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Tag: SEC

  • PAT KILEY: ‘There Seems To Be Some Distortions’ In SEC Recordings Of Radio Show; Meanwhile, Accused Schemer Says Trevor Cook ‘Acted Like Pontius Pilate’

    Trevor Cook (pictured) employed a "sick" web designer who declared himself "Trevor's bitch," according to former radio host Pat Kiley. Kiley says he also employed the designer, but fired him after determining he had a high "sleaze factor." Kiley compared Cook to Pontius Pilate.

    In pro se court filings, accused Minnesota schemer Pat Kiley says recordings of his radio show presented on CD for his examination and verification by the SEC in the civil case against him are unreliable. Meanwhile, Kiley described his civil co-defendant Trevor Cook as acting “like Pontius Pilate,” the Roman prefect many Christians believe authorized the crucifixion of Jesus.

    Kiley, 72, was accused by the SEC in 2009 of hawking the scam on his radio show, “Follow The Money.” The same phrase became part of the American lexicon during the Watergate-era administration of President Richard Nixon, when it was uttered by “Deep Throat,” a then-unidentified source used by Washington Post reporter Bob Woodward. The Watergate scandal also featured recordings — and those recordings led to Nixon’s downfall.

    The SEC recordings of his radio show are not fair and accurate, Kiley advised a federal judge, because of dozens of “distortions” in the recordings.

    “There seems to be some distortions,” Kiley said repeatedly, referring to recordings of his radio programs in January, February, March, April, May and June of 2009.

    And because of those distortions, which occurred at various times in the recordings, “Kiley denies that the file . . . is fair and accurate,” Kiley said.

    Cook, who was charged criminally, is serving a 25-year sentence in federal prison. Both Cook and Kiley were sued by the SEC and CFTC, and the civil portion of the case has taken a turn toward the bizarre.

    On May 19, Kiley asked a federal judge to sanction a CFTC attorney $1,000 and make the penalty payable to Kiley. Kiley asserts the CFTC lawyer filed an “offensive” pleading.

    Yesterday, in filings in the SEC case, Kiley raised the issues of the purported distortions in the recordings and compared Cook to Pilate. The Pilate comparison occurred after the SEC asked Kiley to admit he was responsible for the content of the PatKiley.com website.

    “Kiley denies any responsibility for the content of the website at www.patkiley.com,” he advised the judge. “Kiley not only had to contend with Cook’s control of the website but also had to contend with another of Cook’s ‘cast of characters’ . . . ”

    A member of that cast was a web designer, Kiley said.

    Kiley said he had hired the designer, but fired him “after about a month or so” because of his high “sleaze factor.”

    Kiley did not say precisely how he calculated sleaze factors when making personnel decisions. But he claimed that he “caught” the designer saying things to prospective clients that “were not accurate” and causing problems on the website.

    After Kiley fired the designer for his purportedly high sleaze factor, the designer went to work for Cook, Kiley claimed.

    Kiley further became alienated with the designer after the designer described himself as “Trevor’s bitch,” Kiley claimed.

    The “bitch” remark, Kiley said, “was a very ‘sick’ comment for any human being to make about themselves.”

    “By this time Kiley was totally fed up with the website because it had become nothing more than a ‘literary bordello,’” Kiley informed the judge.

    Kiley concluded his answer to the SEC by giving it advice on how to conduct itself in court.

    “Kiley is wondering if the SEC uses ‘confusion’ as a strategy and if so, then Kiley recommends that they change direction,” he said in yesterday’s filing.

  • ‘Offensive’ Claim Prompts Accused Schemer Pat Kiley To Ask Judge To Sanction Government Attorney And Award Cash To, Well . . . Pat Kiley

    The civil litigation in the $194 million Trevor Cook Ponzi and Forex caper has taken a strange turn.

    Former radio host Pat Kiley, a Cook co-defendant in civil cases brought by the SEC and CFTC, has filed a pro se pleading asking Chief U.S. District Judge Michael J. Davis to order David Slovick, an attorney for the CFTC, to pay Kiley $1,000 for making Kiley respond to an “offensive” government motion to strike his answer to the CFTC’s complaint.

