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Tag: FBI

  • U.S. Marshals, FBI, Police Capture Ponzi Figure Who Ducked Sentencing; Michael Derrick Peninger Returned To Jail Amid Reports He Cut Transmitter On Electronic Monitoring Device

    Michael Derrick Peninger was captured yesterday, nine days after he failed to show up for sentencing court in a South Carolina Ponzi scheme case.

    Authorities said he cut the transmitter on an electronic monitoring device he was ordered to wear prior to fleeing April 12. A federal magistrate judge jailed Peninger yesterday after he was arrested on a warrant issued by the federal judge in Charleston presiding over the Ponzi case.

    Peninger, 50, was convicted in October of eight counts of mail fraud and one count of making a false statement to an FBI agent. Though jailed briefly after the conviction, Peninger was freed pending sentencing after his 72-year-old mother appealed to U.S. District Judge P. Michael Duffy to permit her son to leave jail to assist with the care of her husband, who has Alzheimer’s disease.

    Duffy structured a release by which Peninger would wear an ankle monitor and submit to supervision pending sentencing. The sentencing date was set for April 12, and Peninger did not show up in court. He faced a maximum penalty of nearly two decades in prison, and prosecutors unsuccessfully argued last fall against the release.

    The U.S. Marshal’s Service “developed information that Peninger was on Daniel Island” yesterday, the agency said.

    Daniel Island is within the borders of Charleston and is the home of Peninger’s mother, although it was not immediately clear if Peninger — who had been living with his mother since his release last year — was attempting to return to her home.

    Deputy U.S. Marshals, Charleston City Police Officers and FBI Agents immediately responded to the Daniel Island area, the U.S. Marshals Service said.

    “K-9 officers tracked Peninger into a wooded area and followed his trail into the business district where Peninger was spotted walking in the 300 block of Seven Farms Drive and taken into custody,” the agency said.

    Peninger was captured as a result of teamwork, the agency said.

    “We appreciate the support from our fellow law enforcement community in apprehending Peninger,” said U.S. Marshal Kelvin Washington. “[H]e will now face the courts for his original sentence to be imposed.”

    Peninger may face more jail time for ducking sentencing court and faces the prospect of a contempt-of-court hearing.

    Prosecutors again argued yesterday that Peninger was a flight risk, and the magistrate judge jailed him.

    Just days prior to Peninger going on the lam, the CFTC obtained a judgment of more than $3.9 million against him in a civil fraud case brought in 2008.

  • BULLETIN: Another Spectacular Florida Ponzi Case Emerging; Nevin K. Shapiro Charged Criminally, Civilly In Alleged $900 Million Fraud

    BULLETIN: Nevin K. Shapiro, the founder and president of Capitol Investments USA Inc., surrendered to authorities this morning after being charged both criminally and civilly in an alleged $900 million Ponzi and fraud scheme in south Florida and elsewhere, the SEC said.

    Shapiro, 41, is a prominent Miami Beach businessman and philanthropist in the wholesale grocery business. He is expected to make a court appearance in New Jersey today.

    Most of Shapiro’s investors live in Florida or Indiana, according to the SEC complaint. Some diverted funds from their IRA’s to earn profits by investing with the grocery company, but Shapiro conducted virtually no meaningful business after 2004 and simply propped up his grocery business with a shell game that raised $880 million from investors between 2005 and 2009 before the scheme collapsed, the SEC charged.

    “Capitol’s sales were less than $300,000 in 2005 and 2006, and it had no sales from 2007 through 2009,” the SEC charged.

    “Shapiro lured investors by falsely touting Capitol’s securities as a risk-free investment with extraordinarily high returns,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “He used his prominence and prestige to gain investors’ trust in funding Capitol’s grocery diverting business, but behind their backs he diverted their money to enrich himself.”

    Grocery-diverters buy merchandise in one market and sell it in another at a higher price. Shapiro’s company, however, began operating a Ponzi scheme in 2005 after operating at a loss in 2004, the SEC charged.

    The SEC said Shapiro diverted $38 million “to enrich himself and finance outside business activities unrelated to the grocery business, including a sport representation business and real estate ventures.

    “His lavish lifestyle includes a $5 million home in Miami Beach, a $1 million boat, luxury cars, expensive clothes, high-stakes gambling, and season tickets to premium sporting events,” the SEC said. “Shapiro additionally tapped approximately $13 million of investor funds to pay large undisclosed commissions to individuals who attracted other investors.”

    A girlfriend received goods totaling $116,000 that were charged to Capitol’s American Express Black Card, and Shapiro himself made personal purchases of about $524,000 on the card, the SEC charged.

    All in all, the SEC said, the scheme was “a $900 million offering fraud and Ponzi scheme.” Investors were offered returns of 26 percent annually, backed by bogus claims that “Capitol’s purchase contracts and accounts receivable secured their investments.”

