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Tag: FBI

  • PONZI NEWS/NOTES: Judge Says Matthew Pizzolato ‘Swindled The Salt Of The Earth’; Feds Allege New Scheme In New York; Henri Zogaib Arrested Again In Florida

    EDITOR’S NOTE: The briefs below summarize recent developments in Ponzi cases or actions in new Ponzi cases.

    Sentenced: Matthew B. Pizzolato, 26, Tickfaw, La. Ripped off senior citizens in Ponzi scheme.

    In sentencing Pizzolato to 30 years in federal prison, U. S. District Judge Lance M. Africk said Pizzolato “stole from hard working Americans” and “swindled the salt of the earth,” prosecutors noted.

    “[B]ecause of you,” the judge noted, “many must find ways to pay for their daily bread.”

    Prosecutors called the 30-year sentence “powerful.”

    “[The] powerful 30-year federal prison sentence handed down by U. S. District [Judge] Africk against convicted swindler Matthew Pizzolato will hopefully serve as a stark deterrent to those calculating predators who, like Pizzolato, may seek to prey on the trust and innocence of hard working citizens,” said U.S. Attorney Jim Letten. “The human wreckage of broken lives, dreams, and peace of mind — as well as stolen life savings — is shockingly evident in this case and in the tragedies of the victims whom Pizzolato hunted. Our hope is that these decent, trusting victims can begin to find some sense of justice and peace knowing that this criminal will not steal again.”

    A veteran FBI agent said members of the public would serve themselves well by imagining how a Ponzi scheme aimed at senior citizens could cripple entire families.

    “Mr. Pizzolato targeted senior citizens for his own gain,” said David Welker, FBI special agent in charge. “Personalizing this — what if it was your own mother, father or grandparent? Mr. Pizzolato’s actions were reprehensible and his punishment reflects the seriousness of his crime.”

    The IRS is well-equipped to peel back layers of the Ponzi onion, a criminal investigator said.

    “Special Agents of IRS Criminal Investigation are highly trained investigators who specialize in financial crimes of greed,” said Michael J. De Palma, special agent in charge of the IRS Criminal Investigation Unit. “We are committed in our efforts and will continue to work with our Law Enforcement partners and the United States Attorney’s Office to pursue evidence of criminal activity wherever it leads.”

    Postal inspectors have prioritized the investigation of crimes against senior citizens, an official said.

    “Frauds against the elderly are a priority for the Postal Inspection Service and we will continue to work closely with our partners to aggressively investigate these types of crimes,” said Keith E. Milke, U. S. postal inspector in charge.

    Accused: Laurence M. Brown, a certified public accountant in Armonk, N.Y. Brown was arrested on allegations of securities fraud, wire fraud and money-laundering. Prosecutors said he fleeced investors in a $2 million Ponzi scheme involving a purported gas pipeline in Tennessee. Brown was sued separately by the SEC.

    One need not pull off a Bernard Madoff-sized fraud to get the attention of the Feds, a top prosecutor said.

    “Laurence Brown allegedly concocted a scheme that fleeced clients and fattened his own wallet,” said U.S. Attorney Preet Bharara. “[The] charges show that you do not have to be a billion-dollar Ponzi schemer to get our attention. We are committed to rooting out financial fraud wherever it may hide.”

    Investors were duped into putting money into a company known as Infinity Reserves-
    Tennessee Inc. The SEC also charged Ronald J. Mangini in its civil case, saying he and Brown fraudulently sold securities and misappropriated the money for their own use. Mangini also is an accountant, the SEC said.

    “In fact,” the SEC said, “the securities Brown and Mangini sold were fictitious.

    “Infinity Reserves is the name of a company owned by one of their clients, and the company’s principal asset is a now defunct natural gas pipeline in Tennessee,” the agency continued. “Without the knowledge or authorization of the client, who is the sole shareholder of Infinity Reserves, Brown and Mangini have been falsely holding themselves out to investors as senior officers of Infinity Reserves with authority to sell the phony securities at issue.”

    Arrested: Former Grand Am racecar driver Henri Zogaib has been arrested again after making bail in the original case filed against him in Florida, WFTV reports.

    As the original Ponzi probe progressed, investigators discovered other victims, including NASCAR drivers, the station reported.

    Zogaib’s bail now has been upped to $2.2 million, and there may be other victims, the station reported. Bail on the original arrest was set at $100,000.

