UPDATED 9:24 P.M. EDT (U.S.A.) A spokeswoman for U.S. Attorney B. Todd Jones of the District of Minnesota refused to say today whether the government’s probe into the business practices of Inter-Mark Corp. and INetGlobal is over.
“[W]e never confirm or deny the existence of investigations,” said Jeanne Cooney.
The firms announced yesterday that prosecutors had agreed to return more than $20 million seized by the U.S. Secret Service in a Ponzi scheme probe in February 2010. Some INetGlobal members instantly seized on the news, claiming the government’s release of the funds validated the company’s business practices as they existed at the time of the seizure.
Separately, INetGlobal members circulated a statement from Inter-Mark Board Chairman Bob Kinsella. The PP Blog was sent a copy of the statement by an INetGlobal member, under a subject line of “Gov. Releases funds Lets Rock!”
“Today’s outcome is validation of the Inter-Mark Corporation business model,” the statement quoted Kinsella as saying. “I wonder if any business has been more researched and analyzed as Inter-Mark in the last year. Sales Associates all over the world should have complete confidence in the future of Inter-Mark Corporation.”
Cooney had no immediate comment today on Kinsella’s statement that the firm’s business model had been validated.
But Cooney did say that she believed a claim on the INetGlobal Blog that the firm had been validated had been made in “error” by the company — and that the firm “removed” the claim from its Blog.
Agreement
The money is not being released to INetGlobal directly, under the terms of an agreement approved by U.S. District Judge Donovan Frank. Instead, it is being released to attorney R.J. Zayed, who was appointed Temporary Administrator of Seized Funds.
Zayed, who also is the court-appointed receiver in the Trevor Cook Ponzi scheme, will distribute the funds under judicial supervision to INetGlobal affiliates owed money at the time of the February 2010 seizure.
Frank gave the government up to 45 days to turn over the money to Zayed. Prosecutors can petition for an extension of time beyond 45 days for “good cause,” according to the order.
“The Administrator shall conserve, hold, and manage the Seized Funds transferred by the United States as part of the Court’s Order, and shall perform all acts reasonably necessary or advisable to preserve the value of the Seized Funds until they are validly distributed to the members of Inter-Mark,” according to the order.
“If the Administrator is satisfied, in his sole discretion, that the identity of the Inter-Mark member is correct, that the amount due and owing to the member is correct, and that the name, address, government identification documents, and IRS tax forms of that member are proper, the Administrator shall wire transfer from the Seized Funds to that member’s ‘e-wallet’ account with International Payout Systems the amount due and owing to that member,” according to the order.
Funds that remain after Zayed pays INetGlobal affiliates will be returned to the company, according to the agreement.
No one has been charged criminally in the INetGlobal probe. Former executive Steve Renner, who denied wrongdoing, was sentenced in 2010 to 18 months in federal prison in an unrelated tax case. He is scheduled to be released in October.
The firm says it will have an exciting future.
“InetGlobal will use the remaining funds to launch a new and exciting array of products, many of which have been delayed due to the seizure of the funds,” the company announced on its Blog. “What working capital was available was used to service the existing business and to pay for the expensive process required to convince the United States government that iNetGlobal’s business is legal.”
An INetGlobal supporter who emailed the PP Blog this afternoon included a link to the Star Tribune story, which included Kinsella’s comment that the firm had been validated.
“Wow, it looks like you have some explaining to do,” the sender opined, referring to the Blog’s coverage of the allegations against the firm.
The sender then imagined a fantasy conversation in which the Blog would say “oh uh uh well uh” — and which he would say in return, “THAT’S WHAT I THOUGHT!!”
UPDATED 2:37 P.M. ET (U.S.A.) If you’re a modern-day commodities fraudster and Ponzi schemer, be prepared to have massive criminal and civil exposure. The recent cases against Charles E. “Chuck” Hays of Minnesota tell a tale of significant prison time, a huge criminal restitution order and civil fines that effectively exposed him to treble damages while also holding him accountable for his ill-gotten gains. Indeed, his legal problems didn’t end even after he was sentenced to jail in May 2010.