    Earlier this year, U.S. Attorney General Eric Holder said south Florida was “ground zero” for Ponzi schemes, noting that many of Bernard Madoff’s victims lived in the region. The government still is in the process of unwinding Madoff’s $65 billion fraud and Scott Rothstein’s $1.2 billion fraud.

    Smaller — though still massive Ponzi frauds — recently have occurred in the state, and Shapiro’s alleged $900 million fraud now is included among them.

    “To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned in a January speech in Florida. “If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

    The FBI and IRS also are involved in the Shapiro probe, the SEC said.

    “By late 2004, Capitol was operating at a loss,” the SEC charged. “From 2005 though late 2009, Capitol had almost no business operations. To hide this from investors, Shapiro merely repaid earlier investors with approximately $769 million collected from new investors in typical Ponzi scheme fashion.”

    The agency said “Capitol has never registered an offering or class of securities under the Securities Act or the Exchange Act,” and Shapiro was charged with securities fraud.

    In the past 48 hours, law enforcement and regulators have filed complaints in cases in Florida and New York that allege frauds totaling about $1 billion.

  • FBI Director Again References ‘Shadow Banking System’ In Congressional Testimony; Warns About ‘Homegrown Violent Extremists’ And ‘Lone Actor’ Terrorists

    EDITOR’S NOTE: Still selling autosurfs and HYIPs? Quick! Name your autosurfing neighbor, his or her neighbors, the source of their funding — and describe their intent. Do you even know the names of the program owners, the venues from which they operate and the sources of their funding? How many companies do they own? How many bank accounts do they control? How do they keep their books? Do they truly know their own customers? Has your need to believe you could not possibly be doing business with criminals affected your ability to think things through clearly?

    Getting paid via a debit card or an offshore processor? Ever ask why? Has your “due diligence” ever gone beyond parroting what you’ve been told by others? Have you ever really peeled back layers of the onion, looked for connections to other schemes and performed anything other than cursory research? How many “bad apples” do you think you might find in a barrel of tens of thousands of members, especially if the barrel exists in a business universe already infamous for shadowy practices? Think that some of the participants may live in the dimmest corners of the nation and world and have secret agendas?

    What if their agenda is to do the unthinkable in the United States or elsewhere? What if they’re a “lone wolf” — a lone actor waiting for the perfect time? And what if you’re helping them?

    The FBI has been advising Congress about the nexus between white-collar crime and the potential for terrorism. Some very strange things have been happening in the United States as a result of what FBI Director Robert Mueller III described as the emergence of a “shadow banking system” and an increasing reliance on “shell corporations” to commit crimes and hide from investigators. Some of the crimes have been elaborate, using multiple companies, domestic and offshore venues and selling multiple “services” such as tax-avoidance schemes and “debt-elimination” services.

    Although Mueller did not mention AdSurfDaily and other “autosurf” companies in Congressional testimony yesterday, the Justice Department did outline a separate case against several companies and individuals who offered “services” similar to the “services” offered by some ASD members.

    Longtime PP readers know that ASD and a closely connected autosurf known as AdViewGlobal have been linked to racketeering allegations and tax-avoidance and debt-elimination schemes similar to the cases encapsulated below. Some members of ASD also associated themselves with militia and tax-denial movements, underground “associations” and credit-repair organizations. Some of them associated themselves with wild conspiracy theories — the kind that would cause you to lose friends and cause your family to distance itself from you if you ever associated yourself with the theories.

    Find yourself attacking the messenger or spinning impossible yarns because the truth you fear is just downright uncomfortable and you are not ready to confront it yet? Have you generally supported law enforcement throughout your life — and yet now find yourself condemning the very agencies whose efforts have permitted you to rest comfortably at night since birth? Is it really you constructing a theory that the agents mysteriously somehow had become a sort of hybrid that mixes Nazism and Communism and that the hybrids have made it their business to destroy your entrepreneurial spirit?

    Here, now, a story about a mysterious and perhaps increasingly dangerous world that largely exists outside of public view . . .

    UPDATED 7:49 P.M. EDT (U.S.A.) Returning to a theme voiced last month, FBI Director Robert Mueller III appeared before another Congressional panel yesterday and warned lawmakers about a “shadow banking system” and a troubling increase in certain areas of U.S. white-collar crime, including mortgage fraud, securities fraud and money-laundering.

    Meanwhile, cross-border crime also is producing a dangerous cocktail, Mueller said.

    “[T]he potential for terrorism-related activities associated with criminal enterprises is increasing due to the following: alien smuggling across the southwest border by drug and gang criminal enterprises; Columbian based narco-terrorism groups influencing or associating with traditional drug trafficking organizations; prison gangs being recruited by religious, political, or social extremist groups; and major theft criminal enterprises conducting criminal activities in association with terrorist-related groups or to facilitate funding of terrorist-related groups,” Mueller said.

