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Tag: FBI

  • WELCOME TO PLANET CYBERFRAUD, U.S. REGION: IC3 Report Shows Tremendous Surge In Dollars Lost To Online Scams; Nevada, Utah, Florida, D.C. Among Cyberscam Capitals

    Dollar value (in millions) of fraud referred for investigation by IC3 between 2007 and 2009. Source: IC3 2009 Internet Crime Report.

    Welcome to the rapidly evolving world of Planet Fraud, U.S. Region — or, more precisely, the U.S. Region of Planet Cyberfraud, the electronic web of deceit that often exists out of view and is sucking wealth at an alarming pace.

    Its capitals last year, according to a new report from The Internet Crime Complaint Center (IC3), included California, Florida, New York, Texas, Washington and the District of Columbia, with cyberfraud — viewed on a per-capita basis — particularly concentrated in D.C., Nevada, Washington, Montana, Utah and Florida.

    People who complained about fraud — and the fraudsters they complained about — most often did not live in the same state. Complainants often weren’t able to identify the state in which a fraudster resided, according to the report.

    Countries mentioned in the IC3 report include the United States, United Kingdom, Nigeria, Canada, Malaysia and Ghana. The report focuses on reports to IC3’s website, which operates in the United States.

    Highest, per-capita concentration of cyerfraud in the United States in 2009. Source: IC3 2009 Internet Crime Report.

    Not even law enforcement was immune from attacks by cybercriminals. The most common complaint that IC3 received last year was about an email scam in which the perpetrators used the name of the FBI — one of the world’s premier police agencies — “in an effort to gain information from the target,” IC3 said.

    IC3 is a partnership between the FBI and the National White Collar Crime Center (NW3C).

    “The figures contained in this report indicate that criminals are continuing to take full advantage of the anonymity afforded them by the Internet,” said NW3C Director Donald Brackman. “They are also developing increasingly sophisticated means of defrauding unsuspecting consumers. Internet crime is evolving in ways we couldn’t have imagined just five years ago.”

    IC3 placed the dollar losses in cases it referred for investigation last year at $559.7 million, up more than double from 2008’s figure of $264.6 million. The number of complaints in 2009 surged to 336,655, up 22.3 percent from 2008’s total of 275,284.

    Peter Trahon, section chief of the FBI’s Cyber Division, reissued the age-old warning:

    “[I]f something seems too good to be true, it likely is,” Trahon said. He added that computer users should ensure they have “up-to-date security protection on their devices and evaluate e-mail solicitations they receive with a healthy skepticism.”

    Why? Various appeals for money and various rogue attempts to corrupt computers by installing unwanted software and malicious code, including misery delivered by fake pop-up ads that “directed [victims] to purchase anti-virus software to repair their computers.”

    In some instances this resulted in viruses, Trojans, or key loggers being downloaded onto victims’ computers, IC3 said.

    Some highlights of the report:

    • In 2009, IC3 received several complaints presenting a new spin on the media coined “Hitman Scam,” a type of email extortion scheme. Victims are reportedly being threatened in an attempt to extort money. The victim receives an email from a member of an organization such as the “Ishmael Ghost Islamic Group.”
    • One of the components of crime committed via the Internet that makes investigation and prosecution difficult is that the offender and victim may be located anywhere in the world. This is a unique characteristic not found with “traditional” crime.
    • Another popular scam of 2009 involved unsolicited calls regarding fraudulent “government stimulus money.” IC3 received numerous complaints from victims receiving unsolicited telephone calls with a recorded message. The recorded voice message reportedly sounds very much like President Barrack Obama discussing alleged government funds available for those who apply.
    • IC3 received numerous complaints about work-at-home scams and survey scams related to online job sites.
    • Of the complaints involving financial harm that were referred to law enforcement, the highest median dollar losses were found among investment fraud ($3,200), overpayment fraud ($2,500), and advance fee fraud ($1,500).

    Read the IC3 Internet Crime Report for 2009.

  • Secret Service, FBI, IRS Raid Steve Renner’s INetGlobal Operations In Minneapolis; Scene Resembled AdSurfDaily Raid In Florida

    UPDATED 10:40 A.M. ET (U.S.A.) Federal and state agents have raided the Minneapolis offices of Inter-Mark Corp., seeking evidence of a Ponzi scheme, the Star Tribune of Minneapolis/St. Paul is reporting.

