BULLETIN: A Florida jury found that TD Bank assisted now-disbarred and imprisoned attorney Scott Rothstein in his epic Ponzi scheme and has found the bank liable for $67 million in damages.
The victorious attorney in the civil case is David S. Mandel, who represented the plaintiffs against the bank.
If Mandel’s name seems familiar to PP Blog readers, it’s because he also is the court-appointed receiver in the Commodities Online LLC fraud case brought by the SEC last year.
Separately, a company known as SSH2 Acquisitions Inc. had sued Commodities Online figure James C. Howard III on Sept. 15, 2010, alleging that Howard and others were running a massive Ponzi scheme into which SSH2 had plowed $39 million.
Records in Nevada show that former AdSurfDaily member and “Surf’s Up” forum moderator Terralynn Hoy was a “director” of SSH2.
Hoy has not been accused of wrongdoing.
The private lawsuit against Howard and the others became notable because of the clashing images: Although SSH2 was complaining about the alleged Ponzi scheme directed at it by Howard and others, it was doing so in the months after Hoy had helped lead cheers on Surf’s Up for accused ASD Ponzi schemer Andy Bowdoin, who was implicated by the U.S. Secret Service in an alleged Ponzi scheme even larger than Howard’s alleged scheme. Hoy also was a moderator on a forum that supported AdViewGlobal, an autosurf that vanished mysteriously in June 2009.
Now defunct, Surf’s Up was known for unapologetic, unabashed cheerleading for Bowdoin, whom federal prosecutors said had swindled investors in Alabama in a previous securities caper during the 1990s and took in at least $110 million through ASD. Clarence Busby, an alleged business partner of Bowdoin and the operator of the Golden Panda Ad Builder autosurf, swindled investors in three prime-bank schemes in the 1990s, according to the SEC.
More than $14 million linked to Golden Panda was seized as part of the ASD case — and yet the cheerleading for autosurf schemes continued on Surf’s Up. The forum labeled ASD pro-se litigant Curtis Richmond a “hero” after he accused the judge and prosecutors of crimes in 2009.
Roger Green: Source: Broward County Sheriff's Office.
Saying that money-laundering and securities fraud were part of a $7 million Ponzi scheme involving aircraft parts, the Florida Department of Law Enforcement (FDLE) has arrested two men, charging them with racketeering.
Roger Green, 78, remains in custody at the Broward County Jail. Alleged accomplice Victor Brown, 55, of Hollywood, was freed after posting bail. The men were arrested Wednesday.
Green and Brown were accused of obtaining funds fraudulently from investors and using proceeds from the scheme “to gamble and for the purchase of expensive cars and other items.”
The arrests, FDLE said, came as a result of “Operation Usual Suspects,” which began in 2009 and focused on a company known as Military Air Parts International.
Web records tie the men to a now-defunct site known as C130Spares. Among other things, the site featured a photo of a U.S. Air Force C130 transport plane with the words “Welcome Aboard” appearing in the image.
“You will soon find how committed we are to the aviation industry,” the site promised. “We serve the C130 Military and L100 Commercial aircrafts exclusively! As founders, we look forward to supporting your parts and flight requirements world wide.”
But “Green and Brown did not acquire, nor were they in possession of, the aircraft parts they were offering to sell,” FDLE said. “The few aircraft parts they did obtain were used to acquire funds from additional victims.”
All in all, the swindle ensnared 24 “victim investors in Florida and elsewhere,” operating between 2004 and 2007, FDLE said.
Investors were told Green and Brown could generate returns of up to 18 percent within three to six months, FDLE said.
BULLETIN: Yesterday a federal judge in Michigan sentenced 75-year-old Ponzi schemer Edward May to 16 years in federal prison for pulling off a $350 million fraud.
Today in New Jersey — in a separate case — a 77-year-old Ponzi enabler and his Ponzi-enabling, 40-year-old son were sentenced to combined prison terms of just shy of eight years for helping make Nevin Shapiro’s $930 million swindle possible.
It could have been worse, but the pair later helped unmask the caper they once enabled.