    “There also remains the ever-present concern that criminal enterprises are, or can, facilitate the smuggling of chemical, biological, radioactive, or nuclear weapons and materials,” he said.

    But Mueller said it would be a mistake to view terrorism as a uniquely international problem and look at it only through the narrow lens of traditional threats and the post-9/11 threat posed by al Qaeda.

    “Homegrown violent extremists also pose a very serious threat,” Mueller told the Senate Committee on Appropriations, Subcommittee on Commerce, Justice, Science, and Related Agencies.

    Beware The ‘Lone Actor’

    “Homegrown violent extremists are not clustered in one geographic area, nor are they confined to any one type of setting — they can appear in cities, smaller towns, and rural parts of the country,” Mueller said. “This diffuse and dynamic threat — which can take the form of a lone actor — is of particular concern.

    “While much of the national attention is focused on the substantial threat posed by international terrorists to the homeland, the United States must also contend with an ongoing threat posed by domestic terrorists based and operating strictly within the United States,” he said. “Domestic terrorists, motivated by a number of political or social issues, continue to use violence and criminal activity to further their agendas.”

    Mueller’s testimony took place against the backdrop of a order by a federal judge in Arkansas that effectively banned a “private banking system” from operating.

    Judge Shutters ‘Private Banking System’

    Wayne Hicks and his company, My Icis Inc., gathered about $100 million between 2003 and 2006 and helped customers avoid taxes by shielding their identities and other financial transactions from the Internal Revenue Service (IRS), the Justice Department said yesterday. Hicks and My Icis consented to an injunction that barred the system from operating.

    Hicks already is serving five years in federal prison after pleading guilty to conspiracy to defraud the United States in a related criminal case. Although the agency did not raise the issue of terrorism yesterday, the case underscores the sensitivity of the United States to banking practices that are hard to monitor and may involve thousands of people whose identities are murky or unknown.

    My Icis “helped customers set up purportedly anonymous bank accounts to hide their identities, income and other financial transactions, including deposits, wire transfers and bill payments,” the Justice Department said. “Hicks admitted in his criminal case that My Icis helped customers ‘get out’ of the traditional banking system and successfully shield their financial transactions from the government, more specifically the IRS, and thereby avoid paying federal income taxes.”

    The scheme was promoted through websites, seminars in Mexico and online newsletters, the Justice Department said.

    To recruit customers, Hicks promoted his banking system at Pinnacle Quest International (PQI) seminars in 2005 in the Mexican resorts of Cancun and Ixtapa, the Justice Department said.

    Eight people associated with PQI were convicted in Florida last month of wire-fraud, money-laundering and tax charges by a federal jury following a weeks-long trial in Pensacola.

    Investigators said PQI, which also was known as Quest International, was operating a “fraudulent tax and debt elimination scheme.” My Icis was one of its vendors, and the PQI scheme crossed U.S. borders and ventured into Panama, a hotbed for financial fraud.

    “PQI was an umbrella organization for numerous vendors of tax and credit card debt elimination scams,” the Justice Department said. “Some of the PQI vendors, such as Southern Oregon Resource Center for Education (SORCE), sold bogus theories and strategies for tax evasion.

    “For fees starting at $10,000, SORCE assisted its customers in the creation of a series of sham business entities in the United States and Panama,” the Justice Department said. “Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a purported ‘reliance defense’ that consisted of a paper trail of frivolous correspondence [that] a client could allegedly use as evidence of good faith if the client were prosecuted.”

    My Icis “operated as a sophisticated, computerized ‘warehouse bank,’” the Justice Department said. “[It] was a single bank account in which customers pooled their money. [My Icis] was promoted to PQI’s clients as a method to hide their assets from the IRS as a result of the pooled nature of the account.”

    The company had 3,000 clients, the Justice Department said of My Icis. PQI, meanwhile, had more than 11,000 members “throughout the United States.”

    Prosecutors established that Arthur Merino, who operated a company known as Financial Solutions and sold a scheme to eliminate credit-card debt, “charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt.

    “The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy,” the Justice Department said.

    Convicted in the PQI case were Claudia Constance Hirmer and Mark Steven Hirmer of Niceville, Fla. They were found guilty of conspiracy to defraud the United States, conspiracy to commit wire fraud, conspiracy to commit money laundering and tax evasion.

    Eugene “Gino” Joseph Casternovia of Ashland, Ore., Arnold Ray Manansala of Renton, Wash., Dover Eugene Perry of Renton, Wash., and Michael Guy Leonard of Troy, N.Y., were convicted of conspiracy to defraud the United States, conspiracy to commit wire fraud and conspiracy to commit money laundering.

    Meanwhile, Mark Daniel Leitner of Fairport, N.Y., and Merino, who lives in Renton, Wash., were convicted of conspiracy to defraud the United States and conspiracy to commit wire fraud.

