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Tag: Stephen L. Cohen

  • Stephen L. Cohen, SEC Official Who Introduced World To Zeek Case, Leaving Agency After Nearly 12 Years

    “The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors. ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.” — Stephen L. Cohen, Associate Director, SEC Division of Enforcement, Aug. 17, 2012

    Our best wishes to Stephen L. Cohen, who delivered the words above nearly four years ago. Cohen is leaving the U. S. Securities and Exchange Commission after nearly 12 years of service.

    “Throughout his career at the SEC, Steve has made substantial and long-lasting contributions to the Commission’s mission,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division.  “He has supervised significant cases involving a wide variety of misconduct and has been closely involved in the implementation of various enhancements to the enforcement program.  His keen intellect and enthusiasm will be missed.”

    One of the cases he supervised — as the SEC noted today — was Zeek Rewards.

    The PP Blog’s lede in the story reporting the SEC’s Zeek action on Aug. 17, 2012 (italics added):

    The SEC has filed an emergency action in federal court in Charlotte, N.C., that alleges Zeek Rewards is a $600 million Ponzi and pyramid scheme.




  • BULLETIN: First, Notre Dame’s ‘Rudy’ — Now, Willie Gault Of The ‘Super Bowl Shuffle’ Chicago Bears; SEC Charges Former NFL Wide Receiver In Alleged Stock Caper; Feds Arrest Lawyer

    BULLETIN: The SEC has gone to federal court in the Central District of California to charge former U.S. Olympian and NFL wide receiver Willie Gault in an alleged stock scheme involving Heart Tronics Inc.

    Gault, 51, was a member of the 1980 U.S. Olympic Team that boycotted the summer games in Moscow. He later played in the NFL for 11 seasons for the Chicago Bears and the then-Los Angeles Raiders. With Gault playing wide receiver, the 1985 Bears team won the Super Bowl over the New England Patriots. The Bears’ team also was famous for the “Super Bowl Shuffle” video and recording.

    Just last week, the SEC charged former Notre Dame walk-on Daniel “Rudy” Ruettiger  and 12 others in an alleged penny-stock caper. Ruettiger, 63, was the inspiration behind the 1993 movie “Rudy.” The agency said today that the separate scheme involving Gault also involved others, including J. Rowland Perkins, a founder of the Creative Artists Agency talent agency, and Mitchell J. Stein, an attorney in Hidden Valley, Calif., and Boca Raton, Fla.

    Perkins and Gault were charged civilly. Stein, 53, was charged both civilly and criminally.

    Stein was arrested Sunday at Los Angeles International Airport, the Justice Department said this afternoon. He is charged with one count of conspiracy to commit mail fraud and wire fraud, three counts of mail fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering and one count of conspiracy to obstruct justice.

    “Stein took advantage of Gault’s celebrity to further prop up the image of Heart Tronics as a successful enterprise,” said Stephen L. Cohen, associate director in the SEC’s Division of Enforcement. “Stein secretly sold millions of dollars in stock while peddling false claims of Heart Tronics’s lucrative sales orders, and has been living the high life off his illicit proceeds with multiple homes, exotic cars, and private jets.”

    Also charged civilly was Martin B. Carter of Boca Raton. The SEC described him as Stein’s “chauffer and handyman.” Other civil defendants include Ryan A. Rauch of San Clemente, Calif., and Mark C. Nevdahl of Spokane, Wash.

    “Stein and Gault together defrauded one investor into making a substantial investment in Heart Tronics based on false representations that his money would fund the company’s operations,” the SEC alleged. “Instead, Stein and Gault diverted the investor’s proceeds for personal use, including the purchase of Heart Tronics stock in Gault’s personal brokerage account ‘Catch 83’ to create the false appearance of volume and investor demand for the stock.”

    Gault wore No. 83 for the Bears and the Raiders. The SEC said Heart Tronics installed him “as a figurehead co-CEO along with . . .  Perkins in order to generate publicity for the company and foster investor confidence.”

