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Tag: Steve Renner

  • Prosecutors Ask Judge For Order To Disqualify INetGlobal Attorney, Saying They May Wish To Cross-Examine Him As Witness In Ponzi Case

    UPDATED 11:31 A.M. EDT (U.S.A.) Federal prosecutors have filed a motion to disqualify attorney Mark Kallenbach as counsel for INetGlobal and related companies, claiming that Kallenbach is attempting to be both a witness in the case and a lawyer for multiple clients involved in a Ponzi scheme, wire fraud and money-laundering probe.

    Kallenbach, prosecutors said, has made himself a subject of cross-examination because of an affidavit he filed last month. They added that wearing two hats in the same case might create a conflict with the Minnesota Rules of Professional Responsibility, a local rule of U.S. District Court in Minnesota and the “Court’s inherent supervisory authority over its bar.”

    “Should Mr. Kallenbach testify, he will be cross-examined,” prosecutors said. “The Court will have to decide whether Mr. Kallenbach’s voluntary assumption of the role of witness works as a waiver of the attorney-client privilege on cross-examination, or whether the government’s cross-examination of Mr. Kallenbach will be limited, in ways it might not be limited if the witness was not counsel to several parties, in order to preserve the privilege.”

    On April 2 — a week ago yesterday — prosecutors said INetGlobal had no attorney of record in the autosurf Ponzi scheme litigation. Kallenbach filed a notice of appearance for the firm and several related companies on Monday, three days after the prosecution’s filing.

    On Wednesday, Kallenbach filed a second affidavit (see subhead below) labeled a supplement to an affidavit he filed March 25.

    Prosecutors responded by saying Kallenbach’s second affidavit “heightens the government’s concern about Mr. Kallenbach attempting to serve as both lawyer and witness” and that he should be disqualified as an attorney for “any of the individuals or companies involved” in the case.

    “This motion is brought because Mr. Kallenbach has made himself a necessary witness in this case,” prosecutors argued. “This is a case in which Mr. Kallenbach conducted his own
    investigation and then voluntarily drew up a lengthy affidavit setting forth his observations.”

    Their claim is based on a 20-page affidavit and 12 additional pages of exhibits Kallenbach filed March 25 — before he entered his notice of appearance as INetGlobal’s attorney in court.

    In his March 25 affidavit, Kallenbach said he conducted an “investigation” and concluded that “Inter-Mark and its subsidiary iNetGlobal and its other subsidiaries are clean, legitimate and profitable businesses.”

    Kallenbach, in the March 25 affidavit, attacked an affidavit for a search warrant by the U.S. Secret Service and also challenged assertions the government made about V-Local, a company related to INetGlobal.

    Prosecutors argued that the affidavit and conclusions Kallenbach described as “true facts” make him a witness. Some of the information was woven into a memorandum of law filed March 25 by Jon Hopeman on behalf of INetGlobal owner Steve Renner, prosecutors said.

    The prosecution motion was filed by Assistant U.S. Attorney John Docherty, one of the prosecutors who handled the Ponzi case against Tom Petters. Petters was sentenced this week to 50 years in prison for operating a $3.65 billion fraud.

    U.S. Attorney B. Todd Jones of the District of Minnesota approved the filing of the disqualification motion. The main page on Jones’ website lists three major Ponzi probes the office has undertaken in recent months, including the Petters’ case, the case involving Minnesota Ponzi scheme figures Trevor Cook and Pat Kiley, and the investigation into the business practices of Renner at INetGlobal.

    Minnesota’s Ponzi Plague

    Ponzi schemes have plagued Minnesota. The Cook/Kiley case involves at least $190 million and investor losses of at least $139 million, according to court filings.

    Another big case in Minnesota involved Gerard Cellette Jr. Cellette was implicated in a $53 million Ponzi scheme last year by Hennepin County Attorney Mike Freeman.

    Meanwhile, Charles “Chuck” E. Hays pleaded guilty last year to charges in a $20 million Ponzi-scheme case in which the government seized a $3 million yacht.

    Separately, three members of a Minneapolis family were indicted last year on Ponzi and fraud charges. The case became known as the Kalin Thanh Dao case. Dao’s parents also were indicted.

    Dao and her parents pleaded guilty. Prosecutors said money was siphoned from the scheme to pay for gambling in Las Vegas.

    “Investors were promised that their money would be placed in investment programs targeted within specific markets and industries,” prosecutors said. “Investors were also told that Kalin Dao had a ‘partner’ who held a seat on the New York Stock Exchange, had contacts in the emerging Asian markets who had ‘inside’ information, and was associated with various Las Vegas casinos.”

    The Kalin Thanh Dao probe uncovered a web of deceit in which Dao’s father claimed nearly $3 million in losses for businesses owned by his daughter to eliminate his personal tax liabilities, and Dao’s mother claimed to be “single,” the “head of [a] household” — and also claimed a tax exemption for Dao.

    Kalin Thanh Dao was 32 years old and operated at least four companies, prosecutors said.

    “Instead of investing the investors’ funds as promised, Kalin Dao diverted substantial amounts of the funds for her own purposes, including gambling, lulling payments and personal expenses,” prosecutors said. “She also admitted that the fraud was between $2.5 and $7 million.”

    Also on the Ponzi front, AdSurfDaily, a Florida-based company implicated in a massive autosurf Ponzi scheme by the Secret Service in 2008, was popular in Minnesota. Some Minnesota members of ASD were among the staunchest defenders of ASD President Andy Bowdoin.

    The Secret Service referenced the ASD case in filings in the INetGlobal case, saying an undercover agent was introduced to INetGlobal by an ASD member who described the operation as a wink-nod enterprise.

    A federal judge in the District of Columbia has issued three orders of forfeiture totaling more than $80 million in the ASD case. Bowdoin is appealing. His appeal brief cites two other cases filed under seal and suggests that prosecutors subpoenaed at least two attorneys involved in the defense of ASD’s assets to appear at a grand-jury proceeding.

    It is unclear if the attorneys attempted to invoke attorney-client privilege. What is clear is that a federal judge ordered the attorneys to appear and that the order is being challenged in a federal appeals court.

    Kallenbach’s Second Affidavit

    Kallenbach filed a second affidavit April 7. The affidavit asserts that a Renner entity known as V-Media Marketing LLC “borrowed” all of the money that was placed in a bank account at Premier Bank Minnesota in early March, about a week after the Secret Service raid at INetGlobal’s offices in Minneapolis.

    Prosecutors, describing the INetGlobal case as a “major fraud and money laundering investigation,” said $47,400 was deposited into the account.

    “IMC Desperately Needs Working Capital To Pay Its Creditors,” Kallenbach said.

    He also described a webcast he attended April 5 that was “sponsored by one of IMC’s marketing consultants.”

    “At the April 5th Meeting, I learned, amongst other things, that many of iNetGlobal’s new customers have demanded refunds,” Kallenbach said. “The number of customers seeking refunds and the amount of such refunds is unknown. What is known is that as each and every day passes, without iNetGlobal being in business as usual, more of iNetGlobal’s customers will seek refunds.”

    He also asserted that “iNetGlobal’s marketing consultants are clamoring for commission payments that are legitimately due and owing to them,” according to the affidavit. “iNetGlobal has been unable to pay the commissions.”

    Kallenbach’s filing also suggested that, through negotiations, a little more than $1 million has been returned to INetGlobal and that the sum was now considered “unrestricted” cash. The affidavit did not disclose specific details about the negotiations

    In the March 25 affidavit,  Kallenbach argued that INetGlobal had no cash to operate.

    “At the time I signed my March 25, 2010 Declaration, I believed it to be true that iNetGlobal had no unrestricted cash meaning cash available for working capital. I have since learned that as a result of negotiations in which I was involved, on March 22, 2010 iNetGlobal netted approximately $220,000 from the return of restricted cash. As of the time my March 25, 2010 Declaration was prepared, I was unaware that this money had been returned to iNetGlobal.

    “After my Declaration was signed, approximately $795,000 of restricted cash was made available to iNetGlobel for working capital after close of business on March 25, 2010,” Kallenbach said. “As of today [April 7], iNetGlobal’s unrestricted cash is approximately $1,015,000. I arrive at this sum by adding $220,000 and $795,000 to reach $1,015,000.”

    Prosecutors said that, because Kallenbach has become an “essential witness” subject to cross-examination by the prosecution and direct examination by the INetGlobal side, there is a question about “whether Mr. Kallenbach’s clients can be provided constitutionally effective assistance.”

    “The government did not bring this situation about,” prosecutors contended. “[T]he government has not subpoenaed Mr. Kallenbach, or raised questions about whether he, and only he, can testify as to certain facts.

    “This is a case in which Mr. Kallenbach conducted his own investigation and then voluntarily drew up a lengthy affidavit setting forth his observations. Nor may Mr. Kallenbach, at this juncture, announce that he will henceforth act only as an advocate, because the choice to be a witness was made when the affidavit was filed.”

  • BULLETIN: Tom Petters, Minnesota Ponzi Scheme Figure, Sentenced To 50 Years In Federal Prison

    BULLETIN: (UPDATED 12:21 P.M. EDT (U.S.A.) Tom Petters, whom federal prosecutors said presided over a $3.65 billion Ponzi scheme, has been sentenced to 50 years in prison.

