BULLETIN: In an unprecedented move, the SEC today announced that it had suspended trading in 379 penny stocks, saying the companies were delinquent in filings and ripe for hijacking and scams involving reverse mergers and pump-and-dump schemes.
“The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures,” the agency said.
The previous one-day record for trading suspensions was 35. That mark was set in 2005, but the SEC now says “enhanced intelligence technology” has enabled it to spot dormant companies more effectively and head off trouble at the pass.
“Empty shell companies are to stock manipulators and pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors.”
Regulators such as the SEC and FTC and agencies such as the FBI long have fretted about the use of shell companies to pull off fraud schemes, dupe investors, customers and vendors and conceal crimes and civil offenses.
“It’s critical to assess risks to investors in the capital markets and, through strategic planning, develop ways to neutralize them,” said Thomas Sporkin, director of the SEC’s Office of Market Intelligence. “We were able to conduct a detailed review of the microcap issuers quoted in the over-the-counter market and cull out these high-risk shell companies.”
As part of an initiative dubbed “Operation Shell-Expel” undertaken by the SEC’s Microcap Fraud Working Group, the trading suspensions announced today affect “clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud,” the agency said.
“The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors,” the SEC said. “But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.”
From pleadings by Christian Oesch in a lawsuit filed against him in Utah by Fannie Mae. (Redaction/emphasis by PP Blog.)
EDITOR’S NOTE: In July 2010, Christian Oesch of Utah, and Kenneth Wayne Leaming of Spanaway, Wash., sought to sue the United States — apparently for the staggering sum of more than $29 trillion — for its actions in the AdSurfDaily Ponzi forfeiture case brought by the U.S. Secret Service in August 2008. The Secret Service described ASD as a “criminal enterprise” operated by Andy Bowdoin, a 77-year-old recidivist con man.
ASD had gathered at least $110 million from tiny Quincy, Fla., by offering outsize investment returns of 1 percent a day, the Secret Service alleged. It has been known since the earliest months of the ASD case that the business had ties to so-called “sovereign citizens.”
One of the calling cards of the “sovereign citizen movement” is what has been described as “paper terrorism”: an effort to clog the courts with baseless or vexatious litigation and legal pleadings designed to tie the hands of public servants and/or courtroom opponents
Leaming, a 56-year-old purported “sovereign citizen,” was arrested by an FBI terrorism task force in November 2011 on charges of filing false liens against at least five public officials involved in the ASD case. A superseding indictment was returned against Leaming earlier this year. He remains jailed at a federal detention facility near Seattle. A September trial date for Leaming has been set in federal court in Washington state, the venue from which he allegedly filed the false liens and committed other crimes such as harboring fugitives and possessing firearms as a convicted felon.
Judge Christine Odell Cook Miller of the U.S. Court of Federal Claims ultimately dismissed the lawsuit brought by Oesch and Leaming, saying in December 2010 that the “complaint deteriorates into rambling.” Earlier — in July 2009 — Oesch had sought to intervene in the ASD case and set aside the forfeiture of tens of millions of dollars in the personal bank accounts of Andy Bowdoin. Like Leaming, Bowdoin is scheduled to go on trial in September. Bowdoin’s trial will be conducted in the District of Columbia.
Oesch, known to have business ties to Leaming, has not been accused of wrongdoing in the ASD case.
U.S. District Judge Rosemary Collyer of the District of Columbia — later allegedly targeted by Leaming with false liens — denied standing to Oesch and numerous other pro se litigants in the ASD case.
The ASD case has been marked by strangeness, including pro se court filings that accused Collyer of treason and operating a “Kangaroo Court.” Oesch accused Collyer of interfering with commerce, arguing that the judge and federal prosecutors also were guilty of “Anti-Trust Violations” and “Criminal RICO” violations.
That same type of language now is being used by Oesch in his responses to a January 2012 lawsuit in Utah in which he was named a defendant by mortgage giant Fannie Mae . . .
