Tag: IRS

  • SPECIAL REPORT: AdSurfDaily/Zeek Pitchman Todd Disner Gave Thousands To Gingrich, Romney After Soliciting Money To Sue The United States; Records Show Tax Liens Of More Than $405,000 Dating Back To 1999

    EDITOR’S NOTE: ASD was a multilevel-marketing scheme that planted the seed it paid a return of 1 percent a day on top of two-tiered affiliate commissions totaling 15 percent for recruiters. Federal prosecutors described the purported “opportunity” as a Ponzi scheme based in the the small town of Quincy, Fla., and operated by recidivist securities felon Andy Bowdoin.

    UPDATED 9:46 A.M. ET (NOV. 18, U.S.A.) A Florida man who claimed in a November 2011 lawsuit against the United States that AdSurfDaily was not a Ponzi scheme doled out thousands of dollars to Republican candidates and organizations in the following months, records show.

    The man, ASD promoter Todd Disner of Miami, joined with fellow Miami resident and suspended Connecticut attorney Dwight Owen Schweitzer in suing the United States as pro se plaintiffs after soliciting donations from fellow ASD members to fund the lawsuit earlier in 2011, according to records. As the lawsuit proceeded, Disner and fellow ASD promoter Schweitzer raised the prospect in court filings that the seizure of ASD’s database in a 2008 case brought by the U.S. Secret Service and federal prosecutors in the District of Columbia could lead to the ASD duo’s prosecution for tax evasion.

    A federal judge tossed the lawsuit in August 2012, but Disner and Schwetizer are appealing. They have accused the judge of “sophistry.”

    Both Disner and Schweitzer have been engaged in continuous litigation against the United States for more than a year. Neither has been charged with a crime. After their days promoting ASD, Disner and Schweitzer went on to promote Zeek Rewards, an ASD-like,  1.5-percent-a-day “program” with accompanying commissions that triggered probes by both the SEC and the U.S. Secret Service. On Aug. 17, the SEC accused North Carolina-based Zeek of operating a $600 million Ponzi-and pyramid scheme that potentially swindled more than 1 million investors.

    Zeek operator Paul R. Burks did not contest the SEC’s civil allegations and consented to a judgment in the case. Records show that Burks gave $2,500 to the campaign of GOP Presidential hopeful Ron Paul between 2011 and early 2012.

    On Dec. 26, 2011, only weeks after the Disner/Schweitzer lawsuit was filed against the government, Disner provided a donation of $1,000 to the GOP Presidential campaign of Newt Gingrich (Newt 2012), Federal Election Commission records show. The Gingrich donation by Disner appears to have been his first to a national candidate or organization. The FEC database, for example, shows no donations from Disner between Jan. 1, 1990, and Dec. 25, 2011.

    Disner matched the Dec. 26 donation with another $1,000 to Gingrich in January 2012, according to FEC records.

    Separately, records in Miami-Dade County show that the IRS filed a tax lien against Disner for $101,723 on Aug. 1, 2006. Included in that sum was $95,015.97 allegedly owed from 1999, and $6,707.77 allegedly owed from 2002.

    ASD, operated by the now-convicted and jailed Andy Bowdoin, launched just weeks after the IRS filed the lien against Disner. Two years to the day after the lien was recorded in Miami-Dade, the Secret Service seized $65.8 million from 10 Bowdoin bank accounts.  A raid of ASD’s headquarters followed four days later. Bowdoin later was charged criminally with operating a Ponzi scheme. Among the allegations against Bowdoin was that he had used money from the ASD Ponzi scheme to make a donation to the National Republican Congressional Committee.

    Bowdoin, 77, pleaded guilty to wire fraud in May 2012. In August, he was sentenced to 78 months in federal prison. Prosecutors said he was at the helm of a $119 million Ponzi scheme and promoted other MLM fraud schemes even after his December 2010 arrest.

    On Nov. 21, 2007, according to records, the IRS filed another lien against Disner in Miami-Dade totaling $294,940.89. This lien was for the 2003 and 2004 tax years. The IRS filed yet another lien against Disner on Oct. 22, 2008. This one sought $8,661.36 for the 2000 and 2001 tax years.

    All in all, records show three tax liens against Disner for the combined sum of $405,325.99.

    Whether Disner has cleared the IRS liens is unclear. What is clear is that, in June 2012, he raised the prospect in court filings that he could be prosecuted for tax evasion because of the seizure of ASD’s database in 2008. Records in the Zeek case, meanwhile, show that the Zeek database also has been seized.

    Records suggest that, with Gingrich out of the GOP Presidential race by May 2012, Disner switched his support to Mitt Romney, who went on to become the party’s nominee. Romney ultimately lost in the general election to President Obama, a Democrat seeking a second term.

    Gingrich, a former Georgia Congressman, is a former Speaker of the U.S. House of Representatives.

    On June 25, 2012, Disner gave $1,000 to Romney for President Inc., according to FEC records.

    Just days earlier — on June 18, 2012 — Disner and Schweizer claimed in federal court that the government’s Ponzi case against ASD was a “house of cards,” despite Bowdoin’s guilty plea and acknowledgment that he had operated a Ponzi scheme and that ASD never had operated lawfully after its 2006 inception.

    A month later — on July 17, 2012 — Disner gave $200 to the Republican National Committee, according to FEC records.

    Exactly a month after that — on Aug. 17, 2012 — the SEC filed an emergency action in federal court that accused Burks of presiding over a massive fraud scheme that effectively extended across the world.