    Guilty plea: Donald Anthony Young, 38, of Palm Beach, Florida, has pleaded guilty to one count of mail fraud and one count of money laundering. Federal prosecutors charged him in a $25 million fraud scheme involving companies operating in Pennsylvania.

    “He solicited individuals to invest with him, claiming that their funds would be invested in the stocks of large stable companies,” prosecutors said. “Ultimately, Young obtained more than $95 million from his investors. Instead of investing all of these funds as promised, Young allegedly diverted more than $25 million of investor funds for his own use, purchasing, among other things, luxury homes for himself in Palm Beach, Florida, Coatesville, Pennsylvania, and Northeast Harbor, Maine.

    “When investors requested redemptions, Young was forced to liquidate other investors’ funds to make the pay outs,” prosecutors said.

    Young also tried to obstruct the SEC probe, prosecutors said.

    “When the United States Securities and Exchange Commission opened an investigation into Young’s business, Young attempted to obstruct the investigation by providing false and misleading information to the SEC and by refusing to provide the SEC documents, to which it was legally entitled.”

    Young used $1.9 million in funds stolen from investors “to purchase his luxury home in Palm Beach,” prosecutors said.

    In January, U.S. Attorney General Eric Holder ventured to the Palm Beach area, warning fraudsters they were writing their own tickets to jail.

    Young faces up to 30 years in prison when sentenced in October, prosecutors said.

  • GO FINRA! Regulator Tackles Online HYIPs; Issues Warning On ‘Social Media-Linked Ponzi Schemes’; References P2P, Genius Funds, ‘Con Artists’ And ‘Bizarre Substratum’ Of Internet

    EDITOR’S NOTE: It has become increasingly clear that regulators and the law-enforcement community are rallying around a common theme that web-based promoters are using discussion forums and social-networking sites in bids to sanitize HYIP Ponzi schemes by positioning them as attractive investment opportunities and even a thrilling form of gambling that pays commissions.

    Today the Financial Industry Regulatory Authority (FINRA) launched an awareness campaign aimed at taking the lipstick off financial pigs and exposing them for the economy-killing, filthy hogs they are. FINRA did not mince words, calling the HYIP universe a “bizarre substratum of the Internet.”

    Here, now, the story . . .

    The Financial Industry Regulatory Authority (FINRA) has launched a public-awareness campaign and issued an investor alert on HYIP schemes that use social-media sites such as YouTube, Twitter, Facebook and online forums and “rating” sites to spread Ponzi misery globally.

    “HYIPs are old-fashioned Ponzi schemes dressed up for a Web 2.0 world,” said John Gannon, FINRA’s senior vice president. “Some of these schemes encourage people to bring in new victims, while others entice investors to ‘ride the Ponzi’ by attempting to get in and get out before the scheme collapses.”

    FINRA is supplementing its educational campaign with an advertising campaign.

    “By using Google AdWords, we are hoping to reach anyone searching the Internet for HYIPs before they fall into the hands of con artists,” Gannon said.

    FINRA’s campaign occurs against the backdrop of remarkable law-enforcement actions against the alleged Legisi Ponzi scheme pushed by Matt Gagnon of Mazu.com, the alleged Pathway To Prosperity (P2P) Ponzi scheme pushed on forums such as ASA Monitor, MoneyMakerGroup, Talk Gold and MyCashForums, and the collapse of an HYIP known as Genius Funds.

    It also occurs against the backdrop of “prelaunch” buzz surrounding a mysterious program known as WebsiteTester.biz, which is spreading virally on the Internet through electronic news releases, references on promoters’ websites and daily updates on Twitter.

    Promoters’ advertising is heavy for WebsiteTesterBiz, despite the fact the company’s domain name is registered behind a proxy, its purported parent company’s domain name is registered behind a proxy and there is a paucity of any verifiable information about either firm.

    FINRA specifically referenced the alleged P2P Ponzi in its educational materials. It also provided a link to information published about the collapsed Genius Funds HYIP by the British Columbia Securities Commission. Alarmingly, FINRA said the Genius Funds’ fraud costs investors a staggering $400 million.

    Federal prosecutors who filed criminal charges against P2P operator Nicholas Smirnow declared in May that “[a] large percentage, if not all, HYIPs, are Ponzi schemes.”

