BULLETIN: Jacquline Hoegel, an American living in American Canyon, Calif., has been charged criminally in an alleged Ponzi scheme that gathered $129.5 million, the office of U.S. Attorney Melinda Haag of the Northern District of California said.
Also indicted was William Wise, a citizen of Canada. Wise, 62, formerly resided in Raleigh, N.C. A warrant has been issued for his arrest, prosecutors said.
Hoegel, 55, made an initial appearance before U.S. Magistrate Judge Carolyn Delaney in Sacramento, and was released on bond, prosecutors said.
The case flowed from an SEC civil prosecution brought in March 2009. Hoegel and Wise now have been charged criminally with conspiracy, mail fraud and wire fraud for their actions involving the sale of CDs issued by Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust.
Hoegel also has been charged with four counts of making and subscribing a false tax return, one count of obstruction and one count of false statements, and Wise also has been charged with money-laundering, prosecutors said.
“The CDs issued by Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust all promised CD purchasers guaranteed rates of returns — sometimes over 16 percent — that were allegedly based on overseas investments,” prosecutors said. “In fact, CD purchasers’ funds were not used for overseas investments that generated the promised returns; the funds were instead used to enrich Wise and Hoegel and to make interest payments to earlier CD purchasers.”
When the SEC brought the civil case three years ago, customer losses were estimated at $75 million. More than 1,200 investors were affected by the scheme, which was unraveled by the IRS, the FBI and federal prosecutors in the Northern District of California and the Eastern District of North Carolina, Haag’s office said.
The 23-count indictment was returned under seal Feb. 21. It was unsealed after Hoegel’s arrest yesterday, prosecutors said.
In 2009, the SEC said the CDs “purportedly offered returns that were up to 321 percent higher than legitimate bank-issued CDs.”
This grainy likeness of Gregory N. McKnight is taken from federal court filings in 2008.
URGENT >> BULLETIN >> MOVING:Gregory N. McKnight, the operator of the Legisi HYIP Ponzi scheme, has pleaded guilty to wire fraud in federal court in the Eastern District of Michigan, the SEC said this afternoon.
McKnight was charged criminally on Feb. 14 — Valentine’s Day. His guilty plea followed two days later, the SEC said. He faces a maximum sentence of 20 years in federal prison. The SEC charged him civilly in May 2008.
Legisi, which gathered more than $72 million and fleeced more than 3,000 investors in the United States and several other countries, was popularized in part on Ponzi cesspits such as TalkGold and MoneyMakerGroup.
MoneyMakerGroup is specifically referenced in U.S. court files in the Legisi case.
Legisi’s Terms of Service resemble those of JSS Tripler/JustBeenPaid, a purported “opportunity” currently being flogged on the Ponzi boards even as CONSOB, the Italian securities regulator, has opened a probe into the actions of JSS Tripler/JustBeenPaid promoters.
Promos by Legisi triggered an undercover operation by the U.S. Secret Service and state regulators in Michigan.
In addition to the prospect of jail time, McKnight is on the receiving end of a civil judgment and penalties totaling about $6.5 million, the SEC said.
Legisi members, according to the Terms, had to affirm they were not an “informant, nor associated with any informant” of the IRS, FBI, CIA and the SEC, among others, according to documents filed in federal court.
The others included “Her Majesty’s Police,” the Intelligence Services of Great Britain, the Serious Fraud Office and Interpol.
JSS Tripler/JustBeenPaid makes members affirm they are “not an employee or official of any government agency.” In addition, it makes them affirm they are not “acting on behalf of or collecting information for or on behalf of any government agency” and not “an employee, by contract or otherwise, of any media or research company.”
One of Legisi’s payment “programs” advertised a return of .25 (one-quarter) percent per day, according to court filings.
JSS Tripler/JustBeenPaid promotes a return of 2 percent a day — eight times higher than Legisi.
A sentencing date for McKnight will be determined later, the SEC said.
U.S. District Judge Mark A. Goldsmith presided over McKnight’s guilty plea, the SEC said.
