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Tag: FBI

  • FBI Arrested Ponzi Suspect Aboard Jet Preparing For Flight To ‘Overseas’ Destination Last Month; Tarakeswar Chaudhary Taken Off Emirates Airlines Plane

    Federal agents and airport police have arrested a man suspected of operating a Ponzi scheme and fleecing investors in a fraudulent Google stock offering, the FBI said.

    Tarakeswar “Tarak” Chaudhary, 49, of Tustin, Calif., was arrested last month at San Francisco International Airport after he boarded an Emirates Airlines flight bound for an “overseas” destination, the FBI said.

    U.S. Marshals now have returned Chaudhary from San Francisco to Santa Ana to face the charges.

    Emirates Airlines is wholly owned by the government of Dubai and flies to 100 cities in 62 countries across the Middle East, Africa, the Indian Subcontinent, Europe, the Far East, South America and North America, according to its website.

    “Chaudhary was removed from an Emirates Airlines flight bound overseas at the time of his arrest,” the FBI said.

    Chaudhary, 49, operated a company known as Transpacific Intertrade Inc. He was charged with mail fraud in U.S. District Court in Santa Ana, Calif., on Dec. 7.

    “[He] defrauded victims by promising to invest their money in initial public offerings and secondary share offerings by companies such as Google, Inc., when in fact, no such investments were made,” the FBI and Acting U.S. Attorney George S. Cardona said.

    At least three victims “are believed to have provided over $3 million to Chaudhary,” the FBI said.

    As part of the scheme, Chaudhary mailed forged statements on Morgan Stanley letterhead to at least one victim from whom Chaudhary obtained $1 million,” the FBI said. “The forged statement indicated that stock purchases had been made through a Morgan Stanley account, when in fact, no such account existed.

    In make investors feel safe, Chaudhary “lulled” them by fabricating “the identity of a financial advisor at Morgan Stanley,” the FBI said.

    “Chaudhary told at least one victim that his investment of $995,000 was gone and that he had also defrauded at least 20 people out of a total of $10 million or more,” the FBI said. “Chaudhary recently admitted to another victim that he was running a Ponzi scheme and that he had not invested any of the victims’ money.”

  • California Man Who Tried To Flee Country While His Ponzi Was Disintegrating Sentenced To Prison; John Anthony Miller Was Targeted In FBI/State Department Sting

    A California man who tried to adopt the identity of a deceased classmate from his school days to flee the United States while his Ponzi scheme was unraveling has been sentenced to 159 months in federal prison.

    The FBI and the State Department already were aware that John Anthony Miller’s scheme was falling apart when they targeted him in a sting in November 2008.

    Miller, who was convicted in 1998 of racketeering “predicated on mail fraud, wire fraud, and securities fraud offenses” was operating a Ponzi scheme a decade later through a company known as JAM Jr. Enterprises of Newport Beach, Calif., according to the criminal complaint in the case. Miller, 52, lived in San Clemente.

    Working with an informant, an FBI agent who also was an attorney and a former clerk for a judge on the U.S. Court of Appeals for the Third Circuit, set up a sting operation. Miller’s telephone calls with the informant were recorded as the scheme was collapsing.

    Miller sought the informant’s help in obtaining a passport to a country that did not have an extradition treaty with the United States, according to the complaint. Using a story that a family friend knew a corrupt passport official, the informant set up a meeting between Miller and the purportedly corrupt official, who was actually an undercover officer from the U.S. Department of State.

    <!–adsensestart–>Miller agreed to pay $20,000 for the passport, with $5,000 paid up front and the balance of $15,000 upon delivery of the passport. Miller paid the undercover officer $5,000 in cash that had been stuffed in an envelope. He then filled out a passport application that used the identity of his deceased classmate, according to the complaint.

    Worried about his ability to honor redemption requests in the Ponzi scheme, Miller told the informant that he had been “meditating” since 2007 over whether it was best to “hide out in the United States or abroad” and had contacted at least one other individual about obtaining a “fake identity,” according to the complaint.

    By October 2008, according to the complaint, Miller needed between $4 million and $5 million to meet redemption requests and did not have the money. He was worried about “tense” people who could bring him unwanted attention “quick” and wondered how long it would take for the FBI and the SEC to respond to complaints about him if “someone pull[s] the trigger.”

