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Tag: U.S. Attorney Benjamin B. Wagner

  • Judge Calls Ponzi Schemer Who Raised Conspiracy Theory His Attorney Was Working With The Government A Liar, Sentences Him To 16 Years In Federal Prison

    ponziblotterAnthony Vassallo pulled a page from Ponzi schemer Andy Bowdoin’s playbook when he advanced a conspiracy theory that his own defense counsel was working with the government to sell him down the river.

    It didn’t work for Bowdoin, the 78-year old recidivist securities fraudster now serving a 78-month prison term after claiming he’d been “hoodwinked” by his lawyer.

    Now, a similar claim hasn’t worked for Vassallo, 34. He is one of the purveyors of the Equity Investments Management & Trading (EIMT) Ponzi scheme in California, a crime that served up a heaping helping of the bizarre. Three individuals who led an alleged shakedown bid to recover money for investors were charged criminally in 2009, amid allegations they posed as federal agents.

    The Sacramento Bee reported that Vassallo pleaded guilty to wire fraud on Feb. 1. After that, he tried to change his plea, claiming that government prosecutors and agents and a defense attorney “ganged up on him to extract a guilty plea to a crime he didn’t commit.”

    But U.S. District Judge Garland E. Burrell Jr. called Vassallo a “liar” in court on Friday, sentencing him to 16 years in federal prison, prosecutors said.

    “This lengthy sentence is justice served, though it is small comfort to the victims of Vassallo’s crimes, many of whom lost their homes, health, and retirements to this fraud,” said U.S. Attorney Benjamin B. Wagner of the Eastern District of California. “This case was unusual in its scope, but not in the nature of the fraudulent conduct.”

    EIMT gathered more than $80 million before it began to unravel in late 2008, prosecutors said.

    With EIMT foundering, “Vassallo continued to recruit new investments,” prosecutors said. “One investor transferred $250,000 to Vassallo’s account less than two weeks before Vassallo admitted to a group of investors that he had ceased trading and their money had been lost.”

    “This was a classic Ponzi scheme, where you rob Peter to pay Paul,” said José M. Martínez, IRS-Criminal Investigation special agent in charge. “Eventually, you run out of Peters and Pauls.”

  • California Scammers Who Wiped Out Investors In 4,000 Percent ‘International Bank Trades’ Swindle Get Extra Prison Time For Filing False Liens Against Federal Prosecutor, FBI Agents

    ponziblotterRonald Wesley Groves and Donald Charles Mann swindled $4.8 million from 642 investors in a bizarre “international bank trades” caper that promised a payout of 4,000 percent. Now, they’ve been sentenced to an extra year in federal prison for filing false liens against a federal prosecutor and two FBI agents involved in the fraud probe, the office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California said.

    Prime-bank fraud schemes, which may trade on secrecy and claim to be humanitarian in nature, are among the strangest of all in Ponzi Land. In the Groves/Mann scheme, $300,000 made its way into “the coffers of a Liberian presidential candidate,” prosecutors said.

    Liberia is a country in West Africa.

    Groves, 71, was sentenced last week to 10 years in federal prison for his role in the “Money Growth Solutions” (MGS) swindle, which operated between April 2005 and April 2006.

    Mann, 56, was sentenced to more than 17 years for the same swindle.

    Both men were sentenced today to an extra year in jail for filing the bogus liens while they were awaiting trial on fraud charges from the MGS scheme in 2008. The liens claimed that Groves and Mann were owed $101.9 million and that the meter was running against the prosecutor and FBI agents at a rate of $100,000 a day.

    Groves and Mann were charged with four counts of retaliation against federal officials by false claim and slander of title and one count of obstruction of justice.

    From a statement by prosecutors:

    The defendants told investors that these bank trades were a highly secretive investment vehicle known only to a few people around the world.

    In June 2011, a jury returned guilty verdicts against Groves and Mann after a nine-day trial. According to evidence presented at their trial, in one program, investors were offered a 10 to 1 return (1,000 percent) on their investment within a matter of weeks. In a later offering, the defendants promised a 40 to 1 return (4,000 percent) in the same amount of time. The defendants told investors that while their money was waiting to be placed into a bank trade, it would be maintained in an escrow account that could not be touched for any other purpose. The defendants also told investors that if they were unable to execute a “bank trade,” the investors would receive their entire investment back plus 6 percent interest within 12 months. With the exception of a few people who were able to obtain refunds, every MGS investor lost their entire investment.

