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  • Receiver For Alleged Wayne McLeod Ponzi Scheme That Bilked Government Workers Opens Website; Michael I. Goldberg Asks For Help From Victims

    Saying he is interested in receiving input from victims, the court-appointed receiver in the alleged K. Wayne McLeod/Federal Employee Benefits Group Ponzi scheme has opened a website titled after the name of one of the companies named a defendant in the case by the SEC.

    Also named a defendant in the SEC case was another McLeod entity known as F&S Asset Management Group Inc. (FSAMG). McLeod died June 22. His death has been described by the Jacksonville Sheriff’s Office as a suicide. The SEC said in court filings last week that McLeod admitted to operating a fraud scheme after being confronted with evidence.

    He initially painted his company in a favorable light, according to court filings.

    The URL for the receiver’s site is FEBGinfo.com. (See link below.) Federal Employee Benefits Group went by the acronym FEBG and allegedly offered two bond funds that used the same acronym: FEBG Bond Fund and FEBG Special Fund. Both purported funds were scams, the SEC said.

    Receiver Michael I. Goldberg, a veteran attorney who also holds an MBA and has considerable experience in unraveling Ponzi schemes, cautioned that his probe was in its early stages.

    Goldberg’s early suggestions for creditors and victims are here.

    He noted that he was open to ideas, while also suggesting at least some of the victims may have “years of investigatory experience” that may be helpful to his probe.

    The SEC said the scheme, which is alleged to have begun in 1988, was targeted at government workers and law-enforcement agents. McLeod allegedly raised at least $34 million from an estimated 260 workers.

    Investigators said the government paid McLeod “up to” $15,000 to speak about benefits and retirement planning to government workers.

    Here is the link to the FEBG receivership site.

    Here (below) is a snapshot from one of the SEC filings in the case. Read the full document here.

  • RECEIVER: Cook/Kiley Ponzi ‘Incredible Tragedy’; Some Investors ‘Destitute’; Management So Screwed Up That Historic Van Dusen Mansion Was Not Insured; Assets ‘Sent All Over The World’

    EDITOR’S NOTE: As is the case with other Ponzi schemes, the alleged Trevor Cook/Pat Kiley scheme in Minnesota is proving to be an incredible paper chase that is consuming hundreds of hours of manpower as attorneys, investigators and support staff work to reverse-engineer what authorities say was an epic, international fraud.

    Want to be a Ponzi receiver? Expect to be criticized — and also expect to put in long hours, perhaps for months or even years. It simply is not an easy job, especially if a scheme has fleeced investors by the hundreds or thousands. Simply put, there is no way to make all parties happy. Perhaps all one can hope for is to contain the devastation of a Ponzi scheme.

    This is part of the story of R.J. Zayed, as told through court filings and a statement before Chief U.S. District Judge Michael J. Davis March 29. Zayed is the receiver in the Cook/Kiley case . . .

    Investor losses will be huge in the alleged Trevor Cook/Pat Kiley Ponzi scheme in Minnesota, the court-appointed receiver in the case said.

    Painting a picture that deception was the rule and not the exception in the alleged $190 million fraud, receiver R.J. Zayed said that money was moved “all over the world” and that $139 million of investor funds was “spent or hid.”

    Management of the scheme was so screwed up that Trevor Cook, whom Zayed described as the “architect,” reportedly paid $2.6 million from investors’ resources in 2008 for the historic Van Dusen mansion in Minneapolis — but then did not bother to maintain property insurance or even to maintain the property.

    Zayed’s early findings are alarming, and his statement and reports to Chief U.S. District Judge Michael J. Davis  cannot be ignored. Indeed, Zayed suggested, Cook used investors’ money to buy the mansion, but put the entire purchase price at risk and potentially invited catastrophic downstream liabilities by not insuring the property and letting it fall into a state of disrepair.

    Welcome to the bitter world of the Ponzi. Easy come, easy go.

    Although Cook purchased an island property in Canada for $250,000, a contractor who performed work for Cook has filed a “lien for unpaid work.” The filing of the lien added another layer of complexity to an already-complex case that involves multiple international jurisdictions.

    “We are working to get that issue resolved and clear title to the land,” Zayed said, noting that he has hired lawyers in Canada to help navigate the jurisdictional issues. The receivership estate also is working to convert assets in Panama to cash.

    Cook, 37, was charged criminally with mail fraud and tax evasion March 30. It is believed he may enter a guilty plea during a court appearance April 13.