    Kiley has denied wrongdoing.

    But the government, according to Kiley, is trying “to ‘get Pat Kiley’ at all costs.” Kiley was sued in 2009 by both the SEC and the CFTC.

    Kiley contends Slovick filed an “un-researched and frivolous pleading” filled with “wild and silly allegations” that Kiley was manipulating the legal system.

    Davis should impose a penalty of $1,000 against Slovick and arrange for the money “to be paid to Pat Kiley,” Kiley advised the judge.

    Nonsense, the CFTC said.

    And the agency further claimed that Kiley was not really a pro se litigant — and thus should be held to a higher pleading standard — because a professional attorney was helping Kiley and not signing the pleadings.

    Attorney H. Nasif Mahmoud of Illinois and Gary, Ind., is assisting Kiley, the CFTC said.

    Mahmoud has not filed a required appearance notice on Kiley’s behalf, according to the CFTC.

    In court filings, the CFTC quoted a May 10 email from Mahmoud to the agency.

    “What I do in my private time to assist an innocent man whom you have falsely accused of wrong doing is my business,” the email read in part.

    The CFTC engaged in “illegal” conduct when it suggested Mahmoud was acquired to file an appearance notice, according to the email.

    Screen shot of part of CFTC's "Exhibit A," an email attributed to attorney H. Nasif Mahmoud. The agency claims that Pat Kiley is benefiting from a liberal pleading standard by purporting to be pro se litigant. Kiley, though, is receiving assistance from Mahmoud, who is not signing the pleadings, according to the CFTC. In this section of the CFTC exhibit, Mahmoud asserts that the CFTC is engaging in illegal conduct and that what he does to assist Kiley is his own business. The CFTC "can not prevent that," according to the email attributed to Mahmoud. (NOTE: PP Blog masked the email address.)

  • KABOOM! CFTC/FTC Cases Against American Precious Metals LLC Were Part Of Broader Effort By New Task Force Operating In South Florida; Feds, State Throw Down Gauntlet Against Scammers

    Kaboom! It turns out that the cases announced this week against American Precious Metals LLC (APM)  by the CFTC and FTC were part of a geographically localized law-enforcement initiative that sprouted from “Operation Broken Trust,” a major national initiative undertaken last year by the U.S. Department of Justice and partner agencies as part of the interagency Financial Fraud Enforcement Task Force.

    The localized initiative that led to both the CFTC and FTC bringing actions against APM is known as the South Florida Securities and Investment Fraud Initiative. It was created in December 2010 by U.S. Attorney Wifredo Ferrer, the top federal prosecutor in the Miami region.

    The CFTC accused APM of running a precious-metals scam. Meanwhile, the FTC opened up a second legal front by charging the company with operating a telemarketing fraud scheme from a boiler room. The effect of the approach is that APM, which both agencies accused of running frauds that had gathered tens of millions of dollars, now has to square off against litigation coming from two different directions.

    Ferrer has warned for months that white-collar fraudsters operating in the region had no safe haven either onshore or offshore.

    In addition to Ferrer’s office, the CFTC and FTC, members of the South Florida Task Force include the FBI, the IRS, the U.S. Secret Service, the U.S. Postal Inspection Service, the SEC, the FDIC, the Florida Office of Financial Regulation and ICE Homeland Investigations.

    ICE is a division of the U.S. Department of Homeland Security.

    “Investors lose billions of dollars annually to fraudulent schemes,” Ferrer said in December, when introducing the new task force. “Some victims — the luckier ones — lose only thousands of dollars. Others lose their entire lives’ savings. While the victims of fraud are financially ruined, the fraudsters live a life of luxury. Together with our law enforcement and regulatory partners, we hope to help put an end to this type of fraud.”

  • UPDATE: Renee Marie Brown, Sued By SEC Last Year In Mysterious ‘Fund X’ Scam, Now Faces Criminal Charges Of Securities Fraud, Wire Fraud And Money Laundering

    Renee Marie Brown, the Minnesota woman accused by the SEC last year of orchestrating a bizarre fraud known as “Fund X,” has been indicted on criminal charges of securities fraud, wire fraud and money laundering.