    Miller ultimately concluded it was best to flee the country. After using Ponzi proceeds to pay the undercover agent the $5,000 deposit  required for the bogus passport in November 2008, Miller was told it would take seven to 10 days for the documents to be prepared. He provided two photographs of himself, and used the name, Social Security number and date of birth of his deceased Catholic school classmate in the application.

    FBI agents who had been keeping Miller under surveillance arrested him while he was preparing to flee. He was charged with mail fraud (for bogus statements he sent to investors), bribery, passport fraud and identity fraud. He pleaded guilty last year.

    Investors lost more than $15 million in the scheme, which also involved a Miller company known as Forte Financial Partners.

    “Miller promised investors ‘guaranteed’ annual returns of between 10 percent and 18 percent per year, telling investors that their money would be invested in foreign currency trading, oil wells, real estate and other vehicles,” prosecutors said.

    Some investors raided their IRAs to invest with Miller, who promised better returns, prosecutors said.

  • Hedge-Fund Manager With ‘Great Tan’ And Porsche ‘Getaway Car’ Sentenced To Decade In Prison For Ponzi Scheme; Judge Scolds Bradley L. Ruderman At Sentencing

    After Bernard Madoff’s Ponzi scheme was exposed in December 2008, Beverly Hills hedge-fund manager Bradley L. Ruderman wrote a letter to clients assuring them them their money was safe and deploring Madoff’s “chicanery,” federal prosecutors in the Central District of California said.

    “[S]uch disgraceful practices will never happen under my watch,” Ruderman declared in the letter.

    Less than five months later — on April 28, 2009 — the SEC charged Ruderman, 46, with defrauding investors and lying about his Ruderman Capital Partners and Ruderman Capital Partners “A” hedge funds.

    Ruderman had  falsely told investors that Lowell Milken, chairman of the Milken Family Foundation and Michael Milken’s younger brother, and Larry Ellison, chief executive officer of Oracle Corp., invested with him, the SEC said.

    And “Ruderman falsely told investors that the hedge funds had earned positive returns from 15% to 60% per year and had over $800 million in assets,” the SEC said. “In reality, the hedge funds lost money and had less than $650,000 in assets.”

    Criminal charges followed in May 2009. In August 2009, Ruderman pleaded guilty to two counts of wire fraud, two counts of investment adviser fraud and one count of not filing a tax return for 2007, a year in which he earned $2 million.

    He was sentenced yesterday, and U.S. District Judge John F. Walter admonished Ruderman.

    “He stole from individuals he knew for many years, who cared about him, had invited him into their homes and shared meals with him, who had known him since he was a child,” Walter said.

    Ruderman family members and friends lost $25 million in the scheme, prosecutors said.

    When Ruderman wrote the letter assuring investors he was no Madoff and that their accounts were safe, the judge said, “he was stealing their money.”

    After hearing a statement from a victim that Ruderman was no different than a convenience-store thief or bank robber except he had “committed his crimes with manicured nails, a great tan, wearing an Armani suit and the getaway car was a Porsche that his victims all paid for,” Walter sentenced Ruderman to 121 months in federal prison.

    Given the recent “staggering increase” in investor-advisor frauds, Walter said, he wanted to “send a message that these crimes will result in significant prison sentences.”

    FBI agents who reverse-engineered the crime determined Ruderman had lost “$5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.”

    Meanwhile, the investigation revealed that Ruderman, like Madoff, had sent investors bogus account statements. At the same time, it revealed he had spent had spent at least “$8.7 million of investor money on personal expenses, including $200,000 each summer for a rented beach house in Malibu, two Porsches, $53,930 on sporting events, $896,000 in credit card charges and $327,000 in cash expenditures.”

    Walter ordered Ruderman to pay nearly $26 million in restitution to victims. The FBI and IRS conducted the criminal probe.

  • SAN DIEGO COUNTY: Man On Probation For Ponzi Scheme Starts New Scheme, Prosecutors Say; Edmundo Rubi Targets Filipino Community For Second Time

    Four California residents have been indicted on charges they targeted the Filipino Community of Greater San Diego in a foreclosure-rescue investment scam prosecutors have dubbed the “Apocalypse Trust” and “Amerisian Trust” scheme.