    Within days of the SEC action, Disner — who previously solicited money to sue the United States for alleged misdeeds in the ASD Ponzi case — participated in a conference call with self-described Zeek “consultant” Robert Craddock, who himself was soliciting money for some sort of court action against the SEC or the court-appointed receiver in the Zeek case.

    Nothing has been filed by Craddock to date. During one call, Craddock dropped the name of former Florida Attorney General Bill McCollum, claiming McCollum as a “friend.” McCollum is a Republican. In 2008, while attorney general, McCollum accused ASD of operating a pyramid scheme.

    Some ASD members reacted by suggesting that McCollum and a Florida TV station that carried the news of the ASD lawsuit should be charged with Deceptive Trade Practices.

    Despite Craddock’s claim after the SEC action that McCollum’s law firm SNR Denton had become the attorneys for a Craddock and a group of Zeek members, SNR Denton appears to have decided not to represent Craddock or his group.

    FEC records show that Disner gave $1,500 to the Republican National Committee in September 2012.

  • BULLETIN: Securities Fraudster/Ponzi Schemer Sentenced To 40 Years

    BULLETIN: Jasen M. Snelling — who last month was sentenced to nearly 11 years in prison in a federal Ponzi-scheme case brought in Ohio — now has been sentenced in Indiana state court to 40 years.

    The state case was brought after an investigation by the office of Indiana Secretary of State Connie Lawson. Snelling was accused of selling unregistered securities, theft and using victims’ money as his own. The scam involved entities known as CityFund Advisory and Dunhill Investment.

    “While we are pleased with today’s sentencing, we will continue to aggressively pursue this case in criminal courts, civil courts or administrative proceedings, if necessary, in order to hold all those accountable who contributed to the financial losses and deep sorrow of these victims,” Lawson said in a statement today.

    Snelling, a resident of Cincinnati, was prosecuted in Indiana by Franklin County Prosecutor Mel Wilhelm, Lawson said, adding that Indiana investors lost more than $3 million.

    “This sentencing showcases cooperation between state and local officials,” Lawson said. “Securities fraud is a serious crime and by working together we can root out more fraud and abuse and stop these schemes before investors lose millions.”

    After pleading guilty in June to federal charges, Snelling, 48, was sentenced in October to 131 months and ordered to pay $5.3 million in restitution. The scam created about 72 victims, federal prosecutors said.

    “Consistent with a classic Ponzi scheme, early investors were paid interest or return of capital payments, which were not generated by investment earnings, but rather by monies solicited from later investors,” U.S. Attorney Carter M. Stewart of the Southern District of Ohio said at the time. “These payments served to lull the victims into a false sense of security and to prevent or delay the discovery of the fraudulent investment scheme.”

    Snelling compounded matters by engaging in “obstruction” and tax crimes, federal prosecutors said.

    And, they noted, “Snelling was ordered to forfeit a boat, trailer and real estate he owned in Michigan.”

    The IRS and the U.S. Postal Inspection Service handled the federal probe.

  • BULLETIN: Purported ‘Sovereign Citizen’ Tim Turner Of Purported ‘Republic for the united States of America’ Charged In Alleged ‘Seminar’ Scam In Which He Taught Attendees How To File Bogus Liens Against Public Officials; Tax Crimes Also Charged, Justice Department Says

    “Turner is alleged to have attempted to pay his own taxes with a fictitious $300 million bond and to have assisted others in attempting to pay their taxes with fictitious bonds purporting to be worth amounts ranging from $10 million to $100 billion.”U.S. Department of Justice, Sept. 18, 2012

    BULLETIN: James Timothy Turner, a purported “sovereign citizen” who claims to be “President” of the “Republic for the united States of America,” has been indicted by an Alabama grand jury on charges of conspiracy to defraud the United States, attempting to pay taxes with fictitious financial instruments, attempting to obstruct and impede the Internal Revenue Service, failing to file a 2009 federal income tax return and falsely testifying under oath in a bankruptcy proceeding, the Justice Department announced.

    Among the allegations against Turner is that he “conducted seminars at which he taught attendees how to file retaliatory liens against government officials and to defraud the IRS by preparing and submitting fictitious bonds to the United States government in payment of federal taxes,” the Justice Department said.

    “Turner is alleged to have attempted to pay his own taxes with a fictitious $300 million bond and to have assisted others in attempting to pay their taxes with fictitious bonds purporting to be worth amounts ranging from $10 million to $100 billion,” the Justice Department said.

    The IRS and the FBI led the probe, the Justice Department said.

    So-called “sovereign citizens” may have an irrational belief that laws do not apply to them.

    Purported “sovereign citizen” Kenneth Wayne Leaming — a mainstay in the AdSurfDaily Ponzi scheme story — was arrested by the FBI last year on charges he filed bogus liens against at least five public officials involved in the ASD case, including a federal judge, three federal prosecutors and a special agent of the U.S. Secret Service.

    He also is accused of uttering a bogus “bonded promissory note,” concealing fugitives wanted in a home-business caper and being a felon in possession of firearms.

    Leaming also has sought to sue President Obama and U.S. Attorney General Eric Holder on a theory they are imposters in office. In June, Leaming, 56, sought to sue a county sheriff in Arkansas, demanding purported damages be paid in gold and silver.

    In August, purported “sovereign citizen” Michael Chung, 52, was arrested in New York on charges that he threatened to kill two bank employees.

  • As Zeek Apologists Solicit Funds And Plant Seed They’ll Sue SEC, Guest Columnist Asks, ‘Whose Lawyer Is This Anyway?’