    Brown, 47, of Golden Valley, presided over a company known as Investors Income Fund X LLC, which the SEC described as a “sham” bond fund that promised investors annual returns of 8 percent or 9 percent.

    Federal prosecutors now say that Brown lied to investors when she told them she had put $200,000 of her own money into the purported fund.

    “Fund X never was a bond fund, and Brown never invested any of her own money in Fund X,” prosecutors said. “Moreover, Brown allegedly used more than $500,000 of the investors’ funds for her personal use, including the purchase of a condominium and the payment of credit card bills. Allegedly, the ‘returns’ distributed to investors merely were transfers from Fund X investors’ funds, not legitimate returns from investments.”

    Money-laundering came into play because Brown transferred $85,000 in fraud proceeds into the account “of another one of her companies,” prosecutors said.

    And securities fraud and wire fraud occurred because she fraudulently induced investors to give her money and electronically communicated with financial institutions and her marks, prosecutors said.

    Brown potentially faces decades in prison if convicted of all counts in the indictment. The case was brought by elements of the Financial Fraud Enforcement Task Force created by President Obama in November 2009.

    Minnesota has been home to a number of massive fraud capers in recent years. Brown’s assets were frozen on the very same day in 2010 that Ponzi schemer Tom Petters was sentenced to 50 years in federal prison.

  • UPDATE: Thanh-Viet ‘Jeremy’ Cao’s 30-Year Ponzi Sentence One Of Longest In Southern California History; Feds Say He Told Story About A ‘Chopped Up’ Infant And Threatened Victims With ‘Extreme Violence’

    Thanh-Viet “Jeremy” Cao, the California Ponzi schemer later accused in Nevada of filing fraudulent liens for enormous sums against public officials and identified by the Anti-Defamation League as a “sovereign citizen,” once threatened to torture and kill his business partner and the partner’s wife and family, federal prosecutors said.

    To keep victims in a state of terror, Cao said he knew people who previously had “chopped up” a baby in front of the baby’s parents, and then killed the baby’s mother,” prosecutors said.

    Those threats led to an extortion and firearms case brought by the state of California.

    And Cao dialed up the terror by referencing an “assassination” and “fatal car accident.” When he was arrested, “he possessed a loaded firearm, and body armor and other firearms were found at his residence,” prosecutors said.

    Cao, who was convicted in the state-level extortion case in 2009, was convicted Monday in the federal Ponzi case, which was brought after an investigation by the U.S. Secret Service. He was sentenced by U.S. District Judge Larry A. Burns to 30 years in prison and ordered to pay victims $12.4 million in restitution. He is scheduled to stand trial in the false-liens case later this year.

    Victims in the liens case included four federal judges, staff members of the U.S. Attorney’s Office for the Southern District of California and employees of the SEC, the Secret Service and the IRS, federal prosecutors in Nevada said year.

    The IRS Criminal Investigations unit brought the Nevada case, prosecutors said.

    Cao filed at least 22 fraudulent liens for astronomical sums, according to records. He turned to filing bogus financial claims after law enforcement, acting with the authority of a court order in the California Ponzi case, seized a $200,000 Bentley Cao had acquired with investor funds and sought to equip with armor.

    “Cao is a financial predator who will stop at nothing to cheat his victims out of their life savings,” said U.S. Attorney Laura E. Duffy of the Southern District of California.

    “He continues to show no remorse for his actions, which destroyed the finances of many innocent and hardworking people,” Duffy said. “When law enforcement and the federal judiciary stepped in to stop this fraud, Cao retaliated by trying to ruin their finances through the filing of false liens. The sentence in this [Ponzi] case demonstrates how dangerous predators like Cao can be.”

    A veteran Secret Service agent said bids to injure victims and the U.S. financial system would not be tolerated.

    “The U.S. Secret Service has more than 140 years of experience in investigating criminals like Cao, who target the stability of this country’s financial systems and prey on innocent victims,” said Gregory J. Meyer, special agent in charge.

    Cao faces a maximum sentence of 223 years if convicted of all counts in the false-liens case. He was indicted by a federal grand jury in Las Vegas in July 2010.