    Edmundo Rubi, one of the defendants, was on federal probation for the infamous “Knights Express” Ponzi scheme that fleeced Filipino investors out of $24 million when he started the new scheme, said San Diego County District Attorney Bonnie M. Dumanis.

    “Rubi brazenly ignored the conditions of his parole and went right back to committing the same types of crimes,” said Dumanis.

    Planning for the new scheme reportedly got under way while Rubi was serving a 70-month-sentence in federal prison for the “Knights Express” Ponzi, which affected at least 425 investors.

    Rubi, 52, was on supervised release when arrested in the new scheme.

    Also indicted were Joseph Encarnacion, 59, Benjamin Hebron, 51, and Gloria Hebron, 53. The defendants were charged with 54 felony counts, including Conspiracy to Commit Securities Fraud, Securities Fraud, Sale of Unqualified Securities, Grand Theft, Perjury, Foreclosure Consultant Fraud and Rent Skimming.

    “Mr. Rubi’s recidivism into this type of crime demonstrates his disregard for engaging in legitimate business practices,” said Keith Slotter, FBI Special Agent-in-Charge.

    Investigators said 22 “Apocalypse Trust” and “Amerisian Trust” participants quit-claimed 34 properties into various fraudulent trusts, owned by Rubi and administered by Ben and Gloria Hebron.

    Instead of assisting homeowners in foreclosure, the defendants stole their money or did not apply money as advertised, according to the indictment. Rubi lied about his criminal history.

    “Rubi and Encarnacion recruited former victims of the ‘Knight Expresss’ Ponzi scheme” into the quit-claim scheme, prosecutors said. The terms of his probation prohibited him from “from having any contact with investors or financial accounts.”

    In the Knights Express scheme, investors were told they were investing in a “secret international trading program” in which Federal Reserve notes were purchased and sold at discounted rates, prosecutors said in 2003.

    In the “Apocalypse Trust” and “Amerisian Trust” scheme, investors were coerced into signing a “Non-Disclosure & Confidentiality Agreement,” according to the indictment.

  • KA-BOOM! SEC Files Emergency Action In Alleged Richard Elkinson ‘Uniform’ Ponzi Scheme; U.S. Attorney General Warns Fraudsters, ‘You Are Writing Your Ticket To Jail’

    Ka-boom! A federal judge has frozen the assets of alleged Ponzi schemer Richard Elkinson, accused of fleecing investors in Massachusetts by telling them he brokered deals for government uniforms and uniforms worn by Olympic athletes.

    Meanwhile, the attorney general of the United States ventured to Florida today and gave a dramatic speech at the Forum Club of the Palm Beaches. The speech was important symbolically — indeed, Florida is awash in a sea of Ponzi and mortgage-fraud schemes — and Holder wanted to reassure the noontime crowd of 700 that the government was doing everything it could to restore faith in the markets.

    But the speech also was important politically. The Obama administration wanted to showcase its new Interagency Financial Fraud Enforcement Task Force, which the President announced in November, and Holder chose Florida to drive home the message that Ponzi schemers, mortgage fraudsters and financial criminals are going to have many sleepless nights in the months ahead.

    “To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned. “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.”

    Even as Holder was delivering his remarks, the SEC announced that it had sued Elkinson in an emergency action in Massachusetts that complemented the FBI’s criminal action in the case, dubbed a “Mini-Madoff” because it allegedly was both a Ponzi scheme and a case of affinity fraud that targeted Jewish investors.

    Court records show that the FBI was working the case on Christmas Eve, even as the government was shutting down for the holidays. Records also show that Massachusetts Secretary of State William Galvin sent a team of investigators to conduct interviews and to get to the heart of the matter while Massachusetts residents were doing their last-minute holiday shopping.

    State and federal agencies now have filed three separate actions in the Elkinson case. Elkinson, 76, was arrested at a casino in Biloxi, Miss., fresh off a trip to casinos in Las Vegas. The FBI said he had conducted at least $3.7 million in transactions at the Las Vegas casinos since 1998 and that investors in his Ponzi scheme were out $29 million.