Frederick Mann is the purported operator of JSS Tripler/JustBeenPaid.
A federal grand jury in Charlotte has returned an indictment against Jonathan D. Davey, 47, of Newark, Ohio; Jeffrey M. Toft, 49, of Oviedo, Fla.; Chad A. Sloat, 33, of Kansas City, Mo.; and Michael J. Murphy, 51, of Deep Haven, Minn., the office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina said.
It was a case that married a conspiracy to a series of lies and ultimately was unraveled by the FBI and the IRS, prosecutors said. Among the key new allegations is that a second Ponzi scheme emerged to replace one that had collapsed earlier.
Davey, a CPA, organized a Belize company known as Divine Circulation Services Ltd. that assisted now-convicted Black Diamond felon Keith F. Simmons in pulling off the $40 million scam, according to federal records.
Other corporate entities identified in a 2011 CFTC civil complaint as having links to the alleged scam also used names that conjured images of religion and safety. Davey also was at the helm of a Belize firm known as Sovereign Grace Inc., a firm that benefited from the scam, the CFTC said last year.
“The indictment also charges Davey with tax evasion for claiming to the IRS on his 2008 tax return that $810,000 that Davey stole from victims was a ‘loan,’” federal prosecutors said today. “In reality, the indictment charges, Davey stole that $810,000, plus approximately $500,000 in 2009, from victims to build Davey’s personal mansion.”
All four of the new criminal defendants are charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud and conspiracy to commit money-laundering, prosecutors said.
Elements of the case as outlined in the CFTC’s civil complaint last year read like a work of impossible fiction. Regulators and other law-enforcement agencies increasingly have been squaring off against bizarre fraud schemes that seek to mask themselves behind shell companies both domestic and offshore. The schemes often feature appeals to greed and faith, amid claims of fantastic earnings.
Read the announcement about the new indictments on the FBI website, which also lists the names of individuals already convicted in the scheme.
“The greed in this case is stunning. [Frederick Darren Berg] stole and squandered the dreams of hundreds: dreams of retirement, dreams of homeownership, dreams of a college education for their children and grandchildren. While we could not restore those dreams, today he was held accountable for his acts.” — U.S. Attorney Jenny A. Durkan, Western District of Washington, Feb. 9, 2012
Frederick Darren Berg gestures during his sales pitch for his Ponzi scheme in 2009. Source: YouTube.
It was the largest fraud scheme ever prosecuted in the Western District of Washington. Before his Meridian Group of funds collapsed into a pile of Ponzi rubble, Frederick Darren Berg ensconced himself in the lap of luxury.
Among other things, prosecutors said, Berg had acquired:
A $1.95 million condominium at Second and Union in Seattle.
A $1.25 million house in La Quinta, Calif.
A $1.4 million condominium in San Francisco.
A $5.475 million waterfront home on Mercer Island in Washington state.
Two Lear jets for $5.5 million, including operational costs.
“Several” yachts that consumed $3.6 million through “purchase, operation and frequent modification.”
Even after he was caught, the lies and profligate spending continued, prosecutors said.
Berg concealed about $400,000 from bankruptcy trustees while claiming to be cooperating. He sold a home he did not disclose in his bankruptcy filing, pocketing the proceeds and depositing the undisclosed windfall “into a series of bank accounts he concealed from the trustee.”
While his investors were left holding the bag, Berg used the cash to make lease payments on a Porsche Cayenne and Porsche 911 Turbo Cabriolet. In addition, prosecutors said, he paid a year’s rent up front on a Los Angeles apartment, bought an Audi S5 convertible, purchased insurance for “jet skis” and a yacht — and plunked down a retainer for a criminal defense attorney.
Berg was charged criminally in November 2010 with wire fraud, money laundering and bankruptcy fraud. He pleaded guilty in August 2011.
“Those who peddle false investments and prey on investors for their own personal financial benefit need to understand that law enforcement will not sit by and let it happen,” said Kenneth J. Hines, IRS special agent in charge of the Pacific Northwest.
