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Tag: U.S. District Judge Michael J. Davis

  • ‘Offensive’ Claim Prompts Accused Schemer Pat Kiley To Ask Judge To Sanction Government Attorney And Award Cash To, Well . . . Pat Kiley

    The civil litigation in the $194 million Trevor Cook Ponzi and Forex caper has taken a strange turn.

    Former radio host Pat Kiley, a Cook co-defendant in civil cases brought by the SEC and CFTC, has filed a pro se pleading asking Chief U.S. District Judge Michael J. Davis to order David Slovick, an attorney for the CFTC, to pay Kiley $1,000 for making Kiley respond to an “offensive” government motion to strike his answer to the CFTC’s complaint.

    Kiley has denied wrongdoing.

    But the government, according to Kiley, is trying “to ‘get Pat Kiley’ at all costs.” Kiley was sued in 2009 by both the SEC and the CFTC.

    Kiley contends Slovick filed an “un-researched and frivolous pleading” filled with “wild and silly allegations” that Kiley was manipulating the legal system.

    Davis should impose a penalty of $1,000 against Slovick and arrange for the money “to be paid to Pat Kiley,” Kiley advised the judge.

    Nonsense, the CFTC said.

    And the agency further claimed that Kiley was not really a pro se litigant — and thus should be held to a higher pleading standard — because a professional attorney was helping Kiley and not signing the pleadings.

    Attorney H. Nasif Mahmoud of Illinois and Gary, Ind., is assisting Kiley, the CFTC said.

    Mahmoud has not filed a required appearance notice on Kiley’s behalf, according to the CFTC.

    In court filings, the CFTC quoted a May 10 email from Mahmoud to the agency.

    “What I do in my private time to assist an innocent man whom you have falsely accused of wrong doing is my business,” the email read in part.

    The CFTC engaged in “illegal” conduct when it suggested Mahmoud was acquired to file an appearance notice, according to the email.

    Screen shot of part of CFTC's "Exhibit A," an email attributed to attorney H. Nasif Mahmoud. The agency claims that Pat Kiley is benefiting from a liberal pleading standard by purporting to be pro se litigant. Kiley, though, is receiving assistance from Mahmoud, who is not signing the pleadings, according to the CFTC. In this section of the CFTC exhibit, Mahmoud asserts that the CFTC is engaging in illegal conduct and that what he does to assist Kiley is his own business. The CFTC "can not prevent that," according to the email attributed to Mahmoud. (NOTE: PP Blog masked the email address.)

  • ‘Bo’ Beckman’s 11-Room Florida Ponzi Palace Has Screened-In, Heated Pool, Spa, ‘Summer Kitchen,’ Game Room, View Of Golf Course And Two Garages, Appraiser’s Report Says

    Jason 'Bo' Alan Beckman's Florida Ponzi property has a screened-in, heated pool and spa, according to court filings.

    As alleged Ponzi palaces go, Jason ‘Bo’ Alan Beckman’s Florida property is hardly the gaudiest. Even so, the 11-room home in Palm City has features and amenities many Americans only dream about.

    But one group of Americans — victims of the Trevor Cook Ponzi scheme — are likely only to have only bad dreams about the property. They are out millions of dollars as a result of a massive fraud in which Beckman allegedly played a big role.

    The two-story, five-bedroom, five-bathroom home built in 2005 is situated near a golf course and equestrian facility, according to newly filed documents in the Beckman civil-fraud case. Receiver R.J. Zayed is seeking an order that would turn the property back over to Beckman and his wife because the home — despite its amenities — likely cannot be sold for what is owed on the $707,301 mortgage.

    Keeping the property could create a drain on the receivership estate, Zayed argued.

    Chief U.S. District Judge Michael J. Davis asked last week that an appraisal be done on the property. The appraisal now has been filed with the court, and the appraiser reported that the home is worth $540,000, about $167,301 less than what is owed.

    Other court filings suggest the property may be worth even less. The SEC described Beckman in March as a “leading” figure in the Cook scheme, alleging that he raised about $47.3 million of the $194 million gathered in the overall fraud.

    Floor plan of the Beckman Florida home.

    Cook is serving a 25-year sentence in federal prison.

    Beckman used $1.49 million of investors’ money for payments “toward the purchase” of luxury homes in Minneapolis, Texas and Florida, the SEC charged. The Minneapolis home already is in foreclosure, and the Florida home is situated in an upscale neighborhood trying to make a comeback after the state’s foreclosure glut caused property prices to plunge, according to court filings.

    The Beckman Florida game room.

