PatrickPretty.com

Tag: IRS

ZEEK: Key Figures — And Paul Burks’ Defense
EDITOR’S NOTE: Prosecutors and Paul Burks are clashing over expert witnesses and the admissibility of certain evidence. The article below reproduces the anticipated core of Burks’ trial defense, as advanced by his lawyers. This article is not intended to be all-encompassing. Prosecutors, of course, have an altogether different take. They have posted the indictment against Burks here.

UPDATED 10 A.M. EDT JULY 5 U.S.A. The Ponzi-related criminal trial of Paul Burks of Zeek Rewards is scheduled to begin tomorrow (July 5) in federal court in Charlotte, N.C. Burks is 69. He is charged with wire fraud, mail fraud, conspiracy to commit both and tax-fraud conspiracy. Prosecutors say he fabricated numbers, sent bogus tax forms and duped Zeek members into believing he was at the helm of an enormously profitable enterprise.

If convicted of the charges, Burks potentially could face decades in prison — effectively a life sentence.

His defense is led by Noell P. Tin, C. Melissa Owen and Jacob H. Sussman of Tin Fulton Walker & Owen of Charlotte. The firm has carded some notable wins for clients.

The office of U.S. Attorney Jill Westmoreland Rose is handling the prosecution. Among those on the prosecution team are Jenny Grus Sugar and Corey Ellis, both Assistant U.S. Attorneys. The judge’s calendar also shows Assistant U.S. Attorney Benjamin Bain-Creed as a member of the prosecution team.

Rose is well-known as the lead prosecutor in the classified-leaks case against Gen. David Petraeus, who pleaded guilty. Some Zeekers bizarrely have tried to portray the Tin Fulton firm as country bumpkins. Here we’ll point out that Sussman, one of Burks’ lawyers, was on the Petraeus defense team. The general was sentenced to probation.

U.S. District Judge Max O. Cogburn Jr. is presiding over the Burks’ case. He has presided over other Ponzi cases. The judge complimented the Burks’ defense team last year.

What follows are snippets from June 28 trial brief by the Burks defense team (italics added/light editing performed):

**________________________**

INTRODUCTION The defense anticipates presenting lay and expert testimony, and numerous exhibits, in support of a defense that goes to the heart of the charges against Mr. Burks. The defense will dispute, among other things: (1) that Mr. Burks made material misrepresentations regarding the ZeekRewards program; (2) that Mr. Burks’ company, Rex Ventures Group, had no books and records; (3) that ZeekRewards was a Ponzi or pyramid scheme; and (4) that Mr. Burks ever intended to mislead ZeekRewards affiliates.

STATEMENT OF ANTICIPATED FACTS Mr. Burks was previously the owner of Rex Ventures Group (“RVG”), a single member L.L.C. that began in 1997. During the time frame alleged in the indictment, RVG was comprised of two divisions: (1) Zeekler, a penny auction website; and (2) ZeekRewards, a multilevel marketing program RVG conceived and promoted as the marketing arm of Zeekler. RVG’s product was bids which were sold in the form of retail bids for the Zeekler penny auction or VIP sample bids for ZeekRewards affiliates.

Affiliates who purchased sample bids gave them away to promote the Zeekler penny auction, which in turn entitled the affiliates to participate in RVG’s Retail Profit Pool.

A. Paying what he promised. As set out on the ZeekRewards website, affiliates who met certain qualifying criteria (e.g., paying a subscription fee, giving away sample bids, and placing ads to promote the Zeekler penny auction) were promised up to 50 percent of RVG’s net daily profits. Evidence at trial will show the company performed as promised. From January 1, 2011, when the program began, until August 16, 2012, when the doors closed, RVG took in $938.8 million in cash from affiliates and auction customers.

During the same period RVG paid $499.5 million . . . to affiliates in cash as the RPP Award. In other words, RVG made good on the core of its promise by paying out 53.2 percent of its revenues to affiliates. The government has repeatedly asserted, and will continue to assert, that Mr. Burks kept no books or records. Acceptance of this argument will require the jury to find that RVG’s SQL database contained no records.

In fact, the SQL database contained terabytes of data consisting of approximately 589 tables with hundreds of millions of rows. The SQL database was accessed daily by Mr. Burks, the company’s technology personnel, as well as over 2 million ZeekRewards affiliates who relied on it to keep contemporaneous track of their accounts. Through the SQL database affiliates accessed their respective back-offices to monitor their VIP Point balances, to place ads, to select the percentage of RPP Award they wanted as VIP bid repurchases versus cash award, to check their available cash balances, to request cash payments, and so on.

Similarly, the SQL database was at all times available to Mr. Burks and provided him the information he needed to run RVG, including the information he needed to determine each day’s Retail Profit Pool percentage.

B. Bid sales were final. VIP sample bids were not, as the government suggests, “represented as functioning like shares of Zeekler stock.” . . . To the contrary, before participating in ZeekRewards, affiliates were required to sign a statement acknowledging the following: Submitting this payment confirms that you understand you are purchasing VIP Bids to use as samples to give to potential retail customers. You also understand that this purchase is non-refundable and is not a “deposit” or “investment” and cannot be “withdrawn” later. You affirm that you have read and understand the ZeekRewards Policies and Procedure and agree to all of their terms. NO REFUNDS CAN BE MADE AFTER PAYMENT IS PROCESSED.

Completed and submitted bid purchase forms, of which there are thousands in number, will be presented to the jury.

C. Mr. Burks made changes to the program in good faith based on the advice of experts. During the life of the ZeekRewards program, Mr. Burks retained a number of experts to advise him on complying with the myriad of laws governing the multi-level marketing industry. Many of these experts (including accountants, attorneys, and others) had combined decades of experience in the industry and were regarded as leaders in their respective fields. Many programmatic changes the government will claim were “cosmetic” . . . were initiated not by Mr. Burks, but by those he had hired to advise him on how to run ZeekRewards.

