BULLETIN: In a blistering response to TelexFree’s bid to continue its business and move forward with its Chapter 11 bankruptcy case, the United States’ trustee said the embattled firm has not engaged “in full and fair disclosure.”
“The former CFO and board members have disappeared with no explanation,” U.S. Trustee Tracy Hope Davis alleged. “The only declarations in support of the Debtors’ requests for relief have been signed by individuals that have been on the job for less than 3 weeks. Yet, Debtors are pressing forward with their motions for ’emergency’ relief so they can continue business ‘as usual.’ It appears that [James] Merrill, [Carlos] Wanzeler, and [Joe] Craft have all fallen down the rabbit hole and are now expecting the Court to follow.”
“At the hearing on April 17, 2014, Craft was not present in the Courtroom,” Davis argued. “Counsel for Debtors informed the Court during the hearing that Craft was no longer an officer, director, or authorized signatory of the Debtor. No explanation was offered to the Court for the sudden change of management and the short duration (3 days) of Craft’s tenure.”
And, Davis continued, MacMillan has provided “no explanation for why he felt it necessary to terminate Debtors’ entire former management team.”
Among the trustee’s witnesses is Julio J. Defigueiredo Jr., a sheriff’s deputy from Bristol County, Mass. In a declaration to the bankruptcy court, Defigueiredo said he was present at an April 15 raid of TelexFree’s Massachusetts office by the U.S. Department of Homeland Security.
Defigueiredo, according to the declaration, observed Craft “entering an office and attempting to grab a laptop and bag.”
Craft, according to the deputy, claimed the items were “personal.”
But nearly $38 million in TelexFree-related cashier’s checks were discovered in the bag, the deputy said.
Davis described the situation as a series of “extraordinary changes of circumstances” and part of a confluence of events that makes it “unfathomable” that TelexFree is “still going forward on their cash management motions . . . as if business were proceeding as usual.”
“Currently,” Davis argued, “Debtors have no operating business. Due to the TRO [in the TelexFree fraud case filed by the SEC on April 15], their accounts have been frozen and remain frozen for the foreseeable future. MacMillan admits their offices in Massachusetts have been shut down since the Federal raid and all remaining employees have been laid off.”
MacMillan contended earlier this week that he did not believe that “Mr. Craft was attempting to divert any of the Debtors’ cash or other resources.”
Davis appears not to be buying that assertion, alleging that “Craft was apprehended attempting to walk out the back door of Debtors’ offices with $38 million in negotiable cashier’s checks.”
She further asserted that William Runge, a turnaround specialist hired to “to safeguard existing cash” by TelexFree three days before its bankruptcy filing, “[a]pparently . . . wasn’t able to perform his new job duties very well” given the circumstances surrounding Craft.
MacMillan contended earlier this week that Craft “was acting at the direction of Mr. Runge and me to secure the cashier’s checks in a safe and reliable location for the benefit of the Debtors’ constituencies.”
Key bankruptcy hearings for TelexFree are scheduled tomorrow.
But emergency motions filed by the firm “have not been amended to reflect any change of circumstances in Debtors’ business operations such as the raid on their offices by Special Agents from Homeland Security, or the freezing of all their banks accounts and sources of revenue, or the fact that Craft, their former accountant, Chief Financial Officer, Board Member and signatory is no longer associated with the Debtors in any capacity,” Davis asserted.
URGENT >> BULLETIN >> MOVING: (Updated 6:24 P.M. EDT U.S.A.) The U.S. Securities and Exchange Commission has entered the TelexFree fray in Nevada Bankruptcy Court and has petitioned the judge to transfer the case to Bankruptcy Court in the Central District of Massachusetts, an area that is a potential TelexFree stronghold. The Central District covers communities such as Worcester, Ashland, Framingham, Holliston, Bellingham, Franklin and Medway.
In a filing, the SEC also noted that the FBI and Department of Homeland Security are involved in a separate TelexFree probe led by the office of U.S. Attorney Carmen M. Ortiz. How long that probe has been under way was unclear in the filing.
SEC lawyers asserted Massachusetts was the “nerve center” of TelexFree and that TelexFree’s “late Sunday” bankruptcy filing in Nevada on Oct. 13 was a “transparent attempt to avoid Massachusetts, where their ‘business’ and numerous witnesses are located and where various government agencies have been investigating their fraudulent conduct.”
“[U]ntil [April 15], the U.S. Attorney’s Office was operating in secret,” the SEC advised a federal judge in Massachusetts last week, according to a transcript provided the Nevada Bankruptcy Court. “We couldn’t reveal ourselves without tipping things, so we had to wait until the search warrant was executed [on April 15.]”
TelexFree nevertheless knew the regulators were coming and started moving money, the SEC said.
One SEC investigator advised the Massachusetts judge who granted an asset freeze that he’d personally viewed “several hours” of TelexFree-related YouTube videos and performed transcription work before the SEC filed its fraud complaint last week, according to the transcript.