Using the same street address in Midvale, Utah, that appears in court filings in the civil-forfeiture portion of the AdSurfDaily Ponzi case, ASD figure Christian Oesch curiously declared himself a “Fiction & Transmitting Utility” in his response to a lawsuit in which he was named a defendant by the Federal National Mortgage Association, the PP Blog has learned.
The U.S. mortgage giant commonly known as Fannie Mae initially sued Oesch, Becky Oesch, Michael A. King and two alleged “Doe” occupants of a home on South Wayside Drive in Sandy, Utah, in January 2012. The complaint was removed to federal court in Salt Lake City in February, but now has been kicked back to Utah state court, according to court dockets.
Oesch, who once claimed that U.S. District Judge Rosemary Collyer and other public officials involved in the ASD case were guilty of racketeering and antitrust violations, now has essentially accused Fannie Mae of the same thing.
“Securitization is illegal under US legislation — primarily because it is fraudulent and causes specific violations of R.I.C.O., usury, Antitrust and bankruptcy laws,” Oesch argued.
At issue in the case is a dispute over the ownership of the Sandy home. King was listed as the owner of the home in a September 2011 notice of trustee’s sale for the property. Fannie Mae said in court filings that it purchased the home at the September trustee’s sale and that “Defendants have failed to vacate and yield possession of the Subject Property” and hold it in “unlawful detainer.”
Oesch went on to argue that “US authorities from the highest level downwards, financial institutions, intermediaries, Intelligence Power operatives and others are gearing up for what they doubtless hope will be intensified racketeering and trading activity with (corrupt) foreign counterparties.
“This behavior is being fine-tuned ‘as we speak’ . . .” Oesch ventured.
He went on to advance a conspiracy theory that involved the “US Treasury, the White House, the US State Department and the Central Intelligence Agency and its subsidiaries such as the lethal Office of Naval Intelligence . . .”
ASD is not referenced in the Utah complaint against Oesch and the others. Filings suggest, however, that Oesch lived at one time in the Sandy house that is the center of the case. Fannie Mae is seeking treble damages for an alleged failure of the defendants to vacate the property when requested.
EDITOR’S NOTE: If you’re keeping a “Bubba Blue” notebook on how to have your Ponzi scheme, this alleged caper in Greater Philadelphia involving prepaid phone cards and purported ties to major retailers perhaps merits an entry . . .
A 42-year-old Pennsylvania man has been charged in an alleged “prepaid phone cards” Ponzi scheme that operated for more than five years and bilked more than 200 investors out of more than $2 million.
Istvan Merchenthaler of Downingtown was indicted on four counts of wire fraud, one count of aggravated identity theft and two counts of money laundering, the office of U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania said.
Merchenthaler also is known as Steve Merchenthaler, prosecutor said, alleging that the scheme operated “at least” between May 2006 and September 2011.
The long-running scam involved a business known as PhoneCard USA of which Merchenthaler claimed to be the founder, prosecutors said.
They described the scheme as one that duped investors by trading on fancy terms such as “exponential growth,” defining the market as a wide geographic expanse and fabricating ties to famous businesses to keep the Ponzi wheel greased.
Merchenthaler positioned PhoneCard USA as a “premier distribution source” for phone cards and cell phones, claiming to have contracts with Walmart, 7-Eleven and BJ’s Wholesale Club, prosecutors said.
It is common for scammers to purport to have ties to famous business entities — and that proved to be the case with Merchenthaler and his PhoneCard USA pitch, prosecutors said.
“In reality, Merchenthaler had no such contracts with these major retail chain stores,” prosecutors said.
Investors were drawn into the Ponzi morass in part through claims that the firm’s “lucrative contracts” with vendors covered “territories that span the east coast,” prosecutors said.
“Merchenthaler claimed that these investments would finance the ‘exponential growth’ of PhoneCard USA and would provide investors with ‘generous returns’ on their investments,” prosecutors said.
