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Tag: redemption scams

  • Purported Alabama ‘Sovereign Citizen’ Convicted Of Trying To Pay Off Mortgage With Bogus Note For $10 Million

    breakingnews72A 64-year-old Alabama man who tried to pay off his mortgage by mailing a bogus “bonded promissory note” for $10 million to a mortgage-servicing company has been convicted of fraud, the office of U.S. Attorney Joyce White Vance of the Northern District of Alabama said.

    Donald Joe Barber of Pinson faces up to 25 years in federal prison when sentenced July 31 by U.S. District Judge Inge P. Johnson.

    “Self-appointed ‘sovereign citizens’ preach an extremist, anti-government ideology to their followers and teach a myth about American history that is untrue,” Vance said. “They often use this mythical ideology to justify crime. Sovereign citizens may disavow the authority of the U.S. government, but it exists and my office will use it to prosecute those who break the law.”

    Barber “presented the fraudulent $10 million note as if it were a valid financial instrument drawn on a secret U.S. government account,” prosecutors said.

    His note, they said, constituted a “fictitious financial instrument.”

    Some “sovereign citizens” cling to a bizarre theory known as “redemption,” which holds in part that the U.S. government created secret accounts for citizens decades ago and that the accounts can be accessed through the filing of precise paperwork to retire debts.

    “All citizens should be wary of individuals or groups that claim they can inform you on secret bank accounts, and should report that activity to the FBI,” said Richard D. Schwein Jr., FBI special agent in charge.

  • Alleged Missouri ‘Sovereign Citizen’ Indicted In $212,000 Social Security Rip-Off, Feds Say; Charles Daniel Koss Allegedly Sent Agency ‘False Negotiable Instrument’ To Pay Off Debt

    Charles Daniel Koss, 62, of Independence, Mo., allegedly owed the Social Security Administration $212,000 because he collected disability benefits to which he was not entitled between September 1994 and January 2010.

    Koss allegedly was working with his wife at Embassy Mortgage in Blue Springs, Mo.,  and “willfully failed” to let Social Security know about “the income derived from his work activity,” federal prosecutors in the Western District of Missouri said.

    A purported “sovereign citizen,” Koss now has been charged with two counts of theft of government money, one count of Social Security disability fraud, one count of passing a fictitious instrument with the intent to defraud and one count of mail fraud, federal prosecutors said.

    When Koss learned he had to repay the money, he allegedly mailed the Social Security Administration a false financial instrument dubbed a “Registered Private Money Order” in purported payment of the debt.

    The bogus instrument allegedly was part of a “redemption” theory favored by “sovereign citizens.” Under the theory, prosecutors said, the government is purported to have created “secret accounts” from which debtors can draw to satisfy their obligations.

    In a news release, the office of Acting U.S. Attorney David M. Ketchmark said:

    Koss subscribed to what is known as the redemption theory, the indictment says, which claims that a “Birthright Trust” is created with the U.S. Treasury when parents of a newborn child pledge the child’s birth certificate to the government. Redemption theory involves bogus claims that when the United States government abandoned the gold standard in 1933, it pledged its citizens as collateral so it could borrow money. The movement also asserts that common citizens can gain access to funds in secret accounts using obscure procedures and regulations.

    According to the indictment, adherents of the redemption theory sometimes call themselves “sovereign citizens.”  The sovereign citizen movement is a loosely organized collection of groups and individuals who have adopted anarchist ideology. Its adherents claim that virtually all existing government in the United States is illegitimate and they seek to “restore” an idealized, minimalist government that never actually existed. Redemption theory and sovereign citizen beliefs are totally without merit and they have no basis in law or fact.  Individuals often use these ideas to further various fraudulent schemes.

  • DIALING UP THE BIZARRE: Prisoner Who Reportedly Once Stole Tractor-Trailer Full Of ‘Canned Beans’ And Later Followed ‘Sovereign Citizen’ Bleatings Convicted Of Running Tax Scam From Jail

    This one is almost indescribably bizarre . . .

    Ronald Williams, 48, was an inmate in various prisons in New York state between 2006 and 2010, federal prosecutors said.

    His mother told the Syracuse Post-Standard that her son was jailed in 2006 on charges of stealing a tractor-trailer full of “canned beans” off a street in Buffalo.

    While incarcerated, Williams got the not-so-bright idea of filing false tax returns from prison, apparently after being influenced by a purported “sovereign citizen” website article attributed in part to “Obi-Wan Kenobi,” the newspaper reported.

    Obi-Wan Kenobi, of course, is a fictional character from the Star Wars franchise.

    Federal prosecutors now say Williams filed 11 false returns from prison, and assisted another prisoner in filing a bogus return.

    In one instance, prosecutors said, Williams managed to dupe the IRS into sending him a refund of $327,456.04 to his prison address. The check was intercepted by the prison and returned to the IRS.

    Williams, who “never actually received any monies,” also engaged in redemption scams in which he fabricated “withholdings on numerous Forms 1099-OID by claiming false withholding credits,” prosecutors said. “The eleven returns were for payment of refunds of taxes totaling $890,000,000.”

    (See a PP Blog story about a different redemption scam, this one operating from Washington state and allegedly involving purported “sovereign citizen” John Lloyd Kirk, who once was imprisoned for possessing a pipe bomb.)