    The Van Dusen mansion, which was used as a headquarters for the alleged $190 million scheme, quickly became a white elephant to the receivership estate, Zayed said.

    “Ongoing expenses, such as utilities and property maintenance, cost approximately $12,000 per month,” Zayed said. “In addition, we had to obtain property insurance (there was none under Mr. Cook’s management).”

    Moreover, Zayed said, the mansion’s furnace was not working and its security system had been “dismembered.”

    “Numerous individuals had ‘worked,’ lived, and socialized throughout the house,” Zayed said. “The property was littered with trash and paraphernalia from these activities. Evidence had to be preserved and the remainder had to be cleaned out — this was a tremendous task.”

    Spectacular Sums Collected, But No Books Kept

    Cook and Kiley both were charged civilly by the SEC and the CFTC in November. Kiley, 71, is a former host on Christian radio. Cook was a purported money manager.

    “The damage that Trevor Cook and Pat Kiley have done is nothing short of devastating to each of over 1000 investors who trusted and invested their life savings with these individuals,” Zayed said.

    In many cases, individual investors lost their life savings, Zayed said. Some of them had borrowed against the value of their homes.

    “Many of these investors are so destitute that they cannot afford to hire private counsel to represent their interests,” Zayed said.

    He described the scheme as an “incredible tragedy” that has been “nothing short of devastating” to investors, saying he is aware that some people believe the receivership estate has billed “extensive fees and costs.”

    Zayed, though, said he had arranged for discounted billings with key personnel such as attorneys and professional investigators and, in some cases, was relying on recent law-school graduates and criminal-law students to perform work for the estate to contain costs.

    WayPoint Inc., a professional investigations firm whose staff consists of former FBI and IRS agents and a former postal inspector, has performed some work at no charge because it recognizes the grave circumstances confronting Cook/Kiley investors, Zayed said.

    “It is the right thing to do,” Zayed said, quoting Rick Ostrom, one of WayPoint’s principals. Ostrom is well-known in Greater Minneapolis. He spent 26 years with the FBI.

    “WayPoint has been instrumental in cost containment,” Zayed said. “For example, to effectuate a proper distribution plan, the Receiver has to have as complete a list as possible of all investors who have lost money in this scam. Approximately 580 investors have registered claims with the Receiver — this is about half of the individuals who are believed to have invested with the Defendants.

    “In an effort to identify the remaining individuals in the most cost-effective manner possible, WayPoint interviewed and engaged local criminal-law students to review Defendants’ investor files to create a list that is complete and as accurate as possible,” Zayed continued. “These students reviewed 75 boxes of investor files and are in the process of updating the investor database with the information they reviewed. This work was performed at no cost to the Receivership, except that we paid for these students to park downtown while they worked at the U.S. Attorney’s Office.”

    Moreover, Zayed said his own firm, Carlson, Caspers, Vandenburgh & Lindquist (CCVL), cut its billing rate by 15 percent. The firm’s CFO has been working as a “de facto CFO” for the estate “without a single of her many hours billed.”

    Meanwhile, Zayed said, the “entire administrative staff of CCVL has also worked on behalf of the Receivership, often with late hours at the expense to their family and home lives, without billing a single hour.”

    At the same time, the firm’s technical staff also contributed to the Receivership, constructing a separate part of the firm computer infrastructure to handle the tremendous volume of electronic documentation that the Receivership has collected and created.”

    ‘Complicated Web’ Of Deceit

    Management of the Cook/Kiley entities was an unqualified disaster, Zayed said.

    “[T]he scope and depth of this fraud are so severe . . .  that the recovery in this case will be nowhere near the loss,” Zayed said. “The Defendants’ construction of this Ponzi scheme and their maintenance of the fraud lured investors into a scheme that produced a complicated web through which assets were sent all over the world.”

    Although investors filed lawsuits last summer and the SEC and the CFTC launched probes that resulted in the filing of the civil charges, the scheme continued to consume investors’ money even after the allegations were filed, Zayed said.

    “Trevor Cook was spending tens of thousands of dollars to buy gift cards around the city for his own personal gain,” Zayed said. He added that the receivership estate, the SEC, the CFTC and federal prosecutors in Minnesota worked to preserve assets and that the consequence to Cook was that he was jailed in January for not cooperating.

    “Suffice it to say that there was no legitimate book keeping of the Defendants and Relief Defendants,” Zayed said. “There were no accounting systems in place, or even a general ledger.”