“[T]here are plenty of examples of each of those people helping to promote the scheme and helping to explain how great it is, how much money you can make for virtually no effort, and without — they’re all active enough, these people — well [James] Merrill, [Carlos] Wanzeler, and [Steve] Labriola are officers, they certainly know this,” the SEC investigator advised the Massachusetts judge.
The Massachusetts judge granted an asset freeze on April 16.
BULLETIN: (11th Update 2:35 p.m. EDT U.S.A.) The United States’ trustee who serves the region (Nevada) in which TelexFree’s bankruptcy case was filed on April 13 has alleged there are “reasonable grounds” to believe that “criminal conduct” occurred at TelexFree.
Trustee Tracy Hope Davis, who works for a division of the U.S. Department of Justice, says in Bankruptcy Court filings that the court should appoint a Chapter 11 trustee because “[t]here is compelling evidence of fraud, dishonesty and gross mismanagement of the affairs of the TelexFree debtor entities, TelexFree, LLC, TelexFree, Inc. and TelexFree Financial, Inc.
The motion by Davis cites separate fraud actions against TelexFree filed April 15 by the Massachusetts Securities Division (MSD) and the U.S. Securities and Exchange Commission (SEC). MSD is the state-level securities regulator in Massachusetts. The SEC is the top securities regulator in the United States.
“In response to subpoenas issued by the MSD in January and February, 2014, TelexFree changed its compensation plan so that promoters would now be required to sell its VoIP product in order to qualify for the payments that TelexFree had previously promised to pay them,” Davis alleged. “The rule change has generated a storm of protests from promoters who cannot recover their money. The change has also caused a precipitous decline in investor revenue which has pushed TelexFree into bankruptcy.”
Meanwhile, the Davis motion cites an SEC complaint and emergency motion in Massachusetts federal court on April 15 that successfully sought an asset freeze against alleged TelexFree co-owners James Merrill and Carlos Wanzeler and TelexFree CFO Joseph Craft (and others), along with a Temporary Restraining Order.
“Millions of additional investor funds received by TelexFree are presently unaccounted for,” Davis alleged. “Fortunately, the TRO was granted by the District Court for the District of Massachusetts and all of the Debtors’ accounts have been frozen pending a preliminary injunction.”
As a result of TelexFree, Davis alleged, “[t]wo companies controlled by Craft received more than $2,010,000.00 between November 19, 2013 and March 14, 2014.” Millions more allegedly went to Merrill and Wanzeler.
Among the assertions by Davis:
The Debtors did not disclose that several banks and at least one payment processor stopped doing business with them, apparently due to concerns about the legality of its multi-level marketing program.
It appears that part of the reason for the Debtors’ cash flow problems was the diversion of funds to insiders.
Craft was caught “holding the bag” when the U.S. Department of Homeland Security was executing a search warrant at TelexFree headquarters in Massachusetts on April 15.
“When Craft was caught ‘holding the bag’ during the execution of the HSI search warrant on April 15, 2014, nine of the ten cashier’s checks that were confiscated were dated April 11, 2014 and were remitted to Merrill,” Davis asserted. “Of these checks, five were made out to TelexFree, LLC totaling $25,548,809.00, and one was made out to Katia B. Wanzeler (Wanzeler’s wife) in the amount of $2,000,635.00. The tenth check, dated April 3, 2014, was remitted to Wanzeler and was made out to TelexFree Dominicana SRL in the amount of $10,398,000.00.”
Davis also expressed concern about a TelexFree board meeting that occurred in the hours leading up to the bankruptcy filing. (See April 21 PP Blog story that references the same meeting.)
From the Davis motion to appoint a trustee (italics added):
The minutes of the special meeting of the Board of Managers of TelexFree, LLC held on April 13, 2014, indicate that Merrill and Wanzeler comprise the entire Board of Managers (the “Board”). . . At this meeting, Merrill and Wanzeler selected Craft and [Stuart] MacMillian as the Debtors’ “Authorized Persons,” empowered to execute and file pleadings on behalf of the Debtors, to employ counsel and other professionals (including Craft’s accounting firm), and to exercise signature authority over the Debtors’ accounts. Although the minutes include language revoking any prior signature authority of other individuals, there is no language stating that Merrill and Wanzeler are stepping down from the Board or that anyone else is stepping up to serve as their replacements. On information and belief, the new interim CFO and CEO still report to and take direction from the Board which is still comprised of 2 individuals – Merrill and Wanzeler.
And, Davis alleged, “Merrill, Wanzeler, Craft, and possibly others have engaged in securities fraud, withheld material information from investors, and improperly diverted millions of dollars of estate property to themselves or their entities, as set forth in the SEC Complaint and Memorandum.”
In the trustee’s view, according to the allegations, “[t]he modus operandi of Merrill and Wanzeler and their cohorts suggests that it is more likely than not that anyone handpicked by them to manage their wholly owned companies will be another cohort.”
Davis asserted “on information and belief” that there have been “no allegations to date regarding the involvement of MacMillan (the new CEO) or [William] Runge (the new CRA) in the Debtors’ Ponzi scheme, neither is there any indication that these interim officers are truly independent of the fraud of ‘former’ management.”