    Inter-Mark Corp. is operated by Steve Renner, who also operates a purported “advertising” service known as INetGlobal. In a scene that resembled the August 2008 raid at the headquarters of Florida-based AdSurfDaily, agents in Minnesota were seen carting boxes of documents and computers.

    ASD was implicated in a $100 million Ponzi scheme.

    Renner has been under investigation for at least 17 months and likely longer. He was indicted on charges of tax evasion in September 2008, about a month after the ASD raid. He was convicted in December 2009 of evading more than $332,000 in taxes between 2002 and 2005.

    Renner, 54, “diverted substantial funds from his business, Cash Cards International (CCI), between 2002 and 2005 to pay his personal living expenses as well as to make personal investments in coins, oil wells, art, stamps, and vintage musical instruments,” prosecutors said in December.

    He also used CCI funds to promote his musical band, “Stevie Renner and the Renegades,” prosecutors said.

    “From 2001 to 2006, Renner owned CCI, an Internet-based stored-value card and money
    transmission business, with locations in Minnesota, South Dakota, and Hawaii,” prosecutors said. “Although he was legally obligated to file federal income tax returns and pay all federal taxes owed, he failed to file his income tax returns with the Internal Revenue Service for tax years 2002 through 2004 until March 5, 2006, the date on which he also filed his 2005 federal income tax return.”

    “Tax evasion is not a victimless crime,” said Julio La Rosa of the IRS, upon Renner’s conviction.

    “Honest, hardworking taxpayers pay the price when others choose to evade their tax obligations,” La Rosa said. “As this verdict shows, those that cheat will get caught.”

    Renner faces up to 20 years in federal prison in the tax case.

    Renner also is associated with a domain known as AdPacs.com, which is throwing a server error. It is believed that AdPacs promoters also promoted the AdViewGlobal (AVG) autosurf, which had close ties to ASD.

    Affiliates of Steve Renner's AdPacs.com pushed AdViewGlobal just prior to its February 2009 launch. This screen shot of search result that appeared online more than a year ago lists the name of Juan Fernandez, the CEO of AdSurfDaily. ASD is implicated in a $100 million Ponzi scheme. AVG launched AFTER the federal seizure of tens of millions of dollars in the ASD case. Like ASD President Andy Bowdoin, Fernandez took the 5th Amendment at an evidentiary hearing in September 2008. Now, Renner's company is the subject of a major federal probe. ASD sold "ad-packs." AVG referred to its version of "ad-packs" as "viewer impressions" after the phrase "ad-packs' became radioactive.

    As was the case with the ASD raid in Florida, local media caught the events at Renner’s office yesterday on video. Minnesota has been plagued by Ponzi schemes. Some ASD members from Minnesota have been among the loudest advocates for ASD President Andy Bowdoin.

    The Minnesota Financial Crimes Task Force assisted in the raid.

    Earlier this month, the Secret Service announced the formation of an Electronic Crimes Task Force (ECTF) based in Memphis. The agency also has ECTFs in St. Louis, Kansas City, New Orleans and Europe.

    “One of the top priorities for the Secret Service continues to be combating the computer
    related crimes perpetrated by domestic and international criminals that target the U.S.
    financial infrastructure,” said Secret Service Director Mark Sullivan.

    “The Secret Service, in conjunction with its many law enforcement partners across the United States and around the world, continues to successfully combat these crimes by working closely with experts from all affected sectors to constantly refresh and adapt our investigative methodologies.”

    Read the Star-Tribune’s coverage of the Steve Renner raid.

  • ANOTHER FLORIDA FRAUD CONVICTION: Michael J. Muzio Ran ‘Pump-And-Dump’ Scheme In Case Tied To Ponzi And Affinity-Fraud Scheme Targeting Haitian-Americans

    A Florida man implicated in a pump-and-dump scheme tied to a Ponzi- and affinity-fraud scheme has been convicted and faces decades in federal prison.

    Michael J. Muzio, 46, of Tampa, was convicted on six counts of securities fraud, two counts of substantive wire fraud, two counts of lying to the SEC and the FBI and one count of conspiring to commit wire fraud.

    Muzio’s pump-and-dump scheme is linked to the alleged Home Pals Investment Club Ponzi and affinity-fraud scheme involving Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri.

    Bass, Alabre and Taglieri were accused civilly and criminally of targeting Haitian-Americans in a $14.3 million scheme.

    Alabre, 33, of Miramar, Fla., and Taglieri, 39, of Jupiter, Fla., already have pleaded guilty to criminal charges, which were brought in October 2009. Bass and Alabre were accused by the SEC of fooling investors by saying Taglieri was Home Pals’ attorney, but Taglieri is not an attorney, according to records.