U.S. District Judge Susan D. Wigenton imposed a 48-month sentence on Roberto Torres, who will not leave prison until he is at least 81. Torres’ son, Alejandro Torres, was imposed a slightly lower sentence: 46 months. Both father and son also were hit with an $82 million restitution order. The elder Torres once resided in Lighthouse Point, Fla., but now lives in New York. His son lives in Boca Raton, Fla.
When the Torreses will begin serving their terms was not immediately clear.
Shapiro, 42, formerly of Miami Beach, is serving a 20-year-term and is liable with Roberto and Alejandro Torres in the restitution order. Both father and son pleaded guilty to a single count of securities fraud. Shapiro pleaded guilty last year to one count of securities fraud and one count of money laundering.
Roberto Torres was the chief financial officer of Capitol Investments USA Inc., Shapiro’s phony “grocery” arbitrage business. Alejandro Torres was an accountant at the firm, which hatched a four-year-long scheme beginning in 2005 to siphon money from investors by cooking the books.
Father and son “admitted to creating, or directing others to create, fraudulent documents which falsely touted the profitability of Capitol’s fictitious grocery diversion business,” the office of U.S. Attorney Paul J. Fishman of the District of New Jersey said today. “The Torreses admitted that those documents included: profit and loss figures fraudulently representing that Capitol’s wholesale grocery business was generating tens of millions of dollars in annual sales; personal and business tax returns for Shapiro and Capitol also fraudulently reflecting those sales; and numerous invoices fraudulently reflecting transactions between Capitol and other companies in the wholesale grocery business.”
The Shapiro Ponzi, which was based in South Florida, toppled in January 2009, prosecutors said.
Sydney Jack Williams, 63, of Naples, Fla., faces sentencing in January on charges he was Shapiro’s top recruiter and did not report $12 million in commissions.
BULLETIN: A federal judge in Florida who says she was accused of “abusing” her discretion and “trampling” the Constitutional rights of a man implicated in an alleged multimillion-dollar commodities fraud by the SEC has ordered the defense attorney who made the assertions to explain himself and substantiate claims that his client had been denied due process.
U.S. District Judge Patricia A. Seitz ordered attorney Horecia I. Walker to respond in writing no later than Sept. 9 and explain what kind of investigation he conducted prior to asserting that James Clark Howard III and his counsel present at an Aug. 23 evidentiary hearing did not have adequate time to prepare for the hearing.
Howard, who appeared at the hearing, was represented at the hearing by attorney Mark C. Perry, according to records. Both Howard and Perry had 11 days to prepare for the hearing, Seitz wrote.
In an order issued on the same day as the hearing, Seitz directed Howard and Sutton Capital LLC to turn over $1.45 million to attorney David S. Mandel, the court-appointed receiver in the Commodites Online LLC fraud case filed in April by the SEC.
Seitz gave Howard and Sutton, another firm associated with Howard, until yesterday to turn over the money. It was not immediately clear if either party complied with the order.
What is clear is that Seitz was not amused by an emergency motion filed by Walker on behalf of Howard and Sutton to stay the Aug. 23 order to turn over the money pending an appeal of the order.
“Walker has accused this Court of trampling Howard’s constitutional rights and abusing its discretion in entering the turnover Order,” Seitz wrote. “The factual underpinnings for these accusations are that Howard and Perry had insufficient time to prepare for the August 23, 2011, hearing. To avoid running afoul of Rule 11, Walker should have investigated these factual circumstances before relying on them to accuse the Court of a constitutional affront.”
The judge added that “it appears to the Court that no such investigation occurred.”
Seitz took issue with Walker’s characterization of the Aug. 23 hearing as an “apparent ‘evidentiary hearing,’” according to an order she issued yesterday denying the stay.
“Walker posits that the hearing ‘was not an evidentiary hearing at all’ and the Court’s Order requiring disgorgement amounts to an abuse of discretion,” Seitz wrote. “Lost in all of his hyperbole is the simple fact that Howard and Perry received notice of the hearing eleven days before the hearing commenced.”
Neither Howard nor Perry asked for a continuance, Seitz wrote.