And, Davis continued, “[t]he only way to ensure honest and independent management of these Debtors going forward is for the Court to direct the United States Trustee to appoint a Chapter 11 trustee.”
From yesterday’s national infrastructure report by the U.S. Department of Homeland Security. Red highlight by PP Blog.
TelexFree — specifically the Ponzi- and pyramid complaint filed against it Tuesday by Massachusetts Commonwealth Secretary William Galvin — was the top story yesterday in the U.S. Department of Homeland Security’s daily infrastructure report.
DHS was formed after the terrorist attacks of Sept. 11, 2001. Galvin alleged that TelexFree had gathered more than $1.2 billion in a massive, international fraud scheme.
Yesterday’s infrastructure briefing singled out four “Top Stories” in the United States, with TelexFree listed at the top of the thumbnail reports.
“The Massachusetts Securities Division charged TelexFREE Inc., with running a Ponzi scheme targeting Brazilian-Americans that has raised over $90 million from Massachusetts residents and around $1 billion globally,” the thumbnail read.
DHS pointed to a story by Jordan Maglich in Forbes on the Massachusetts action. The agency listed the TelexFree matter in the infrastructure category of “Financial Services.”
Yesterday’s infrastructure report did not mention that DHS itself had a role in executing a search warrant and securing the premises of TelexFree’s headquarters in Marlborough, Mass.
Agents were at the site Tuesday, the same day Galvin filed a state-level action and the SEC filed a federal action. An SEC affidavit credits DHS and a Bristol County Sheriff’s Deputy with stopping a bid by an accused TelexFree executive to remove nearly $38 million in cashier’s checks from the premises.
The DHS infrastructure report is culled from various media reports. Although yesterday’s report highlighted four top stories across a broad spectrum, it also listed stories in various categories of infrastructure protection.
These include:
Energy
Financial Services
Chemical
Transportation Systems
Nuclear Reactors, Materials, and Waste
Information Technology
Critical Manufacturing
Communications
Defense Industrial Base
Commercial Facilities
Dams
Government Facilities
Food and Agriculture
Emergency Services
Water and Wastewater Systems
Healthcare and Public Health
The DHS Daily Open Source Infrastructure Reports are available here.
URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.
The sting featured a phony “consulting” company created by the FBI, authorities said. News about the make-believe consultancy followed on the heels of news last month that U.S. investigators had created a “payment processor” as part of a different probe into illegal gambling.
Charged criminally in today’s undercover cases were Brian Gibson, 63, of Coconut Creek, Fla; Donald W. Klein, 40, of Frisco, Texas; Douglas Newton, 66, of Rancho Mirage, Calif; Charles Fuentes, 66, of Dana Point, Calif; and Thomas Schroepfer, 54, of Las Vegas. Schroepfer also is known as Thomas Schroepfer Baetsen.
The men and several companies also were charged civilly by the SEC in what the agency described as a coordinated law-enforcement assault against microcap hucksters.
“Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement.
The Miami region’s top federal prosecutor, meanwhile, said the cases evolved from the Southern District of Florida’s ongoing Securities and Investment Fraud Initiative, a task force aimed at criminals and fraudsters operating in the region.
“The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” said Wifredo A. Ferrer.
Undercover FBI agents posed as scammers and set up a phony “consulting” business as part of the probe, the SEC said.
“The defendants charged today were intent on making profits for themselves while defrauding others,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.
Newton, the SEC said, was chief executive officer of Real American Brands Inc., now known as Real American Capital Corp. He was accused of paying kickbacks to a “purported employee pension fund trustee” to buy more than 6.2 million shares of restricted Real American Brands stock.
He further was accused of trying to conceal the kickbacks through a “consulting” firm.
However, the trustee Newton believed to be corrupt actually was “a fictitious person,” the SEC said. Meanwhile, “the trustee’s business associate who helped arrange the deal was an undercover FBI agent,” and the consulting company was a “phony” one created by the FBI, the SEC added.
Klein was the president and chief executive officer of KCM Holdings Corp. He is accused of engaging in two restricted stock transactions and one market transaction involving KCM Holdings’ stock.
“Klein and the company paid kickbacks to an undercover FBI agent who portrayed himself as a business associate of a corrupt trustee of an employee pension fund, in exchange for the fund’s purchase of 2.5 million shares of restricted KCM Holdings stock,” the SEC said. “Klein attempted to conceal the kickbacks through a consulting agreement with a phony company that would receive the kickbacks. In another scheme, Klein bribed a purported corrupt stockbroker (actually an undercover FBI agent) to purchase KCM Holdings stock in the open market for brokerage clients with discretionary accounts.”
Thomas Schroepfer was president and president of of SmokeFree Innotec Inc. He, too, got caught in the sting, the SEC said.
For his part, Fuentes was a promoter of SmokeFree’s stock, and “paid kickbacks to an undercover FBI agent, posing as the business associate of a corrupt employee pension fund trustee, in exchange for the fund’s purchase of 400,000 shares of restricted SmokeFree stock,” the SEC said.
Schroepfer, the SEC said, “attempted to conceal the kickbacks through a consulting agreement with a phony company created to receive the kickbacks.