    The SEC said today that Elkinson had “no relationship” with a uniform manufacturer based in Japan. Elkinson had told investors he had an exclusive arrangement and that only he was permitted to do business with the manufacturer.

    “Unfortunately, it was all make-believe,” the SEC said in its complaint. “Elkinson had no
    relationship with a Japanese uniform manufacturer, and there were no contracts to purchase uniforms. While some investors did receive payments of principal and interest, those payments were made using funds obtained from other investors, and Elkinson was able to keep the scheme going as long as most of the investors kept rolling over their investments.”

    Elkinson’s purported contracts to provide uniforms for government workers also were “fictitious,” the SEC said.

    The current attack on financial crime by law enforcement may be unprecedented. Holder said today that the FBI is investigating 2,800 cases of mortgage fraud, up a staggering 400 percent from 2005 case totals.

    In his Palm Beach remarks, Holder also dropped the names of Ponzi schemers.

    “Palm Beach is, in many respects, ground zero for the $65 billion Ponzi scheme perpetrated by Bernard Madoff — the largest investor fraud case in our nation’s history,” the attorney general said. “Before the house of cards Madoff built collapsed in 2008, before he was sentenced to 150 years in prison last June, before he became a notorious criminal on the cover of newspapers around the world, he was one of your neighbors.

    “His former home sits just north of us,” Holder continued. “An 8,700-square-foot mansion that’s worth . . . well, we’ll know what its worth once the U.S. Marshals Service auctions it off and the proceeds are distributed to Madoff’s victims.”

    Holder also mentioned the Ponzi cases of Tom Petters of Minnesota, Allen Stanford of the United States and Antigua and disbarred Florida attorney Scott Rothstein of Fort Lauderdale.

    “I’m proud that these men, along with more than 450 others convicted of corporate and securities fraud in 2009, have been taken out of the game,” Holder said.

    In Massachusetts, U.S. District Judge Joseph L. Tauro issued a temporary restraining that froze Elkinson’s assets. Tauro also entered an order freezing all proceeds of the misconduct held by others, and an order prohibiting the acceptance of additional investor funds.

    At the same time, Tauro ordered an accounting of assets and issued an order prohibiting the alteration or destruction of documents.

    The orders in the SEC case — as well as the legal action filed earlier this week by Galvin — bottle up any profits made by people who helped Elkinson promote the scheme.

    Holder said the law-enforcement community is fighting back against people who have licensed themselves to steal.

    “They’ve robbed people of their homes and their economic security,” Holder said.  “They’ve depleted bank accounts and pension funds.  In some places, they’ve dried up philanthropic giving and shuttered charities.  They’ve placed unfair challenges before cash-strapped governments, local police departments, small businesses, and American workers and consumers.”

  • Now, A ‘Concert’ Ponzi Scheme: FBI Says Miko Dion Wady Of Arizona Claimed Bogus Tie To The Rolling Stones, Barbra Streisand, Mary J. Blige To Lure Investors

    If this were Forrest Gump and the subject were Ponzi schemes instead of shrimp, Benjamin Buford “Bubba” Blue might say something along these lines:

    There are ‘advertising’ Ponzi schemes, ‘printing’ Ponzi schemes, CD Ponzi schemes, ‘billboard’ Ponzi schemes, Ponzi schemes claiming that ‘uniforms’ are being purchased for prisons and police agencies, ‘Big-Box Retailer’ Ponzi schemes, real-estate Ponzi schemes, ‘kiosk’ Ponzi schemes, ‘autosurf’ Ponzi schemes, ‘HYIP’ Ponzi schemes, ‘Charitable Giving’ Ponzi schemes, commodities-trading Ponzi schemes, precious-metal Ponzi schemes, and insurance Ponzi schemes. That . . . that’s about it.

    Except the FBI said today it was not.

    Today the FBI announced a “concert” Ponzi scheme, saying Miko Dion Wady, 34, of Chandler, Ariz., and others gathered at least $50 million from 250 investors by telling them he promoted concerts for some of the top acts in the world.