It was a case of “unadulterated greed,” a top FBI agent in Seattle said.
“Mr. Berg took advantage of hopeful investors — many of them senior citizens who depended on their carefully built savings to afford assisted living, medical care, and higher educational opportunities for future generations,” said Steven M. Dean, assistant special agent in charge of the Seattle office.
The day of reckoning for Berg, 49, came yesterday.
Prior to sentencing Berg to 18 years in federal prison, U.S. District Judge Richard A. Jones told Berg “he had ‘reckless disregard for his victims . . . and had no moral compass,” prosecutors said, quoting the judge.
Restitution is still being compiled. Prosecutors said it is expected to top $100 million, noting that Berg’s real-estate and financial swindle took in $245 million between 2001 and 2009 and consisted of schemes within schemes.
Without investors’ knowledge, about $45 million was peeled off to acquire buses and to operate a transportation company known as MTR Western and subsidiaries.
The long-running Berg swindle defrauded more than 800 investors, prosecutors said.
Here is an outtake from the government’s sentencing memo. (Italics added):
“Indeed, many of Mr. Berg’s victims will be forced to make significant changes to their lifestyle and that of their families such as foregoing retirement, taking additional jobs to support their children’s’ education and selling their homes. Others are likely to be forced into bankruptcy and may also lose their homes because of the financial devastation Mr.Berg’s fraud has caused.”
Read a Seattle Times story on Berg’s sentencing and courtroom comments. Visit the YouTube site of the Times to see a Berg Ponzi sales pitch. (He references Bernard Madoff while addressing the audience.)
Charles G. Martin has been sentenced to 17 years in federal prison — and fellow Forex Ponzi schemer John E. Walsh has been sentenced to more than 12 years — in a case in which investors’ money went to pay for strippers, fine meals, fine hotels, a piano, high-end electronics, artwork, jewelry, flashy cars and private jets, prosecutors said.
Martin, 46, formerly resided in Glencoe, Ill., and Malibu, Calif. Walsh, 63, lived in Lake Forest, Ill.
More than 1,000 investors “worldwide” got sucked into the scheme, which gathered more than $17 million. The fraud gained a head of steam even though Martin previously had been in trouble with the National Futures Association and had been barred from being a principal in a commodities firm, prosecutors said.
Martin and Walsh were principals of an entity known as One World Capital Group LLC.
“One World’s trading platform operated as a front to placate customers whose margin funds were being systematically misappropriated by them,” the office of U.S. Attorney Patrick J. Fitzgerald of the Northern District of Illinois said.
After investigators peeled back layers of the One World onion, they found that tax evasion had occurred, in addition to wire fraud and securities fraud, prosecutors said.
U.S. District Judge Virginia Kendall ordered restitution of more than $16.9 million.
Customers who provided money did not realize they were getting scammed out of the gate, prosecutors said. New money went to cover existing shortfalls in One World’s trading account, and tremendous sums were diverted to fuel extravagant lifestyles.
“Credit card and bank records show that Martin spent more than $1 million at a strip club and restaurants, nearly $1 million at elite hotels and another $1 million renting flight time on private jets,” prosecutors said. “He purchased a fleet of luxury vehicles, donated hundreds of thousands of dollars to celebrity charity events, and hired personal security guards to accompany him in public.”
Walsh also frittered away investors’ funds to live the high life, using his One World “credit card to charge personal expenses, including more than $140,000 of jewelry,” prosecutors said. “He also used $70,000 in One World funds for country club expenses and $1,425,000 to purchase a second home in Lake Forest.”
About $500,000 from investors was diverted to finance a movie “that had listed Martin as a contributing producer,” prosecutors said.
The FBI and the IRS handled the criminal probe, and the CFTC and NFA assisted, prosecutors said.
In December 2007, the CFTC obtained a trading halt and asset freeze. At the time of the freeze, One World had only $677,932 in assets and unpaid customer liabilities of more than $17.6 million, prosecutors said.