“In addition, SmokeFree issued shares of its stock to a cooperating witness for acting as a middleman in the scheme,” the SEC said.
Gibson “created a now-defunct website, Roaringpennystocks.com, to promote shares of Xtreme Motorsports International Inc., as part of a planned pump-and-dump scheme,” the SEC charged.
He is accused of touting Xtreme Motorsports “by blasting a series of e-mails to potential investors” and posting “false testimonials on the site from purported investors raving about their success in following the website’s stock picks,” the SEC said.
In a separate case in Maryland last month, prosecutors announced that federal agents had created a “payment processor” to infiltrate illegal gambling operations.
The name of the Feds’ “payment processor” was Linwood Payment Solutions — and its website now serves this message:
“Linwood Payment Solutions is a Department of Homeland Security Undercover Business set up to identify and prosecute companies accepting and paying out funds for U.S. customers who gamble online illegally.”
In response to a white-collar fraud epidemic involving huge sums of money and fraudsters and criminals operating both domestically and internationally, U.S. agencies, including the Secret Service, ICE and others, have been employing techniques once largely reserved for organized-crime probes.
BULLETIN: A deputy U.S. marshal was shot and killed this morning while serving an arrest warrant in a drug case at a home in Elkins, W. Va., a law-enforcement official said.
Two other deputy marshals were wounded in the attack. Their conditions were not immediately known. Charles E. Smith, the alleged assailant, reportedly was killed by return fire from law enforcement.
Smith, 50, used a shotgun in his attack on the marshals, officials said.
The attack on the marshals in West Virginia followed by a day an attack on two U.S. Immigration and Customs Enforcement (ICE) agents in Mexico.
Special Agent Jaime Zapata was shot and killed in the attack, and a second ICE agent was wounded by gunfire. The agents were assigned to ICE’s attaché office in Mexico City, and were ambushed while driving between Monterrey, Mexico, and Mexico City, officials said.
ICE is an agency within the U.S. Department of Homeland Security (DHS).
“[A]ny act of violence against our ICE personnel — or any DHS personnel — is an attack against all those who serve our nation and put their lives at risk for our safety,” said DHS Secretary Janet Napolitano.
Elkins, a city of about 7,000 in North Central West Virginia, is about 163 miles south of Pittsburgh, Pa.
EDITOR’S NOTE: This developing story on the alleged actions of accused securities schemer Christopher Love Blackwell is apt to cause paranoia among HYIP and prime-bank fraudsters, including criminals who populate online forums such as TalkGold and MoneyMakerGroup.
It features the presence of a Department of Homeland Security (DHS) undercover operative who allegedly infiltrated Blackwell’s scheme and was so good at keeping his identity secret that Blackwell pitched him repeatedly over a period of months in a Hooters restaurant and bar as other agents worked to unmask the complex caper. The undercover agent eventually returned an “investment contract” prepared by Blackwell and plunked down $1,000 of government money as a down payment on a purported $500,000 investment. Blackwell allegedly later contacted the undercover agent repeatedly via email and telephone to collect the outstanding “balance” of $499,000. Blackwell even left a voicemail on the agent’s phone, according to court filings.
BULLETIN: The SEC has gone to federal court in Dallas and is seeking an emergency injunction to halt an alleged Ponzi scheme involving Christopher Love Blackwell of Euless, Texas, and Roswell, N.M., AV Bar Reg Inc. of Colleyville, Texas, and Millers A Game LLC of Chandler, Ariz.
Blackwell, 31, and his companies initially came on the Feds’ radar screens last year when the U.S. Department of Homeland Security (DHS) was alerted that he was wiring large sums of money and conducting cash transactions that raised terrorism concerns, according to court records.
In the end, the SEC dryly advised a federal judge, “it became clear to DHS that Blackwell was not a terrorist — just a thief.”
Regardless, the SEC said, the fraud was ongoing and Blackwell still appeared to be selling the scheme as recently as Jan. 19.
DHS operatives kept Blackwell under surveillance, assembled documents, conducted interviews and “made video and audio recordings of meetings during which Blackwell offered investments to undercover agents,” the SEC said in court filings.
Records show that Blackwell was on the receiving end of a default judgment of $24 million in a civil fraud case filed in July 2008 and sought Chapter 7 protection in U.S. Bankruptcy Court on Christmas Eve 2008.
Despite the lawsuit, judgment and bankruptcy filing, Blackwell continued to operate what he described as a “Fixed Income Trading Program” that offered returns of up to 30 percent a month, according to the SEC.
To pull off his Ponzi and fraud scheme, Blackwell bragged about his “academic pedigree,” falsely claiming to have Master’s and PhD degrees “from a prestigious university in Spain” and also falsely claiming once to have been employed by Goldman Sachs and the Bank of Madrid.
In 2007, with the scheme unknown to law enforcement, Blackwell stole $750,000 from an investor. In 2008, according to court filings, he swindled $200,000 from another investor, returning $9,926 in bogus “profits” to the investor. This investor was introduced to Blackwell by “an intermediary who claimed to run a faith-based business and investment development firm,” according to the SEC complaint.
