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Tag: redemption theories

  • 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.

  • UPDATE: Charles Daniel Koss, Purported Missouri ‘Sovereign Citizen,’ Convicted In ‘Redemption’ Swindle Against Social Security

    recommendedreading1Charles Daniel Koss, a 63-year-old purported “sovereign citizen” from Independence, Mo., faces up to 61 years in federal prison after being convicted in a “redemption” scam targeted at Social Security.

    Koss was convicted of two counts of theft of government money, one count of Social Security disability fraud, one count of mail fraud and one count of transmitting a false negotiable instrument with the intent to defraud the government, prosecutors said. The false negotiable instrument was a purported “Registered Private Money Order” mailed to the Social Security Administration purportedly to repay $212,768 Koss owed the agency after it was determined he’d defrauded Social Security and had received disability payments to which he was not entitled between September 1994 and January 2010.

    From the office of U.S. Attorney Tammy Dickinson of the Western District of Missouri (italics added):

    Koss told federal agents in interviews during the investigation that he has studied redemption theory. 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 theory, the government created a fictitious person (or “straw man”) corresponding to each newborn citizen and each citizen has an alleged secret trust account with the United States Treasury. The theory also claims that through obscure procedures under the Uniform Commercial Code, a citizen can “reclaim” the “straw man” and write negotiable instruments against its accounts. Its adherents 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 believe that virtually all existing government in the United States is illegitimate and they seek to “restore” an idealized, minimalist government that never actually existed.

    And, Dickinson’s office added, “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.”

    Even as he was receiving disability payments, prosecutors said, Koss worked full time at a business known as Embassy Mortgage. He also led an active life-style, including “bowling, golfing, horseshoes, boating, activities at his lake house and frequent visits to Ameristar Casino, where he gambled a total of $260,000 during this time.”

    Koss “failed to report any change in his health condition or any income from Embassy Mortgage to the Social Security Administration,” prosecutors said.

  • 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.

     

  • Now, An Alleged ‘Sham Cemetery’ And $90 Million ‘Promissory Note’ Scam; Feds Say Men ‘Concocted’ Millions Of Dollars In ‘Fake Partnership Losses’ In Bizarre Tax Scheme Hatched Through ‘Shell Companies’

    If the “redemption” scams in which delusional hucksters tell enraptured prospects that the government maintains secret accounts Americans can tap to qualify for multimillion-dollar tax refunds and pay for everything from cars to speeding tickets haven’t caused your brain to shut down from suspending too much disbelief, you now may have another opportunity to fry your mind.

    The Justice Department has filed a lawsuit in federal court in the District of Columbia to halt what it described as a “Sham Cemetery” tax-shelter scam operated through “shell companies” controlled by Michael A. Strauss of Herndon, Va.; Patrick B. Strauss, of Washington, D.C.; and Joseph C. Barreiro of Poughkeepsie, N.Y. Patrick Strauss is the son of Michael Strauss.

    Investigators identified the shell companies as Burial Specialists LLC, Memorial Specialists LLC and Dignified Charitable Burials.

    The Strausses and Barreiro promoted “illegal tax schemes,” received “millions of dollars from their customers and concocted approximately $35 million in fake partnership losses and phony charitable contribution deductions, which they falsely told their customers could be used to offset their federal income taxes,” the Justice Department said.

    Customers were falsely promised they’d receive $5 in tax benefits for every dollar that they ‘invested,’” the agency said.

    As part of the scheme, the Justice Department said, customers also were falsely told that  “Burial Specialists had bought a ‘license’ worth more than $90 million from a company called Southern Dorchester LLC using a $90 million ‘promissory note.’

    “The license purportedly gave Burial Specialists the right to future profits from performing funeral services at a purported cemetery in Spotsylvania County, Va.,” the Justice Department said.

    And  “the defendants also falsely claimed that Burial Specialists could annually deduct a portion of the license’s supposed value and then pass on millions of dollars in losses to the customers,” the agency said.

    But the Justice Department  “contends that there was no arm’s-length sale by Southern Dorchester and that Michael Strauss and Barreiro fabricated the $90 million ‘license’ value, along with the accompanying $90 million ‘promissory note,’ to generate fake tax benefits,” the agency said.

    “The defendants also allegedly used the fictitious promissory note to siphon off, for their personal benefit, funds that they told their customers were being ‘invested,’” the Justice Department said.

    A virtually identical scheme hatched by the three men also was under way involving “a supposed cemetery in Lloyd, N.Y.,” the agency said.

  • UPDATE: California Man Who Allegedly Filed ‘False Liens’ In Bizarre Paperwork Attack Against Law Enforcement Claimed IRS Owed Him $82 Billion

    A California man accused of filing “false liens” against public officials in pursuit of their duties also filed a “bogus” tax-refund claim with the IRS for the preposterous sum of $82 billion, federal prosecutors said.

    Thanh Viet Jeremy Cao and his business, Phoenix Financial Management Group, now have been permanently barred by a federal judge from preparing federal tax returns.

    Cao was found in a civil case to have “prepared numerous federal tax returns” for clients, “claiming a total of over $200 million in tax refunds based on false representations of tax withholdings,” prosecutors said.

    He filed for a bogus refund of $82 billion “on his own 2009 income tax return,” prosecutors said.

    The scheme centered on a “frivolous” theory that the U.S. government established “secret” Treasury Department accounts for citizens in the 1930s and that citizens can “draw” on the accounts to pay their taxes and other debts. The theories sometimes are known as “redemption” or “straw man.”

    One part of the bogus theory holds that the “secret” accounts contain enough money to make every American a millionaire and that the accounts can be tapped to satisfy debts, including tax debts. Another part of the theory holds that the secret money can be accessed by filing tax forms, including Form 1099-OID, which is why the fraud also sometimes is referred to as an “OID redemption” scheme

    Cao is required to provide the government with a list of people for whom he has prepared tax returns since Jan. 1, 2005, and notify those people of the court’s order, prosecutors said.

    A criminal prosecution against Cao is proceeding on a separate track.

    See earlier story on Cao’s alleged “false liens” scheme.