    Any buyer who emerges to purchase Beckman’s Florida property will find that it has twin garages with enough floor space to hold four cars, according to court filings.

    The home also features a yard with palm trees, a driveway built with colored pavers, a screened-in pool and spa, a screened-in “summer kitchen” and porch, central air, a well-appointed interior kitchen, a dining room, a living room, a family room, a game room, a den, a showy staircase, marble floors, a laundry room and other amenities.

    Some of the Ponzi victims have been described in court filings as penniless.

  • BULLETIN: SEC Charges Jason Bo-Alan Beckman In Trevor Cook Ponzi Scheme; Judge Freezes Assets; Agency Says Investors’ Cash Used To Make Child-Support Payments And Puchase ‘Luxury Homes’ And Cars

    BULLETIN: Jason Bo-Alan “Bo” Beckman has been charged civilly by the SEC in the Trevor Cook Ponzi scheme in Minnesota and named a “leading” figure, according to court filings. The case against Beckman was brought as an action separate from the civil action against Cook, who also was charged criminally and is in federal prison serving 25 years after pleading guilty last year.

    The SEC’s complaint suggests other defendants may follow.

    “His fraud was part of a bigger scheme orchestrated by and with Trevor Cook and several associates,” the agency said, alleging that Beckman raised about $47.3 million of the $194 million gathered in the overall fraud — roughly 25 percent of the overall total. Former radio host Pat Kiley previously was charged civilly.

    Chief U.S. District Judge Michael J. Davis has frozen Beckman’s assets.

    One individual — a 41-year old nurse — submitted a sworn affidavit to Davis that Beckman promised him “guaranteed” annual returns of “12% or greater.”

    The nurse, an inexperienced investor who put $130,000 into the scheme, asserted he learned about the purported currency-trading program from Hollie Beckman, Beckman’s wife. Hollie Beckman has been named a relief defendant amid assertions she received ill-gotten gains. Her assets also have been frozen.

    Another inexperienced investor — a 60-year-old man who previously was retired but has returned to work because his life savings of nearly $750,000 were wiped out in the scheme — said in a sworn affidavit that Beckman promised him a “guaranteed”  return of 10.5 percent. Like the nurse, the man was given a tour of the Van Dusen Mansion, the landmark Minneapolis estate from which Beckman and Cook conducted business.

    This man rolled over his 401K account and liquidated his pension fund to become an investor, according to an affidavit.

    Yet-another inexperienced investor — a 62-year-old man who works as a water-plant operator — said he put $99,300 into the scheme by liquidating an account at Bear Stearns. Beckman promised him that his “fixed” account would generate about 13 percent annually, according to a sworn affidavit.

    All told, the SEC charged, “Beckman’s investors ultimately lost over $39 million by investing in the Currency Program and putting their money in his hands.” About 143 investors gave Beckman their money.

    Luz M. Aguilar, an SEC investigator, said that $85 million of the $194 million “was never invested in any type of foreign currency trading.”

    And Aguilar alleged that “the Beckmans deposited approximately $7.7 million into their personal joint accounts.” The funds originated “from accounts containing funds of investors,” according to Aguilar.

    More than $61,000 was used to make child-support payments, Aguilar alleged.

    But most of the money went to fuel an extravagant life-stlye, according to Aguilar. Here is a list of some of the spending:

    • $210,828 for automobile payments. The fleet allegedly included a 2010 Jaguar, a 2008 Land Rover, a 2006 Land Rover, a 2008 Mercedes, a 2008 Suzuki and a 2000 Mercedes.
    • $1.49 million for payments “toward the purchase” of luxury homes in Minneapolis, Texas and Florida.
    • $695,000 for credit-card payments.
    • $180,000 for a suite to watch hockey games.
    • $36,000 to “resorts.”
    • $76,000 to a country club.
    • $108,000 for cash withdrawals.
    • $224,000 for construction and repairs.
    • $997,000 for payments to seven law firms.
    • $223,000 for taxes.

    “Beckman was in a position to know the truth about the Currency Program,” the SEC charged. “He worked side-by-side with Trevor Cook at the Van Dusen mansion. Red flags waved all around him. For example, he knew — by April 2008, over a year before the scheme collapsed — that investors’ funds were pooled and were not in segregated accounts at all. He also learned from Trevor Cook that the location of investors’ funds was ‘not a black and white situation.’ The warning signs were glaring. Yet Beckman kept [quiet] — and kept taking tens of millions of dollars from investors . . .

    “Now that the Currency Program is over — and the money flow has stopped — the Beckmans apparently are struggling to make ends meet. Their expansive home in the Minneapolis suburbs is in foreclosure,” the SEC said.