The purported faith-based intermediary assured the investor that Blackwell’s program in “foreign bank instruments” was “totally safe,” the SEC alleged. Despite the assurance of the intermediary, Blackwell immediately began to distribute the $200,000 provided by the investor to other companies and people, including Blackwell’s former business partner and Blackwell’s father.
By late 2008, according to the SEC, Blackwell was engineering a scheme to rip off a former football player for the Dallas Cowboys. The player had been introduced to Blackwell by another player, according to the complaint.
Neither player was identified in the complaint. The former player, lured by the promise of safe returns from an experienced international trader, gave Blackwell $250,000 in the belief that he was purchasing an investment note from HSBC Bank, one of the largest financial firms in the world.
Blackwell “never” purchased an HSBC note. Instead, according to the SEC, he instructed an attorney exercising control over the escrow account to which the former Cowboy had wired the funds to transfer nearly all of the $250,00 to a Phoenix company controlled by a friend of Blackwell.
When confronted by the SEC, Blackwell allegedly told the agency that he had “earned” the money despite his assurances to the player that the sum would be used to purchase a safe bank note.
Although Blackwell showed the former football player a document on HSBC letterhead as purported proof he had purchased a bank note with the player’s money, “HSBC’s Security and Fraud Risk group has confirmed that the letter was fraudulent.
“In other words,” the SEC said, “it was a forgery.”
The former player appears to have been ripped off for the entire $250,000 investment, the SEC said.
BULLETIN:(UPDATED 3 P.M. ET (U.S.A.) The first experience some people seeking to become U.S. citizens had was to be duped by Americans, the Federal Trade Commission has alleged. After a probe involving multiple government agencies, the FTC has gone to federal court in Nevada to block what it described as an “immigration scam.”
3 P.M. UPDATE: The alleged scheme also resulted in three arrests on criminal charges of Obtaining Money Under False Pretenses in the Course of a Technological Crime, six counts of Conspiracy and two counts of Criminal Racketeering.
Charged criminally by the office of Nevada Attorney General Catherine Cortez Masto were Charles Doucette, Deborah Stilson and Cybil Duran Berti, authorities said.
The scammers posed as government agencies, used the symbols and language of government, used websites that mimicked government sites, used the American flag, the Statue of Liberty and answered phones by using the acronym of the U.S. Citizenship and Immigration Service (USCIS), a division of the Department of Homeland Security, the FTC alleged.
Charged in the case were companies known as “Immigration Center,” a nonprofit based in Colorado, and “Immigration Forms and Publications” of Missouri.
A federal judge has frozen the assets of the companies and co-defendants, including Charles Doucette; Deborah Stilson, also known as Deborah Malmstrom; Alfred Boyce; Thomas Strawbridge; Robin Meredith; Thomas Laurence; and Elizabeth Meredith.
Domains used by the fraudsters included www.uscis-ins.us and www.usgovernmenthelpline.com, the FTC said. The phrase “uscis-helpline” also was used in a domain name, the agency added.
“The sites directed consumers to call a toll-free number that an automated voice answered, ‘Immigration Center,’” the FTC charged. “Consumers were then transferred to a live person who answered, ‘USCIS’ or ‘U.S. Immigration Center,’ and identified him or herself as an ‘agent,’ ‘immigration officer,’ or ‘caseworker.’”
Consumers were duped into paying fees of up to $2,500, the FTC said, alleging that telemarketers were illegally conducting business by posing as immigration counselors.
“[T]he defendants charged fees for application forms that were the same amount as the government processing fees, leading [customers] to believe the fees covered the cost of USCIS processing,” the FTC said. “Some consumers who applied for the forms were told to send checks by overnight mail to cover the costs. Others paid with checks or money orders on delivery.
“Consumers ended up paying for applications that were never processed by the USCIS for failure to pay the official processing fee, or, in some cases, they were charged twice, once by the defendants and once by the government after the defendant forwarded their bank account information to USCIS,” the FTC said.
Assisting in the case were the U.S. Department of Homeland Security; the U.S. Customs and Immigration Services; Immigration and Customs Enforcement; the Office of the Attorney General of Colorado; the Office of the Attorney General of Missouri; the Office of the Attorney General of Nevada; the Pettis County, Mo., Sheriff’s Office; the Department of Justice and Executive Office for Immigration Review; and the U.S. Postal Inspection Service.
“These egregious actions by scammers who impersonate Federal employees and prey on innocent people who are trying to work within the system to achieve citizenship is particularly distressing,” said Cortez Masto.
This is actually Post No. 1,007 since the PP Blog switched to the WordPress platform two years ago this month. We’d hoped to commemorate our 1,000th WordPress post in the actual 1,000th post, but missed the chance because of Breaking News concerning the Financial Fraud Enforcement Task Force’s Operation Broken Trust.
The PP Blog's Breaking News graphic was stolen and used in a promotion for Data Network Affiliates (DNA) earlier this year. DNA, which purports to be in the business of helping the AMBER Alert prohram rescue abducted children, now apparently has morphed into a company known as OWOW, which has instructed members to advertise a secret cure for cancer.