    DISCLOSURE: Gregg Evans, a longtime member of the antiscam community, is a longtime PP Blog contributor. He was not compensated for this column, and his views are not necessarily the views of the PP Blog.

    Whose Lawyer Is This Anyway?

    By Gregg Evans

    A group of Zeek Rewards’ affiliates claim they have retained SNR Denton to do, well, something about the SEC taking over Rex Venture Group, Zeek’s corporate parent. What they intend to do is a mystery at this time. You see, Rex Venture Group, and with it Zeek, is dead. Nothing left but the shell that is in possession of a court-appointed receiver.

    There can be no resurrection here: Paul Burks, the previous owner has turned the company over voluntarily to the receiver and, under the terms of the consent judgment, he cannot change his mind, he cannot appeal, he cannot argue that he didn’t violate securities laws and he can’t reboot the company under a different entity.

    Zeek is no more: All that’s left is to gather up all the money and distribute what’s left back to those that it was stolen from.

    The first problem with this is that not all that was stolen can be recovered, a part of it is going to be spent in the effort to return it and not everyone lost, which means some people won. Fairness, and by the way the law, says that those winners should have to return not only their ill-gotten gains, but in fact they should also return part of their original investment so that they proportionately bear the same loss rate as everyone involved.

    In short, if the average “investor” is only going to recover $30 of the $100 they sent in, why should someone who sent $10,000, and profited in the end, only have to return their net winnings? It’s only fair that they should in fact have to return all their profits, but also 70% of their contributions, so that they bear the same loss as everyone else. If you sent in $10,000 and didn’t take out a dime, I think you’ll see the logic there. If, on the other hand, you were among the early investors who made a sizable profit, you may think differently.

    Zeek presented in online pitch as “Passive Income!” opportunity.

    It was once claimed that some affiliates were “earning” over $1 million a month from Zeek. If you’re a big winner, you might be quietly hoping that the receiver isn’t going to try to get anything back from you and you might be thinking that if he does, you might be wise to get an attorney to do everything legally possible to prevent any of your “profits” being taken from you to be added to the pool of funds eventually refunded to the people who weren’t as lucky as you. Well and good. I don’t agree with you, but then again, I wasn’t getting a million dollars a month in Zeek “profit sharing.” You’re certainly entitled to the best legal talent you can pay for.

    Ah, but you’re too greedy to even accept that. No, you’re not going to use your own money to get that very pricey legal team working to keep you from losing money in the Ponzi scheme like almost all the others, you want the losers to contribute to a fund to pay your lawyers.

    That’s chutzpa, Sparky.

    The names so far mentioned as being behind this legal effort are hardly innocents. Among them are some names very familiar to those of us who follow online investment frauds, Ponzi schemes and MLM hucksters. These are the big recruiters. They pimped this scam, flaunted the money they were raking in, money that was ultimately stolen from their own downlines. Now they’ve cranked up their downlines, incited the victims and are shouting from the Internet hills about the injustice of the evil government shutting down their favorite scam, because, after all, it was still paying.

    Never mind the $3 billion deferred liability that Zeek Rewards had only $225 million to pay. Never mind that only 2% of Zeek’s revenue came from an actual business and that 98% of the money paid out in the end was coming from new money paid into the affiliates programs. (The very definition of a Ponzi scheme.)

    I’d venture you’d be a little less admiring of Paul Burks if the SEC, Secret Service and North Carolina Attorney General had not investigated this scam and it had collapsed of its own weight a few weeks or days later than the SEC action. There were signs that Zeek was in fact about to implode in the very near future anyway. Had that happened I’d expect a few of you would be raising complaints as to why the authorities had let the scam continue when they knew about it and had been investigating it. (Search “CMKX Scam” for an example of that.)

    But with apologies to Arlo Guthrie, that’s not what I’m here to talk about.

    I’m here to talk about your lawyers, and how you’re trying to get the people whose stolen money you have, to pay lawyers so you don’t have to give any of that stolen money back. First, you’re asking people to send the money to you, not to the lawyers. Second, you’re telling them to please not call the lawyers.

    This raises a few issues. To begin with, if the people involved lost money they can of course take advantage of the tax code to at least save on their taxes. They could also, if they retained counsel in relation to their business deduct that money, too. They cannot deduct any contribution they make to someone else’s legal bills.

    In order for them to be able to say they paid a lawyer in relation to a business expense, the IRS is pretty insistent that they paid lawyers, not paid someone else who paid a lawyer, especially when the lawyer in question won’t even take your calls. I’m not an attorney myself but I’m pretty certain that some ethical rule somewhere says you have to take calls from your client. Which brings us to another thing:

    Who is the client, and what is the client’s interest?

    In a solicitation letter published on the Internet, the people soliciting donations say that the law firm will only communicate with 12 people. Forgive me if I take that to mean that only those 12 people are formally the clients represented, and that means that the attorney’s in question MUST represent those 12 people and ONLY those 12 people, and any interest any other people may have that is against the clients are by default adversarial.

    So if, for instance, those 12 people were all net winners wishing to avoid a clawback action, hundreds of thousands of investors who lost would be the enemy, and by the tenets of the legal profession, said lawyers would be opposed to their interests in any conflict. There were early reports of over a million investors in Zeek Rewards. At a later news conference, the receiver said that number may well be over 2 million.

    Mathematically speaking a Ponzi scheme results in at least 88% of participants who are net losers, a percentage that rises the longer a scheme continues, so of the 2 million, 1,760,000 people are likely net losers here. But these lawyers are only looking out for the 12, who I’ll bet are all net winners.