The Commodities Online case has a link to the AdSurfDaily Ponzi scheme case brought by the U.S. Secret Service in August 2008.
SSH2 Acquistions, a Nevada company that listed former ASD member and pro-ASD Surf’s Up moderator Terralynn Hoy as a director, sued Howard and others in September 2010 amid allegations he was part of a massive Ponzi scheme into which SSH2 had plowed $39 million. The lawsuit was filed about six months after the Boca Raton Police Department filed felony charges against Howard in an alleged financial scam that targeted Haitian Americans.
Surf’s Up was a cheerleading site for ASD, and Hoy later became a moderator of a cheerleading forum for the collapsed AdViewGlobal (AVG) autosurf.
While SSH2 claims to be a Ponzi victim of Howard, the Surf’s Up and AdViewGlobal forums both claimed that ASD and AVG were conducting legitimate commerce. With Hoy as a moderator of Surf’s Up, the forum conducted an October 2008 online party complete with images of champagne and fireworks for ASD President Andy Bowdoin.
The U.S. Secret Service described Bowdoin as an international Ponzi schemer and recidivist felon who’d gathered tens of millions of dollars in the ASD caper — most of it in ASD’s final weeks of life in the late spring and summer of 2008. At least $65.8 million was seized from Bowdoin’s 10 personal bank accounts, according to court records. One account alone contained more than $31.6 million. Three accounts contained the exact same amount: $1,000,338.91.
It is unclear if ASD members beyond Hoy had any business ties to Howard and invested any money with the accused schemer. Hoy has not been accused of wrongdoing.
SSH2 said in court filings that it plowed $39 million into the alleged Howard scheme, and received back about $19 million in “fake and fraudulent ‘profits.’” Sutton, Rapallo Investment Group LLC and Patricia Saa also were named defendants in SSH2’s lawsuit.
Howard was sentenced to 57 months in federal prison in the 1990s on narcotics and weapons charges, according to records. ASD’s Bowdoin, meanwhile, narrowly avoided jail time during the same decade when he was implicated in Alabama in a securities swindle, according to records.
Clarence Busby Jr., one of Bowdoin’s alleged business partners, was implicated by the SEC during the 1990s in three prime-bank schemes, according to records.
Some ASD members have been identified as members of the so-called “sovereign citizens” movement. Cheerleading for Bowdoin and ASD continued on the Surf’s Up forum even after it was revealed that Curtis Richmond, one of the purported “sovereign” beings associated with ASD, had a contempt-of-court conviction for threatening federal judges in California and once claimed a federal judge from Oklahoma sitting by special designation in Utah owed him $30 million.
Richmond was a member of the so-called “Arby’s Indians,” an “Indian” tribe that targeted public officials with vexatious litigation. U.S. District Judge Stephen Friot ruled the “tribe” a complete sham.
U.S. District Judge Rosemary Collyer of the District of Columbia is presiding over the ASD Ponzi case. Both Richmond and Bowdoin tried unsuccessfully to have her removed from the case. Richmond accused Collyer of “TREASON” and claimed she may be guilty of 60 or more felonies.
In recent emails to members, accused Ponzi schemer Andy Bowdoin of Florida-based AdSurfDaily has predicted that a jury in the District of Columbia will acquit him based on the testimony of expert witnesses.
Bowdoin, 76, has been appealing to members he is accused of defrauding in a $110 million scheme to pony up $500,000 to pay for his criminal defense on charges of wire fraud, securities fraud and selling unregistered securities.
Formal fundraising efforts have been under way since July 26 — after weeks of online hoopla that preceded Bowdoin’s bid raise to money from the people he is accused of scamming. Those efforts have not gone well: Bowdoin said last week that he had raised only $19,300 and was $480,700 short of his goal of raising half a million dollars.
In an email some members received today, Bowdoin said he encountered more trouble over the weekend.
“Our Website was down most of the weekend, due to power outages caused by [H]urricane Irene that took our server Offline,” Bowdoin advised members.
But he assured them that the site now was back online — and that he was confident he would be acquitted.
“When you watch my Good News Update video and read the 3 Expert Witness testimonies on our Website, you will understand why we are so confident the Jury will come back with a Not Guilty verdict on all counts against me and ASD,” Bowdoin said.
