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Tag: U.S. Attorney David B. Fein

  • URGENT >> BULLETIN >> MOVING: KABOOM! 2 Connecticut Women Found Guilty In Cash-Gifting Pyramid Scheme

    breakingnews72URGENT >> BULLETIN >> MOVING: (2ND UPDATE 6:44 P.M. ET U.S.A.) Both of the defendants on trial in federal court in Connecticut in a cash-gifting pyramid scheme known as Women’s Gifting Tables have been found guilty of wire fraud and filing false tax returns.

    The jury returned the verdicts against Jill Platt, 65, and Donna Bello, 56, this afternoon. Both women live in Guilford. They were charged in May 2012. A third woman, Bettejane Hopkins, 66, of Essex, pleaded guilty.

    In returning the guilty verdicts in about two hours, the jury rejected defense contentions that the women believed their cash-gifting “program” that gathered $5,000 from each participant and used a food theme was legal.

    Prosecutors called it a fraud scheme designed to enrich some participants at the expense of others.

    “As the jury’s swift verdict of guilty on all counts makes clear, ‘Gifting Tables’ are pyramid schemes and illegal, plain and simple,” said U.S. Attorney David B. Fein. “These defendants enriched themselves while fraudulently misrepresenting material facts about the Gifting Tables and conspired to hide their income from the IRS. I commend the agents of IRS Criminal Investigation for their thorough investigation of this matter, which is ongoing.”

    Fein this afternoon threw down the gauntlet against cash-gifters.

    “During the trial, the jury heard evidence that other Gifting Tables continue to operate in Connecticut,” he said. “The jury’s verdict today is fair notice to anyone participating on Gifting Tables that any money received is taxable income and that they may be involved in an illegal pyramid scheme.”

    Included among the damning evidence against Platt and Bello was email correspondence, prosecutors said.

    “I’m pleased to see that the jury saw that the ultimate purpose was the enrichment of the defendants,” said William P. Offord, IRS Criminal Investigation Special Agent in Charge of New England.

    From a statement late this afternoon by prosecutors (italics added):

    Evidence at trial included several emails, including an email sent by Platt in March 2009 that told a participant: “It’s sort of a joke that I refer to our freezer as the ATM.”  Later in March 2009, Bello complained to Hopkins and another individual about two recruits, stating: “They have had enough parties. Its [sic] costing us a small fortune in their food and wine delights. No more parties until they commit with the cash.”

    In June 2009, Bello sent an email that said “I am not a . . . saint . . . . I’m teaching you all how to make an extra 80 grand a year . . . . Isn’t that enough?”

    Platt and Bello were found guilty of one count of conspiracy to commit wire fraud, one count of conspiracy to defraud the IRS and a combined total of 15 counts of wire fraud. (Eleven against Bello and four against Platt.) Meanwhile, the jury found Bello guilty of two counts of filing a false tax return. Platt was found guilty of one count of filing a false tax return.

    Sentencing is set for May 15 before Chief U.S. District Judge Alvin W. Thompson. The women potentially face years in prison.

    Cash-gifting schemes may surface as forms of affinity fraud. They often are targeted at people of faith, and purveyors may claim the “programs” are legal.

  • URGENT >> BULLETIN >> MOVING: Feds Arrest 3 ‘Leaders’ Of Alleged Cash-Gifting Scheme; Conspiracy, Wire Fraud And Tax Fraud Charged; ‘Defendants Attempted To Intimidate A Participant Who Had Questioned The Legality Of The Gifting Table Scheme,’ Prosecutors Say

    So, you think your cash-gifting “sponsor” has your best interest at heart?

    Three women who were “leaders” of a cash-gifting scheme in Connecticut were arrested earlier today on charges of conducting a pyramid scheme and engaging in a conspiracy, wire fraud and tax fraud, federal prosecutors said.

    The scam operated between 2008 and 2011, reached beyond Connecticut’s borders and allegedly featured an element of “intimidation” aimed at a prospect who questioned the purported opportunity.