    I’ll go out on a limb and say that all of them are big-time winners; at least one had a video posted showing off a new luxury home he implied was paid for with Zeek Reward profits. And they want the losers to pay for their lawyers, because after all, Zeek was still paying. There was over $225 million left in the till and if the evil government had just minded their business they could have gotten a pretty good chunk of that, too.

    So, am I wrong? I’m talking now to the 12 people who are allowed to call the lawyer, and to the lawyer, too for that matter. I think this is rotten to the core, but prove me wrong. Make public the retainer agreement between whoever the clients are and SNR Denton.

    If you’re good enough and shameless enough to get your victims to pay for your lawyers, good on you, but I think you owe it to the people you’re asking to pay for it to show them just exactly what they’re paying for, and whose interest is being represented here.

    Oh, and since you’re telling people to pay you, and not the lawyers, and since that means they can’t deduct it on their taxes, I ‘d like to offer my own opinion that any money you get is regular income as far as the IRS is concerned, and you’d better report every penny of it as such.

  • JSS Tripler/JustBeenPaid Touted On Race-Baiting/Catholic-Bashing Site; Pitchman Linked To ‘Church’ That Says It Preaches ‘True Gospel Of The Risen Lord Jesus Christ To White-Raced Peoples Of North America, Europe, Southern Africa And Australia’

    EDITOR’S NOTE: A reader contacted the PP Blog yesterday, saying the JSS Tripler/JustBeenPaid “program” was being “glorified and promoted” on a website styled Vatican Assassins.org. Sure enough, a fawning pitch dated May 21 for JSS/JBP appears on the site — along with a graphic that advertises the purported JSS/JBP payout rate of 60 percent a month and includes a prompt that higher earnings were possible through “daily compounding.”

    But VaticanAssassins could serve up yet another PR disaster for JSS/JBP, which openly acknowledges it is not registered to sell securities, does not disclose its base of operations or identify itself with a nation-state, uses offshore payment processors linked to numerous fraud schemes, may have ties to the “sovereign citizens” movement and says its members must affirm they are not with the “government.”

    “In general, government people are not welcome in JBP,” said JSS/JBP’s purported operator Frederick Mann on May 24, noting that a “cruise missile” attack against the “program” could not totally be ruled out.

    It is paranoia coupled with a curious form of discrimination — we’ll call it exclusion by employment — and JSS/JBP’s new helpmate is almost certain to cause even more stomachs to turn. Indeed, VaticanAssassins describes black people as “savages” and “bastards” even as it tries to link the Catholic Church to one conspiracy after another.

    Blacks, Catholics and other people of goodwill who are JSS/JBP members may recoil in horror if they spend so little as 10 minutes on the VaticanAssassins site and read the ramblings of their fellow pitchman for the “opportunity.”

    On Feb. 7 — presumably in his pre-JSS/JBP days — the pitchman wrote this on VaticanAssassins:

    “If you do not appreciate reading about the racial TRUTH in the Black Pope’s pro-Black, anti-White, ‘Holy Roman’ Fourteenth Amendment, Corporate-fascist, Socialist-Communist American Empire (1868-Present) then this website is not for you.”

    On March 14, 2011 — while trying to draw a distinction between what he deemed “Majority Savage Blacks and the Minority Civil Blacks” — the pitchman said this:

    “28 Majority Savage Black beasts, raised by their fornicating mothers due to seventy-percent of all Black American births being illegitimate, committed this gang rape. Yes, these animalistic Black bastards (for they act like animals’ and are indeed ‘bastards,’ they having no legitimate fathers) have perpetrated yet another unspeakable crime, this time against an 11-year old Hispanic girl.”

    Just who is this pitchman?

    None other than Eric Jon Phelps, who tells readers on another part of the site that he paid an IRS tax lien for $164,551.30 (presumably prior to his involvement in JSS/JBP) and introduces a conspiracy that the Pope secretly controls the tax-collection agency.

    The reader who contacted us yesterday expressed concern, but also confusion.

    “I thought they were shut down by the SEC,” he said of JSS/JBP. “I almost bought into this. Is there anything you can do to prevent people from losing [their] money? Or is this a [legitimate] business?”

    Equally compellingly — in a JSS/JBP conference call Thursday — a distressed woman who said her name was “Ping” implied she was ill with a serious heart condition, was managing three JSS/JBP accounts that had been hacked a month ago and said her “sister borrowed on her house [to] put money in JBP.”

    “I need, Mr. Mann, I beg your lifesaving help,” Ping said to Frederick Mann.

    Ping recited her ticket number multiple times and asked Mann to intervene personally in her case because JSS/JBP customer support had been unresponsive for weeks.

    Mann said, “Well, ah, one of our support staff will check it out.”

    But what Mann said was not what Ping wanted to hear.

    “Yes, but it has been one month and no one — I told them my situation, I told them my life was on [the] line. But help is so slow. Could you please take my case?”

    At that point, JSS/JBP’s female conference-call host — “Dale” — intervened in an apparent bid to reassure the panicked woman that the “opportunity,” which advertises a daily return that corresponds to an annualized return of 730 percent, would look into her case. But Ping, who’d been panting and said she had made a recent trip to “the ER,” either did not hear what “Dale” was saying or was not satisfied that her complaint had been heard and would be escalated and resolved.

    “Dale” then became agitated at Ping’s persistence.

    “Ping, yes,” Dale barked. “We’re gonna try to handle that on this end. OK?”

    Although Dale did express concern for Ping’s health, the remarks came off as patronizing because of the agitation she had displayed toward Ping. The scene had the deeply disturbing feel of the surreal/unreal: a woman who may be seriously ill and whose second language was English was on a conference call begging an HYIP that does not even disclose its base of operations for help. Why? Because support doesn’t respond, not even when a person’s home may be at risk.