    “Stein orchestrated the repeated announcement of fictitious sales orders for Heart Tronics’ products in public filings with the Commission, press releases, and other public broadcasts, all designed to make it appear that Heart Tronics was more successful than it actually was,” the SEC charged.

    As part of the fraud, the SEC charged, Carter flew to Japan to mail back a letter to the United States in a bid to advance the scheme.

    Carter, the chauffer, also posed as a person named “Tony Nony,” the SEC charged.

    Read the SEC complaint.

  • URGENT >> BULLETIN >> MOVING: SEC Says D.C. Attorney Brynee K. Baylor Was Running Prime-Bank Swindle With Frank L. Pavlico III, A Felon On Probation In Case Involving ‘Drug Trafficking’ Proceeds

    UPDATED 10:04 A.M. ET (DEC. 8, U.S.A.)  Frank L. Pavlico III — convicted in 2007 of felony conspiracy to conduct financial transactions involving the proceeds of drug trafficking and released in 2008 after serving his 10-month prison term — has been arrested for wire fraud by the FBI in an alleged prime-bank swindle that occurred while Pavlico was on probation, the SEC said.

    Charged civilly with securities fraud is Brynee K. Baylor, an attorney in the District of Columbia, Maryland and New Jersey. The SEC said Baylor helped Pavlico pull off the swindle, which allegedly gathered about $2.1 million and affected at least 13 investors.

    U.S. District Judge Rosemary Collyer of the District of Columbia approved an emergency asset freeze, the SEC said.

    “Pavlico and Baylor produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing this is a highly-sophisticated investment opportunity,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “This case is particularly egregious because attorneys hold a special position of trust, and Baylor and her law firm cloaked the Milan investment in the guise of licensed legal services to deceive investors and steal their money.”

    Baylor, 37, of Silver Spring, Md., is co-founder and managing partner of Baylor & Jackson PLLC in the District of Columbia, according to the SEC. The agency said she and the law firm “acted as ‘counsel’ for Pavlico’s company The Milan Group, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.”

    The Milan Group, which also was known as The Milan Trading Group Inc., operated from Pavlico’s home in Clarks Summit, Pa., the SEC said. Pavlico is 41, the SEC said.

    The scheme operated in a shroud of mystery, with inexperienced investors being told about a purported “private trading platform” and that  “confidentiality and secrecy requirements prevented the defendants from providing details of the investments,” the SEC charged.

    Baylor “deceive[ed] investors into believing that the Milan investment was legitimate and that investors’ funds would be safe,” the SEC charged, adding that she provided notarized “Attorney Attestation” letters to some investors.

    Moreover, the SEC charged, Baylor “told investors that she had personally witnessed millions of dollars paid to investors through B&J’s trust account, consistent with Pavlico’s representations.”

    Pavlico “deceived investors by using the name ‘Frank Lorenzo’ and by failing to disclose that he pled guilty to a felony, served 10 months in prison, and was on supervised release at the time he was soliciting their investments,” the SEC charged.

    Investors were duped by high-sounding terms such as “standby letters of credit” and “bank guarantees,” the SEC said. Meanwhile, “Pavlico and Baylor also provided investors with bogus excuses attempting to explain the delay in providing the promised returns including, among other things, feigned illnesses, false representations that the European bankers supposedly involved in the transaction were on extended vacation, or that there were unspecified problems with processing the transactions through ‘Euroclear,’ a supposed necessary step in the transaction,” the SEC charged.

    The scheme began in August 2010 or earlier, the SEC charged. Prison records show Pavlico was released in November 2008. His probation ran through Nov. 5, 2011, according to records.

    “Pavlico offered returns of up to twenty times the original investment within forty-five days,” the SEC charged. “Investors were told that the investment involved no risk and that their principal would be returned if a successful bank instrument transaction was not completed.”

