The address of this packaging and shipping store in Minneapolis was used by Crown Forex LLC, one of the firms implicated in the $194 million Trevor Cook/Pat Kiley (et al) Ponzi scheme. The court-appointed receiver in the case today accused Associated Bank of ignoring key markers of a scam in progress and of aiding and abetting fraud.
UPDATED 9:56 A.M. ET (JAN. 30, U.S.A.) In a heavily redacted complaint, the court-appointed receiver in the Trevor Cook Ponzi scheme has accused Associated Bank of Green Bay, Wisc., of aiding and abetting the massive caper that has led to jail sentences for Cook and multiple Cook pitchmen. Associated Bank also operates branches in Minnesota, the home state of the $194 million fraud aimed mostly at senior citizens and people of faith.
Among the extraordinary assertions today by receiver R.J. Zayed is that the bank handed $600,000 in cash to Cook, and then allowed Cook “to stuff the cash into a box and walk out the door under the pretext of buying a yacht.”
The cash, Zayed alleged, belonged to Cook’s fraud victims — and Associated Bank transferred the funds from an account in the name of Crown Forex LLC to an account controlled by Cook.
Crown Forex was using an address of a packaging and shipping store in Minneapolis, according to a review of records by the PP Blog. One unredacted exhibit filed today by Zayed showed a photo of the store at 5413 Nicollet Ave. in Minneapolis. Crown Forex LLC purported to occupy “Suite 14,” according to a separate exhibit.
The Cook/Kiley scheme operated in part by using a regal theme and trading on names that mimicked the names of famous financial firms such as UBS. One of the firms identified in court papers is a bankrupt Swiss firm known as Crown Forex SA.
Cook, Kiley and a Jordanian trader identified as Shadi Swais discussed the purported Forex program with Associated Bank, according to Zayed.
But Associated Bank advised the trio that opening an account with the name of Crown Forex SA could raise regulatory concerns in the United States, so the bank recommended “opening an account with a similarly named” U.S. domestic LLC.
That’s how Crown Forex LLC came into being, apparently using the address of the packaging store, according to court records.
Even though Associated Bank knew the entity was never registered with the state of Minnesota “or any other governmental authority,” Zayed said, the bank nevertheless permitted the “sham” account to be opened.
A former bank executive — in an affidavit — claimed he told Kiley that he “must send the documentation to me after he completed a Secretary of State filing for Crown Forex LLC.”
But the former executive said he “did not remember” to follow-up with Kiley about the absent paperwork. Millions of dollars in investor funds were deposited into the account.
Crown Forex SA’s role in the fraud was to “pretend” it was a facilitator receiving investor funds and holding them in segregated accounts, Zayed alleged.
Swiss authorities shut down Crown Forex SA in 2009, just prior to the collapse of the Cook/Kiley fraud.
“Shadi Swais and others who controlled Crown Forex, SA have disappeared along with millions of dollars of investor funds,” Zayed alleged.
Not a “single penny” of investor funds ever was transferred directly from Crown Forex LLC to Crown Forex SA, despite assertions that the Swiss firm was the American firm’s facilitator, according to court filings.
But millions of dollars were transferred to Cook’s personal accounts, Zayed alleged.
EDITOR’S NOTE: The PP Blog first became aware of reports about the suicide bid of Russell R. Wasendorf Sr. last night, after being contacted by a reader who was defrauded in the Trevor Cook Ponzi scheme. Wasendorf apparently sought to take his own life on the sparkling Cedar Falls, Iowa, property of Peregrine Financial Group Inc., the company he founded in 1990 in Chicago. A deeply disturbing, multipronged mystery has emerged . . .
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Russell R. Wasendorf Sr.
After a reported suicide bid yesterday, Russell R. Wasendorf Sr. is said to be comatose today. Regulators now say that more than $200 million in customer funds is missing from Peregrine Financial Group Inc. (PFG). By law, the customer money was supposed to have been segregated and separately accounted for.
“The whereabouts of the funds is currently unknown,” the CFTC said today in a court filing in Chicago that accused Wasendorf and PFG of fraud and sought an asset freeze.
Those alarming words followed on the heels of an emergency enforcement action yesterday by the National Futures Association, which alleged that Wasendorf “may have falsified bank records” to create the impression that PFG had about $400 million in segregated accounts in late June.
Of the $400 million, $225 million purportedly was held at U.S. Bank.
But when NFA checked with U.S. Bank yesterday, it learned that only about $5 million was on deposit, according to the emergency filing.
Wasendorf is a member of NFA’s Futures Commission Merchant Advisory Committee with a term ending in February 2015, according to NFA’s website. He’s now effectively been accused of fraud by the same organization he purportedly served as a committee member.
Whatever fraud was taking place at PFG, NFA and CFTC now say, appears to date back at least to February 2010. And that fraud, according to the NFA filing, appears to have carried over into both this year and last.
