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Tag: Maxwell B. Smith

  • SENIOR FRAUD CAVALCADE CONTINUES: Ponzi Schemer, 86, Pleads Guilty; Stephen J. Klos Ripped Off Fellow Senior Citizens, Prosecutors Say

    Stephen J. Klos, an 86-year-old church usher who sold elderly congregants in the Seattle area into a $3 million Ponzi scheme that began in 2004, has pleaded guilty to 10 counts of securities fraud, the office of King County Prosecuting Attorney Daniel T. Satterberg said.

    Klos “met several of victims at his church and told them that he would invest their money but used most of it to repay prior investors and for his personal benefit,” Satterberg’s office said. He faces between 51 and 68 months in prison when sentenced Dec. 28 by Judge Bruce Heller.

    Only four years short of his 90th birthday, Klos now joins a curiously long list of convicted or alleged Ponzi schemers and/or swindlers who were detected or charged after their 65th birthdays.

    Others on the list include Bernard Madoff (New York/Florida); Andy Bowdoin (Florida); Arthur Nadel (Florida/now deceased); Martin B. Feibish (Rhode Island); Richard Piccoli (New York); Anthony Lupas (Pennsylvania); John William “Jack” Cranney (Massachusetts); Pat Kiley (Minnesota); Richard Elkinson (Massachusetts); Edward May (Michigan); John F. Langford (Texas); Hans P. Seibt (Nevada); Louis J. Borstelmann (California); Gerald J. “Jerry” Berke (California/Canada); Richard Horace Mayfield (Colorado); Richard M. Hersch (California); Richard Taft Johnson (Michigan); Julia Ann Schmidt (Texas); Ronald Keith Owens (Texas); James Blackman Roberts (Arkansas); Larry Atkins (North Dakota); Maxwell B. Smith (New Jersey); Judith Zabalaoui (Louisiana); Arthur Ferdig (California).

    NOTE: The list above is incomplete.

  • California Man, 72, Sentenced To 110 Months For HYIP Rip-Off; Richard M. Hersch Also Ordered To Pay ‘At Least’ $9.2 Million In Restitution

    First, Richard M. Hersch, 72, told investors they’d earn up to 6 percent a week by plowing money into his company, All States ATM Inc.

    He then explained the company had “contracts” with major horse-racing tracks in California and elsewhere to operate Automated Teller Machines (ATMs) on the “back side” of the tracks.

    Ordinary horse-racing fans could not use the ATMs, according to Hersch, because the “backside” was off-limits to the general public and situated for the convenience of racetrack employees, horse owners, horse trainers and others — his own, highly profitable niche.

    Hersch then made the investments appear to be even more lucrative by explaining “the racetracks allowed him to operate a check-cashing or loan service on the back side of the track for the exclusive use of those with access to that area,” prosecutors said.

    To further disarm skeptical prospects, “Hersch claimed that he had 160 employees and hundreds of ATMs and that his company was in its eighth year of business,” prosecutors said.

    But the tracks Hersch said used his ATM and check-cashing business “reported having no contracts with him or All States ATM to provide financial services of any sort,” prosecutors said.

    Hersch was charged with mail fraud and structuring, and was arrested last year by the FBI and IRS. Investigators determined he had coaxed more than 150 people to invest about $25 million in his company.

    He pleaded guilty in November and was sentenced yesterday, acknowledging he operated an HYIP fraud and conspired with others to structure 15 transactions totaling $141,500 to evade currency-reporting requirements. Prosecutors said he and co-conspirators withdrew cash from a bank account in amounts between $9,000 and $9,500 because they knew that withdrawals of cash over $10,000 triggered the reporting requirements.

    U.S. District Judge John A. Houston sentenced Hersch to 110 months in federal prison and to pay “at least” $9.2 million in restitution.

    “[Hersch’s] sentencing should remind the public of the financial perils associated with high yield investment fraud scams,” said Keith Slotter, FBI special agent in charge.

    HYIP schemers will get caught, a veteran IRS investigators warned.

    “Currency-report information filed by banks and financial institutions provides a paper trail, or roadmap, for investigations of financial crimes and illegal activities, including tax evasion, embezzlement, and money laundering,” said Leslie P. DeMarco, special agent in charge of the IRS Criminal Investigation unit in the agency’s Los Angeles Field Office.