    Muzio defrauded Haitian-American and other investors in South Florida and elsewhere “by manipulating” the stock price of International Business Ventures Group (IBVG), a Florida shell company “with no assets and virtually no business activities,” prosecutors said.

    IBVG purportedly was operated from Palm Beach Gardens. Last month, U.S. Attorney General Eric Holder described the Palm Beach area as the “ground zero” of financial fraud. Holder ventured to Palm Beach to make a speech and introduce the Obama administration’s Financial Fraud Enforcement Task Force.

    The manipulation scheme was carried out through “coordinated stock purchases and sales designed to artificially impact share prices,” the FBI said.

    “To induce investors to purchase the stock, [Muzio] created a false impression that an active market for the stock existed by engaging in illegal ‘wash trades’ in which he simultaneously entered buy orders through one brokerage account under his control and offsetting sell orders at the same price through another brokerage account under his control.

    “These trades had no real economic effect, but the defendant’s brokers unwittingly reported the trading activity and potential investors who saw the online reports were misled into believing that the stock was actively traded at the quoted prices,” the FBI said.

    As often is the case in pump-and-dump schemes, Muzio “issued false and misleading press releases” claiming that the company had profitable business dealings.

    Muzio claimed IBVG “had deals to provide and offer prepaid debit cards in Haiti,” as well as prepaid calling cards and “exclusive rights to market prepaid electric meters in Haiti,” the FBI said.

    “Investors were offered the chance to purchase free-trading shares of stock, but then received certificates for restricted shares which could not be traded and ultimately proved to be worthless,” the FBI said.

    Home Pals advised website viewers that the company was “honest” and adhered to “uncompromising ethics,” the SEC said.

  • DEVELOPING STORY: Plane Hits 7-Story Building In Austin; Injuries Reported; IRS Said To Have Office In Building

    UPDATED 12:54 P.M. ET (U.S.A.) An airplane reported to be “small” has crashed into a seven-story building in Austin, the state capital of Texas.

    NBC affiliate KXAN is reporting that at least two people have been injured, that the FBI and the Bureau of Alcohol, Tobacco, Firearms and Explosives are on the scene, and that an office of the Internal Revenue Service is located in the building.

    The building is known as the Echelon Building. Firefighters are on the scene. The crash occurred in North Austin.

    MSNBC has a live feed of KXAN’s coverage. The station is reporting that the plane was flying “very low” at a high rate of speed.

    Meanwhile, Fox News is reporting that the incident is being investigated as an “intentional act.”

    CNN, quoting a “federal official,” is reporting that the suspect in the case set his home on fire this morning, stole the plane and crashed it into the building.

  • Ohio Attorney Charged In Ponzi Scheme And Tax Case Indicted For Failure To Show At Trial; Dale Zucker On The Lam Since Jan. 26; U.S. Marshals Investigating

    A Cleveland attorney with ties to Texas and Florida has been indicted for failure to appear at his trial in a Ponzi scheme case, federal prosecutors said.

    Dale P. Zucker, a medical-malpractice and personal-injury attorney who practiced in Cleveland and Chagrin Falls, was indicted in August 2009 for mail fraud and filing false tax returns. The FBI said Zucker “fraudulently induced approximately 19 current or former clients of his law practice and other acquaintances to invest in businesses that did not exist.”

    Zucker’s trial was scheduled to begin Jan. 26 in Cleveland, but he did not show. Prosecutors now say he has been indicted for failing to appear.

    Zucker “knowingly and intentionally failed to appear,” prosecutors said, adding that the indictment was handed down after an investigation by the U.S. Marshals Service.

    Losses in the Ponzi scheme case totaled more than $702,000, prosecutors said. Zucker’;s law firm was known as Dale P. Zucker L.P.A.

    Zucker, prosecutors said, “lulled investors into a false sense of security by mailing them promissory notes that guaranteed the return of their initial investment at an interest rate of 10 percent to 25 percent, depending on the investor.”

    He also tricked investors by “providing them with post-dated checks for their principal investment and interest,” prosecutors said.

    In the Ponzi case, Zucker was charged with filing false tax returns for the years 2003, 2004 and 2005, and not reporting income of $588,000 in those tax years..