PFG does business online as PFGBest at PFGBest.com. The website features a photo of PFG’s glistening headquarters building in rural Cedar Falls, Iowa.
The building near the small city of about 40,000 nestled in America’s heartland, however, may belie the reality at PFG.
In February 2012, R.J. Zayed, the court-appointed receiver in the Trevor Cook Ponzi scheme case in Minnesota, sued PFG. Among the allegations was that the company turned a blind eye to Cook’s Forex fraud and checkered history with NFA.
Cook’s Ponzi scheme gathered about $194 million and rendered some investors destitute. About $30 million of that sum was lost in trading accounts at PFG, according to the receiver’s lawsuit.
PFG, according to the lawsuit, permitted Cook to open, manage and maintain trading accounts “in the face of overwhelming red flags of fraud or insolvency.”
Cook is now two years into a 25-year prison sentence for his Ponzi scheme, which has led to criminal charges and convictions of pitchmen Jason Bo-Alan Beckman, Gerald Durand and former radio huckster Pat Kiley.
During the same month Zayed sued PFG, the company agreed to settle an earlier NFA complaint in which it was accused of failing to diligently supervise introducing brokers. One of the respondents in the case was Russell R. Wasendorf Jr., Wasendorf’s son. Wasendorf Jr. is the president and chief operating officer of PFGBest and founded its Forex division, according to the PFGBest website.
The company agreed to pay $700,000 to settle the case with no acknowledgment of wrongdoing, according to NFA.
About five months later, Wasendorf Sr. was accused of fraud. Details remain sketchy. It is unclear how much — if any — of the fraud for which he now stands accused is related to the Cook fraud.
What is clear is that Cook himself was in trouble at least two prior times with NFA, with the self-regulatory organization alleging in 2005 that he manipulated an elderly woman and caused her to liquidate a $100,000 annuity with which she already was earning an annual return of 8.75 percent.
Cook told her she could earn more through him, according to the NFA complaint.
NFA documentation in that case references an entity known as Private Financial Group which, curiously, also used the acronym PFG, the same acronym used by Peregrine Financial Group.
UPDATE: Facing a margin deficit of more than $10 million and at risk of having his trading account closed in February 2008, Jason Bo-Alan Beckman — a figure in the Trevor Cook Ponzi scheme — sought to address the whopping shortfall and prop up the monumental fraud by stealing about $3.9 million from an elderly couple, federal prosecutors in Minnesota now say.
Separately, a federal judge has denied Beckman’s bid for the court to release $3,000 for living expenses. Chief Judge Michael J. Davis ruled Beckman could not have the money after receiver R.J. Zayed and the SEC claimed Beckman had failed to repay an earlier loan of more than $5,120 made to him from receivership proceeds and had shown no proof that $1,248 of that sum had gone to pay child-support obligations as required.
Beckman, 41, has been charged both civilly and criminally, amid allegations he was a central figure in Cook’s $194 million fraud, believed to among the largest in Minnesota history. Victims have complained that Beckman is thumbing his nose at them, and prosecutors say he “has provided shifting and inconsistent rationalizations” for his conduct.
The SEC chose a different phrase to describe Beckman’s alleged manipulations of victims and the courts: contumacious disobedience. (See definition below.)
In shocking new allegations, criminal prosecutors said Beckman stole millions of dollars from an elderly husband and wife now in their nineties and tried to make it appear as though the wife — a stroke victim with “hemispheric paralysis” — had become his business partner.
Beckman sold two life-insurance policies on the woman’s “then 92-year old husband” for about $3.9 million, and then converted “the proceeds of that sale for his own benefit,” prosecutors alleged.
He told neither the wife nor the husband about the sale, but later claimed that the woman — described by prosecutors as “C.O.” — had become an investor in Oxford Private Client Group, an advisory firm controlled by Beckman that allegedly fed Cook’s Ponzi.
“Put differently,” prosecutors alleged, “Beckman now claims that C.O., who was a stroke victim in her eighties, knowingly contributed millions of dollars to the Oxford Private Client Group capital so that she could become Beckman’s partner in high finance.”
The woman, prosecutors said, resides with her husband at an assisted-living facility and suffers from partial paralysis on her left side.
She “can transfer herself from one place to another only with significant assistance,” prosecutors said.
Prosecutors interviewed the woman at the facility last month and now are seeking court approval to take her formal deposition at the facility and preserve it for trial, saying it was “doubtful that she would be able to give live testimony in a federal courtroom without great hardship to herself.”
Prosecutors argued that she was a “critical witness” who’d told them that “Beckman arranged for the purchase of the life insurance policies” on her husband’s life in 2005, telling the couple that he would sell the policies “at a substantial profit.”
But Beckman “subsequently told her that the policies had no value,” prosecutors said. “She reported that Beckman did not tell her that he sold the policies or that their sale had generated almost $4 million in proceeds. She reported that she certainly did not give Beckman permission to use the proceeds. Perhaps most importantly, she reported that she never purchased an interest in the Oxford Private Client Group. On this point she was unequivocal.”