An investigation demonstrated that “Merchenthaler operated a ‘Ponzi’ scheme, stealing over $2 million from over 200 investors and using much of these funds for his own benefit and to perpetuate his scheme,” prosecutors said.
This cash came from the Trevor Cook Ponzi scheme and was stashed, according to filings in the civil case against Cook. Cook is serving a 25-year-sentence in federal prison. Photo source: Court records.
EDITOR’S NOTE: As America’s fraud plague continues, some of the scammers are polluting the free market with incongruous and even bizarre schemes — even as they purport to represent the best that freedom offers.
The PP Blog highly recommends that readers check out this September 2011 document from the SEC that warns about scammers targeting holders of self-directed IRAs. Reading the document may help improve your understanding of the story below. There are differences between IRAs (emphasis added below):
“An Individual Retirement Account (IRA) is a form of retirement account that provides investors with certain tax benefits for retirement savings,” the SEC says. “Some common examples of IRAs used by investors include the traditional IRA, Roth IRA, Simplified Employee Pension (SEP) IRA, and Savings Incentive Match Plan for Employees (SIMPLE) IRA. All IRA accounts are held for investors by custodians or trustees. These may include banks, trust companies, or any other entity approved by the Internal Revenue Service (IRS) to act as a trustee or custodian.
“A self-directed IRA is an IRA held by a trustee or custodian thatpermits investment in a broader set of assets than is permitted by most IRA custodians,” the SEC continues. “Most IRA custodians are banks and broker-dealers that limit the holdings in IRA accounts to firm-approved stocks, bonds, mutual funds and CDs.
“Custodians and trustees for self-directed IRAs, however, may allow investors to invest retirement funds in other types of assets such as real estate, promissory notes, tax lien certificates, and private placement securities.While self-directed IRAs may offer investors access to an array of private investment opportunities that are not available through other IRA providers, investments in these kinds of assets may have unique risks that investors should consider. Those risks can include a lack of disclosure and liquidity — as well as the risk of fraud.”
Here, now, a story about how holders of self-directed IRAs allegedly had their pockets picked . . .
Meanwhile, there’s William Wise, a onetime international fugitive charged in California with a massive Ponzi scheme centering on offshore CDs. (Wise surrendered earlier this week.) And then there’s Robert Stinson Jr., the Pennsylvania Ponzi swindler now doing more than 33 years for his “Life’s Good” scam. (The FBI said he was wiring money even as a raid was under way.)
And who could forget Californian Daniel C.S. Powell, implicated by the SEC in a life-settlement scam? (The venture became known as “Christian Stanley,” and its website traded on the name of former President Bill Clinton.)
Then there’s Chris Cornett, implicated by the CFTC in a Forex swindle.
Here’s why these names are important: All of these individuals — and more — are listed as scammers or alleged scammers in a proposed class-action lawsuit against Ephren W. Taylor II, now implicated by the SEC in a massive Ponzi swindle known as “City Capital.” The alleged City Capital targets were people of faith.
Though not defendants in the Taylor/City Capital lawsuit, the other alleged (or proven) scammers all had something in common beyond their abilities to separate people from their money, according to the complaint: complicit bankers and/or a means of plowing customers’ money from self-directed IRAs (SDIRAs) into their fraud schemes.
SDIRAs are sold as freedom-celebrating devices that encourage personal responsibility and permit their holders to be more flexible in their investment choices. By law, the accounts are held by a custodian or trustee. Even so, sharks allegedly swim in these waters — and the worst of the worst may deny they have any duties to their customers and may be turning a blind eye to fraud schemes as a means of keeping a fee-generating, steady supply of fresh meat and blood in the water.
“I am encouraging our plaintiffs to raise their voices and to make their legislators and regulators aware of how Ponzi schemes continue to be perpetrated through the use of self-directed IRA investment vehicles,” said Cathy Lerman of Cathy Jackson Lerman PA, one of the firms involved the prospective class action.