    Fake “screen shots” also were used to dupe investors, the SEC charged.

    Collyer also is presiding over the AdSurfDaily Ponzi case in the District of Columbia. The FBI alleged last month that Collyer was targeted with false liens by Kenneth Wayne Leaming, 55, of Spanaway, Wash.

    Read the SEC complaint against Pavlico and Baylor.

  • 3 PONZI/FRAUD CAPSULES: (1) Washington State Woman Jailed In Alleged $126 Million Ponzi Scheme; (2) Charity, Church, Investors In Metro Washington, D.C., Allegedly Scammed In $27M Ponzi; (3) South Florida Man Sentenced To More Than 12 Years In $29.5M ‘Gold’ Scam

    Screen shot: PDF from section of Page 1 of the indictment of Doris E. Nelson in an alleged $126 million Ponzi operating internationally through multiple companies.

    EDITOR’S NOTE: This information is presented in the form of briefs, with links to external sources.

    1.) Doris E. Nelson, arrested/jailed in Spokane, Wash., region, last week after federal raid in April 2010. SEC filed civil charges in September 2011.

    The allegations against Nelson and multiple companies in Nevada, Utah and Canada are alarming, but also somewhat standard fare if you’ve been observing how schemes form and then explain away problems when trouble develops.

    Among the core allegations are these:

    • Nelson, of Colbert, Wash.,  ran a payday-loan business called “The Little Loan Shoppe” in the area of Spokane. The firm was linked to multiple LLCs in the United States and multiple LTDs in Canada. The business started out in the Canadian province of British Columbia in roughly 1997, and moved to the United States “in or about 2001.” Investors were told they could earn enormous profits from the spread between the loan shop’s expenses and what it charged customers for a short-term loan.
    • The Ponzi scheme took in “at least” $126 million and caused losses of more than $40 million — losses that affected “at least” 800 investors.
    • Federal prosecutors say they have identified “victim investors” in multiple Canadian provinces and multiple U.S. states. The indictment also lists a victim from Spain.
    • The payday loan business was not profitable. Investors were getting paid through a complex shell game that lasted for years and involved the formation of new companies, including marketing and “leads” arms.
    • Nelson and some of the defendants engaged in wire fraud, mail fraud and money-laundering.
    • Nelson lied to the Manitoba Securities Commission and advised certain parties to lie to the British Columbia Securities Commission (BCSC).
    • Nelson used investor funds to purchase a motor home valued at nearly $127,000, a Chevrolet Corvette valued at more than $61,000, a Mercedes Benz valued at nearly $112,000. She purchased more than $220,000 in clothing at the St. Johns Knits store and $217,000 at other stores, including Nordstrom.
    • Nelson lost $400,000 of investors’ funds gambling at various Las Vegas casinos.
    • Nelson spent investors’ money on luxury sea cruises, including nearly $29,000 on a Royal Caribbean cruise in which she also spent $23,500 in investor funds to gamble.
    • The promissory-notes scheme showed classic signs of collapse in October 2008. (More details below.) Nelson slashed payouts to investors — from an anticipated rate of between 40 percent and 60 percent to 10 percent. The 10 percent payouts collapsed by March 2009.
    • Nelson claimed Little Loan Shoppe bought the building it used in Spokane, but that was a lie. In truth, the company was paying rent to a company owned by Nelson’s husband.
    • In February 2008, leading up to the beginning of the end in October 2008, Nelson forecast “an explosion of profit.” In May, she announced that “our industry is thriving.” She then opened a new window for investments, telling marks that she was “excepting” new money, as opposed to “accepting” it.  “[T]his window of opportunity will probably not be open again due to the expected surplus of income . . .” she wrote.
    • Between late June and late July of 2008, Nelson announced a “massive marketing campaign” that would turn the operation into “one of the largest loan companies.”
    • Millions of dollars flowed to the teetering scheme after Nelson’s various hype fests.
    • In October 2008, Nelson lied to BCSC about how she was making interest payments to investors, denying that the money came from “newer” investors and claiming the cash came from loan profits.
    • BCSC ordered Nelson to stop issuing promissory notes. Nelson then told investors that changes to U.S. lending laws had “dramatically reduced our profits . . .”
    • In February 2009, Nelson advised investors to quit contacting her about their investments because the inquiries were distracting her. She then announced a purported account review. In March 2009, Nelson told investors that the account review was behind schedule and perhaps would not be completed until the middle of April.
    • In March 2009, Nelson traveled to Florida to try to get more money from existing investors.
    • The scam then collapsed in its entirety and investors experienced ruin.