In successfully arguing against the release of funds to Beckman, the SEC said his victims “face a dire situation.”
“The Court has already accommodated Beckman by ordering that some of the limited, frozen funds be advanced to him,” the SEC argued. “Beckman has returned the Court’s leniency with contumacious disobedience.”
UPDATED 9:24 P.M. EDT (U.S.A.) A spokeswoman for U.S. Attorney B. Todd Jones of the District of Minnesota refused to say today whether the government’s probe into the business practices of Inter-Mark Corp. and INetGlobal is over.
“[W]e never confirm or deny the existence of investigations,” said Jeanne Cooney.
The firms announced yesterday that prosecutors had agreed to return more than $20 million seized by the U.S. Secret Service in a Ponzi scheme probe in February 2010. Some INetGlobal members instantly seized on the news, claiming the government’s release of the funds validated the company’s business practices as they existed at the time of the seizure.
Separately, INetGlobal members circulated a statement from Inter-Mark Board Chairman Bob Kinsella. The PP Blog was sent a copy of the statement by an INetGlobal member, under a subject line of “Gov. Releases funds Lets Rock!”
“Today’s outcome is validation of the Inter-Mark Corporation business model,” the statement quoted Kinsella as saying. “I wonder if any business has been more researched and analyzed as Inter-Mark in the last year. Sales Associates all over the world should have complete confidence in the future of Inter-Mark Corporation.”
Cooney had no immediate comment today on Kinsella’s statement that the firm’s business model had been validated.
But Cooney did say that she believed a claim on the INetGlobal Blog that the firm had been validated had been made in “error” by the company — and that the firm “removed” the claim from its Blog.
Agreement
The money is not being released to INetGlobal directly, under the terms of an agreement approved by U.S. District Judge Donovan Frank. Instead, it is being released to attorney R.J. Zayed, who was appointed Temporary Administrator of Seized Funds.
Zayed, who also is the court-appointed receiver in the Trevor Cook Ponzi scheme, will distribute the funds under judicial supervision to INetGlobal affiliates owed money at the time of the February 2010 seizure.
Frank gave the government up to 45 days to turn over the money to Zayed. Prosecutors can petition for an extension of time beyond 45 days for “good cause,” according to the order.
“The Administrator shall conserve, hold, and manage the Seized Funds transferred by the United States as part of the Court’s Order, and shall perform all acts reasonably necessary or advisable to preserve the value of the Seized Funds until they are validly distributed to the members of Inter-Mark,” according to the order.
“If the Administrator is satisfied, in his sole discretion, that the identity of the Inter-Mark member is correct, that the amount due and owing to the member is correct, and that the name, address, government identification documents, and IRS tax forms of that member are proper, the Administrator shall wire transfer from the Seized Funds to that member’s ‘e-wallet’ account with International Payout Systems the amount due and owing to that member,” according to the order.
Funds that remain after Zayed pays INetGlobal affiliates will be returned to the company, according to the agreement.
No one has been charged criminally in the INetGlobal probe. Former executive Steve Renner, who denied wrongdoing, was sentenced in 2010 to 18 months in federal prison in an unrelated tax case. He is scheduled to be released in October.
The firm says it will have an exciting future.
“InetGlobal will use the remaining funds to launch a new and exciting array of products, many of which have been delayed due to the seizure of the funds,” the company announced on its Blog. “What working capital was available was used to service the existing business and to pay for the expensive process required to convince the United States government that iNetGlobal’s business is legal.”
An INetGlobal supporter who emailed the PP Blog this afternoon included a link to the Star Tribune story, which included Kinsella’s comment that the firm had been validated.
“Wow, it looks like you have some explaining to do,” the sender opined, referring to the Blog’s coverage of the allegations against the firm.
The sender then imagined a fantasy conversation in which the Blog would say “oh uh uh well uh” — and which he would say in return, “THAT’S WHAT I THOUGHT!!”
BULLETIN: The court-appointed receiver in the Trevor Cook Ponzi scheme has recovered more than $1.1 million that had been tied up in Switzerland.
Receiver R.J. Zayed says that $1,127,495 has been deposited in a U.S. Court account.
“[T]he Receiver has now accomplished the goal of repatriating the Swiss funds so that money can be returned to investors,” Zayed said in a court filing dated yesterday.
The development is good news to Cook’s swindled investors — but it was not without costs and legal drama.
An individual U.S. investor in the Cook Ponzi scheme filed a criminal complaint in Switzerland to give himself priority to the funds, putting himself ahead of hundreds of other swindled investors and violating a U.S. court order, Zayed said.
Records show that the U.S. investor who filed the claim lost at least $598,921 in the swindle.
A Swiss prosecutor would not release the Cook cash to U.S. investors as a whole while the individual complaint was pending, and Zayed filed a contempt motion in the United States against the individual Cook investor, accusing him of being an impediment to the receivership’s efforts to claim the sum for all defrauded investors.