    Prosecutors today published snippets of emails sent over multiple months and linked to the alleged scheme, which gathered purported “gifts” $5,000 at a time using a food theme.

    “[K]eep bringing in new blood,” one of the emails allegedly read in part. “It is a fact when women get excited about making money, they tend to over extend . . .”

    Another email allegedly advised in part that potential recruits needed “to Shit or get off the pot . . .”

    It has been known for months that a grand-jury probe into so-called “gifting tables” has been under way in Connecticut. That probe now has resulted in the arrests of Donna Bello, 55, of Guilford;  Jill Platt, 64, of Guilford; and Bettejane Hopkins, 66, of Essex.

    An indictment filed yesterday that names Bello, Platt and Hopkins also includes the word “co-conspirators,” suggesting others may be charged.

    “The indictment alleges that the three defendants ran a pyramid scheme designed to enrich themselves at the expense of other participants,” said U.S. Attorney David B. Fein.  “In addition, the indictment alleges that the defendants tried to use the pretext of ‘gifting tables’ as a way to avoid paying taxes on the substantial illegal proceeds of their scheme.”

    Fein noted that the probe, which is being led by the IRS, is ongoing.

    Bello, Platt and Hopkins “conspired to defraud the IRS by misrepresenting to recruits and participants that monies given and received during the scheme were legally considered tax-free ‘gifts’ under the IRS code and that lawyers and accountants had approved gifting tables as legal ventures that generated tax-free proceeds,” prosecutors said.  “The indictment further alleges that Bello, Platt and Hopkins filed false tax returns that failed to report income generated from the scheme.”

    Prosecutors today also released snippets of emails linked to the alleged cash-gifting scammers.

    “[W]e need to keep silent and under the radar,” one of the emails read in part, prosecutors said.

    Another allegedly read in part, “[A]s women we like our own stash. Keep it in a safe.  Keep it quiet because rather not have red flags raised.  Hiring accountants and atterneys [sic] is costly.”

    A third allegedly read in part, “I am not a . . . saint . . . . I’m teaching you all how to make an extra 80 grand a year . . . . Isn’t that enough?”

    Meanwhile, a fourth allegedly read, “It’s sort of a joke that I refer to our freezer as the ATM.” A fifth allegedly read, “They have had enough parties. Its [sic] costing us a small fortune in their food and wine delights. No more parties until they commit with the cash.”

    From prosecutors (italics added):

    . . . a gifting table is configured as a four-level pyramid, with eight participants assigned to the bottom row, four participants assigned to the third row, two participants assigned to the second row, and one participant assigned to the top row.  The top row participant is referred to as the “dessert,” the two participants on the second row as “entrees,” the four participants on the third row as “soup and salads,” and the eight participants on the bottom row as “appetizers.”  To join a gifting table, new participants were required to pay $5,000, typically in cash, to the dessert, that is, the participant occupying the top position on the pyramid.  The $5,000 payment, which was fraudulently characterized as a gift, secured the new participant a position as an appetizer on the bottom row.  Participants moved from the bottom row of the pyramid and progressed through a gifting table by recruiting additional people to join.  When eight new participants joined a gifting table, each having made a $5,000 “gift” to the person occupying the dessert position at the top of the pyramid, the dessert left the gifting table and kept the $40,000 paid by the eight new participants.  That particular gifting table was then split, with the two participants occupying the Entree position on the second row moving to the top position (dessert) of two new pyramids.  The other incumbent members of the gifting table moved up a row on one of the two newly-formed pyramids, and the search for 16 new participants began.  The success of the gifting tables depended on new participants joining and making the $5,000 “gift.”

    The indictment alleges that from approximately 2008 to 2011, Bello, Platt and Hopkins oversaw and profited from this gifting tables pyramid scheme.  The defendants recruited individuals to join the scheme, prepared and distributed materials to recruits that contained false representations, and misrepresented to recruits and participants that gifting tables was not a pyramid scheme.  The indictment further alleges that in May 2010, the defendants attempted to intimidate a participant who had questioned the legality of the gifting table scheme.