    The fraud was one of the largest in U.S. history — though still significantly smaller than the Bernard Madoff scheme, estimated to have involved $65 billion.

    Prosecutors had sought a sentence of more than 300 years. Petters’ attorneys countered with an argument that an appropriate sentence was in the range of four years.

    U.S. District Judge Richard Kyle bridged the gap, sentencing Petters to 50 years — 100 years fewer than the sentence Madoff received, but more than 12 times the sentence sought by the defense.

    Minnesota has been plagued by Ponzi schemes and rocked by allegations of Ponzi schemes.

    Three links on the main page of the website of U.S. Attorney B. Todd Jones lead to information about major Ponzi scheme prosecutions or Ponzi investigations undertaken by the office, including the Petters’ case, the case against Trevor Cook and Pat Kiley, and the investigation into the business practices of Steve Renner, who is alleged by prosecutors to have operated an autosurf Ponzi scheme known as INetGlobal.

  • Government Scores Clean Sweep In ASD Forfeiture Litigation, But That May Not Be The Biggest News: Is A Separate Legal Drama Playing Out In Background?

    Andy Bowdoin

    UPDATED 11:57 A.M. EDT (U.S.A.) Federal prosecutors have won the second forfeiture case against assets tied to Florida-based AdSurfDaily, meaning the government now holds title to 100 percent of the money and assets seized in the autosurf Ponzi scheme, wire fraud and money-laundering investigation.

    U.S. District Judge Rosemary Collyer issued a final order of forfeiture March 30 in a case brought in December 2008. On Jan. 4, Collyer issued a final order of forfeiture in a case brought in August 2008. The government now has control over more than $80 million seized in the cases, along with real estate, cars, marine equipment, computers and other property.

    But that may not be the big news.

    Grand Jury Probe

    Indeed, the big news may be that a hidden legal drama is playing out behind the scenes. Appeal documents filed by attorneys for ASD President Andy Bowdoin in the August 2008 case reference two separate matters filed “under seal” and say that attorneys for unnamed “defendants” were called to testify before a grand jury.

    The filings suggest — but do not state plainly — that prosecutors subpoenaed at least two attorneys involved in the defense of ASD-related property to testify and that a federal judge ordered the attorneys to comply.

    Charles A. Murray, an attorney for ASD President Andy Bowdoin, referenced two sealed court cases when informing the appeals court about litigation “related” to ASD.

    “Only one case related to this matter is currently pending before this Court, an interlocutory appeal alleging that the court below erred in ordering the defendant’s attorneys to testify before a grand jury,” Murray wrote.

    Murray identified the case as “Grand Jury Subpoena, Case No. 09-3118 (Under Seal).”

    “This related appeal arose from an ongoing grand jury investigation, In re: Possible Violations of Title 18, United States Code, Sections 1341, 1343, and 1349, Misc. No. 09-270 (Under Seal),” Murray wrote.

    The sections of federal law cited in Murray’s appeal brief pertain to mail-fraud, wire-fraud and conspiracy statutes. The attorneys are not named, and the brief does not identify the targets of the grand-jury probe.

    Details Unclear

    Why the attorneys were called to testify is unclear. Also unclear are the identities of the attorneys’ clients, the nature of the information the government sought from the attorneys, whether the attorneys sought to invoke attorney-client privilege and whether they actually testified before the interlocutory appeal filed under seal was brought.

    An interlocutory appeal is an appeal to a higher court of a ruling by a lower court that is made before the trial in the lower court has concluded.

    Such appeals, which higher courts are reluctant to entertain, may be filed when a party believes a lower court’s ruling is severely prejudicial and turns to an appeals court to stop it in its tracks, instead of following the customary procedure of waiting for the case to conclude before filing an appeal.

    Racketeering Case Cited

    Murray also identified as a “related” matter a racketeering lawsuit filed against Bowdoin and ASD attorney Robert Garner by three ASD members in January 2009. The racketeering lawsuit, which alleges ASD was a criminal enterprise as defined under federal statutes, has been placed on hold until issues in the federal case are resolved.

    In June 2009, attorneys for the parties suing Bowdoin and Garner referenced the AdViewGlobal (AVG) autosurf, an entity with close ties to ASD. In September 2009, federal prosecutors made a veiled reference to AVG in a filing that suggested that Bowdoin and family members initially planned to “move to another country and profit from a knock-off autosurf program that Bowdoin funded and helped to start.”

    The assets seized in the December 2008 forfeiture case identified Bowdoin family members as beneficiaries of ASD’s illegal conduct. Members of AVG later identified George and Judy Harris as AVG’s owners, with Bowdoin as a silent partner.

    George Harris is the son of Bowdoin’s wife, Edna Faye Bowdoin, who also was named in the December 2008 complaint as a beneficiary of ASD’s illegal conduct.

    AVG crashed and burned in June 2009, taking an unknown sum of money paid by members with it by exercising its version of a “rebates aren’t guaranteed” clause. There were reports that $2.7 million was stolen from AVG, which purportedly operated from Uruguay.

    Among AVG’s most noteworthy promoters were former ASD members, including some of the moderators of the now-defunct Pro-ASD Surf’s Up forum. Surf’s Up suddenly went missing in the earliest days of 2010.

    Bowdoin, 75, has been portrayed by prosecutors as “delusional.” He pleaded guilty in Alabama during the 1990s to felony securities charges, according to court records. A decade later, he associated with Clarence Busby, the operator of Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.

    Bowdoin and Busby, according to court filings by Busby, talked about forming Golden Panda in April 2008 while on a “relaxing fishing trip” to a Georgia lake.

    Busby, identified by the title “Rev.” at least 120 times in autosurf-related litigation, was implicated by the SEC in three prime-bank schemes in the 1990s, according to records. Golden Panda has ceded more than $14.6 million to the government in the ASD case, including $646,266.13 formally ordered forfeited by Collyer last week, and more than $14 million Collyer ordered forfeited in July 2009.

    In his court filings, Busby said he didn’t know Bowdoin “had prior run ins with the law” and had been arrested in Alabama for defrauding investors.

    Busby did not say if he told his fishing partner about his own run-ins with the law: The SEC said Busby defrauded investors in the 1990s “by offering and selling investment
    contracts in connection with three different prime bank schemes.”

    “Using misrepresentations and omissions in each of the three schemes, Busby raised money for purported programs in ‘prime bank’ notes by fraudulently representing to investors that the investments were risk-free and that the ventures would pay 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,” the SEC said.

    Busby went on to operate an autosurf known as Biz Ad Splash, which also crashed and burned, reportedly taking members’ money with it. All of the notable autosurfs that dominated the stage in the aftermath of the ASD seizure — MegaLido, AdGateWorld, BAS, Ad-Ventures4U, Noobing and others — have now either died or are in a serious state of decay.

    Last month, the U.S. Secret Service, which conducted the probes into ASD, Golden Panda and LaFuenteDinero, asserted that INetGlobal, a company operated by Steve Renner, was operating an autosurf Ponzi scheme and targeting Chinese participants.

    The IRS is involved in both the ASD case and the INetGlobal case, according to court filings.

    Steve Renner was convicted of income-tax evasion in December 2009. Federal prosecutors described the INetGlobal case last week as a “major fraud and money laundering investigation.”

    Renner has denied the government’s allegations.

    Bowdoin now says he is appealing the forfeiture order issued by Collyer last week in the December 2008 case. If Bowdoin does appeal the order, it will be his second appeal. He also is appealing the forfeiture order in the August 2008 case.

  • PROSECUTION: Renner Has No Standing To Contest Corporate Seizures In INetGlobal Case; ‘Major’ Fraud And Money-Laundering Probe Under Way; IRS Involved; No Media ‘Leak’ Occurred

    Steve Renner has no standing to contest the seizure of “the vast majority”  of the money and assets in the INetGlobal autosurf Ponzi case because the seized property was owned by corporations, not Renner, federal prosecutors said.

    Only $151,100 of the $26 million seized in the case came from accounts in Renner’s name, prosecutors said, arguing that bids to release the money were premature and that only an attorney for Renner — and not the companies — has filed a notice of appearance in the case.

    Meanwhile, in its response to Renner’s motion last week to challenge the seizure on Constitutional grounds and have $25 million returned, the prosecution said yesterday that his bid was a “thinly veiled attempt to force the government to reveal facts relating to an on-going criminal investigation.”

    A “major fraud and money laundering investigation is under way bearing serious criminal consequences,” prosecutors said.

    The government probe, which prosecutors now say includes the IRS, is in its early stages. Investigators to date have filed neither a civil forfeiture complaint nor criminal charges that seek the forfeiture of the funds, “and much of the evidence has only recently been seized and is needed for the investigation,” prosecutors said.

    “If the seized evidence is returned, it will not be available for the ongoing investigation,” prosecutors argued.

    Moreover, they argued, “If the Court orders the return of the seized funds, the money will be spent, and will be unavailable for future return to victims” should the government prevail.