  • STOP THE MADNESS: Now, AmberAlertHelp.org; Narc That Car Promoters Continue To Link Company To Legacy Of Amber Hagerman

    Two days ago, we wrote about FindThatCar.org, a website with a red banner at the top that appeals to visitors to “Help us,” as though it were promoting a charity such as the Red Cross.

    FindThatCar.org actually is promoting Narc That Car, a Dallas-based multilevel-marketing  (MLM) company that is building a database to sell information to companies in the business of repossessing automobiles. Both Narc That Car and its promoters reference the AMBER Alert program in their sales pitches.

    Today we turn your attention to AmberAlertHelp.org. It, too, is selling Narc That Car. Here’s the AmberAlertHelp.org pitch on the site’s main page (italics added):

    Welcome to Amber Alert Help

    Our goal is to build awareness about an opportunity for you, your friends, and your family to get paid for helping build the Amber Alert system database simply by submitting 6 random license plate numbers per month online. It is so easy, and you can get started now.

    Here is the pitch on a secondary AmberAlertHelp.org page (italics added):

    We Joined Narc That Car and feel wonderful about having the ability to:

    • Help find and save missing children
    • Help build the very valuable Amber Alert system database
    • Make extra money easily

    AmberAlertHelp.org also has an AmberAlertHelp.com version of the domain. Both sites were registered Jan. 20, two days after the BBB in Dallas asked Narc That Car to explain its business practices. The inquiry is still open, according to the BBB website.

    The U.S. Department of Justice, which coordinates the AMBER Alert program, said Wednesday that Narc That Car is in “no way affiliated” with the program. On Thursday, the National Center for Missing & Exploited Children (NCMEC), which manages the Amber Alert Secondary Distribution Program for the Justice Department and 120 Amber Alert coordinators throughout the United States, said Narc That Car “is not a part” of the secondary program.

    Nine-year old Amber Hagerman was abducted 14 years ago while riding her bicycle in Arlington, Texas. She was brutally murdered. The AMBER Alert program — America’s Missing: Broadcast Emergency Response — is her legacy.

    AMBER Alert is about keeping children safe. It is not about keeping the world safe for multilevel-marketing profits. AMBER Alert’s name should be accorded the same dignity accorded Amber Hagerman’s name, which is to say neither name ever should be made part of a pitch fest.

    That AMBER Alert’s name is being mentioned in sales pitches for Narc That Car is beyond the pale. AMBER Alert is about life-altering emergencies. It is not about MLM recruiting and pocketing commissions up to five levels deep.

    Good grief. Narc That Car promoters are using .org extensions — the same extensions used by the Red Cross, the Salvation Army and NCMEC for their noble purposes — to promote a business that is building a database for the repo man — and they are implying it is a public service.

    Today we call on Narc That Car to remove references to AMBER Alert from its marketing materials, including videos. We further call on Narc That Car promoters to do the same.

    Not only are some Narc That Car promoters repeatedly referencing AMBER Alert, they also are referencing government agencies such as the FBI and the Department of Homeland Security as though the agencies have endorsed the Narc That Car program.

    One Narc That Car promoter claims the purpose of the program is “To help The US Dep’t of Homeland Security find terrorists.” Another claims, “We are backed by the better business bureau, the F.B.I., and the Amber Alert system . . . ” Yet another claims, “A company out of Dallas needs to grow a data base of license plates to use for Amber Alerts and other reasons.”

    Elsewhere, a website that uses a name similar to the famous ToysRUs trade name, references AMBER Alert and tells viewers that big money is possible through Narc That Car.

    “I went to Walmart,” a video narrator intones at the PlatesRUs.biz website. “It took me every bit of five minutes to write down 10 tag numbers randomly, go in my back office and log it into the national database through the company, and actually earn a check.”

    This madness must stop.

  • FBI Makes Ponzi Arrest In California; Peter Jerald Frommer Faces Up To 233 Years Behind Bars If Convicted On All Counts

    UPDATED 5:23 P.M. ET (U.S.A.) A California man has been arrested by the FBI and IRS criminal investigators in an alleged Ponzi scheme involving $12 million.

    Peter Jerald Frommer was taken into custody this morning, after a federal grand jury returned a 17-count indictment yesterday.

    Frommer, 34, formerly of Malibu, was charged with two counts of mail fraud, seven counts of wire fraud, five counts of money laundering and three counts of failing to file federal income-tax returns.

    Prosecutors said he faced a maximum sentence of up to 233 years in prison if convicted on all counts.