The email was titled, “More TRUTH – Why We Will Be Found “Not Guilty”! A largely similar email ASD members reported receiving on Aug. 26 was titled, “The TRUTH – Why ASD is Not a Ponzi Scheme!”
Why Bowdoin asserted ASD had been charged with a crime was unclear. Bowdoin was indicted as an individual in December 2010. The government already has at least three civil judgments against about $80 million seized from ASD-related bank accounts in 2008 — and has implemented a program in which ASD members who filed for remission and provided the required documentation will be compensated through the seized funds described in the civil judgments.
Within days of Bowdoin’s arrest, some ASD members received an email that encouraged them to contact the remissions administrator and “write that you knew this was not a investment and you where (sic) purchasing advertising.”
The email was attributed to Gary Talbert, a former ASD executive, and purported to have been based on an email conversation with Bowdoin after his arrest.
“Got a email from Andy and he told me to go ahead and send this email out to everyone,” noted the email attributed to Talbert.
Various email missives have encouraged ASD members either not to file for remissions or to insert addendums on the official remissions form.
A federal judge in Florida has ordered a convicted narcotics and firearms felon who emerged as a central figure in a Ponzi scheme case after his release from prison to disgorge $1.45 million.
The order, signed Aug. 23 by U.S. District Judge Patricia A. Seitz, applies to James Clark Howard III and Sutton Capital LLC.
Howard, a co-managing member of Commodities Online LLC, “directed” that $1.3 million in investor funds from Commodities Online be wired to Sutton Capital, “his wholly owned limited liability company,” Seitz found.
In the 1990s, Howard was sentenced to 57 months in federal prison on cocaine and weapons charges. He also was implicated last year in a separate fraud scheme targeting Haitian Americans.
The SEC sued Commodities Online in March, alleging that the firm was selling unregistered securities and operating an international commodities fraud from South Florida.
Seitz found that the $1.3 million transaction was recorded on the books of Commodities Online as a “loan” to Sutton, “even though no evidence has been found establishing a promissory note, interest rate or terms of repayment.”
The $1.3 million transaction occurred on Feb. 9, 2010, Seitz found.
On Feb. 18, 2010, Howard directed another $150,000 be transferred from Commodities Online to Sutton, Seitz found. She now has ordered Howard and Sutton to return the entire amount of $1.45 million from both transactions, saying they “remain in possession and control of these investor funds.”
Separately, David S. Mandel, the court-appointed receiver in the Commodities Online case, said aspects of his investigation have been “severely delayed and impeded by the noncooperation of the majority of the former officers of the Defendants.”
Although Commodities Online may own iron ore in Mexico, efforts to get at the truth have been hampered “due to the current nature of business in Mexico, and in particular, the iron ore business, which at times can be unsafe, unreliable and uncertain,” Mandel said.
In court filings, Mandel said that he has “received information that others have been purporting to act on the Defendants’ behalf in Mexico.” Mandel hired local counsel in Mexico, an attorney who is a citizen of Mexico and an international security firm to peel back layers of the onion and to protect receivership assets.
A forensic accounting of Commodities Online and thousands of transactions is ongoing, Mandel said.
One phase of the forensic accounting involved 9,500 transactions and 35 bank accounts “maintained at various financial institutions,” Mandel said.
An updated analysis of records shows that Commodities Online gathered nearly $12 million from “insiders and related parties” between January 2010 and April 2011, and paid the insiders and related parties more than $20.2 million.
All in all, the scheme gathered more than $35 million, according to the analysis.
Howard was arrested by the Boca Raton Police Department in a separate scheme targeting Haitian Americans on March 5, 2010.
About six months later — in September 2010 — he was sued by a Nevada company that listed former AdSurfDaily member and Surf’s Up moderator Terralynn Hoy as a director.
The Nevada company — SSH2 Acquisitions Inc. — alleged that Howard was part of a Ponzi scheme that also involved Patricia Saa, Sutton Capital LLC and Rapallo Investment Group LLC.