    Read the indictment, which includes information investigators allegedly gleaned from emails.

     

  • Former Mormon Bishop Who Presided Over ‘Friend’s Investment Group’ Charged In Alleged Connecticut Fraud Scheme Targeting Church Members; Former Broker Charged In Alleged Tennessee Ponzi Scheme

    Julius C. Blackwelder, the 59-year-old former bishop of the Bridgeport Ward of the Church of Jesus Christ of Latter-day Saints in Trumbull, Conn., has been charged with money-laundering, mail fraud and wire fraud.

    “This defendant is alleged to have abused his position of trust as a leader in his church to defraud fellow church members and others out of hundreds of thousands of dollars,” said U.S. Attorney David B. Fein of the District of Connecticut.

    Meanwhile, in Tennessee, federal prosecutors charged Brian Keith Miller of Maryville in a separate alleged fraud scheme.

    Miller, prosecutors said, was a former securities broker who hatched a Ponzi scheme and sucked in the trusting locals. He was arrested Monday on charges of wire fraud, money laundering and filing false tax returns.

    “Rather than investing the victims’ funds as promised, the indictment charges that Miller misappropriated investment funds to his own use and used a portion of the victims’ funds to pay other victims to lull them into believing that they were receiving payments on their investments,” the office of U.S. Attorney William C. Killian of the Eastern District of Tennessee said.

    “The indictment also charges that Miller knowingly engaged in monetary transactions greater than $10,000 with the proceeds of the fraud scheme and filed false federal income tax returns for 2007 and 2008,” Killian’s office said.

    In the alleged Connecticut fraud scheme, Blackwelder solicited members of his church congregation, claiming “that he would invest their money in safe, long-term commodities futures contracts, and that he was an experienced and successful commodities investor,” Fein’s office said.

    But Blackwelder “used investors’ money to pay his own expenses, which included repaying earlier investors in the scheme, building a waterfront home in Stratford, and repaying personal bank loans,” prosecutors said.

    One loan was a credit line from a bank that had received funds from the Troubled Asset Relief Program (TARP) program. An investigation by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the IRS, the Connecticut Department of Banking and the U.S. Postal Inspection Service followed.

    Blackwelder’s fraud scheme had a comforting name, officials said: “Friend’s Investment Group.”

    Even so, it was a scam that plucked $400,000 from victims, prosecutors said, noting that Blackwelder now resides in Utah.

    The Miller Ponzi case in Tennessee was brought by the FBI and the IRS, prosecutors said.

  • UPDATE: Michael S. Goldberg, Ponzi Schemer Who Falsely Traded On Name Of JPMorgan Chase To Dupe Investors, Sentenced To 10 Years In Federal Prison; Caper Included Domain-Name Fraud To Give Investors False Sense Of Security

    Michael S. Goldberg, the Connecticut man who lured investors into bogus deals in part by creating websites that traded on the name of JPMorgan Chase Bank and other companies, has been sentenced to 10 years in federal prison.

    Goldberg, 40, stole more than $30 million from investors over a period of 12 years in a scheme that gathered more than $100 million, U.S. Attorney David B. Fein of the District of Connecticut said. Goldberg was charged last year, and pleaded guilty to three counts of wire fraud in September.

    Elements of the prosecution were brought by the Connecticut Securities, Commodities and Investor Fraud Task Force, an arm of the interagency Financial Fraud Enforcement Task Force created by President Obama in November 2009.

    “As a result of this defendant’s decade-long fraud scheme, many victims lost their homes, retirement security or college savings for their children,” Fein said.

    As is the case in most Ponzi schemes, victims will not emerge with much, Fein said.

    “Despite the best efforts of the FBI and the receiver who has been appointed by the court to recover funds, it is unlikely that most of these victims will ever be made whole,” he said. “The lengthy prison term imposed [May 16] is an appropriate one for an individual who caused financial misery for so many, and should deter others from seeking to prey upon innocent investors.”

    Goldberg, a purported diamond and real-estate expert, used a virtual playbook for fraud, according to records.