U.S. law enforcement has been counting victims of some individual fraud schemes in the thousands — or even the tens of thousands. The cases present unique logistical challenges because of their size and international reach.
In some scams, criminals have used dozens of shell companies and bank accounts to funnel money, hide it or spirit it away. Reverse-engineering a single scheme can take years.
BULLETIN: A 72-year-old Missouri con man already jailed in a fraud case involving taxes and Pell Grants has been charged with orchestrating a Ponzi scheme that allegedly followed on the heels of his original scam.
Ronald W. Shepard pulled off a Ponzi scheme involving more than $3 million, the office of U.S. Attorney Beth Phillips of the Western District of Missouri said.
Separately, a woman has been charged with running multiple Ponzi and fraud schemes that sucked in $9 million, the office of U.S. Attorney Loretta E. Lynch of the Eastern District of New York said.
Charged in the alleged New York capers was Laurie Schneider, 37, of Oceanside.
One of Schneider’s schemes involved a “shell company” known as Janitorial Close-Out City Corp. In that scheme, Schneider duped 25 investors into believing she invested in industrial equipment and machinery manufactured by companies in China and sold products wholesale at a tremendous profit, federal prosecutors said.
But it was a $4 million-plus Ponzi that promised enormous returns of up to 60 percent and paid investors with money from other investors. Another fraud scheme hatched by Schneider fetched $5 million, bringing the combined fraud intake to more than $9 million, prosecutors said.
“As alleged, this defendant falsely represented herself as having international business connections that would benefit her investors, when in reality she was engaged in purely homegrown fraud and deception,” Lynch said.
In the Shepard case, records show that the con man already is jailed in Arkansas for his original Missouri scam involving taxes and Pell Grants. In that 2007 scam, Shepard was accused of preparing and and submitting “false financial aid documents and tax returns to the Department of Education, as well as various colleges and universities, in order to obtain financial aid for his clients and their children. Shepard also allegedly prepared and submitted false federal income tax returns to the Internal Revenue Service in order to obtain inflated refunds for his clients.”
Shepard initially was sentenced in 2009 to five years’ probation in the tax and Pell Grants scam. Pell Grants are named after the late Sen. Claiborne Pell, D.-Rhode Island. The grants provide financial aid to eligible college students.
As part of his probation, Shepard was ordered not to be employed “in any capacity in which he would act in a fiduciary capacity,” not to commit any crimes and not to lie to his probation officer.
After the government demonstrated that Shepard had a role in an ongoing scam involving other people’s money and had played word games with his probation officer, the judge revoked Shepard’s probation and ordered a five-year prison sentence. Although Shepard appealed, he lost.
State and federal investigations continued while Shepard entered the prison system in the tax and Pell Grants case. The probe culminated in a Ponzi indictment charging Shepard with 13 counts of mail fraud and two counts of money laundering.
Prosecutors said he raised more than $3 million in his Ponzi scheme, which involved a company known as Safety Solutions USA LLC that was developing a tow hitch and seeking a patent. The patent application was declined, but Shepard had promised investment returns of up to 100 percent, prosecutors said.
Shepard, formerly of Lees Summit, Mo., also was involved with a real-estate firm known as “The Real Estate.”
“Shepard allegedly told investors that their money was used to purchase property in Kansas City, the Lake of the Ozarks and Hawaii,” prosecutors said. “Except for purchasing his own personal residence at the Lake of the Ozarks, the indictment says, Shepard did not purchase any real estate. Instead, the indictment alleges that Shepard used investor funds for personal living expenses, to pay other investors, to pay relatives, in disbursements of cash to himself and in real estate ventures.”
All in all, prosecutors said, Shepard took in more than $3.18 million though his Ponzi, paid bogus returns of more than $1.2 million — “and lost or spent the rest,” resulting in investors losses of at least $1.8 million.
Ronald Williams, 48, was an inmate in various prisons in New York state between 2006 and 2010, federal prosecutors said.
His mother told the Syracuse Post-Standard that her son was jailed in 2006 on charges of stealing a tractor-trailer full of “canned beans” off a street in Buffalo.