    In its resource material, FINRA is building on that theme.

    “[V]irtually every HYIP we have seen bears hallmarks of fraud,” FINRA said. “We are issuing this alert to warn investors worldwide to stay away from HYIPs.”

    P2P gathered more than $70 million. Legisi also gathered more than $70 million, according to court records.

    Separately, the alleged AdSurfDaily autosurf Ponzi scheme gathered at least $80 million and perhaps $100 million or more, according to records. Autosurfing is a form of HYIP fraud. The U.S. Secret Service acted against ASD in August 2008.

    In February 2010, an autosurf known as INetGlobal also came under investigation by the Secret Service. The SEC has acted against autosurfs known as 12DailyPro, PhoenixSurf and CEP, which gathered tens of millions of dollars combined — fueled by online promotions.

    Citing FBI statistics, FINRA said “the number of new HYIP investigations during fiscal year 2009 increased more than 100 percent over fiscal year 2008.”

    The regulator specifically warned about websites that “Rank the latest programs and provide details of ‘payout options.’” At the same time, it warned about sites that “Allow web designers to buy ready-made HYIP templates and set up an ‘instant’ HYIP.” Meanwhile, it warned about sites that “Blog, chat and ‘teach’ about HYIPs.”

    “Some HYIP ‘investors’ proffer strategies for maximizing profits and avoiding losses — everything from videos showing how to ‘make massive profits’ in HYIPs and ‘build a winning HYIP portfolio’ to an eBook on how to ‘ride the Ponzi’ and get in and out before a scheme collapses,” FINRA said.

    “Other HYIP forums discuss how to enter ‘test spends,’ how to identify new HYIPs to maximize one’s chances of being an early stage payee and even how to check when a HYIP’s domain name expires so you can guess how long it might pay returns before shutting down,” FINRA noted.

    One of the tips offered by FINRA was to be on the look out for “typos and poor grammar” in sales pitches.

    “This is often a tip-off that scammers are at work,” FINRA said.

    FINRA said HYIP scammers often don’t share critical information with investors.

    “HYIP operators cloak themselves in secrecy regarding who manages investor money, where the company is located or where to go to get additional information,” FINRA said.

    Claims about being “offshore” also are made, FINRA said.

    “Be aware that generally persons or firms offering securities to U.S. residents must be licensed by FINRA and registered with the SEC,” FINRA said.

    The sky often is positioned as the limit in the HYIP universe, which often relies on “online payment systems” — some of which “have been tied in recent years to criminal activity, including money laundering, identity theft and other scams,” FINRA warned.

    “High-yield investment programs (HYIPs) are unregistered investments created and touted by unlicensed individuals,” FINRA said. “Typically offered through slick (and sometimes not-so-slick) websites, HYIPs dangle the contradictory promises of safety coupled with high, unsustainable rates of return — 20, 30, 100 or more percent per day—through vague or murky trading strategies.”

    Read FINRA’s warning on HYIPs. (Make sure you click on the links in the body of the warning.)

    Read a PP Blog story about an alleged penny-stock scheme that was operated on Facebook and Twitter. Read a PP Blog story on P2P, and also one on Genius Funds and others.

    Read more about P2P. Read more about Legisi.

  • BULLETIN: Pedro de Sousa, Guillermo Rosario Arrested By FBI; CFTC Lays Out Yet-Another Florida Fraud Case

    BULLETIN: Pedro de Sousa and Guillermo Rosario of FX Professional International Solutions Inc. (FXP) have been arrested by the FBI. The Commodity Futures Trading Commission (CFTC) said the men operated a Forex fraud that issued false account statements, falsely claimed no losing months between 2005 and 2008 when they had lost money in 31 of 40 months reviewed by investigators and claimed winning months through FXP dating back to 2002 — even though the company did not exist prior to 2004.

    “Rosario and de Sousa falsely represented to customers that since 2002 FXP had annual forex trading profits of 21 percent to 85 percent with no losing years,” the CFTC said.

    “However, FXP did not exist prior to 2004,” the agency said.

    Although de Sousa and Rosario sent customers false monthly account statements showing profits every month from 2005 through 2008, their forex trading “resulted in monthly losses in 31 of 40 months during this period,” the CFTC said.