    The federal investigation revealed that by April 2006, out of the $4.8 million received, Money Growth Solutions had less than $65,000 remaining in its bank account. Some of that money — $300,000 apiece — went into the pockets of the two defendants. The remainder of the money went to the defendants’ various pet projects, including $300,000 to the coffers of a Liberian presidential candidate and $2.5 million to a Florida company that was supposedly developing a revolutionary battery. The battery company was later determined by the Securities and Exchange Commission to be a scam and its owner was federally indicted.

  • RECOMMENDED READING: ‘Naras Funds’ Was Ponzi Scheme Tied To 2 Other Fraud Schemes, Prosecutors Say; 50-Count Indictment Returned After 4-Year FBI/IRS Probe

    “He marketed his plan as ‘simply the best financial plan ever created.’” — Office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California, Sept. 14, 2012

    A California man and his 76-year-old father-in-law ran a $7 million Ponzi scheme called Naras Funds, federal prosecutors said yesterday.

    The younger man — Lee Loomis, 54, of Granite Bay — joined with five others in two mortgage-fraud schemes that caused more than $10 million in losses, prosecutors said.

    Now, all seven individuals have been charged in a 50-count indictment after a four-year investigation by the FBI and the IRS, prosecutors said.

    Loomis, also known as Lawrence Leland Loomis, was arrested yesterday. His father-in-law, John Hagener of Granite Bay, is said to be cooperating with investigators.

    From a statement by prosecutors yesterday (italics added):

    The three frauds are connected to a wealth-building program offered to the public through Loomis Wealth Solutions (LWS) in California, Illinois, Washington, and elsewhere from 2006 through 2008. According to the indictment, Loomis encouraged members who joined LWS: (1) to purchase whole life insurance; (2) to “harvest” home equity and retirement accounts to buy shares in the Naras Funds; and (3) to serve as “nominees” in the purchase of residential real estate controlled by Loomis. Loomis promised members of Loomis Wealth Solutions that they could acquire real estate at no cost to themselves. Moreover, he said he would pay them more than $300 per month for each home they agreed to acquire and those payments could be applied to the life insurance premiums. He marketed his plan as “simply the best financial plan ever created.”

    In the Naras Funds Ponzi scheme, Loomis and Hagener are charged with falsely promising 12 percent annual returns in two investment funds: (1) Naras Secured Fund #1 and (2) Naras Secured Fund #2. According to the indictment, to induce people to invest in the Naras Funds, Loomis and Hagener falsely promised that the Naras Funds were invested in junior mortgages paying 14 percent annual returns. The two men also claimed that the Naras Funds were guaranteed by secured deeds of trust in residential real estate and by backing from a third-party company. According to the indictment, those statements were false. In fact, Loomis and Hagener used the money to pay operating expenses of various Loomis-controlled companies, to pay themselves, and to pay earlier investors. Loomis and Hagener are charged with mailing false monthly investment reports to victims and arranging wire transfers of victims’ home equity and retirement accounts to the failing Naras Funds in 2008.

    Meanwhile, the Sacramento Bee is reporting this (italics added):

    The alleged fraud was so complex that federal agents and prosecutors took years before they were ready to seek an indictment, and the cast of characters that Loomis surrounded himself with were worthy of a screenplay.

    One was a white supremacist, another a lifelong con man who fled the country and was eventually arrested coming in from Canada with $70,000 crammed in his cowboy boots.

    Read the report in the Sacramento Bee.

    Read yesterday’s statement by prosecutors on the website of the FBI.