The Swiss complaint filed by the U.S. investor was withdrawn on May 24, Zayed said.
With the impediment of the U.S. investor’s complaint removed, “the Swiss prosecutor was able to lift the freeze on the Receiver’s UBS account and clear the way for the money to be returned to the United States and the victims of this fraud,” Zayed said.
Zayed said the U.S. investor likely did not have the resources to pay back the receivership estate for the money it expended trying to prevent a single investor from gaining an unfair share of the Swiss proceeds, so the receivership — with the Swiss sum safely returned to the United States for the benefit of all investors — dropped the contempt complaint.
Jason Bo-Allan Beckman helped finance the U.S. investor’s Swiss action in December 2009 — more than a month after Cook’s assets were frozen and investors were prohibited by court order from engaging in self-help to recover stolen funds, according to court filings.
Beckman later emerged as a defendant in an action filed by the SEC that accused him of being a leading figure in the $194 million Ponzi and Forex caper.
BULLETIN: In 2009, federal prosecutors warned that pro se pleadings by members of Florida-based AdSurfDaily had the potential to slow efforts to provide restitution for victims of the ASD Ponzi scheme.
Pro se filings by ASD President Andy Bowdoin and dozens of ASD members crowded the court docket for months and delayed the implementation of a remissions program for victims by at least a year, according to records.
All of the pro se pleadings misrepresented the history of the ASD case and the applicable law — and included claims that only can be described as bizarre. Although a federal judge issued rulings that denied standing to the filers, new pleadings from new nonparties making the same arguments streamed into the courthouse, forcing the judge to address them and issue more orders denying standing to the filers.
After months of such back-and-forth, each of the filers ultimately was ruled to have no standing, including Bowdoin, who at once was representing himself pro se and impermissibly representing his own corporation pro se.
Now, R.J. Zayed, the court-appointed receiver in civil litigation related to the Trevor Cook Ponzi scheme in Minnesota, says pro se pleadings by accused scammer Jason Bo-Alan Beckman are slowing the receiver’s recovery efforts and wasting resources set aside for victims.
In March, the SEC charged Beckman with fraud, identifying him as a “leading” figure in a scheme pulled off by Cook and others. Beckman was accused of raising about $47.3 million of the $194 million gathered in the overall fraud — roughly 25 percent of the overall total.
Beckman has no standing to challenge the receiver’s authority to act in the interests of victims, Zayed argued. And, the receiver alleged, Beckman has filed pro se documents to delay the sale of properties he owns in Texas, actions that have forced Zayed to respond at the expense of victims of the scheme.
“The law does not permit individuals in Beckman’s position to challenge the Receiver’s actions precisely to prevent this type of costly motion practice,” Zayed argued, citing a provision of the receivership order that required Beckman to “cooperate with and assist the Receiver.”
Beckman was ordered that he “shall take no action . . . to hinder, obstruct, or otherwise interfere with the Receiver,” Zayed said.
“The funds available to the investors decrease every time the Receiver responds to an opposition raised by an entity that lacks standing,” Zayed argued. “Thus, the Receiver suggests that the Court consider prohibiting Mr. Beckman from filing additional documents challenging the Receivership’s disposition of assets.”
Zayed also claimed Beckman was making untrue and “bizarre” claims at odds with his own actions.
In February, prior to the formation of the receivership and the filing of a complaint against Beckman by the SEC, Zayed said, Beckman put one of the Texas properties on the market.
Although Beckman himself tried to sell the property only a few months ago, he is now asserting — despite having no standing to make the claim and the fact Zayed wants to sell the property before it becomes a cash-sucking white elephant on the receivership’s assets — that Zayed should not liquidate the property “during a recession or other time of economic difficulty,” Zayed said.
Beckman, Zayed said, researched the local market before listing the property in February. After his appointment as receiver in March, Zayed went to Texas to research the market himself.
“Tellingly, evidence that the Receiver recovered shows that Mr. Beckman sought to place the Paseo del Lago house on the market just weeks before the Court put the Receivership in place,” Zayed argued. “It is bizarre at best for Mr. Beckman to attack the Receiver for doing something he himself had sought to do several months earlier.”
Moreover, Zayed argued, holding onto the property adds costs.
“These costs — almost $10,000 in the first three months of operation, even excluding local counsel bills — are substantial, ongoing, and clearly outweigh any argument to wait years or even decades for the real estate market to recover,” Zayed said.
“It would significantly deplete the limited restitution funds if legal fees and other
expenses continue to accrue if the Receiver must continue to maintain and manage these properties,” Zayed said. “The Receivership is envisioned as a short-term entity, one that seeks to return value to the investors in the near future. As such, the Receivership does not have the luxury to play the market as Mr. Beckman suggests, even if the monthly maintenance expenses somehow disappeared.”
Jason 'Bo' Alan Beckman's Florida Ponzi property has a screened-in, heated pool and spa, according to court filings.