    Read Zayed’s full statement.

  • BULLETIN: Receiver In Affiliate Strategies Inc. (ASI) Case Asks Federal Judge To Add Noobing Autosurf To Receivership Probe After Inquiries By ‘Tax Authorities’

    The court-appointed receiver in the fraud case against the parent company of the Noobing autosurf has asked a federal judge for the authority to add Noobing to the receivership probe.

    Larry Cook, the receiver, said that Noobing and 14 other companies under the Affiliate Strategies Inc. (ASI) umbrella have become the subjects of “numerous inquiries” from “tax authorities,”  creditors and “former independent contractors.”

    Cook did not identify specific parties that made inquiries, but noted that “each of the Subsidiaries used the same post office box as the Receivership Defendants.”

    Noobing targeted people with hearing impairments in its promotions. It is known that some Noobing members have contacted the Federal Trade Commission, which is spearheading the ASI probe, along with the attorneys general of Kansas, Minnesota, North Carolina and Illinois.

    At least one deaf member of Noobing says she has contacted a sheriff’s department in California about the company.

    News that Cook is seeking judicial approval to add Noobing to his receivership probe came on the same day that the U.S. Secret Service said it was conducting an intense probe of INetGlobal, which operated a Minneapolis-based autosurf.

    In an application for a search warrant in a Ponzi case against INetGlobal, the Secret Service referenced the AdSurfDaily Ponzi scheme case, saying a member of ASD had attempted to recruit an undercover Secret Service agent into the INetGlobal scheme.

    ASD members and members of a closely connected surf known as AdViewGlobal also promoted Noobing, as did INetGlobal members, according to web records.

    Steve Renner, the owner of INetGlobal, was convicted in December of four felony counts of income-tax evasion for his conduct with other companies earlier this decade.

    Autosurfs are notorious for keeping poor records or no records at all, and autosurf participants are notorious for engineering schemes to milk tax-free income.

    Cook said tax reporting is required, and is seeking an order that pertains to Noobing and 14 other ASI umbrella companies. Cook listed Noobing’s name at the top of the list.

    “In order to complete the tax reporting requirements and otherwise address the creditors’ and other claims, the Receiver seeks a clear order that he is the Receiver for the Subsidiaries,” Cook said.

    And, he added, “Counsel for the [FTC] has reviewed this Motion and concurs.”

    ASI and a number of companies were sued last year in a scheme involving government grants. Noobing went offline in the immediate aftermath of the FTC probe.

  • North Carolina Man Adds To List Of Alleged Schemers Who Bought Jet Skis With Fraud Proceeds; J.V. Huffman Jr. Also Faces Trial On Weapons Charge

    J.V. Huffman Jr. Source: Catawba Country Sheriff's Office

    It’s not as though alleged fraudster J.V. Huffman Jr. did not have the expensive cars and real estate often associated with Ponzi schemes or financial frauds.

    Huffman, jailed awaiting trial in North Carolina on Ponzi and weapons charges, had plenty of those, according to William Walt Pettit, the court-appointed receiver. He had an Aston Martin ($100,000+), three Mercedes (nearly $180,000 combined), and a Prevost motor home (insured against loss for $825,000) , for example. And Huffman had at least 14 parcels or properties, including a $765,000 property in North Carolina and multiple interests in time-shares at Walt Disney World in Orlando.

    But Huffman also had jet skis, which oddly seem to have become a signature purchase among operators of alleged Ponzi schemes or financial frauds. Disbarred Florida attorney Scott Rothstein, implicated in an alleged $1.2 billion Ponzi scheme, had jet skis.

    Affiliate Strategies Inc., a Kansas company under whose umbrella the shuttered Noobing autosurf fell, had a jet ski. ASI is among a number of companies sued by the Federal Trade Commission and the attorneys general of four states for operating a grant-writing scheme.

    Florida-based AdSurfDaily, whose president is implicated by the U.S. Secret Service in a $100 million Ponzi scheme, also had jet skis — two of them. Andy Bowdoin told his members that the jet skis (and a lakefront home) were for their benefit, but the statement was met with anger, the jet skis and Bowdoin’s other marine equipment dismissed derisively as “water toys.”

    Huffman’s next court appearance in North Carolina has been delayed until Jan. 25. He also faces a civil prosecution by the SEC, which said his Ponzi scheme began in 1991 and operated for 17 years before collapsing.