    As part of his liens fraud, Cao developed a “hit list” in which he promised to obtain certain personal information of government offcials “so he could ruin them financially,” prosecutors said.

    He also filed for bogus tax refunds, according to records.

    Cao’s purported business career was one marked by “cheating” that got him fired from his job for “fraud and misconduct,” prosecutors said, describing him as a “career criminal.”

    “When victims asked Cao what happened to their investments, Cao taunted them with profanity,” prosecutors said. “Cao’s victims lost their life savings, retirement funds, and their homes.”

    About 190 victims were affected in the Ponzi scheme, prosecutors said, describing his 30-year sentence as one of the longest in a white-collar case in the history of Southern California.

  • As Promos On Ponzi Forums Continue And Members Claim IRS Recognition, Club Asteria Acknowledges That Its Members Used PayPal ‘To Cheat Fellow Members’; Says Fraudsters Were Turned Over To Unidentified ‘Authorities’; Existing Members Of Virginia-Based Firm Told To Use Offshore Processors

    This May 1 promo for Club Asteria describes its as an "investment company" and instructs prospects that "you will not again anything unless you invest." The promo advertises returns of up to 7 percent a week. "I am happy because even if I am not doing anything I still manage to earn from it," the promo claims.

    In June 2010, the U.S. Department of Justice used its Blog to warn about the emerging threat of “mass marketing fraud,” specifically citing the criminal allegations of a $70 million Ponzi fraud against Nicholas Smirnow of Pathway To Prosperity (P2P).

    P2P was promoted on the TalkGold and MoneyMakerGroup Ponzi forums.

    A little over a month later, in July 2010,  the Financial Industry Regulatory Authority (FINRA) described the HYIP sphere as a “bizarre substratum of the Internet” and issued a fraud alert. FINRA also referenced the P2P case. At the same time, it pointed to the collapsed Genius Funds Ponzi, believed to have consumed $400 million.

    Genius Funds also was promoted on TalkGold and MoneyMakerGroup.

    In December 2010, the interagency Financial Fraud Enforcement Task Force led by U.S. Attorney General Eric Holder specifically warned the public to be wary of social-networking sites and chat forums. The warning was part of “Operation Broken Trust,” a law-enforcement initiative in which investigators described more than $10 billion in losses from recent fraud cases.

    One of the cases described was the SEC’s action against Imperia Invest IBC, a murky offshore business accused of stealing millions of dollars from the deaf.

    Imperia Invest also was promoted on TalkGold and MoneyMakerGroup.

    Last week, promoters of a Virginia-based company known as Club Asteria (CA) announced on the Ponzi boards that PayPal had frozen CA’s funds and blocked its access to the PayPal system. Although CA has been presented as a wholesome “opportunity” recognized by the Internal Revenue Service as a nonprofit organization (see graphic below), the CA promoter who announced the PayPal news last week on MoneyMakerGroup simultaneously was promoting two “programs” that purportedly pay 60 percent a month.

    Some CA promoters claim CA pays 520 percent a year. Even jailed Ponzi schemer Bernard Madoff would blush at such advertised rates of return.

    MoneyMakerGroup is referenced in federal court filings as a place from which Ponzi schemes are promoted. So is TalkGold, another well-known forum in the HYIP world.

    This morning — also on the MoneyMakerGroup — a different CA promoter announced that CA’s Andrea Lucas had responded to last week’s PayPal news. Even as the CA member was announcing on a known Ponzi scheme and criminals’ forum that Lucas had issued a statement on the PayPal matter, he simultaneously was promoting two HYIPs and something called One Dollar Riches.

    “OneDollarRiches allows you to parlay a small investment of just one dollar into a constant stream of cash, day in and day out!” according to its ad. “You can make 100 times your investment in just a few days by following our simple step by step instructions.”

    The mere presence of CA promotions on the Ponzi boards leads to questions about whether the firm’s receipts are polluted by Ponzi proceeds. Paying members from such proceeds would put CA members in possession of tainted money — and banks into which they deposited those proceeds also would be in possession of tainted money.