    Prosecutors made similar arguments in the AdSurfDaily autosurf prosecution — and the arguments prevailed. In filings yesterday, the government once again cited the successful ASD prosecution, along with the successful prosecutions of the 12DailyPro and PhoenixSurf autosurfs.

    “iNetGlobal is not a one-of-a-kind scam, nor is it the first of its kind,” prosecutors said yesterday.

    Steve Renner was convicted on four felony counts of income-tax evasion in December, and is awaiting sentencing in the tax case.

    No ‘Leak’ Occurred: Gov’t Acknowledges Timing ‘Error’ In Posting Of Affidavit

    Prosecutors denied an assertion by Renner last week that the government had leaked the search-warrant affidavit in the INetGlobal case to the media.

    Under a bold subhead titled “The ‘Leak,’” prosecutors said the claim the document was leaked “is false, and has no bearing on the issues presented in this motion.”

    They added that the posting of the document on the government website was intended as a means of informing victims and witnesses efficiently, while trying to avoid a circumstance that occurred in the AdSurfDaily case: switchboards in prosecutors’ offices becoming inundated with telephone calls from people seeking information.

    Prosecutors said the government had explained its point of view to INetGlobal on Feb. 26, almost a month prior to Renner’s “leaking” claim filed last week. Renner’s claim specifically cited the PP Blog.

    “[T]he U.S. Attorney’s Office had planned, once the search and seizure warrants in this case were filed with the clerk’s office, to post a link to the affidavit on the website of the U.S. Attorney’s Office,” prosecutors said. “The U.S. Attorney’s Office for the District of Columbia was inundated with calls following their execution of warrants in the AdSurf Daily case, and the U.S. Attorney’s Office in Minnesota hoped to avoid this by efficiently getting information to victims, witnesses, and other interested parties by referring them to the affidavit.”

    “Through an error, an employee of the U.S. Attorney’s Office’s Community Relations Division mistakenly believed that the time had come to post the affidavit when it had not,” prosecutors said. “The affidavit was posted on the late afternoon or early evening of February 24th, and was taken down the following morning when the error came to light.

    “During the night, apparently, a single blogger found the affidavit and wrote a story about it,” prosecutors continued. “That story is reprinted in Mr. Renner’s motion papers. As noted, all of this was explained to Counsel immediately after the fact, and Counsel did not raise the issue of the premature release of the affidavit again until this motion was filed.”

    IRS Enters INetGlobal Probe

    Filings by the prosecution yesterday confirmed that the IRS has entered the case. An affidavit by an IRS criminal investigator asserts that an entity known as VMedia Marketing LLC opened a checking account at Premier Bank Minnesota on March 1, six days after the Secret Service executed search warrants in the INetGlobal case.

    “Steven M. Renner reserved sole signature authority on the account upon inception,” the IRS agent said. “On or about March 6, 2010, Matthew D. Renner was added to have signature authority on the account.”

    Matthew Renner is Steve Renner’s son. He has not been accused of wrongdoing.

    A total of $47,400 was deposited in the account, the IRS agent said. He listed the names of sources of the deposits. Two individuals with Chinese names wired individual deposits of $7,400 and $8,500 into the account.

    “Official checks” drawn on Wells Fargo bank and totaling $16,500 also were deposited in the account. These checks were made out to “V-Media or U-Media,” the IRS agent said.

    Meanwhile, the agent said, “a check made payable to Steve Renner in the amount of $15,000.00 from The Toronto-Dominion Bank was also deposited into the account.”

    At least 23 withdrawals were made from the account, the IRS agent said. He noted that the majority of these checks have either ‘week 3/1 – 3/5″ or ‘3/1 – 3/5 written on the memo line. In addition, one check was made payable to MEDA (Metropolitan Economic Development Assoc.) in the amount of $2,000.00. The memo section of the check made payable to MEDA stated ‘250 SECOND AVE #106A RENT.’”

    That address was one of the business addresses searched by the Secret Service Feb. 23.

    Prosecutors, saying Renner made “sweeping” assertions last week that he had no cash to pay employees, argued that the investigation by the IRS agent into the Premier Bank Minnesota account opened after the raid suggested otherwise.

    “Renner subsequently wrote 23 checks that appear to be payroll checks, plus a check for the rent on Suite 106A, 250 Second Avenue,” prosecutors said.

    Because the $15,000 deposit drawn on Toronto-Dominion bank was held until March 19, “several” withdrawals by check initially were returned to Premier Bank Minnesota, the IRS agent said.

    “Later on, Steven Renner came into Premier Bank Minnesota and had cashier’s checks issued to the same names indicated on the checks that had previously been returned to the bank,” the IRS agent said. “On or about March 23, 2010, the above indicated account was closed.”

    INetGlobal disclosed “none of this” in its arguments last week to release funds, prosecutors said.

    Moreover, prosecutors said the government “is attempting to work with the company” on the issue of payroll.

    Prosecution: INetGlobal ‘Omitted’ Names Of Employees

    “[T]here is concern that the company continues to have access to unseized funds with which to make payroll,” prosecutors said. “In addition, the first list of employees submitted to the government omitted several names of people the Secret Service had identified as employees of the company during the execution of the search warrants on February 23, 2010. A request that this issue be addressed elicited a response that was confusing; the government requested clarification and is awaiting a response.”

    Meanwhile, prosecutors claimed that Renner had placed “factual inaccuracies” in the record of the case, arguing that Renner’s claim that the seizure was “unreasonable” and that the Secret Service allegedly told “intentional and reckless falsehoods” in securing the warrant could not stand up to judicial scrutiny.

    “Such is the unsurprising reaction of a company accused of running a Ponzi scheme,” prosecutors said.

  • INetGlobal Accuses Former CEO Of Extortion Bid; Says Company Is Solvent; Accuses Government Of Leaking Search Warrant Affidavit To Press

    Steve Renner

    Denying it was a Ponzi scheme, INetGlobal says a federal judge should release about $25 million, business records and computer equipment seized in an investigation by the U.S. Secret Service last month because the property was “unlawfully seized.”

    Meanwhile, INetGlobal has accused its former chief executive officer — whom it describes as a “informant” who lied to the Secret Service — of hatching a plot to extort $500,000 from the company about seven weeks prior to the Feb. 23 raid.

    Steven Keough, the former CEO, could not be reached for comment on this story.

    INetGlobal also accused the Secret Service of lying.

    At the same time, the company said it was part of a family of companies that are “clean, legitimate and profitable businesses,” and it accused the government of leaking the search-warrant affidavit in the case to the media, specifically citing the PP Blog.

    INetGlobal and its operator, Steve Renner, are represented by Jon Hopeman. No criminal charges have been filed against Renner or the company.

    A spokeswoman for U.S. Attorney B. Todd Jones declined to comment on INetGlobal’s court filings, saying that prosecutors would litigate the case in court and not in the media.

    Also filing papers for INetGlobal in the case was attorney Mark J. Kallenbach.

    Government Did Not Contact  PP Blog; PP Blog Did Not Contact Government

    “None of the information we published was obtained as a result of the government or an agent contacting the Blog and providing information for a story,” the PP Blog said. “Nor did the Blog contact the government or an agent to obtain the information.”

    An exhibit the company produced for U.S. District Judge Donovan Frank reproduced a story the Blog published at 1:41 a.m. (ET) Feb. 25. The story was based on the Secret Service affidavit, which the Blog obtained from a government website open to any person with an Internet connection.

    In its court filings, INetGlobal complained that its attorneys did not get a copy of the affidavit until Feb. 26.

    “As of February 25, 2010, I had tried to get a copy of the affidavit,” Kallenbach wrote. “I was informed by the U.S. Attorney’s Office it was sealed. I was not provided a copy until February 26, 2010 at 1:57 p.m., 36 hours after the press had it. Someone leaked the affidavit to the press.”

    The PP Blog was the first news outlet to publish information from the affidavit.

    No member of government contacted the Blog though any means to arrange for access — exclusive or otherwise — to the material. Nor did the Blog contact any member of government to seek access — exclusive or otherwise — to the material. The Blog obtained the affidavit through the normal course of its reporting.

    A Fiery Defense

    Attorneys for Renner, INetGlobal and Inter-Mark Corp., the parent company of INetGlobal, appear ready to come out firing.

    Among the documents the attorneys plan to present to Frank is a copy of an email dated Jan. 6 from Steven Keough, the former CEO, to attorney Aaron Hall of Minneapolis.

    Keough, according to the email, said he was declining to accept a severance proposal offered by the company.

    “If your client, Mr. Renner, is serious about resolving this quickly and amicably, then the minimum acceptable severance payment amount must be $500,000 — payable immediately,” the email read. “This reflects the promised signing bonus of $212,000 and promised one year salary of $288,000.”

    The email suggested Keough was set on the amount of $500,000 and unwilling to negotiate. Keough proposed that Hall schedule a meeting at a place convenient for Hall on Jan. 8.

    “Come with a check and signable documents to the meeting location,” the email read. “After noon on Friday all bets are off as to how this matter will be handled.”

    The email was signed “Thank you,” followed by the word “Regards.” Keough’s name appeared below the closing.

    INetGlobal argued that the email was evidence of an extortion plot.