    The weapons charge was added when guards found a razor blade hidden in Huffman’s Bible in his jail cell. Prosecutors said the alleged financial scheme largely was targeted at Lutherans.

    SEC investigators said Huffman and his company — Biltmore Financial Group — gathered as much as $25 million from 500 investors. At first, Huffman told investors he operated a mutual fund.

    After the 9/11 terrorist attacks and the ensuing volatility in financial markets, Huffman changed his story, telling investors that he pooled funds to purchase and sell safe mortgages that had strong equity positions and were insured, the SEC said.

    “Contrary to his representations, Huffman and Biltmore did not invest the funds as represented,” the SEC said. “Instead, Huffman spent investor funds to subsidize his lavish lifestyle. Returns to investors were paid from money invested by new investors. The purported insurance protecting the investments did not exist and much of the principal has been dissipated or used to purchase real estate for Huffman and/or his wife, expensive automobiles or other luxuries.”

    In another claim reminiscent of the AdSurfDaily case, the SEC said Huffman dropped famous acronyms such as “FDIC” to get people to invest with him.

    North Carolina Secretary of State Elaine F. Marshall is spearheading the criminal prosecution.

    “People who are knowledgeable in the investment industry came to us saying that the
    promises being made sounded ‘too good to be true,’” she said, after agents arrested Huffman in November 2008. “In most cases, when an investment sounds too good to be true, it usually is.”

  • Trevor Cook Allegedly ‘Refused’ To Cooperate With Ponzi Receiver; Security Guards Posted At Van Dusen Mansion In Minneapolis

    A Minnesota man accused of operating a Ponzi scheme with Christian radio host Pat Kiley is not cooperating with the court-appointed receiver in the case and might have spent $30,000 on “gift cards” after the SEC and CFTC brought twin actions last month, according to the receiver.

    The receiver, R. J. Zayed, described efforts to locate and claim assets tied to the alleged $190 million fraud as an international paper chase.  On Dec. 21, Zayed said, the Ontario Superior Court of Justice recognized his appointment by a U.S. federal judge and granted him power over receivership assets in Canada.

    Zayed said he was able to take control over a Cook property in Rainy River. Some investors said Cook had purchased a two-person submarine on eBay for $40,000 to access the island property, but Zayed did not mention the submarine in his initial receivership report to U.S. District Court Chief Judge Michael J. Davis.

    “Based on the Receiver’s Canadian authority, the Receiver obtained a Certificate of Pending Litigation that has been filed against the property in Canada to prevent its transfer without the authority of the Receiver. In addition, the Receiver is in the process of obtaining the three necessary appraisals to sell the property.”

    The situation involving land in Panama upon which a casino was planned is less clear because of litigation filed against receivership assets in the Central American country by Oxford FX Growth, one of the relief defendants named in U.S. litigation.

    “Prior to the appointment of the Receiver, Relief Defendant Oxford FX Growth, L.P. secured Panamanian counsel and filed a lawsuit in Panama in an effort to prevent the sale of the real estate in Panama that was acquired with funds of the Receiver Estates,” Zayed said. “The Receiver has taken control of the Panamanian lawsuit, including the costs of litigation.”

    Zayed said he had been in contact with legal counsel for Oxford FX Growth, and learned that four of five pieces of property had been “successfully attached” and secured by a bond in the amount of $200,000.

    He also learned that Oxford FX Growth had filed a local claim in Panama against Cook, Gary Saunders and Holger Bauchinger for $12 million and that lawyers in Panama are attempting to perfect service.

    The Cook/Kiley investigation is among a number of Ponzi probes in Minnesota. Like other Ponzi cases, it has included spectacular allegations that investor funds were diverted to acquire expensive automobiles and real-estate. Among the assets frozen in the case is the landmark Van Dusen Mansion at 1900 LaSalle Ave. in Minneapolis.

    Zayed said he took control of the mansion and secured its furnishings and equipment on Nov. 24, with the assistance of the U.S. Marshal’s Service and the Minneapolis Police Department.

    “Trevor Cook, Patrick Kiley, Graham Cook and Marc Trimble were found on and escorted from the premises without being allowed to remove any property (except for Patrick Kiley who was allowed to take his personal clothing and toiletries with him),” Zayed said.  “All exterior locks were changed and security guards were posted to safeguard the property.”