Equally important, many of the changes Mr. Burks made did nothing to disguise how the ZeekRewards program operated. Some of these changes Mr. Burks made included the following:
- Adding the requirement of giving away sample bids
- Instituting compliance courses for affiliates
- Upgrading the internal accounting system
- Eliminating lead generation programs
- Hiring a call center in Atlanta to respond to affiliate inquiries and complaints.
The defense expects to call many of these experts as trial witnesses.

D. Dealing with the challenges of explosive growth.

Nobody could have foreseen how much the ZeekRewards program would grow in such a short period of time, approximately 18 months. As witness Kevin Walker has stated, the company “took off like a rocket ship.” Indeed, the growth in numbers of affiliates was staggering. As of December 31, 2011—12 months into the life of ZeekRewards—the program had 57,597 distinct active usernames. This figure increased to 208,601 by March 31, 2012 and 1.25 million by August 15, 2012.

In terms of revenue, average daily revenue went from $5,905 in the first quarter of 2011 to $8,429,626 in the third quarter of 2012. By August 16, 2012, Zeekler.com was the 890th most visited website in the world and ZeekRewards.com ranked 130th globally.

Growth of this magnitude was overwhelming. Despite Mr. Burks’ efforts to bring in additional personnel to address the problems that came with growth at this level, many of the problems RVG encountered—with banks, payment processors, and customer service—were attributable to growth at an unforeseeable rate.

E. The issuance of Forms 1099 was based on sound legal advice—and was anything but evidence of “lulling.” Mr. Burks was advised that it was appropriate—indeed, necessary—to issue 1099s to affiliates. This created all manner of complaints and criticisms. The reality for affiliates that they would have to pay taxes for money earned through ZeekRewards, even if they had chosen to repurchase bids in lieu of a cash payment, was a difficult one for some to accept. But it was the law according to Howard Kaplan, a tax attorney who had previously worked for the IRS and who was retained to advise RVG.

Mr. Kaplan’s advice was unambiguous. As he stated in an email, “I have also given this some thought and I concur that because of the way your plan is structured, there is constructive receipt because of the choice your affiliates have.” Mr. Kaplan repeated the same in conference calls with affiliates. Mr. Burks is not a tax attorney. He relied on the assurances of the people he paid and hired.

NOTE: See the PP Blog’s Zeek Rewards Cloud Tag here.

NOTE: Our thanks to the ASD Updates Blog.
Jul 4, 2016
Another ‘Ken Russo’ Disaster: Team Of Feds Hammers Alleged Operator Of ‘Program’ Pushed By Ponzi-Forum Legend

UPDATED 7:51 EDT U.S.A. Let’s start by giving you the roster of federal agencies involved in the investigations and prosecutions of William M. Apostelos, 54, and Connie M. Apostelos, 50, his wife:

(1.) The Office of U.S. Attorney Carter M. Stewart of the Southern District of Ohio. (2.) Internal Revenue Service Criminal Investigation. (3.) The FBI. (4.) The U.S. Postal Inspection Service. (5.) U.S. Department of Labor Office of Inspector General. (6.) U.S. Department of Labor Employee Benefits Security Administration.

In addition to the six federal agencies, the Ohio Department of Commerce Division of Securities joined in the probe that uncovered an alleged $70 million Ponzi scheme.

So, how does Ponzi-forum legend “Ken Russo” fit into all of this? Here we’ll turn to a Nov. 1, 2014, story at BehindMLM.com. The story quotes “Ken Russo” on yet-another scam he is pushing. (Italics added.)

I am very firm in my belief that this is the real deal and I get no sense whatsoever that any kind of scam is intended here. It is very seldom that we can find an opportunity as transparent and viable as the Genesis Acquisitions International, LLC. investment club.

It turned out that William Apostelos was linked to Genesis Acquisitions and a sorry cast of other companies, including WMA Enterprises LLC, Midwest Green Resources LLC and Roan Capital.

Connie Apostelos, also known as Connie Coleman, also operated and oversaw multiple companies in the Dayton area, including Coleman Capital Inc. and Silver Bridle Racing LLC, prosecutors said.

“These companies were allegedly operated through improper use of investor funds to William Apostelos’ companies,” Stewart’s office said.

From the statement (italics added):

William and Connie Apostelos are charged with one count of conspiracy to commit mail and wire fraud, eight counts of mail fraud and 13 counts of wire fraud, each crimes punishable by up to 20 years in prison. They were also charged with two counts of money laundering, which each carry a potential 10-year prison sentence. They were also charged with one count of theft or embezzlement from employee benefit plan, which carries a maximum penalty of up to five years imprisonment. Finally, Connie Apostelos is charged separately with one count of making a false statement, which carries a maximum penalty of up to five years imprisonment.

See the PP Blog’s archive of story references to “Ken Russo,” perhaps the most prolific Ponzi pitchman on the planet.

Visit a recent “Ken Russo”-related thread at the RealScam.com antiscam forum for a “program” known as “MyBinaryProfits.”

Oct 30, 2015
EDITORIAL: When MLM Is PR Poison: Footnote In Zeek Receiver’s Most Recent Filing Harkens Back To Scam Of Yesteryear — Also, Does Unrelated ‘Agape World’ Case Provide Clues About Tax Scam Within Ponzi Scam At Zeek?

From the 2010 MPBToday MLM scam. Like Zeek Rewards, MPBToday traded in part on Walmart gift cards.

Ah, those serially disingenuous MLM hucksters and commission-based Ponzi pitchmen: They’ll ultimately destroy their own brands while picking millions of pockets. Before doing so, they’ll use your brand as a temporary means of sanitizing themselves, bring PR disasters to your legitimate company and perhaps even find an insidious way to turn the government into their banker.

Longtime PP Blog readers will recall the outrageous scam of MPBToday. MPBToday duped the MLM masses in part by planting the seed that Walmart gift cards or prepaid Visa cards would flow to members in unlimited supply if they sent $200 to the Florida-based “program” for a “one-time” purchase of “groceries” and if the members recruited two others who’d also recruit two others to do the same.

In addition to being a pyramid scheme that sent operator Gary Calhoun to prison in Florida on a racketeering charge, MPB Today could have been a scam that disguised “program” earnings as nontaxable “gifts” to dupe Uncle Sam.