    “Frommer operated a bogus investment scheme under the names ‘Cap Exchange’ and ‘Cap X’ that purported to trade in surplus property of defunct companies,” prosecutors said. “[He] told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices.”

    Between January 2004 and August 2006, prosecutors said, Frommer allegedly solicited “at least $12 million from victims by promising ‘guaranteed’ returns of 8 percent to 15 percent during cycles as short as six weeks.”

    Investors were told Frommer would use their money “to buy the distressed assets for Cap X, and then would share profits from the subsequent sales,” prosecutors said.

    “In addition to personal promissory notes, Frommer issued account statements that purported to show returns in the Cap X investment,” prosecutors said.

    More than 50 investors were targeted in the scheme, including residents of California, Oregon, Virginia, Illinois and Massachusetts, prosecutors said.

    Frommer did not purchase distressed assets with the victims’ money, prosecutors said.

    “Instead, [he] allegedly misappropriated this money to maintain his lavish personal lifestyle and to make Ponzi payments to victims, while falsifying Cap X account statements to lull victims into believing that their money was safe and earning high returns,” prosecutors said.

    It has been a busy week for Ponzi prosecutors in California.

    Miguel Salazar, 36, of West Covina, pleaded guilty to mail fraud Tuesday. Prosecutors said Salazar ran a Ponzi scheme “that took nearly $700,000 from victims who thought they were investing in latex gloves, which were portrayed as being in high demand following the 9/11 terrorist attacks.”

    Salazar’s former partner, Carlos Flores, 43, of Lakewood, pleaded guilty to mail fraud in December.

    In other Ponzi news, an auction company is preparing to sell six vehicles linked to the alleged Trevor Cook/Pat Kiley Ponzi and financial-fraud scheme in Minnesota.

    Among the items set to go up for bid Feb. 13 is a 1989 Rolls Royce Silver Spur linked to Cook. The Cook/Kiley scheme is alleged to be a fraud of at least $190 million.

    In Utah, meanwhile, prosecutors said that Jeffrey Lane Mowen — accused in both a Ponzi scheme and a murder-for-hire plot in which potential Ponzi witnesses were to be killed — used Morse code as part of the murder plot.

  • FBI: Investigators ‘Wrapping Up’ Decade-Long Probe Into ‘Pump And Dump’ Penny-Stock Schemes That Caused ‘Hundreds Of Millions’ In Losses

    Source: FBI

    UPDATED 2:46 P.M. ET (U.S.A.) And to think a cheerleader for AdSurfDaily once boasted online that Megalido was “offshore” and therefore safe from government meddling, after earlier suggesting that ASD members who did not support the company after Ponzi allegations surfaced perhaps would get dragged off in handcuffs while supporters remained free.

    To further chill ASD defectors, the cheerleader even shared his version of lyrics from the television program “COPS.”

    “Bad Boys, Bad Boys, Whatcha Gonna Do?” he chanted on the now-defunct AdSurfZone forum, a predecessor site to the Pro-ASD Surf’s Up forum. “Whatcha Gonna Do>WHEN<THEY COME FOR YOU ?!!!”

    Could an adult be so out of touch he actually believed law enforcement did not have a clue about how fraudsters operate and had no experience at all investigating intricate and elaborate crimes that touched all 50 U.S. states, Canada, the Caribbean and other parts of the world?

    The plain answer is yes.

    Even as the apologist chanted, however, the FBI was in the seventh year of one of the most intricate and exhaustive probes in its history, a history that dates back to 1908.

    Now the FBI, which has 456 satellite offices in the United States and 60 offices overseas, says it is “wrapping up” a penny-stock investigation “that was so massive it took the better part of a decade to unravel.”

    Operation “Shore Shells” included probes into 40 separate schemes and, to date, has resulted in 40 convictions, the agency said. The FBI and partner agencies chose the “Shore Shells” name because the probe originated on New Jersey’s Atlantic coast and involved “fake” companies or “shell” firms.

    Targeted in the probe were CEOs, stock brokers, CPAs, financial advisers and attorneys who conspired to pump up the price of penny stocks with bogus news releases, false postings on Internet forums and fraudulent information delivered in newsletters, the FBI said.

    Perhaps the most notable conviction to date was that of Robert P. Gordon, 57, of
    St. Petersburg, Fla. Gordon was sentenced in New Jersey to 20 years in prison, after a jury found him guilty of conspiracy to commit securities and wire fraud and conspiracy to commit money-laundering.

