Attorney General Kamala D. Harris at a February news conference on the mortgage crisis in California.
James A. Sweeney II and Patrick M. Ryan — the two men who presided over the Big Co-op Inc. and Ez2Win.biz online pyramid scheme and stock swindle — have been sentenced to a combined 64 years in state prison, California Attorney General Kamala D. Harris announced.
Sweeney, 64, of Afton, Tenn., was sentenced to 33 years.
Ryan, 35, of Canyon Lake, Calif., received a sentence of 31 years.
Big Co-op and its Ez2Win arm purported to be an online shopping hub where consumers could go to purchase goods and services at discounted prices from big-name retailers including, Sears, Target and Macy’s.
Operating as a pyramid scheme and recruitment trap from 2005 to 2006, Big Co-op plucked $1.2 million, prosecutors said. A phony stock offering also was part of the mix, and the fraud soared by about $7 million.
The combined scams were fueled by seminars and netted $8.2 million, prosecutors said. More than 1,000 Californians were lured into the schemes. Filings by the California Department of Corporations painted a picture of affiliates making wild claims to drive business to the purported opportunities.
“With investor cash, Sweeney and Ryan bought homes, country club memberships, several luxury cars, and ran up $30,000 to $50,000 in monthly credit card bills,” prosecutors said. “Investor funds were also used to pay for an elaborate bachelor party in Las Vegas, a $23,000 wedding ring and a $100,000 wedding.”
“The so-called ‘Bernie Madoff of Colombia’ now stands convicted of money-laundering . . .”— U.S. Attorney Preet Bharara
David Murcia
BULLETIN: The Colombian mastermind of the D.M.G. Group (DMG) pyramid scheme has pleaded guilty in New York to conspiring to launder drug money in the United States.
David Eduardo Helmut Murcia Guzman (David Murcia) was extradited under heavy guard from Colombia to the United States in January. DMG was a “multi-level marketing scheme” that began in 2003, largely targeting the poor. The firm provided prepaid debit cards that permitted participants to purchase electronics through DMG, prosecutors said.
DMG’s membership ranks swelled to more than 400,000, with the scheme capturing hundreds of millions of dollars. The pyramid collapsed in 2008 — but not before Murcia and others had set up an international money-laundering operation that routed narcotics proceeds through Mexico and concealed the criminality in real estate and other holdings in the United States, prosecutors said.
“The so-called ‘Bernie Madoff of Colombia’ now stands convicted of money-laundering in Manhattan federal court,” said U.S. Attorney Preet Bharara. “Criminals have an increasingly global reach. As they develop more and more sophisticated methods of concealing their criminal proceeds, we will continue to track them, working with our law enforcement partners to bring them to justice. The United States will never be a haven for illegal funds.”
Hundreds of “subsidiary and affiliated companies” were established in a bid to cleanse dirty money, prosecutors said.
Bharara’s Terrorism and International Narcotics Unit handled the case, which includes multiple defendants and multiple guilty pleas. The DEA, ICE, the New York Police Department and the Justice Department’s Office of International Affairs played prominent roles in the case.
See Aug. 9 story about the extradition of Murcia’s legal adviser Margarita Leonor Pabon Castro, who now is among six defendants who have pleaded guilty.
BULLETIN: ACN Inc., a North Carolina-based multilevel-marketing company that bills itself “The World’s Largest Direct Seller of Telecommunication Services,” has been accused by the state of Montana of operating a pyramid scheme.
Monica J. Lindeen, Montana’s Commissioner of Securities and Insurance, has issued a cease-and-desist order against ACN and a Notice of Proposed Agency Action.
“Pyramid schemes are immensely profitable to a few individuals at the top and a complete loss for almost everyone else,” Lindeen said. “The actions against ACN and its officers seek to shut down the company’s alleged unlawful operation before more people lose their hard-earned money.”
Also named in the actions were Gregory Provenzano, Robert Stevanovski, Anthony Cupisz and Michael Cupisz, all officers and founders of ACN, according to Lindeen’s office.
“[A]n overwhelming portion of revenues earned by ACN representatives was derived from participants who must personally buy a telephone service that does not work in many parts of Montana to become managers or recruit new participants into the program,” Lindeen’s office said.
Investigators said the odds of making any money in ACN were overwhelmingly against participants.
“In 2008, ACN recruited 91 Montana participants who paid approximately $61,741.69 to be a part of the program,” Lindeen’s office said. “Only two of the participants made any money, with one participant making $696 and the other making $700.”
In the whole of 2009, according to investigators, Montana-based reps paid ACN nearly $239,000 to be a part of the program. The money came from more than 300 participants.
“ACN’s records indicate a mere $896.86 was paid out in compensation to these participants,” Lindeen’s office said.
Four California residents have been indicted on charges they targeted the Filipino Community of Greater San Diego in a foreclosure-rescue investment scam prosecutors have dubbed the “Apocalypse Trust†and “Amerisian Trust†scheme.
Edmundo Rubi, one of the defendants, was on federal probation for the infamous “Knights Express†Ponzi scheme that fleeced Filipino investors out of $24 million when he started the new scheme, said San Diego County District Attorney Bonnie M. Dumanis.