It’s almost axiomatic in MLM Scam Land that an “opportunity” and/or its Stepfordian promoters will imply a tie to a major brick-and-mortar business or even the government, when no such ties exist or the ties are no more official than ties any consumer can enjoy — purchasing a gift card from a major retailer, having a bank account or renting a room at a major hotel chain, for instance. It happened at MPB Today in 2010, and it’s happening now within the Stepfordian wing of TelexFree — a wing in which promoters have suggested that TelexFree has been “authorized” or “approved” by the government.

It also happened both internally and externally at WCM777, now the subject of cross-border investigations in both North America and South America. In an apparent bid to sanitize the WCM777 scheme, alleged operator Ming Xu arranged to have himself photographed with celebrities such as former U.S. Vice President Al Gore and Apple co-founder Steve Wozniak. Meanwhile, WCM777 promoters rushed to YouTube and other social-media sites to claim that WCM777 had ties to famous businesses such as Siemens and a host of hospitality companies with famous flags.

Such rank MLM disingenuousness also occurred within the $850 million Zeek Rewards scheme. In the PP Blog’s view, Zeek’s maximum expression of such deception occurred when it was auctioning sums of U.S. cash and telling successful bidders they’d get paid through offshore payment processors such as AlertPay and SolidTrustPay. By divining sums up for auction and accepting bids for U.S. currency, Zeek implied it had been approved by the U.S. government, perhaps specifically the Treasury Department.

And by sending the incongruous (and bizarre) message that the Treasury-approved Zeek MLM scheme would pay members via offshore processors linked to the equally outrageous AdSurfDaily Ponzi scheme broken up by a Task Force consisting of the U.S. Secret Service and the Treasury Department (IRS) in 2008, Zeek served up another colossal mess for MLM.

Zeek, of course, followed the footsteps of MPBToday — whose operator lost his liberty after pushing all those Walmart cards out the door — by leeching off the names of major American retailers. In addition to auctioning cash, Zeek auctioned gift cards.

And this brings us to an interesting footnote in a quarterly report filed Jan. 30 by Kenneth D. Bell, the receiver in the Zeek Rewards Ponzi-scheme case. Zeek operated through Rex Venture Group (RVG).

“Unlike other retailers the Receiver Team approached, Wal-Mart and Home Depot readily agreed to refund the full amount of their gift cards held by RVG at the time of shut-down,” Bell advised Senior U.S. District Judge Graham C. Mullen. “The remaining gift cards were sold at auction, and their value is included in the gross receipts from the personal property portion of the Receivership auction.”

Walmart and Home Depot know a PR disaster when they see one. They ponied up quickly when the receiver asked them, thus making his job of gathering funds for Zeek victims a bit easier. Some other companies that perhaps have less PR savvy did not. The receiver auctioned their gift cards in public.

Bell’s examination of Zeek’s money flow continues, according to the Jan. 30 report. The report reveals that lawsuits against alleged insiders and winners had not been filed as of the 30th, but remain pending.

The receivership is “on the brink of filing,” Bell said.

Some Zeekers who choose to see instead of turning a blind eye perhaps can gain an understanding of just how dangerous the “program” was to the U.S. financial system — and not just the relatively small segment in which retailers that issue gift cards reside. Not only did Zeek create legal and PR dilemmas for itself, it created them for others, including gems of U.S. commerce and banking.

During 2013’s fourth quarter, attorneys for the receiver “sent demand letters to fifty-four (54) financial institutions seeking reimbursement for teller’s checks on which financial institutions were believed to have improperly stopped payment under Section 3-411 of the Uniform Commercial Code and in violation of the Freeze Order,” Bell advised the court.

“As of December 31, 2013, thirty-one (31) financial institutions had not responded to the Receiver’s demand(s) for payment of stopped payment cashier’s checks and bank money orders,” Bell continued. “Additionally, fifteen (15) issuers of teller’s checks had not responded to demand letters.”

Let’s hope these financial institutions develop the PR savvy of Wal-Mart and Home Depot. Zeek not only was a train wreck unto itself, it set the stage to involve legitimate enterprises in its own bizarre drama. Company after company that conducted business with Zeek or whose customers did so has had to lawyer up or at least rely on in-house counsel to determine how much exposure the “program” brought to legitimate enterprises.

The Zeek story is far from being over and likely will reverberate for years in the financial community. Bell now says that he’s “discovered additional RVG financial accounts during the fourth quarter.”

Zeek money, according to the report, circulated onshore and offshore.

“All transactional information received from financial institutions through the end of the fourth quarter has been included in the creation of the financial books and records,” Bell advised the court. “However, communications with financial institutions are ongoing, and there are outstanding requests by the Receiver for transactional information.”

When will other shoes drop?

“The Receiver Team continued its investigation into potential claims against RVG insiders and third-party advisers as a part of its ongoing fact investigation, continuing its analysis of documentary evidence that will be used in proving such claims,” Bell advised the court. “The Receiver Team also responded to requests for assistance and information from the U.S. Attorney’s Office that aided the government in obtaining plea agreements from both Dawn Wright-Olivares and Daniel Olivares.”

Wright Olivares, Zeek’s former COO, was charged criminally and civilly in December ~~2012~~ 2013 (Feb. 5, 2014 edit). Olivares, her stepson, also was charged criminally and civilly. They are expected to appear in court this week to enter formal guilty pleas to criminal conduct.

Federal prosecutors say tax fraud occurred at Zeek.

Here, we’ll point you to an unrelated story by Jordan Maglich at PonziTracker.com. The story is about an alleged pitchman for Ponzi schemer Nicholas Cosmo, now serving 25 years in federal prison for his epic Agape World fraud. (Quick side note: Agape World was a purported “bridge lender,” similar in some ways to the outrageous “Profitable Sunrise” MLM fraud scheme broken up by the SEC last year.) The PonziTracker story on Agape World developments is titled, “Ponzi Associate Jailed For ‘Mind-Boggling’ Money Laundering Scheme.”