As alleged Ponzi palaces go, Jason ‘Bo’ Alan Beckman’s Florida property is hardly the gaudiest. Even so, the 11-room home in Palm City has features and amenities many Americans only dream about.
But one group of Americans — victims of the Trevor Cook Ponzi scheme — are likely only to have only bad dreams about the property. They are out millions of dollars as a result of a massive fraud in which Beckman allegedly played a big role.
The two-story, five-bedroom, five-bathroom home built in 2005 is situated near a golf course and equestrian facility, according to newly filed documents in the Beckman civil-fraud case. Receiver R.J. Zayed is seeking an order that would turn the property back over to Beckman and his wife because the home — despite its amenities — likely cannot be sold for what is owed on the $707,301 mortgage.
Keeping the property could create a drain on the receivership estate, Zayed argued.
Chief U.S. District Judge Michael J. Davis asked last week that an appraisal be done on the property. The appraisal now has been filed with the court, and the appraiser reported that the home is worth $540,000, about $167,301 less than what is owed.
Other court filings suggest the property may be worth even less. The SEC described Beckman in March as a “leading” figure in the Cook scheme, alleging that he raised about $47.3 million of the $194 million gathered in the overall fraud.
Floor plan of the Beckman Florida home.
Cook is serving a 25-year sentence in federal prison.
Beckman used $1.49 million of investors’ money for payments “toward the purchase” of luxury homes in Minneapolis, Texas and Florida, the SEC charged. The Minneapolis home already is in foreclosure, and the Florida home is situated in an upscale neighborhood trying to make a comeback after the state’s foreclosure glut caused property prices to plunge, according to court filings.
The Beckman Florida game room.
Any buyer who emerges to purchase Beckman’s Florida property will find that it has twin garages with enough floor space to hold four cars, according to court filings.
The home also features a yard with palm trees, a driveway built with colored pavers, a screened-in pool and spa, a screened-in “summer kitchen” and porch, central air, a well-appointed interior kitchen, a dining room, a living room, a family room, a game room, a den, a showy staircase, marble floors, a laundry room and other amenities.
Some of the Ponzi victims have been described in court filings as penniless.
This 10-room home with five baths and a garage of nearly 1,100 sq. ft. in Florida is "under water" on its mortgage and could create a drain on the receivership estate in the Bo Beckman fraud case, according to the court-appointed receiver.
Accused Minnesota fraudster Jason Bo-Alan Beckman’s 5,097-sq.-ft.-home with five bedrooms, five bathrooms and a roomy garage of nearly 1,100 sq. ft. in Palm City, Fla., is seriously “under water” on its mortgage and thus creates a drain on assets that are best used to compensate victims, the court-appointed receiver has advised a federal judge.
Receiver R.J. Zayed has asked Chief U.S. District Judge Michael J. Davis for an order that would return control of the property to Beckman and his wife on the theory it is “imprudent to diminish the Receivership’s severely limited resources to continue efforts to market and/or maintain the Property.”
The Beckmans, whose home in Minnesota is in foreclosure, owe “at least” $207,000 more than the Florida property is worth, Zayed advised Davis. The receiver noted that the mortgage has a balance of more than $707,301 and that the home may not even fetch $500,000 if sold.
The “negative equity” should be the Beckmans’ problem, not the problem of the victims of his alleged fraud, which is part of the Trevor Cook Ponzi scheme case, Zayed argued. The SEC sued Bo Beckman earlier this month, alleging that he was a “leading” figure in Cook’s fraud and had “guaranteed” annual returns of 12 percent or greater in an international Forex scheme.
Cook is serving a 25-year sentence in federal prison.
Bo Beckman, according to the SEC, purchased luxury homes in three states and assembled a fleet of luxury cars. He essentially is accused of being a rainmaker for Cook by driving nearly $50 million to the $190 million fraud.
“[T]he Receiver is not seeking to abandon the [Florida] property, but rather have the Court confirm the return the property to the Beckmans’ custody, control and possession, thereby placing at least some of the burden of unwinding the fraud on its perpetrators,” Zayed advised Davis.
“Based on his track record, there is no reason to doubt — and every reason to believe — that [Trevor] Cook is hiding assets, and that he can do much, much more to recover stolen funds. Why else would Cook send millions of dollars to 14 foreign countries, including Dubai, Cyprus, Greece, Belize, Antigua, England, Germany, Denmark, Mexico, Canada, Panama, Costa Rica, Jordan, and Switzerland?”— SEC, Sept. 24, 2010
On July 21 — six months after Trevor Cook had been jailed for contempt of court in a civil case brought by the SEC, and three months after he had pleaded guilty to criminal charges and agreed to cooperate with investigators — the FBI received a tip that led agents to the home of Cook’s brother Graham.
“The investigation involved assets hidden in Graham Cook’s home in ‘air ducts,’ in ‘ceiling rafters,’ and behind a ‘toilet paper dispenser,’” the SEC said yesterday.
