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Tag: IRS

  • Government Revokes Plea Offers In Case Against ‘Professor’ Patrick Moriarty; Prosecution Says It Has Seven Binders Of Evidence, Including Evidence From A ‘Casino’

    Federal prosecutors have revoked plea offers made during discussions with a federal public defender representing AdSurfDaily mainstay “Professor” Patrick Moriarty.

    Moriarty has hired a new attorney, and prosecutors have advised the attorney that they have “voluminous” evidence, including seven 4-inch binders of records.

    Part of the evidence came from records at an unspecified casino, according to court records.

    “Please be advised that any plea offers previously made with the defendant’s former counsel are revoked,” said Rosemary Casey Meyers, the prosecutor handing the case, in a letter to Moriarty’s new attorney.

    Meyers is an assistant U.S. Attorney for the Eastern District of Missouri, where a tax indictment against Moriarty was returned in March by a federal grand jury. The letter means that any offer the government might have made earlier in the case is off the table.

    Other evidence, according to court filings, includes IRS records, bank records, Social Security records, business records and verbal statements by Moriarty. Some 4-inch binders hold 780 sheets of paper.

    Citing his client’s poor health, Moriarty’s new attorney, Lenny Kagan, now has asked for a continuance. The government did not object. Moriarty is scheduled to have cancer surgery this month. The trial had been slotted for next month.

    The prosecution agreed to let Moriarty know if it intended to introduce evidence of other crimes prior to trial, without disclosing if Moriarty was being investigated for other matters unrelated to the tax indictment handed down in March.

    Screen shot: Discovery receipt that shows government has casino records in the case against 'Professor' Patrick Moriarty.
    Screen shot: Discovery receipt that shows government has casino records in the case against 'Professor' Patrick Moriarty.

    Moriarty was charged with filing false income-tax returns for the tax years 2002, 2003, 2004 and 2005. Prosecutors said he underreported his income by an unspecified amount for the tax year 2002; claimed a false deduction of $30,000 for “legal fees” for the tax year 2003; and claimed a false amount of $23,533 withheld for the tax year 2004 and a false amount of $23,433 withheld for the tax year 2005.

    In May, the PatrickPretty.com Blog reported that Moriarty, in 2006, started a nonprofit organization for a Missouri man accused of murdering a woman in cold blood after he had shot a police officer four times.

    The officer and his partner had stopped the man, Bryan Tullock, for running a stop sign in Montgomery City, Mo., on June 2, 2006. As officer Brandon LyBarger, 25, approached Tullock’s car shortly after midnight, Tullock shot him four times with a 9-mm handgun and also opened fire on LyBarger’s partner.

    The second officer, Jarrod Brooks, returned fire, striking Tullock’s Cadillac but not Tullock.

    When officer Brooks called for backup and went to the aid of his downed colleague, Tullock fled, police said. Tullock broke into the home of Heidi Casagrand about a block from the scene of the police shooting.

    He shot and killed Casagrand, 32, and also shot at her husband. Tullock fled the second shooting scene and confronted Ricky Fry, 33. Tullock shot Fry eight times outside of his home, leaving him for dead.

    LyBarger and Fry, who had been hit by a combined total of 12 bullets, survived.

    Tullock was sentenced to life in prison without the opportunity for parole earlier this year. He could have been sentenced to death.

    Moriarty registered the nonprofit for Tullock, the shooter, on Oct. 2, 2006, four months to the day after the rampage. Records suggest that the IRS already was interacting with Moriarty at the time be started the nonprofit.

    Two years later, in October 2008, Moriarty was instrumental in registering another nonprofit in Missouri. Along with members of the Pro-AdSurfDaily Surf’s Up forum, Moriarty started an organization known as ASD Members International (ASDMI), which solicited money to do battle with the government in the civil-forfeiture case against ASD, a Florida company implicated in an alleged $100 million wire-fraud, money-laundering and Ponzi scheme.

    ASDMI promised to litigate against the government even if it was behaving legally. Payments were accepted from at least 176 ASD members, but no litigation was filed.

  • Richard M. Harkless, Ponzi Scheme Figure, Sentenced To 100 Years In Prison; Judge Says He Showed No Remorse

    A California man convicted of wire fraud, mail fraud and money-laundering in a $60 million Ponzi scheme has been sentenced to 100 years in prison and ordered to pay nearly $35.5 million in restitution.

    Separately, Richard M. Harkless was ordered to pay $42 million in disgorgement, prejudgment interest and civil penalties in a case brought by the SEC. Three accomplices were ordered to pay assessments totaling $28 million and sentenced to a combined total of up to 18 years in prison.

    The scheme featured payouts to whet the appetites of investors, a program designed to encourage them to “roll over” money to keep it in the system and appeals to get family members and friends involved, prosecutors said.

    Dozens of victims wrote to the judge, requesting a harsh sentence. One of the victims in the case was a 79-year-man who lost $85,000 and now depends on help from a church and a senior center that serves free meals to get by.

    Harkless’ 100-year sentence is believed to be the longest sentence for a white-collar crime ever handed down in the Central District of California, and the judge minced no words in condemning the scheme

    U.S. District Judge Virginia A. Phillips said Harkless had shown no remorse for his crimes, pointing out that he had taken advantage of vulnerable people, some of whom lost their retirement savings and college funds.