“Rubi brazenly ignored the conditions of his parole and went right back to committing the same types of crimes,†said Dumanis.
Planning for the new scheme reportedly got under way while Rubi was serving a 70-month-sentence in federal prison for the “Knights Express†Ponzi, which affected at least 425 investors.
Rubi, 52, was on supervised release when arrested in the new scheme.
Also indicted were Joseph Encarnacion, 59, Benjamin Hebron, 51, and Gloria Hebron, 53. The defendants were charged with 54 felony counts, including Conspiracy to Commit Securities Fraud, Securities Fraud, Sale of Unqualified Securities, Grand Theft, Perjury, Foreclosure Consultant Fraud and Rent Skimming.
“Mr. Rubi’s recidivism into this type of crime demonstrates his disregard for engaging in legitimate business practices,” said Keith Slotter, FBI Special Agent-in-Charge.
Investigators said 22 “Apocalypse Trust†and “Amerisian Trust†participants quit-claimed 34 properties into various fraudulent trusts, owned by Rubi and administered by Ben and Gloria Hebron.
Instead of assisting homeowners in foreclosure, the defendants stole their money or did not apply money as advertised, according to the indictment. Rubi lied about his criminal history.
“Rubi and Encarnacion recruited former victims of the ‘Knight Expresss’ Ponzi scheme” into the quit-claim scheme, prosecutors said. The terms of his probation prohibited him from “from having any contact with investors or financial accounts.”
In the Knights Express scheme, investors were told they were investing in a “secret international trading program” in which Federal Reserve notes were purchased and sold at discounted rates, prosecutors said in 2003.
In the “Apocalypse Trust†and “Amerisian Trust†scheme, investors were coerced into signing a “Non-Disclosure & Confidentiality Agreement,” according to the indictment.
EDITOR’S NOTE: Finding the United States an unfriendly environment, the so called autosurf and HYIP “industries” increasingly are relying on offshore money-exchange businesses and debit cards to entice participants, advising them that the offshore locations are “safe” havens that “shelter” U.S. residents from regulators and law-enforcement agencies.
In August 2009, we reported that a Dallas-based company, Virtual Money Inc., which provided debit cards to Florida-based AdSurfDaily Inc., was indicted on charges of helping a Colombian cocaine operation launder money by providing cards that were used to convert drug proceeds to cash at ATMs in Medellin. ASD is implicated in an alleged $100 million Ponzi scheme.
In a follow-up story, we asked if autosurf and HYIP enthusiasts who describe the enterprises as harmless despite the fact they steal wealth from a large group to give it to a smaller one had yet felt a “lump” in their throats because law enforcement also had tied the offshore debit-card business to international narco-trafficking.
That lump only should be getting bigger.
The story below is about D.M.G. Group (DMG) and its operator, David Eduardo Helmut Murcia Guzman (David Murcia). DMG used debit cards as the principal part of a pyramid scheme that largely targeted the poor in Colombia. The scheme is believed to have collected hundreds of millions of dollars from as many as 400,000 people before collapsing in 2008.
Murcia, who owned two airplanes, three yachts and at least 12 luxury vehicles, was arrested in Panama in 2008, just as he was attempting to flee to Costa Rica to avoid extradition to Colombia. He was convicted of money-laundering in Colombia in December 2009, sentenced to 30 years in prison and fined $12.5 million. Viewed as a Robin Hood figure by some people, Murcia portrayed himself as a man simply interested in creating wealth for others. His arrest initially led to rioting in Colombia.
Police used tear gas to disperse protesters, and the government launched a nationwide crackdown on Ponzi and pyramid schemes and declared a state of emergency. Dozens of schemes using various corrupt business models were operating simultaneously, sucking wealth from the economy and placing it in the hands of a small number of people. At least 12 people reportedly were killed in Colombia during Ponzi/pyramid-related rioting. Only the people who got into the schemes first made money. By some estimates, 90 percent or more of the participants lost money.
One of the fraudulent companies operating at the same time as DMG was known as DRFE (Dinero Rapido Facil en Efectio), which means “Rapid Money, Easy Cash.” It, too, collapsed.
DMG, for its part, had 59 offices in Colombia; the government shuttered them all in a single day, after linking DMG money to international drug traffickers.
Here, now, the story about the dramatic extradition of Murcia to the United States yesterday . . .
David Murcia
His jailers at La Picota prison in Bogota placed him in handcuffs. They wrapped him in a heavy, bullet-proof jacket. From there they took him to the Catam military airport under heavy guard. He was led to a plane owned by the U.S. Drug Enforcement Administration (DEA). Officials made sure that the moments were captured on film and videotape. They were sending a simple message: We will come after you, no matter where you are, even if you pretend you are Robin Hood.
And with that David Eduardo Helmut Murcia Guzman (David Murcia), known as the “Bernie Madoff of Colombia” for his collapsed financial scheme, was whisked to Miami. He’ll be tried in New York on charges of conspiring to launder millions of dollars in narcotics proceeds through his company, D.M.G. Group (DMG), a house of cards propped up by a pyramid-scheme involving debit cards and promises that participants would get back 100 percent of what they paid in and perhaps more.