    Lucas, according to the CA website, now has publicly acknowledged last week’s actions by PayPal. Details, though, were spartan. CA did not say how much money PayPal had frozen. Meanwhile, the firm instructed members to fund their accounts by using offshore processors.

    At the same time, CA urged members not to spread bad news about the company on forums. Members who shared negative information were subject to having their CA accounts revoked, according to the company.

    “Members shall not publically (sic) disparage, demean or attack Club Asteria, its members, services or charitable activities,” CA remarks attributed to Lucas on the CA website read. The remarks were dated May 16 and appeared in the “News” section of the site.

    In the same announcement, Lucas acknowledged that a “small group” of CA members “used their PayPal accounts to cheat fellow members.”

    The company claimed it had turned the members “over to the authorities,” but did not identify the authorities or say whether they were based in the United States or elsewhere.

    CA, which said PayPal was “acting with integrity,” then counseled its members to rely on offshore processors.

    “First, if you have been paying for your membership through PayPal, please discontinue your subscription with PayPal immediately and start using one of the other approved payment processors AlertPay, Towah or CashX to ensure that your membership stays current,” the remarks attributed to Lucas read.

    “Second, Do NOT use online forums, websites or social networks to lodge blame or complaints about PayPal or your Club Asteria team,” the remarks continued. “There is no benefit or purpose in this, and it only serves to create discord and spread rumors. Not only that, doing so is a direct violation of Code of Ethics & Conduct, Rule 8 and can result in immediate revocation of your membership.”

    CA’s bizarre announcement occurred against the backdrop of thousands of bizarre promos for the firm that appear online. Some promos claim $20 spent with CA monthly turns into a lifetime income of $1,600 a month. Others claim CA is a “passive” investment opportunity, which raises questions about whether CA — whose members claim the program typically pays out about 3 percent to 4 percent a week or up to 208 percent a year — is selling unregistered securities as investment contracts.

    Lucas has been referred to in promos as a former “chairman” and “vice president” of the World Bank. Several promos have described her as a Christian “saint.”

    CA’s claims that only a “small group” of members is causing problems may be dubious. Wild claims have been made in promo after promo for the firm, which says it is not in the investment business.

    This promo for CA contains a link that resolves to an active CA affiliate site. The affiliate site has a low affiliate ID number, suggesting the affiliate was one of CA's earliest members. The promo claims CA is a 501 (c)(3) nonprofit organization recognized by the IRS.

  • BULLETIN: FLORIDA — AGAIN (VIA NEW YORK): SEC Says Men Gathered $8 Million Through Lure Of Nonexistent IPO And ‘Contracts’ With Famous Companies; Angelo Cuomo And Recidivist George Garcy Of E-Z Media Inc. Charged With Securities Fraud

    BULLETIN: A recidivist securities offender in Florida and his business partner in New York have been charged by the SEC with fraud in a case that alleges they pumped an IPO that never happened.

    Charged in the civil case were George Garcy, 54, of Aventura, Fla., and Angelo Cuomo, 62, of Staten Island, N.Y. Garcy also is known as Jorge Garcia, and was charged by the SEC in 1997 with improperly selling stock, the SEC said.

    Today’s case was brought in federal court in the Eastern District of New York. It involved an offering fraud for a company known as E-Z Media Inc., the SEC said.

    “Garcy and Cuomo conducted an offering fraud that was rife with false statements and omissions to entice unsuspecting investors,” said George S. Canellos, director of the SEC’s New York Regional Office. “Instead of using the offering proceeds to develop their business, Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”

    Both Garcy and Cuomo failed to tell investors of E-Z Media Inc. about Garcy’s previous encounter with regulators when he was a California resident, the SEC charged.

    As part of the newly detected fraud, E-Z Media investors were told the firm had “contracts” with Heineken, Anheuser Busch and Aramark Corp. for its beverage and -food carrier product, but no contracts existed, the SEC said.

    Investors also were lured by the promise of a profitable IPO, but E-Z Media “never took even the basic steps to prepare” for an IPO, the agency said.

    The scheme attracted “at least” 200 investors and gathered about $8 million between April 2003 and March 2009, the SEC charged.