    “On January 6, 2010, Mr. Keough attempted to extort over $500,000 from iNetGlobal,” Kallenbach argued in a brief. “He demanded payment of the money by 5:00 p.m. that day or all bets are off. According to the Secret Service’s affidavit, Keough contacted the government in this matter for the first time on January 8, 2010.”

    Why Kallenbach referenced the time of 5 p.m. — and not noon, as the email referenced — was not immediately clear. Also unclear was the amount INetGlobal offered in the severance package that Keough purportedly rejected.

    Whether Keough could argue the amount was too small and did not reflect his understanding of how he would be compensated should be be terminated or choose to leave the company was unclear.

    In the Secret Service affidavit, Keough, an attorney and former naval officer, was portrayed as having asserted he was fired for asking too many questions and had come to believe InetGlobal owner Steve Renner had hired him to be a “good face” for the company.

    Kallenbach, whose brief said Keough had been fired Jan. 5 — the day before Keough sent the email to Hall — claimed Keough had been fired for cause.

    “Mr. Keough was terminated because within a month or so after being hired in late October of 2009, Mr. Keough made no progress in understanding the business, did not fit in with IMC’s rank and file, was unwilling to work with IMC’s board of directors, and attempted to take over IMC’s business from Mr. Steven Renner,” the brief argued.

    Secret Service Accused Of Lying

    Hopeman asserted in his brief that the Secret Service affidavit contained “intentional and reckless falsehoods” that undermined the probable cause to search.

    “In this case, the entire premise of the search warrant affidavit is that little advertising was sold, little was used, and there were no legitimate advertisers,” Hopeman argued. “The search warrant affidavit states that the advertisements ranged from other multi-level marketing sites to affiliate programs, non-English websites, and even iNetGlobal’s home page . . .

    “It concluded, without support, that there were ‘few legitimate advertisers,’” Hopeman argued.

    At the same time, Hopeman argued that the Secret Service also omitted facts from the affidavit that were favorable to Renner.

    “Keough appeared on the company’s website as of January 5, 2010 stating that he intended to recruit new customers from all around the world,” Hopeman asserted. “These are not the same words that Keough spoke to the agents days later when he claimed that the entire business was fraudulent. The agents knew this fact because it is posted on the website, which they studied. This fact if included in the affidavit would have cast substantial doubt on the credibility of the informant, who provided the principal basis for probable cause.”

    Hopeman also said the Secret Service painted an unfair picture of how Renner behaved at a January INetGlobal gathering in New York. The Secret Service, which had at least two undercover agents in the room, said Renner often spoke over an interpreter even though many of the attendees had little facility in English, started a pandemonium by handing out $20 bills in exchange for $10 bills, and told at least two different stories about INetGlobal’s revenue figures.

    “A viewing of the tapes show that Mr. Renner was very candid about the nature of the business,” Hopeman argued. “During these same presentations, he informed those assembled that this was not an investment, and that one could not earn money by doing nothing. He also explained the internet services that he was selling and made it clear that web hosting, domain registration, and advertising, were his products.”

    In previous autosurf prosecutions, the government has argued that surf operators attempt to mask investment programs by calling them something else. Prosecutors in the AdSurfDaily Ponzi case, for example, said that the ASD program was an investment program disguised as an “advertising” program.

    It is not uncommon for autosurfs to instruct members to avoid using certain words, including the words “investment” or “investing.” Some autosurf members have scolded others for using the word “investment,” which prosecutors have painted as evidence of the wink-nod nature of autosurfs.

    In the ASD case, which was filed in August 2008, the Secret Service described a member speaking to an undercover agent, instructing the agent to be careful not to use certain words.

    “Don’t call it investing, you know what I mean, we can get in trouble if we say that, we have to be careful,” the agency quoted an ASD member as saying.

    The agency, which asserted in its affidavit in the INetGlobal case that an ASD member tried to recruit an undercover agent to join Renner’s surf, said the ASD member demonstrated the wink-nod nature of the autosurf business.

    “The [ASD] member said he had previously been a member of ASD . . . and said, ‘We know what happened there,’” the Secret Service alleged in the INetGlobal affidavit. “The member said he was reluctant to join iNetGlobal due to it being similar to ASD. The member said, ‘we all know what this program is.’ The member said his daughter and wife surfed the websites and the member did not care about the services provided. The member said he just wanted to put his money in and get it out.”

    Hopeman, though, said the Secret Service was wrong.

    “On February 23, 2010, the United States Secret Service strapped on its guns and raid jackets, searched the premises of Mr. Renner s business, took all of its documents and computers, seized over $25 million in cash belonging to the business and its customers, put 75 people out of work, and seized the money for their paychecks and their children s health insurance,” Hopeman argued. “The sealed affidavit was leaked to the press. This was not a cocaine cartel. It was not a mafia front. It was a legitimate business.”

    In the ASD case, prosecutors argued that an ASD filing to counter the government’s Ponzi assertions was”full of sound and fury, [but] signifying nothing.”

    How the prosecution intends to respond to INetGlobal’s arguments is unclear.

    Hopeman was the attorney for Tom Petters, implicated in a masssive Ponzi scheme in 2008. Petters was convicted in December.

  • BULLETIN: Autosurf Biz Takes Another Pounding; Federal Judge Adds Noobing As Receivership Defendant In Fraud Case Against Parent Company; 14 Other Subsidiaries Named

    UPDATED 6:05 P.M. EDT (U.S.A., Jan. 20, 2011.) In yet another case that portends disaster for the so-called “autosurf” industry, a federal judge has ordered the Noobing autosurf to be added as a receivership defendant in a fraud case brought against its parent company.

    The FTC and attorneys general from Minnesota, North Carolina and Kansas brought the case against Noobing’s parent — Affiliate Strategies Inc. (ASI) — in July 2009. Several other companies were named defendants in the case, which alleged the firms participated in a scheme that promised guaranteed government grants from economic-stimulus funds.

    Brett Blackman, ASI’s head, also was president of Noobing, members said. Noobing was not initially named a receivership defendant.

    U.S. District Judge Julie A. Robinson issued an asset freeze Sept. 1, along with stern orders to preserve evidence and repatriate to the United States all assets and documents held on foreign soil. She also broadened the powers of Larry Cook, the court-appointed receiver.

    Through his investigation, Cook determined that Noobing was operating under the umbrella of Apex Holdings International LLC, the same company under which ASI operated. Cook also determined that at least 14 other companies were operating under the Apex Holdings umbrella.

    Noobing, which was registered in the United States, also had an offshoot in Nevis, according to court filings. Noobing targeted people with hearing impairments.

    Cook asked Robinson last month to add Noobing and the other companies as receivership defendants after determining “each of the Subsidiaries used the same post office box as the [initial] Receivership Defendants.”

    Moroever, Cook advised Robinson that he had received “receive numerous inquiries from creditors, former independent contractors, and tax authorities for the Subsidiaries.” He further argued that “each of the Subsidiaries was entirely reliant upon the business operations of the [initial] Receivership Defendants.”

    Robinson, saying Cook had shown “good cause,” added Noobing and the others as defendants March 18.

    No party  — including the FTC, the state attorneys general, the initial set of defendants and the new defendants — objected, Robinson noted. In December, Illinois joined the FTC, Minnesota, North Carolina and Kansas in the action.

    On the previous day, March 17, FBI Director Robert Mueller III, without naming names, testified before Congress. Mueller said that “shell corporations” are emerging as a threat to the U.S. banking system because owners were using them “to facilitate the concealing of criminal proceeds” and engage in money-laundering.

    Neither Noobing not its corporate parent has been accused of a crime.

    In February, the U.S. Secret Service alleged in a civil forfeiture complaint that INetGlobal, a company that operates an autosurf, was engaged in money-laundering and wire fraud while operating a Ponzi scheme.

    INetGlobal is operated by Steve Renner, under his “umbrella corporation, InterMark,” the Secret Service alleged. The agency identified what it described as “subsidiaries,” specifically referencing “Virtual Payment Systems [LLC of Wisconsin/Brackets Denoting the LLC Designation added Jan. 20, 2011], V-Media, Cash Cards International, and V-Local,” as well as a company named “INet Global Productions.”

    NOTE IN BOLD ADDED JAN. 20, 2011: An Indianapolis-based company known as Virtual Payment Systems Inc. has contacted the PP Blog to let it know it is not affiliated with the Renner company Virtual Payment Systems LLC of Wisconsin, which is referenced in the paragraph above.

    “The commission by Renner of the federal crimes of wire fraud, in violation of Title 18, United States Code Section 1343, and money laundering, in violation of Title 18, United States Code Section 1957, is essential to the operation of this Ponzi scheme,” the Secret Service alleged.

    In August 2008, the Secret Service said AdSurfDaily, a Florida-based autosurf company, also was engaging in wire fraud and money-laundering while operating a Ponzi scheme.

    U.S. District Judge Rosemary Collyer — on Jan. 4, 2010 — ordered the forfeiture of more than $65.8 million in the personal bank accounts of ASD President Andy Bowdoin. A little more than a month later, on Feb. 23, the Secret Service moved against INetGlobal.