Howard and the defendants, according to the lawsuit, told SSH2 it was trading in commodities and “would produce profits of 40% per month or more, while not risking any of the invested funds.”
In its lawsuit, SSH2 alleged that its dealings with Howard and the others began in “early 2009” and continued through March 2010.
If SSH2?s assertions against Howard and the others are true, it means the transactions occurred during a period in which Hoy, later to emerge as an SSH2 director, also was moderating cheerleading forums for ASD and the AdViewGlobal autosurf.
Surf’s Up became infamous for deleting commentary unflattering to ASD President Andy Bowdoin and links members left to outside sources of information. The forum mysteriously vanished in January 2010, after cheerleading for Bowdoin and ASD nonstop for more than a year.
AdViewGlobal, which collapsed in June 2010, purported to operate from Uruguay and enjoy protection from U.S. regulators because of a purported “private association” structure. ASD was implicated by the U.S. Secret Service in August 2008 in an alleged $110 million Ponzi scheme. Bowdoin was arrested on charges of wire fraud, securities fraud and selling unregistered securities in December 2010.
Former moderators of Surf’s Up, which unabashedly cheered for Bowdoin and received ASD’s official endorsement in November 2008, just days after a key court ruling in a civil-forfeiture case went against Bowdoin and ASD, largely have been silent since the January 2010 disappearance of Surf’s Up.
It is not known if individual ASD members also invested money with Howard. What is known is that many ASD members did not skip a beat after the Secret Service moved against ASD in August 2008. Within days, some ASD members were promoting other autosurf schemes, HYIP schemes and cash-gifting schemes, positioning them as a way ASD members could make up their ASD losses.
Hoy has not been accused of wrongdoing. Court filings and other records suggest that Hoy could have been conducting business with firms (ASD, Sutton and Rapallo) and individuals (Bowdoin, Howard and Saa) who were running separate Ponzi schemes involving at least $149 million and perhaps more.
SSH2, with Hoy as a director, alleged that it was scammed by Howard, Sutton and Saa, and plowed$39 million into their Ponzi. The firm accused the defendants of selling unregistered securities and causing at least $19 million in damages. It specifically accused Howard and the other defendants of not revealing that Howard was a convicted felon.
As a Surf’s Up moderator, however, Hoy presided over a forum that overlooked or pooh-pooed matters pertaining to the alleged ASD Ponzi, ASD’s alleged sale of unregistered securities to thousands of people internationally and Andy Bowdoin’s previous encounters with law enforcement in fraud cases.
In October 2008, at the conclusion of an evidentiary hearing, Surf’s Up held an online party for Bowdoin, who’d been charged with felonies in an Alabama securities caper in the 1990s and avoided jail by agreeing to make restitution to investors he defrauded. The party was conducted during an active criminal investigation into Bowdoin’s conduct at ASD.
A federal prosecutor was derided as “Gomer Pyle” on Surf’s Up. He also was described as a “goon” and a person who should be made to suffer in a medieval torture rack. Critics were described as “rats” and “maggots.”
The party was conducted despite the fact the Secret Service had alleged that one of Bowdoin’s business partners had been implicated by the SEC in the 1990s in three prime-bank schemes.
“[Y]ou invest in this fund and all of a sudden you start making more money than you’ve ever made in your life with your investors. And then all of a sudden you start making enough money where you don’t have to go to work . . . [a]t Safe Harbor, you could retire today, like right now. And I’m telling you, you get rid of the struggle.”— SEC, quoting accused Ponzi pitchman Daniel Joseph Sebastian, Aug. 29, 2011
BULLETIN: A Ponzi schemer arrested on criminal charges in June had the help of a pitchman who targeted senior citizens, church members, educators and golfers, the SEC said. The agency identified the pitchman as Daniel Joseph Sebastian of Celebration, Fla.
Sebastian conducted business as “Safe Harbor,” and helped James D. Risher pull off a $22 million Ponzi scheme that affected more than 100 investors, the SEC said.
Risher, 61, of Sanibel, Fla., was arrested on criminal charges by the U.S. Postal Inspection Service in June. He, too, now has been charged civilly by the SEC, which noted he had been charged criminally five times since 1992 in various schemes and had spent 11 of the past 21 years in jail.