Other attorney/firms involved in the litigation include California local trial counsel David Dorenfeld of Snyder Dorenfeld LLP; Michael W. Brown, an associate at Snyder Dorenfeld; and Jim Gitkin, principal of Salpeter Gitken LLP.
Among the defendants named in the Taylor class action are Bank of America; Missouri Bank and Trust of Kansas City; Equity Trust Corp. of Ohio (an SDIRA provider); Entrust New Direction IRA Inc. of Colorado; The Entrust Group of California (an SDIRA provider); Entrust Administration Inc. of California; and Sunwest Trust Inc. of New Mexico. Other defendants also are named, and there is an allegation that Taylor used as many as 50 shell companies as part of his long-running fraud.
A separate proposed class action has been filed against SDIRA providers named in the Taylor class action. That lawsuit alleges that as much as $94 billion may be tied up in SDIRAs nationwide, suggesting that fresh meat and blood could churn in the waters indefinitely.
In effect, the lawyers are arguing that SDIRAs, which are lightly regulated or not regulated at all, have become the tools of criminals and are being used to separate investors from their money in one scam after another. Unlike traditional IRAs, SDIRA vessels may end up steering vast sums of cash into “opportunities” that not only may be exceptionally risky, but also may be downright crazy — such as Taylor’s purported “sweeps machines.”
The Taylor lawsuit, for instance, argues that African American Christians effectively found themselves owning machines used in illegal gambling parlors and that churches that had invited Taylor to speak also got swept into incongruous schemes.
Liberty City Church of Christ in Miami lost $100,000, owing to Taylor’s scams, the lawsuit contends. William Lee of Raleigh, N.C., got duped of $160,000 because Taylor and associates caused him to believe he was making a “socially conscious” investment that would help the public at large while at once resulting in an individual profit.
The same thing happened to Gennet Thompson of Delray Beach, Fla. Thompson entrusted $17,200 to Taylor in one “opportunity” and $10,500 in another, according to the complaint.
Trudy Morgan of Lithonia, Ga, had a similar experience — one that sucked away $30,000, according to the complaint.
The onetime commander of the California National Guard base in Los Alamitos has pleaded guilty to mail fraud in a Ponzi scheme that defrauded 28 investors of $2.7 million, federal prosecutors said.
Ret. Col. Timothy Melvin Murphy, 70, of Orange, ran his investment scam through an entity known as Capital Investors Inc., also of Orange, the office of U.S. Attorney André Birotte Jr. of the Central District of California said.
In pleading guilty yesterday, Murphy admitted that he made materially false promises to clients, offered fraudulent investment opportunities to certain of his clients, and that he created and used a variety of false documents to execute the scheme,” prosecutors said.
The FBI investigated the case.
As the probe unfolded, investigators discovered that Murphy sometimes offered “guaranteed” returns, misdirected investors’ money and “created false account statements to mislead his clients into thinking that their money was properly invested and generating the promised income.”
But the former officer “did not use the clients’ investment funds as he promised he would — an investors got plucked for $2.7 million, prosecutors said.
Sentencing before U.S. District Judge David O. Carter is preliminarily set for June 25. Murphy faces up to 20 years in federal prison, a substantial fine, a restitution order and supervised probation after getting out of jail, prosecutors said.
Murphy now joins a growing list of convicted or accused Ponzi schemers in their senior years.
In Rhode Island yesterday, Martin B. Feibish, 81, of Providence, pleaded guilty to mail fraud in an alleged Ponzi swindle that lasted 10 years and plucked $5 million from a single victim.
The Orange County Register is reporting that prosecutors believe Murphy’s scam in California began as early as 2001.
Federal prosecutors in Rhode Island said the Feibish scheme also dated back to 2001.
BULLETIN: (UPDATED 4:14 P.M. EDT U.S.A. APRIL 14) The CFTC has gone to federal court in Idaho, alleging that Brad Lee Demuzio of Chubbuck was running a Forex Ponzi scheme that tanked.