While incarcerated, Williams got the not-so-bright idea of filing false tax returns from prison, apparently after being influenced by a purported “sovereign citizen” website article attributed in part to “Obi-Wan Kenobi,” the newspaper reported.
Obi-Wan Kenobi, of course, is a fictional character from the Star Wars franchise.
Federal prosecutors now say Williams filed 11 false returns from prison, and assisted another prisoner in filing a bogus return.
In one instance, prosecutors said, Williams managed to dupe the IRS into sending him a refund of $327,456.04 to his prison address. The check was intercepted by the prison and returned to the IRS.
Williams, who “never actually received any monies,” also engaged in redemption scams in which he fabricated “withholdings on numerous Forms 1099-OID by claiming false withholding credits,” prosecutors said. “The eleven returns were for payment of refunds of taxes totaling $890,000,000.”
(See a PP Blog story about a different redemption scam, this one operating from Washington state and allegedly involving purported “sovereign citizen” John Lloyd Kirk, who once was imprisoned for possessing a pipe bomb.)
A jury convicted Williams last week on all 12 counts filed against him, the office of U.S. Attorney Richard S. Hartunian of the Northern District of New York said.
“The object of these schemes is to defraud the government and the taxpaying public,” said Victor W. Lessoff, acting special agent in charge of the IRS Criminal Investigations Unit. “Although a check was computer generated in this case, immediate action was taken as soon as it was identified by IRS Criminal Investigation and those involved in this scheme were vigorously prosecuted.”
Recidivist huckster Edward L. Moskop was sentenced yesterday to 20 years in federal prison by U.S. District Judge William Stiehl of the Southern District of Illinois.
Among the victims of his fraud scheme was an 85-year-old woman who survived a Nazi labor camp during World War II, the St. Louis Post-Dispatch reported.
At Moskop’s sentencing hearing, the district’s top federal prosecutor addressed the judge and asked him to impose the maximum prison term permitted under the facts of the case. Stiehl imposed the maximum after hearing from the defense, the prosecution team and the victims, including the labor-camp survivor.
“Mr. Moskop is a financial predator,” said U.S. Attorney Stephen R. Wigginton of the Southern District of Illinois. “He preyed on hardworking citizens who toiled for years at their jobs in order to save for their retirement. Instead, many of the victims lost everything. Moskop imposed a financial death sentence on many of these victims.”
Court records suggest that Moskop, 64, of Belleville, Ill., also stole from the labor-camp survivor’s elderly husband. In November 2010, the SEC described two of the victims of the scheme as an 88-year old man and his 84-year-old wife who’d come to the United States from Poland in 1949 and had been systematically ripped off by Moskop since 1989.
Moskop’s long-running investment scheme was exposed in part by the elderly couple’s daughter, according to court filings. Other victims included Moskop’s own relatives, customers referred by word-of-mouth and the local VFW post.
“This conduct is reprehensible and Moskop deserved the lengthy prison sentence imposed by the court,” Wigginton said.
The FBI, the IRS, the U.S. Postal Inspection Service, the State of Illinois Securities Department and the SEC helped unmask the scheme, which involved more than $2.4 million gathered from 26 victims, prosecutors said.
John Mattera: Source: Mattera Foundation Nov. 2. 2011, news release
EDITOR’S NOTE: So, you recognize the power of the names of Groupon and Facebook and want to trade on their magnetism to drive traffic to your purported “opportunity” — and you want to further sanitize your scheme by describing yourself as a philanthropist and trading on the name of a charity such as the American Red Cross?
And you perhaps want to give money from your scheme to your wife and your mother, a senior citizen?
What follows is a story about the allegations against John Mattera and some of his activities in Florida . . .
John A. Mattera of Boca Raton, Fla., pleaded guilty in 2003 to seven counts of grand theft in three separate Florida criminal cases, according to court records. Among other things, “Mattera stole $34,000 from two Florida investors by promising to provide them with shares of stock that Mattera falsely represented he owned,” the SEC said of the 2003 cases.