“Risher, who masqueraded as a highly successful equity trader, teamed up with Sebastian to tout sophisticated trading strategies they claimed would generate substantial profits for investors,” said Eric Bustillo, director of the SEC’s Miami Regional Office. “Instead, Risher and Sebastian used investors’ life savings and retirement nest eggs to line their own pockets.”
The scheme also operated under the names of Safe Harbor Private Equity Fund, Managed Capital Fund and Preservation of Principal Fund, the SEC said.
Risher had been arrested at least four times in Georgia, and at least once in Florida prior to the 2007 launch of the Safe Harbor scheme, the SEC said.
Sebastian turned to old customers of his insurance business and recruited them into the Ponzi scheme, the SEC said.
“From 2007 through July 2010, Sebastian solicited his former insurance customers, educators, retirees, and members of several churches in Florida,” the agency charged. “During the same time period, he also solicited investors in California, other states, and Canada. Sebastian persuaded his former customers to roll over the funds in their insurance and annuity products into the Fund. He told his customers the Fund would provide a higher rate of return than they could receive from the products he had previously sold them. At least one investor liquidated an annuity she had purchased from Sebastian and invested the proceeds in the Fund.”
No registration statement was filed for any elements of the Safe Harbor scheme, the agency said.
“Throughout the fraud, Sebastian also hosted numerous annual golf tournaments and other promotional events for investors, which Risher sometimes attended,” the agency charged. “At an investor event held on March 12 through 14, 2010 at an Orlando resort, Sebastian told investors in a speech, ‘[Y]ou invest in this fund and all of a sudden you start making more money than you’ve ever made in your life with your investors. And then all of a sudden you start making enough money where you don’t have to go to work . . . [a]t Safe Harbor, you could retire today, like right now. And I’m telling you, you get rid of the struggle.’”
Michael Scott Segal. Source: Florida Department of Corrections.
A Florida man started a $1.3 million fraud and Ponzi scheme in November 2008, five months after he was released from prison after serving seven years for trying to kill a woman, according to federal prosecutors and state records.
Michael Scott Segal, 50, of Miami, was charged in 2001 — when he was 40 — with attempted murder, kidnapping and aggravated battery for beating a woman, stuffing her into the trunk of car and trying to launch the car into a lake.
The woman survived because a police officer was nearby and observed Segal repeatedly trying to drive the car over a raised embankment and into the lake, according to news accounts. Segal ultimately spent seven years behind bars for his crime.
State records show that Segal was released from prison on June 1, 2008. Federal prosecutors now say he started a domestic and international fraud scheme five months later — not disclosing his felonious past to investors and referring to himself as “Scott Segal” to keep them from discovering his prison record.
The scheme involved purported inexpensive consumer goods from China, a purported land-development project in China and a purported “Venezuelan security cargo locks deal,” prosecutors said.
It operated through a Segal-controlled company known as Bright Jewel Holdings Limited Inc., and some investors were issued bad checks, prosecutors said.
Segal has been charged with 12 counts of mail and wire fraud.
Some investors appear to have started a Blog to publicize Segal’s alleged fraud before charges were filed. Supporters of Segal appear to have shown up at the Blog to defend him and his purported honesty, according to web records.
“This blog is not real,” an apparent defender wrote. “[I]f he has wrote (sic) checks for 60k or others believe me he wont (sic) be out from jail for a long time. So stop writing false things about him and get back to real life and be honest. He is a good man and a very kind person.”
Another apparent defender commented on a Blog that “writing these types of comments is counterproductive.”
Andy Bowdoin, another accused Florida Ponzi schemer with a felonious past, initially enjoyed significant support among investors and continues to have some support while awaiting his criminal trial.
Bowdoin was the head of Quincy-based AdSurfDaily. Federal prosecutors said he ripped off investors in a swindle in Alabama during the 1990s.