Several hours after we reported that the Task Force now was counting investment-fraud victims by the tens of thousands and noting that even deaf people had been targeted in massive scams, we reported that Walmart had joined the “If you see something, say something” terrorism-awareness campaign operated by the Department of Homeland Security (DHS).
Walmart was instantly and savagely pilloried on YouTube, apparently for holding the view that DHS deserved private-sector help in its work to keep America safe. On. Dec. 6, when the PP Blog first observed the DHS video on YouTube announcing the Walmart partnership, the video had received only 310 views. That number now has shot up to 289,657. YouTube posters called DHS Secretary Janet Napolitano names that could peel paint. We’ll leave it at that, except to say that scores of Americans appear to have emerged as kneejerk critics and appear unwilling to view America’s economic well-being within the lens of national security.
Indeed, how safe is America — and the world at large — if fraud victims are being counted in numbers that would fill stadiums and vast sums of wealth are being consumed and disappearing down ratholes? In the Task Force announcement, Attorney General Eric Holder said that, since Aug. 16 alone, cases investigated by the Task Force have uncovered losses of more than $10.4 billion. The schemes affected at least 120,000 victims.
The victims’ count in just this relatively small cluster of cases is more than enough to fill the Rose Bowl in Pasadena or Michigan Stadium in Ann Arbor, America’s largest college-football stadium.
Just prior to our Operation Broken Trust post — in Post No. 999 — we reported that the AdPayDaily autosurf, which has promoters and members in common with both AdSurfDaily and AdViewGlobal, was showing signs of collapse. Flash forward to Post No. 1,002: In this post, we reported that a New York Internet Marketer had been arrested by the U.S. Postal Inspection Service for cyberstalking.
Vitaly Borker apparently believed it prudent to use the Internet to threaten to rape women who had received what investigators described as bogus and inferior-quality goods from him. A fair reading of the complaint against Borker shows that he used the same type of gutter language directed at Napolitano on YouTube — you know, for her apparent High Crime of asking Walmart shoppers to be aware of their surroundings in the Age of Terrorism.
We next reported on a 54-year prison sentence handed down to a former Indiana pastor who duped Christian investors in a Ponzi scheme. After that, we reported that a company that once did business with Steve Renner’s Cash Cards International had been implicated in a massive Forex scheme that affected at least 800 investors.
Renner was the operator of the INetGlobal autosurf, which the U.S. Secret Service said in February was operating a Ponzi scheme affecting thousands of people, including victims of Chinese descent who may have limited ability to understand English. The Secret Service said an undercover agent had been introduced to INetGlobal by an AdSurfDaily member.
On Dec. 8, we reported that a Maryland man had been arrested after the FBI intercepted his plot to detonate a car bomb at a military-recruitment center. A similar plot had been unmasked by the FBI in Portand, Ore., on the day after Thanksgiving. It was aimed at a Christmas tree lighting ceremony, meaning it was aimed at children and families.
Here is one way to look at the alleged Thanksgiving plot: The arrest was announced on Nov. 26. By Dec. 6, crackpots were flooding YouTube with paint-peeling comments about Napolitano and the terrorism-awareness campaign. Two days after that, on Dec. 8, a man was arrested in the Maryland plot. He allegedly also talked about blowing up Andrews Air Force Base, which happens to be the home base of Air Force One, which happens to be the aircraft used by the President of the United States.
We haven’t even written about Wikileaks and the arrest in Britian of Julian Assange. Wikileaks’ sympathizers reacted by bringing DDoS attacks, apparently based on the belief that the best way to show support for Assange was to send out an army of bots to disrupt the websites of businesses that did not support Assange.
By week’s end, Prince Charles and Camilla, the Duchess of Cornwall, were surrounded by a mob unhappy about the skyrocketing costs of getting a college education in the United Kingdom. Civility, it seems, can be cast out the door in a country minute and replaced by the taunts of a mob.
Yesterday, as we again sought to commemorate our 1,000 post, word arrived about the apparent suicide of Bernard Madoff’s son on the second anniversary of his father’s arrest.
There is no doubt — none whatsoever — that Ponzi = Pain. There also is no doubt that the Internet has ushered in an era of unprecedented, mass-produced, viral crime. Criminals have been aided in their nefarious pursuits by crackpots who employ no editorial filters and simply create or repeat lies that institutionalize crime as an occupation and even celebrate it.
At the precise moment in time in which Americans and other citizens of the world could benefit most from serious words and serious research backing those words, some of the world’s great publishing companies are struggling to make ends meet. Print circulation is down. Journalists are losing jobs. Designers and salespeople are losing jobs.
The switch to electronic publishing platforms has been accompanied by piracy, wanton theft and trademark infringement that further erodes the value of words and intellectual property, undermines the economy and adds to concerns about national and international security. People, including well-intentioned people, simply copy-and-paste entire editorial wells from one site to another. The public becomes confused about the original source of material, which often is shoe-horned to fit a specific agenda.