    Here is the short list:

    • The Rolling Stones.
    • U2.
    • Barbara Streisand.
    • Faith Hill.
    • Tim McGraw.
    • Mariah Carey.
    • George Strait.
    • Billy Joel.
    • Jamie Foxx.
    • Jimmy Buffet.
    • Mary J. Blige.
    • Pearl Jam.

    The trouble with the claim, the FBI said, was that Nady “had no association or contractual arrangement with any of the significant concerts or tours.”

    In fact, the FBI said, “Wady appears to have actually promoted fewer than 10 concerts, all involving only local or lesser known artists.”

    Victims may be out $25 million, the FBI said.

    Wady, according to the FBI, represented that he “operated and had an ownership interest in various business enterprises that purportedly were engaged in the business of promoting concerts or tours of well known entertainers and artists.”

    Among the enterprises were Dezert Heat Entertainment Inc.; Dezert Heat Inc.; Dezert Heat Worldwide LLC; NATO Enterprises LLC; and NATO Entertainment LLC. Investors typically were promised interest rates of 4 percent per month for a maximum of six months or 24 percent for one promoted event, the FBI said.

    When the Ponzi scheme collapsed in 2007, about 140 victim investors still had not been repaid their outstanding “investment” loans of approximately $25 million, the FBI said.

    Between 2004 and March 2007, the FBI said, “Wady used no less than $3 million of victim investor funds to pay for a lavish personal lifestyle.”

    Wady bought at least 30 vehicles for himself and others, including a Lamborghini, a Ferrari and a Bentley, the FBI said. He also purchased a $175,000 luxury boat and $800,000 in real estate.

    Wady was arrested yesterday in Tempe, Ariz. He was indicted on 37 counts of wire fraud and transactional money laundering.

  • Massachusetts Man, 76, Becomes Latest Senior Citizen Implicated In Ponzi Scheme; Richard Elkinson Accused Of $29 Million Fraud; Investigators Find Millions Of Dollars In Las Vegas Casino Transactions

    A Massachusetts man has been arrested in Mississippi and charged with orchestrating a $29 million Ponzi scheme by tricking people into believing they were investing in a company that provided uniforms for the Winter Olympics, the Pan American games and the government.

    Ironically, Richard Elkinson told investors he provided prison uniforms — and also uniforms for police officers, federal prosecutors said.

    It was not immediately clear how much of Elkinson’s purported uniform business was legitimate. Investigators say the Ponzi scheme might have been operating for 20 years before flaming out in December.

    The FBI was working the case on Christmas Eve, according to the criminal complaint. After securing purchase orders claiming the states of Connecticut and Georgia were among Elkinson’s customers, an agent called the phone numbers on the purported purchase orders.

    “In each instance, I encountered ‘disconnected’ messages,” the agent said.

    The investigation also revealed that Elkinson had an affinity for Las Vegas and claimed to have credit lines of $25,000 each at the Venetian, MGM Grand and Caesars Palace casinos.

    Elkinson, 76, of Framingham, was charged with mail fraud. The SEC and the Securities Division of the Massachusetts Secretary of State are assisting in the probe.

    Records in Las Vegas casinos show that Elkinson had “conducted a total of more than $3.7 million in currency transactions over $10,000” since 1998, prosecutors said. The Ponzi scheme began to collapse last year, and Elkinson missed a meeting with investors in December, and stopped answering his phone.

    Records suggest he was at the Wynn casino in Las Vegas Dec. 22, and canceled a reservation at the Venitian Dec. 23.

    The Alleged Scheme

    One of the elements, according to the complaint, was that the purported Japanese garment manufacturer, which purportedly had an office in Chatsworth, Calif., would do business with only Elkinson “personally,” a possible signal that agents believe Elkinson was attempting to keep investors from asking too many questions or performing thorough due diligence.

    In 2003 or 2004, according to the FBI, Elkinson showed investors a 1998 letter purportedly written by “Alan Shimuka” on the California office’s letterhead that said, “My Honorable Father, once again, requires me to state that we do business with Mr. Richard Elkinson of Northeast Sales.”