    Garcy and Cuomo diverted about half of the scheme proceeds to themselves and family members, the agency charged.

    A carrier patent E-Z Media purportedly held also was used to lure investors, but the patent was contingent upon a $14.5 million payment to Cuomo and may not have been valid to begin with because “Cuomo had previously transferred his ownership rights” to his sister, the agency charged.

    Cuomo’s sister,  Judith Guido, 55,  received at least $1.7 million from the scheme, the SEC said. She has been named a relief defendant, as have two sons of Cuomo: Ralph Cuomo, 37, and Vincent Cuomo, 31.

    The Cuomo brothers received a combined total of at least $240,500 from the scheme, the SEC said.

    Also named a relief defendant was attorney Joseph Lively, 55, of Farmingdale, N.Y. Lively received at least $120,000, the SEC said.

    The SEC described the payments to the relief defendants as ill-gotten gains, saying none of the relief defendants had any legitimate claim to the money.

     

  • URGENT >> BULLETIN >> MOVING: Raj Rajaratnam Guilty In Insider-Trading Case; Sentence Potentially Could Exceed Madoff’s 150 Years

    BULLETIN: Raj Rajaratnam has been found guilty of all 14 counts of conspiracy and securities fraud filed against him in the Galleon Group insider-trading case.

    The verdict came on the 12th day of jury deliberations. It deals a devastating blow to Rajaratnam, but is a major win for prosecutors. The case was brought by the office of U.S. Attorney Preet Bharara of the Southern District of New York.

    Rajaratnam, 53, once was listed by Forbes magazine as one of the wealthiest men in the United States. Prosecutors said that crime ultimately became his business model. Wiretaps and recordings were used to convict him.

    The Justice Department has said it recent months that tools traditionally used in organized-crime investigation have been helpful in exposing white-collar fraud.

    “Raj Rajaratnam, once a high-flying billionaire and hedge fund manager, is now a convicted felon, 14 times over,” Bharara said. “Rajaratnam was among the best and the brightest — one of the most educated, successful and privileged professionals in the country. Yet, like so many others recently, he let greed and corruption cause his undoing. The message today is clear — there are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have.”

    Insider trading “cheats the ordinary investor, victimizes the companies whose information is stolen, and is an affront not only to the fairness of the market, but the rule of law,” Bharara said.

    Rajaratnam traded illegally in the stock of Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom and PeopleSupport, prosecutors said, describing the case as the “largest hedge fund insider trading scheme in history.”

    He potentially faces up to 205 years in federal prison. Sentencing is scheduled for July 29. Prosecutors said he gained nearly $64 million by trading on material, nonpublic information culled from fellow cheaters.

    Rajaratnam remains free pending sentencing. He has been placed on electronic monitoring.

    The SEC provided “extraordinary assistance,” Bharara said. The FBI led the criminal probe and also received praise from Bharara.

  • ‘SURF/HYIP HELPERS BEWARE: Woman Who Helped Tennessee Ponzi Schemer Cover Up Fraud Sentenced To 6 Years In Federal Prison; Donna Jones’ Role In $12.3 Million Caper Outlined By Jailed Boss In Court After Investigators ‘Follow The Paper Trail’

    EDITOR’S NOTE: Although Donna Jones did not run an autosurf or online HYIP fraud, the case against her is instructive. Indeed, prosecutors said, Jones was an insider who was aware of the Ponzi scheme being conducted by her boss, Michael J. Park. And Jones took an active role in the scheme, encouraging customers to invest, hustling cash even as the scheme was unraveling, creating bogus “spreadsheets” and fabricating information given to investors.

    It is common for autosurf and HYIP insiders to solicit funds for fraud schemes, use spreadsheets with bogus or illusory information to reel in and (later) lull prospects, siphon investor funds and simply lie to maintain their ability to keep drinking from a criminal well.

    At least seven federal, state and local agencies became part of an intense probe to reverse-engineer the Park scheme. In the end, Park himself testified against his former employee.

    UPDATED 9:58 A.M. EDT (U.S.A.) A woman employed by a Tennessee Ponzi schemer added $19,000 in new clothes to her wardrobe, withdrew $225,000 in cash and spent more than $300,000 on home renovations, federal prosecutors said.