The story explains why alleged Cosmo pitchman Anthony Ciccone now is in jail. A snippet from the story:

According to prosecutors, Ciccone overpaid approximately $1.7 million in federal and state income taxes beginning in 2008 that was comprised of Ponzi scheme proceeds. Several years later, the funds were returned to Ciccone in the form of tax refunds, and Ciccone subsequently had his wife and mother-in-law launder the refund money through their bank accounts.

We wonder: Could some of the Zeekers effectively have been doing the same thing — deliberately overpaying taxes and using the government as a de facto bank that temporarily would conceal and warehouse Ponzi proceeds for return later in the form of tax refunds?

From a Dec. 20, 2013, PP Blog report on the criminal allegations against Wright-Olivares (italics/bolding added):

And for the 2011 tax year, according to the charging documents, “P.B.,” Wright-Olivares and others reported to the IRS that Zeek investors had received more than $108 million from the scheme when Zeek had paid out only about $13 million.

This caused Zeek victims to file “false tax returns with the IRS reporting phantom income that they never actually received,” according to the charging documents.

Zeek used the “false tax notices to perpetuate the Ponzi scheme,” according to the charging document.

NOTE: Our thanks to the ASD Updates Blog.

Feb 2, 2014
From Zeek To ‘The Healthy Hog’

Hearty cuisine and the Internet are the things at The Healthy Hog. Source: 5News video.

EDITOR’S NOTE: A “razorback” is a wild (feral) hog present in certain U.S. states, including Arkansas. The University of Arkansas calls its sports teams the “Razorbacks.” Zeek Rewards Ponzi-scheme figure Dawn Wright-Olivares, an Arkansas resident, recently opened a Clarksville restaurant called “The Healthy Hog.” Though the words “healthy” and “hog” may appear to be in conflict, the marriage of such incongruous-sounding words might be perfectly at home, completely inoffensive and good for business in Arkansas, which is known as “The Razorback State.”

Until a TV report aired yesterday, Clarksville residents may not have known that Ponzi history has touched their town of fewer than 10,000 residents in a big way. The Johnson County community is known for its scenic beauty and annual Peach Festival.

5News (KFSM-TV in Fort Smith and KXNW-TV in Fayetteville) sent a crew to The Healthy Hog after Wright-Olivares was charged criminally and civilly in the Zeek Rewards Ponzi-scheme case in December 2013.

Zeek, the SEC says, gathered at least $850 million. Wright-Olivares appears to have parachuted into Lexington, N.C., from time to time as part of her role as Zeek’s onetime marketing maven.

Kenneth D. Bell, the court-appointed receiver in the civil case and the special master in the criminal case, has noted that Zeek operated from Lexington and drew in participants from at least 100 countries around the globe.

In terms of the number of victims and the creation of net losers (an estimated 800,000), the Internet-driven Zeek scheme may be the largest Ponzi scheme in U.S. history. By comparison, the 2008 AdSurfDaily Ponzi scheme — at the time considered the largest Internet-based Ponzi scheme in U.S. history — affected about 100,000 people and gathered about $120 million.

Wright-Olivares, 45, was Zeek’s former COO. She has settled the SEC civil case against her and agreed to plead guilty to Zeek-related criminal charges of investment-fraud conspiracy and tax-fraud conspiracy, federal investigators said. Her stepson, Daniel Olivares, 31, also has settled the SEC’s civil allegations and agreed to plead guilty to a criminal charge. In Daniel’s case, it’s a charge of investment-fraud conspiracy.

The criminal charges were the first in the long-running Zeek probe, which became public in August 2012 and also involves the U.S. Secret Service, the IRS and the office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina. The SEC filed its first Zeek-related civil case on Aug. 17, 2012, naming Zeek operator Paul R. Burks of Rex Venture Group LLC a defendant.

Bell has identified Alexandre “Alex” De Brantes, the husband of Wright-Olivares, as member of a group of alleged Zeek insiders. Images of De Brantes appear briefly in the 5News report. Bell is expected to file lawsuits against alleged Zeek insiders and “net winners” soon.

Jan 3, 2014
4 Californians Indicted In ‘False Liens’ And Conspiracy Case; Prosecutors Say 2 Of The Scammers Hired Collection Agency To Pursue Government Official Over Nonexistent Debt And That False Tax Returns Seeking $60 Million Were Filed In 26 States

Three residents of Placerville, Calif. — Teresa Marie Marty, Charles Tingler and Victoria Tingler — have been charged in a superseding indictment with filing false liens against government officials performing their duties.

In what may be an emerging form of menacing aimed at government officials, one government worker was targeted with a fabricated $500,000 lien and two other bogus liens — and “Harris and Marty engaged a commercial collection agency” to collect on one of the fabricated debts, prosecutors said.

“Harris” refers to Pamela Harris, also of Placerville. She was described by prosecutors as an “office manager” at Advanced Financial Services (AFS), Marty’s company.

Marty has been charged with “filing liens against the property of three Internal Revenue Service (IRS) employees,” prosecutors said.

She also “filed liens of at least $84 million against the property of two Justice Department attorneys involved in a lawsuit filed against her in 2009 to enjoin her” and AFS from preparing tax returns, prosecutors said.

From a statement by the U.S. Department of Justice (italics added):

According to the superseding indictment, the Tinglers were clients of Marty and AFS, who filed a false tax return in 2008 fraudulently claiming a refund of $358,415. The indictment charges the Tinglers, as well as Marty, with filing this tax return. When the IRS tried to collect the fraudulently obtained refund, both Mr. and Mrs. Tingler filed multiple liens against the IRS revenue officer who was handling their collection case.

According to the charging documents the liens disclosed the social security numbers of the respective government employees. Marty and the Tinglers are also charged with multiple counts of unlawfully using the social security numbers of the government employees in the liens they filed with the California Secretary of State.

Finally, the indictment charges Marty, Mr. Tingler and AFS office manager Pamela Harris, of Placerville with participating in a conspiracy to defraud the IRS. The indictment alleges that as part of the conspiracy, Harris and Marty engaged a commercial collection agency to collect one of the three false liens that Mr. Tingler had filed, one of which was in the amount of $500,000.