    Read/view coverage of alleged Nelson scam at KXLY.com.

    The Alleged Garfield M. Taylor Ponzi Scheme In Metro Washington, D.C.

    2.) Garfield M. Taylor, others sued by SEC last week amid spectacular allegations of Ponzi fraud targeted at charities and people of faith, among others.

    Outlined below are some of the core allegations in the alleged Garfield M. Taylor Ponzi scheme, which includes multiple defendants and multiple companies. The SEC brought the case last week, alleging a $27 million Ponzi scheme.

    First, a quote from Stephen L. Cohen, the SEC’s associate director in the Division of Enforcement.

    “Garfield Taylor and his partners in the scheme touted themselves as seasoned and trustworthy financial professionals offering a conservative but lucrative investment opportunity. In reality, they were gambling away investor assets in extremely risky trades and operating a classic Ponzi scheme.”

    Key allegations:

    • Garfield Taylor, of North Bethesda, Md., formerly worked for Fannie Mae and “frequently” used its name in his fraud pitch. His companies, Garfield Taylor Inc. and Gibraltar Asset Management Group LLC, were charged by the SEC, as were five alleged “collaborators”: Maurice G. Taylor of Bowie, Md., who is the brother of Garfield Taylor; Randolph M. Taylor of Washington, D.C., who is the nephew of Garfield Taylor; Benjamin C. Dalley of Washington, D.C., who is the childhood friend and business partner of Randolph Taylor; Jeffrey A. King of Upper Marlboro, Md., whose sister is married to Maurice Taylor; William B. Mitchell of Middle River, Md.
    • The scheme operated “at least” between 2005 and 2010, targeting “middle class” investors and charities.
    • The FDIC’s name was used to sanitize the scam.
    • Unregistered brokers were used to recruit investors.
    • The firms themselves were not registered.
    • Misleading PowerPoint presentations were used.
    • A Baptist church in Maryland, a children’s charity in Washington and an investment club in Philadelphia were shown the PowerPoint presentations.
    • Fancy language such as “proprietary strategy,” “covered call investment strategy” and “unparalleled downside protection” was used.
    • The Baptist church also was shown a “fake ‘letter of recommendation’ from Charles Schwab.”
    • “This letter was not prepared by anyone at Charles Schwab. Rather, it is a fabrication.”
    • A retiree from Lanham, Md.,  plowed more than $780,000 into the scam, an amount that represented “nearly his entire retirement savings.”
    • At least one investor in 2009 was worried about his/her nest egg in the post-Bernard Madoff environment, but Dalley reassured the investor that the opportunity had “taken the internal measures to strictly regulate our traders and accounting to ensure that our investor’s investments are safe.”
    • When Dalley provided the assurance, he already knew that the opportunity “had not followed a covered call trading strategy and had instead engaged in highly speculative naked options trading.”
    • Garfield Taylor actually was operating a “joint Ponzi scheme” through his companies.
    • Garfield Taylor “convinced at least three individuals to give him the username and password to their online brokerage accounts in order for Garfield Taylor to place trades in those accounts on a discretionary basis in exchange for a share of any profits generated.” A Maryland woman duped in this fashion lost “nearly her entire account” originally worth $450,000 “in a matter of two months.”
    • Garfield Taylor used investors’ money to send his children to private school at a cost of $73,000.
    • At one point, one of the Garfield Taylor firms had “less than” $1,000 in its account, but an investor “wired approximately $590,000.” Garfield Taylor used the incoming money to make Ponzi payments.