    Now, Donna Jones has been sentenced to 72 months in federal prison. Jones, 37, of Dickson, Tenn., also was ordered to pay nearly $8.2 million in restitution to victims.

    Jones was the office manager of Park Capital Management Group (PCMG), a Brentwood, Tenn.-based business operated by Michael J. Park. Park, who is serving a 96-month prison sentence, testified about Jones’ knowledge of the scheme at her sentencing hearing, prosecutors said.

    Federal, state and local law-enforcement agencies worked together to expose the fraud, prosecutors said.

    Among the agencies working the criminal probe were the U.S. Attorney’s Office, the FBI, the U.S. Postal Inspection Service, the IRS, the Tennessee Bureau of Investigation and the Brentwood (Tenn.) Police Department. The SEC sued Park in a civil case.

    “Jones repeatedly encouraged people to invest by falsely promising security, growth and inflated returns on their money, but instead the investors lost their savings as part of an elaborate Ponzi scheme,” said U.S. Attorney Jerry E. Martin of the Middle District of Tennessee.

    Park advised U.S. District Judge Aleta Trauger that Jones used a “spreadsheet” to keep track of “fictitious” PCMG accounts and that he and Jones “pooled” investor funds and used them as “their own personal bank account,” prosecutors said.

    “This case further demonstrates how effectively IRS Criminal Investigation agents work jointly with our federal and state law enforcement partners in investigating complex financial crimes,” said Darryl Williams, acting special agent in charge of the IRS Criminal Investigation unit in Nashville.

    “IRS Criminal Investigation agents were able to use their expertise to conduct a complex financial investigation, follow the paper trail, and unravel violations of federal law,” Williams said.

    It also was Jones’ idea to use the seal of the Securities Investor Protection Corp. (SIPC) to create the illusion that investing with PCMG was safe, according to Park’s testimony.

    But “PCMG was not a member of the SIPC, and the SIPC provided no protection for PCMG investors,” prosecutors said.

    Jones, who also was accused of concealing the scheme by fabricating documents and soliciting funds to cover shortfalls, pleaded guilty to mail fraud and money-laundering in January.

    Among the documents were IRS 1099 forms, but “none of the funds listed in PCMG investment accounts were ever invested,” according to Park’s testimony.

    It is common in the autosurf and HYIP spheres for purveyors to claim an “opportunity” is legitimate because the company gathers tax information and sends 1099 forms.

    Park also was the subject of a 2008 complaint filed by the SEC, bringing the number of state and federal agencies involved in PCMG-related litigation to at least seven.

    “Park used investor funds, among other things, to help purchase a $1 7 million home, pay for expensive golf memberships, to purchase a Porsche automobile and to purchase a Mercedes Benz sedan worth more than $90,000,” the SEC said in September 2008.

  • BULLETIN: John Bravata, Figure In Alleged ‘Billionaire Boys Club’ Ponzi Scheme In Michigan, Arrested At JFK Airport After Return From Italy

    BULLETIN: John Bravata, who was sued by the SEC in July 2009 in a Ponzi Scheme case that became known as the “Billionaire Boys Club” case, has been arrested at JFK International Airport in New York, the FBI said.

    Bravata was arrested on an inbound flight from Italy, prosecutors said.  He is charged with wire fraud.

    The Bravata civil case has been marked by oddities, including the November 2009 indictment of his defense attorney on charges he was running his own fraud scheme. The attorney, Gregory Bartko, was convicted last year.

    Separately, Bravata was accused in 2009 by the SEC of violating the asset freeze in the civil Ponzi case by taking loans against life-insurance policies. Judge David M. Lawson ordered Bravata to repay the money.

    Now Bravata has been charged criminally. He will be prosecuted in the Eastern District of Michigan.

    From 2006 through 2009, the FBI said, “Bravata knowingly participated in a scheme to defraud investors. Bravata and those working on his behalf made multiple misrepresentations to numerous prospective investors, including misrepresentations regarding how their investment funds would be utilized, the security of funds invested with BBC, and the returns that could be expected by investors of BBC.