    Rosario also is known as Guillermo Rosario-Colon. He lives in Coral Gables, Fla. Meanwhile, de Sousa also is known as Pedroiz J. Sanz. He lives in Orlando, according to the CFTC.

    Neither Rosario nor de Sousa was registered with the CFTC. Their company also was known as FX Professional Solutions LLC. Both entities were dissolved for failure to file an annual report, and FXP was never registered with the CFTC, the agency said.

    “Rosario asserted to one of the [c]ustomers that he had devised a system of trading forex that he was confident would, at a minimum, consistently return 20% in annual profits,” CFTC charged.

    “Beginning in May 2005 and continuing to February 2009, Defendants sent false monthly account statements to the Customers,” CFTC charged. “With very limited exceptions, these statements claimed profits of between 0.16% and 2.55% every month when, in fact, actual forex trading conducted by Defendants during this period (with or without the Customers’ funds) resulted in net monthly losses more than 75% of the time.”

    When the scheme was collapsing last year and customers were asking questions and demanding their money back, FXP acknowledged losses to customers, according to the CFTC.

    When a customer asked to see trading records, Rosario refused on the basis of “customer confidentiality,” the CFTC said.

    De Sousa, meanwhile, told customers that the company started sending out bogus account statements because it feared that acknowledging losses would lead to redemption requests it could not fund, the CFTC said.

    “In April 2009, one of the Customers asked de Sousa why FXP continued to send monthly statements indicating profitable trading during the latter half of 2008 if, in fact, FXP was losing money during this period,” CFTC said. “De Sousa replied that Rosario was afraid that if they told customers about the losses, customers would request to withdraw their money, and that Defendants would not have the funds to honor the withdrawal requests.

    “For this reason, according to de Sousa, beginning in or about September 2008,
    Defendants ‘started faking the statements’ that they sent to the Customers,” CFTC charged.

    Investigators determined that the company had been “issuing false statements from as far back as 2005,” CFTC said.

  • BULLETIN: Trevor Cook To Be Given Lie-Detector Test; Sentencing In $190 Million Ponzi Case May Be Delayed

    BULLETIN: The FBI will administer a lie-detector test to Ponzi schemer Trevor Cook. Meanwhile, his July 26 sentencing date may be delayed, a source told the PP Blog.

    The date upon which the test will be administered was not immediately clear. The source, however, suggested that Cook could be subjected to the polygraph as early as tomorrow.

    Under the terms of Cook’s April agreement in which he pleaded guilty to mail fraud and tax evasion in a $190 million Ponzi scheme case involving more than 1,000 investors, Cook is required to take a polygraph exam “[i]f requested by the government.”

    Victims have expressed fears that Cook, 38, has hidden money from the scheme and could emerge from prison in his early sixties to reclaim the loot. The scheme was operated out of Minneapolis.

    R.J. Zayed, the court-appointed receiver in the case, has recommended that the government administer the lie-detector test, according to his website.

    Victims arranged a meeting with prosecutors, and the polygraph became a topic of conversation, according to a source who has knowledge about the meeting. Prosecutors have instructed the FBI to administer the test.

    The Cook case has turned into an international paper chase. Zayed has served court orders on more than 400 financial institutions.

    “We also have served subpoenas on approximately 250 individuals and institutions,” Zayed noted on his website. He added that he expects investor losses to top $139 million.

    FBI Director Robert Mueller has warned Congress at least twice this year about the increasing complexities of white-collar crime, including criminals’ reliance on shell companies and a “shadow” banking system to frustrate efforts to detect and unravel schemes.

    Cook was at the center of an international fraud scheme, part of which involved companies with confusingly similar names, according to court filings.

    Victims have said they fear he is incapable of telling the truth.

  • Now, A $145 Million Fraud Scheme in Utah; SEC Charges Travis Wright Amid ‘Sandwich In A Can’ Allegations

    A Utah man whose assets — including a taxidermy of a full-body African lion — was put on the action block amid Ponzi allegations earlier this year was selling unregistered securities and running a $145 million offering fraud, the SEC said today.

    Charged in the case was Travis L. Wright. The SEC said the scheme raised “nearly $145 million from approximately 175 investors” by providing investors promissory notes issued by Waterford Loan Fund LLC.

    The notes purportedly were secured by a lien on a trust that held all the assets of the fund, but Wright made “numerous” misrepresentations to investors, the SEC charged.