    Records show that ASD’s Bowdoin operated several corporations over the years. In September 2009, the state of Florida revoked the corporate registrations of AdSurfDaily and Bowdoin/Harris Enterprises Inc.

    The revocations occurred just four days after Bowdoin told members he had exciting plans for ASD’s future. Despite his claim, Bowdoin never bothered to submit the paperwork to keep the firm’s registration intact, despite having been given a five-month window to do so.

    In his remarks to members, Bowdoin said the government had seized the assets of ASD members. In his own sworn court filings, however, Bowdoin said the seized assets belonged to him and his company.

    The Secret Service transcribed Bowdoin’s remarks, and presented them to Collyer Sept. 28. Federal prosecutors said Bowdoin’s remarks were evidence that “this con man cannot manage to keep his stories straight.”

    Collyer ordered the ASD asset forfeiture a little more than three months later. In the INetGlobal case, the Secret Service said one of its undercover agents was on the receiving end of a sales pitch from an ASD member who was trying to recruit the agent into INetGlobal.

    Renner’s autosurf  “began operating just weeks after ASD was put out of business by the Secret Service, and this new entity uses the same terminology and business model as ASD,” the agency said in an affidavit for a search warrant.

    At least one of the undercover agents working the INetGlobal case also worked the ASD case, according to court filings. The Secret Service searched the Web for an INetGlobal affiliate site, and the INetGlobal affiliate who pitched the undercover agent also had been an ASD member, according to the affidavit.

    “The member asked if [the undercover agent] was a network marketer,” the Secret Service said. “The member said he had previously been a member of ASD . . . and said, ‘We know what happened there.’

    “The member said he was reluctant to join iNetGlobal due to it being similar to ASD,” the agency continued in the affidavit. “The member said, ‘we all know what this program is.’” The member said his daughter and wife surfed the websites and the member did not care about the services provided. The member said he just wanted to put his money in and get it out. The member said you convert your earnings to V-cash and then receive payouts by check or through an ATM card you can sign up for.”

    Less than a month later, FBI Director Mueller told Congress that “shell corporations” and “stored value” debit devices and “reloadable debit cards” increasingly were being used “to move criminal proceeds.”

    “This has created a ‘shadow’ banking system, allowing criminals to exploit existing vulnerabilities in the reporting requirements that are imposed on financial institutions and international travelers,” Mueller said.

    Mueller did not name any companies in his Congressional testimony.

  • ANALYSIS: Another Troubled Autosurf, Another Bizarre PR Approach; Some INetGlobal Supporters Attack The Messenger

    Steve Renner

    If you follow news about the so-called autosurf “industry,” the mind-boggling PR approach by some supporters of Steve Renner’s INetGlobal is apt to remind you of the bizarre approach employed by Florida-based AdSurfDaily and some members of the now-defunct Surf’s Up forum.

    If you’re new to the ongoing saga of AdSurfDaily (ASD), the developing story about INetGlobal and the autosurf “industry” in general, ASD’s case is instructive. Although ASD claimed to be a professional advertising and communications firm, one of its first efforts to counter the federal government’s allegations was to compare prosecutors and the U.S. Secret Service to “Satan” and the 9/11 terrorists who killed nearly 3,000 people in New York.

    ASD President Andy Bowdoin later asked for an evidentiary hearing in the civil-forfeiture case against the company’s assets  — the same sort of case INetGlobal is facing — but Bowdoin then took the 5th Amendment, as did his chief executive officer.

    In a comment that will live for the ages, one ASD supporter explained that Bowdoin, who was running the company with 10 bank accounts in his personal name and let it slip that ASD had $1 million in an account under a different name on the Caribbean island nation of Antigua, was “too honest” to testify.

    One of the issues in the ASD case was the Ponzi issue — specifically, whether ASD had sufficient revenue to pay members “rebates” without resorting to taking money from new members to pay old ones. ASD’s evidentiary hearing lasted two days. The company did not submit an audited and certified balance sheet to refute the government’s Ponzi claims.

    Instead, after the hearing — while ASD was awaiting a decision by U.S. District Judge Rosemary Collyer on whether it was operating lawfully and had demonstrated it was not a Ponzi scheme at the hearing  — the company issued a news release.

    The news release claimed ASD was expecting a revenue infusion of $200 million from a penny stock company. Performing no due diligence at all, some ASD members immediately raced to forums and websites to announce the company had a business deal worth one-fifth of a billion dollars.

    Other ASD members sought to substantiate the company’s announcement and insisted that ASD prove its $200 million claim. The company then deleted the news release.

    Meanwhile, ASD also claimed that Ponzi allegations brought against it by Florida Attorney General Bill McCollum had been dropped. Once again, ASD members who did no checking at all raced to forums and websites to announce the good news.

    In response, McCollum’s office issued a statement that, not only had Ponzi allegations not been dropped, they’d never been filed to begin with. ASD was accused by McCollum of operating a pyramid scheme.

    Earlier, some ASD supporters were part of a bizarre campaign to have McCollum charged with Deceptive Trade Practices for holding the view the company had broken the law. They also wanted to charge a Florida TV station with the same offense, apparently for broadcasting a story they deemed unflattering to ASD.

    Like ASD’s Andy Bowdoin, Steve Renner — now ordered by a federal judge to wear a GPS tracking device as he awaits sentencing on federal tax-evasion charges and plans his defense for the civil Ponzi allegations against INetGlobal — is being portrayed as a victim of a corrupt government bent on destroying small business.

    The approach is absurd. It did not work for Bowdoin, and it won’t work for Renner.

    Renner, of course, is entitled to have supporters. Regardless, his supporters will be hard-pressed to persuade — let alone convince — the Ponzi-hating public that government evil is driving events at INetGlobal when the Secret Service already has produced an affidavit that says a bank closed down Renner-connected accounts prior to the raid because it suspected money-laundering.

    Moreover, federal records show that one of Renner’s companies — a money-services business known as Cash Cards International (CCI) — previously had provided services for a Ponzi scheme that resulted in lengthy prison sentences for four people associated with the scheme.

    When the receiver in the Ponzi case asked Renner to convert electronic credits to cash to fund the estate for Ponzi victims, Renner could not do it because he had spent the money as though it were his own, according to court filings.

    As was the case with ASD, some INetGlobal members are attacking the media, amid claims there has been a rush to judgment.

    Blaming Renner’s predicament on the media or suggesting the media have rushed to judgment also won’t work. The media did not invent the allegations; it simply reported them, as it would do in any other case.

    Some INetGlobal members are pointing to an opinion piece on The Independent Business News Network (IBNN) website that the Star-Tribune newspaper of Minneapolis/St. Paul was guilty of “bias” in its coverage of the Secret Service raid on INetGlobal.

    The IBNN piece, however, did not disclose that Don Allen, the author of the IBNN editorial, also worked as a spokesman for a Renner company. In short, while Allen was opining the Star-Tribune was guilty of bias, he did not make it clear that his own impartiality could be questioned.

    IBNN’s Twitter site later reported that the Secret Service was “leaking” information to the PP Blog.  It simply did not happen. The Secret Service leaked no information to the Blog.

    While bashing the media in this context may provide some red meat for INetGlobal’s supporters, it does nothing to address the compelling reality that the allegations against Renner and his company are serious:

    Ponzi scheme. Wire fraud. Co-mingling. Suspicious withdrawals. Accounts closed by a bank that suspected criminal activity. Money-laundering.

    It’s the Minneapolis version of the ASD case. As was the case with ASD, INetGlobal is entitled to its day in court. It is entitled to argue passionately in its defense, and it is entitled to poke holes in the prosecution’s case. If the government does not have the goods, INetGlobal is entitled to win the forfeiture case and any future litigation that evolves.

    At the same time, INetGlobal members who support the company are entitled to argue their point of view passionately. They are not entitled, however, to be taken seriously if they spin events in ridiculous ways that cannot pass the giggle test.

    One difference between the INetGlobal forfeiture case and the ASD forfeiture case is that ASD did not appear to have gained traction in China. INetGlobal, though, does appear to have a substantial base of members in China. One of the issues in the INetGlobal case is language barriers: Can members who speak Chinese and have limited or no facility in English understand the business they joined and the complex litigation now engulfing the Renner companies?

    Neither bashing the government nor bashing the media does anything to address those concerns. Such an approach leads to questions about whether INetGlobal’s members who have limited facility in English are being ill-served by the efforts of English-speaking members to spin the story in ways that avoid the unpleasant realities and cloud the critical issues, which can be confusing even if a member has perfect understanding of English.

    On March 16, the PP Blog was provided a copy of an email some INetGlobal members received from their upline.

    “[T]he first court appearance which took place yesterday [March 15] went in favor of iNetGlobal,” the email claimed. It did not mention that a federal judge ordered Renner to wear the GPS tracking device as he awaits sentencing on four felony counts of income-tax evasion.

    Renner was convicted of the tax charges in December, more than two months prior to the Secret Service raid.

    Among the other claims in the email was that “[t]he judge in the case ordered the ‘Feds’ to release iNetGlobal payroll monies back to the company.”