In 2009, the SEC charged Mattera “with fraudulently attempting to avoid registration requirements by backdating promissory notes to obtain improperly unrestricted shares of a company,” according to the agency.
And now Mattera, 50, has been sued civilly by the SEC and charged criminally by federal prosecutors in New York in yet another alleged scheme — this one involving claims that Mattera traded on the names of Groupon, Facebook and others in a scam that netted between $11 million and $12.6 million.
The SEC said it is seeking an emergency court order to freeze the assets of Mattera; John R. Arnold, 61, of Florida; Joseph Almazon, 22, of Hicksville, N.Y.; David E. Howard II, 32, of New York City; Bradford Van Siclen, 43, of Montclair, N.J., and eight different business entities. (Ages in this paragraph approximate.)
Authorities said Mattera and “cohorts” duped investors into believing that they could convert shares in Mattera’s purported hedge fund — a company that happened to be pushed by “a web of registered and unregistered broker-dealers” — into shares of companies such as Groupon and Facebook in advance of the famous firms’ IPOs.
Both the SEC and federal prosecutors used descriptive verbs when describing what is alleged to be Mattera’s latest scam — a scam that allegedly involved a network of associates and a company with the high-sounding name of “The Praetorian Global Fund.”
(Emphasis added to SEC’s choice of verbs.)
“By conjuring up a seemingly prestigious hedge fund and touting the safety of an escrow agent, these men exploited investors’ desire to get an inside track on a wave of hyped future IPOs,” said George S. Canellos, director of the SEC’s New York Regional Office. “Even as investors believed their funds were sitting safely in escrow accounts, Mattera plundered those accounts to bankroll a lifestyle of private jets, luxury cars, and fine art.”
(Emphasis added to U.S. Attorney’s choice of verbs and other descriptors.)
“As alleged, John Mattera duped investors into believing they had bought rights to shares of coveted stock in Facebook and other highly visible and attractive companies which had not yet gone public,” said U.S. Attorney Preet Bharara of the the Southern District of New York. “As the complaint describes, Mattera told elaborate lies about stock he did not own and about how he would keep investors’ money safe in escrow accounts. Instead, Mattera took the investors’ money to fund his own extravagant lifestyle. With today’s charges, his charade is exposed and he will be held to account for his alleged crimes.”
Named relief defendants in the SEC case are Ann Mattera, Mattera’s 71-year-old mother, and Lan T. Phan, Mattera’s wife. Phan, 43, is a physician and yoga practitioner. Authorities say the women, who are not charged with an offense, were beneficiaries of the scheme. (Ages in this paragraph approximate.)
The publicity surrounding John Mattera’s alleged business misdeeds has caused embarrassment for a local chapter of the American Red Cross in South Florida. John Mattera, who is linked on the web to numerous companies or philanthropic organizations even in the wake of previous lawsuits and criminal charges against him, was on the Red Cross board in Broward County until last month, according to the Sun-Sentinel.
On Nov. 2, just days before the SEC and the Feds came knocking, John Mattera was quoted in this news release about an entity known as the Mattera Foundation, which purported to look “to support those in need” by making it easier for them to find grant funding.
“John Mattera hopes that organizations across South Florida will use the new grant application tool to contact The Mattera Foundation and secure funding for their causes,” the news release read in part.
On March 24, 2011, meanwhile, John Mattera was quoted in this news release about a Red Cross golf tournament sponsored by the Mattera Foundation.
From March 2011 news release by the Mattera Foundation.
“Investor and American Red Cross board member John Mattera announced today that his eponymous The Mattera Foundation will sponsor the upcoming American Red Cross Golf Tournament,” the release read in part. “The tournament will be held at the Inverrary Country Club on April 1, and all proceeds will benefit the American Red Cross, South Florida Region.”
It was not immediately clear if Mattera plowed investors’ money into charities. What is clear, according to federal prosecutors, is that he had high appetites and caused investors to believe their money was going into escrow accounts.