“Extradition signals Colombia’s continuing commitment with the U.S. in fighting drug dealers,” said New York City Police Commissioner Raymond Kelly. “It is also important in attacking the money laundering that accompanies drug trafficking. The black market peso exchange is just one of many schemes to launder drug money and corrupt once legitimate business in the process. Left to their own devices, narcotics traffickers would undermine entire economies through drug trafficking, money laundering, extortion and corruption. This was an auspicious victory in a continuing fight.”
U.S. prosecutors yesterday pointedly called DMG “a vehicle for a multi-level marketing scheme.” Participants were told to buy prepaid debit cards that operated on a points system and would permit them to buy electronics and other merchandise at DMG retail stores and enable them to get back 100 percent of what they paid in and perhaps more.
Points accumulated when purchases were made and participants introduced others to the scheme, which was sold as an opportunity to buy anything they wanted — from groceries to flat-screen TVs and motorcycles — while getting the products and at least 100 percent of the purchase price back in six months.
Murcia, 28, founded DMG in Colombia’s coca-growing region. The complex scheme ultimately led to questions about how Murcia, a high-school graduate, had figured out a way to give back at least 100 percent of the purchase price of products without operating a shell game in which money was taken from new participants to pay returns to the original participants. Murcia never could explain clearly how the program worked, and sometimes used accounting terms such as “cash flow” to deflect questions. He had assembled a massive following of devotees, many of whom zealously defended the program, saying Murcia was helping people rise out of poverty.
At first it was speculated that DMG bought merchandise in bulk and sold it to debit-card customers at grossly inflated prices to create a hugely profitable spread. That all changed, however, when investigators found $3.2 million in cash stuffed in cardboard boxes in the coca-growing region — and linked the cash to Murcia — and later linked Murcia to a reputed drug smuggler.
U.S. prosecutors now say Murcia had acquired so much money that it created a problem for him — the classic dilemma faced by corrupt operations. In the fall of 2007, Murcia and Margarita Leonor Pabon Castro, a 35-year-old co-defendant in the U.S. case, “approached another individual in Colombia and said that they had cash — apparently in U.S. dollars — that they could not deposit into the Colombian banking system.”
Murcia and Castro asked the unidentified person to set up an account in the United States. A U.S. account was opened at Merrill Lynch in the name of Blackstone International Development. Neither Murcia nor Casto was listed as owners of the account.
In March 2008, Murcia and Castro told the person who had opened the account that they had “provided $2.2 million worth of Colombian Pesos to German Enrique Serrano-Reyes, 45, in Colombia, and, in exchange, Serrano-Reyes had caused nearly $2.2 million to be wired into the Blackstone Account through 18 separate wire transfers.”
Prosecutors seized the Blackstone Account in May 2008.
When Murcia was informed of the seizure of the Blackstone Account, he “told the individual who set up the account that he should not attempt to retrieve the contents of the account, and should not under any circumstances inform the authorities of [Murcia] or [Castro’s] interest in the Blackstone Account, prosecutors said.
Also indicted in the United States was William Suarez-Suarez, 41, whom prosecutors said was the head of DMG’s Colombian operations and attempted to bribe officials in Colombia.
Suarez-Suarez, according to prosecutors, helped Murcia and “others” establish “hundreds of subsidiary and affiliated companies linked to DMG in countries including Colombia, Panama, and the United States.”
DMG also had links to the drug trade in Mexico, prosecutors said. Murcia, Santiago Baranchuk-Rueda, 34, Daniel Angel Rueda 36, and Luis Fernando Cediel Rozo, 34, “coordinated the pick-up and transportation of millions of dollars in narcotics proceeds in Mexico,” prosecutors said.
“The defendants concealed narcotics proceeds by investing them in legitimate real estate
and limited liability companies in the United States,” prosecutors said.
U.S. Attorney Preet Bharara said prosecutors and their law-enforcement colleagues would leave no stone unturned in fighting international money-laundering and drug-trafficking.
“David Murcia Guzman is charged with using his namesake company as cover for the laundering of illicit drug proceeds,” Bharara said. “[He] allegedly played a shell game with dirty money, masking millions for narco-traffickers as legitimate transfers. This extradition affirms that we will not tolerate the abuse of the U.S. banking system to stimulate the black market economy.”
John P. Gilbride, DEA Special-Agent-in-Charge, said investigators have the experience and the patience to peel back layers of the onion to expose the corruption.
“Hiding behind a corporation name did not make this business legitimate,” Gilbride said. “In fact, it was facilitating millions of narco drug dollars into pesos for drug traffickers worldwide. This extradition highlights law enforcement’s international efforts to identify and arrest those who profit from the sale of illegal narcotics.”
Bharara thanked the government of Colombia for its cooperation.
Murcia faces a prison term of 20 years in the United States, if convicted. He’ll serve any sentence that emerges in the United States, and then will be sent back to Colombia to serve his 30-year sentence there.