    No such order appears to have been issued. Federal forfeiture law puts property that has been “arrested” — money in a bank account that has been seized, for example — in a state of limbo.

    Judges may entertain motions to have seized money released, but may be reluctant to release it out of concern the money will be “lost” prior to the conclusion of a forfeiture case.

    In general, the law seeks to avoid an inequitable result — for example, a decision to free money to pay employees could lead to a result in which less money would be available to compensate people who invested in a scheme and lost money.

    In the ASD case, the company asked for $2 million to be released. Collyer said no after hearing live testimony, weighing briefs submitted by attorneys from both sides and deliberating on the issues for several weeks.

    “The $2 million that ASD seeks to utilize are funds that were paid to ASD by advertisers and members,” Collyer ruled. “ASD has not demonstrated sufficiently that ASD is a legitimate business. Thus, the Court cannot release the funds to be used by the Company in its current form. And, if the plan to revamp ASD’s business proves unsuccessful, the citizens who paid that money will receive no advertising benefits and no return on their advertisement purchases. Quite simply, the money will be ‘lost’ forever.

    “Despite the obvious hardships endured by the employees of ASD and a great number of its members,” Collyer continued, “the Court cannot ignore its oath to uphold the law, nor can it rightly take the hardships of some and transfer them unto others.”

    Some of the same legal issues may come into play in the INetGlobal case, although the fact sets are not precisely the same. U.S. District Judge Donovan Frank is hearing the case, and the prosecution already has filed papers that reference ASD and a ruling by Collyer that ordered the forfeiture of more than $65 million to the government.

    Another section of the email was worded in a vague way that implied Donovan had arrived at the conclusion that INetGlobal might have the upper hand in the case.

    “Also indicated by the judge that inetGlobal should petition the court to have other funds released,” the email said.

    The mere act of petitioning a court for a result does not mean the court will rule favorably. That’s already been demonstrated in the INetGlobal case.

    Prosecutors sought to jail Renner, arguing he did not abide by the law while awaiting sentencing for his December tax conviction. Instead of jailing Renner, the judge ordered GPS tracking, enabling him to remain free.

    In the ASD case, members routinely spread misinformation after Collyer issued orders. When Collyer ordered ASD to file papers by a certain date, some ASD sponsors told downline members the prosecution had been ordered to prove ASD was a Ponzi scheme by the same date or lose the case.

    When Collyer ordered the government to file motions in response to Bowdoin’s pleadings by a certain date, ASD sponsors told downline members that the prosecution was in a panic because it could not prove ASD was a Ponzi scheme and was trying to find a way to save face.

    For at least a year,  the Pro-ASD Surf’s Up forum spread a rumor based on “inside information” that the prosecution had admitted behind closed doors that ASD was not a Ponzi scheme. The rumor persisted, despite the fact that the government filed a second forfeiture complaint against ASD-connected assets after the rumor started.

    Like the first complaint, the second complaint alleged the company was operating a Ponzi scheme. Not even the filing of the second complaint stopped the rumor, which was being repeated as though the court filings that disproved it simply did not exist.

  • INetGlobal, AdPacs Websites Offline; Acesse.com, Associated Search Site, Has Limited Functionality

    UPDATED 2:24 P.M. ET (U.S.A.) If you’re wanting to visit Steve Renner’s INetGlobal.com and AdPacs.com sites, at the moment you’ll land on pages that say “InetGlobal is currently down for maintenance. We’ll to (sic) be back by 12:00pm CST.”

    The message on InetGlobal.com and AdPacs.com has been in place for at least three hours and, despite the fact the INetGlobal and AdPacs sites suggested they would be back up by noon Central Standard Time, that time has passed by more than an hour — and the sites still are down.

    Why the Renner sites are down is unclear.

    UPDATE 2:24 P.M. The message on the site now has been changed to read, “InetGlobal is currently down for maintenance. We’ll to (sic) be back by 12:00am CST on Saturday, March 13th.”

    Another Renner site — Acesse.com, a search engine the U.S. Secret Service said last month was just a link to another search engine — appears to have limited functionality. It is possible to perform a search on the site and glean results, but several links on the site appear to have no functionality.

    The links are titled Images, Videos, Maps, News and Shopping, and appear in the upper-left corner of the Acesse.com site. The links appear to be dead. At the same time, other links that appear on the site — links that point to other Renner sites such as Adpacs.com and INetGlobal.com — are generating the “down for maintenance” message.

    Another link on Acesse.com titled “Top Searches” resolves to a page that says, “Top searches as of Tuesday December 2nd 2008 00:00:00 CST.”

    It was not immediately clear if the dead links at Acesse.com were caused by code that had been

    Part of the maintenance message at INetGlobal and AdPacs.

    removed to disable the links or code that had not been entered.

    The error message at INetGlobal and AdPacs appears under INetGlobal’s logo, and a headline that reads, “Preparing for bigger waves!” Two men are pictured riding a wave on surf boards, and a subhead reads, “Surf Alert.”

    Acesse.com purports to include a “Get Paid To Search The Web” element through the search engine.

    In a court affidavit last month, the U.S. Secret Service said Renner was at the head of an international Ponzi scheme.

  • Is A New Company Known As RGMG Emerging To Promote Elements Of Inter-Mark Corp. In Wake Of Secret Service Raid At INetGlobal Amid Ponzi Allegations?

    Image of the logo of V-Local.com from a March 2009 news release.

    UPDATED 5:43 P.M. ET (U.S.A., Jan. 20, 2011.) On Feb. 23, the U.S. Secret Service raided the Minneapolis offices of INetGlobal, a company operated by Steve Renner under the Inter-Mark Corp. umbrella. The raid occurred amid allegations that INetGlobal was operating an autosurf Ponzi scheme and also engaging in wire fraud and money-laundering.

    A week later — on March 2 — a domain titled RGMG.net was registered in the name of Matt Renner, according to web records. The domain lists a different Minneapolis address than the Steve Renner entities, some of which used a “V” theme: “V-Media” and “V-Local,” among others.

    Matt Renner, 27, is Steve Renner’s son.

    “We’re running a legitimate business,” he said of RGMG.

    V-Local, which has a website at V-Local.com that is registered to Renner’s Inter-Mark in Las Vegas, was “offered to iNetGlobal members as a service they could sell,” the Secret Service said in an affidavit last month.

    Matt Renner, who worked as an executive at V-Local, said V-Local provided legitimate products and services.

    “We at V-Local were doing nothing wrong,” he said.

    And Matt Renner defended his father. “I don’t believe any wrongdoing was done,” he said.

    Steve Renner was convicted in December of four felony counts of income-tax evasion.  He was awaiting sentencing in the tax case, even as the Ponzi allegations surfaced against INetGlobal.

    V-Local’s logo is featured prominently on the RGMG.net site, which says, “RGMG LLC is a rising player in Digital Media Planning, Buying, Selling and Development. With over 35 years combined digital marketing experience and more than 800 past and current clients, the team at RGMG has the experience to deliver high value wide ranging services.”

    Another section of the RGMG site says, “Based out of the Beautiful city of Minneapolis Minnesota, RGMG started because the demand for a company who’s (sic) Executives pay more attention to their customers (sic) needs, than their own pocket books, was felt by Founder and President, Matthew D. Renner.”

    Yet another section of the RGMG site says, “The team at RGMG has developed many custom platforms including in partnership with V-Media and iNetGlobal the powerful local lifestyle and business directory V-Local.com.”

    Although there are serious allegations of wrongdoing against INetGlobal and it is possible that Ponzi proceeds were used to fund V-Local, the RGMG.net site does not mention the allegations or inform visitors that the Secret Service painted a picture that Steve Renner’s claims about V-Local were overblown. (Read a section of the affidavit concerning V-Local lower in this story.)

    “[T]here is probable cause to believe that [Steve] Renner is operating a large, Internet-based, Ponzi scheme through his umbrella corporation, InterMark, and some of its subsidiaries, particularly Virtual Payment Systems [LLC of Wisconsin/Brackets Denoting the LLC Designation added Jan. 20, 2011], V-Media, Cash Cards International, and V-Local,” the Secret Service said last month. It further alleged that INetGlobal was the “primary vehicle for the perpetration of this fraud.”

    NOTE IN BOLD ADDED JAN. 20, 2011: An Indianapolis-based company known as Virtual Payment Systems Inc. has contacted the PP Blog to let it know it is not affiliated with the Renner company Virtual Payment Systems LLC of Wisconsin, which is referenced in the paragraph above.

    There have been no assertions of wrongdoing against RGMG, and the RGMG site does not appear to have a surfing component among the services listed. RCMG stands for “Renner Global Media Group,” according to the site.

    Matt Renner, who said he read the Secret Service allegations, said he was not worried that problems could spill over into RGMG and create a problem for the emerging brand.

    “It’s a legitimate website,” he said. “It’s a legitimate company; it’s absolutely a valuable service.”

    The site, however, may come with a built-in PR dilemma: how to navigate the choppy waters of embracing the Steve Renner V-Local brand without addressing the Ponzi assertions against INetGlobal and V-Local, perhaps especially if a Renner family member is at the head of RGMG.