    He added that he found 41 computer hard drives and other media at the mansion and that they were “forensically copied.” Meanwhile, 21 computer hard drives and other media were found at a separate property at 12644 Tiffany Court in Burnsville, Minn. The data was copied, the premises and furnishing were secured, locks were changed and guards were posted.

    To date, Zayed said he has seized six cars — a 1989 Rolls Royce; a 1985 Pontiac Fiero;  a 1989 Mercedes 420 SEL; a 1998 BMW Z3; a 2000 Lexus; and a 2004 Audi RS6 — and “has identified additional vehicles that may be subject to the Receivership.”

    Cook, he said, “has asserted the Fifth Amendment privilege and refused to cooperate with the Receiver.” Zayed also asserted that Cook might have depleted receivership assets after the SEC and CFTC brought their respective cases.

    “In December, the Receiver received information that Mr. Cook had been purchasing gift cards in large denominations,” Zayed said. “As a result of this information, Mr. Cook turned over approximately $30,000 in gift cards and now faces Motions brought by the SEC and CFTC for a Rule to Show Cause as to why he should not be held in contempt of the Court’s asset freeze orders.”

    A hearing on the motions is set for Jan. 8.

    Zayed said he has been receiving “30 to 60” calls from investors each day. He established a website for information.

    See Cook/Kiley Receivership website.

    U.S. District Court for the District of Minnesota also has established a Cook/Kiley website.

  • ‘3 Hebrew Boys’ Guilty In $82 Million Ponzi/Affinity Fraud Scheme; Company Operated In Fashion Similar To AdViewGlobal Autosurf, Imploring Members To Maintain Secrecy

    ponzinewsIn yet another case that may cause widespread unease in the autosurf world, three men accused of defrauding participants in a bogus debt-relief “ministry” have been found guilty of 174 counts of mail fraud, money-laundering and transporting stolen goods.

    Parts of the case against “3 Hebrew Boys” were remarkably similar to events engulfing the AdSurfDaily autosurf. In 2007, for example, the defendants filed a court document that described their investment program as an effort to free people from government “bondage” and referred to the investigation as “Satan’s handiwork.”

    In 2008, AdSurfDaily President Andy Bowdoin described the case against his purported Florida “advertising” firm as the work of “Satan,” comparing it to the 9/11 terrorist attacks. Prosecutors said ASD was selling unregistered securities, while engaging in wire fraud, money laundering and operating a $100 million Ponzi scheme.

    In 2007 and 2008, prosecutors brought essentially the same charges against “3 Hebrew Boys” — Joseph Brunson, Tim McQueen and Tony Pough.

    About 100 supporters of the “3 Hebrew Boys” rallied in Columbia, S.C., in the early days of the probe, to demand that investigators leave them alone. Participants told reporters that the government did not understand the program, had overreached in its prosecutorial efforts and refused to deny it was wrong, choosing to move forward with the case in a bid to save face.

    Prosecutors said the “3 Hebrew Boys” scam was targeted at churchgoers and members of the military from South Carolina and North Carolina, and also from other states. The scam got its name from the company’s website name, which was based on a biblical tale of believers who escaped a furnace by relying on their faith.

    At least $82 million was consumed in the scheme, prosecutors said.

    The company attempted to chill law enforcement, regulators and members of the media from scrutinizing operations, prosecutors said.

    In an approach similar to one used by the AdViewGlobal (AVG) autosurf,  members were forced to agree to a confidentially clause that purportedly prohibited them from discussing the company outside the confines of meeting places. Participants were threatened with a $1 million penalty for sharing information.

    AVG, which has close ties to ASD, morphed into a “private association” in February 2009. Members were scolded for sharing information and calling the autosurf an “investment” program. As the company appeared to be collapsing in May and June, members were threatened with copyright-infringement lawsuits. Critics were told AVG would contact their ISPs to file abuse reports and suspend service.

    Not only did the plan to force secrecy and mute criticism not work in the “3 Hebrew Boys” case, it resulted in intense scrutiny by federal prosecutors, the FBI, the IRS and other agencies. It also resulted in intense scrutiny on the state level.

    South Carolina Attorney General Henry McMaster filed civil and criminal charges, posting all the documents in the case on his website.

    A court-appointed receiver also published documents, listing an astonishing array of luxury purchases made by the schemers with investors’ money. Among the items were a Gulf Stream jet, a Prevost Motorcoach and automobiles with famous names such as Mercedes, Lexus, BMW, Saab, Cadillac and Lincoln.