EDITOR’S NOTE: Both the CFTC and SEC have encountered incredibly elaborate fraud schemes — some with elements that only can be described as bizarre and deeply disturbing. The story below is based on a fraud case brought by the CFTC against Gary D. Martin and Brenda K. Martin of St. Augustine, Fla. The Martins are husband and wife. Their company, Queen Shoals Consultants LLC, also was named in the March 2011 complaint. The complaint was filed in the Western District of North Carolina.
The CFTC now has obtained a consent order against the defendants. Chief U.S. District Judge Robert J. Conrad Jr. presided over the case. In issuing the uncontested order, Conrad highlighted testimony by Gary Martin. Martin’s testimony and the fact set against him and his co-defendants was disturbing in several ways. The PP Blog previously has written about “fraud creep” on the Internet, and the Martin/Queen Shoals case provides another compelling example of viral larceny that traded in part on religion and devastated senior citizens . . .
A Florida couple scammed investors in an elaborate Forex and commodities swindle in which they posed as “experts” to recruit customers while funneling $22 million to a criminal scammer now serving a 22-year prison sentence in the same North Carolina facility that houses Bernard Madoff.
Among the alarming consent findings by Chief U.S. District Judge Robert J. Conrad Jr. against Gary D. Martin and his wife Brenda K. Martin were that they used the Internet and pitchmen who had minimal or no trading credentials to fuel a fraud turbine that put money in their pockets as well as the pocket of Ponzi schemer Sidney S. Hanson.
Hanson controlled a similarly named entity known as Queen Shoals LLC and was running a $33 million Ponzi scheme that targeted senior citizens and people of faith by using QSC and other entities as feeders, according to court filings.
In March 2011, Hanson, 63, was sentenced to 22 years in federal prison. He is listed as an inmate at the Butner Federal Correctional Complex in Butner, N.C. The Martins and QSC drove $22 million to the Hanson scheme, receiving referral fees of up to 5 percent while maintaining the illusion that legitimate commerce was taking place, according to court filings.
Said Noth Carolina Secretary of State Elaine F. Marshall upon Hanson’s sentencing, “What made this case even more sickening was that the scam was crafted to appeal to victims through their deeply held religious beliefs.”
Through a process that remains unclear, the Martins and QSC managed to recruit at least 53 “consultants” to pitch their scheme, according to Conrad’s ruling.
“Although the Martins represented via the QSC website that ‘[our consultants have a vast background in financial services … ,’ Martin admitted that this representation was false,” Conrad wrote. “Of the 53 known QSC consultants, only 8 to 10 had taken a four day course to become ‘certified estate planners, but even these consultants had no other background in financial services. None had any experience trading forex. Martin admitted that a number of the QSC consultants represented to customers as possessing a ‘vast background in financial services’ were actually former high school coaches, J. C. Penney sales clerks, or insurance salesmen . . .”
The ruling makes in clear that, not only were unqualified reps acting as QSC pitchmen, the QSC scheme was a fraud itself — one that was enabling an even larger fraud operated by Hanson.
“All of the representations concerning the Defendants’ alleged experience and expertise in trading forex were false,” Conrad ruled. “Martin admitted in his testimony under oath as the corporate designee of QSC that, contrary to the Defendants’ in-person and website representations to prospective and actual customers, he and his wife had no training or experience in buying or selling foreign currency, commodity futures contracts, options on commodity futures contracts, or any other financial instrument.”
Promises of “guaranteed” annual earnings of between 8 percent and 24 percent were used by the Martins to lure customers as part of the fraud, Conrad ruled.
Fancy terminology such as “non-depletion,” “leveraged” trading and “proprietary trading practices” also were part of the fraud, according to court filings.
Customers also were told that “no less than 18 different profit centers” existed and that the purported profit centers “allowed the creation of the profits claimed to be achieved by the Defendants,” Conrad ruled.
“Indeed, the website touted that all customer funds were ‘immediately placed into our approximate (sic) 60 sub accounts’ and that the forex accounts traded by the Defendants were ‘profit generating,’” Conrad ruled.
But “[a]ll of the representations concerning trading and guaranteed profits were false,” Conrad ruled.