The FBI “learned about the assets through a tip, not from Cook,” the SEC stressed, arguing that Cook’s earlier pledge to cooperate to make victims as whole as possible was virtually meaningless.
Agents later found even more loot stashed at a Minnesota shopping mall, the SEC said.
All in all, federal agents “ultimately recovered over $200,000 in cash, over 2,000 gold and silver coins (worth an additional $200,000), numerous Rolex watches, and valuable sports memorabilia” from the home, the SEC advised Chief U.S. District Judge Michael Davis of the District of Minnesota.
Meanwhile, at the mall, agents summoned by a security guard found “118 gold and platinum coins, as well as ‘stocks of different currency denominations from different foreign countries to include Iraqi Dinars, Turkish Lira, [and] Dominican Republic, Canadian, and Asian currencies,’” the SEC said.
The money stashed at the mall was recovered July 24, three days after the FBI recovered the cash from Graham Cook’s home, the SEC said.
Davis had jailed Trevor Cook in January for ignoring orders in the civil case. In August, he was sentenced to 25 years in federal prison by U.S. District Judge James Rosenbaum, who presided over the criminal aspect of the case brought by federal prosecutors.
Now, the SEC says Cook never purged the contempt citation in the civil case and should remain jailed until he does. The blistering filing suggests that, in theory, the clock may not start running on Cook’s 25-year sentence in the criminal case until he purges the civil contempt.
Some defendants jailed for contempt in civil cases involving large sums of money have remained behind bars for years, the SEC noted.
Going against the prosecution’s recommendation, Rosenbaum did not give Cook credit for time served in the civil case when sentencing the Ponzi schemer last month.
“I will tell you that I will not purge him of that contempt,” Rosenbaum said from the bench last month, according to a transcript of the proceeding in sentencing court. “That is an order of my Chief and that is his choice.”
In a memo to Davis, the SEC said Trevor Cook simply cannot be trusted.
“This Court ruled that Cook would remain incarcerated unless and until he performed 11 duties, including repatriating over $27 million from overseas, recovering over $6 million in preferential payments, and surrendering $2 million from domestic accounts, among others,” the SEC argued.
“Since then, Cook has repatriated $0 from overseas, has recovered $0 in preferential payments, and has surrendered $0 from domestic accounts,” the agency continued. “Yet Cook now asks to be released [from the contempt citation], based on the notion that he has done everything that he can do, and based on his promise to be helpful in the future. He gives his word.
“With all due respect, Cook’s word is not worth the paper that it is written on,” the SEC argued to Davis.
Any bid by Cook to argue he has cooperated with investigators and genuinely sought to purge the contempt citation is defeated by the facts of the case, the SEC argued.
“Cook promises that he is not hiding anything — honest — but Cook’s credibility has long since run out. As Judge Rosenbaum stated: ‘You haven’t got a clue what the difference is between the truth and a lie. The two words mean nothing to you,’” the SEC said, citing Rosenbaum’s courtroom comments to the Ponzi schemer.
And Cook is thumbing his nose at both the court and victims, the SEC said.
“Despite holding the keys to the jailhouse gates in his pocket, Cook has chosen to stay in jail, presumably in the hope of reaping a bounty someday,” the SEC said. “That is his choice, but he cannot now be heard to complain that his detention continues. Cook cannot secure his release by offering self-serving statements and empty promises.
“One of Cook’s victims said it best at the sentencing hearing: ‘If he wanted to help, he’s been sitting in jail since January. He could have helped recover any money that there was between now and then. Promises now of being able to help in the future are ridiculous. It’s just not acceptable,’” the SEC argued, quoting a statement from a victim.
Even as Cook professes to be cooperative, a laundry list of unanswered questions remains, the SEC said:
What were the circumstances surrounding each overseas transfer?
Who did Cook interact with concerning each transfer?
In particular, who did Cook communicate with at the foreign banks?
Who helped him create the accounts and/or wire the funds?
How much money was in each account at the time of the entry of the Asset
Freeze Order?
Where are the account statements?
What, if anything, has he done to obtain the account statements and all other financial records?
Did Cook transfer any funds from those foreign accounts to other foreign or domestic accounts? If so, where, when, and how much? And why?
What role did Cook play in creating the accounts in the first place?
What was the purpose of the offshore accounts?
What was the purpose of each transfer?
Who are the signatories? Who else had access to the funds in the accounts?
What are the passwords?
If Cook has no access to the accounts, as he suggests, then how does he know that the accounts lost money in trading?
What, if anything, has he done to return the funds to the United States?
What, if anything, has prevented him from simply contacting the foreign institutions and having them return the money?
Indeed, the SEC said, question-and-answer sessions involving the agency, Cook and R.J. Zayed, the court-appointed receiver, “were remarkable for [Cook’s] inability to remember and answer straightforward questions.”
Although Cook has the keys to the contempt cell, he has chosen not to use them, the SEC argued.