    Some of the luxury items are missing, meaning they cannot be sold to compensate victims.

    Brunson, McQueen and Pough were found guilty yesterday. The jury in the case, which was heard in Columbia, S.C., returned the verdict in less than three hours, after listening to testimony for weeks.

    Separately, Lee Otis Fluker was charged with perjury and convicted in 2008 for lying about his knowledge of the scheme. He was sentenced to a year in prison.

    Brunson, McQueen and Pough face decades in prison and fines in the millions of dollars.

    Last month, Beattie B. Ashmore, the court-appointed receiver in the case, warned victims about “companies [that] claim to offer professional services for recovering losses associated with your involvement with CCG,” one of the companies associated with the “3 Hebrew Boys” scheme.

    “Please note that you are not required to respond to these letters in order to be considered for a distribution from the Receiver,” Ashmore said on the receiver’s website.  “In addition, the Receiver takes no position as to any consequential effect filing a claim and recovering funds in this case may have upon any action you have taken or may take with Fraud Recovery Group or any similar type company.

    “Therefore, it is strongly recommended that you seek professional legal and tax advice from a trusted advisor, and that you properly research any professional advice before acting upon it,” Ashmore said.

  • BREAKING NEWS: Receiver In FTC Case Against Parent Company Of Noobing Autosurf Seeks Wholesale Demolition Of Firm; Asks Judge To Approve Plan To Sell Assets — Right Down To Restroom Wastebasket

    Assets of the parent company of an autosurf firm that targeted customers with hearing impairments would be sold at auction — up to and including a stainless-steel wastebasket in the women’s restroom, according to a plan proposed by the receiver in the case against Affiliate Strategies Inc. (ASI) and other companies.

    ASI is the parent company of the Noobing autosurf. U.S. District Judge Julie A. Robinson of the District of Kansas would have to approve the plan submitted by Larry Cook, the court-appointed receiver.

    Screen shot from court filings: Part of the inventory of Affiliate Strategies Inc.
    Screen shot from court filings: Part of the inventory of Affiliate Strategies Inc.

    Robinson previously ordered ASI to repatriate to the United States all assets and documents held on foreign soil, and cleared the way for any safe-deposit boxes to be opened and inspected. The judge also ordered assets not to be concealed or dissipated and records not to be destroyed.

    In a coincidence that conjures images of another autosurfing company embroiled in litigation, Cook revealed in the plan that ASI owns a jet-ski. Federal prosecutors said in December that money from Florida-based AdSurfDaily Inc. (ASD) was used to purchase two jet-skis.

    Prosecutors seized ASD’s jet-skis in a forfeiture complaint and may choose to liquidate them later, if court approval is gained.

    Cook’s plan would sell ASI’s jet-ski, a 2005 Yamaha, along with a 2003 Saturn automobile owned by the firm.

    “[Cook] previously determined the Receivership Defendants’ business operations could not be operated legally and profitably,” the receiver’s attorney, Brian M. Holland, said in a court filing.

    The Grant Writer’s Institute — another company affiliated with ASI — was accused in August of charging a 70-year-old Philadelphia man $995 for the names and addresses of three benevolent entities that could help him repair the home he shares with his wife.

    One of the addresses proved to be the address of the Philadelphia Regional Office of the U.S. Department of Housing and Urban Development, which had been misidentified by the Grant Writer’s Institute as a benevolent organization known as “World Changers,” according to court filings.

    In July, ASI, the Grant Writer’s Institute and several affiliated firms and individuals were accused by the FTC and the attorneys general of Kansas, Minnesota and North Carolina of participating in a scheme that promised “guaranteed” grants of $25,000 from economic-stimulus funds provided by the government.

    Brett Blackman, president of Noobing, is the head of ASI.

    In August, Cook advised Robinson that the companies were insolvent and that attorneys had received “thirty two US Mail crates” filled with consumer complaints on a single day.

    Blackman, according to Cook, recently registered several corporations offshore, including Noobing, which was registered on the Caribbean island of Nevis on March 25, 2009; ASI Management Inc., formed in Belize on March 24, 2009; Landmark Publishing Group LLC, formed in Nevis on March 25, 2009; Landmark Publishing LLC, formed in Nevis on March 25, 2009; International Research and Writing Group LLC, formed in Nevis on July 1, 2009; and International Publishing Group LLC, formed in Nevis on July 1, 2009.

    All in all, Cook said, “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.”