“[Gary] Martin admitted under oath that the Defendants never engaged in any forex trading on behalf of customers,” Conrad ruled. “In fact, Martin admitted that the Defendants never engaged in any type of trading or investing with customer funds. There were no forex accounts, gold accounts, silver accounts, or ’60 sub accounts.’
“All of the Martins’ representations regarding ‘profitable accounts’ were false,” Conrad ruled. “There was no ‘leveraging’ on behalf of customers, no ‘profit centers,’ and, because there was no trading, there were no profits. Instead, the Martins simply turned over customer funds to Sidney S. Hanson . . . in return for a payment of approximately $1.44 million Martin described in his testimony as a ‘referral’ fee.”
A Miami attorney awaiting sentencing in a Ponzi scheme case now has been accused of stealing from an employee benefit plan, federal prosecutors in the Southern District of Florida said.
Lorn Leitman, 61, was charged with stealing from the South Florida Emergency Physicians P.A. Profit Sharing Plan. He faces up to 20 years in federal prison after pleading guilty to a mail-fraud offense in the Ponzi case, and now faces up to another five years on the theft charge, prosecutors said.
The Ponzi scheme operated for 10 years, prosecutors said. The sentencing phase of the Ponzi case against Leitman was under way Monday when the new indictment on the theft charge was announced. The sentencing phase in the Ponzi case is scheduled to resume July 6.
Leitman was indicted on the theft charge after an investigation by the U.S. Department of Labor.
“This case reaffirms the Labor Department’s commitment to protect workers’ benefits by identifying criminal activity wherever and whenever it occurs,” said Isabel Colon, acting regional director of agency’s Employee Benefits Security Administration Atlanta Regional Office and the Miami District Office.
In addition to being an attorney, Leitman also is a CPA, prosecutors said. The Florida Bar previously sanctioned Leitman for misconduct in a case in which it was alleged members of the military were targeted in a loan scheme that charged usurious interest rates.
In 2007, the Florida Supreme Court ordered Leitman to attend Ethics School.
Florida officials have announced the capture of Erline Telfort, one of the states “Most Wanted” insurance criminals.
Telfort, of Broward County, was accused of operating a $500,000 Ponzi scheme and defrauding a finance company. Her arrest was announced by Jeff Atwater, the chief financial officer of Florida.
“This arrest is a direct reflection of the hard work and dedication of our fraud investigators,” said Atwater. “For too long scam artists like these have been allowed to steal hard earned money from honest Floridians.”
Florida has been plagued by Ponzi schemes and other forms of financial fraud. Atwater implemented a website that flashes pictures of wanted hucksters. The idea behind the site, according to Atwater, is to engage “Floridians in the search for scammers who have eluded law enforcement.”
Telfort, 29, was charged with organized fraud and criminal conspiracy. After her capture, the state published her photo, superimposing the word “CAPTURED” in red type to drive home the point that investigators and members of the public have a new tool to keep information on alleged criminals flowing.
The names and photos of “Most Wanted” subjects who remain at large repeatedly load on the site. The state is offering tipsters rewards of up to $25,000 “for information that directly leads to an arrest and conviction in an insurance fraud scheme.”
“I can assure you my office is up to the challenge of uncovering these schemes and continuing to bring the perpetrators to justice,” Atwater said.
In his role as Florida’s CFO, Atwater oversees the state’s Department of Financial Services, including the Division of Insurance Fraud.
BULLETIN: A Florida jury found that TD Bank assisted now-disbarred and imprisoned attorney Scott Rothstein in his epic Ponzi scheme and has found the bank liable for $67 million in damages.
EDITOR’S NOTE: Both the CFTC and SEC have encountered incredibly elaborate fraud schemes — some with elements that only can be described as bizarre and deeply disturbing. The story below is based on a fraud case brought by the CFTC against Gary D. Martin and Brenda K. Martin of St. Augustine, Fla. The Martins are husband and wife. Their company, Queen Shoals Consultants LLC, also was named in the March 2011 complaint. The complaint was filed in the Western District of North Carolina.
A Miami attorney awaiting sentencing in a Ponzi scheme case now has been accused of stealing from an employee benefit plan, federal prosecutors in the Southern District of Florida said.