NEWS: In the world of high finance, Tom Petters was Bernard Madoff before Bernard Madoff was Bernard Madoff — at least with respect to shocking headlines about Ponzi schemes.
Jury selection is under way in Minnesota in the Petters case. The allegations that Petters presided over a $3.65 billion Ponzi were unfathomable in September 2008. The allegations dwarfed the August 2008 assertions by the U.S. Secret Service that Florida pitchman Andy Bowdoin of AdSurfDaily Inc. had operated a then-unfathomable $100 million Ponzi scheme.
But with Madoff’s overnight ascent to the stratosphere of infamy in December 2008 amid allegations that he had operated a $50 billion Ponzi scheme, Petters faded from the headlines.
Bowdoin would have faded, too, except he could not stop doing things such as comparing the Secret Service and federal prosecutors to the 9/11 terrorists; taking the 5th Amendment at a hearing his company requested to present evidence that it was not a Ponzi scheme, even as his supporters agreed he was “too honest” to testify; announcing a $200 million deal with a penny-stock company few people ever had heard of (while the penny-stock firm continued its practice of not publishing verifiable financial information and Bowdoin was awaiting a ruling on whether unaudited financial information he had supplied the court was reliable enough to make the Ponzi allegations go away); trying to sell members of AdSurfDaily VOIP telephone service after the Ponzi ruling went against him; negotiating with federal prosecutors; submitting to the forfeiture less than a month after prosecutors filed a second forfeiture complaint that asserted his wife and family had benefited from the illegal actions of his company and that Bowdoin had not reported a purported theft of $1 million by “Russian” hackers to authorities; and trying to get back in the case about six weeks later by saying he’d changed his mind, fired his attorneys and now was relying on a mysterious “group” of amateur attorneys to help him do his legal bidding.
Not even Petters, who owned Polaroid and operated what prosecutors described as a multibillion-dollar Ponzi scheme involving a separate electronics company, could top Bowdoin in terms of relentless strangeness.
Petters, however, easily topped Bowdoin in terms of the size of the alleged Ponzi he operated. And now the Petters trial is set to begin. One of the expected defenses in the case is a Bowdoin-like assertion that his hands were clean.
NOTE: Sir Allen Stanford now is accused of running a Ponzi that was larger than even the alleged Petters’ Ponzi. Stanford’s alleged crimes also are dwarfed by the Madoff Ponzi.
Stanford was regarded as a sort of king of Caribbean banking, perhaps particularly on the island nation of Antigua.
Federal prosecutors say ASD’s Bowdoin told the Secret Service that the company had $1 million in an account under a different name on Antigua. The claim was strange, considering that Bowdoin had told members in 2007 that he could not pay them because his purported advertising company had become insolvent after it overpaid members and was looted by the previously mentioned “Russian” hackers.
The claim became Ãœber Strange in 2008, when Bowdoin asked a federal judge to free up $2 million from the tens of millions of dollars seized because ASD could not pay its hosting bill or rent or employees and had no money to implement a compliance plan — while apparently forgetting he had told the Secret Service about the $1 million on deposit in Antigua.
Some of Bowdoin’s friends and employees remained staunch allies, always willing to support the company, call the prosecutors Nazis, diss doubters and even work for free to demonstrate their loyalty to the boss.
An employee of Allen Stanford had a different idea about how to behave when a company’s words could not be reconciled with its actions.
Charles Satterfield, an investment adviser, couldn’t make sense of things in the months after he joined Stanford Financial Group in 2005 as managing director of fixed income.
Stanford stressed sales of its CD, regardless of the profiles of its customers. Old ladies were to be sold CDs. Young mothers were to be sold CDs. All people in between were to be sold CDs — at the virtual exclusion of all other financial products that perhaps were better suited for the unique situations of individual customers.
On a business trip? Sell the CD. Sitting down with Grandpa or Junior? Sell the CD.
When Satterfield asked his bosses to reduce their instructions to writing, he was fired the next day.
He told the Financial Industry Regulatory Authority (FINRA) in 2007 that some strange things were going on inside Stanford Financial Group. The company said no — that Satterfield had gotten it all wrong, that he was incompetent and disgruntled.
Satterfield was described as disloyal, incapable of recognizing that tremendous growth at companies causes problems and that the problems sort themselves out in the end.