    “Individuals who deliberately break down cash withdrawals into amounts less that $10,000, so as not to trigger a bank’s reporting requirement, are committing a financial crime,” said DeMarco. “In this investigation, IRS special agents used their financial expertise to uncover Mr. Hersch’s intentionally structured cash withdrawals, designed to hide his investment fraud scheme.”

    U.S. Attorney Laura E. Duffy of the Southern District of California said Hersch’s sentence sent a message to financial fraudsters who are duping investors.

    “[The] sentence demonstrates our commitment to investigating and prosecuting those individuals who prey upon innocent victims in our community through fraudulent investment schemes,” Duffy said.

    Hersch now joins the ranks of Bernard Madoff, 71, (New York/Florida); Richard Piccoli, 83, (New York); Andy Bowdoin, 75, (Florida); Julia Ann Schmidt, 68, (Texas); Judith Zabalaoui, 71, (Louisiana); Arthur Nadel, 77, (Florida/NewYork); Ronald Keith Owens, 73, (Texas); James Blackman Roberts, 71, (Arkansas); Larry Atkins, 65, (North Dakota), Richard Taft Johnson, 67, (Michigan), Maxwell B. Smith, 69, (New Jersey) and others as senior citizens implicated in large financial frauds.

  • Yet Another Senior Citizen Guilty In Ponzi Scheme That Targeted Fellow Seniors; Crime Was ‘Ruthlessly’ Executed, NJ Attorney General Anne Milgram Says

    A New Jersey financial adviser who created a sham company and operated it for 17 years has pleaded guilty to five felony counts of mail fraud, federal prosecutors said.

    Separately, state prosecutors announced a guilty plea to a felony charge of money-laundering.

    Maxwell B. Smith, 69, of Fairhaven, operated a Ponzi scheme that consumed more than $9 million, said U.S. Attorney Paul J. Fishman of the District of New Jersey.

    Smith faces a maximum sentence in the federal case of 100 years in prison and a maximum fine of $1.25 million. He will be sentenced Feb. 26 and remains free on bail of $1 million.

    Senior citizens were among the victims of a Ponzi scheme operated by a senior citizen, prosecutors said. New Jersey Attorney General Anne Milgram, whose office brought the companion money-laundering prosecution, described the crime as ruthless.

    milgram“This defendant ruthlessly preyed on elderly investors, targeting longtime clients who trusted him to look out for their interests,” Milgram said. “Instead, Smith deceived them and stole their money, in some instances depriving retired investors of their life savings.”

    Part of the deception was to operate the scheme out of a Mail Boxes Etc. “mail drop leased by Smith,” prosecutors said.

    Prosecutors said Smith worked for financial-services companies in Millburn and Tinton Falls, and admitted he created a sham entity known as Health Care Financial Partners (HCFP) in 1992. HCFP purported to be an investment fund with more than $300 million in assets under management, consisting of loans to healthcare facilities such as nursing homes.

    “Using his relationships with his investor clients, Smith admitted that he sold debt securities in HCFP through sham bond offerings ranging in prices from $25,000 to $300,000 per investment,” prosecutors said. “Smith induced individual investors by creating a phony investment prospectus falsely stating that the total value of HCFP’s holdings exceeded $300 million. To further induce individuals to invest in HCFP, Smith falsely claimed that their money would earn yearly dividend interest of between 7.5 and 9 percent, and that the returns on their investments would be tax-free, similar to municipal bonds.”

    Smith duped investors by lulling them into “thinking their investments were legitimate and earning returns” by using their money “to purchase bank checks, which he then sent
    to investors as purported earnings on their investments,” prosecutors said.

    But Smith told U.S. District Judge Mary L. Cooper that, instead of investing the funds as promised, he diverted the investments to his own bank accounts where he used the investors’ money for his personal expenses.”

    Smith spent client funds on dining, entertainment, gambling and international travel, “defrauding HCFP investors out of more than $9 million, prosecutors said.

    He also was charged under state law with money-laundering by Milgram. Smith pleaded guilty in the state case last week, and state prosecutors recommended a sentence of 15 years. The state sentencing is scheduled for March 5 in Morris County. Superior Court Judge Thomas V. Manahan will preside.

    “This investment broker stole millions of dollars from elderly clients, callously betraying the trust they placed in him as their longtime financial advisor,” said Milgram. “In pleading guilty to these charges, Smith faces a lengthy prison sentence and must pay full restitution to his victims.”