PatrickPretty.com

Tag: Robert M. Goldstein

  • In Response To Search Warrant In TelexFree Case, YouTube Delivers 45GB Of Data

    newtelexfreelogo2ND UPDATE 9:18 A.M. ET FEB. 13 U.S.A. On Oct. 16, 2014, Google was served a search warrant in the TelexFree criminal case against accused operators James Merrill and Carlos Wanzeler, according to joint court filings by federal prosecutors in the office of U.S. Attorney Carmen M. Ortiz of the District of Massachusetts and Robert M. Goldstein, a defense attorney for Merrill.

    Merrill and Wanzeler are charged with wire fraud and wire-fraud conspiracy. U.S. prosecutors have called Wanzeler a fugitive now likely living in Brazil. With discovery involving incredible amounts of data and an avalanche of documents under way that both sides must sift though, no trial date has been set.

    The search warrant sought “a substantial amount of video content held by [Google’s] subsidiary, YouTube,” according to the joint interim status report by prosecutors and Goldstein docketed on Dec. 17. The lawyers noted that “Google reports that compliance will take several more weeks.”

    Precisely why the government sought the material is unclear, but promoters of MLM or network-marketing HYIP schemes frequently pitch their offerings on YouTube. Filings last week by Stephen B. Darr, the court-appointed trustee in the TelexFree bankruptcy case, assert that TelexFree had gathered as much as $1.8 billion in about two years and that the cross-border “program” may have involved 1 million or more people.

    Darr flat out called TelexFree a pyramid scheme.

    In another joint interim report docketed Monday, prosecutors said they recently received 45GB of material from Google under the search warrant. The corresponding number of hours of video contained within the production wasn’t specified.

    Prosecutors also said in the report that they’d received an unspecified amount of data from Hotmail and Apple that had been sought in a search warrant.

    This data involved email accounts, prosecutors said in the interim report. The names of the account-holders and the content of the emails were not revealed in the report.

    HYIP schemes often get pitched in emails from promoters. The government did not say why it had sought the material.

    Prosecutors did note that “[p]roduction of this material has been delayed by errors in the data as produced by the email providers.”

    Darr, the trustee, has turned over 75GB of data, according to the Feb. 9 report.

    Getting to the heart of an HYIP scheme that operated over the Internet is an exceptionally time-consuming task. Delays are almost inevitable and even can be caused by external events that affect resources. In the Feb. 9 filing, prosecutors noted that “paralegals and litigation technical support staff” in Ortiz’s office also are participating in the prosecution of the Boston Marathon bombing case, a mammoth undertaking.

    Absences or delays, however, are not unique to the prosecution side of the argument. A TelexFree defense attorney who has to sift through discovery material is involved in a trial in another state and could not attend a status conference that had been scheduled for today, according to the joint interim report.

    U.S. Magistrate Judge David H. Hennessy canceled today’s conference, setting April 13 as the next date the parties would meet. In his own report, Hennessy noted that discovery was proceeding in the case despite the enormous volume of material.

    And that volume only will grow, he wrote, pointing to a TelexFree criminal investigation in Brazil and assertions by U.S. prosecutors that they expect to receive “a large amount of material, both hardcopy and electronic, from the Brazilian government” in March.

    News of the conference delay was received on the same day publications in Brazil reported that an accounting firm (Ernst & Young) in that country had reported to the judiciary in Acre state that TelexFree (as Ympactus) had the characteristic of a pyramid scheme.

    TelexFree is the subject of both state and federal probes in Brazil.

    The Feb. 9 joint interim report in the United States notes that “the government anticipates receiving [data] in response to a search warrant submitted to the Court this week.”

    What was targeted in that search warrant was not revealed. Nor was the identity of the person or entity served with the warrant.

    The interim report also notes that the U.S. government is in possession of “[v]arious recordings made by undercover [Homeland Security Investigations] agents at TelexFree conference and in conversations with a TelexFree promoter.”

    Brazil-based TelexFree figure Carlos Costa appears to be the subject of a veiled reference in the Feb. 9 report, which describes an unnamed person in Brazil as “the third owner of TelexFree.”

    Authorities in Brazil have served “about nine” TelexFree-related search warrants in that country and have seized on the order of $450 million, according to the Feb. 9 report.

    NOTE: Our thanks to the ASD Updates Blog.

  • BULLETIN: Prosecutors Ask Judge Not To Release Money To TelexFree Figure James Merrill

    James Merrill
    James Merrill

    BULLETIN: Federal prosecutors handling the criminal case against TelexFree figure and alleged co-owner James Merrill have asked a judge not to release $4 million Merrill says he needs to pay for his criminal defense.