    Waterford was placed in bankruptcy last year, and Ponzi allegations emerged. The asset sale was billed in April as stemming from the proceeds of “one of the largest alleged Ponzi fraud cases in Utah.”

    Among the taxidermy items put up for bid were a “full body African lion,” Cape Horn buffalo, African antelope and hyena, wildebeest and other exotic animals. Forty-three firearms also were put up for auction, along with “beautiful, top-quality office furniture,” paintings, Persian and Oriental rugs, “fine home furnishings, antiques and more.”

    In June, the FBI said that recent Ponzi schemes and cases of investment fraud have cost Utah residents an estimated $1.4 billion. Some of the schemes were targeted at Mormons, the agency said.

    About 370 investigative “subjects” — defined as “potential perpetrators” in current cases — have been identified, and the agency and its law-enforcement partners have embarked on a public awareness and education campaign aimed at keeping Utahns safe from scammers.

    About 4,400 people have been affected by investment-fraud schemes in the state, the FBI said. The education campaign includes billboards and public-service messages.

    Among the allegations by the SEC against Wright was that he directed money to a company that planned to sell a product through vending machines. The product was described as a “sandwich in a can.”

    The SEC asserted that Wright told investors “that their funds would be used only to make loans secured by commercial real estate, when in fact he used their funds primarily for loans and investments having nothing to do with real estate.”

    Meanwhile, Wright told investors their promissory notes were secured by interests in a trust, “but no such trust existed” and “the notes were not secured,” the SEC said.

    Although Wright told investors that Waterford would never lend more than 50 percent of the value of its real estate holdings, he did not disclose “that he never obtained an appraisal or valuation of real estate before lending investor funds against it” and that “he was using investor funds to pay for a lavish lifestyle for himself and his friends and family,” the SEC charged.

  • Wayne McLeod Becomes Subject Of FBI Probe; Agency Asks Victims, Witnesses To Come Forward

    EDITOR’S NOTE: This story originally was published June 30. The PP Blog later encountered a database problem, which caused the site to go down and resulted in the temporary loss of some data. The data now has been retrieved.

    The FBI in Jacksonville has opened a probe into Kenneth “Wayne” McLeod, the Florida man who appears to have committed suicide last week when his alleged $34 million Ponzi scheme was exposed by the SEC.

    In a statement on its website, the FBI confirmed an investigation was under way and asked victims and witnesses to come forward.

    “Victims and other individuals with knowledge of FEBG are encouraged to call the FBI’s Jacksonville Field Office at (904) 248-7000 or to contact us via e-mail at Jacksonville@ic.fbi.gov and include “FEBG” in the e-mail subject line,” the agency said.

    Individuals are asked to provide the following:

    1. Their full name, address, and contact information.
    2. Their point of contact at Federal Employee Benefits Group (FEBG), McLeod’s company, and how they learned of the company and the investment opportunity.
    3. Their understanding of the terms of their investment(s).
    4. The total dollar amount of their investment(s).
    5. A description of any records they have in their possession that confirm their investment(s) — for example, statements, correspondence, etc.

    “Clients of FEBG should be aware that not all of the firm’s investments are at risk,” the FBI said. “However, individuals who invested in the ‘FEBG Bond Fund’ or ‘FEBG Special Fund’ may be victims of investment fraud and are welcome to contact the FBI.”

    McLeod was 48 when he died June 22. The SEC said his Jacksonville company was paid “up to” $15,000 by government agencies for seminars conducted by McLeod.

    The SEC alleged last week that McLeod was operating a Ponzi scheme dating back to at least 1988. The scheme was alleged to have gathered “at least” $34 million.

    McLeod’s company conducted seminars at various federal agencies, and also used the Federal Law Enforcement Training Center (FLETC) in Glynco, Ga., as a seminar outlet, 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.

    If the company’s seminar 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 was 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • BULLETIN: Another Florida Ponzi Scheme: SEC Sues Estate Of Dead Man, Saying Kenneth Wayne McLeod And His Companies Ripped Off Members Of ‘Law Enforcement’ And Operated Ponzi Scheme For Decades

    BULLETIN: The SEC has gone to court in Florida to obtain emergency relief against two companies and their late owner, alleging that Kenneth Wayne McLeod targeted government employees and members of law enforcement to invest in a government bond fund that did not exist.