Unable to make payouts, Demuzio “fabricated a letter purporting to be from the CFTC and bearing the fraudulently copied signature of a CFTC officer, which falsely represented that the company’s funds had been frozen in connection with a purported CFTC investigation,” the CFTC charged.
But Demuzio didn’t stop there, the agency charged.
“The complaint also alleges that Demuzio subsequently fabricated a second letter fraudulently providing an update as to the status of the purported investigation as well as a third document purporting to be a dismissal of the investigation and bearing the fraudulently copied signature of an Administrative Law Judge,” the agency charged.
Meanwhile, the CFTC alleged, the official seal of the Commission was used in the bid to cover up the fraud and Demuzio “attempted to pass these documents off to investors as official Commission documents.”
Chubbuck now has been indicted on five counts of wire fraud, the CFTC said, noting that the FBI was involved in the probe.
“On or about January 13, 2012, Demuzio confessed to an agent of the Federal Bureau of Investigation that he had knowingly made false statements to investors and fabricated Commission documents,” the CFTC said.
The scheme, which operated through an entity known as Demuzio Capital Management (DCM) and netted $1.8 million, began to unravel during the summer of 2011, when certain investors told Demuzio they wanted their capital outlays and purported profits back, the CFTC said.
Checks were issued to investors in August 2011, but the checks bounced, the CFTC said.
By Aug. 5, Demuzio said he could not pay because “the Commission had frozen DCM’s funds in the course of an investigation,” the agency said.
As part of the scheme, Demuzio manufactured a document addressed to himself, with a CFTC official as the purported sender.
This document falsely stated in part that “the CFTC has opened an investigation into your activities. This investigation requires the temporary freezing of your current assets. The investigation along with the freezing of your assets is intended to be temporary.”
By October, the CFTC alleged, Demuzio had manufactured another letter to himself that purportedly had originated at the agency, thanked him for his cooperation and suggested that a decision would be forthcoming.
Among other things, the bogus October letter asserted that “This letter is being sent to express our appreciation to you for your cooperation during the investigation . . . We are also writing to confirm to you that a letter of resolution will be sent to you no later than Friday October 14, 2011.”
By Oct. 11, a third bogus document surfaced. This one was styled “Order of Dismissal” and purported “to have been signed by a Commission Administrative Law Judge,” the agency said.
This document, the CFTC alleged, included this false statement:
“At the parties’ request, the complaint is DISMISSED with prejudice and this proceeding is TERMINATED in its entirety. IT IS SO ORDERED.”
Demuzio confessed to the FBI in a signed statement, the CFTC said.
“The first and most important mistake that I have made has been to lie to each of these individuals, all of whom are close friends and family,” the confession read in part, according to the CFTC. “I have lied to them about the money we made and how we made it.”
And Demuzio further confessed in his statement that he had “engaged in a series of lies that culminated in my making letter [sic] from the cftc showing that I could not return their money because of an investigation,” the CFTC said.
URGENT >> BULLETIN >> MOVING:Robert Stinson Jr., the Philadelphia-area Ponzi schemer who was wiring stolen funds from one account to another even as the FBI was conducting a raid in 2010, has been sentenced to 400 months in federal prison. The term amounts to more than 33 years.
Stinson, a 57-year-old securities huckster and recidivist felon whose criminal record dates back at least to 1986, defrauded more than 260 investors out of more than $17 million in his most recent scam, federal prosecutors said.
The scam operated through an entity known as Life’s Good Inc. and featured false claims that Stinson was a graduate of the Massachusetts Institute of Technology and a fabulously successful businessman.
In reality, he was a serial huckster who’d twice filed for bankruptcy and was enjoined in a 1990 SEC case from breaking federal securities laws.