    On July 1, Merrill asked for an evidentiary hearing aimed ultimately at securing “an order returning the identified funds” to him.

    TelexFree might be the largest MLM HYIP pyramid- and Ponzi scheme in U.S. history, based on global reach, dollar volume and the number of affected recruits. Regulators have called it a cross-border fraud that gathered more than $1.2 billion.

    Prosecutors contended today that the “funds Merrill asks the Court to release, however, are investor funds — money victims gave to TelexFree during the course of the alleged fraud.”

    The funds were seized via warrants on April 24. Thirty-seven TelexFree-related seizure warrants were applied for that day, after an undercover probe led by Homeland Security Investigations, an arm of the U.S. Department of Homeland Security. TelexFree had declared bankruptcy 11 days earlier. At least five of the seizure warrants were targeted at Merrill accounts holding more than $4.18 million, according to court filings.

    In cases involving assets alleged to be forfeitable, prosecutors typically argue that the assets should be preserved until a trial occurs and a verdict on the alleged underlying crime that led to the seizures is returned. If such assets are returned prior to trial, they will be dissipated and thus lost to victims in the event of a finding of guilt.

    Beyond that, prosecutors contended, Merrill is not automatically entitled to an evidentiary hearing on the release of the funds and has not made a threshold showing that he lacks access to other funds to pay for his defense.

    “[Merrill] fails to submit any evidence in support of his bald assertion that the United States cannot establish probable cause as to forfeitability of the seized assets, and such failure is fatal to his request for a hearing,” prosecutors argued to U.S. District Judge Timothy S. Hillman of the District of Massachusetts.

    Boston-based attorney Robert M. Goldstein is defending Merrill.

    “[T]he government cannot establish probable cause to believe that the assets in dispute are traceable or otherwise sufficiently related to the crime charged in the criminal complaint,” Goldstein argued on July 1.

    Prosecutors asserted today that probable cause to seize the funds already had been established and that Merrill was trying to get a “sneak preview” at the criminal case against him. Merrill currently faces a single charge of wire-fraud conspiracy brought via criminal complaint in May.

    A grand jury has been impaneled, which means that other criminal charges are possible. Some TelexFree members have alleged that the company was a racketeering enterprise.

    Merrill’s co-defendant in the existing criminal case charging wire-fraud conspiracy is alleged TelexFree co-owner Carlos Wanzeler, described by prosecutors as  an international fugitive who first ducked out of the United States through Canada on April 15 and ultimately fled to Brazil.  April 15 was the date of a federal raid on TelexFree’s office in Marlborough, Mass.

    Prosecutors from the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts are handling the criminal cases against Merrill and Wanzeler.

    NOTE: Our thanks to the ASD Updates Blog.

  • BULLETIN: Merrill May Be Turning Against Wanzeler

    James Merrill. Source: YouTube
    James Merrill. Source: YouTube

    BULLETIN: (5th Update 10:06 p.m. EDT U.S.A.) A defense filing by alleged TelexFree co-owner James Merrill may signal a serious divide between Merrill and Carlos Wanzeler, now described by the United States as an international fugitive.

    At the same time, new defense filings by Merrill say arguments made in bankruptcy court that suggest TelexFree could restore its business in a new form should be considered at a hearing to free Merrill on bail.

    Merrill, 53, of Ashland, Mass., has been detained since his May 9 arrest on charges of wire-fraud conspiracy.

    “Indeed, unlike his co-defendant in this case, Mr. Merrill did not attempt to flee or avoid this prosecution, despite clear notice and knowledge of the government’s ongoing criminal investigation,” a lawyer for Merrill said in court filings today.

    Government filings have said Wanzeler, 45, of Northborough, Mass., ducked into Canada under cover of darkness on April 15, and flew to Brazil two days later. Like Merrill, Wanzeler was charged criminally with wire-fraud conspiracy on May 9.

    Wanzeler allegedly fled into Canada on the same day TelexFree’s headquarters in Marlborough, Mass., were raided. Two days later — on April 17 — he allegedly boarded a plane in Toronto bound for Brazil.

    From the defense filing (italics/bolding/carriage returns added):

    On May 9, 2014, more than three weeks after execution of the search warrants, the government filed a criminal complaint and arrested Mr. Merrill. He was still here, in Massachusetts, driving his car on Route 9 at the time of his arrest. At no time during the intervening three weeks did Jim Merrill ever attempt or consider fleeing the jurisdiction. Instead, he was in the process of preparing to lawfully defend himself, fully confident in the legal process.