    “The use of abusive trust schemes and fraudulent debt elimination tactics intended to conceal income from the IRS isn’t tax planning; it’s criminal activity,” said Victor S.O. Song, chief of the IRS Criminal Investigation division. “There is no secret formula that can eliminate a person’s tax obligations.”

  • Federal Judge Dispatches U.S. Marshals To Arrest Convicted Ponzi Schemer; Michael Derrick Peninger Did Not Show Up At Sentencing Court In South Carolina

    UPDATED 5:45 P.M. EDT (U.S.A.) A federal judge has issued a bench warrant for Michael Derrick Peninger after Peninger did not show up for sentencing yesterday in a $7 million, Ponzi-scheme case in South Carolina.

    Peninger, 50, of Charleston, was convicted in October of eight counts of mail fraud and one count of making a false statement to an FBI agent, the CFTC said.

    The Post and Courier newspaper of Charleston is reporting that prosecutors argued last fall that Peninger should have been kept in jail upon conviction because he posed a flight risk.

    Peninger was released until his sentencing date after his 72-year-old mother appealed to U.S. District Judge P. Michael Duffy to permit her son to leave jail to assist with the care of her husband, who has Alzheimer’s disease.

    Duffy permitted Peninger to assist his mother and stepfather, ordering him to wear an ankle monitor. The judge now has dispatched the U.S. Marshals Service to locate and arrest Peninger, the Post and Courier is reporting.

    Just days ago a judgment of more than $3.9 million was placed against Peninger in a fraud case brought by the CFTC in 2008. The judgment was ordered by U.S. District Judge C. Weston Houck.

    Peninger was charged criminally in January 2009. Prosecutors said he operated three companies: Cooper River Group Inc., CSA Trading Group Inc., and Daniel Island Builders LLC.

    “[A]t least 20 investors provided Peninger and others with funds to invest on their behalf, but . . . Peninger and others misappropriated the money to pay personal expenses, to pay employees, to fund unauthorized business ventures, and to pay previous investors in a manner akin to a Ponzi scheme,” prosecutors said.

    Peninger faced a maximum penalty of nearly two decades in prison.

    South Carolina has had some unusual Ponzi cases, including the curious case of the “3 Hebrew Boys.”

    In that case, convicted Ponzi schemer Joseph B. Brunson of Hopkins declared himself “sovereign” and therefore immune from U.S. law. The claim was reminiscent of claims made by Curtis Richmond, a mainstay, pro se litigant in the AdSurfDaily Ponzi scheme case.

    In the 3 Hebrew Boys case, Brunson declared that former U.S. Attorney Walt Wilkens was guilty of treason, insurrection and conspiracy to overthrow the U.S. government in his successful efforts to prosecute Brunson.

    Richmond argued in the ASD case that U.S. District Judge Rosemary Collyer was guilty of treason.

  • BULLETIN: Trevor Cook, Minnesota Ponzi Scheme Figure, Pleads Guilty In $190 Million Fraud Case

    BULLETIN: (UPDATED 12:35 P.M. EDT (U.S.A.) Trevor G. Cook, implicated in a $190 million Ponzi scheme that pushed tremendous sums of money all over the world and is believed to have fleeced investors out of at least $139 million, has entered a guilty plea in federal court in Minnesota.

    No sentencing date has been sent.

    Cook, 37, of Apple Valley, faces up to 25 years in federal prison after pleading guilty to mail fraud and tax evasion. Cook has been in jail since January, after a finding he had violated a court order by not cooperating with investigators and continuing to spend investors’ money after he was sued by the SEC and CFTC in November. His plea deal is contingent on assisting the government in unraveling the scheme.

    Criminal charges were filed against Cook last month.

    The guilty plea included acknowledgments by Cook that he lied to investors and was “aided and abetted by others” in a scheme “to defraud no fewer than 1,000 people out of approximately $190 million by purportedly selling investments in a foreign currency trading program,” prosecutors said.

    Cook did not have $4 billion under management, as he told investors, prosecutors said.

    During his plea hearing this morning, Cook admitted that he diverted investors’ money, deceived Swiss regulators when Crown Forex SA was plunging into bankruptcy in 2008, purchased ownership interest in two trading firms with investors’ money, bought property in Panama with investors’ money, bought the Van Dusen mansion in Minneapolis with investors’ money and raided investors’ money to make personal purchases and pay gambling debts.

    “To carry out his scheme, Cook caused false statements to be made to potential investors, including promises that the investment program would generate annual returns of ten to twelve percent, and that trading would present little or no risk to investors’ principal,” prosecutors said. “He also caused material information to be withheld from investors, such as the precarious financial position of Crown Forex, SA” in Switzerland.

    Meanwhile, prosecutors said, Cook “withheld the fact that trading at PFG in Chicago generated losses in excess of $35 million between July 1, 2006, and August 31, 2009.”

    A company with a name confusingly similar to Crown Forex SA was part of the scheme, prosecutors said.