    My God.

    Here is Ping’s Ticket No: 836560. May it become the most famous ticket number in the sordid history of HYIP frauds — and may Ping get the help she needs.

    As the PP Blog was preparing a report on Thursday’s JSS/JBP call, it received the report about the promo on VaticanAssassins.org. We present that development below — with Ping still very much on our mind . . .

    In a YouTube video dated April 7, 2009, Eric Phelps shares a vision of a "white" America.

    UPDATED 12:29 P.M. EDT (JUNE 3, U.S.A.) JSS Tripler/JustBeenPaid is being promoted on a website whose operator touts a vision of “white” America, advances conspiracy theories, bashes Catholics, claims the Motion Picture Association of America is “ruled” by the “Black Pope’s Knights of Malta” — all while the conspiracy site is linked to a purported church that says it preaches the “True Gospel Of The Risen Lord Jesus Christ to White-raced peoples of North America, Europe, Southern Africa and Australia.”

    The website is known as VaticanAssassins.org. Meanwhile, the church is known as Reformation-Bible Puritan-Baptist Church. Both entities have conspiracy theorist Eric Jon Phelps, also known as Brother Eric Jon Phelps, in common — and Phelps now has emerged as a JSS/JBP pitchman.

    Whether the site has received the blessing of JSS/JBP is unclear.

    Phelps’ sales pitch asks prospects to obtain a Gmail account, register for JSS/JBP and to acquire accounts at the offshore payment processors AlertPay and SolidTrustPay — and start earning 60 percent a month.

    “Your Editor is delighted to inform his readers of JSS Tripler,” Phelps gushes on VaticanAssassins in a post dated May 21. “It has been existence for over a year now with nearly one million members. This is a way we can make a little extra cash to help with daily needs or we can buy more Tripler positions and continue to make money over a period of time and benefit from greater returns.”

    One of the most popular posts on Vatican Assassins is titled, “Three Savage Black American Soldiers Rape 12-Year Old Japanese Girl, 1995.”

    Here is a snippet (italics added):

    Meanwhile, no one, not one news room or major daily reported these merciless, heartless, savage bullies were Black. To add insult to injury, all articles in the Pope’s Trilateral Commission-controlled Japanese Press have removed every reference indicating these criminals were Black! Under orders from Jesuit-ruled Washington, Jesuit-ruled Tokyo removed this blatant fact of race, further generating a hatred for all Americans in general, as though we White Protestants and Baptists are equally guilty of such wicked and shameful behavior.

    The post went on to assert that “Majority Savage Blacks were never taught to behave in civil White Protestant culture and thus have been released upon us Reformation Bible-believing Whites to further destroy our once White Protestant and Baptist American culture founded upon the Reformation’s AV1611 English Bible and a White Protestant Presbyterian Constitution with its attached White Baptist-Calvinist Bill of Rights.”

    Both JSS/JBP and the payment processors have members who are black and/or Catholic. Mann has publicly claimed that JSS discriminates against no one — with the possible exception of government workers who are “part of a criminal gang of robbers, thieves, murderers, liars, imposters.”

    Whether Mann or the payment processors would repudiate Phelps’ views was not immediately clear. For now, at least, Phelps has active affiliate links for both JSS/JBP and the processors.

    Also unclear was whether Phelps had any licenses or registrations required to sell securities. The business model of JSS/JBP is similar in key aspects to the business model of AdSurfDaily, a Florida-based scam broken up the U.S. Secret Service in 2008. ASD President Andy Bowdoin pleaded guilty last month to wire fraud in the ASD case.

    Federal prosecutors said ASD had gathered at least $110 million over the Internet, including tens of millions of dollars in just weeks during the spring and summer of 2008. ASD is known to have had “sovereign citizens” within its membership ranks. In 2008, JSS/JBP’s Mann was identified as an ASD pitchman — and a website linked to Mann has showcased videos on Francis Schaeffer Cox, a purported “sovereign citizen” implicated in an alleged murder plot against public officials.

    Whether Phelps has any sympathies with the purported “sovereign citizens” movement is unclear. What is clear is that his presence as a JSS/JBP pitchman could become divisive. JSS/JBP purports to have a membership of about 1 million. It is a virtual certainty that a group of that size would include people of all races, belief systems and political persuasions — and Phelps potentially could alienate a large part of the JSS/JBP base.

    In a YouTube video dated April 7, 2009, Phelps said he’d contemplated visiting Mexico to take in its culture, venturing that if he made such a trip he’d enjoy observing women in “beautiful Mexican dresses” and men in their “Mexican wedding shirts.”

    And Phelps also ventured that he’d enjoy eating “tacos.”

    But when it became time to leave Mexico, Phelps said, “I want to go back to my country that’s white. We speak English. We have organic hamburgers on wheat bread.”

    The United States, he ventured, is experiencing an “alien invasion of Mexican Roman Catholics.”

    “Mexico could be a wealthy country, but why it is broken is because of the Papacy, because of the Vatican . . .”

    In his “new white nation,” Phelps ventured, “all the junk food’s gone.”

    And then the man who’d one day become a JSS/JBP pitchman hatched a conspiracy theory involving “sugar processing” and the “Jesuit Order.”

     

  • FEDS: Istvan Merchenthaler Charged In Alleged ‘Prepaid Phone Cards’ Ponzi Scheme That Stole More Than $2 Million From Investors

    EDITOR’S NOTE: If you’re keeping a “Bubba Blue” notebook on how to have your Ponzi scheme, this alleged caper in Greater Philadelphia involving prepaid phone cards and purported ties to major retailers perhaps merits an entry . . .