    Investors lost $15 million in the pump-and-dump scheme, which included company names such as TeleServices Internet Group Inc. (TSIG) and Phoenix Information Systems Inc.

    “Gordon and several of his co-conspirators executed fraudulent agreements between TSIG and offshore entities, which they secretly controlled,” prosecutors said. “Typically, the offshore entities were located in the Cayman Islands.”

    The elaborate scheme involved fraudulent consulting agreements with other entities, and co-conspirators “caused millions of shares of the TSIG stock to be issued in the name of the entities,” prosecutors said. The conspirators attempted to skirt securities laws, and
    fraudulently received shares that were laundered in Canada and the United States.

    “Afterward, the ill-gotten proceeds were often laundered by wire transferring those funds from the brokerage accounts to an attorney trust account located in Denver and then dispersed to the co-conspirators,” prosecutors said.

    Investors dump their life savings into pump-and-dump schemes, which deliberately are designed to be elaborate to line the pockets of insiders.

    Now the FBI has disclosed some details about the victims — the people the AdSurfZone poster would have ASD members believe were the “Bad Boys” for not cheerleading for the international scammers.

    Here, according to the FBI, are some victims’ stories in brief:

    • A man suffering from multiple sclerosis. His stockbroker liquidated the man’s pension and IRA, “and left him nearly penniless.”
    • A woman who invested her savings and pension. She also took out a second mortgage to bolster her stake, and “lost everything.”
    • A husband and wife who both developed dementia during the probe. FBI agents spent hours with the victims and their family members at a nursing home, while also meeting with the victims’ accountants to reverse-engineer their losses.
    • A physician from a “prestigious hospital.” The doctor “began suffering from severe depression after learning of the scam and became unable to work.”

    As operation “Shore Shells” expanded, it grew to include more than 100 seizure and forfeitures actions totaling more than “$70 million in cash, artwork, jewelry, homes, cars, and other valuables.”

    The real “Bad Boys” have been ordered to pay more than $130 million in restitution.

    “We expect millions more to be forfeited and repaid to the victims,” the FBI said. “We spent years interviewing more than 600 mainly elderly victims, painstakingly documenting their sometimes heartbreaking losses.”

    Others convicted in operation “Shore Shells” include Gary Brown, 61, of Sarasota, Fla.; Joseph Morgan, of St. Pete Beach, Fla.; and Gary Brown, also of Florida, for their roles in a scheme involving a company known as Skylynx Communications.

    Brown pleaded guilty to conspiracy to commit securities fraud, wire fraud, and money laundering. His sentencing is set for for May 7.

    “At his plea hearing, Brown admitted that beginning in May 2002 and continuing through October 2005, he operated a sophisticated scheme, involving more than five co-conspirators, which used deceptive and manipulative practices in connection with the fraudulent issuance, purchase, and re-sale of shares of stock of Skylynx Communications,” prosecutors said.

    More than 50 Skylynx investors were defrauded. Brown admitted that he conspired with Morgan, who already has been sentenced to two years in prison, and McPhee, whose sentencing is pending, prosecutors said.

    Brown agreed to forfeit about $650,000, as part of his plea.

    Read more about operation “Shore Shells” and pump-and-dump schemes.

  • IT’S OFFICIAL: Scott Rothstein Is A Racketeer; Disbarred Lawyer Pleads Guilty, Forfeits $1.2 Billion; FBI Cites ‘Red Flags,’ IRS Cites ‘Lies’

    Disbarred Florida attorney Scott Rothstein has pleaded guilty to a racketeering conspiracy that included mail fraud and wire fraud, and to two separate counts of wire fraud.

    “Today’s guilty plea is an important step in bringing to justice those who perpetrated a $1.2 billion Ponzi scheme under the guise of operating a legitimate law firm,” said U.S. Attorney Jeffrey H. Sloman.

    The case is far from over, even with the plea, Sloman said.

    “The U.S. Attorney’s office will continue to pursue all leads and evidence as they are uncovered,” Sloman said. “Rest assured, those who are criminally culpable will be held accountable. Victims can also take comfort in knowing that the United States will do everything it can to identify, seize and equitably refund fraud proceeds.”

    Rothstein, 47, of Fort Lauderdale, forfeited $1.2 billion, 24 pieces of real estate, luxury cars such as Bugattis, Rolls-Royces and Cadillacs, yachts, shares in businesses and more. He faces a maximum sentence of 100 years in prison.

    The elaborate Ponzi fraud included bogus legal settlements, forged court documents, fraudulent promissory notes, fraudulent campaign donations and gratuities paid to “high ranking members of police agencies,” prosecutors said.

