James P. Burg, formerly of Fairplay, Colo., ripped off his customers for gold coins and, in at least one instance, “used one customer’s payment for coins to refund funds to another customer,” federal prosecutors said.
The scam fetched more than $2.4 million and operated through three websites, prosecutors said.
Burg, 61, became the subject of an investigation carried out by the FBI, the IRS and the U.S. Postal Inspection Service, the office of U.S. Attorney John Walsh of the District of Colorado said.
He has been charged with six counts of wire fraud, four counts of money laundering, four counts of willful failure to file tax returns and nine counts of mail fraud.
“The U.S. Postal Inspection Service has no shortage of investment investigations and this is another example of greed overcoming honest business practices,” said Adam Behnen, inspector in charge of the U.S. Postal Inspection Service.
From a statement by prosecutors (italics added):
As part of the scheme, Burg represented that he was the chief executive officer of a company known as Superior Discount Coins (SDC) and that SDC was in the business of selling coins. Burg also conducted business using a company known as Gold Run Investments (GRI) and represented that GRI was in the business of selling coins. At times, Burg operated GRI using the alias “Tim Burke.” Burg advertised and solicited customers through radio advertisements and over the Internet using websites he controlled, including; www.superiordiscountcoins.com, www.yourcoinbroker.com, and www.goldruninvestments.net.
Burg misrepresented and promised customers that if they ordered coins from SDC or GRI and paid him for those coins, he would deliver the coins to them or to accounts designated by them. He sent and caused to be sent to customers that ordered coins from SDC or GRI invoices stating amounts of money owed for the coins and, in some cases, providing information about a bank account to which the customers should transfer their money to purchase the coins.
The money Burg received from customers was not used to purchase coins for such customers, but instead he converted the money to his own use and benefit. Burg refused to refund money to customers in several instances where the customers requested a return of their money after he failed to deliver coins as originally promised. To prevent the scheme’s detection, Burg sometimes filled customers’ orders for coins only after such customers threatened to take legal action or report him to law enforcement authorities. Burg used one customer’s payment for coins to refund funds to another customer.
“Fraud schemes are often described as a house of cards and will eventually fall apart exposing the individuals responsible,” said Stephen Boyd, special agent in charge, IRS-Criminal Investigation, Denver Field Office
BULLETIN:Philip Lochmiller Sr., the Colorado recidivist securities huckster and Ponzi schemer whose case drew comparisons to the AdSurfDaily Ponzi case for a lack of key disclosures to investors, has been sentenced to 405 months in federal prison and ordered to pay restitution of $18.6 million.
The term amounts to nearly 34 years. Lochmiller is 64. He was taken into custody immediately by the U.S. Marshals Service upon his sentencing, federal prosecutors said.
U.S. District Judge Philip A. Brimmer presided over the case.
“Make no mistake,” said U.S. Attorney John Walsh of the District of Colorado. “Today’s sentence, which amounts to a life sentence, demonstrates that those who rob with the pen and the computer cannot evade the painful consequences of their crimes. Although this sentence can’t by itself undo the damage suffered by the many victims of this fraudulent scheme, justice was done.”
All in all, the scheme attracted more than $30 million and affected more than 400 investors, prosecutors said.
“Today’s sentencing provides 403 citizens victimized by Philip Lochmiller Sr some justice for the devastating financial losses he caused with deceit and misrepresentations,” said James Yacone, FBI special agent in charge.
Added Sean Sowards, special agent in charge of the IRS Criminal Investigation Unit in Denver: “IRS Criminal Investigation will work with our law enforcement partners to vigorously pursue and hold accountable those who perpetrate these schemes to get rich quick at the expense of honest Americans.”
Lochmiller’s stepson — Philip Lochmiller Jr. — also was implicated in the scheme. So was Shawnee Carver, an employee of Valley Investments, a company linked to Lochmiller’s Valley Mortgage Inc. entity.
Lochmiller Jr. earlier was sentenced to eight years and ordered to pay $18.6 million in restitution. Carver was sentenced to two years and ordered to pay $2.5 million in restitution.
Lochmiller and two members of his family were sentenced to prison for their roles in a California securities swindle in the 1980s, according to records. The 1980s scheme operated in the Greater San Diego area and resulted in 1,600 investors being bilked out of a total of $5 million.
Investors in Lochmiller’s most recent scheme were not told about his previous felony conviction, prosecutors said. Nor were they told about a bankruptcy filing.
Like Lochmiller, ASD’s Andy Bowdoin shielded investors from knowing he had been implicated in an Alabama securities swindle in the 1990s and had pleaded guilty to a felony, according to court filings.
At the same time, ASD investors were denied information that Clarence Busby, a key Bowdoin business associate, had declared bankruptcy and had been implicated by the SEC in three prime-bank swindles in the 1990s, according to records.
