one day’s operating cash requirements in their bank accounts,” according to the receiver.

    “The Receiver’s work over the past three weeks suggests the Defendants’ operations were insolvent on the date [July 24] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds,” the receiver said.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • RECEIVER: Firm Associated With Noobing Autosurf Charged Senior Citizen In Search Of Housing Grant $995 For Three Names And Addresses Of Providers; One Of The Addresses Proved To Be Regional HUD Office

    UPDATED 2:11 P.M. EDT (U.S.A.) A company associated with the Noobing autosurf charged a 70-year-old Philadelphia man on Social Security $995 for the names and addresses of three entities that possibly could help him secure a grant to repair his rapidly deteriorating home, according to the receiver in the fraud case against Affiliate Strategies Inc., Brett Blackman and other defendants.

    Noobing pitches itself to the deaf on YouTube.
    Noobing pitches itself to the deaf on YouTube.

    Noobing itself targeted people with hearing impairments, according to web records and YouTube videos. The Kansas-based surf came to life after the U.S. Secret Service seized tens of millions of dollars last year from Florida-based AdSurfDaily Inc., amid allegations of wire fraud, money-laundering, selling unregistered securities and operating a Ponzi scheme.

    Noobing was promoted by some ASD members after the government filed a forfeiture complaint against ASD in August 2008.

    Meanwhile, the Federal Trade Commission now says Blackman received more than $1.37 million from various entities under the ASI umbrella in 2008 and 2009 and also benefited from perks.

    “ASI paid personal expenses for cleaning services, landscaping services, and moving services,” the FTC claimed in court filings this week. “Plaintiffs believe, based on interviews with former employees, that these expenses were paid on behalf of Brett Blackman, and categorized as ‘executive expenses.’”

    Blackman and the other defendants said in court filings that the various business enterprises named in the complaint filed last month by the FTC and attorneys general from three states provided legitimate products and services and that no consumers were harmed.

    But the Philadelphia man said otherwise, providing the receiver three letters he had written to entities whose names and addresses were provided by the Grant Writer’s Institute for a fee of $995 as benevolent entities that could help him repair the home he shares with his wife.

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

    Brenda M. Laroche, HUD’s deputy regional director, wrote a personal letter back to the man, explaining that HUD did not provide individual grants and pointing out where he could get free information on housing-assistance programs in Philadelphia and free information on a provider of weatherization assistance.

    Laroche, for free, even researched World Changers after receiving the letter from the man, who described himself as a recipient of only $185 a month in Social Security benefits and driving a cab at age 70 to make ends meet. In her letter to the man, Laroche provided the phone number and website address of World Changers, an entity of the Southern Baptist Convention.

    A second entity identified by the Grant Writer’s Institute — United Methodist Action Reach-out Mission by Youth (U.M. ARMY) — proved to be an organization that seeks grants, but does not provide them, according to court filings.

    Like Laroche at HUD, the executive director of the Christian organization wrote a personal letter back to the Philadelphia man, expressing concern that he had been duped and asking the man for the name of the company that duped him.

    “You are not alone,” said Brian Smith, executive director of the United Methodist mission, in the letter to the Philadelphia man. “[W]e would love to find out where you have learned this false information so that we can put away any artificial hope of funding from our organization to other individuals such as yourself.”

    At the same time, a third name provided to the Philadelphia man proved to be a website — netwish.org — which says it underwrites grants up to a maximum of $500 after people in need submit an essay that is compared to essays from other people in need to establish whose needs are most critical and can be funded. The maximum grant is $500, or $495 less than the amount the Grant Writer’s Institute charged the man.

    The Grant Writer’s Institute is one of the co-defendants in the case, which alleges that Blackman and others were part of a scheme to make customers believe they would receive a “guaranteed” $25,000 grant from the government from economic-stimulus funds.

    Larry Cook, the receiver, also determined that chargebacks attributed to another company named a defendant in the case actually were Noobing chargebacks and that a customer complained in July that Noobing had drafted an unauthorized payment, according to court filings.

    The chargebacks were confusing even to the bank because of the interrelationships of the defendants’ companies, the FTC said. Cook previously said that the “ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.”

    It had been difficult to get an early fix on finances because because “several thousand intercompany transfers” occurred and because other entities recently had been registered offshore, Cook said.

    Read the Receiver’s declaration.

    Read FTC Supplemental filing.

  • BREAKING NEWS: Receiver In ASI/Brett Blackman Case Delivers Devastating Preliminary Report; Noobing Autosurf Identified As Part Of ASI Affiliate Fold And Was Registered In Nevis; Belize Used For Other Firm

    A receiver appointed to review financial records of Affiliate Strategies Inc. and related companies named defendants in a fraudulent government-grants scheme last month advised a federal judge that the companies were insolvent and had less than one day’s operating cash requirements in their bank accounts.

    Astonishingly, receiver Larry Cook advised U.S. District Judge Julie A. Robinson that the attorneys he hired to assist in the probe “received thirty two US Mail crates” filled with complaints on Wednesday alone.

    “Although it is difficult to summarize the mass volume of calls and letters, a majority of the communications are from elderly individuals, or their children, who have discovered automatic checking account deductions from their, or their parents’, checking accounts and are requesting refunds,” Cook said in the preliminary report.

    Although Cook advised the judge he has been able to recover about $300,000 through the early weeks of his investigation and expected to recover more as the investigation proceeds, the defendants’ businesses appeared to be broke.

    “The Receiver’s work over the past three weeks suggests the Defendants’ operations were insolvent on the date [July 24] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds,” Cook said.

    He observed that the “Defendants’ business operations were high revenue/low margin operations which required significant cash in-flows from new victims to meet current trade creditor and consumer refund obligations.”

    Noobing, an autosurf that targeted people with hearing impairments, was identified by Cook as a company affiliated with ASI. Noobing was not named a defendant in the fraud complaint filed last month by the Federal Trade Commission and the attorneys general of Kansas, Minnesota and North Carolina.

    Cook, though, said he discovered Noobing had registered as a corporation on the Caribbean island of Nevis on March 25, 2009. Noobing launched last year and was promoted by members of AdSurfDaily Inc., a surf firm from which the U.S. government seized tens of millions of dollars last year in a wire-fraud, money-laundering and Ponzi scheme probe.

    Noobing generated more than $590,000 in revenue last year and more than $541,000 this year before going offline, according to Cook’s preliminary report.

    Cook estimated that Noobing was in the hole nearly $550,000 since last year.

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

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

    “Of immediate concern is the large distributions and salary paid to defendant Brett Black[man] since 2008,” Cook advised the judge in his report. “Per the QuickBooks accounting records, Blackman received $841,545 of distributions from Apex Holdings International, LLC in 2008 and made a net contribution of $491,559 into Affiliate Strategies, Inc. ($581,388 of contributions and $89,829 of distributions) for a total net distribution of $349,986, in addition to salary payments of $118,049.

    “In 2009,” Cook continued, “Blackman has received $253,506 of distributions from Apex Holdings International, LLC and has made a net contribution of $113,000 into Affiliate Strategies, Inc. ($349,000 of contributions and $226,000 of distributions). The total net distributions and salary to Blackman for 2008 and 2009 is approximately $490,000.”

    Cook said his assessment was ongoing. He reported that some of the accounts involved in the investigation had chargeback rates of as high as 77 percent, meaning that better than three of four customers who made credit-card charges requested refunds.

    Read Cook’s preliminary report.