  • BREAKING NEWS: Receiver In ASI/Brett Blackman Case Delivers Devastating Preliminary Report; Noobing Autosurf Identified As Part Of ASI Affiliate Fold And Was Registered In Nevis; Belize Used For Other Firm

    A receiver appointed to review financial records of Affiliate Strategies Inc. and related companies named defendants in a fraudulent government-grants scheme last month advised a federal judge that the companies were insolvent and had less than one day’s operating cash requirements in their bank accounts.

    Astonishingly, receiver Larry Cook advised U.S. District Judge Julie A. Robinson that the attorneys he hired to assist in the probe “received thirty two US Mail crates” filled with complaints on Wednesday alone.

    “Although it is difficult to summarize the mass volume of calls and letters, a majority of the communications are from elderly individuals, or their children, who have discovered automatic checking account deductions from their, or their parents’, checking accounts and are requesting refunds,” Cook said in the preliminary report.

    Although Cook advised the judge he has been able to recover about $300,000 through the early weeks of his investigation and expected to recover more as the investigation proceeds, the defendants’ businesses appeared to be broke.

    “The Receiver’s work over the past three weeks suggests the Defendants’ operations were insolvent on the date [July 24] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds,” Cook said.

    He observed that the “Defendants’ business operations were high revenue/low margin operations which required significant cash in-flows from new victims to meet current trade creditor and consumer refund obligations.”

    Noobing, an autosurf that targeted people with hearing impairments, was identified by Cook as a company affiliated with ASI. Noobing was not named a defendant in the fraud complaint filed last month by the Federal Trade Commission and the attorneys general of Kansas, Minnesota and North Carolina.

    Cook, though, said he discovered Noobing had registered as a corporation on the Caribbean island of Nevis on March 25, 2009. Noobing launched last year and was promoted by members of AdSurfDaily Inc., a surf firm from which the U.S. government seized tens of millions of dollars last year in a wire-fraud, money-laundering and Ponzi scheme probe.

    Noobing generated more than $590,000 in revenue last year and more than $541,000 this year before going offline, according to Cook’s preliminary report.

    Cook estimated that Noobing was in the hole nearly $550,000 since last year.

    Blackman, according to Cook, recently registered several corporations offshore, including Noobing; ASI Management Inc., formed in Belize on March 24, 2009; Landmark Publishing Group LLC, formed in Nevis on March 25, 2009; Landmark Publishing LLC, formed in Nevis on March 25, 2009; International Research and Writing Group LLC, formed in Nevis on July 1, 2009; and International Publishing Group LLC, formed in Nevis on July 1, 2009.

    All in all, Cook said, “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.”

    “Of immediate concern is the large distributions and salary paid to defendant Brett Black[man] since 2008,” Cook advised the judge in his report. “Per the QuickBooks accounting records, Blackman received $841,545 of distributions from Apex Holdings International, LLC in 2008 and made a net contribution of $491,559 into Affiliate Strategies, Inc. ($581,388 of contributions and $89,829 of distributions) for a total net distribution of $349,986, in addition to salary payments of $118,049.

    “In 2009,” Cook continued, “Blackman has received $253,506 of distributions from Apex Holdings International, LLC and has made a net contribution of $113,000 into Affiliate Strategies, Inc. ($349,000 of contributions and $226,000 of distributions). The total net distributions and salary to Blackman for 2008 and 2009 is approximately $490,000.”

    Cook said his assessment was ongoing. He reported that some of the accounts involved in the investigation had chargeback rates of as high as 77 percent, meaning that better than three of four customers who made credit-card charges requested refunds.

    Read Cook’s preliminary report.

  • UPDATE: Receiver In ASI Case Launches Website

    Larry Cook, the receiver in the Federal Trade Commission case against Affiliate Strategies Inc., Brett Blackman and several co-defendants, has started a website to inform interested parties.

    Visit the receiver’s website in the ASI case.

    The FTC said the defendants were involved in a fraudulent scheme that promised “guaranteed” grants of $25,000 from economic-stimulus funds provided by the government. State attorneys general from Kansas, Minnesota and North Carolina joined in the lawsuit.

    Blackman is ASI’s president, chief executive officer and founding partner, and also president of Noobing, a surf site. Noobing was not named in the FTC complaint, but the site is offline. Noobing targeted members of the deaf community.

    U.S. District Judge Julie A. Robinson issued a temporary restraining order (TRO) and asset freeze July 24.