“Foreclosure-rescue scams prey on distressed homeowners’ desire to save their homes and to find any means to help fix their dire financial situations. As is the case with most loan-modification and foreclosure-rescue operations, consumers who dealt with Bella Homes lost not only the thousands of dollars they paid for ‘help,’ but also their homes.” — John Suthers, Attorney General of Colorado, Feb. 23, 2012
From a YouTube pitch for the Bella Homes' MLM compensation scheme.
BULLETIN: Colorado’s U.S. Attorney and the state’s Attorney General have gone to federal court in Denver to halt what they described as a foreclosure-rescue scam operated through an entity known as Bella Homes LLC.
Bella, which operated as an MLM and allegedly recruited more than 200 salespeople who paid the firm a combined total of more than $138,000 to pitch the “opportunity” and earn a shot at commissions from desperate homeowners, has been sued.
Also named defendants were Mark Stephen Diamond, Michael Terrell, David Delpiano and Daniel David Delpiano.
In court filings in the civil case, Daniel Delpiano was described by state and federal prosecutors as the Georgia-based “mastermind” of the Bella Homes fraud, which allegedly gathered more than $3 million.
Daniel Delpiano is a convicted felon currently on supervised federal probation, prosecutors said. Terrell is a Georgia attorney, and Diamond is an Arizona businessman, according to the complaint.
In February 2005, Daniel Delpiano was convicted of conspiracy to commit wire fraud in the District of Massachusetts. After that — in November 2006 — he was convicted of conspiracy to commit mail fraud, wire fraud and money laundering in the Middle District of Florida, prosecutors said.
And in May 2007, prosecutors noted, he was convicted of mortgage fraud and racketeering in Georgia Superior Court. Daniel Delpiano is the father of David Delpiano, who also resides in Georgia, prosecutors said.
RealScam.com, a forum that concerns itself with mass-marketing fraud, was among the first outlets today to report the news of the Colorado lawsuit. RealScam has been tracking Bella Homes’ developments at least since Nov. 27, 2011.
“To become a representative, the representative must pay Bella Homes an initial enrollment fee of $99.00 and a $195.00 fee to complete mandatory online training,” prosecutors said. “Each representative also has an option to pay a $49.00 monthly fee to create his own replicate of the Bella Homes website in order to recruit homeowners for the program.”
But the program, which has ceased to operate in the wake of the state and federal action, was a scam, prosecutors said.
“Bella Homes gave false hope to desperate homeowners, taking advantage of their desire to do anything to save their homes,” said U.S. Attorney John Walsh. “Bella Homes’s actions not only hurt those vulnerable homeowners, but the housing market generally. The company will now face the consequences of its misconduct.”
At least 450 people sent Bella money to save their homes, but no evidence has surfaced that Bella saved any homes, prosecutors said.
The 52-page complaint includes a number of examples in which financially strapped homeowners allegedly paid Bella thousands of dollars in illegal, upfront fees.
“The homeowner is fraudulently induced to pay ‘rent’ to Bella Homes in lieu of making the mortgage payments,” prosecutors charged. “Some of the mortgage lenders and mortgage servicers detrimentally affected by Bella Homes’ fraudulent scheme are federally insured financial institutions.”
Most of the money paid by victims “has been diverted to the individual Defendants for their own personal use,” prosecutors said.
Diamond, for instance, allegedly received “at least” $321,000 in fraud proceeds, “including more than $277,000 for his American Express bills,” prosecutors said.
Meanwhile, Daniel Delpiano received “at least” $184,000 in fraud proceeds that were applied to personal expenses. Of that sum, as much as $86,180 appears to have come in the form of ATM cash withdrawals, prosecutors said.
“The ATM cash withdrawals were frequently in the amount of $700,” prosecutors said.
Although YouTube videos touting the Bella Homes’ MLM compensation scheme continue to appear, the company’s website is offline and a federal judge has issued orders to preserve assets.
Here is a snippet from the complaint. (Italics added):
Rather than helping homeowners remain in their homes long term, as promised, Bella Homes preys upon distressed homeowners, duping them into paying thousands of dollars based on false promises and false representations, yet provides no meaningful assistance to prevent foreclosure or to allow homeowners to remain in their home for the time period promised by Bella Homes.
Bella Homes has fraudulently obtained approximately $3,000,000 from over 450 homeowners across the nation, and is rapidly expanding its fraudulent operations. In the last two months of 2011 alone, it has fraudulently obtained approximately $1,000,000 from homeowners.
As part of the scheme, Defendants solicit distressed homeowners to convey title to their home to Bella Homes for no consideration and to enter into purported three-, five-, or seven-year lease agreements under which the homeowner pays Bella Homes monthly “rent.” Bella Homes also collects an advance fee from the homeowner of three-months? “rent” upon transferring title and signing the lease. Despite Bella Homes taking title to and collecting “rent” for the property, it does not pay the homeowner for the property and it does not pay off or assume the existing mortgage. Nor does Bella Homes make any of the mortgage payments or pay any of the taxes or insurance for the property.