“Based on the misrepresentations of Mattera and others, investors sent more than $11 million into escrow accounts maintained at a Florida bank,” prosecutors charged. “Mattera reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place, at which time the investors would receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts as he promised, Mattera caused the vast majority of it to be transferred to other entities with which he was associated. Ultimately, Mattera misappropriated more than $11 million of investor money and spent nearly $4 million on personal items for his family and himself, such as expensive jewelry, interior decorating and luxury cars.”
A veteran IRS agent also used strong language when describing Mattera’s latest alleged fraud scheme. (Emphasis added.)
“The allegations against Mr. Mattera show that the appearance of success can be a tangled web of financial lies,” said Victor W. Lessoff, special agent-in-charge of the Newark (N.J.) Field Office of the IRS Criminal Investigation Unit (IRS-CI).
Such descriptions also surfaced in the epic Scott Rothstein Ponzi caper, which also operated in South Florida.
UPDATED 11:27 P.M. ET (U.S.A.) In May, an email attributed to AdSurfDaily member Todd Disner declared, “Let the games begin!” The remark was in the context of a lawsuit Disner and fellow ASD member Dwight Owen Schweitzer intended to file against the United States once ASD members chipped in enough money to fund the complaint.
Those games apparently have begun with the filing today of a pro se “complaint for declaratory relief” by Disner and Schweitzer in the Southern District of Florida against the United States and Rust Consulting Inc., the government-approved claims administrator in the civil-forfeiture portion of the ASD Ponzi case.
The lawsuit asks a federal judge in Florida to find that the seizure of assets and business records belonging to Disner and Schweitzer was “illegal and void” and demands their return. It also asks the judge to order Rust to “disclose all information in its possession or available to it pertaining to” Disner and Schweitzer.
Among the claims in the lawsuit are that undercover agents from a U.S. Secret Service/IRS Task Force who joined ASD prior to the seizure of tens of millions of dollars from the bank accounts of ASD President Andy Bowdoin violated ASD’s Terms of Service and had a duty to report their alleged TOS violations, including the insertion of an agent’s undercover “MySpace” page in ASD’s advertising rotator, to the company.
Rust is headquartered in Minnesota. Although the complaint named the United States a defendant alongside Rust, the address listed for the United States by Disner and Schweitzer was the address of the office of U.S. Attorney Ronald C. Machen Jr. in the District of Columbia.
Disner, an unsuccessful pro se litigant in the ASD civil case brought by the government, is a co-founder of the Quiznos sandwich franchise. He lives in Miami. Schweitzer, a former attorney, also lives in Miami. The government’s case against ASD-related assets was filed in the District of Columbia in August 2008. Disner was denied standing in the District of Columbia on Aug. 31, 2009, more than two years ago.
Among other things, Disner and Schweitzer claim their private records as contained in ASD’s database were confiscated illegally by the government. They also claimed an affidavit filed in the forfeiture case by the U.S. Secret Service was flawed and that the government hired Rust to implement a remissions program “designed to collect evidence and coerced admissions from the plaintiffs to be used by the government” at the criminal trial of ASD President Andy Bowdoin.
Federal prosecutors in the District of Columbia — the venue in which both the criminal and the civil cases against Bowdoin and ASD-connected assets were filed — had a different take.
“The funds in this case were seized under properly issued judicial warrants,” Machen’s office said today. “Beyond that, the U.S. Attorney’s Office has no comment on the matter at this time. ”
Puzzlingly, the complaint filed by Disner and Schweitzer and recorded on the docket of U.S. District Judge Cecilia M. Altonaga today makes the assertion that “To date the plaintiffs are unaware of any remission payments having been made and specifically the plaintiffs were unable to get the information required for their submissions, all of which are still in the possession of the government.”
On Sept. 22 — more than six weeks ago — the PP Blog reported that thousands of ASD members who filed approved remissions claims would receive back 100 cents on the dollar. Members reported that the money was deposited electronically into their bank accounts beginning on Sept. 23. On Sept. 26, the government announced that $55 million was being returned, with the Secret Service describing ASD as a “criminal enterprise” and the Department of Justice describing the ASD scheme as “insidious.”