    “In furtherance of the scheme, Cook caused an account to be opened in the name of Crown Forex, LLC, at Associated Bank, which he used for depositing investor funds that he subsequently diverted for his personal use as well as the personal use of others,” prosecutors said. “He also caused statements to be sent to investors that misrepresented the status of their investments. In addition, he caused due-diligence letters to be prepared that falsely represented Oxford Global Advisors as having more than $4 billion in assets under management, and that all accounts were liquid.”

    Prosecutors gave credit for the probe, arrest and conviction to the interagency Financial Fraud Enforcement Task Force. President Obama created the task force in November 2009.

    Assistant U.S. Attorney Frank J. Magill is the lead prosecutor in the criminal aspect of the case.

    In November, the SEC and CFTC sued Cook, along with Pat Kiley. Kiley, 71, formerly hosted a program on Christian radio and is accused civilly of steering people into the international scheme.

    Law enforcement officials and prosecutors in Minnesota say they are battling several Ponzi schemes that have fleeced investors out of hundreds of millions of dollars.

    Last month, FBI Director Robert Mueller III said criminals increasingly were relying on “shell corporations” and hard-to-trace financial-services products to commit fraud on a massive scale.

  • Another Fraud Case In Minnesota: Renee Marie Brown Accused By SEC Of Starting ‘Sham’ Investment Fund Known As ‘X’

    UPDATED 7:52 A.M. EDT (April 13, U.S.A.) On the very day Tom Petters was sentenced in Minnesota to 50 years in prison for operating a colossal Ponzi scheme, a federal judge froze the assets of Renee Marie Brown after the SEC accused her of ripping off clients by persuading them to invest in a mysterious vehicle known as “Fund X.”

    U.S. District Judge Donovan W. Frank issued a temporary restraining order against Brown and her company, Investors Income Fund X LLC. The order was issued April 8.

    Brown, 46, of Golden Valley, was accused of operating a “sham” fund into which investors plowed more than $1.1 million between July 2009 and March 2010.

    “Brown told her investors that Fund X is a ‘bond fund’ with fixed annual returns of 8% or 9%,” the SEC said. “[S]he distributed fictitious ‘returns’ to investors, furthering the fiction that Fund X was a legitimate and successful investment opportunity.”

    But Brown “misappropriated most of the $1.1 million she raised from investors to, among other things, purchase a condominium for herself and build . . . office space for her new business,” the SEC said.

    Investors Income Fund X LLC was registered as a corporation in South Dakota, the SEC said.

    “Unbeknownst to her victims, Fund X is a sham — Brown’s alter ego,” the SEC said.

    The case features allegations of siphoning, forgery, cherry-picking clients of Brown’s former employer and issuing fraudulent “returns” in Bernard Madoff-like fashion. It also occurred against the backdrop of March 17 Congressional testimony by FBI Director Robert Mueller III that U.S. companies increasingly were relying on shell corporations to commit fraud.

    Minnesota Fraud Cases

    In recent months, investigators and prosecutors in Minnesota have opened up a number of major fraud probes. The combined cases are alleged to have drained hundreds of millions of dollars from investors. In some instances, prosecutors and regulators have asserted that companies used multiple names to commit fraud.

    Petters was convicted last week of presiding over that was described as the largest financial-fraud case in Minnesota history: a $3.65 billion Ponzi scheme.

    Petters displayed “stunning criminality,” prosecutors said. One of the victims wrote, “Our society, unfortunately, is becoming plagued with too many people like this, and like Bernard Madoff. Tom Petters needs to learn that there are severe consequences for his incomprehensible behavior.”

    Meanwhile, the SEC, the CFTC, the FBI, prosecutors and a court-appointed receiver are poring over records to reverse-engineer the alleged Trevor Cook/Pat Kiley Ponzi scheme. Court records suggest multiple company names were involved and that the scheme involved at least $190 million and caused investor losses of at least $139 million.

    Money was moved “all over the world,” according to court filings.

    Cook and Kiley were sued by the SEC and the CFTC in November. Cook was charged criminally last month. Prosecutors said he was “aided and abetted by others.” In this document, the National Futures Association, which also filed an action that references Cook, asserted that $75 million from a purported Swiss fund may have been directed at a mysterious investor known only as “Fased.”

    The purported payment occurred while Cook, a Minnesota resident, allegedly was managing money for a Canadian company known as KINGZ Capital Management Corp. KINGZ name also has been linked to an autosurf known as AdViewGlobal (AVG), which had close ties to an autosurf known as AdSurfDaily (ASD).

    On May 4, 2009 — on the same day the Obama administration announced a crackdown on international financial fraud — AVG announced that KINGZ had become its facilitator for international wire transfers. KINGZ denied the assertion, saying it believed it had been targeted in a scam. The company painted the picture that AVG was attempting to route money to itself through a U.S. shell company.