Here is some of the notable math from the criminal case against Hays, who pleaded guilty in April 2009 to running a commodity-pool Ponzi scheme.
Jail sentence ordered by U.S. District Judge Donovan Frank: 117 months.
Restitution ordered by Frank in criminal case: $21.6 million.
The criminal case against Hays, who operated a company known as Crossfire Trading LLC, was brought by federal prosecutors and the U.S. Postal Inspection Service.
Now, the math of the civil side of the Hays’ prosecution has been released:
Civil fine against Hays ordered by Frank: nearly $64.8 million. (The amount was arrived at by totaling the proceeds of the Ponzi scheme ($40.4 million) and subtracting the Ponzi payments to victims ($18.8 million) to arrive at the figure of $21.6 million — and then trebling that number to determine the fine.)
Disgorgement of ill-gotten gains ordered by Frank: $19.9 million. (The amount is a bit less than the $21.6 million figure noted above because Hays was given credit for slightly more than $1.6 million he lost while trading. Even so, the full amount of $21.6 million is due in the judgment in the criminal case.)
Additional penalty imposed by Frank in civil case: lifetime ban from trading.
Although Hays argued he didn’t deserve a lifetime ban after running a Ponzi scheme that gathered more than $40 million and issuing false statements to investors, the judge didn’t buy it.
“Hays’ activities justify a permanent trading ban because Hays has shown himself to represent an inherent threat to the integrity of the futures market,” Frank wrote.
The CFTC brought the civil case and persuaded Frank the steep fine and disgorgement order were warranted.
“In light of the egregiousness and continuing nature of the fraud in this case, which spanned over eight years, such an assessment is appropriate,” Frank wrote. He also left the door open for victims to sue Hays, meaning that the orders in the federal cases did not bar private litigants from seeking their own remedies against Hays.
Fraudsters could take a clue from the federal litigation and severe penalties against Hays, Frank suggested.
“Given that Hays must repay his criminal penalty before turning to his civil penalty, the imposition of a civil monetary fine (or for that matter, disgorgement) is largely academic,” he noted in his order. “Nonetheless, the Court was persuaded by the CFTC’s comments at the motion hearing that this action is necessary to adequately address Defendants’ violations and deter against future violations while the events leading to this lawsuit are fresh in people’s minds.”
Steve Renner is in the custody of the U.S. Marshals Service, the agency said this afternoon.
Renner, 55, was the operator of the INetGlobal autosurf. He was convicted of income-tax evasion in December 2009. On May 5, he was sentenced by U.S. District Judge Donovan Frank to 18 months in prison, although Renner was not immediately jailed after sentencing and was given permission to report on a date uncertain.
His prison term appears now to have begun.
Renner is listed by the Federal Bureau of Prisons as “in transit” to a federal detention facility. The name and location of the facility were not immediately clear, and the Marshals Service said it could not provide any additional details.
INetGlobal continues to be under investigation by the U.S. Secret Service amid allegations Renner was operating an autosurf Ponzi scheme. Renner’s tax case was separate from the INetGlobal probe.
Renner was indicted on the tax charges in September 2008, about a month after the Secret Service raided the Florida headquarters of AdSurfDaily, another alleged autosurf Ponzi scheme.
Sign of the apocalypse? The headquarters of the “3 Hebrew Boys” Ponzi scheme in Columbia, S.C., was gutted in a fire Monday and Tuesday. Firefighters spent 19 hours over two days battling the blaze, but the “building and all contents . . . were completely destroyed,” according to Beattie B. Ashmore.
Ashmore is the court-appointed receiver in the case. Proof-of-claim forms for victims of the $80 million Ponzi swindle became available April 15, only 11 days before the fire broke out. The cause of the fire is under investigation, and the building was an asset of the receivership estate.
“All computers and documents have been stored off-site since the Receiver took possession of the building in October 2007,” Ashmore said. “The building was being managed by a reputable property management company, fully insured and continuously monitored by a security company. The Receiver will make a claim immediately with the Hartford Insurance Company for the full value of the building with the insurance proceeds going to the benefit of the victims.”