The experience of Charles Satterfield at Stanford will sound like a familiar refrain to many people who have followed the AdSurfDaily saga and observed a pattern of dissing critics as though they were simpletons, marginalizing their voices and authoring ad hominem attacks — before ostracizing them completely and banning them to the hinterlands.
It was before Bernard Madoff and before Sir Allen Stanford. President Obama was candidate Obama. Sarah Palin, the little-known governor of Alaska, would not become part of the public consciousness for nearly another month. Few people had heard of the so-called “Arby’s Indians.” Fewer yet could instantly place Uruguay or Panama on a map or understand the acronym “RICO” without a quick trip to Wikipedia. No one had heard of AdViewGlobal, BizAdSplash or AdGateWorld. The 31st Annual Pilgrimage to Graceland to commemorate the life and passing of Elvis Presley would not begin officially until Aug. 9, another eight days.
Regardless, the term Ponzi scheme — which goes missing from the public consciousness for years at a time, despite the nonstop play it recently has received — started making a big comeback late in the afternoon of Aug. 1, 2008. For good measure and to sear the memory, nature treated part of the world to a total eclipse of the sun on Aug. 1. The small town of Quincy, Fla., was too far south to witness the spectacle — but Quincy soon would witness a spectacle of its very own.
Friday, August 1st 2008 afternoon update
Upon direction from the U.S. Attorney’s Office in the District of Columbia, ASD will not be able to move funds into company accounts, or out of them. We will work to resolve this problem, and return to normal operation, as soon as we are permitted to do so.
ASD Management.
Yes, ASD signed this life-altering message “ASD Management.” A company that claimed to be a professional advertising and communications firm — one whose promoters claimed had Fortune 500 clients and signed contracts from major advertisers for millions of dollars — lost the PR war with a single, vague posting.
It was only the first of many incongruities. Reporters who called later were told there was nothing to fear because God was on ASD’s side.
Quincy’s spectacle began on Aug. 5, the date agents showed up with search warrants for ASD’s headquarters and the home of ASD President Andy Bowdoin. WCTV was the first media outlet to report the news. Here is how we put it:
WCTV is reporting that agents are executing a search warrant at ASD Cash Generator headquarters in Quincy, Florida.
Details are sketchy. WCTV serves Tallahassee, Thomasville and Valdosta., and is a CBS affiliate.
Our first update came at 3:09 P.M. EDT (U.S.A.):
WCTV is reporting that the U.S. Secret Service and the Gadsden County Sheriff’s Department are conducting the raid at ASD Cash Generator. Agents reportedly are searching for documents and computers.
We obtained a copy of the forfeiture complaint later in the day. Here are the initial quotations and background we published from the complaint.
” . . . there is reasonable cause to believe that ASD, Thomas A. Bowdoin, Jr. and others, devised and intended to devise a scheme or artifice to defraud, or a scheme for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, and that he and they transmitted or cause to be transmitted by means of wire, communications in interstate or foreign commerce (including writings, signs, signals, pictures, or sounds), for the purpose of executing such scheme or artifice, to wit: an Internet-based Ponzi scheme, in violation of Title 18, United States Code, Section 1343 (Wire Fraud); and in violation of Title 18, United States Code, Section 371 (Conspiracy to Commit Wire Fraud),” the complaint read in part.
“Further, based on the information provided herein, there is reasonable cause to believe that the defendant properties constitute proceeds of the above-specified offenses or property involved in financial transactions, with wire fraud proceeds, that are prohibited by the federal anti-money laundering statutes.”
ASD sales materials positioned Bowdoin as an accomplished business person who once received a medal for business achievement from President Bush. Federal prosecutors, however, say Bowdoin received no such medal from Bush and that “successes are remarkably absent from his true work history.”
Bowdoin “was arrested in Alabama for one or more felony violations related to Fraud in Connection with the Offer and Sale of Securities by an Unregistered Agent,” prior to his involvement in ASD, prosecutors said.
In the Alabama case, prosecutors said, Bowdoin and co-defendants in a company known as Mobile International Inc. were charged with selling “unregistered securities to investors and with failing to state material facts to the investors that would have impacted the victims’ decisions to invest.
Alabama officials asserted Bowdoin “instigated a scheme by which he took money from some victims to pay off prior investors,” prosecutors said.