At 12:06 p.m. on June 29, 2010 — the date of the raid and while federal agents were executing search warrants and seizing two Mercedes Benz sedans Stinson had purchased with money stolen from investors — Stinson began a series of wire transactions in which he moved at least $225,000 to prevent the cash from being seized, according to the indictment.
Two of the transactions occurred during the same minute and involved two separate banks, according to the indictment.
Stinson’s wife, Susan L. Stinson, is scheduled to be sentenced tomorrow on charges of obstructing the SEC’s 2010 investigation into her husband.
U.S. District Judge Michael M. Baylson of the Eastern District of Pennsylvania presided over Robert Stinson’s sentencing today. In addition to ordering Stinson jailed for decades, Baylson ordered restitution of $14 million and three years’ supervised release when Stinson leaves jail.
Stinson will be close to the age of 90 if he survives the term of incarceration.
The Philadelphia Daily News is reporting tonight that Stinson told the judge today that he’d “changed” while awaiting sentencing and had dedicated his life to serving God.
Fort Lauderdale lawyer Steven N. Lippman conspired with now-disbarred attorney, convicted racketeer and Ponzi schemer Scott Rothstein to prop up the Rothstein, Rosenfeldt and Adler (RRA) law firm through electioneering, check-kiting and tax scams, federal prosecutors charged yesterday.
A 70-attorney firm that employed about 150 staff members, RRA collapsed in the wake of Rothstein’s epic Ponzi caper, which operated from the disgraced firm and was exposed in 2009. The Miami region’s top federal prosecutor yesterday described the scheme as “mind-boggling.”
“The breadth, scope, and sheer complexity of Rothstein’s $1.2 billion Ponzi scheme is mind-boggling,” said U.S. Attorney Wifredo A. Ferrer. “Its success depended, in no small part, on the complicity of his colleagues and associates, like Steven Lippman. Lippman, an attorney, is now the ninth person to face criminal charges in connection with this scheme. As this investigation continues, I am sure that more will follow.”
Lippman, 49, of Plantation, now has been charged criminally with conspiracy to violate the Federal Election Campaign Act, to defraud a financial institution and to defraud the United States.
The Alleged Electioneering Scam
It was the desire of Rothstein and others to “dramatically increase the stature and political power of RRA on the federal, state, and local level by making substantial political contributions to political candidates,” prosecutors said.
In line with that, Rothstein enlisted Lippman and others to donate to the 2008 U.S. Presidential campaign of Sen. John McCain “by agreeing that RRA unlawfully would provide them with the funds to make the political contributions,” prosecutors said.
In one instance, prosecutors said, Lippman made a $67,800 contribution to McCain-Palin Victory 2008 — and received $77,500 back from RRA.
Then- Alaska Gov. Sarah Palin was McCain’s Vice Presidential running mate on the Republican ticket in 2008. Neither she nor McCain has been accused of wrongdoing.
But Rothstein, through RRA, was interested in elevating his profile and improving his influence with politicians and political campaigns, prosecutors said.
The RRA check Lippman received “was fraudulently backdated to reflect that it was issued six days prior to the date of the actual contribution and the memo section of the check stated ‘bonus,” prosecutors said.
Various donations to GOP causes were “bundled” through the RRA firm — and Rothstein emerged a delegate to the 2008 Republican National Convention. Rothstein, in the midst of operating a colossal Ponzi caper, also was appointed to Florida’s 4th District Judicial Nominating Committee, which has sway “as to which persons should be nominated to be state appellate judges,” prosecutors charged.
The Alleged Check-Kiting Scam
With the RRA facing financial pressures in 2006, prosecutors said, Rothstein enlisted Lippman into a check-kiting scheme that involved an account at Lippman’s former law firm. The account at the former firm remained opened because the firm was still winding down its business when Lippman joined RRA in 2005.
Over time, prosecutors charged, Lippman issued checks from the former firm totaling more than $10.3 million. Those checks — “many” of which were written with insufficient funds in the account — were deposited into RRA accounts.