Earlier this year, the PP Blog’s Breaking News graphic was stolen by a member of Data Network Affiliates (DNA), an MLM company that routinely targets promos at Christians and, among other things, has claimed it is helping the AMBER Alert program rescue abducted children. DNA now apparently has morphed into a company known as OWOW, which is asking members to suggest that a product known as TurboMune cures cancer.
This is not “freedom,” as the scammers would have you believe; it is theft and piracy on the high electronic seas, plain and simple. It also often is the case that this specific brand of theft also gets mixed with appeals to faith, meaning the scammers are seeking to pluck heartstrings and separate Believers from their money.
There simply is no way that any government or branch of government can be at all places at all times. Although it is fashionable to describe efforts to battle crime in the Age of the Internet and the Age of Terrorism as an effort by Big Brother to assign each individual citizen his or her own bureaucrat to bring commerce and freedom to a screeching halt, such opinions often are simple rants that lack any real-world context.
Within hours of the PP Blog’s publication of a story about the alleged Portland plot, the Blog was bizarrely assailed by an MLM aficionado for DNA/OWOW as a tool for Israel. Michael Chertoff, a former federal judge, federal prosecutor and DHS secretary, was described as a “suspect” in the 9/11 attacks, which the poster blamed on Israel while calling Chertoff an Israeli scum bag.
As noted above, when Janet Napolitano announced a simple partnership with Walmart to encourage citizens to be aware of their surroundings, she encountered vicious name-calling — and it all happened during the same week yet-another bombing plot was unmasked, the Task Force was noting that America’s largest stadiums were not large enough to accommodate recent victims of financial fraud, DDoS attacks were aimed at companies deemed by third parties to be unfriendly to Wikileaks and the future king of England and his wife were surrounded by an angry mob.
Even if one is willing to assume that Wikileaks seeks to serve a higher, noble purpose, directing DDoS attacks at businesses and government sites hardly helps Assange elicit sympathy or understanding. He lost an important round in the PR war last week, as did the unthinking crowd that assailed Napolitano and the mob that heckled Prince Charles and the Duchess.
The lionization of crackpots of all stripes is rapidly emerging as a dangerous, unintended consequence of the Internet — as are all the tortured claims that MLM products treat or cure cancer, create vast sums of wealth for ordinary participants and the tortured claim that appropriating the names of Walmart and Winfrey and Trump and Buffet and Clinton is just another word for freedom.
Far from promoting freedom, the crackpots and criminals are promoting anarchy. They do not seek to compete in either a free marketplace of commerce or a free marketplace of ideas. Rather, they seek to commit crimes on a global scale and to fill entire stadiums with victims — even as would-be terrorists speculate about throwing cocktail bombs into military-recruitment centers and shooting soldiers and staff as they flee the flames through the doors.
In Portland, meanwhile, the idea was to kill wide-eyed children contemplating the miracles of Christmas and Santa Claus with a fireball that also would consume their parents.
We conclude this 1,000 post commemoration with a simple thought: Death and taxes are not the only two certainties of life. It is equally certain that law enforcement needs the proactive participation of the public more than ever. It is one thing to direct reasonable criticism at agencies and public officials; it is quite another to cheer against the people who are responding to unprecedented security challenges while trying to make sure the stadiums fill up with football fans, not victims.
It has become kneejerk sport to deride Department of Homeland Security (DHS) Secretary Janet Napolitano as “Big Sis.”
Today the attacks on Napolitano turned even more caustic, with the announcement by both DHS and Walmart that Walmart had joined the DHS-operated “If You See Something, Say Something” campaign.
Walmart issued a news release today saying it was proud to become part of the campaign, linking its announcement to a 44-second DHS video that will begin playing in 588 Walmart stores across the United States in the coming weeks .
“Homeland security starts with hometown security, and each of us plays a critical role in keeping our country and communities safe,” said Napolitano. “I applaud Walmart for joining the ‘If You See Something, Say Something’ campaign. This partnership will help millions of shoppers across the nation identify and report indicators of terrorism, crime and other threats to law enforcement authorities.”
Snarky, vile comments were posted on the DHS YouTube site in response to the video — some of the sort that made the “Big Sis” slam seem almost like a compliment.
Walmart, though, is not alone in backing the campaign.
Other DHS partners in the campaign include Mall of America, the American Hotel & Lodging Association, Amtrak, the Washington Metropolitan Area Transit Authority, sports and general aviation industries and state and local fusion centers across the country.
Walmart’s announcement that it had joined the campaign occurs against the backdrop of a recent terrorist plot targeted at a community Christmas tree lighting ceremony in Portland, Ore. The plot, which was detected by the FBI, was scheduled to be carried out on “Black Friday.”
“Black Friday” is the day after Thanksgiving in the United States, and has become a day filled with heavy retail shopping and community events. The suspect in the foiled Portland attack allegedly told the FBI that the plot would be less apt to be detected because the city was not front-and-center on law enforcement’s antiterrorism radar screens.
“. . . it’s in Oregon; and Oregon, like, you know, nobody ever thinks about it,” the FBI quoted the Portland suspect as saying.