  • MOST UN-‘WISE’: 2 Ponzi Schemers Ride Their Wordplay To Prison Sentences Totaling More Than 33 Years; Judge Declares Crime ‘Evil’

    “Defendant Trebor Company (Robert spelled backward) is a sole proprietorship owned by [Robert C. Brown Jr.] and is the name he has used for his ‘investment group.’” — U.S. Securities and Exchange Commission, in civil complaint against Trebor and Brown, July 23, 2008

    “Evidence at trial established that much of the investor money was funneled through the ‘WISE’ account (wise investors simply excel) opened by Duane Allen Eddings.” — Office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California, April 24, 2012

    It was a Ponzi scheme involving a purported expert, a shill and at least $17 million — and it featured wordplay: A business entity known as TREBOR got its name from spelling “Robert” backward, and WISE was a limited-liability company that stood for Wise Investors Simply Excel. Now, TREBORS’s namesake Robert C. Brown Jr., 59, of Vallejo, Calif., has been sentenced to 15 years and eight months in federal prison.

    Meanwhile, Duane Allen Eddings, 52, of San Francisco, has been sentenced to 17 years and six months. Federal prosecutors said Ponzi cash was funneled through a WISE account he opened, setting the stage for money-laundering to occur through an account Eddings controlled in the  name of CDC Global Inc. He is listed in records as the managing member of WISE, and prosecutors said he effectively was shilling for Brown by painting him as a stock-market “expert.”

    Eddings was found guilty by a jury last year on Ponzi-related charges of money-laundering, wire fraud, bankruptcy fraud and tax evasion. Ponzi colleague Brown pleaded guilty to wire fraud.

    In bringing a civil action in 2008, the SEC said investors believed Brown would invest their money in the stock market. But most of the funds never were invested.

    Instead, “Brown deposited investors’ money into accounts that he treated like personal piggy banks, using the money to pay for luxurious personal expenses such as upkeep on his Ferrari, limousine services, and expensive shopping trips with his girlfriend,” the SEC alleged in 2008.

    After the SEC brought its 2008 civil case, Brown and Eddings were charged criminally in 2009. The investigation that led to the charges was conducted by the U.S. Postal Inspection Service and IRS-Criminal Investigation.

    False statements and omitted details critical to prudent investment decisions were part of the Brown/Eddings scam, prosecutors charged.

    Eddings showcased his wealth to investors, claiming Brown was the “expert” who made it possible, prosecutors said.

    As the probe moved forward, however, investigators discovered that Eddings had invested only $1,000 with Brown and had been using investor cash to live the high life by funneling client money that did not belong to him through WISE — and then transferring it to the CDC Global account to make personal purchases.

    “In sentencing Brown, [U.S. District Judge John A. Mendez] expressed sympathy to the victims stating, ‘This is a crime among the worst that I see,’” prosecutors said.  “And he said that what Brown had done to his victims was ‘evil.’ Judge Mendez later said that this comment applied equally to Eddings. He further said that he was not convinced that the defendants were ‘no longer a danger to the public.’”

    About 400 victims were defrauded by the Brown/Eddings Ponzi, which operated between September 2005 and May 2007, prosecutors said.

    Making matters worse was that Brown and Eddings “encouraged investors to raise additional funds by taking out mortgages and home equity lines of credit on their homes,” prosecutors said.

    “Many” investors lost their homes, prosecutors said.

    In reverse-engineering the complex caper involving Brown and Eddings, investigators discovered that “Edding’s personal spending habits led to the collapse of the Ponzi scheme” and that Eddings had grossly understated his taxable income during one of Ponzi years and claimed to have a taxable income of zero during two of the years.

    Some of the Ponzi money went to “lulling payments to earlier investors” in a failed bid to keep the scheme afloat and prevent its detection, prosecutors said.

    “It can be devastating when the financial well-being of an individual falls into the wrong hands through trickery and deceit,” said Marcus Williams, special agent in charge of the IRS Criminal Investigation Unit.

    Postal Inspector Oscar Villanueva described the Brown/Eddings scheme as “complex.”

    “Fraud schemes like the one perpetrated in this case are devastating to victims,” said U.S. Attorney Benjamin B. Wagner.

  • BULLETIN: Man Whose Invesment License Was Revoked 6 Years Ago Arrested In California; Janamjot Singh Sodhi Suspected Of Hatching Swindle That Gathered At Least $2.4 Million, Feds Say

    BULLETIN: A California man whose license to deal in investments was revoked in 2005 and was the subject of a desist-and-refrain order four years later has been arrested on charges be was operating a fraud scheme, federal prosecutors said.