    AVG purportedly operated from Uruguay.

    Florida-based ASD, which members said was popular in Minnesota, was implicated in August 2008 by the Secret Service in a Ponzi scheme. A federal judge has issued orders of forfeiture totaling more than $80 million in the ASD case. ASD used at least three names, according to records: AdSurfDaily, AdSalesDaily, and ASD Cash Generator.

    Prosecutors also linked ASD to at least two other autosurfs: LaFuenteDinero (the “fountain of money”) and Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.

    In February, the U.S. Secret Service alleged that Minnesota resident Steve Renner was operating a Ponzi scheme through a company known as INetGlobal and companies related to the firm. The scheme, the Secret Service said, largely targeted Chinese members who may have little or no facility in English.

    Renner denies the allegations. Prosecutors described the case as a “major fraud and money laundering investigation,” saying INetGlobal came to life during a period in which federal agents were seizing tens of millions of dollars in the ASD case amid Ponzi, wire-fraud and money-laundering assertions.

    An ASD member introduced an undercover Secret Service agent to INetGlobal, the agency said in court filings.

    Other recent fraud cases in Minnesota include the Gerard Cellette Jr. Ponzi case ($53 million); the Charles “Chuck” E. Hays case ($20 million); and the Kalin Thanh Dao case (up to $10 million).

  • NEWS/UPDATES: Feds Charge Donald Young In Massive Ponzi In Pennsylvania; Matthew Pizzolato Pleads Guilty In Louisiana; Jeffrey Mowen Loses Cars In Utah; ‘Today’ Show Interviews Daughter Who Turned In Mom For Ponzi

    A grand jury has returned an indictment against a suburban Philadelphia man, accusing him of operating a Ponzi scheme that gathered at least $95 million and fleeced investors of more than $25 million.

    Charged criminally with mail fraud and money-laundering was Donald Anthony Young, who also has been sued by the SEC.

    Meanwhile, Matthew Pizzolato has pleaded guilty in a separate Ponzi case targeting senior citizens in Louisiana, prosecutors said.

    Pizzolato, 26, of Tickfaw, pleaded guilty to 21 counts of mail fraud, three counts of money-laundering, and single counts of wire fraud, securities fraud and witness tampering. In all, Pizzolato pleaded guilty to 27 felonies. He also was sued by the CFTC.

    At the same time, accused Ponzi schemer Jeffrey Lane Mowen has lost his monstrous collection of vehicles in Utah. The U.S. Marshals Service began selling the 210-vehicle collection at auction yesterday — April Fool’s Day.

    Marshals were authorized to sell the cars because the bill to store them cost $21,000 a month. Mowen, 47, was arrested in Panama in 2009, extradited to the United States and jailed in Utah on Ponzi charges. He later was charged in an alleged murder-for-hire plot in which he was accused of trying to recruit a fellow prisoner to kill witnesses in the Ponzi case.

    The auction had been delayed twice, but proceeded yesterday. It was billed by Erkelens & Olson Auctioneers as the “Largest collection of Muscle, Collector & Exotic vehicles ever [offered] in Utah!”

    Elsewhere, NBC’s “Today” show this morning featured a daughter who turned in her mother in a Ponzi scheme. The mother ultimately was not charged because authorities came to view her as a victim who had been recruited to sell the scheme.

    Authorities busted the California scheme, operated by Pastor Robert Jennings and Henry Uliomereyon Jones, a magnetic figure. The affinity-fraud scheme involved investments in coal and a bogus international gold deal.

    Jones was arrested in Hong Kong and extradited to the United States. He and Jennings were convicted last year.

    Kim Flanigan told Today that she reached her limit when she observed her mother, a widow, trying to recruit a widow with nine children into the Ponzi scheme. Both widows attended the same church.

    “That was my breaking point,” Flanigan told Today. (See link to story below. NBC’s “Dateline” program will feature Flanigan tonight 9 EDT.)

    In the Donald Anthony Young case in Pennsylvania, prosecutors said Young stole from investors so he could live in the lap of luxury.

    “Ponzi schemes are usually a vehicle for an unscrupulous person to live high off of someone else’s wealth,” said U.S. Attorney Michael L. Levy. “According to the indictment, this defendant helped himself to others’ fortunes, living a life of luxury, with little or no regard for the damage to our financial markets, our economy, and the reputation of the investment advisors who follow the rules.”

    A veteran FBI agent said the agency was committed to destroying Ponzi fraud.

    “The FBI views these types of financial investment Ponzi fraud schemes as significant criminal problems, because of the devastating effect they have not only on the individual victims who are preyed upon but also the effect they have on financial markets and on the overall economy,” said Janice K. Fedarcyk, special agent-in-charge of the Philadelphia Division of the FBI.

    Prosecutors and agents involved in the Pizzolato case, meanwhile, also said Ponzi fraud will not stand in the United States.