    “Elkinson allegedly represented that his business involved entering into contracts directly with large purchasers (such as government entities), in which Elkinson had to pay 50 percent of the contract amount as a down payment to the manufacturer in order to initiate the manufacturing process,” prosecutors said.

    “[U]pon completion and delivery of the uniforms, Elkinson reported that he would receive payment from the purchasing entity,” prosecutors continued. “[He] claimed that banks were unwilling to lend funds to his business based upon unexecuted contracts, so he needed to borrow a portion of the funds required to pay the 50 percent down payments.”

    As has been common in recent Ponzi schemes, Elkinson lulled investors with promissory notes, prosecutors said. In his specific case, Elkinson’s notes “generally required repayment within a term of 330-360 days, and with interest rates that ranged from 9 percent to 13 percent.

    “Upon maturity of the notes, investor/lenders were given an option to take a return of their principal and interest, to take interest only, or to roll the principal and interest over into a new note,” prosecutors said.

    In April or May of 2009, Elkinson began to default on the notes, providing investors “a variety of excuses,” prosecutors said.

    Among the excuses was that Elkinson’s wife was ill and he had to accompany her to Houston for treatment. Elkinson also told investors that government budgetary problems at the state level were delaying payments.

    The wheels fell off in December, when Elkinson missed a meeting with two investors and stopped answering his cell phone.

    In the early stages of the probe, investigators have identified about 130 investors and calculated that Elkinson owes them $29 million.

    U.S. Attorney Carmen M. Ortiz said that prosecutors will post information on a website to update victims. Here is the website:

    http://www.usdoj.gov/usao/ma

    Victims may also call the U.S. Attorney’s Office’s victim assistance toll-free number at 888-221-6023 to obtain status information.

  • SENIORS HARMED: Judge Issues Findings In CFTC Case Against Matthew B. Pizzolato; Says Investors Lost Retirement Savings In Scheme

    A Louisiania man charged criminally in an alleged Ponzi scheme and sued civilly on the same day last month lied to investors, some of whom liquidated retirement savings and annuities only to suffer massive losses by entrusting funds to Matthew B. Pizzolato, a federal judge has ruled.

    The case against Pizzolato is proceeding on separate tracks: a criminal prosecution by U.S. Attorney Jim Letten with the help of the FBI, the IRS, the U.S. Postal Inspection Service and the State of Louisiana Office of Financial Institutions, and a civil prosecution brought by the Commodity Futures Trading Commission.

    U.S. District Judge Mary Ann Vial Lemmon of the Eastern District of Louisiana now has extended an asset freeze, enjoined Pizzolato from breaking commodities laws and issued some findings in the civil case.

    Pizzolato is  26. He formerly resided in Tickfaw.

    Among Lemmon’s findings were that Pizzolato and his co-defendants in the civil case — William Guidry, 35, of Plano. Texas, and Jacksonville, Fla., and Capital Funding Consultants LLC of Covington, La. — ripped off senior citizens. Guidry and Capital Funding’s assets also have been frozen, and they have been enjoined from breaking the law.

    “Specifically, the order finds that Pizzolato, as part of a broader scheme in which he solicited $19.5 million, obtained more than $3.1 million from 24 mostly elderly investors, which he gave to Guidry to invest,” CFTC said.

    “Despite representing to these elderly investors that their funds would be invested in safe, secure investments with guaranteed rates of return, Pizzolato gave the funds to Guidry to trade high risk commodity futures, among other things,” CFTC continued. “The order also finds that Guidry and Capital Funding misappropriated more than $221,815.53 of investor funds for personal purposes, and used some of those misappropriated funds to trade commodity futures in accounts owned by Capital Funding. The investors were not told about Guidry’s commodity futures trading losses. The order further finds that Guidry and Capital Funding commingled commodity pool participants’ funds with the funds of other persons.”

    In the criminal case, which is being heard by U.S. District Judge Lance M. Africk, Pizzolato was charged with 52 counts of mail fraud, two counts of wire fraud, seven counts of money laundering, and single counts of securities fraud, obstruction of justice and witness tampering.

    He faces more than 1,100 years in prison and a fine of more than $16 million, if convicted on all counts. As many as 160 people were duped, prosecutors said.