Rothstein and Lippman played the “float” on the checks to prop up the RRA firm and to “unlawfully obtain beneficial financing for RRA” by making it appear as though RRA had higher bank balances.
As was the case with the political donations, Lippman came out ahead by playing ball with Rothstein in the check-kiting scheme, according to the charging document. Although checks from the former Lippman firm routed through RRA totaled more then $10.3 million, Lippman deposited checks from RRA accounts totaling more than $10.6 million into the account of the former firm.
The Alleged Tax Scam
Lippman, prosecutors said, “defrauded the IRS by failing to report as income certain expense reimbursements and other reportable income he received from RRA.
The tax scam, prosecutors said, featured an agreement between Rothstein and Lippman that “Lippman would be paid a base salary and be given an expense account for which he would be fraudulently reimbursed for personal expenditures disguised as deductible business expenses”
Through the conspiracy, prosecutors charged, Lippman and RRA sought to “avoid paying additional federal income and employment taxes.”
“In addition,” prosecutors charged, “Lippman was paid from both the operating account and the payroll account of RRA, but would only receive an IRS Form W-2 reflecting the moneys paid to him through the payroll account. Lippman would not report to the Internal Revenue Service the moneys paid to him by RRA for expenses.”
“The charges against Steven Lippman show our resolve to unravel all the schemes in this complex financial fraud perpetrated by convicted Ponzi schemer Scott Rothstein and his co-conspirators,” said John V. Gillies, special agent in charge of the FBI’s Miami Office.
The probe in ongoing, Gillies said.
“It is disappointing that the number of people who chose wrong over right and participated with Rothstein in this massive fraud is at nine and rising,” he said.
The investigative efforts of the IRS are being led by José A. Gonzalez, special agent in charge of the IRS-Criminal Investigation Unit in Miami.
Gregory Bartko, the Atlanta attorney and securities swindler, has been sentenced to 23 years in federal prison after being convicted of fraud in North Carolina.
“Gregory Bartko targeted church members and made empty promises for big investment returns,” said Chris Briese, special agent in charge of the Charlotte Division of the FBI. “The FBI and our federal partners dismantled his fraud ring and we will keep pursuing con men who put their own greed above the law.”
Added Keith Fixel, U.S. postal inspector in charge of the Charlotte Division, “Cases like this are particularly devastating because people, like Gregory Bartko, try to hide behind their professional credentials while using them to gain the trust of their victims. Investors should remain vigilant and verify all information for a potential investment, especially if there are claims of outperforming the market.”
Bartko’s victims were “everyday hardworking people,” said Jeannine A. Hammett, special agent in charge of the IRS Criminal Investigations Unit. “That makes his crimes even more horrible. It is despicable that Mr. Bartko violated his position of trust for his own personal gain.”
Eric Aronson, the accused New York scammer and convicted felon originally arrested in October 2011 in an alleged Ponzi scheme, now has been formally indicted, federal prosecutors in the Eastern District of New York said.
Charged along with Aronson with conspiracy, securities fraud and money laundering were Vincent Buonauro and Fredric Aaron. Aaron is an attorney from Port Washington, N.Y. In a related civil action by the SEC in October 2011, his age was listed as 47.
In the same civil complaint last year, the SEC listed Aronson’s age as 43. He is a resident of Syosset, N.Y., according to SEC filings. Buonauro was described in the same October 2011 SEC complaint as a 40-year-old resident of West Islip, N.Y.
The men allegedly were principals in Permapave Industries and Permapave USA, which the SEC described as a $26 million Ponzi scheme involving paving stones purportedly imported from Australia.
“The defendants are alleged to have misled investors and, in paying some of them with proceeds from others, engaged in a Ponzi scheme to conceal how flimsy the investment was,” said Janice K. Fedarcyk, assistant director-in-charge of the FBI’s New York Field Office.