Marty, Harris, and Marty’s daughter, Rebecca Bandera-Marty, had previously been indicted in June 2013 for a large-scale tax-fraud scheme. Those charges are included in this superseding indictment. According to the superseding indictment, in 2008 and 2009 Marty, Bandera-Marty, and Harris conspired to file at least 250 false individual federal income tax returns on behalf of individuals who resided in twenty-six states, and which claimed more than $60 million in false federal income tax refunds.

Cases involving the alleged filing of false liens against government employees have surfaced across the United States. The tactic, which has been described as “paper terrorism,” may involve the filing of purported UCC Financing Statements and has been associated with tax fraudsters and members of the so-called “sovereign citizens” movement.

Records show that, in 2011, a federal magistrate judge in California ordered that eight “UCC Financing Statements” filed by Marty “be declared null, void, and of no legal effect.” At least three of the statements targeted IRS workers. A fourth targeted a former U.S. Attorney who became a judge in California. A fifth targeted a Justice Department attorney.

Kenneth Wayne Leaming, a purported “sovereign citizen” and a figure in the AdSurfDaily Ponzi-scheme story, was convicted in March of filing bogus liens against public officials involved in the ASD prosecution.

Aug 21, 2013
URGENT >> BULLETIN >> MOVING: 2 Connecticut Cash-Gifting Pyramid Schemers Sentenced To Combined 10.5 Years In Federal Prison; Probe ‘Ongoing,’ Feds Say

URGENT >> BULLETIN >> MOVING: UPDATED 10:18 P.M. EDT (U.S.A.) Two Connecticut women convicted of wire fraud and filing false tax returns in a multimillion-dollar cash gifting scam have been sentenced to a combined 10.5 years in federal prison, federal prosecutors announced tonight.

Donna Bello, 57, was sentenced to six years. Jill Platt, 65, was sentenced to four and a half years years. Both women reside in Guilford and were ringleaders in the Women’s Gifting Tables scam, prosecutors said.

Bello and Platt both were ordered to serve three years’ supervised probation after their release. Bello also was fined $15,000. Both women were ordered to pay a combined total of $32,000 in restitution to several victims

“These significant sentences are appropriate for two individuals who profited from an illegal pyramid scheme and conspired to conceal their income from the IRS,” said Acting U.S. Attorney Deirdre M. Daly. “The investigation into this and other Gifting Tables schemes in Connecticut is ongoing. Hopefully, this successful prosecution and the prison terms imposed today will serve as a strong deterrent and end this criminal activity.”

Chief U.S. District Judge Alvin W. Thompson imposed the sentences.

From a statement tonight by prosecutors (italics added):

From approximately 2008 to 2011, BELLO, 57, and PLATT, 65, oversaw and profited from this Gifting Tables pyramid scheme. The defendants recruited individuals to join the scheme, prepared and distributed materials to recruits that contained false representations, and affirmatively misrepresented to recruits and participants that Gifting Tables was not a pyramid scheme. Also, in May 2010, the defendants attempted to intimidate a participant who had questioned the legality of the Gifting Table scheme.

BELLO and PLATT also conspired to defraud the Internal Revenue Service by telling recruits and participants that monies given and received during the scheme were tax-free “gifts” under the IRS Code and that lawyers and accountants had approved Gifting Tables as legal ventures that generated tax-free proceeds. In addition, BELLO and PLATT filed false tax returns that failed to report income generated from the scheme.

See prosecution sentencing memo at RealScam.com, courtesy of wserra of Quatloos.

Aug 13, 2013
BULLETIN: Songkram Roy Shachaisere, Figure In AdSurfDaily Ponzi Story, Indicted With 8 Others In ‘One Of The Largest International Penny Stock Frauds In History’
BULLETIN: Songkram Roy Shachaisere, a sidebar figure in the AdSurfDaily Ponzi scheme story, has been indicted with several others in what federal prosecutors in the Eastern District of New York are calling “one of the largest international penny stock frauds in history.”

The probe “used wiretaps in the United States and undercover agents in foreign countries,” prosecutors said.

Chillingly, prosecutors said some of the scammers impersonated IRS employees. Others joined forces to scam victims a second time by creating a “fake law firm.” Some of the money allegedly ended up in “an account maintained in Beirut, Lebanon.”

Indeed, prosecutors said, some of the scammers branched off from the penny-story scheme to orchestrate a scheme “in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses,” the office of U.S. Attorney Loretta E. Lynch said. “In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed. To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims.”

“The criminals behind this scheme were shameless in heartlessly defrauding hundreds of victims out of their savings and retirement accounts for their own enrichment,” said James C. Spero, special agent in charge of Immigration and Customs Enforcement Homeland Security Investigations (HSI) in Buffalo.

All in all, the scams netted at least $140 million and defrauded victims in 35 countries, prosecutors said.

Fake news releases, bogus announcements about nonexistent ventures, bribes and fake posts on social-media sites were used to dupe the masses, prosecutors said.

Shachaisere allegedly was involved in a massive pump-and-dump scheme. In 2010, according to the SEC, Sahachaisere fraudulently touted the stock of Praebius Communications. That’s the company ASD once conveniently announced was providing it a $200 million revenue infusion. ASD made the claim while awaiting a key ruling by the federal judge presiding over the ASD Ponzi case brought by the U.S. Secret Service in 2008.

Even as critics were voicing concerns that ASD was advancing yet-another story that was too good to be true, members of the now-defunct Pro-ASD Surf’s Up forum were cheerleading ASD’s purported revenue infusion from Praebius.

Some ASD members sprinted to forums to announce the news, but the information could not be verified. ASD later removed the announcement from its website.

ASD’s name was not referenced in the SEC’s 2010 complaint against Shachaisere, and Praebius was not listed as a defendant in the case. Praebius was referenced in the case as a client that paid Sahachaisere and his company in stock “to provide investor relations services.”

All in all, seven defendants were arrested today, with nine indicted. Before the bust, one of the defendants bragged, “We know enough to be subtle,” prosecutors said.