In a Sept. 28 email, even Bowdoin acknowledged that he was aware the government had returned money to members through the remissions process. Among other things, the ASD patriarch claimed the government had forced members to lie to receive compensation.
Disner and Schweitzer not only claim in their complaint that they are “unaware” of any money being returned, they also claim the remissions program was designed to “prevent, hamper and forestall the return” of funds.
Meanwhile, Disner and Schweitzer claim that ASD was a profitable venture, in stark contrast to assertions by the government that ASD was insolvent because it created a liability of $1.25 for each dollar it took in through the sale of purported “advertising.”
Disner and Schweitzer also took issue with government agents joining ASD and allegedly violating the ASD membership agreement, including an undercover agent who placed his undercover “MySpace” page in ASD’s advertising rotator. In August 2008, the government alleged that “ASD did not require, or even verify that the agent “had any product or service to sell.”
Had the agents “lived up to the obligations they took on by becoming members of ASD they should have reported their own violations of the ASD terms of service with the result that the sites they foisted upon ASD would have been removed and the benefits to them as advertisers’ would be forfeited as the ASD rules mandated,” Disner and Schweitzer argued.
UPDATED 5:25 P.M. EDT (U.S.A.) Alfred Gerebizza has been charged with mail fraud and tax crimes in a superseding indictment in the Daniel Spitzer Ponzi case, which alleged both domestic and offshore fraud. The SEC initially charged Spitzer civilly in June 2010, accusing him of “moving investor money through a complex network of foreign bank and brokerage accounts” and spending more than $900,000 “in cash at the Wynn Las Vegas Casino.”
Spitzer later was charged criminally after investigations by the FBI, the U.S. Postal Inspection Service and the IRS.
Gerebizza, 56, formerly resided in the Chicago suburb of Crystal Lake. A criminal indictment against him was unsealed last month, and Gerebizza surrendered in Atlanta, federal prosecutors in the Northern District of Illinois said yesterday. He is in federal custody at a prison facility in Chicago, according to records.
The superseding indictment naming Gerebizza as a new criminal defendant with Spitzer alleges that Gerebizza was a pitchman who “held himself out as a trader for a dozen investment funds, known collectively as the ‘Kenzie Funds,’ purportedly operated by Kenzie Financial Management in the U.S. Virgin Islands.”
Spitzer was a Kenzie principal, prosecutors said. He has been charged with 10 counts of mail fraud.
Gerebizza faces 10 counts of mail fraud and six counts of filing bogus tax returns. Both men were named in forfeiture allegations that seek $34 million.
“Through sales agents and various marketing materials, they informed investors and potential investors that their investments would be used primarily in foreign currency trading, that the Kenzie Funds had never lost money, and had achieved profitable historical returns,” federal prosecutors said of Spitzer and Gerebizza. “The defendants had to continually raise funds through the solicitation of new investors in the Kenzie Funds to make payments on investments made by earlier investors, all of which they concealed and intentionally failed to disclose to both new and earlier investors. Ultimately, between 2004 and July 2010, the defendants allegedly raised approximately $105 million from investors, misappropriated a significant portion of those funds, and caused losses totaling approximately $34 million.”
On Sept. 12, 2010, the PP Blog received a communication purportedly from Gerebizza that threatened a lawsuit if the Blog did not remove Gerebizza’s name and/or alter or delete comments from readers.
“I will sue you personally as well as your web site for slander as well as other charges,” the communication read in part.
The Blog did not submit to the threat. Instead, the Blog reported on the threat.
It is somewhat common for the PP Blog to receive threatening communications related to its coverage of Ponzi probes.
BULLETIN: Jacquline Hoegel, an American living in American Canyon, Calif., has been charged criminally in an alleged Ponzi scheme that gathered $129.5 million, the office of U.S. Attorney Melinda Haag of the Northern District of California said.