Here is a snippet from the preliminary injunction. (Italics added):
Except as noted below, Defendants and those involved in active concert with them who are served with a copy of this Order are ENJOINED from:
1. Conducting or continuing to conduct business activities by or on behalf of Bella Homes, LLC, including but not limited to: (a) engaging in any action affecting real title to any property; (b) entering into any agreements relating to real property; (c) collecting, negotiating, or depositing any rental payments made by purported lessees of Bella Homes, LLC; (d) distributing or receiving disbursement of any funds from Bella Homes, LLC; and (e) advertising, promoting, or soliciting customers on behalf of Bella Homes, LLC.
2. Transferring, withdrawing, pledging, dissipating, or otherwise using or concealing funds of Bella Homes, LLC or funds received by any Defendant from Bella Homes, LLC in any accounts with any financial institution . . .
The defendants have agreed to the preliminary injunction, which calls for “ceasing further operations and transferring approximately $500,000 to the government for homeowner restitution, pending final resolution of the case,” prosecutors said.
On May 17, 2011, Matthew “Matt” O’Neill, 52, entered a post office in Kremmling, Colo., and “filled out documents for certified or registered mail,” federal prosecutors said.
O’Neill, though, did not immediately put his envelope in the mail. Instead, he left the post office and “reentered several times before finally mailing” it, prosecutors said.
By May 25, a mail-room employee of the Colorado Department of Revenue had begun the typical process of opening the envelope, stapling the documents inside and routing it to the intended recipient, prosecutors said.
After placing the envelope on her desk, the recipient observed “white powder” falling out onto her work space. She then took the contents to another office, informed a colleague about the suspicious substance — and the two employees placed the contents on the desk, left the office and locked the door.
They next informed the Revenue Department floor manager, who immediately dialed 9/11 and contacted the Colorado State Patrol. Fearing they’d been exposed to a biological or chemical substance, the two employees tried to decontaminate themselves by washing their hands, prosecutors said.
More moments of high anxiety followed as the employees waited for the Denver Fire Department and the HAZMAT team to arrive. Practically every adult in America understands the horror caused when powdered substances spill out of envelopes. In September 2011 — about a week after the 9/11 terrorist attacks — the anthrax attacks began through the mail.
Five people died. Seventeen became infected. One of the largest investigations in U.S. history began.
When the fire department and HAZMAT team arrived at the Revenue Department, first responders — necessarily expecting the worst — took precautions with clothing and equipment and entered the building. An evacuation of people ensued.
It was not the first time the Revenue Department had heard from Matthew O’Neill.
As the probe continued, investigators learned that O’Neill had “sent several documents that express his views as a sovereign citizen, and that he believes that he does not have to pay state or federal taxes.”
O’Neill pleaded guilty this week to providing false information related to a terrorism offense for his mailing of the white powder, which proved to be baking soda but nevertheless caused fear to spread and left employees wondering if they’d lose their limbs or perhaps even their lives.
“Those who mail a threat, especially one containing material simulating a biological or chemical agent, will face felony criminal consequences,” said U.S. Attorney John Walsh.
“All threatening communications are taken seriously, the recipient of these types of threats cannot determine the true nature of the implied, or stated danger,” said James Yacone, special agent in charge of the FBI’s Denver office. “The FBI wants to remind everyone that mailing a threatening communication that contains a hoax of any kind in a parcel will be aggressively investigated. We will continue to respond to such threats, along with our federal, state, and local law enforcement partners, through the combined resources of the Joint Terrorism Task Force.”
Whether the power was harmful was not the issue, said the region’s top postal inspector.
Threatening mailings “not only constitute a federal crime, but cause alarm to victims and victim institutions,” said Tommy Coke, acting postal inspector in charge of the Denver Division of the U.S. Postal Inspection Service.
Sentencing for O’Neill before U.S. District Judge Marcia S. Krieger is set for June 4. He potentially faces up to five years in federal prison and a fine of up to $250,000.
Some “sovereign citizens” have attempted to use the mail to instill fear among judges, prosecutors, investigators, litigation opponents, community officials and taxing authorities.
UPDATED 8:57 P.M. EDT (U.S.A.)Philip R. Lochmiller Sr., 63, has been found guilty of money-laundering, mail fraud and conspiracy in federal court in Colorado.
The jury returned the verdict in three hours, after a 10-day trial, the office of U.S. Attorney John Walsh of the District of Colorado said.
Lochmiller spent three years in a California state prison for a securities swindle in the 1980s, according to records. The California scheme involved about $5 million. Two decades later, a new Lochmiller real-estate scheme evolved in Colorado, involving about $30 million, prosecutors said.
A final restitution sum has not been calculated. Lochmiller potentially faces decades in federal prison.
The “verdict is a victory for the over 400 victims in this case, many of whom are from the Grand Junction area,” Walsh said.
Lochmiller was associated with firms known as Valley Mortgage Inc. and Valley Investments. Investors were promised returns of up to 18 percent, prosecutors said.
James P. Burg, formerly of Fairplay, Colo., ripped off his customers for gold coins and, in at least one instance, “used one customer’s payment for coins to refund funds to another customer,” federal prosecutors said.