‘House Of Cards’
“The defendants allegedly abused the trust placed in them by their investors by lying and stealing the investors’ money,” U.S. Attorney Loretta E. Lynch said. “They promised a sound investment in a quality product, but instead shuttled the investors from one deceptive securities offering to another in an attempt to maintain their house of cards.”
Aronson is a convicted felon who used proceeds from the Permapave scheme to pay restitution to victims of a scheme to which “he pleaded guilty to conducting in 2000? and was sentenced to 40 months in prison, the SEC said last year.
BULLETIN:Stewart David Nozette, the Maryland man with a PhD from the Massachusetts Institute of Technology and a “Top Secret” security clearance, has been sentenced to 13 years in federal prison on charges of tax fraud and attempted espionage.
The espionage case was brought by the FBI after Nozette — believing he’d been recruited by Israel’s Mossad to spy on the United States — accepted $10,000 left by the FBI in an undercover sting. In effect, Nozette sold out his country for the price of a used car and the expectation that more cash would be forthcoming.
Nozette already was under investigation for tax evasion and financial fraud against the United States when he was arrested in the 2009 sting.
“Stewart Nozette’s greed exceeded his loyalty to our country” said U.S. Attorney Ronald C. Machen Jr. of the District of Columbia. “He wasted his talent and ruined his reputation by agreeing to sell national secrets to someone he believed was a foreign agent. His time in prison will provide him ample opportunity to reflect on his decision to betray the United States.”
The case was notable for reasons other than Nozette’s bid to sell out his country. Indeed, elements of the case were prosecuted by Machen’s office — an office familiar to readers of the PP Blog because it brought the AdSurfDaily Ponzi scheme case (under then-U.S. Attorney Jeffrey A. Taylor) in 2008 and supervised the return in 2011 and 2012 of more than $59 million (under Machen) to defrauded ASD investors.
Michael K. Atkinson, the assistant U.S. Attorney who led the Nozette tax and fraud prosecutions, once was assigned to the ASD case.
Nozette “betrayed his country and the trust that was placed in him by attempting to sell some of America’s most closely-guarded secrets for profit,” said Assistant Attorney General Lisa Monaco.
Monaco is from the Justice Department’s National Security division. She joined Machen in making the announcement about Nozette’s sentence, along with Principal Deputy Assistant Attorney General John A. DiCicco of the Tax Division.
Also joining in the the announcement were James W. McJunkin, assistant director in charge of the FBI’s Washington Field Office; Paul K. Martin, inspector general for the National Aeronautics and Space Administration (NASA OIG); Eric Hylton, acting special agent in charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI); and John Wagner, special agent in charge of the Washington, D.C., Office of the Naval Criminal Investigative Service (NCIS).
“Federal agents take an oath to protect our nation ‘against all enemies, foreign and domestic,” said Wagner. “That would include ‘insider threats’ like Stewart Nozette.”
Nozette, 54, parlayed his impressive academic credentials and MIT doctorate in planetary science into a career in which he conducted business with the U.S. government. He worked at the White House, for example, on the National Space Council through the Executive Office of the President of the United States.
Prosecutors said he also worked as a physicist for the U.S. Department of Energy’s Lawrence Livermore National Laboratory, and also had access to the U.S. Naval Research Laboratory (NRL) in Washington, D.C., the Defense Advanced Research Projects Agency (DARPA) in Arlington, Va., and NASA’s Goddard Space Flight Center in Greenbelt, Md.
“We are particularly proud that NASA OIG’s fraud investigation of Nozette, which began in 2006, served as the catalyst for further investigation and today’s outcome,” said Martin, NASA’s inspector general.
The indictment did not allege that the government of Israel or anyone acting on its behalf committed any offense under U.S. laws in this case, prosecutors said.
BULLETIN: In an unprecedented move, the SEC today announced that it had suspended trading in 379 penny stocks, saying the companies were delinquent in filings and ripe for hijacking and scams involving reverse mergers and pump-and-dump schemes.