    “Bravata also misled investors by telling them that managers of BBC would not earn money unless BBC was profitable,” the FBI said. “He also represented that the managers of BBC did not take fees, commissions, or a salary. In reality, Bravata and others received lucrative compensation from BBC and related entities despite that fact that BBC was never profitable. Bravata also used investor funds to pay for the construction of his roughly 18,000 square foot personal home and to pay for other personal expenses.”

    A California Ponzi scheme in the 1980s also was known as “The Billionaire Boys Club.”

    Bravata’s company is known as BBC Equities LLC.

  • RECEIVER: ‘Insiders And Related Parties’ Of Commodities Online Took Out Twice What They Put In; Shuttered Florida Firm Had Office With ‘Boiler Room’; Winners Received ‘Fraudulent Transfers’

    James Clark Howard III: At the center of three Florida fraud investigations. (Photo source: Boca Raton Police Department,)

    The court-appointed receiver unraveling the affairs of a Florida firm accused by the SEC of operating a $27 million commodities fraud and selling unregistered securities says the company had “insiders and related parties” who took out twice what they put in.

    Clawback actions are anticipated against unspecified “targets” because the money they received constituted “fraudulent transfers,” receiver David S. Mandel advised a federal judge.

    Meanwhile, Mandel says Commodities Online shared office space with a law firm. On the second floor of the shared space was a “boiler room” with 12 cubicles, phone lines and computers.

    At the same time, Mandel says an early analysis of records shows that the company had at least five bank accounts, including accounts at Bank of America, Fifth Third Bank, JP Morgan Chase, PNC Bank and Wachovia.

    The insiders at Commodities Online put more than $5.36 million into the firm between Jan. 1, 2010, and April 1, 2011, and took out more than $10.84 million, according to the early analysis.

    “[T]he Receiver was able to identify potential targets who received fraudulent transfers under §726.101 of the Florida Statutes,” Mandel said. “In the upcoming weeks, the Receiver intends to send letters to each of these targets demanding the disgorgement of profits and the recovery of fraudulent transfers.”

    Although the firm operated only for about 16 months and allegedly told investors they would “earn 5% or more per month without price speculation,” Mandel’s preliminary analysis suggests more than $885,000 was allocated for “salaries” and more than $523,000 was allocated for “Legal and Professional” fees.

    The firm was not registered with the SEC, according to court filings. Mandel said a forensic analysis continues and that records, including computer records, are being scoured for clues.

    “Existing email from the Defendants has been downloaded and is being searched for potential transfers of funds or other related activity that may yield additional assets to be acquired for the receivership estate,” Mandel said.

    And, he noted, there are “preliminary indications” that Commodities Online “may own a substantial quantity of iron ore located in Mexico,”  but that ownership has not been verified.

    “The Receiver has retained Mexican counsel to attempt to determine if the Defendants do, in fact, own the iron ore, and if so, to take whatever steps are required to safeguard the ore for later sale or liquidation, for the benefit of the receivership estate,” Mandel said.

    At least two persons associated with Commodities Online have criminal records for offenses ranging from “narcotics and firearms felonies” to bank fraud and “transmitting a threat to injure,” according to the SEC.

    Although the SEC did not identify the individuals, records show that Commodities Online figures James Clark Howard III and Louis Gallo were charged with the offenses. Implicated in a drugs and weapons case, Howard was sentenced to 57 months in federal prison in the 1990s.

    Gallo was implicated bank-fraud and threats cases, and was on supervised release while the firm operated.

    Howard is at the center of at least three financial storms in Florida, including the SEC case against Commodities Online. Separately, private litigants — including SSH2 Acquisitions, a company that listed former AdSurfDaily (ASD) member and Surf’s Up Mod Terralynn Hoy as a director — alleged last year that Howard was part of a separate Ponzi scheme that gathered at least $39 million.

    Florida authorities charged him criminally in 2010 in a fraud scheme that allegedly targeted the Haitian American community.

    ASD was implicated by the U.S. Secret Service in an alleged $110 million Ponzi scheme. Hoy has not been accused of wrongdoing.

    See earlier story.