    Part of his caper featured domain-name fraud in which websites were created in the name of JPMorgan Chase and others to sanitize his scheme and disarm skeptics, according to records.

    Although Goldberg claimed to buy distressed assets from Chase, no such business relationship existed, prosecutors said.

    If the bogus websites were not enough, Goldberg also “often created false documents and other items to induce investors to believe that his business relationships were legitimate,” the Task Force said.

    Bogus inventories, manifests, contracts, business checks, bank statements, business cards and  company identification cards were part of the scam, the Task Force said.

    And Goldberg did not invest in “diamond contracts” as he purported, prosecutors said.

    U.S. District Judge Robert N. Chatigny ordered Goldberg to pay more than $31 million in restitution and to report to prison on July 18. Various authorities continue to unravel the scam, prosecutors said.

    Read earlier story.

  • URGENT >> BULLETIN >> MOVING: Feds, SEC Say Connecticut Ponzi Scheme With International Reach Involved ‘Hundreds Of Millions Of Dollars’; 2 Arrests Made By FBI In Florida

    BULLETIN: A Connecticut hedge-fund operator not registered with the SEC “in any capacity” and two other men — both Venezuelan nationals — have been charged in a spectacular Ponzi caper that allegedly involved hundreds of millions of dollars and a derailed plot to thwart an SEC investigation.

    FBI agents have arrested Juan Carlos Guillen Zerpa, and Juan Carlos Horna Napolitano in Florida. They are charged with conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.

    Guillen Zerpa, 43, is an accountant and a citizen of Venezuela. Horna Napolitano is a Venezuelan citizen living in Pembroke Pines, Fla. Pembroke Pines is a city in Broward County.

    The principal defendant in the case — Francisco Illarramendi, 42, of New Canaan, Conn. — already has pleaded guilty to criminal charges, according to U.S. Attorney David B. Fein of the District of Connecticut. He was accused by the SEC in its civil case of misappropriating at least $53 million in investor assets.

    “As a result of the scheme, the investors and creditors of Illarramendi’s funds face potential losses of hundreds of millions of dollars,” the FBI said in a statement.

    The SEC today upgraded civil charges filed against Illarramendi in January, saying he “attempted to hide the fact that his hedge funds were missing assets by providing the SEC staff with a false letter from an accountant in Venezuela that purported to verify the existence of approximately $275 million in assets held by one of the funds.

    “Those assets do not exist,” the agency alleged.

    “Illarramendi knew that the SEC was onto his scheme and compounded his fraud by attempting to mislead the Commission’s staff,” said David P. Bergers, director of the SEC’s regional office in Boston.

    Fein said the scheme may prove to be the largest in Connecticut’s history.

    “This investigation has revealed that Francisco Illarramendi operated a massive Ponzi scheme that has defrauded foreign investors of hundreds of millions of dollars,” Fein said. “While the precise dollar losses will not be known for some time, based on this fast-moving investigation, we believe this case represents the largest white-collar prosecution ever brought by this office.”

    Both the FBI and the SEC pursued the case forcefully, Fein said. The agencies are part of the newly formed Connecticut Securities, Commodities and Investor Fraud Task Force, which Fein said was “actively investigating this and other financial fraud schemes.”

    A veteran FBI agent said criminals domestic and “overseas” should expect to get caught.

    “This investigation should serve as fair warning to those, whether in Connecticut, elsewhere in the United States, or overseas, who would attempt to victimize an increasing number of American and foreign investors,” said Kimberly K. Mertz, special agent in charge.

    “The Connecticut Securities, Commodities, and Investor Fraud Task Force will continue to aggressively investigate these criminals and protect the rights of the investing public,” Mertz said.

    Charging documents in the case allege a spectacular fraud that relied on self-dealing and an elaborate maze of deceit.

    Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment adviser fraud and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.

    He faces up to 70 years in federal prison.

    “Illarramendi has admitted that he agreed to pay Guillen [Zerpa] and Horna [Napolitano] more than $3 million for fabricating” a letter and creating false support for $275 million in loans, the FBI said.