Charges were dismissed after Bowdoin agreed to enter Pre-Trial Diversion with three years’ supervised probation. He was ordered to pay $15,000 in restitution to victims. The case was settled in 1997.
Then, in 1999, Bowdoin plead guilty in Wilcox County to one count of selling unregistered securities. He was sentenced to a year in prison and three years’ supervised probation. The prison sentence was suspended, and Bowdoin was ordered to make restitution in the amount of $75,000.
U.S. Attorney Jeffrey A Taylor of the District of Columbia, the U.S. Secret Service, the Internal Revenue Service and other agencies are involved in the ASD probe, which also involves Golden Panda Ad Builder, another autosurf.
An IRS-Secret Service Task Force agent opened an A[SD] account as part of the investigation, according to the complaint. Agents also interviewed a number of ASD members as part of the investigation.
Here is how we followed up on Aug. 6:
Yesterday U.S. Attorney for the District of Columbia Jeffrey A Taylor filed a forfeiture complaint in a case involving Ad Surf Daily Inc., ASD Cash Generator, Thomas “Andy” Bowdoin, Golden Panda Ad Builder, Clarence Busby Jr. and Dawn Stowers.
Meanwhile, some ASD members appear to be acting in organized fashion to criticize the government. This has led some ASD critics to dismiss Bowdoin’s advocates as “Kool-Aid” drinkers. References to Bowdoin, Christianity and religion are common parts of the discussion across the Web.
Federal prosecutors and the U.S. Secret Service, which raided ASD’s Quincy, Florida, headquarters, are seeking $53 million held in various Bank of America accounts, a condominium in Myrtle Beach, S.C., and Bowdoin’s home in Quincy.
The Justice Department called ASD a “massive Internet-based wire fraud scheme,” alleging that ADSurfDaily Inc. was nothing more than a common Ponzi that used incoming money from new ASD members to sustain payouts to earlier members of the program.
Some ASD members appear to be going on the offense, attacking the government and flooding news sites, Blogs and forums with defenses for ASD and Bowdoin. Some of the messages have a fire-and-brimstone quality. The message in many cases is that ASD members have a Christian duty to back ASD and Bowdoin, who has a criminal record in Alabama for selling unregistered securities and bilking investors.
WCTV-TV, a CBS affiliate in Tallahassee, has been flooded by comments from ASD members. Many of the posts are defenses for Bowdoin. Some posters mentioned a medal Bowdoin allegedly received from the Bush administration for business achievement. Prosecutors said Bowdoin received no such award, even though the alleged award was cited in ASD advertising materials.
Other posters compared the government’s actions yesterday to the actions of Nazi Germany. Others suggested the government was involved in a conspiracy to defame Bowdoin and that overzealous prosecutors were trying to destroy private enterprise.
ASD members have contacted this Blog, saying it has a duty to investigate the Social Security program if it is going to report on ASD Cash Generator. The argument — directed at this Blog and at others — is that Social Security is a government-sanctioned Ponzi. It therefore follows that ASD should be let off the hook.
Elsewhere online there are reports of people who’d directed life savings and large sums of cash at ASD. One Blog poster and ASD member asked if anybody could point him in the direction of a bridge from which he could jump. The post appeared to be in jest, but it’s easy to believe that people who have thousands of dollars tied up in ASD are unnerved.
The Government Makes Its Case Against Bowdoin And Busby
Bowdoin once was sentenced to prison for his role in a securities scheme. The sentence was suspended after he agreed to three years’ supervised probation and to make restitution in the amount of $75,000, according to the Feds’ complaint.
Like Bowdoin, Golden Panda’s Busby also had a previous run-in with the law over securities issues.
In 1997, according to prosecutors, the “SEC successfully charged that Busby had violated anti-fraud provisions of the Securities laws by offering and selling investment contracts in connection with three different ‘prime bank’ schemes. Busby was accused of raising money for purported trading programs in ‘prime bank’ notes by fraudulently representing that investments were risk-free and the ventures would result in returns ranging from 750% to 10,000%. In total, Busby raised nearly $1 million from more than 70 investors.