    Read the SEC complaint.

    Gold Scammer Gets More Than 12 Years In Slammer

    3.) Jamie Campany, 48, of Palm Beach County, Fla., sentenced to federal prison in $29.5 million fraud.

    Key allegations:

    • More than 1,400 investors defrauded.
    • Multiple companies operating in South Florida and elsewhere involved, including Global Bullion Exchange LLC of Lake Worth. Scam also used name of “Barclay.”
    • Fraud fueled by telemarketing.
    • FBI, U.S. Postal Inspection Service and Florida Office of Financial Regulation handled probe.

    Read Feds’ statement announcing the Campany sentencing.

    Watch Campany tell ABC News how he scammed the masses.

     

  • BULLETIN: SEC Goes To Federal Court In Dallas To Halt Alleged Ponzi Scheme Involving DOZENS Of Companies; China Voice Holding Corp. Implicated In Alleged Domestic And International Fraud

    BULLETIN: UPDATED 3:07 P.M. EDT (U.S.A.) The SEC has gone to federal court in Dallas to halt the operations of what it described as a highly complex fraud and Ponzi scheme involving a purported VOIP/telecommunications firm and more than 40 individuals and companies.

    A federal judge has frozen the assets of China Voice Holding Corp., and the SEC described the case as a “complicated web” of deceit engineered by David Ronald Allen and others associated with the firm, which is headquartered in Boca Raton, Fla.

    Allen, 60, resides in Dallas. Also named defendants were former China Voice executive William F. Burbank IV, 52, of Delray Beach, Fla.; Alex Dowlatshahi, 36, of Dallas; Ilya Drapkin, 64, of Dallas; Christopher Mills, 34, of McKinney, Texas; Gerald Patera, 69, of Pinehurst, N.C.; and Robert Wilson, 42, of Dallas.

    Dowlatshahi was described by the SEC as a recidivist securities offender who was part of a 2006 offering fraud in California.

    Dozens of companies were part of the China Voice fraud, the SEC alleged.

    Investors were told they’d earn returns of “at least” 25 percent, but an $8.6 million Ponzi scheme was under way, the SEC charged.

    “These promoters falsely touted what they claimed to be a prudent investment with reliable returns through loans made to carefully selected businesses,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “This fraud illustrates that when extraordinarily high returns are promised in a supposedly low-risk investment, that’s a tell-tale sign that something likely is amiss.”

    China Voice, Allen and Burbank were accused of issuing a “series of fraudulent company statements about its financial condition and business prospects,” the SEC said.

    Patera and Drapkin helped China Voice “finance stock promotion campaigns to pump up the company’s stock price,” the SEC charged,

    Meanwhile, Wilson orchestrated a “a blast fax campaign,” the SEC charged.

    “The spam faxes were sent to thousands of people at once and contained false and misleading statements about China Voice and who was paying for the faxes,” the SEC alleged. “At the same time they were spending more than a million dollars on stock promotion, Patera and Drapkin dumped millions of shares of the company into the market.”

    So many individuals and companies were involved in the alleged fraud that the recitation of the names of the defendants and relief defendants in the 50-page complaint took up all or parts of seven pages.

    The facts as outlined by the SEC did not begin until the tenth page of the complaint. Regulators at virtually all levels have been encountering increasingly complex financial capers that involve dozens of corporations and shell companies.

    A case filed in Nevada by the FTC in December alleged that 10 corporations and 52 shell companies were part of a colossal fraud that had gathered hundreds of millions of dollars.

    Read the SEC complaint.