Here is a list of the defendants:
- Sandy Winick
  Citizenship: Canada
  Age: 55
  Bangkok, Thailand
- Gregory Curry
  Citizenship: Canada
  Age: 63
  Bangkok, Thailand
- Kolt Curry
  Citizenship: Canada
  Age: 38
  Ontario, Canada
- Gregory Ellis
  Citizenship: Canada
  Age: 46
  Ontario, Canada
- Gary Kershner
  Citizenship: United States
  Age: 72
  Tucson, Arizona
- Joseph Manfredonia
  Citizenship: United States
  Age: 45
  Tom’s River, New Jersey
- Cort Poyner
  Citizenship: United States
  Age: 44
  Boca Raton, Florida
- Songkram Roy Shachaiser
  Citizenship: United States
  Age: 43
  Huntington Beach, California
- William Seals
  Citizenship: United States
  Age: 51
  Fallbrook, California
Here’s how prosecutors described the pump-and-dump scheme (italics added):

As alleged in the indictment, defendants Sandy Winick, Gary Kershner, Joseph Manfredonia, Cort Poyner, Songkram Roy Shachaisere and William Seals orchestrated one of the largest international penny stock frauds in history. First, the defendants gained controlling interests of huge quantities of worthless stock in 11 public companies known in the industry as ‘file cabinet businesses’ – thinly traded companies with minimal assets and non-existent business operations, which in many cases were mere shell companies. They then ‘pumped up’ the share prices of the companies’ stock by engaging in fraudulent and illegal sales campaigns, which included distributing false press releases, announcing non-existent business ventures and fake mergers, posting false information on social media sites and bribing stock promoters and brokers.

And here’s how prosecutors described the advance-fee component of the scam (italics/bolding added):

As the indictment alleges, defendants Winick, Gregory Curry, Kolt Curry and Gregory Ellis perpetrated a second scheme in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses. In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed. To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims.

To facilitate the scheme, the defendants established boiler rooms or call centers from which members of the conspiracy would solicit advance fees from the unsuspecting penny stock victims. The call centers were located in various locales around the world, including Canada, Thailand and the United Kingdom. Recently, the defendants began planning to open a new call center in Brooklyn, New York. Some of the victims were told that they either needed to pay the advance fee to remove restrictions that were placed upon their penny stock, which prevented the victims from selling their stock in the market, or to join investors in a pending or anticipated lawsuit to recover losses that they incurred while owning the penny stock. Victims were then told that the advance fees were needed to convert the warrants of their stocks to a saleable security. In several instances, the advance fee defendants even pretended to be IRS employees collecting a bogus advance tax from victim investors before they could unload their penny stocks. The victims were directed to send payment of the advance fees to banks around the world, including bank accounts in New York City. The fraud proceeds were then transferred through a funds transfer network, located in Getzville, New York, to an account maintained in Beirut, Lebanon. Ultimately, these defendants generated more than $20 million in fraudulently obtained advance fees.

Defendant Kolt Curry described the Advance Fee Scheme in the following way over an intercepted wire communication: “I would say that 100 percent of these stocks are like uh pink uh… just dumps . . . . so … ya know they’re totally, they’re like, so a lot of these guys are dying . . . . to get rid of this crap. . . . The money is good, it’s easy. It’s easy money. Definitely easy money, and it’s good money.” In fact, while bragging about his prowess as a fraudster, defendant Kolt Curry further stated, “I had a guy send me a million dollars over one phone call . . . . He actually sent me almost two million dollars over the period of the hit . . . . I guess in the industry they coin it as a smash and grab.” As for the group’s recent plans to open a call center in Brooklyn, New York, defendant Kolt Curry said, “I tell you what man . . . hitting the Americans would be like taking money from a baby.”

Lynch’s office thanked various U.S. agencies for their worked on the probe. She also thanked the Royal Canadian Mounted Police, Financial Crime Intelligence Unit in Vancouver and the Integrated Market Enforcement Team in Toronto, and the Serious Organized Crime Agency in the United Kingdom. Meanwhile, prosecutors said that significant assistance was also provided by the United States Embassies in Ottawa, Toronto, London, Bangkok and Beijing.
Aug 13, 2013
BULLETIN: James Timothy Turner, Purported ‘President’ Of Purported ‘Republic for the united States of America’ (RuSA), Sentenced To 18 Years In Federal Prison

James Timothy “Tim” Turner, a purported “sovereign citizen” and the purported “President” of a shadow government known as the “Republic for the united States of America” (RuSA), has been sentenced to 18 years in federal prison in a bizarre tax scam in which he was convicted of conspiring to defraud the IRS and teaching others to do so.

In a particularly bizarre display of magical thinking, Turner and three other purported “Guardian Elders” sent “demands to all 50 governors in the United States in March 2010 ordering each governor to resign within three days to be replaced by a ‘sovereign’ leader or be ‘removed,'” the Justice Department said.

Investigations by the FBI and IRS soon began, the agency said.

“This lengthy prison sentence shows that tax defiers like Turner who use bogus tax schemes and file retaliatory liens against government officials will be punished,” said Kathryn Keneally, assistant Attorney General for the Justice Department’s Tax Division.

Added Acting U.S. Attorney Sandra J. Stewart of the Middle District of Alabama: “This sentence should send a message that if you attempt to use retaliatory tax liens and fraudulent tax schemes as weapons against the United States and its citizens you will be punished.”

A top IRS official, meanwhile, said Turner espoused a “false ideology.”

“Turner influenced others with his false ideology by aggressively promoting obstruction of the IRS,” said Richard Weber, chief of IRS-Criminal Investigation. “In truth, Turner’s own defiance of IRS and his attempts to lead others through the same labyrinth of lies and distortions led to his downfall as shown by the significant sentence he must now serve.”