    “[Pizzolato’s]  plea demonstrates our resolve, along with our partners in federal law enforcement, including the FBI, IRS and U.S. Postal Inspection Service, to aggressively investigate and pursue those economic predators who seek to take advantage and prey upon the most vulnerable among us, including our senior citizens who most desperately need our protection,” said U.S. Attorney Jim Letten.

    Letten thanked the Office of the Louisiana Commissioner of Securities for its assistance in the Pizzolato case.

    An FBI agent said the case sends a signal.

    “This guilty plea represents once again, the FBI’s resolve to aggressively investigate financial crimes which victimize our most vulnerable citizens,” said David Welker, special agent in-charge. “It is reprehensible that Mr. Pizzalotto would target senior citizens and defraud them of their life’s savings. The FBI, along with our law enforcement partners, will continue to identify and investigate frauds such as this.”

    An IRS investigator said authorities would leave no stone unturned to expose financial fraudsters.

    “This investigation shows that the appearance of success can be a mask for a tangled financial web of lies,” said Michael J. DePalma, special agent in-charge of the IRS New Orleans’ office.

    “No matter what we call this type of crime, the bottom line is that Mr. Pizzolato robbed over a hundred investors of more than $19 million and spent just about all of it,” DePalma said. “Special Agents of IRS Criminal Investigation will continue to work with our federal and state law enforcement partners and the United States Attorney’s Office to pursue evidence of criminal activity wherever it leads, leaving no financial stone unturned.”

    Visit the Today show site to read about Flanigan’s experience.

  • BULLETIN: Trevor Cook Charged Criminally With Mail Fraud And Tax Evasion In Alleged $190 Million Ponzi Case In Minnesota

    BULLETIN: Trevor Cook, the reputed head of a $190 million Ponzi scheme in Minnesota, has been charged criminally with mail fraud and income-tax evasion.

    Cook, 37, previously had been charged civilly by the SEC and the CFTC. The criminal charges filed today came after a probe by the FBI and the IRS Criminal Investigations Unit, working with the regulatory agencies.

    Prosecutors alleged Cook filed a false tax return in 2009, failing to report report taxable income of at least $5.2 million “upon which there was tax due in the amount of at least” $1.8 million, prosecutors said.

    Cook was charged via a criminal information, rather than an indictment. Such charging documents sometimes mean a defendant is negotiating with prosecutors.

    Prosecutors said Cook was “aided and abetted by others” in a scheme that fleeced at least 1,000 people “out of at least $190 million by purportedly selling investments in a foreign currency trading program,” prosecutors said.

    “In reality,” prosecutors continued, “he was diverting the money provided him for other purposes, including making payments to previous investors; providing funds to Crown Forex, SA, in an effort to deceive Swiss banking regulators; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses, including substantial gambling debts; and acquiring the Van Dusen Mansion in Minneapolis.”

    The mansion has been sold by R.J. Zayed, the court-appointed receiver in the civil case. Zayed also has sold large-screen TVs and automobiles linked to the scheme, including a Rolls-Royce.

    Prosecutors said the Cook case was being tackled by the Financial Fraud Enforcement Task Force, which President Obama formed late last year.

    U.S. Attorney B. Todd Jones of  the District of Minnesota made the announcement of the criminal charges against Cook.

    Cook has been in jail since January as a result of a contempt of court order in the civil case, which was brought by the SEC and the CFTC.

    Former Christian radio host Pat Kiley also was charged in the civil case.

    The narrative of the Cook story occasionally has played out like a James Bond movie, with references to a submarine, an island retreat, Faberge eggs and foreign currency purportedly acquired by Cook with fraud proceeds.

    A real-estate agent ventured to Cook’s island in Canada during the winter on a snowmobile to get the lay of the land, according to court filings.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Mueller did not name any companies in his Congressional testimony.

  • Astonishing Case Of Bank Fraud Alleged In New York; Charles J. Antonucci Sr. Charged With Bilking Pastors, TARP Program — And The Bank He Led

    Acting Assistant Director in Charge of the FBI’s New York Office George Venizelos announces the arrest.

    EDITOR’S NOTE: At the moment, I don’t have the time to do this story justice. The allegations, however, are astonishing. And law-enforcement officials at both the state and federal level  are calling it another case that has been solved by the Interagency Financial Fraud Enforcement Task Force.

    A New York man has been arrested on charges he tried to prop up a failing bank while fleecing two Florida church pastors and attempting to defraud the Troubled Asset Relief Program (TARP) operated by the government — all while stealing from the bank itself.

    The charges against Charles J. Antonucci Sr. read like a work of fiction, painting him as a man who engaged in one deception after another, received first-class transportation on a private plane by approving millions of dollars in overdrafts by a co-conspirator, pocketed money that did not belong to him  and hatched a complex scheme to fleece taxpayers.