    A senior FBI agent said Rothstein charmed millions and millions of dollars from investors.

    “Scott Rothstein used a classic approach to mislead investors — an ostentatious lifestyle, a charismatic personality and guarantees of sky-high returns — all red flags in the world of Ponzi schemes,” said FBI Special Agent in Charge John V. Gillies.

    “It is a lesson for all investors to learn that they need to look beyond the hype,” Gillies said.  “We will continue to work with our partners to investigate investment fraud schemes.”

    A senior IRS investigator said Rothstein traded on appearances.

    “This case shows that the appearance of success can be a mask for a tangled financial web of lies,” said Daniel W. Auer, IRS Special Agent in Charge. ‘This investigation is not over, as we are committed to ‘following the money trail.’  We will continue to pursue the evidence wherever it leads, leaving no financial stone unturned.”

    Rothstein’s sentencing is scheduled for May 5.

  • PONZI UNIVERSE: Just How Weird Will It Get? Spammer With Possible ASD Ties Tries To Post News Release In 10 Separate PP Threads; Elsewhere, A ‘Comic Book’ Ponzi Scheme

    On a day a federal judge ordered alleged Minnesota Ponzi schemer Trevor Cook jailed — in part for not turning over a two-passenger submarine allegedly purchased on eBay with Ponzi proceeds — the following things happened:

    • A would-be PP Blog poster attempted to post the same news release about AdSurfDaily mainstay “Professor” Patrick Moriarty in 10 separate threads over a span of 26 minutes. The early indications are that the spammer was associated with both the alleged ASD Ponzi scheme and Gold Nugget Invest (GNI), an HYIP that tanked earlier this month after advertising tax-free returns of 7.5 percent a week. (One poster after another on the Ponzi boards has defended GNI, saying the program was “real” and “honest” because it paid. The same defenses have been uttered for ASD.)
    • The FBI announced the Ponzi scheme arrests of two Greater Chicago men, alleging they had met in federal prison while serving time for previous fraud schemes. After they emerged from prison, they started a Ponzi scheme involving comic books and movies that bilked investors out of $4 million.

    Just how crazy are things going to get in the Ponzi universe? It’s a universe that already includes figures associated with bizarre litigation centered on bizarre claims they are immune from U.S. law because they are adopted members of “Indian” tribes purported to be “sovereign” and that their sovereignty not only is absolute, but also is portable; figures who claim Ponzi schemes are legal as long as participants get “paid”; figures who claim the presence of convicted felons in one scheme after another is mere coincidence; figures who claim prosecutors are not permitted Constitutionally to interfere with commerce even if the commerce is illegal; figures who believe the United States passed secret legislation in the 1990s in anticipation of a visit by reptilian aliens; figures who claim the answer to Ponzi schemes that plague America is even more Ponzi schemes.

    First, a few paragraphs about the would-be serial poster on the PP Blog earlier today:

    We were working on a story this afternoon when our Comments Box in the Blog’s administrative panel began to bulge from spam from a would-be poster. We always check the spam box several times a day in case our filter flags a legitimate comment as spam. When we took a peek this afternoon, the filter had collected 10 consecutive posts from the same sender.

    Each of the would-be posts was targeted at separate Comments threads below stories. Each was a duplicate of a Justice Department news release on “Professor” Patrick Moriarty’s guilty plea to tax charges earlier this month, a story we covered 15 days ago. (If you’re new to the PP Blog, Moriarty was a member of the alleged ASD Ponzi scheme. His tax case was separate from the alleged scheme masterminded by ASD President Andy Bowdoin, and Moriarty is not listed as a defendant in the ASD Ponzi case. He became notable, however, for advancing a theory that the ASD prosecutors had interfered with commerce. Moriarty also once established a nonprofit entity in the name of a man accused of murdering a woman in cold blood and shooting a Missouri police officer four times.)

    In any event, none of the threads the would-be poster selected to copy and paste the news release pertained to Moriarty. Near as we can tell, the poster may have a link to both the alleged ASD scheme and the GNI “arbitrage” program, an HYIP that tanked recently. The would-be poster did not include an actual comment with his copy-and-paste news release; he simply copied and attempted to paste it in 10 separate threads over a period of 26 minutes.

    The first attempt occurred at 3:03 p.m. ET; it was followed by attempts at 3:24 in two separate threads; 3:25 in two separate threads; 3:26 in a separate thread; 3:27 in two separate threads; 3:28 in a separate thread; and 3:29 in a separate thread.