    At the same time, certain marketing materials and the prominence with which Steve Renner’s V-Local is referenced on the RGMG site — indeed, V-Local’s logo appears on the site in at least two places and RGMG encourages visitors to make V-Local their “new Homepage” — may leave some customers and employees of INetGlobal and its “V” entities scratching their heads.

    V-Local’s name is prominently mentioned in INetGlobal marketing materials, including a news release dated March 25, 2009. The headline on the news release said, “iNetGlobal launches V-Local and iNetSurf on Saturday, March 28, 2009.” The news release included the V-Local.com logo (pictured above.)

    Despite the claim that V-Local launched in March 2009, a news release issued 11 months later — in February 2010 — claimed a January 2010 launch date for V-Local under this headline: “V-Local Reports Exponential Growth Following January Launch.” The Feb. 16 news release includes a graphic of a logo for V-Local labeled “BETA.”

    Why the news releases list two different launch dates for V-Local is unclear. Steve Renner’s own website — SteveRenner.com — announced the launch of V-Local on March 3, 2009.

    “Steve Renner who is known for his knack of creating successful online ventures, has Struck Gold with his latest project, V-Local,” the website reported.

    No mention was made that Renner already was under indictment for tax evasion and that another Renner entity — Cash Cards International — had been unable to return money to victims of a Ponzi scheme known as “Learn Waterhouse,” amid assertions that Renner had spent customers’ money as though it were his own and had invested $250,000 in the Learn Waterhouse scheme.

    Renner’s site said the type of service V-Local provided “would normally cost the $1,000’s but V-Local has set the price at an extremely affordable price of just $59 per month, for their Top Of The Line ‘Showcase’ listing.”

    By clicking on the “Contact Us” link on The V-Local.com website, visitors arrive at a page that lists the street address of Steve Renner’s Minneapolis entities.

    A section of the Feb. 16, 2010, news release reads, “V-Local, the first-of-its-kind online business and lifestyle directory, announced today that it has experienced unprecedented growth since its launch on Jan. 15, 2010. Site traffic increased 900 percent in February alone, according to Google Analytics, with more than 100,000 visitors since the site’s launch.”

    Going back 11 months, the body copy of the March 2009 news release that announced V-Local’s launch read, in part: “On Monday, March 16, 2009 iNetGlobal did a ‘soft’ launch of iNetSurf. This product and had over 3,000 internet users sign up in one work day. At iNetSurf current pace, we can expect over 200,000 active ‘surfers’ in 6 months!”

    Meanwhile, the emergence of RGMG after the Secret Service raid at INetGlobal could lead to questions about why INetGlobal ever used an autosurf component and folded components such a V-Local into the enterprise.

    Between Jan. 11 and Jan. 29, according to a Secret Service affidavit, undercover agents logged in to the INetGlobal website on “multiple occasions.”

    Among the things agents noted while logging in, according to the affidavit, was that ‘V-Local’ has an address listed as 250 Second Avenue South, Suite 145, Minneapolis, Minnesota, 55401.”

    The Secret Service said it conducted surveillance of the office suite in January — prior to the raid — from a skyway and corridor open to the public.

    “Agents saw signs reading ‘iNetGlobal’ and ‘V-Local.com’ at the door of Suite 106A, and saw signs reading ‘V-Records’ and ‘VWebs’ at the door of suite 145,” the agency said. The office suites later were searched as part of the raid.

    The phone number associated with RGMG.net in its domain registration also is referenced in INetGlobal marketing materials that quote Matt Renner.

    In the Feb. 16 news release, which was issued about a week before the Secret Service raid, INetGlobal is described as V-Local’s parent company.

    “V-Local is a lifestyle and business directory, featuring over 3.5 million businesses, events, classifieds and coupons,” the release said. “As a premier online advertising resource for businesses, V-Local provides a platform for businesses to leverage their brand and generate local and global exposure. V-Local bridges the gap between businesses and consumers at both global and local levels.”

    A week after the Feb. 16 news release, the Secret Service suggested in its affidavit for a search warrant that Steve Renner’s V-Local marketing claims were overblown. Here is a snippet from the affidavit:

    “[Steve] Renner claimed that iNetGlobal’s business directory, V-Local, had over 3.5
    million businesses signed up. He explained that attendees could make a great deal of money selling V-Local and signing up businesses to participate in V-Local.

    “[Steve] Renner stated that V-Local was expanding into Canada, Europe, and China. He claimed that when a company was listed on V-Local, iNetGlobal would list the business with over 65 local directories, plus social networking sites, and would arrange for the business to be input into Garmin and TomTom GPS navigation devices, as well as Cadillac OnStar.

    “On January 28, 2010, [an undercover agent] searched for ‘coffee shop’ in Minneapolis, Minnesota on V-Local, asking V-Local to find the nearest coffee shop. There were no results. [An undercover agent] then broadened the search to coffee shop, food and dining. V-Local then identified six coffee shops in Iowa, Kansas, and other states, only one of them in Minnesota (in Byron).

    “[Steve] Renner stated that if an attendee wanted to sell V-Local the attendee would need to pay $300, watch several videos, and take a certification test. Renner stated that for every person in a member’s ‘downline’ who got certified to sell V-Local, the original member would receive $100. Renner stated that this would be an enormous jump in a member’s income. Approximately one week after the Freedom Conference [in New York Jan. 23], [an undercover agent] searched on V-Local for ‘gym’ and ‘restaurant. There were no hits in the search for gym, and only one hit in the search for restaurant.”

    Matt Renner said he believed RGMG would emerge a leader, despite the assertions against INetGlobal.

    “They didn’t shut the company down,” he said, referring to INetGlobal. “No arrests were made. RGMG is a company that will generate good, positive results.”

  • AdSurfDaily’s Bowdoin Says He’s Appealing Forfeiture Order Issued By Federal Judge; Notice Filed 6 Days After INetGlobal Raid; Riddle Of Bowdoin’s Competing Affidavit Claims Unsolved

    Andy Bowdoin

    The president of a Florida-based autosurf company implicated in a Ponzi scheme by the U.S. Secret Service says he is appealing a forfeiture order that gave the government title to more than $65 million seized from his personal bank accounts in 2008.

    Notice of the appeal by Andy Bowdoin of AdSurfDaily was filed by his attorneys March 1, about six days after federal agents — citing the Jan. 4 forfeiture order by U.S. District Judge Rosemary Collyer of the District of Columbia — raided the Minneapolis offices of INetGlobal.

    In an affidavit for a search warrant last month, the Secret Service said INetGlobal, a company operated by Steve Renner, was operating a similar autosurf Ponzi scheme and also engaging in wire fraud and money laundering.

    The INetGlobal affidavit asserts, among other things, that a member of ASD attempted to recruit an undercover Secret Service agent into INetGlobal despite the member’s own reservations about ASD.

    INetGlobal was described by the ASD member as a wink-nod enterprise, according to the Secret Service affidavit. The company “uses the same terminology and business model as ASD,” the agency said.

    In court filings prior to the INetGlobal raid, Bowdoin’s attorneys laid the groundwork for an appeal of Collyer’s Jan. 4 forfeiture order on the grounds of judicial error, arguing that Bowdoin had not received proper notice about orders Collyer issued last year and did not react to them because of computer glitches at the office of one of his attorneys, Charles A. Murray.

    “I experienced as yet unidentified computer/server issues, wherein multiple email messages apparently never loaded to the firm’s Inbox,” Murray said in court filings on Feb. 17.

    The glitches occurred between Nov. 10 and “early January” of this year, Murray said.

    Paperwork for Bowdoin’s appeal shows a “minute order” issued by Collyer Feb. 21, denying earlier motions by Bowdoin.

    A “minute order” is a document that encapsulates legal issues before a judge. Minute orders sometimes are used when paperwork among the parties in a case is flying and a judge memorializes rulings by addressing them in a short entry, as opposed to issuing lengthy orders for each issue.

    “The Court’s Order of November 10, 2009 . . . was not a final, appealable order,” according to Collyer’s minute order. “Nor has Mr. Bowdoin shown that the Court erred in entering . . . the November 20, 2009, Order to Show Cause. The order granting default judgment and final order of forfeiture . . . is the final order in this case.”

    On Nov. 10, Collyer ruled that Bowdoin no longer had standing in the case after he had battled for 10 months to reenter the case. Bowdoin submitted to the forfeiture in January 2009 — and then changed his mind, first acting as his own attorney and later acting with Murray’s help because Bowdoin had fired his previous paid counsel.

    On Nov. 20, Collyer issued an order that gave potential claimants in the case 30 days to come forward. No claimant emerged. On Dec. 17, however, Bowdoin filed a motion to disqualify Collyer, saying she was biased. Collyer denied the motion Dec. 18. She issued the forfeiture order Jan. 4.

    In February, Bowdoin, 75, flatly claimed in a sworn affidavit that he was told by a former defense attorney that, if he submitted to the forfeiture in January 2009 of tens of millions of dollars, he would face no jail time if criminal charges were filed in the ASD Ponzi scheme case.

    He did not name the attorney in the February filing, referring to him obliquely as “prior counsel.” In an earlier filing, Bowdoin identified his counsel as Stephen Dobson.