“Cook cannot lighten his burden by claiming that he has already sat in jail for eight months,” the agency said. By definition, there is no time limit for civil contempt. Sanctions for civil contempt include ‘confining a contemnor indefinitely until he complies.’”
Meanwhile, one of Cook’s victims told the PP Blog late last night that Cook showed no respect for victims and set aside money to gamble even after the SEC probe began 16 months ago.
A court filing suggests a bid was made to route the gambling money through Antigua.
“The United States suggested I give you credit for the time which you have served, and I shan’t do that,” Judge Rosenbaum told Cook in sentencing court, according to the transcript. “You’re not doing my time, you’re in jail as a contempt order. That’s called
dead time. That’s Judge Davis’s sentence. It’s not mine.
“So whatever you’ve done up until now counts zero against the sentence I’m imposing. And as far as I’m concerned, but it’s not my opinion that matters, you’re still in contempt,
and whether or not they’re going to run your time till you purge yourself with my brother, that’s up to somebody else,” Rosenbaum said.
BULLETIN: Ponzi schemer Trevor Cook has been sentenced to 25 years in federal prison for his role in an international Forex Ponzi scheme that gathered more than $190 million and fleeced victims out of more than $158 million.
In ordering the prison term, U.S. District Judge James Rosenbaum sided with the prosecution’s recommendation of a quarter of a century. It is believed to be the longest prison term ever imposed in a Minnesota financial-fraud case in which the defendant pleaded guilty.
“Such a sentence fairly, adequately, and justly punishes the defendant for his offense, reflecting the seriousness of the offense, his willingness to plead guilty and provide information to law enforcement, and the need to protect the public,” prosecutors said last week in a sentencing recommendation to Rosenbaum.
“Over the course of a few years, the defendant executed an investment fraud, victimizing approximately 923 victims and defrauding them of over $158 million,” prosecutors said. “As is all too common, the defendant often used victims’ religious beliefs as a means of enticing them to give him their money.”
Cook, 38, is not out of legal harm’s way — even with the sentence of 25 years. Prosecutors disclosed last week that he has signed a waiver that would subject him to further punishment if the ongoing investigation shows he has “somehow secreted undisclosed assets.”
Victims have expressed concerns that Cook could have stashed money from the scheme anywhere on earth. Cook failed a lie-detector last month about the whereabouts of assets.
FBI and IRS agents later found more than $400,000 in undisclosed assets under the control of Graham Cook, Trevor Cook’s brother.
Despite Cook’s lack of disclosure, prosecutors contended that it made no sense to delay Cook’s sentencing any longer as the asset search by the government and R.J. Zayed, the court-appointed receiver in a civil case filed against Cook and former Christian radio host Pat Kiley last year by the SEC and the CFTC, continued.
Cook had been scheduled to be sentenced last month. Kiley, who called his radio listeners “truth seekers,” has not been charged criminally in the case.
“The government has worked closely with the court-appointed receiver to assist its efforts in finding and identifying assets,” prosecutors said of Cook. “The government and the receiver now agree that any additional time prior to sentencing will not result in any additional information or assistance to the receiver’s efforts.”
It is possible that Cook could prove to be a valuable source of information for the government — in the same sense that disbarred attorney, convicted racketeer and Ponzi schemer Scott Rothstein has become an information source.
Rothstein, who presided over a $1.2 billion Ponzi scheme in Florida, was sentenced to 50 years in federal prison earlier this year. It is known that Rothstein has provided information helpful to the government.
Cook “has been repeatedly debriefed by law enforcement in an effort to identify assets and to provide information regarding other individuals,” prosecutors said. “He has done so. The information has been of assistance to law enforcement in its ongoing investigation.”
Ponzi schemes are toxic — and frequently are incredibly elaborate. Court documents in case after case show that the schemes frequently feature schemes within schemes and elaborate money-laundering networks. Criminals often go to fantastic lengths to disguise the conduits of the schemes, using shell companies and multiple bank accounts to funnel money and make the schemes difficult to reverse-engineer.
FBI Director Robert Mueller has warned Congress at least twice this year about a “shadow” banking system criminals employ and an increasing reliance on “shell corporations†to commit crimes and hide from investigators.
Cook’s scheme featured companies with confusingly similar names.
Records show that Cook had a tie to a company the AdViewGlobal (AVG) autosurf claimed to be its facilitator of offshore wires.
KINGZ Capital Management, AVG’s purported facilitator, denied any affiliation with AVG, which has close ties to the AdSurfDaily autosurf. ASD is implicated in a Ponzi scheme alleged to involve tens of millions of dollars.
AVG collapsed in June 2009, after running a virtually nonstop promotion that advertised matching bonuses of 200 percent for both recruits and their sponsors.
The National Futures Association said last year that Cook was managing money for KINGZ. AVG made the claim KINGZ was its wire facilitator on May 4, 2008 — the same day the Obama administration announced a crackdown on offshore fraud.
Part of the loot the FBI and the IRS found under the alleged control of Graham Cook on July 23.