    The fact that his co-defendant chose to leave the United States on April 15, 2014, or that Mr. Merrill allegedly spoke to Mr. Wanzeler on that date, facts relied upon extensively by the government at the original bail hearing . . . do not remotely support detention in this case. To the contrary, given the inference the government apparently seeks to draw from the telephone records (i.e., that Mr. Merrill spoke to Mr. Wanzeler on April 15, 2014, and was therefore aware he was leaving the country), the logical conclusion to draw from the government’s suggested inference is that Mr. Merrill deliberately chose to remain in the United States.

    In any event, whether they spoke that date or not, and whatever they discussed, the fact of the matter is that Mr. Merrill had the same opportunity as Mr. Wanzeler to leave the country, but he did not do so, with full knowledge he was the subject of a criminal investigation, and fully cognizant that the government believed (rightfully or wrongly) that the company was a massive pyramid scheme . . .

    Through his attorney Robert M. Goldstein, Merrill also is arguing that certain claims made in U.S. Bankruptcy Court by interim TelexFree CEO Stuart MacMillan and turnaround specialist William Runge should be considered in a bail application by Merrill.

    “Indeed,” Goldstein argued, “Stuart MacMillan, a person with over 25 years of management experience who was hired to serve as Interim Chief Executive of TelexFree in February 2014 . . . has averred under oath his belief ‘that through a revamped model [TelexFree] will be able to leverage their uniquely situated product to provide valuable and dependable services to their customers while ensuring that their operations are profitable.’”

    And, Goldstein noted, Runge has contended that TelexFree participants used approximately 11 million minutes of VoIP service in February 2014.

    MacMillan was hired by Merrill and Wanzeler on April 13, and also caused Merrill’s resignation and the firing of Wanzeler on April 17, according to bankruptcy court records.

    With respect to bail, Goldstein argued, friends and family of Merrill would agree to post real estate as security for his appearance at trial and Merrill himself would agree to house arrest and electronic monitoring.

    Today’s defense motion also signals that Merrill may introduce a “reliance of counsel” defense, specifically the counsel of MLM attorney Gerald Nehra.

    Some TelexFree members have painted Nehra as a racketeer who helped fraud schemes such as TelexFree and Zeek Rewards thrive. Zeek, the SEC said in 2012, was a Ponzi- and pyramid scheme that had gathered hundreds of millions of dollars.

    Nehra also was an expert witness for AdSurfDaily in 2008, asserting that ASD was not a Ponzi scheme. In 2012, ASD President Andy Bowdoin pleaded guilty to wire fraud and admitted ASD was a Ponzi scheme that had never operated lawfully from its inception in 2006.

    Merrill’s latest motion to be freed on bail coincidentally occurred on the same day the U.S. Court of Appeals for the 9th Circuit agreed with both a lower court and the FTC that the BurnLounge MLM “program” was a pyramid scheme — despite the fact that a certain percentage of retail sales could have occurred.

    In a lawsuit against TelexFree by the SEC, the agency contended that members could make money through TelexFree without selling anything at all because of an attached passive investment scheme in which members were told they were getting paid for posting ads online about TelexFree. The investment program was known as “AdCentral” and was a sham to mask the pyramid scheme, the SEC alleges.

    Among other things, the SEC contends that credit-card and banking transactions “indicate that, from August 2012 to March 2014, TelexFree received slightly more than $1.3 million from the retail sale of approximately 26,300 monthly VoIP contracts. During the same period, TelexFree received more than $340 million from hundreds of thousands of investors who purchased AdCentral or AdCentral Family contracts. Through the sale of those one-year contracts, TelexFree effectively promised to pay more than $1.1 billion to the investors who posted the required ads.”

    Goldstein argued today that retail sales of TelexFree’s VOIP product may be much higher than the government believes.

    “Most critically,” Goldstein argued, “significant doubt exists regarding the accuracy of the government’s main contention—i.e., that TelexFree sales of its VoIP product amounted to approximately 1% of total revenue, and the company therefore constitutes an unlawful pyramid scheme. In fact, the company’s revenue from the sales of its VoIP product may have amounted to more than two hundred million dollars ($200,000,000.00), a sales-to-revenue ratio in line with accepted industry practice and certainly well beyond the 1% figure the government has stressed to the Court.”

    NOTE: Our thanks to the ASD Updates Blog.