    A 42-year-old Pennsylvania man has been charged in an alleged “prepaid phone cards” Ponzi scheme that operated for more than five years and bilked more than 200 investors out of more than $2 million.

    Istvan Merchenthaler of Downingtown was indicted on four counts of wire fraud, one count of aggravated identity theft and two counts of money laundering, the office of U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania said.

    Merchenthaler also is known as Steve Merchenthaler, prosecutor said, alleging that the scheme operated “at least” between May 2006 and September 2011.

    The long-running scam involved a business known as PhoneCard USA of which Merchenthaler claimed to be the founder, prosecutors said.

    They described the scheme as one that duped investors by trading on fancy terms such as “exponential growth,” defining the market as a wide geographic expanse and fabricating ties to famous businesses to keep the Ponzi wheel greased.

    Merchenthaler positioned PhoneCard USA as a “premier distribution source” for phone cards and cell phones, claiming to have contracts with Walmart, 7-Eleven and BJ’s Wholesale Club, prosecutors said.

    It is common for scammers to purport to have ties to famous business entities — and that proved to be the case with Merchenthaler and his PhoneCard USA pitch, prosecutors said.

    “In reality, Merchenthaler had no such contracts with these major retail chain stores,” prosecutors said.

    Investors were drawn into the Ponzi morass in part through claims that the firm’s “lucrative contracts” with vendors covered “territories that span the east coast,” prosecutors said.

    “Merchenthaler claimed that these investments would finance the ‘exponential growth’ of PhoneCard USA and would provide investors with ‘generous returns’ on their investments,” prosecutors said.

    An investigation demonstrated that “Merchenthaler operated a ‘Ponzi’ scheme, stealing over $2 million from over 200 investors and using much of these funds for his own benefit and to perpetuate his scheme,” prosecutors said.

    The FBI and IRS led the probe.

  • URGENT >> BULLETIN >> MOVING: Feds Arrest 3 ‘Leaders’ Of Alleged Cash-Gifting Scheme; Conspiracy, Wire Fraud And Tax Fraud Charged; ‘Defendants Attempted To Intimidate A Participant Who Had Questioned The Legality Of The Gifting Table Scheme,’ Prosecutors Say

    So, you think your cash-gifting “sponsor” has your best interest at heart?

    Three women who were “leaders” of a cash-gifting scheme in Connecticut were arrested earlier today on charges of conducting a pyramid scheme and engaging in a conspiracy, wire fraud and tax fraud, federal prosecutors said.

    The scam operated between 2008 and 2011, reached beyond Connecticut’s borders and allegedly featured an element of “intimidation” aimed at a prospect who questioned the purported opportunity.

    Prosecutors today published snippets of emails sent over multiple months and linked to the alleged scheme, which gathered purported “gifts” $5,000 at a time using a food theme.

    “[K]eep bringing in new blood,” one of the emails allegedly read in part. “It is a fact when women get excited about making money, they tend to over extend . . .”

    Another email allegedly advised in part that potential recruits needed “to Shit or get off the pot . . .”

    It has been known for months that a grand-jury probe into so-called “gifting tables” has been under way in Connecticut. That probe now has resulted in the arrests of Donna Bello, 55, of Guilford;  Jill Platt, 64, of Guilford; and Bettejane Hopkins, 66, of Essex.

    An indictment filed yesterday that names Bello, Platt and Hopkins also includes the word “co-conspirators,” suggesting others may be charged.

    “The indictment alleges that the three defendants ran a pyramid scheme designed to enrich themselves at the expense of other participants,” said U.S. Attorney David B. Fein.  “In addition, the indictment alleges that the defendants tried to use the pretext of ‘gifting tables’ as a way to avoid paying taxes on the substantial illegal proceeds of their scheme.”

    Fein noted that the probe, which is being led by the IRS, is ongoing.

    Bello, Platt and Hopkins “conspired to defraud the IRS by misrepresenting to recruits and participants that monies given and received during the scheme were legally considered tax-free ‘gifts’ under the IRS code and that lawyers and accountants had approved gifting tables as legal ventures that generated tax-free proceeds,” prosecutors said.  “The indictment further alleges that Bello, Platt and Hopkins filed false tax returns that failed to report income generated from the scheme.”

    Prosecutors today also released snippets of emails linked to the alleged cash-gifting scammers.

    “[W]e need to keep silent and under the radar,” one of the emails read in part, prosecutors said.

    Another allegedly read in part, “[A]s women we like our own stash. Keep it in a safe.  Keep it quiet because rather not have red flags raised.  Hiring accountants and atterneys [sic] is costly.”

    A third allegedly read in part, “I am not a . . . saint . . . . I’m teaching you all how to make an extra 80 grand a year . . . . Isn’t that enough?”

    Meanwhile, a fourth allegedly read, “It’s sort of a joke that I refer to our freezer as the ATM.” A fifth allegedly read, “They have had enough parties. Its [sic] costing us a small fortune in their food and wine delights. No more parties until they commit with the cash.”