    Prosecutors said Pizzolato attempted to silence employees with bribes of $20,000 and get them to destroy records to cover up the scheme. Meanwhile, they said Pizzolato obstructed justice by stealing documents that could incriminate him from the home of a client.

    Among the luxury items Pizzolato purchased with investors’ money were a BMW 750LI, a Mercedes Benz S430V, a Range Rover Sport and a Chevrolet Corvette, prosecutors said. He also bought sports tickets, a $35,000 engagement ring, a $500,000 home in Ponchatoula, La., and spent $35,000 on Carnival cruises.

    All in all, Pizzolato took about $19.5 million from clients and spent “nearly all” of it, prosecutors said.

  • Alleged Jeffrey Mowen Ponzi Creates Storage Problem For U.S. Marshals Service; Huge Auction Scheduled In Utah

    This 1986 Panther Kallista and at least 239 other vehicles are on the auction block in Utah.A Utah man arrested in Panama on Ponzi charges, brought back to the United States to stand trial and later implicated in a murder-for-hire plot owned so many cars and motorcycles that the U.S. Marshal’s Service has been given permission to sell them prior to the trial.

    Jeffrey Lane Mowen had acquired more than 200 vehicles through his Ponzi, real-estate and forex scheme, federal prosecutors said. The Salt Lake Tribune reported that the U.S. Marshal’s Service had been paying $20,000 a month just to store the seized assets and that a judge agreed that the storage costs were depleting the amount of money victims would receive.

    Mowen was indicted under seal in February 2009. When the indictment was unsealed April 21, authorities said Mowen was “living outside of the United States.”

    That changed quickly. He was arrested just three days later in Panama “by Panamanian authorities in conjunction with the FBI Legal Attache office,” the FBI said.

    Mowen was jailed in Davis County, Utah. In November, a new indictment was issued, charging him

    Jeffrey Lane Mowen

    with wire fraud, solicitation to commit a crime of violence, witness tampering and retaliating against a witness.

    Prosecutors said Mowen, 47, of Lindon, Utah, hatched a plot while jailed to hire a fellow prisoner to kill four witnesses in the Ponzi scheme case upon the inmate’s release from prison.

    The Utah vehicle auction is billed by Erkelens & Olson Auctioneers as the “Largest collection of Muscle, Collector & Exotic vehicles ever [offered] in Utah! Over 240 Units to be sold in 2 auctions.”

    See a Nov. 19 story on Mowen.

    Visit the auctioneers’ website.

    Visit the Salt Lake Tribune.

  • Michigan Men Who Urged Victims Not To Cooperate With FBI Sentenced To Prison In Oil-And-Gas Ponzi Scheme

    ponziblotterTwo Michigan brothers who urged investors in their oil-and-gas Ponzi scheme not to cooperate with the FBI have been sentenced to prison.

    Eric Riley Merkle, 55, and Jay Vernon Merkle, 53, both of Williamston, Mich., were sentenced to 10 years in federal prison for conspiracy, securities fraud, mail fraud and wire fraud. They also were ordered to pay their victims nearly $21.6 million in restitution.

    U.S. District Judge Robert Holmes Bell said the crime was deplorable because the Merkles traded on faith to recruit church members into their scheme.

    Prosecutors said they created a firm known as Platinum Business Industries (PBI), telling investors PBI would use their money to fund oil and gas exploration in Oklahoma. The company advertised returns of 6 percent a month or 300 percent over three to five years.

    Despite their claims that the money would be invested in oil and gas exploration, the Merkles instead “put the investors’ money in high-risk schemes unrelated to oil and gas in the United States and overseas, and lost it,” prosecutors said.

    A substantial amount of the funds was used “to pay off their previous investors in another oil-and-gas Ponzi scheme involving more than a dozen fraudulent shell corporations,” prosecutors said. “The Merkles perpetuated the illusion that their sham corporations were profitable by using new investors’ funds to pay ‘earnings’ to earlier investors.”

    The scheme ensnared more than 600 victims, many of whom lost their life savings, prosecutors said.

    Even after state and federal investigators opened a probe into the business affairs of the brothers, the Merkles “continued to raise money under false pretenses,” prosecutors said.