There also have been bizarre events this year in which Walmart’s name was appropriated by members of murky multilevel-marketing businesses. Members of MLM programs known as Narc That Car/Crowd Sourcing International and Data Network Affiliates/OWOW instructed prospects to take photos of the license plates of cars parked at Walmart and other large retail stores.
The plate numbers purportedly were to be entered into databases controlled by the MLM firms as a means of helping law enforcement and the AMBER Alert program rescue abducted children. No evidence has surfaced that either of the MLM firms has any tie to the AMBER Alert program, which is administered by the U.S. Department of Justice and the National Center for Missing and Exploited Children.
Meanwhile, bizarre promos for an MLM program known as MPB Today routinely used Walmart or its branding materials as backdrops for a purported program that suggested a one-time, $200 purchase from MPB Today could lead to free groceries for life.
In its news release announcing it had joined the “If You See Something, Say Something” campaign, Walmart urged customers to support the program, but did not say precisely why it had made the decison to become to first national retailer to partner with DHS.
UPDATED 5:31 P.M. EDT (U.S.A.) A company operated by a man found dead Tuesday in Florida from an apparent self-inflicted gunshot wound was scheduled to conduct a seminar for government workers July 2 at the Federal Law Enforcement Training Center (FLETC) in Glynco, Ga., according to the firm’s website.
FLETC is operated by the Department of Homeland Security and serves as an interagency law-enforcement training organization for 88 federal agencies.
Kenneth Wayne McLeod was 48 when he died Tuesday. The SEC said his Jacksonville company, Federal Employee Benefits Group Inc. (FEBG), was paid “up to” $15,000 by government agencies for seminars conducted by McLeod.
The SEC now says McLeod was operating a Ponzi scheme dating back to at least 1988. The scheme was alleged to have fetched “at least” $34 million, and the SEC’s top official in Miami said McLeod might have destroyed the savings of federal employees who entrusted him.
“The victims gave years of public service and McLeod stole their futures,” said Eric I. Bustillo, Director of the SEC Miami Regional Office.
In the early hours after the scheme was exposed, the extent of losses was unclear. What is clear is that FEBG used its website to boast about its federal contacts, while using what appeared to be clipart files to drive home the company’s message of “Professionalism, Experience, Integrity.”
What appears to be clipart of two businessmen holding briefcases and shaking hands in front of a globe appears on the website. An image of an attractive woman from an apparent clipart file also appears on the site, as do other elements of apparent clipart. The site appears to use other static elements associated with earlier web technology. The site also appears to use older technology in its contact form, which publishes live links to email addresses of employees.
Also on the site is a link to the U.S. Office of Personnel Management from which visitors can download forms. Another link on the site purports to link to the domain SEBG.US, but the site was throwing a server error at the time of this posting. Records suggest the SEBG site was live Wednesday, and that SEBG stands for State Employees Benefits Group. Archives show the SEBG site featured keywords such as “retirement system, florida retirement system, state retirement systems, public employees, state employees, municipal employees, law enforcement, police officers, sheriff s office, benefits analysis, financial planning” and more.
For its part, the FEBG site touted trust.
“Through dedication and commitment to our core values of Professionalism, Experience and Integrity, FEBG holds all associates and subsidiaries responsible to vigilance, service and honor for each of our clients’ individual needs and planning strategies,” the company proclaimed on the website.
“It is our mission to educate and maximize the financial well being of all Federal employees,” the company said. “Contact us to discuss scheduling a training workshop or speak with one of our leading financial planners.”
The website also published a schedule of its seminars. If the schedule is accurate, FEBG completed a seminar for U.S. Immigration and Custom Enforcement (ICE) at the FLETC facility in Georgia June 8 — 14 days prior to McLeod’s death. Another ICE seminar is listed for July 2 at the same FLETC facility.
Seminars for the Federal Air Marshals Service (FAMS) were scheduled July 7-9 in Miami. Dual seminars were scheduled for July 21 — one at the Georgia FLETC facility for ICE, and another in San Antonio for “SSA – OIG,” which stands for Social Security Administration, Office of the Inspector General.
Seminar schedules dating back to 2006 appear on the site, featuring names such as the FBI, WIFLE (Women in Federal Law Enforcement), the DEA, the IRS, the U.S. Census Bureau, USSS (United States Secret Service), the U.S. Forest Service, USPS (United States Postal Service), ATF (the Bureau of Alcohol, Tobacco, Firearms and Explosives), NAADHS (National Association of African-Americans in the Department of Homeland Security, US Bankruptcy Court and US District Court, the Federal Public Defenders Office, the National Park Service, the US Fish & Wildlife Service, NABNA (National Association of Black Narcotics Agents), DCIS (Defense Criminal Investigative Service), NCIS (Naval Criminal Investigative Service) and others.
It was not immediately clear if members of each of the agencies or employee associations invested in the alleged scheme. Also unclear was the total exposure of investors to losses.
BULLETIN: In a blistering response to TelexFree’s bid to continue its business and move forward with its Chapter 11 bankruptcy case, the United States’ trustee said the embattled firm has not engaged “in full and fair disclosure.”
URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.
