Updated 2:45 P.M. EDT (April 16, 2014) The SEC has sued the operators of an alleged Ponzi scheme in Florida — and federal prosecutors have filed criminal charges.
In its announcement of the prosecution against Joseph Signore of West Palm Beach and Paul L. Schumack II of Pompano Beach, the SEC provided a link to a YouTube video used by the alleged scammers. Separately, the office of U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida said the scheme gathered about $70 million from investors nationwide.
Schumack, according to the SEC’s civil complaint, solicited investors by touting his military credentials and a passage from 1 Corinthians 10:31: “Whatever you do, do it all for the glory of God.”
Financial records, however, showed that Schumack’s business entity “transferred approximately $4 million from its investor account to an unrelated account from which Schumack and others executed more than 100 cash withdrawals totaling around $4.8 million, which was 91 percent of the account balance,” the SEC said.
Signore, Schumack’s colleague and sales agent, is a convicted thief, the SEC said.
Signore, 49, and Schumack, 56, were arrested for their alleged actions in the Florida Ponzi scheme. They are charged with “conspiracy to commit mail and wire fraud, five counts of mail fraud each, and six counts of wire fraud,” Ferrer’s office said.
The men were at the helm of companies known as JCS Enterprises Inc. (Signore) and T.B.T.I. Inc. (Schumack) that touted “virtual concierge machines” or VCMs, the SEC said. The agency long has warned that YouTube and other social-media sites have been used to push investment-fraud schemes.
Perhaps to further drive home its point, the SEC today posted the YouTube video to its own website. In one scene, a man is seen polishing a Cadillac. Another man says, “What an amazing car! How can you afford this?”
The first man replies, “My Virtual Concierge.”
A similar scene in the video played out at at home that featured a swimming pool.
“Your new pool is spectacular. How are you able to afford it?” a woman asks. Another woman replies, “My Virtual Concierge.”
A smiling narrator then intones, “Do you want to make more money? Then it’s time you learn about owning a Virtual Concierge.”
“Signore and Schumack touted VCMs as a revolutionary enterprise and fail-safe investment based on a stream of advertising revenue that would generate the guaranteed returns paid to investors,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “However, the advertising revenue was virtually non-existent and investors aren’t enjoying the riches touted on YouTube.”
From the SEC’s statement (italics added):
The SEC alleges that Joseph Signore of West Palm Beach, Paul L. Schumack II of Pompano Beach, and their respective companies JCS Enterprises Inc. and T.B.T.I. Inc. falsely promised hundreds of investors nationwide that their funds would be used to purchase ATM-like machines that businesses could use to advertise products and services via touch screen and printable tickets or coupons. Investors supposedly needed to do nothing to earn returns on their investment in a VCM, which would purportedly be placed at such locations as hotels, airports, and stadiums where they would derive revenue from the businesses paying to advertise through them. However, instead of advertising revenue serving as the driving force behind the returns paid to investors, the two men and their companies paid returns to earlier investors using money from newer investors. Signore and Schumack also diverted millions of dollars in investor funds for their personal use and other unrelated expenses.
The “majority” of investors stopped receiving payouts in January 2014, but “Signore and Schumack continued to solicit new investors while fabricating excuses to placate irate investors no longer receiving their returns,” the SEC said.
In the run-up to the collapse and feeling heat from investors, the SEC alleged, Signore’s JCS claimed it was “investigating” Schumack’s T.B.T.I.
“JCS issued a press release, which it posted on its website, indicating it was investigating the matter,” the SEC alleged. “In denying any wrongdoing, JCS placed the blame squarely on T.B.T.I., and claimed it had only an arms-length relationship with T.B.T.I. This was patently false.”
Records showed that “Signore personally used investor funds, including diverting approximately $2,000,000 to himself, his wife and son,” the SEC alleged. “Signore also diverted approximately $90,000 to a business jointly operated by himself and his wife, and approximately $44,000 to Schumack personally.”
A website known as ATMHospitality.com was among the sites used in the scheme, according to the SEC’s complaint. The site, which appears to be registered in the name of Schumack’s wife, now resolves to a page that displays a photo of a Bible, a cross and an infant.
In December 2013 2003 [edited April 16, 2014] Signore, the “chairman and president” of JCS, filed for bankruptcy, the SEC said.
Signore also has a criminal history, the SEC said.
“On February 10, 2006, Signore was adjudicated guilty per a plea agreement to theft charges emanating from two separate indictments brought by the State of New Jersey,” the agency said. “Signore first pled guilty to charges he failed to share the proceeds from the sale of an automobile with a charity to which he was legally obligated. Signore had to pay $11,475 in restitution to the National Multiple Sclerosis Society, as well as nominal amounts to other organizations, and fees. Signore also pled guilty to unlawfully obtaining vehicles owned by Sears Roebuck & Company, selling the vehicles, and retaining the proceeds for himself and his co-defendant. He was sentenced to four years’ probation, restitution of $47,850, and other nominal fines and fees.”
In 2011, the SEC said, JCS was registered as a Delaware corporation.
“JCS and its investment offerings are not registered with the Commission in any capacity,” the SEC said.
T.B.T.I. was incorporated in Florida in 2001, the SEC said.
Like JCS, “T.B.T.I. and its investment offerings are not registered with the Commission in any capacity,” the agency said.
Investors in the VCM program could “could choose between an aggressive or passive option,” the SEC alleged.
“The aggressive option burdened investors with responsibility, but allowed for greater returns,” the SEC continued. “The passive option left the investor with no responsibility, required no effort, and guaranteed them $300 monthly returns per VCM. The Defendants continuously and clearly stressed the passive option as the best choice for the investors.”