    McLeod, 48, was found dead Tuesday in Jacksonville’s Mandarin Park. Local media outlets are reporting that the death is believed to be a suicide, but the SEC described the death only as “sudden.”

    In a dramatic emergency action, the SEC has sued McLeod’s estate and both of his businesses: Federal Employee Benefits Group Inc. (FEBG), a consulting firm, and F&S Asset Management Group Inc., a registered investment-advisory firm.

    U.S. District Judge Federico A. Moreno has frozen the assets of McLeod and the companies. The SEC said it was unclear who even was running the firms in the wake of McLeod’s death.

    Among the astonishing allegations was that McLeod had been operating a Ponzi scheme since at least 1988 and that the colossal fraud gathered “at least” $34 million from 260 investors across the country.

    “McLeod victimized law enforcement agents and other government employees who dedicated their lives to the service of this country,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “The victims gave years of public service and McLeod stole their futures.”

    McLeod conducted investment seminars “at government agencies nationwide” to lure clients, the SEC said. The agencies paid “up to” $15,000 each for these seminars,” and FEBG held itself out as “dedicated to the complex issues surrounding special group employees, including Law Enforcement Officers, Firefighters and Air Traffic Controllers,”the SEC charged in the complaint.

    At least one investor was told the purported bond program was a special fund for family and friends, and families of “fallen agents,” the SEC charged.

    If the allegations are true, it means that McLeod was selling a Ponzi scheme dressed up as a secure retirement plan backed by government bonds right inside government offices — while earning a fee to make the pitch and plucking heartstrings by referring to people who had lost their lives in the line of duty.

  • BULLETIN: KABOOM x 1,215! Feds Announce ‘Operation Stolen Dreams’ Mortgage-Fraud Sweep; 1,215 Defendants Charged In Largest Mortgage Scammer Takedown In U.S. History

    Attorney General Eric Holder announced the creation of the Financial Fraud Enforcement Task Force last year.

    BULLETIN: UPDATED 1:10 P.M. EDT (U.S.A.) At least 1,215 criminal defendants have been named in “Operation Stolen Dreams,” which U.S. Attorney General Eric Holder described as a “three and a half month takedown of mortgage fraud schemes throughout the country.”

    The mortgage-fraud operation began March 1 and is the largest-such undertaking in U.S. history, Holder said.

    “The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country,” Holder said. “We have seen mortgage fraud take on all shapes and sizes — from schemes that ensnared the elderly to fraudsters who targeted immigrant communities. We have seen cases that have resulted in dozens of foreclosures and millions in losses, as well as fraudsters who have bankrupted entire companies and national lenders who were not playing by the rules.

    Holder said the defendants caused more than $2.3 billion in losses. “Operation Stolen Dreams” was brought as part of President Obama’s interagency Financial Fraud Enforcement Task Force. The attorney general was joined in the announcement by Sallie Cooper, deputy director of the IRS Criminal Investigation Unit;  Ken Jenkins, special agent in charge of the U.S. Secret Service Criminal Investigative Division;  FTC Commissioner Edith Ramirez; Ken Donohue, inspector general of the U.S. Department of Housing and Urban Development; FBI Director Bob Mueller;  Illinois Attorney General Lisa Madigan;  Chief Postal Inspector Bill Gilligan; and Jim Freis, director of the Treasury Department’s Financial Crimes Enforcement Network.

    Investigators did not limit the operation to criminal cases.

    “[T]he operation involved 191 civil enforcement actions through which more than $147 million has been ordered recovered, with still millions more pending court approval,” Holder said.

    “This represents the largest collective enforcement effort ever brought to bear in confronting mortgage fraud,” he noted. “The success of this operation is a direct result of our unprecedented focus not just on federal criminal cases, but also on civil enforcement, recovering funds for victims and increasing cooperation with state and local partners.”

    Mueller said the FBI was “tracking” fraudsters aggressively.

    “From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” Mueller said. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

    Fraudsters lining their pockets at the expense of others have plenty to worry about, said Donohue.

    “The last several years have seen enormous and damaging developments in the mortgage and housing markets, and the government has stepped in to bolster unstable marketplaces and devastated communities,” Donohue said. “The HUD-OIG, in partnership with other agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance today.”

    Holder, who ventured to Florida in January and warned fraudsters that they were writing their own tickets to jail, also noted that law-enforcement had broken up yet another Ponzi- and affinity-fraud scheme in the state.