    From prosecutors (italics added):

    . . . a gifting table is configured as a four-level pyramid, with eight participants assigned to the bottom row, four participants assigned to the third row, two participants assigned to the second row, and one participant assigned to the top row.  The top row participant is referred to as the “dessert,” the two participants on the second row as “entrees,” the four participants on the third row as “soup and salads,” and the eight participants on the bottom row as “appetizers.”  To join a gifting table, new participants were required to pay $5,000, typically in cash, to the dessert, that is, the participant occupying the top position on the pyramid.  The $5,000 payment, which was fraudulently characterized as a gift, secured the new participant a position as an appetizer on the bottom row.  Participants moved from the bottom row of the pyramid and progressed through a gifting table by recruiting additional people to join.  When eight new participants joined a gifting table, each having made a $5,000 “gift” to the person occupying the dessert position at the top of the pyramid, the dessert left the gifting table and kept the $40,000 paid by the eight new participants.  That particular gifting table was then split, with the two participants occupying the Entree position on the second row moving to the top position (dessert) of two new pyramids.  The other incumbent members of the gifting table moved up a row on one of the two newly-formed pyramids, and the search for 16 new participants began.  The success of the gifting tables depended on new participants joining and making the $5,000 “gift.”

    The indictment alleges that from approximately 2008 to 2011, Bello, Platt and Hopkins 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 misrepresented to recruits and participants that gifting tables was not a pyramid scheme.  The indictment further alleges that in May 2010, the defendants attempted to intimidate a participant who had questioned the legality of the gifting table scheme.

    Read the indictment, which includes information investigators allegedly gleaned from emails.

     

  • FEDS: Florida Attorney Conspired With Ponzi Schemer Scott Rothstein To Run Electioneering, Check-Kiting And Tax Scams And Prop Up Cash-Gushing Law Firm

    Fort Lauderdale lawyer Steven N. Lippman conspired with now-disbarred attorney, convicted racketeer and Ponzi schemer Scott Rothstein to prop up the Rothstein, Rosenfeldt and Adler (RRA) law firm through electioneering, check-kiting and tax scams, federal prosecutors charged yesterday.

    A 70-attorney firm that employed about 150 staff members, RRA collapsed in the wake of Rothstein’s epic Ponzi caper, which operated from the disgraced firm and was exposed in 2009. The Miami region’s top federal prosecutor yesterday described the scheme as “mind-boggling.”

    “The breadth, scope, and sheer complexity of Rothstein’s $1.2 billion Ponzi scheme is mind-boggling,” said U.S. Attorney Wifredo A. Ferrer. “Its success depended, in no small part, on the complicity of his colleagues and associates, like Steven Lippman. Lippman, an attorney, is now the ninth person to face criminal charges in connection with this scheme. As this investigation continues, I am sure that more will follow.”

    Lippman, 49, of Plantation, now has been charged criminally with conspiracy to violate the Federal Election Campaign Act, to defraud a financial institution and to defraud the United States.

    The Alleged Electioneering Scam

    It was the desire of Rothstein and others to “dramatically increase the stature and political power of RRA on the federal, state, and local level by making substantial political contributions to political candidates,” prosecutors said.

    In line with that, Rothstein enlisted Lippman and others to donate to the 2008 U.S. Presidential campaign of Sen. John McCain “by agreeing that RRA unlawfully would provide them with the funds to make the political contributions,” prosecutors said.

    In one instance, prosecutors said, Lippman made a $67,800 contribution to McCain-Palin Victory 2008 — and received $77,500 back from RRA.

    Then- Alaska Gov. Sarah Palin was McCain’s Vice Presidential running mate on the Republican ticket in 2008. Neither she nor McCain has been accused of wrongdoing.

    But Rothstein, through RRA, was interested in elevating his profile and improving his influence with politicians and political campaigns, prosecutors said.

    The RRA check Lippman received “was fraudulently backdated to reflect that it was issued six days prior to the date of the actual contribution and the memo section of the check stated ‘bonus,” prosecutors said.

    Various donations to GOP causes were “bundled” through the RRA firm — and Rothstein emerged a delegate to the 2008 Republican National Convention. Rothstein, in the midst of operating a colossal Ponzi caper, also was appointed to Florida’s 4th District Judicial Nominating Committee, which has sway “as to which persons should be nominated to be state appellate judges,” prosecutors charged.

    The Alleged Check-Kiting Scam

    With the RRA facing financial pressures in 2006, prosecutors said, Rothstein enlisted Lippman into a check-kiting scheme that involved an account at Lippman’s former law firm. The account at the former firm remained opened because the firm was still winding down its business when Lippman joined RRA in 2005.

    Over time, prosecutors charged, Lippman issued checks from the former firm totaling more than $10.3 million. Those checks — “many” of which were written with insufficient funds in the account — were deposited into RRA accounts.

    Rothstein and Lippman played the “float” on the checks to prop up the RRA firm and to “unlawfully obtain beneficial financing for RRA” by making it appear as though RRA had higher bank balances.

    As was the case with the political donations, Lippman came out ahead by playing ball with Rothstein in the check-kiting scheme, according to the charging document. Although checks from the former Lippman firm routed through RRA totaled more then $10.3 million, Lippman deposited checks from RRA accounts totaling more than $10.6 million into the account of the former firm.

    The Alleged Tax Scam

    Lippman, prosecutors said, “defrauded the IRS by failing to report as income certain expense reimbursements and other reportable income he received from RRA.

    The tax scam, prosecutors said, featured an agreement between Rothstein and Lippman that “Lippman would be paid a base salary and be given an expense account for which he would be fraudulently reimbursed for personal expenditures disguised as deductible business expenses”

    Through the conspiracy, prosecutors charged, Lippman and RRA sought to “avoid paying additional federal income and employment taxes.”

    “In addition,” prosecutors charged, “Lippman was paid from both the operating account and the payroll account of RRA, but would only receive an IRS Form W-2 reflecting the moneys paid to him through the payroll account. Lippman would not report to the Internal Revenue Service the moneys paid to him by RRA for expenses.”