    Harkless, 65, caused “every kind of grief and loss imaginable” and demonstrated he “would commit his crimes all over again if given the chance,” Phillips said.

    Harkless operated the MX Factors Ponzi scheme earlier this decade. Prosecutors said he began to hide money offshore when the scheme was on the verge of discovery by authorities.

    “As the scheme began to collapse [in 2004], Harkless diverted millions of dollars of investor money to Belize and Mexico,” said the office of Acting U.S. Attorney George S. Cardona. “In the final months of the scheme, once Harkless knew that he was under investigation by various state regulators, he accelerated his fundraising and accelerated the transfer of funds to his own accounts in Belize.”

    Harkless then fled to Mexico, prosecutors said. He tried to slip back into the United States in 2007, but was arrested by IRS special agents in Phoenix.

    The case featured the combined investigative tools of the Justice Department, the IRS, the SEC, the U.S. Postal Inspection Service and the FBI.

    Harkless “skimmed investor funds to finance a Mexican crab fishing business, pay personal expenses, and fund overseas bank accounts,” the SEC said today, in announcing the sentence.

    Three Harkless accomplices also have been sentenced to federal prison.

    Daniel Berardi, Thomas Hawkesworth and Randall Harding pleaded guilty and received sentences of up to six years each.

    Berardi and Hawkesworth were ordered to pay more than $11 million in disgorgement, prejudgment interest and civil penalties. Harding was ordered to pay more than $17 million.

    Investors in what MX Factors positioned as a government-guaranteed loans program were promised returns of up to 14 percent every 60 to 90 days and encouraged to keep their money in the system by “roll over,” prosecutors said.

    “The vast majority of MX Factors investors were ‘reloaded,’ meaning that they were convinced to invest money more than once,” prosecutors said.

    Much of the evidence in the case would sound like a familiar refrain to readers of autosurf Ponzi boards and surf promoters, although MX Factors was not an autosurf.

    “[S]everal victims testified that Harkless and his co-conspirators encouraged potential investors to try out the MX Factors program, investing in one 60- or 90-day cycle and then withdrawing their money to see if it worked,” prosecutors said.

    “Once victims felt more comfortable with the program, Harkless and his co-conspirators encouraged them to invest even more and to get their families and friends to invest as well,” prosecutors said.

  • BREAKING NEWS: Criminal Probe Under Way Into Practices Of Regenesis 2×2 Matrix; Secret Service Executed Search Warrants In Washington State Amid Ponzi And Wire Fraud Concerns

    The U.S. Secret Service is conducting yet-another investigation into the practices of an Internet-based business amid Ponzi allegations. Agents have seized computers and business records from Regenesis Marketing Corp., which operates online as Regenesis 2×2 at this website.

    A felon on federal probation was an integral part of the company, according to court records. Meanwhile, federal agents said they found the personal records of customers in a Dumpster.

    Regenesis 2×2 sells what it calls “commission centers” for $325 and touts itself as “THE ECONOMIC STIMULUS PLAN FOR YOU.”

    Seized were envelopes containing credit cards, debit cards and financial statements; 13 Priority Mail envelopes and 10 First Class Mail envelopes; and various computers, computer equipment and business records.

    Screen shot of Regenesis 2x2 video
    Screen shot of Regenesis 2×2 video

    In court documents, the Secret Service revealed Regenesis 2X2 had been under surveillance for five weeks prior to the government applying for multiple search warrants, which were approved by a federal magistrate judge July 17.

    The case has featured surveillance at multiple locations, including a UPS Store in Kirkland, Wash., that the company used as a mailing address. Business actually was conducted elsewhere in Washington state, including the town of Snoqualmie, according to court filings.

    No charges have been filed and the website continues to resolve to a server. The Secret Service, however, laid out allegations of an elaborate fraud involving multiple individuals, multiple bank accounts, multiple addresses and multiple company names, including a firm known as Streamline Media of both Reno, Nev. and Kirkland.

    Agents observed complaint letters directed at the firm being discarded into a Dumpster that was kept under constant surveillance. Also found in the Dumpster were copies of checks sent in by customers, other documents that included customers’ names and information to identify them personally, complaint faxes sent by customers and a letter from a law firm complaining about false, misleading and deceptive advertising, according to court filings.

    In one case in which agents were observing one of the adult principals in the case, they observed a youth described as a teenager exiting a vehicle and “struggling with a large arm full of opened business and UPS Priority Mail envelopes,” the Secret Service said in court filings.

    The juvenile entered a building and “then immediately came back outside and discarded the materials into an alley [D]umpster,” agents said.

    Agents identified the adult under surveillance as a person “arrested by the Internal Revenue Service out of Las Vegas, Nevada[,] for felony violations related to Illegal Money Laundering from Securities Fraud and Wire Fraud” in a previous case.

    The subject under surveillance was on federal probation, agents said.

    Assisting the Secret Service in the probe are the Federal Trade Commission, the Seattle Police Department, the Kirkland Police Department, and the Washington state Department of Revenue, Employment Security Department and Department of Licensing.