    Suspects were arrested in the case yesterday, which targeted Haitian-Americans in South Florida.

    Arrested were Maxo Francois, also known as “Max Francois,” Jean Fritz Montinard, Aiby Pierre-Louis and Maguy Nereus, also known as “Maguy Jean-Louis.”

    The scheme involved businesses known as Focus Development Center Inc. and Focus Financial Group Inc., also known as Focus Financial Associates Inc.

    Investors were promised annual returns of 15 percent, but it was a Ponzi scheme, authorities said.

    The fraudsters used church presentations to pitch the scheme, prosecutors said.

  • KABOOM! KABOOM! KABOOM! KABOOM! KABOOM! 5 Separate Federal Probes Lead To Dozens Of Fraud Arrests In Multiple States; 1 Case Alleges Nearly $2 Billion Scheme

    Lanny Breuer, assistant attorney general and head of the Criminal Division of the U.S. Department of Justice

    BULLETIN: The U.S. government has announced charges against at least 43 defendants in five separate financial-fraud schemes, the largest of which allegedly involved $1.9 billion and contributed to the collapse last year of a bank with 346 branches and a mortage-lending company in Florida.

    Smaller schemes in cases outlined by federal prosecutors today involved tens of millions of dollars, including a New Jersey real-estate Ponzi scheme that netted $45 million, a California mortgage-fraud scheme that netted at least $5.5 million, a second California scheme that netted an unknown amount and another real-estate fraud scheme in New Jersey that netted at least $5.5 million.

    The youngest defendant charged in the cases was 27; the oldest 77.

    Law-enforcement operations were centered in the states of Florida, New Jersey, Virginia and California, and involved multiple agencies working under the umbrella of the Financial Fraud Enforcement Task Force established by President Obama in November.

    Lee Bentley Farkas, former chairman of Taylor, Bean & Whitaker (TBW), was arrested last night in Ocala, Fla. Farkas was named in a 16-count indictment filed in Virginia that accused him of presiding over a $1.9 billion fraud scheme that contributed to the failures last year of Colonial Bank, one of the 50 largest banks in the United States, and TBW, one of the nation’s largest privately held mortgage-lending companies.

    “The fraud alleged here is truly stunning in its scale and complexity,” said Lanny Breuer, head of the Criminal Division of the U.S. Department of Justice.

    “According to the indictment, the fraud began as early as 2002 in an effort to conceal significant TBW operating losses,” Breuer said. “It then evolved over the course of seven years as Mr. Farkas and his co-conspirators sought to misappropriate hundreds of millions of dollars from Colonial Bank and Ocala Funding, a mortgage lending facility that was controlled by TBW and financed by large banks.”

    Farkas and unnamed coconspirators compounded the fraud by asking for bailout funds from the federal Troubled Asset Relief Program (TARP), prosecutors said.

    “That [TARP] application included materially false information, and no TARP funds were released,” said Breuer.

    The case was brought by the office of U.S. Attorney Neil MacBride of the Eastern District of Virginia.

    “Taxpayers have paid a hefty price for the crimes related to the current financial crisis, and investors in Colonial and Ocala Funding were among those directly affected by this conspiracy,” said MacBride.

    Neil Barofsky, the Special Inspector General of the TARP program (SIGTARP), said the banking scheme was unprecedented.

    “Due to the efforts of SIGTARP agents, our law-enforcement partners, and the SEC, this scheme was stopped dead in its tracks, taxpayers were protected, and Lee Farkas has joined the growing list of financial industry executives who have been charged with TARP-related frauds,” Barofsky said.

    In one of the separate alleged schemes in New Jersey, 28 people were charged. (See link below to read the names of the defendants in the cases, which involve at least $5.5 million.)

    “These cases demonstrate just how pervasive the mortgage fraud problem is in New Jersey,” said U.S. Attorney Paul J. Fishman.  “Mortgage fraud is not limited to people who steal millions at a time.  It is more insidious.  It is more pernicious.  And it is more prevalent. Mortgage fraud is often done at a retail level, and involves many different people playing many different roles.  No matter what your role, if you participate in this kind of scheme, you will be held accountable.”

    Among the 28 defendants are 12 real estate agents, four investors, four mortgage consultants, three individuals who allegedly created fraudulent documents, two accountants, a real-estate appraiser, a bank employee and a mortgage broker.

