PatrickPretty.com

Tag: Black Diamond

  • EDITORIAL: With Conviction Of Zeek’s Burks, Another Senior MLMer Faces Prospect Of Decades In Prison

    paulburkszeekUPDATED 4:31 P.M. EDT U.S.A. Zeek Rewards was always inexcusably horrid, fueled by serial willful blindness and the sort of practiced disingenuousness that props up so many MLM “programs.” In dollar volume, Zeek ended up being more than seven times larger than the $119 million AdSurfDaily MLM Ponzi scheme that put ASD operator Andy Bowdoin in federal prison for six and a half years. By this measuring stick, Zeek’s Paul Burks could be staring at 45 or more years.

    As things stand, Burks, 69, faces a maximum of 65 years. He was convicted July 21 of mail fraud, wire fraud, conspiracy to commit both and tax-fraud conspiracy. The jury reportedly returned the verdict in less than three hours.

    Bowdoin, 77 when he accepted a plea deal before trial in 2012, received the maximum term of 78 months under the deal after earlier facing decades in prison. He pleaded guilty to a single count of wire fraud and acknowledged ASD was a Ponzi scheme and that the “program” never had operated lawfully from its 2006 inception. Other charges that could have led to a longer term were not pursued.

    Burks did not have a plea deal. The $939 million dollar volume of the Zeek scam will not be the sole measuring stick considered by U.S. District Judge Max O. Cogburn Jr. when Burks’ sentencing date comes around. Even so, 45 years is not out of the question, given the terms imposed on other Ponzi schemers. Scott Rothstein, for example, received 50 years for a $1.2 billion scam.

    Rothstein reportedly cooperated with the government after his convictions with the hope of receiving a sentencing reduction. Whether Burks will have a similar option or be able to argue successfully for mitigation is unknown.

    What is known is that even 20 years for Burks, nearing his 70th birthday, is a virtual life sentence. Like Rothstein, he has some serious thinking to do.

    Zeek was a tragedy for many, many investors lured in by promises of enormous returns. Can there be any doubt it’s also a personal tragedy for Burks and his family, given what the Zeeker-in-chief now faces?

    Why Burks ever would choose to pursue Zeek after what happened at ASD remains an open question. The frauds were remarkably similar. Bowdoin went to jail for an MLM scam when he was 77. The ASD case practically screamed, “Don’t do this!”

    “This massive scam is one of the largest in breadth and scope ever prosecuted by this office,” U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said about Zeek.

    Another problem for Burks is that North Carolina, a U.S. banking center, can be downright unfriendly to Ponzi schemers. Keith Franklin Simmons was sentenced to 50 years for his $40 million “Black Diamond” scheme, a scheme much smaller than Zeek. Although that sentence later was reduced on appeal to 40 years, four decades is hardly a bargain — and Zeek had something else in common with Black Diamond in addition to operating in the same federal district in the same state.

    Indeed, with both Zeek and Black Diamond, the Feds pursued actions against banks that allegedly were asleep at the wheel. Ponzi schemes put economic security at risk.

    Burks had to know that Zeek was going to cause his world to crumble. He’d been an MLMer for years, he knew about the ASD case, Bernard Madoff, Rothstein, Ponzi pain in general throughout society and bizarre happenings in his own company.

    Why he moved forward is a sort of maximum imponderable. Why so many in the trade followed him after ASD is an even more disturbing question.

    Zeek’s wing of MLM, which also includes ASD, TelexFree, WCM777 and others, has harmed millions and millions of people. It is a vast wasteland of wink-nod disingenuousness and racketeering. The cross-border nature of these schemes is truly frightening.

    Kenneth D. Bell, the court-appointed receiver for Zeek, is pursuing class-action litigation involving more than 9,000 alleged Zeek winners. It is known that some of the winners also participated in ASD. These winners were at the scene of two crimes. Some of them were at the scene of more than two.

    This is a major problem for MLM, whether the trade acknowledges it or not. Recruits were told Zeek couldn’t be a Ponzi scheme because MLM lawyers were involved.

    And they were told that Zeek was on the up-and-up because it issued 1099 tax forms. These longstanding MLM myths have been shattered in both criminal and civil prosecutions.

    With respect to Burks’ sentencing, the government’s recommendation is not yet known. Lengthy sentences for senior-citizen Ponzi schemers, however, are hardly unprecedented. Madoff, in his seventies, received 150 years.

    Richard Piccoli, 83, received 20 years for a scheme far smaller than Zeek in dollar volume and number of victims. Piccoli advertised in Catholic publications, and is believed to have caused about $25 million in losses to about 250 people.

    Zeek advertised online and in MLM publications, creating hundreds of millions of dollars in losses while creating hundreds of thousands of victims.

    NOTE: Our thanks to the ASD Updates Blog.

     

     

  • CHARLOTTE OBSERVER: Jonathan Davey, Figure In ‘Black Diamond’ Ponzi Caper, Sentenced To 21 Years In Federal Prison

    ponzinews1EDITOR’S NOTE: Thanks to a PP Blog reader for pointing us to the Charlotte Observer’s story on the sentencing of Jonathan Davey.

    One of the key figures in the bizarre “Black Diamond” Ponzi caper in North Carolina has been sentenced to 21 years in federal prison.

    Here is the URL from the Charlotte Observer on the sentencing of Jonathan Davey.