    Investigators said all of these things occurred:

    • The Park Avenue Bank in New York was failing.
    • It was seized by the FDIC and New York banking regulators Friday.
    • Prior to the seizure, Antonucci, who served as the bank’s president and chief executive officer from June 2004 to October 2009 and also was a member of the board of directors, engaged in “self-dealing, bank bribery and embezzlement.”
    • Antonucci and a co-conspirator participated in an investment scheme that fleeced the pastors of  Calvary Springs Chapel in Coral Springs, Fla. out of $103,940 by making them believe they could earn back the principal and a profit of about $500,000 in weeks by investing in a bond. The pastors, who were investing the funds to build a new church, deposited the money into an account in the name of “Park Avenue Insurance.” The account proved to be owned by Antonucci, who split the proceeds with his co-conspirator and did not pay the interest promised the church.
    • Antonucci was at the center of a fraud in which he caused the bank to lend a company he owned $400,000 by installing a puppet president to hide his ownership of the firm, which was called “Easy Wealth Group Ltd.” The puppet president applied to the bank for a $300,000 line of credit, and Antonucci personally approved it, later increasing it to $400,000. The puppet president drew down the entire line, causing the bank a loss of the entire sum.
    • Antonucci approved overdrafts totaling more than $8 million tied to an entity of a co-conspirator. (The FBI cryptically referred to this co-conspirator as “CC-1,” an associate of Antonucci’s and part of the “Oxygen-related entities.”) In 2008 and 2009, Antonucci flew on the co-conspirator’s private plane more than 10 times, including trips to Florida, Panama, Arizona (to attend the Super Bowl), and Augusta, Ga. (to attend the Masters golf tournament). When a check from one of the “Oxygen” entities bounced in 2009 — apparently because Antonucci did not intervene — Antonucci was told he no longer could fly on the private plane.
    • Antonucci caused Park Avenue Bank to lease and pay expenses and upkeep on three properties he personally owned. Each of the properties was in Fishkill, N.Y. The bank had no legitimate need for two of the properties.
    • Antonucci tried to calm depositors’ concerns about the bank by saying he personally had pumped in $6.5 million. The money he invested, however, came from a series of loans the bank had made to businesses that had relationships with Antonucci. Those businesses then routed the money to Antonucci, who re-deposited the money back into the bank.
    • Antonucci lied to the FDIC about the source of the $6.5 million.
    • Antonucci tried to get $11 million in TARP funds, based on his purported, personal capital infusion of $6.5 million. He issued a false press release about the purported infusion, saying the bank was “well-positioned.”
    • The FDIC declined the bank’s TARP application. Antonucci then lied, saying he had withdrawn the application because of “issues” with TARP and because he did not want to create the “market impression” the bank was weak because it had accepted TARP funds.
    • To conceal the $6.5 million fraud, Antonucci created a bogus certificate of deposit in the amount of $2.3 million and engaged in an elaborate deception involving at least two companies to conceal the fraud.

    Read the FBI news release.

  • BULLETIN: CFTC Busts 2 Alleged Ponzi Schemes; Patrick H. Rakotonanahary Arrested By FBI In Florida After Financial Fraud Enforcement Task Force Probe

    A Florida man has been arrested by the FBI on 21 counts of wire fraud amid allegations he operated a forex Ponzi scheme, collecting more than $10.2 million and pocketing $1 million for himself.

    The announcement of the arrest of Patrick H. Rakotonanahary, 34, of  Punta Gorda, Fla., was made in Hawaii after a joint probe by the FBI, the Commodity Futures Trading Commission (CFTC), and the State of Hawaii Department of Commerce and Consumer Affairs (DCCA).

    His arrest was credited to a joint investigation by the agencies, which operated under the umbrella of the Interagency Financial Fraud Enforcement Task Force, the FBI said.

    President Obama formed the task force in November.

    “[I]nstead of using investor money to engage in Forex trading, Rakotonanahary primarily paid investment returns to earlier investors with investment funds from later investors as part of a ‘Ponzi scheme,’ using only about $1,864,000 for Forex trading, which generated losses of $814,806,” the FBI said. “Rakotonanahary used approximately $8,375,703 to pay investment returns and another $1 million personally.”

    Most of Rakotonanahary’s 100 investors hailed from Hawaii, the FBI said.

    Separately, CFTC announced yet another Ponzi case — this one in North Carolina.

    The agency charged Dennis Todd Hagemann and Yellowstone Partners Inc., both of Raleigh, with operating a forex Ponzi scheme involving the fraudulent solicitation of at least $700,000 from at least nine individuals.

    Hagemann was arrested and jailed by North Carolina state authorities.

    In yet another bizarre Ponzi twist, CFTC said Hagemann purported to have a tie to former Russian Federation President Boris Yeltsin.

    Hagemann failed to inform a potential investor “that Mr. Yeltsin is deceased, and was deceased at the time he made the representation,” CFTC said.