    Read the statement from the FBI and Fein.

    Read the SEC complaint.

  • Michael Goldberg Pleads Guilty In $100 Million Ponzi Scheme Featuring Bogus ‘Diamond’ Sales And Bogus Ties To JP Morgan Chase Bank; Gov’t Describes Scammer As Financial Predator And Pitchmen As ‘Feeders’

    EDITOR’S NOTE: The story of Michael Goldberg’s long-running Ponzi scheme is one that also includes a form of domain-name fraud. Goldberg, for example, created a website that used the name of JP Morgan Chase. Scammers routinely seek to piggyback off well-known brands to separate people from their money, sometimes using the names of famous firms to cover their tracks or create “legitimacy” out of thin air. Such domain schemes may feature the unauthorized use of a company’s name in a domain registration or violate trademarks in other ways. Fraudsters also may register  a .org domain to plant the seed that a purported business “opportunity” is connected with a charity or register a name that is very close to the name of a well-established company, perhaps by adding words to the company’s name or varying the spelling of a company’s name. If you’ve been following our coverage of Data Network Affiliates, Narc That Car/Crowd Sourcing International and MPB Today, for instance, perhaps you’ve noted that .org websites were used by affiliates to promote the companies — even though none of the multilevel-marketing (MLM) firms is a charity.

    Here, below, the story of a Ponzi scheme that used domain fraud to fleece investors.

    The wantonness of Michael S. Goldberg’s 12-year Ponzi scheme was stunning. He told clients he invested in “diamond contracts” when he did not.

    And Goldberg, 39, of Wethersfield, Conn., also told clients he invested in “distressed assets from JP Morgan Chase Bank,” federal prosecutors said. Goldberg, though, did not invest in distressed Chase assets.

    What he did, prosecutors said, was create a web domain that used the Chase name, supplementing his web of lies by creating documents that used Chase’s name and the URL of the bogus Chase website so investors could not discover the fraud, prosecutors said.

    Not to be outdone, Goldberg also paid “finder’s” fees to attract new business and created bogus domains in the names of other companies, prosecutors said, referring to the compensated pitchmen as “feeders.”

    “When an investor questioned Goldberg about his business relationships, either with Chase or with any other company, he often created false documents and other items to induce investors to believe that his business relationships were legitimate, including inventories and/or manifests, contracts, business checks, bank statements, business cards and company identification cards,” prosecutors said.

    “Goldberg also created domain names in the names of actual companies, including Chase, that would be listed on false documents in case an investor attempted to verify the authenticity of the documents,” prosecutors continued. “In addition, Goldberg opened actual bank accounts in the names of the companies to whom he purported to be selling foreclosed business assets, without the permission of those companies, that could also be used to create the false impression that he had a business relationship with the companies.”

    A top federal prosecutor described the fraud, which duped 350 people into plowing $100 million into nonexistent diamond contracts and nonexistent Chase deals that paid “returns” in Ponzi proceeds, as overwhelming.

    “For 12 years, this defendant lured hundreds of investors with one false promise after another, the end result being financial misery for many of them,” said U.S. Attorney David B. Fein of the District of Connecticut.

    Losses may total more than $30 million, prosecutors said.

    Meanwhile, a veteran FBI agent described Goldberg as a financial predator.

    “Michael Goldberg’s actions have devastated the financial security of hundreds of innocent investors,” said Kimberly K. Mertz,  special agent in charge of the New Haven division. “The FBI, along with our law enforcement and regulatory partners, will continue to police the actions of those preying upon the investing public.”

    Aside from a brief period in 1997, Goldberg hadn’t dabbled in diamonds — and “he did not have any relationship with Chase,” prosecutors said.

    Goldberg, who confessed to the scheme last year, faces up to 60 years in federal prison after his guilty plea to three counts of wire fraud. Sentencing is scheduled for December. The investigation was conducted by elements of President Obama’s Financial Fraud Enforcement Task Force.