“None of the investors earned the exorbitant returns promised by Busby,” prosecutors said in the forfeiture complaint. “Busby was ordered to pay $15,000 in disgorgement to victims; however, after Busby filed a financial statement to support a professed inability to pay, the court dismissed the order of payment. Busby filed for bankruptcy in 1997. This information was not disclosed on Golden Panda’s webpage or mentioned by Busby during his recent conference call.”
Although Bowdoin positioned ASD Cash Generator as an advertising program, the government said it was a smokescreen.
In July 2008, according to the forfeiture complaint, the Ad Cash Generator website stated that ([emphasis] added):
All payments made to ASD are considered advertising purchases, not investments or deposits of any kind. All sales are final. ASD does not guarantee any earnings or profits. Any commissions paid to Members are for the service of viewing other Member web sites and for referring Members to AdSurfDaily. All advertising purchases are non-refundable.
Prosecutors dismissed the disclaimer language, calling it “ASD’s effort to avoid being recognized as an unregistered issuer of securities and to avoid liability to participants, for breaking promises it makes elsewhere, when the Ponzi is revealed.”
Government Describes Role Of ASD Attorney Robert Garner
It was widely known online that ASD explained to new members that its program was legal — and used an attorney to help make it’s non-Ponzi case.
The attorney, Robert Garner, appeared in a video alongside Bowdoin and is mentioned prominently in the forfeiture complaint.
Here’s what the government had to say about Garner’s video appearance with Bowdoin:
“Mr. Garner proceeds to explain that Bowdoin hired [Garner] to insure that ASD’s operations are legal in all aspects. Garner assures the viewer that he and ‘other attorneys in our offices . . . are dedicated to this work with Andy and his company.’ He continued by saying his attorneys ‘are available at any time to deal with the issues as they arise.’
“Garner address[ed] the concerns that new ASD members sometimes have in the area of the legality of the Ad Cash Generator opportunity, by saying: ([Emphasis] added):
Andy has directed us to ensure that his company is structurally sound today and tomorrow and far into the future. My staff and I are dedicated to Andy’s vision that his company will continue to rapidly grow bigger and stronger, and will continue to be an industry leader in Internet advertising in the years to come.
“According to Garner,” the forfeiture complaint continued, “ASD . . . complies with all laws and regulations that apply to it. In explaining that ASD is not a Ponzi scheme, Garner notes that a Ponzi scheme is ‘illegal, because [it] use[s] money from new investors to pay the first investors in the scheme their promised returns.’”
“On behalf of ASD, on its website,” prosecutors said in the forfeiture complaint, “Garner advises prospective members that ASD is not a Ponzi scheme because, among other things, ASD is developing other revenue sources and ‘[t]here is no continuing obligation to pay returns to infinity.’ Contrary to Garner’s claim that this is not a Ponzi scheme, however, an infinite payment obligation is irrelevant and the lack of a non-member revenue source is a tell-tale sign of a Ponzi.”
In what prosecutors described as a “further attempt to make Bowdoin’s business model sound more legitimate, Garner describes ASD rebates as ‘function[ing] something like ‘loss leaders’ in that advertisers are presented [with] a way[ ] to earn their money back, plus a little more, in addition to having their ads viewed on the internet.’”
But an IRS-Secret Secret Service Task Force has “not found any other product or service that ASD sells, aside from new memberships, to cover the ‘losses’ it incurs by allowing its so-called ‘advertisers’ to ‘earn their money back, plus a little more,’” the government said in the forfeiture complaint.
Agents discovered that ASD’s “Nevada incorporation documents list Garner as a director. [Garner], however, does not disclose the fact that he is an insider of ASD in his interview, in his typewritten opinion letter that appears on ASD’s webpage, or anywhere else on ASD’s webpage,” the complaint said.
“Furthermore, although Garner is admitted to the North Carolina Bar, it appears that [Garner] works out of his home and that he does not employ the team of lawyers that, he claims, have worked diligently to confirm ASD’s legality,” prosecutors said.
All in all, the government’s forfeiture complaint takes up 101 pages (including exhibits).
A year has passed. The documentation is much thicker now. Andy Bowdoin has fewer people willing to support him publicly. AdViewGlobal is in a state of decay; like AVG, BizAdSplash recently announced the suspension of member cash-outs. AdGateWorld announced it was selling itself to an unnamed party in the Middle East.
The autosurf world continues to alter lives, continues to turn friend against friend and family member against family member. Every day is a total eclipse of the sun.