    “The charges against Steven Lippman show our resolve to unravel all the schemes in this complex financial fraud perpetrated by convicted Ponzi schemer Scott Rothstein and his co-conspirators,” said John V. Gillies, special agent in charge of the FBI’s Miami Office.

    The probe in ongoing, Gillies said.

    “It is disappointing that the number of people who chose wrong over right and participated with Rothstein in this massive fraud is at nine and rising,” he said.

    The investigative efforts of the IRS are being led by José A. Gonzalez, special agent in charge of the IRS-Criminal Investigation Unit in Miami.

  • Federal Agents Arrest 77-Year-Old Pennsylvania Attorney Amid Swirl Of Ponzi Allegations; Anthony Lupas Charged With Mail Fraud; U.S. Secret Service, IRS Spearhead Probe

    Federal agents at the scene of the emerging Anthony Lupas case in Wilkes-Barre, Pa. Source: YouTube.

    Another major Ponzi case appears to be brewing — this one in Pennsylvania, where federal agents were seen carting boxes from the Wilkes-Barre office of attorney Anthony Lupas.

    Lupas, the former solicitor of the Wilkes-Barre School District, is 77. He now joins a number of alleged swindlers over the age of 65 implicated in fraud schemes nationwide involving millions of dollars.

    The office of U.S. Attorney Peter J. Smith of the Middle District of Pennsylvania confirmed the arrest of Lupas, who was ordered at his first court appearance placed under “house arrest” with electronic monitoring, prosecutors said.

    Senior U.S. District Judge James M. Munley presided over the arraignment in Scranton. Lupas also was ordered to surrender his passport.

    Agents from the U.S. Secret Service and the IRS are conducting the probe.

    Read local coverage in the Citizens’ Voice.

  • BULLETIN: Ronald James Davenport, Purported ‘Sovereign Citizen,’ Sentenced To 41 Months In Federal Prison After Filing ‘False Liens’ Against Public Officials And Trying To Attach Their Real Estate and Personal Property

    BULLETIN: Ronald James Davenport, the Washington state “sovereign citizen” convicted in November 2011 of filing false liens for billions of dollars against four public officials, has been sentenced to 41 months in federal prison, the Justice Department said today.

    Davenport was convicted of the false-liens charges during the same month AdSurfDaily figure and purported Washington state “sovereign citizen” Kenneth Wayne Leaming was accused in a separate case of filing bogus liens against five public officials involved in the ASD Ponzi case brought by the U.S. Secret Service in August 2008.

    Leaming’s targets included a federal judge and three federal prosecutors in the District of Columbia and a special agent of the U.S. Secret Service, according to court filings.

    Davenport, described by prosecutors as a tax defier, targeted the U.S. Attorney for the Eastern District of Washington, an assistant U.S. Attorney, an IRS agent and a court clerk with false liens, prosecutors said.

    “The liens were filed in the county auditor records of Spokane and Whatcom Counties, Wash,” prosecutors said.  “Each lien claimed that the victim owed Davenport $5,184,000,000.  It also purported to attach all of the victim’s real and personal property as security for this debt.  As proved at trial, the defendant chose these four victims because of their involvement in an effort to collect from Davenport more than $250,000 in back taxes.”

    U.S. District Judge Garr M. King of Oregon sat in special designation in the Davenport case because the Washington state federal judiciary recused itself, prosecutors said.

    The Justice Department’s Tax Division and the Treasury Inspector General for Tax Administration (TIGTA) prosecuted the case because the U.S. Attorney’s Office in Eastern Washington also recused itself, the Justice Department said.

  • Illinois Man Faces Up To 5 Years In Federal Prison After Pleading Guilty To Selling Unregistered Securities Via Mail/Email; Case Brought By Postal Inspectors, IRS, State

    An Illinois man hawking a Yukon gold-mining venture via postal mail and email has pleaded guilty to selling unregistered securities, federal prosecutors said.

    Jeremiah D. Jacob, 32, of Columbia, faces up to five years in federal prison, a fine of $10,000 and three years’ supervised release, the office of U.S. Attorney Stephen R. Wigginton of the Southern District of Illinois said.

    The office also brought the criminal prosecution against alleged Pathway To Prosperity HYIP operator Nicholas Smirnow in 2010. Like the Smirnow case, the case against Jacob began with a probe by the U.S. Postal Inspection Service.

    State and federal investigators, including the Illinois Securities Department and the IRS, worked with postal inspectors in the Jacob probe, prosecutors said.

    “In selling and offering for sale the security, Jeremiah D. Jacob made use of the United States mail service and email communications in interstate commerce,” Wigginton’s office said.

    The company Jacob was pitching “was, in fact, dissolved,” prosecutors said.

    Even so, Jacob tapped an investor for $200,000 with the promise of an annual return of 15 percent, prosecutors said.

    Some HYIP schemes tout unregistered securities and advertise returns that dwarf the returns Jacob purported to offer.

    In the HYIP sphere, securities-registration violations are common, as are the sale of unregistered securities by MLM-style hucksters who troll the Internet in search of marks from whom they can “earn” commissions.

    Some of the purported HYIP “opportunities” have been linked to companies that are dissolved or exist in a shell form to disguise tentacles of a financial-fraud scheme. Some of the “companies” do not exist in any real-world sense.

    Although Jacob’s company was not an HYIP in the usual sense of the term, HYIP operators and purveyors are subject to the same securities laws that led to the prosecution of Jacob.