    Janamjot Singh Sodhi, also known as Jimmy Singh, was arrested yesterday and will make a court appearance today in California, prosecutors said.

    Sodhi also is known as “Jimmy Sodhi,” according to records in California.

    Sodhi, former owner of a company known as Elite Financial Inc., gathered $2.4 million from investors despite his dubious history, according to prosecutors.

    Some of the money was used to pay off previous investors and personal bills, prosecutors said.

    He and Elite are named in a January 2009 desist-and-refrain order issued by the state of California. The order alleged that Sodhi wrote bad checks to an investor after being permanently banned from the New York Stock Exchange in 2005 for misappropriating $474,700 belonging to a client.

    The new charges against Sodhi were not immediately clear. The Financial Fraud Enforcement Task Force said this afternoon that the office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California is prosecuting the case and that the arrest evolved from an investigation by the FBI and the Fresno Police Department.

  • SEC: Another Florida Ponzi Scheme; Financial Fraud Task Force: Guilty Plea By Attorney In California Mortgage-Fraud Case, Plus New Indictments

    In a fast-moving news day on the fraud front, the SEC has accused two men and their Florida company of orchestrating a real-estate “promissory note” Ponzi scheme.

    Separately, the Financial Fraud Enforcement Task Force announced the guilty plea of a California attorney in a real-estate swindle, plus the indictments of seven other people in separate cases of mortgage fraud in California.

    In the SEC case, the agency accused Edward A. Allen and David L. Olson of Lakeland, Fla., and their company A&O Investments LLC, of conducting a fraudulent, unregistered offer and sale of approximately $14.8 million in securities.

    Although Allen and Olson allegedly pulled off the swindle in Florida, the case was brought in the Northern District of Ohio because part of the scheme operated in the Youngstown-area community of Boardman.

    “Allen and Olson’s representations about their use of offering proceeds, the collateral securing the investments, and the success of the investments were all false,” the SEC charged.

    Allen is 42; Olson is 59. Their scheme affected at least 100 investors in at least nine states, the SEC said.

    “As part of their money raising tactics, Allen and Olson convinced some of their investors to take out home equity loans so that they could invest the proceeds in the A&O promissory notes,” the SEC charged. “They persuaded other investors to refinance their home mortgages to interest-only loans with lower monthly payments so that they could invest the excess cash from the new interest-only mortgages in the promissory notes.”

    SEC: Investors Lulled By ‘Interest’ Payments

    It was yet-another case in which investors were lulled into a false sense of security because they were receiving payments even as a Ponzi scheme was occurring, the SEC said.

    “A&O made monthly ‘interest’ payments to the investors through approximately March 2008,” the SEC charged. “The regularity of the ‘interest’ payments led several investors to invest more money and caused others to encourage their family and friends to invest.

    “In approximately March 2008, A&O stopped making regular monthly ‘interest’ payments to most of the existing investors and investors began requesting the return of their investments. At that time, Allen and Olson admitted to A&O’s employees that they did not have enough money to make A&O’s March payroll. However, they continued to solicit investors and raised an additional $2.2 million from March through December 2008, some of which was used for payroll.”

    Allen and Olson also used about $2.2 million to pay personal expenses for themselves and their family members, about $3 million to pay A&O employees and other independent contractors, about $1 million to acquire, rehabilitate, and furnish a lavish office building from which they conducted A&O’s activities, and about $506,000 for other A&O-related operating expenses.

    Investors were left in the dark about how the men and the company were conducting business, the SEC said. The agency added that the deception ran wide and deep.

    “In addition, Allen and Olson also made payments for multiple start-up companies that Allen and Olson formed and controlled which were not involved with real estate,” the SEC said. “These companies had names such as Geriatric Care Partners, LLC, and Cornerstone International Ministries, Inc. Allen and Olson transferred approximately $959,000 of investor funds to those entities and used the vast majority of the funds for purposes unrelated to A&O’s real estate business.”

    California Mortgage Fraud

    Anthony G. Symmes, 59, of Paradise, has agreed to plead guilty to money-laundering and conspiracy to commit mail fraud for his role in a mortgage swindle and assist the government in an ongoing probe into the affairs of Garret G. Gililland.