    A jury convicted Williams last week on all 12 counts filed against him, the office of U.S. Attorney Richard S. Hartunian of the Northern District of New York said.

    “The object of these schemes is to defraud the government and the taxpaying public,” said Victor W. Lessoff, acting special agent in charge of the IRS Criminal Investigations Unit.  “Although a check was computer generated in this case, immediate action was taken as soon as it was identified by IRS Criminal Investigation and those involved in this scheme were vigorously prosecuted.”

  • REPORTS: FBI Arrests Purported ‘Sovereign Citizen’ And Fugitive Shawn Rice After Arizona Standoff

    Shawn Rice, a purported “sovereign citizen” the FBI described in March 2011 as a “fugitive,” has been arrested in Seligman, Ariz.

    The Arizona Republic is reporting that the arrest occurred at 5:30 p.m. local time yesterday after a standoff that ended peacefully after negotiations with Rice, who had barricaded himself inside a house.

    Rice, whom federal prosecutors in Nevada said was 48, was charged in Nevada with money-laundering and conspiracy in March 2009. His initial arrest occurred as a result of a sting in which he allegedly agreed with Samuel Davis, 56, of Council, Idaho, to launder proceeds from what the men believed was a bank-fraud scheme.

    In reality, according to federal prosecutors, Rice and Davis were conducting business with undercover FBI agents posing as scammers.

    Davis, another purported “sovereign citizen,” pleaded guilty to the charges in March 2011. He was sentenced in October to 57 months in federal prison. Rice, though, became a fugitive, the FBI said.

    It was not immediately clear how the FBI learned yesterday that Rice was in Seligman. The arrest occurred while much of the nation’s attention was focused on the holidays.

    The Southern Poverty Law Center (SPLC) has described Davis as a redemptionist-seminar tax scammer and “one of the elders in the Guardians of the Free Republics, a sovereign group that claims to have recently set up ‘common-law courts’ in all 50 states.”

    It is becoming somewhat common for “sovereign citizens” to conduct “trials” — occasionally inside places such as restaurants — at which fellow “sovereigns” implicated in crimes and within the jurisdiction of real courts are “acquitted.”

    Prior to his guilty plea, Davis advised customers of his tax scheme “that everything is going as planned,” SPLC reported.

    Rice is known as “Rabbi Shawn Rice,” SPLC reported.

    “According to the court records, from March 2008 through the date of the Indictment, Davis and Rice allegedly laundered approximately $1.3 million of monies for FBI undercover agents,” federal prosecutors said in March 2009. “Davis and Rice were told by the undercover agents that the monies were proceeds of a bank fraud scheme, specifically from the theft and forgery of stolen official bank checks. Davis and Rice laundered the monies through a nominee trust account controlled by Davis and through an account of a purported religious organization controlled by Rice. Davis and Rice took approximately $74,000 and $22,000, respectively, in fees for their money laundering services.”

  • Washington State Man Sentenced To 25 Years In ‘Foreclosure Relief’ Scam; Judge Calls Jeff McGrue ‘Heartless’; FBI Says He Issued Nonexistent ‘Bonded Promissory Notes’ Purportedly Drawn On U.S. Treasury To Fleece Lenders And People ‘At The End Of Their Rope’

    Photo source: FBI

    A Washington state man who ran a foreclosure-rescue scam by telling victims he could save their homes gathered more than $1 million from people “at the end of their rope” and tried to bilk lenders out of at least $55 million, federal prosecutors and the FBI said.

    Jeff McGrue, 51, of Tacoma, targeted California borrowers. He has been sentenced to 25 years in federal prison.

    U.S. District Judge Otis D. Wright III called McGrue “heartless” when ordering the sentence, prosecutors said.

    Documents in the case suggest McGrue fashioned a purported remedy for distressed homeowners that mixed redemption fraud with standard hucksterism. As is typical in foreclosure-rescue schemes, McGrue got paid up front, and his customers lost everything.

    Redemption fraud normally is associated with tax fraud and efforts to gain illegal tax refunds, often for spectacular sums. Under the crackpot redemption theory, the U.S. government maintains secret accounts for individual citizens that can be tapped to retire tax debt and other forms of debt.

    In his scam, McGrue appears to have borrowed from the redemption theory and applied its bizarre conjecture to mortgage debt relief.

    Through a company known as Gateway International, McGrue and “others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use ‘bonded promissory notes purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings,” the FBI said.

    “The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway International at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses,” the agency said.

    But McGrue “did not own any bonds and did not have a U.S. Treasury Department account,” the FBI said. “Nor could he have the type of account described to homeowners because the Treasury Department does not maintain accounts that can be used to make payments to third parties.”

    More than 250 customers enrolled in the McGrue plan, but he “did not save a single home,” prosecutors in the Central District of California said.

    Real-estate agents who did not do their homework but nevertheless were eager to earn commissions helped popularize the foreclosure-relief scheme, according to the government.

    Strange, foreclosure-related events are occurring across the United States. In the Atlanta area, for example, so-called “sovereign citizens” have been moving into foreclosed homes and issuing fake quit-claim deeds designed in theory to undermine lenders’ interests in properties.