From a statement by the Justice Department (italics added):

In March 2013, following a five-day jury trial, Turner was convicted on 10 counts in the U.S. District Court for the Middle District of Alabama. Based on the evidence introduced at trial and in court filings, Turner, the self-proclaimed “president” of the sovereign citizen group Republic for the united States of America (RuSA), traveled the country in 2008 and 2009 conducting seminars teaching attendees how to defraud the IRS by preparing and submitting fictitious bonds to the U.S. government in payment of federal taxes, mortgages, and other debt. The evidence at trial revealed the bonds are fictitious and worthless but witnesses testified that Turner used special paper, financial terminology and elaborate borders in an effort to make them look authentic and more likely to succeed in defrauding the recipient. Turner was convicted of sending a $300 million fictitious bond in his own name and of aiding and abetting others in sending fifteen other fictitious bonds to the Treasury Department to pay taxes and other debts.

The evidence at trial also established that Turner taught people how to file retaliatory liens against government officials who interfered with the processing of fictitious bonds. Turner filed a purported $17.6 billion maritime lien in Montgomery County, Ala., Probate Court against another individual. This investigation began after Turner and three other self-proclaimed “Guardian Elders” sent demands to all 50 governors in the United States in March 2010 ordering each governor to resign within three days to be replaced by a “sovereign” leader or be “removed.” The FBI immediately began investigating Turner and IRS- Criminal Investigation (IRS-CI) joined the investigation soon thereafter.

Jul 31, 2013
Raymond Leo Jarlik Bell, 70-Year-Old Purported ‘Sovereign Citizen’ Linked To AdSurfDaily Figure Kenneth Wayne Leaming, Sentenced To More Than 8 Years In Federal Prison

Raymond Leo Jarlik Bell, a 70-year-old purported “sovereign citizen” linked to AdSurfDaily figure Kenneth Wayne Leaming, has been sentenced to 97 months in federal prison for a tax scam.

In July 2011, federal agents found records of bogus liens filed by Leaming against public officials while executing a search warrant at Jarlik Bell’s residence in Yelm, Wash., according to court records. Bell was under investigation for his tax scam at the time the records were found. Leaming, 57, later was charged with filing bogus liens, harboring federal fugitives from Arkansas in Washington state and being a felon in possession of firearms, including a “street sweeper” shotgun and an assault rife.

Leaming was sentenced in May to eight years in federal prison. David Carroll Stephenson, another Leaming associate and purported “sovereign citizen” from Washington state, was sentenced in May to 10 years for filing bogus liens against two U.S. prison officials. Stephenson, 57, already was serving time for a tax scam when those liens were filed.

Jarlik Bell’s scam centered on filing for false tax refunds “using a scheme known as OID fraud,” prosecutors said.

OID fraud may include claims that the U.S. government maintains secret accounts for citizens and that such accounts can be tapped to receive tax “refunds” in the tens or even hundreds of thousands of dollars at a time if paperwork is filed in a certain manner.

“No matter what the promoter calls it, a scheme to file bogus tax returns claiming outrageous tax ‘refunds’ that don’t belong to you, is just fraud,” said Kenneth J. Hines, special agent in charge of IRS Criminal Investigation in Seattle.

“This defendant held himself out as a tax expert with contacts at the IRS – when both the IRS and a federal judge told him repeatedly that his conduct was criminal,” said U.S. Attorney Jenny A. Durkan of the Western District of Washington. “Mr. Jarlik Bell believed he was above the law, and aggressively promoted and spread his scheme to others looking to duck their fair share and steal tax dollars through fraudulent refunds.”

From a statement by prosecutors (italics added):

In 2006, BELL obtained a tax refund in excess of $30,000 using the scheme. Numerous others who were advised by JARLIK BELL also filed for and received fraudulent refunds they did not deserve. One woman received a tax refund of more than $590,000. In 2005, JARLIK BELL was ordered by U.S. District Judge Robert J. Bryan to stop promoting fraudulent tax schemes. Less than three years later, he was back promoting another massive tax fraud among friends, family and strangers.

Ute Christine Jarlik Bell, Jarlik Bell’s wife, also is a purported “sovereign citizen” and tax scammer, prosecutors said. She is scheduled to be sentenced tomorrow on four counts of filing false, fictitious and fraudulent claims.

Jarlik Bell was convicted in March 2013 of five counts of filing false, fictitious and fraudulent claims, 15 counts of assisting in filing false tax returns, three counts of mail fraud, and one count of criminal contempt, prosecutors said.

U.S. District Judge Ronald B. Leighton described Jarlik Bell’s scheme as “fraud at its core,” prosecutors said.

“You are hurting people intentionally, regardless of your adherence to [your beliefs],” prosecutors quoted Leighton as saying.

Leaming filed bogus liens against a federal judge, federal prosecutors and a U.S. Secret Service agent involved in the prosecution of the the ASD Ponzi scheme. The Secret Service has described ASD as a “criminal enterprise” that gathered about $119 million by duping people into believing that ASD’s purported payout of 1 percent a day came from legitimate means. ASD operator Andy Bowdoin, 78, is serving a 78-month prison term.

When Leaming was arrested in November 2011, investigators discovered he’d been harboring two federal fugitives from Arkansas charged with mail fraud in a separate home-business scheme that allegedly had gathered millions of dollars.

Leaming, who previously had sued President Obama and Attorney General Eric Holder on a theory that Obama was not born in the United States and was an unlawful President who’d appointed Holder unlawfully, went on to claim that Leighton owed him 208,000 ounces of silver.

The lawsuit against Obama and Holder was tossed out of court by a federal judge.

Jun 17, 2013
URGENT >> BULLETIN >> MOVING: Liberty Reserve, Founder, Others Indicted In New York

URGENT >> BULLETIN >> MOVING: (15TH UPDATE 2:31 P.M. EDT U.S.A.) Liberty Reserve, its founder and several others have been indicted in U.S. District Court for the Southern District of New York (Manhattan).

The charges, which include conspiracy to commit money-laundering, conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business, were confirmed this morning by the office of U.S. Attorney Preet Bharara.

Liberty Reserve founder Arthur Budovsky was using the aliases “Eric Paltz” and “Arthur Belanchuk,” according to the indictment.

Co-conspirators, according to the indictment, include Vladimir Kats, also known as “Ragnar”; Ahmed Yassine Abdelghani, also known as “Alex”; Allan Esteban Hildago Jimenez, also known as “Allen Garcia”; Azzeddine El Amine; Mark Marmilev, also known as “Marko”; and Maxim Chukharev.