    The brothers then blamed the government for their predicament, lying to investors by telling them their money “was being ‘held up’ by U.S. and foreign government agencies,” prosecutors said.

    That’s when an already-underhanded scheme turned took a turn for the worse, with the Merkles instructing investors to “wire a total of over $1 million to Nigeria, Ghana, and other countries for ‘fees’ associated with releasing their money,” prosecutors said.

    Investors then were urged not to cooperate with the FBI, with the Merkles “suggesting that such cooperation would jeopardize their repayment,” prosecutors said.

    “Judge Bell noted that the crime was especially serious in that the Merkle brothers abused their affinity with church members and extended family to gain their confidence,” prosecutors said.

    U.S. Attorney Donald A. Davis said the FBI and the U.S. Postal Inspection Service played important roles in the case.

  • Virginia Attorney Whose License Was Revoked After Firm Wrote Bad Checks For Huge Sums Convicted In Ponzi Scheme; Troy Titus Faces Up To 590 Years In Prison

    ponziblotterThese are some trying times for the legal profession. Disbarred Florida attorney Scott Rothstein is implicated in an alleged $1.2 billion Ponzi fraud in which prosecutors said attorneys from his shuttered, 70-attorney firm in Fort Lauderdale were getting paid from Ponzi proceeds that flowed from bogus “settlements” in cases involving sexual harassment or sexual infidelity.

    And now a federal jury in Virginia has found former attorney Troy A. Titus, 43, guilty of running a real-estate Ponzi scheme and other fraud schemes that fleeced clients out of more than $7 million.

    Titus was found guilty of 33 charges. He faces up to 590 years in prison. Sentencing is scheduled April 15 before U.S. District Judge Raymond A. Jackson.

    “[A] jury found Troy Titus stole millions from people who trusted him to protect their investments,” said U.S. Attorney Neil H. MacBride of the Eastern District of Virginia. “[His] conviction is a testament to the ability of our law enforcement partners to tackle complicated investment and mortgage fraud cases. Especially in the light of the recent economic crisis, we are even more determined to work together to aggressively fight financial fraud in this district.”

    A veteran FBI agent said enough is enough.

    “[W]e will continue to target those who, motivated by greed, prey on honest investors and damage our country’s financial confidence,” said A.J. Turner, special-agent-in-charge of the FBI’s Norfolk field office.

    Titus’ law license was revoked by the Virginia State Bar in 2005 after an investigation revealed a continuing pattern of writing bad checks for tremendous sums. Between November 2002 and May 2005, according to records, Sun Trust Bank and Monarch Bank notified both Titus and the Virginia Bar about 15 overdrafts on accounts Titus had the responsibility of maintaining.

    The Virginia Bar, which initially gave Titus an opportunity to right the ship after he explained that his accounting systems lacked controls and that he had taken corrective measures and hired a CPA, later determined he had engaged in a continuing pattern of “ethical misconduct” when more bad checks surfaced.

    Even after the CPA produced evidence and showed Titus in August 2004 that statements reflected that a key Titus account had a balance of $2.177 million, that checks totaling $4.746 million had been written on the account and that the account had an adjusted negative balance of $2.569 million, Titus pooh-poohed the situation and continued to overdraft the account by tremendous sums.

    Titus eventually was charged criminally. In March 2009, a superseding indictment was issued by a grand jury, accusing Titus of dozens of counts of fraud, including Ponzi fraud.

    “Titus approached clients or seminar participants and induced them into investing money with him to purchase and rehabilitate real estate, promising to return the money at a later date with a high rate of interest,” prosecutors said. “However, Titus obtained many of the real properties involved through fraud or transferring the properties into trusts controlled by him. Instead of using the funds as promised, Titus directed the investment income toward paying business or personal expenses, backfill investment losses, and at times to make token payments or repay previous investors.”

    The disgraced lawyer also took advantage of “elderly or incapacitated clients who provided him with income intended to be held in trust and took steps to conceal those uses from those who inquired about the management of the trust,” prosecutors said.

    Trial evidence and testimony “showed that Titus failed to make payments for the trust clients’ basic medical and housing needs,” prosecutors said. “Titus engaged in a similar scheme to defraud involving real estate closing funds he held in trust.”