The 3 Hebrew Boys case is one of the strangest in the United States, drawing comparisons to the alleged AdSurfDaily Ponzi scheme owing to elements of affinity fraud and antigovernment rhetoric.
Joseph Brunson, Tim McQueen and Tony Pough were convicted in November of swindling tens of millions of dollars in a bogus debt-relief “ministry.” The purported aim of the program was to free people from government “bondage,†and the investigation was referred to as “Satan’s handiwork.â€
In the earliest days of the 3 Hebrew Boys case, more than 100 people protested on behalf of the scheme at a rally in Columbia, saying the government did not understand the program, had overreached in its prosecutorial efforts, refused to deny it was wrong and had chosen to move forward with the case in a bid to save face.
In an approach similar to one used by the AdViewGlobal (AVG) autosurf, members were forced to agree to a confidentially clause that purportedly prohibited them from discussing the company outside the confines of meeting places. Participants were threatened with a $1 million penalty for sharing information.
AVG, which has close ties to ASD, morphed into a “private association†in February 2009. Members were scolded for sharing information and calling the autosurf an “investment†program. As the company appeared to be collapsing in May and June, members were threatened with copyright-infringement lawsuits for sharing information published by the firm.
Brunson, McQueen and Pough are jailed awaiting sentencing. After they were found guilty of 174 counts mail fraud, money-laundering and transporting stolen goods, the men filed documents accusing former U.S. Attorney Walt Wilkins of treason and committing acts of war by prosecuting them.
The men became known as “3 Hebrew Boys†after operating a website with the same name, which is based on a biblical story of believers who escaped a furnace by relying on their faith. The Ponzi scheme operated under the name Capital Consortium Group LLC.
Minnesota Ponzi Sentencing
A Ponzi scheme operator in Rosemount, Minn., has been sentenced to 117 months in prison and ordered to pay $21.8 million in restitution to victims.
Charles “Chuck†E. Hays, 56, has been detained since his arrest in February 2009. He pleaded guilty last year to one count of mail fraud, one count of wire fraud and one count of structuring transactions to avoid financial reporting requirements.
Among the items seized in the case was a $3 million yacht acquired with investors’ money. Hays operated a firm known as Crossfire Trading LLC and bilked investors out of more than $20 million by operating a Ponzi scheme.
“Hays told potential investors he was a day trader in stock index futures and other futures contracts,” federal prosecutors said.
Investors plowed money into the scheme based on lies told by Hays, and he “admitted he diverted and converted those funds for his personal use and other unauthorized purposes,” prosecutors said.
The sentencing judge in the case was U.S. District Judge Donovan Frank.
California Ponzi Sentencing
Milton Retana, 46, of Huntington Park, was sentenced to 25 years in prison for a $62 million Ponzi scheme that bilked mostly Spanish-speaking investors out of at least $33 million.
The case became known as the “Best Diamond case.” Retana operated a purported real-estate investment company known as Best Diamond Funding. It was yet another instance another in which the name of a precious metal or mineral was used in a Ponzi scheme.
Evidence of the fraud was hidden in the back of a religious bookstore operated by Retana’s wife, prosecutors said. When investigators searched the bookstore, they found millions of dollars in cash. Best Diamond was located next door to the bookstore.
The scheme — like many other Ponzi schemes — featured an appeal to religion, prosecutors said.
“Best Diamond Funding solicited money through advertisements in Spanish-language magazines, on the Internet, and during weekly investment seminars at locations across Los Angeles. The raucous investment seminars often had as many as 300 potential investors and incorporated religious messages,” prosecutors said.
“Retana guaranteed returns as high as 84 percent each year, claiming that he would purchase properties in bulk at below-market prices and immediately sell them for a profit,” prosecutors said. “However, records obtained by federal investigators showed that Retana used only a tiny fraction of the victims’ money to purchase real estate and that his company was actually losing money.”
The sentencing judge in the case was U.S. District Judge R. Gary Klausner.
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.â€
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.
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.
UPDATED 9:24 P.M. EDT (U.S.A.) A spokeswoman for U.S. Attorney B. Todd Jones of the District of Minnesota refused to say today whether the government’s probe into the business practices of Inter-Mark Corp. and INetGlobal is over.