Marmilev also is known as “Mark Halls,” according to an affidavit that accompanies the indictment.

Budovsky and El Amine were arrested Friday in Spain, Bharara’s office said today. Kats and Marmilev were arrested Friday in Brooklyn. Chukharev was arrested Friday in Costa Rica. Hildago and Abdelghani are “at large” in Costa Rica.

“As alleged, the only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes — the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers, and traffickers,” Bharara said. “The global enforcement action we announce today is an important step towards reining in the ‘Wild West’ of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.”

Added Steven G. Hughes, special agent in charge of the U.S. Secret Service. “These arrests are an example of the Secret Service’s commitment to investigate and apprehend criminals engaged in the misuse of virtual currencies to conduct global monetary fraud. Cyber criminals should be reminded today that they are unable to hide behind the anonymity of the Internet to avoid regulated financial systems.”

The IRS and the U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI)) also are involved in the probe, as are multiple nations, Bharara’s office said.

Liberty Reserve and its co-conspirators “intentionally created, structured, and operated Liberty Reserve as a criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,” according to the indictment.

The United States has seized the Liberty Reserve domain name along with several others, according to an affidavit that accompanies the indictment. The others include: ExchangeZone.com; SwiftExchanger.com; MoneyCentralMarket.com; and Asianagold.com. As part of the seizure process, a federal judge ordered the U.S. Secret Service to point the domain nameservers to a “sinkhole” URL at ShadowServer.org.

News about the seizures destroys various examples of wishful thinking advanced by online HYIP hucksters at forums such as TalkGold and MoneyMakerGroup since LibertyReserve’s domain went offline Friday. On Saturday, reports surfaced that Budovsky had been arrested in Spain and that Liberty Reserve was under investigation in Costa Rica and the United States.

Seizure notices are expected to appear on the domains, although the timing was not clear.

The indictment ties Liberty Reserve to the crimes of “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.”

Among other things, the indictment alleges that “virtually all of Liberty Reserve’s business derived from suspected criminal activity” and that the scope of the fraud is “staggering.”

Between 2006 and May 2013, according to the indictment, Liberty Reserve processed an estimated 55 million transactions and is believed “to have laundered more than $6 billion in criminal proceeds.”

Supporting affidavits in the case show that the indictment was returned under seal on May 20 and that prosecutors applied for an injunction barring Amazon Web Services Inc. from providing services to Liberty Reserve. The affidavit also shows that the United States is seeking forfeiture of sums on deposit in at least 42 accounts in various countries

These banks are in countries such as Costa Rica, Cyprus, Russia, Hong Kong, China, Morocco, Spain, Latvia, Australia and the United States. Tens of millions of dollars are being sought in forfeiture actions, although the final sum is unclear.

Liberty Reserve, according to the indictment, used “exchangers” in countries with little oversight, including Malaysia, Russia, Nigeria and Vietnam. The process was part of a criminal scheme to bury evidence of fraud while providing anonymity for the fraudsters.

The enterprise, according to the indictment, functioned “in effect as the bank of choice for the criminal underworld.”

Link to documents posted by Bharara’s office. Read statement by Bharara’s office.

In a separate but related action, the U.S. Department of the Treasury announced it had identified Liberty Reserve as a “Financial Institution of Primary Money Laundering Concern.”

“Treasury is determined to protect the U.S. financial system from cyber criminals and other malicious actors in cyberspace, including overseas entities like Liberty Reserve that facilitate online crime and hope to evade regulatory scrutiny,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen. “We are prepared to target and disrupt illicit financial activity wherever it occurs – domestically, at the far reaches of the globe or across the internet.”

May 28, 2013
Man From Colorado Town Of Fairplay Ran ‘Gold Coin’ Fraud Scheme, Prosecutors Say

James P. Burg, formerly of Fairplay, Colo., ripped off his customers for gold coins and, in at least one instance, “used one customer’s payment for coins to refund funds to another customer,” federal prosecutors said.

The scam fetched more than $2.4 million and operated through three websites, prosecutors said.

Burg, 61, became the subject of an investigation carried out by the FBI, the IRS and the U.S. Postal Inspection Service, the office of U.S. Attorney John Walsh of the District of Colorado said.

He has been charged with six counts of wire fraud, four counts of money laundering, four counts of willful failure to file tax returns and nine counts of mail fraud.

“The U.S. Postal Inspection Service has no shortage of investment investigations and this is another example of greed overcoming honest business practices,” said Adam Behnen, inspector in charge of the U.S. Postal Inspection Service.

From a statement by prosecutors (italics added):

As part of the scheme, Burg represented that he was the chief executive officer of a company known as Superior Discount Coins (SDC) and that SDC was in the business of selling coins. Burg also conducted business using a company known as Gold Run Investments (GRI) and represented that GRI was in the business of selling coins. At times, Burg operated GRI using the alias “Tim Burke.” Burg advertised and solicited customers through radio advertisements and over the Internet using websites he controlled, including; www.superiordiscountcoins.com, www.yourcoinbroker.com, and www.goldruninvestments.net.

Burg misrepresented and promised customers that if they ordered coins from SDC or GRI and paid him for those coins, he would deliver the coins to them or to accounts designated by them. He sent and caused to be sent to customers that ordered coins from SDC or GRI invoices stating amounts of money owed for the coins and, in some cases, providing information about a bank account to which the customers should transfer their money to purchase the coins.

The money Burg received from customers was not used to purchase coins for such customers, but instead he converted the money to his own use and benefit. Burg refused to refund money to customers in several instances where the customers requested a return of their money after he failed to deliver coins as originally promised. To prevent the scheme’s detection, Burg sometimes filled customers’ orders for coins only after such customers threatened to take legal action or report him to law enforcement authorities. Burg used one customer’s payment for coins to refund funds to another customer.

“Fraud schemes are often described as a house of cards and will eventually fall apart exposing the individuals responsible,” said Stephen Boyd, special agent in charge, IRS-Criminal Investigation, Denver Field Office

See 9News.com report from 2011:

Jan 17, 2013