    As often is the case with ASD, the question is why. Based on a preliminary analysis of data, we believe the would be-poster was a member of the now-defunct Surf’s Up forum, a Pro-ASD site that railed against the government and advocated on behalf of Ponzi schemes. Surf’s Up went missing earlier this month. A forum with Surf’s Up ties that had advocated for a surf known as AdViewGlobal (AVG) went missing last summer — after AVG, which had close ASD ties, suspended payouts.

    We’ll update readers on the would-be serial poster if we develop more information. At the moment, the data suggest his effort is connected in some form or fashion to this story. His name may or may not be “joe.”

    Turning now to the alleged “comic book” Ponzi scheme, the FBI said it operated in the Chicago area and was known as Sundown Entertainment Inc.

    Charged with wire fraud in the case were Daniel Parrilli, 59, of Carol Stream, and Christopher Andersen, 59, of Westmont.

    Parrilli and Anderson allegedly met while serving time for fraud in federal prison earlier this decade.

    The alleged Parrilli/Andersen Ponzi scheme was the second to touch Carol Stream in recent weeks. On Jan. 8, the SEC charged Steve Salutric, 51, a church treasurer, with operating a Ponzi scheme by raiding the Charles Schwab accounts of clients of Results One Financial LLC.

    Salutric is accused of misappropriating at least $1.8 million in clients’ funds, including more than $400,000 from a 96-year-old woman with dementia. The woman, identified by the SEC as “Client A,”  resided in a nursing home.

    Fearing his fraud was about to be exposed, Salutric began to approach clients with offers to pay them “hush money,” the SEC said.

  • California Man Guilty In $62 Million Ponzi Scheme; Milton Retana Targeted Latinos, Ordered Evidence To Be Hidden In Back Of Religious Bookstore

    In yet another case in which the name of a precious metal or mineral was used in a Ponzi scheme, Milton Retana has been found guilty of six counts of mail fraud and one count of lying to federal investigators.

    Evidence of the fraud was hidden in the back of a religious bookstore operated by Retana’s wife, prosecutors said. When investigators searched the bookstore, they found millions of dollars in cash, prosecutors said.

    Retana, 46, of Huntington Park, Calif., faces a maximum of up to 125 years in prison. Sentencing is set for April 26. Investigators said he operated Best Diamond Funding, a Ponzi, affinity-fraud and real-estate investment scheme that fleeced more than 2,000 victims out of more than $62 million.

    Best Diamond was located next door to the bookstore. The FBI and U.S. Postal Inspection Service smashed the scheme, prosecutors said.

    Jurors returned the verdict in less than an hour, after a week-long trial. Dozens of victims appeared in court to hear the verdict, prosecutors said.

    Beginning in 2006, Retana told investors their money would be used to buy and sell real estate. He targeted mostly a Spanish-speaking audience, and used religion in his pitches, prosecutors said.

    “Retana guaranteed returns as high as 84 percent each year, claiming that he would purchase properties in bulk at below-market prices and immediately sell them for a profit,” prosecutors said.

    But records showed Retana “used only a tiny fraction of the victims’ money to purchase real estate and that his company was actually losing money,” prosecutors said.

    As often is the case in investment schemes, victims “mortgaged their homes and drained their retirement accounts because they believed Retana’s promises that their investments would be safe,” prosecutors said.

    Among the victims were a stone mason, a truck driver and a roofer. The roofer also was the pastor of his church.

    The scheme nearly was detected in 2008, when the California Department of Real Estate audited Best Diamond, prosecutors said.

    Retana, though, stymied the probe “by ordering his employees to hide all of the investor files at the back of his wife’s religious bookstore, La Libreria Del Exito Mundial.

    “His scheme was disrupted in October 2008, when federal agents from the United States Postal Inspection Service and the Federal Bureau of Investigation executed search warrants on the offices of Best Diamond Funding and the bookstore,” prosecutors said.

    Agents found $800,000 in cash stashed in Retana’s desk and $3.2 million in cash hidden in the back of the bookstore. Investigators seized another $8 million from Retana’s bank accounts.

    “Soon after the execution of the federal search warrants, agents interviewed Retana, who lied about how much money he had received from the investors and claimed that he could pay all of them back,” prosecutors said. “Retana was later secretly recorded telling a Best Diamond employee not to tell the government how much money Best Diamond had received from the investors.”