    A veteran FBI agent described the New Jersey cases as a battle in an ongoing war against fraud.

    “Today’s arrests do not signify the culmination of a single investigation, but rather serve as notice that law enforcement is aggressively pursuing mortgage fraud schemes in New Jersey,” said Michael B. Ward, special agent in charge.

    In the second New Jersey case, Antoinette Hodgson, 58, of Montclair, was arrested on charges of operating a $45 million Ponzi scheme involving false tales of property-flipping. (See earlier story.)

    Meanwhile, 13 people were charged in a California real-estate fraud cases. U.S. Attorney Benjamin B. Wagner announced the indictments of Hoda Samuel, 58, of Elk Grove, Calif.; Connie Devers, 40, of Elk Grove; Dana Faulkner, 43, of Oakland; Charles Robert Maness, 32, of Elk Grove; Tracy Painter, 50, of Lodi, Calif.; Sean Patrick Gjerde, 34, of Elk Grove; Ronald Burris, 36, of Elk Grove; Ygnacia Bradford, 34, of Oakland; Nicole Dawson, 40, of Oakland; and Daniel Harrison, 40, of San Diego.

    Gjerde is an attorney;  Samuel a licensed real estate broker and the head of Liberty Real Estate and Investment Co. and Liberty Mortgage Co. of Elk Grove .

    “From April 2006 through February 2007, Liberty was involved in approximately 30 residential real estate transactions in which the mortgage lenders were given false information as to the income of the purchasers and/or the value of the homes being purchased,” prosecutors said.

    “At least 28 of the properties have since gone into foreclosure, resulting in a loss to lenders of over $ 5.5 million,” prosecutors said.

    Also in California, Eric Ray Hernandez, 34, Monica Marie Hernandez, 29, and Evelyn Brigget Sanchez, 27 were indicted in a mortgage-fraud case. Each of the defendants lists an address in Bakersfield.

    Link to names of New Jersey defendants.

  • New Jersey Woman Charged In Alleged $45 Million Ponzi Scheme; Antoinette Hodgson Faces Decades In Prison If Convicted

    A New Jersey woman was arrested this morning on charges she fleeced more than 20 Greater New York investors by engineering  a $45 million Ponzi scheme involving purported real- estate flips, the FBI said.

    Antoinette Hodgson, 58, of Montclair, New Jersey, was accused of conspiracy and wire fraud amid allegations she recruited clients by telling them they were investing in her real-estate business, which purportedly acquired residential properties and then resold them at a profit or rented them before being sold at a profit.

    In fact, according authorities, Hodgson spent “hundreds of thousands of dollars at casinos in Atlantic City and Las Vegas,” gave “tens of thousands of dollars” to family and friends and used investors funds to buy a Dunkin Donuts franchise in Arizona for $700,000.

    Of the $45 million she gathered in the scheme, only $6 million went toward residential real estate. Most of the money was used immediately to repay investors in “classic” Ponzi fashion, authorities said.

    “Antoinette Hodgson allegedly has already proved she’s a lousy gambler by losing the investor’s money in the casinos,” said George Venizelos, acting FBI special agent in charge. “She has now gambled with her future and faces serious charges for a plot of her own making.”

    U.S. Attorney Preet Bharara, who put his Complex Frauds Unit on the case,  warned investors that high-dollar scammers are on the prowl for their cash.

    “What Antoinette Hodgson allegedly promised to investors seemed too good to be true and that’s because it was,” said Bharara. “This case is a further reminder that whether the real estate market is up or down, innocent investors can be and will be targeted by unscrupulous fraudsters.”

    Prosecutors encouraged victims and witnesses to come forward by contacting Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York. Olsen-Clancy can be reached at (866) 874-8900 or via email at Wendy.Olsen@usdoj.gov.

    Here is the website for victims and witnesses:

    http://www.usdoj.gov/usao/nys/victimwitness.html

    The case was brought as part of the undertakings of President Obama’s Financial Fraud Enforcement Task Force.

    “The FBI will continue to seek out those who engage in all types of fraudulent real estate deals, bringing about certain justice for them and clearing a path for those who work hard to uphold the standards of our justice system,” Venizelos said.

    Fraudsters “in every sector of our nation’s economy” are being pursued for prosecution, Bharara said.