Trevor Cook’s brother was hiding more than $400,000 in cash and valuables from a $190 million Ponzi scheme, according to an extraordinary statement by the court-appointed receiver in the case.
The loot was found July 23 — after Trevor Cook, whose plea agreement in the case required him to submit to a lie-detector test if requested by the government — “flubbed” the test, according to the Star Tribune of Minneapolis/St. Paul.
Graham Cook, Trevor Cook’s brother, has not been charged in the case. But the revelation that proceeds from the scheme allegedly were under his control and concealed for months from investigators and two federal judges presiding over elements of the case raise troubling, new questions about Trevor Cook’s capacity to tell the truth in any context and whether Cook and others had stashed money elsewhere.
Trevor Cook was jailed in January by Chief U.S. District Judge Michael J. Davis for concealing assets and spending money frozen by court order on Nov. 23, 2009. Davis, who is presiding over the civil elements of the case filed by the SEC and the CFTC, said the government had established that Cook had violated the court order.
Another part of the loot.
At the time, Cook made a technical argument that he had not been properly served in the case at the Van Dusen mansion in Minneapolis on Nov. 24 and thus was not bound to follow the order, a position that gave short shrift to the hundreds of victims in the case, some of whom had been rendered destitute.
Victims complained that Cook was thumbing his nose at both the court and investors. Cook also asserted his 5th Amendment right against self-incrimination, which caused victims to wonder what else he could be hiding.
Davis did not buy any of Cook’s story, and jailed him.
“[C]opies of said Orders were shown to Cook, and the relevant portions of the Orders were explained to him by the Receiver” on Nov. 24, 2009, Davis ruled. Regardless, Cook later used frozen assets to purchase $7,510 in gift cards from Cub Foods and $16,000 in gift cards from Target.
“Given the amount of investor money at issue, and Cook’s repeated violations of the Asset Freeze Orders, the Court finds that the appropriate remedy for the contempt finding in this case is to incarcerate Cook until such time as he purges such contempt.”
Jail was an appropriate remedy for Cook, even in a civil case, a top SEC official said at the time.
Sports collectibles, such as this baseball card of Minnesota Twins' immortal Kirby Puckett, also were part of the stash.
“Mr. Cook has elected to disregard the court’s orders and will now be a guest of the federal correctional system until he mends his ways,†said Merri Jo Gillette, director of the SEC’s Chicago Regional Office.
In March, while Cook was jailed in the civil case, prosecutors charged him criminally with mail fraud and tax evasion, opening up a new round of litigation over which U.S. District Judge James M. Rosenbaum is presiding.
Cook pleaded guilty to the criminal charges in April. His plea required him to take a lie-detector test “if requested†by prosecutors to determine “whether he has truthfully disclosed the existence of all of his assets and the use of the fraud proceeds.â€
It is believed the test was administered in mid-July, prior to Cook’s scheduled sentencing date of July 26. Sentencing has been postponed until Aug. 24, and Rosenbaum may have to determine whether Cook once again has thumbed his nose at the court, prosecutors, victims and the receiver in a bid to prevent the discovery of funds that could be used to make the victims as whole as possible.
The discovery of the funds also raises questions about whether Cook failed to disclose the whereabouts of assets in a bid not to implicate others in the scheme.
The stash also included Rolex and other expensive watches.
Cook’s plea agreement also required him to to “fully and completely disclose to the United States Attorney’s Office the existence and location of any assets in which he has any right, title, or interest and the manner in which the fraud proceeds were used.â€
Prior even to Cook’s polygraph exam, R.J. Zayed, the court-appointed receiver, raised questions about Cook’s cooperation and level of truthfulness. The plea agreement, as written, conceived a 25-year sentence for Cook, although prosecutors said Rosenbaum had the final say.
Victims fretted that Cook, who is in his late thirties, could emerge from prison as a relatively young man in his early sixties and have access to money that had been hidden from the court, investigators and the receiver.
Zayed now says that federal prosecutors, the FBI and the IRS found the hidden loot July 23.
Seized from Graham Cook were “$202,600.00 in cash, 2891 gold and silver coins, 27 watches, some sports memorabilia cards and other personal property belonging to the Receivership,” Zayed said yesterday.
“A rough estimate of the value of the coins is approximately $200,000.00 to $225,000.00,” Zayed said.
Read this PP Blog story from April in which victims said they believed Cook was lying about the whereabouts of assets.
Read this June PP Blog story in which Cook victims said they sought a meeting with prosecutors to delay Cook’s sentencing until more facts emerged. Victims said they feared he stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.
Read this July 12 PP Blog story in which a source told the PP Blog that Cook would be subjected to a lie-detector test.
UPDATED 9:24 P.M. EDT (U.S.A.) A spokeswoman for U.S. Attorney B. Todd Jones of the District of Minnesota refused to say today whether the government’s probe into the business practices of Inter-Mark Corp. and INetGlobal is over.