    Gililland is under indictment in the Eastern District of California for mortgage fraud. He was extradited from Spain and jailed while awaiting trial.

    Symmes is an attorney, a CPA and a builder in the Chico area. The scheme involved the fraudulent sales of 62 houses. Symmes already has deposited $4 million for restitution, the Task Force said.

    The Symmes’ case started as a state investigation by a local district attorney and morphed into a federal probe as the local DA discovered more and more fraud, the Task Force said.

    “Greedy, crooked developers, appraisers, mortgage brokers, and others contributed significantly to the great mortgage meltdown of the past two years,” said Butte County District Attorney Mike Ramsey.

    “Greed led this formerly well-respected Chico developer down a path to his downfall and the destruction of a number of neighborhoods populated by good folks who have found their homes devalued by the empty foreclosures on their block,” Ramsey said.  “Once we discovered the complex, fraudulent scheme hatched here we began an extensive investigation. When we found the tentacles of this corrupt organization stretched beyond Butte County, we reached out to our federal partners for help. We are most gratified with the assistance and cooperation that has lead to the justice we see this day.”

    Federal agencies are attacking mortgage fraudsters aggressively, said U.S. Attorney Benjamin B. Wagner of the Eastern District of California.

    Schemers Causing Collapse Of Home Prices

    “The various schemes reflected in the cases announced today illustrate the many varieties of mortgage fraud,” Wagner said. “These types of crimes have a broad impact on our communities, not only weakening financial institutions and devastating individual victims of the fraud schemes, but also driving down the value of many families’ primary asset, their home. Rooting out and prosecuting fraudsters in the mortgage and real estate industries is an extremely high priority for the U.S. Department of Justice. We are working on other mortgage fraud investigations here in the Eastern District of California, and there will be more to come.”

    Tax criminals participating in mortgage fraud also will be weeded out, one of the region’s top tax investigators said.

    “IRS-Criminal Investigation takes mortgage fraud seriously,” said said José M. Martínez, assistant special agent in charge, IRS-Criminal Investigation. “The impact of these types of crimes cannot be overstated. Fraud in the mortgage industry has played a major role in almost crippling this nation’s economy, and directly affecting our tax administration system.”

    From 2006 through 2008, Symmes sold Gililland and Gililland’s associates 62 houses at artificially inflated prices, prosecutors said.

    “These fraudulent purchases were financed by mortgage lenders in the total amount of approximately $21 million,” prosecutors said. “Symmes wrote checks back to Gililland and his associates totaling approximately $2.5 million. These price rebates from Symmes were concealed from the lenders. To date, dozens of Symmes’s homes have been foreclosed or short-sold. Losses realized to date total almost $5 million and are expected to climb. Due to the volume of the artificially inflated prices on homes in Chico, Symmes and Gililland were able to create artificially high comparable sales that appraisers relied upon, affecting the overall new-home market in the Chico area.”

    Indicted in separate cases in Sacramento County were Lawrence Davis, 26, and Joel Clark, 27, both formerly of Sacramento and currently living in Las Vegas, and Eric Mortenson, 28, of Sacramento.

    The indictments were unsealed this morning after Clark and Mortenson were arrested by FBI and IRS agents in Sacramento and Las Vegas. The indictment charges them with conspiracy to commit wire fraud and wire fraud in connection with an alleged property-flipping scheme in the Sacramento County area.

    The federal case evolved from a state probe by the California Department of Real Estate, the Task Force said.

    Meanwhile, in Shasta County,  Jeremiah Andrew Martin, 32, of San Antonio, Darrin Arthur Johnston, 45, of Redding, Todd Allen Smith, 47, of Redding, and Cheryl Ann Hitomi Peterson, 47, of Redding, were indicted yesterday by a federal grand jury.

    The indictment was unsealed this morning when the defendants were arrested by FBI and IRS agents in Shasta County. All four defendants were charged with conspiracy to commit mail fraud, mail fraud and money laundering in connection with an alleged fraudulent foreclosure rescue scheme.

    Assisting in the case are the FBI and the IRS, the Task Force said.