    “I was assured by my prior counsel that, if I released my claims in this [civil-forfeiture] action, I would not be facing any incarceration,” Bowdoin claimed last month. “My January 2009 motion to withdraw my claim . . . was solely based upon prior counsel’s unilateral mistaken belief that my release of claims would unequivocally assure that any subsequent criminal sentence entered would not include any prison time.”

    Last month’s filing was witnessed by Florida notary public Joe B. Cox of Lee County.

    But in a sworn affidavit Bowdoin signed Sept. 15 before a different notary public — Patricia C. Sanson of Lee County — Bowdoin repeatedly said Dobson had said only that there was a possibility Bowdoin would not be sentenced to prison if criminal charges emerged.

    In the Sept. 15 affidavit, Bowdoin repeatedly swore that Dobson had not promised him no jail time.

    These are among the phrases Bowdoin swore to in the Sept. 15 affidavit (emphasis added):

    • Dobson represented to me that I could possibly avoid prison or get a reduced sentence if I agreed to disclose details concerning ASD and releasing the assets.
    • I also signed a document stating that I would release my claims in the abovecaptioned civil in rem forfeiture proceeding, again thinking that necessary for a possible avoidance of a prison term.
    • I did all of this on the understanding that by cooperating I could possibly avoid a prison sentence.
    • I agreed not to exercise my rights in the civil forfeiture proceeding, anticipating from representations made by Dobson that this could possibly keep me out of prison.
      Dobson lead [sic] me to believe that if I cooperated there was a possibility that I would not be incarcerated or imprisoned.
    • I believed that my cooperation would still result in a criminal sentence that could possibly not include imprisonment or incarceration.
    • I slowly came to understand what I understood from Dobson not to be the case: that my agreement to cooperate provided me no benefit in the criminal matter except the possibility of a reduced sentence if the judge desired which would still be a life sentence.

    Bowdoin’s filing last month led to questions about whether he deliberately chose to appear before a different notary to swear to the affidavit. At the same time, it led to questions about whether Bowdoin somehow was unaware that Collyer already had cited Bowdoin’s Sept. 15 sworn affidavit in a major ruling that Bowdoin no longer had standing in the case.

    On Nov. 10, Collyer noted Bowdoin’s repeated use of the words “possibly,” “possible” and “possibility” in the Sept. 15 affidavit when referring to the advice Dobson had given him on the matter of jail and finding that Dobson had behaved responsibly while representing Bowdoin.

    “Such an approach from counsel could be seen as the norm when the Government’s evidence is strong,” Collyer said. “What Mr. Bowdoin hoped to gain from his release of claims/early acceptance of responsibility and his debriefing with the Government was a promise of no jail time. When that was not forthcoming from the Assistant United States Attorney, Mr. Bowdoin balked and tried to back up, as if he had not already released his claims and talked to the Government.”

    There may be other news associated with Bowdoin’s appeal: The filings suggest that William Cowden, who spearheaded the forfeiture case for the Department of Justice as an assistant U.S. Attorney and then accepted a job in the private sector, may be returning as a special prosecutor while maintaining his job in the private sector.

    Cowden was derided by Bowdoin supporters as “Gomer Pyle,” but piloted the case through an evidentiary hearing that resulted in a ruling from Collyer in November 2008 that ASD had not demonstrated it was a legal business and not a Ponzi scheme.

    With the Secret Service leading the investigation, Cowden then filed a second forfeiture complaint against assets linked to ASD. The second complaint was filed in December 2008 and named members of Bowdoin’s family as beneficiaries of ASD’s illegal scheme.

  • Timeline Suggests INetGlobal Was Pounding Clickbank Vendors With Traffic From China In Months Proceeding Raid While Sucking Bandwidth And Destroying Conversion Stats

    EDITOR’S NOTE: Untargeted, unfocused traffic and participants who did not have websites to advertise are two of the issues in the AdSurfDaily autosurf Ponzi scheme case. They also are issues in the INetGlobal case.

    UPDATED 8:20 A.M. ET (March 10, U.S.A.) Public records and other information suggest INetGlobal was becoming largely dependent on cash from Mainland China and was routing unwanted traffic that did not convert into sales to the sites of Clickbank vendors — while passing along the bandwidth costs to the vendors and grossly distorting  their conversion statistics.

    In an affidavit for a search warrant, the U.S. Secret Service, citing an analysis of INetGlobal’s money stream by an unnamed employee, said “at least 87% of the company’s revenue was generated from sale of memberships to members residing in China.”

    The affidavit also describes an INetGlobal function in Flushing, N.Y., on Jan. 23 that was attended by at least two undercover agents.

    About 400 people attended the function, the Secret Service said. The “majority” were Chinese. Attendees to whom an undercover agent spoke “had either little or no facility in English.” The agent noted that that “conference registration took a long time because nobody at the registration desk spoke Chinese, and many of the conference attendees could not make themselves understood in English.”

    Moreover, the agent said, when INetGlobal owner Steve Renner “asked, through an interpreter, how many people in attendance had their own business . . . only two raised their hands.”

    One attendee — an existing INetGlobal member — was asked by the second undercover agent if she had a website to advertise in INetGlobal’s rotator.

    The INetGlobal member — a woman Renner had identified as a “New Jersey resident making $6,000 per day, or $180,000 per month” — said she had no site to advertise in the rotator because having a website “was not required,” the Secret Service said.

    A second INetGlobal member approached by the same undercover agent was asked if he had a website to advertise in the rotator. This member — a man described as telling the agent he made $3,000 a month in INetGlobal — explained that he had a website, but did not post it because “it was ten years old,” the Secret Service said.

    Renner was observed telling different stories, the Secret Service said. One version had INetGlobal posting $25 million in revenue in December; another version “a short time later” pegged the figure at $20 million. Renner also said “iNetGlobal’s search engine, Access, would soon rival Google’s.

    “Renner did not explain to the crowd that Access was simply a link to another search engine, and that an Access web search was just the same as a web search on this other search engine,” the Secret Service said.

    Despite the claim that INetGlobal’s search engine would rival Google’s, the Secret Service said, internal company emails discussed “the possibility of the other search engine cutting the link and thus taking down Access.”

    A Public Tip-Off From Renner Himself That INetGlobal Was Up To No Good?

    Meanwhile, web records suggest that INetGlobal — at least for a time — either took it upon itself to add the sites of Clickbank vendors to its advertising rotator or instructed members who did not own businesses to add Clickbank links, an act that resulted in a surge of traffic from China that led to few if any sales. The apparent lack of sales suggests that Chinese members viewing the ads either did not understand what they were viewing or were viewing the ads simply to get paid.

    At the same time, web records suggest that INetGlobal was relying on the websites of individuals and companies that had no tie to the firm to provide surfers something to see in the firm’s advertising rotator — at the bandwidth expense of the unaffiliated companies and individuals, at least some of whom were Clickbank vendors.

    One of the Clickbank vendors — writing on the Digital Point Forum Sept. 26 — reported that he was studying his Clickbank affiliate stats and discovered something “REALLY messed up.”

    The vendor reported on Digital Point that the ID “inetgbal’ suddenly was sending  junk traffic that “appears to be coming from China.”

    The vendor published screen shots to support his claim and noted, “If you do a ‘surfin demo’ on the iNetGlobal website, you’ll see it takes you to random CPA offers and Clickbank products.”

    On Sept. 27, the vendor reported on Digital Point that he considered the traffic problematic and was considering a means of blocking it at the server level with the use of an .htaccess file.

    Working with .htaccess files, which can be used to block traffic from an IP or IP range, is not for the faint of heart. It is not uncommon for inexperienced webmasters to bring down their own servers or create an endless loop of error messages when attempting to tweak server behavior with an .htaccess file.

    Recognizing the dilemma, the Clickbank vendor put out a call for “good coders” to walk him through a fix for a problem he believed INetGlobal was causing for him.  Other posters inquired about the possibility of asking Clickbank to block the unwanted affiliate link.

    The discussion on the forum suggests INetGlobal was creating a situation in which Clickbank affiliates might have to incur an expense simply to block unwanted traffic — while creating the additional burden of polluting conversion statistics, potentially making the products less attractive to affiliates.

    If, say, a product ordinarily made one sale per each 100 views of an affiliate link — and if INetGlobal suddenly sent through 1,000 page views from China (er elsewhere) that did not convert because the traffic was untargeted or people simply were surfing to get paid — a vendor’s conversion rate could drop from one in 100 to one in 1,100.

    On Nov. 6, 2009, a person posting as Steve Renner — the “Director” of INetGlobal — appeared at Digital Point. A little more than a month later, Renner was convicted of income-tax evasion in a case brought in September 2008.

    Less than three months after Renner’s tax conviction, the Secret Service asserted that INetGlobal was part of an international Ponzi scheme that had engaged in wire fraud and money-laundering.

    “The problem was we had no Daily Budget in place and so traffic was running rampant,” the Digital Point poster purporting to be Renner explained on Nov. 6.

    The Clickbank vendor did not mince words in his response to the Nov. 6 post. Others were equally unhappy.

    Visit the intriguing thread on Digital Point.