    Snippet from the Observer (italics added):

    At Davey’s sentencing Thursday, U.S. District Judge Robert Conrad focused on how Davey’s actions caused “life-wrecking damage” to the scheme’s elderly and vulnerable clients.

  • BULLETIN: 4 More Indictments In Alleged North Carolina Ponzi Caper; New Charges Follow On Heels Of 7 Previous Convictions And Criminal Allegations That Bank Turned A Blind Eye To Fraud Scheme

    BULLETIN: With seven defendants already convicted of Ponzi-related crimes and a North Carolina bank accused of turning a blind eye to the fraud, four new criminal defendants have been named in the Black Diamond Capital Solutions probe.

    A federal grand jury in Charlotte has returned an indictment against Jonathan D. Davey, 47, of Newark, Ohio; Jeffrey M. Toft, 49, of Oviedo, Fla.;  Chad A. Sloat, 33, of Kansas City, Mo.; and Michael J. Murphy, 51, of Deep Haven, Minn., the office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina said.

    It was a case that married a conspiracy to a series of lies and ultimately was unraveled by the FBI and the IRS, prosecutors said. Among the key new allegations is that a second Ponzi scheme emerged to replace one that had collapsed earlier.

    Davey, a CPA, organized a Belize company known as Divine Circulation Services Ltd. that assisted now-convicted Black Diamond felon Keith F. Simmons in pulling off the $40 million scam, according to federal records.

    Other corporate entities identified in a 2011 CFTC civil complaint as having links to the alleged scam also used names that conjured images of religion and safety. Davey also was at the helm of a Belize firm known as Sovereign Grace Inc., a firm that benefited from the scam, the CFTC said last year.

    “The indictment also charges Davey with tax evasion for claiming to the IRS on his 2008 tax return that $810,000 that Davey stole from victims was a ‘loan,’” federal prosecutors said today. “In reality, the indictment charges, Davey stole that $810,000, plus approximately $500,000 in 2009, from victims to build Davey’s personal mansion.”

    All four of the new criminal defendants are charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud and conspiracy to commit money-laundering, prosecutors said.

    Elements of the case as outlined in the CFTC’s civil complaint last year read like a work of impossible fiction. Regulators and other law-enforcement agencies increasingly have been squaring off against bizarre fraud schemes that seek to mask themselves behind shell companies both domestic and offshore. The schemes often feature appeals to greed and faith, amid claims of fantastic earnings.

    Read the announcement about the new indictments on the FBI website, which also lists the names of individuals already convicted in the scheme.

  • URGENT >> BULLETIN >> MOVING: Keith Simmons’ Forex Ponzi Caper Leads To Criminal Charges And Deferred Prosecution Against North Carolina Bank; CommunityONE Bank Charged With Not Maintaining Effective Anti-Money Laundering Program

    BULLETIN: Federal prosecutors say the collapsed Forex Ponzi scheme operated by Keith Franklin Simmons put an undercapitalized  North Carolina bank with 45 offices in 38 communities in harm’s way.

    In a dramatic announcement, Justice Department officials said CommunityONE Bank N.A of Asheboro, N.C., turned a blind eye to Simmons and did not file a single Suspicious Activity Report despite the fact the scheme sent out red flags for more than two and a half years.

    CommunityONE lost 16 percent of its value because of the scheme, the Justice Department said. Had the bank collapsed, it would have cost the FDIC insurance fund $500 million, prosecutors added.

    In a deferred prosecution agreement, the bank has been charged criminally with failing to maintain an effective anti-money laundering program. The agreement, officials said, would enable the bank to recapitalize and execute a merger plan while providing $400,000 to help the Ponzi victims recover.

    “Banks asleep at the switch need to wake up,” said U.S. Attorney Anne Tompkins of the Western District of North Carolina.  “Federal law requires banks to implement a robust and proactive anti-money laundering program to detect fraud and protect the public from harm.  This bank’s failure to detect and report a Ponzi scheme cost it 16 percent of its value.  Other financial institutions should heed this warning:  the Bank Secrecy Act applies to more than just drug and terrorist financing.”

    Simmons, prosecutors said, operated his massive scam “almost entirely through an account at the bank.”

    Between April 2007 and September 2009, prosecutors said, Simmons used CommunityONE to deposit more than $35 million in investor funds and withdraw at least the same amount.

    Even though “hundreds” of suspicious transactions occurred, the bank chose to be willfully blind, the Justice Department said.

    “CommunityONE Bank turned a blind eye to criminal conduct occurring under its nose,” said Assistant Attorney General Lanny Breuer.

    The Justice Department made the announcement from Washington, and Breuer said the bank was implementing a new program and beginning the process of “righting its wrongs.” The charges will be dismissed in two years if the bank complies with its agreement.

    Records at CommunityONE, prosecutors said, showed that Simmons diverted more than $2 million to other accounts at the bank “to operate his other businesses.”

    Meanwhile, he “diverted nearly $800,000 in cash withdrawals, gift cards and transfers to his personal account with the bank” and “diverted numerous payments to support his luxurious lifestyle, including payments for private jets, vehicles and gifts,” prosecutors said.

    Simmons, who was convicted of securities fraud, wire fraud and money laundering last year, operated a company known as Black Diamond Capital Solutions LLC. He faces a maximum sentence of 80 years in federal prison. Read more about Black Diamond here.

    The action against CommunityONE was brought by elements of the interagency Financial Fraud Enforcement Task Force created by President Obama in November 2009.