    The SEC asked Davis to halt a sheriff’s sale set for March 14, and the judge issued an order blocking it.

    Even though Beckman had serious doubts about Cook, he kept them to himself, not sharing with investors information they needed to make informed decisions, the SEC charged.

  • EXPLOSIVE REVELATION: FBI, IRS Find More Than $400,000 In Stashed Loot In Trevor Cook Ponzi Case, Including More Than $200,000 In $100 Bills, Gold Coins, Watches, Baseball Cards

    Part of the loot the FBI and the IRS found under the alleged control of Graham Cook on July 23.

    Trevor Cook’s brother was hiding more than $400,000 in cash and valuables from a $190 million Ponzi scheme, according to an extraordinary statement by the court-appointed receiver in the case.

    The loot was found July 23 — after Trevor Cook, whose plea agreement in the case required him to submit to a lie-detector test if requested by the government — “flubbed” the test, according to the Star Tribune of Minneapolis/St. Paul.

    Graham Cook, Trevor Cook’s brother, has not been charged in the case. But the revelation that proceeds from the scheme allegedly were under his control and concealed for months from investigators and two federal judges presiding over elements of the case raise troubling, new questions about Trevor Cook’s capacity to tell the truth in any context and whether Cook and others had stashed money elsewhere.

    Trevor Cook was jailed in January by Chief U.S. District Judge Michael J. Davis for concealing assets and spending money frozen by court order on Nov. 23, 2009. Davis, who is presiding over the civil elements of the case filed by the SEC and the CFTC, said the government had established that Cook had violated the court order.

    Another part of the loot.

    At the time, Cook made a technical argument that he had not been properly served in the case at the Van Dusen mansion in Minneapolis on Nov. 24 and thus was not bound to follow the order, a position that gave short shrift to the hundreds of victims in the case, some of whom had been rendered destitute.

    Victims complained that Cook was thumbing his nose at both the court and investors. Cook also asserted his 5th Amendment right against self-incrimination, which caused victims to wonder what else he could be hiding.

    Davis did not buy any of Cook’s story, and jailed him.

    “[C]opies of said Orders were shown to Cook, and the relevant portions of the Orders were explained to him by the Receiver” on Nov. 24, 2009, Davis ruled. Regardless, Cook later used frozen assets to purchase $7,510 in gift cards from Cub Foods and $16,000 in gift cards from Target.

    “Given the amount of investor money at issue, and Cook’s repeated violations of the Asset Freeze Orders, the Court finds that the appropriate remedy for the contempt finding in this case is to incarcerate Cook until such time as he purges such contempt.”

    Jail was an appropriate remedy for Cook, even in a civil case, a top SEC official said at the time.

    Sports collectibles, such as this baseball card of Minnesota Twins' immortal Kirby Puckett, also were part of the stash.

    “Mr. Cook has elected to disregard the court’s orders and will now be a guest of the federal correctional system until he mends his ways,” said Merri Jo Gillette, director of the SEC’s Chicago Regional Office.

    In March, while Cook was jailed in the civil case, prosecutors charged him criminally with mail fraud and tax evasion, opening up a new round of litigation over which U.S. District Judge James M. Rosenbaum is presiding.

    Cook pleaded guilty to the criminal charges in April. His plea required him to take a lie-detector test “if requested” by prosecutors to determine “whether he has truthfully disclosed the existence of all of his assets and the use of the fraud proceeds.”

    It is believed the test was administered in mid-July, prior to Cook’s scheduled sentencing date of July 26. Sentencing has been postponed until Aug. 24, and Rosenbaum may have to determine whether Cook once again has thumbed his nose at the court, prosecutors, victims and the receiver in a bid to prevent the discovery of funds that could be used to make the victims as whole as possible.

    The discovery of the funds also raises questions about whether Cook failed to disclose the whereabouts of assets in a bid not to implicate others in the scheme.

    The stash also included Rolex and other expensive watches.

    Cook’s plea agreement also required him to to “fully and completely disclose to the United States Attorney’s Office the existence and location of any assets in which he has any right, title, or interest and the manner in which the fraud proceeds were used.”

    Prior even to Cook’s polygraph exam, R.J. Zayed, the court-appointed receiver, raised questions about Cook’s cooperation and level of truthfulness. The plea agreement, as written, conceived a 25-year sentence for Cook, although prosecutors said Rosenbaum had the final say.

    Victims fretted that Cook, who is in his late thirties, could emerge from prison as a relatively young man in his early sixties and have access to money that had been hidden from the court, investigators and the receiver.

    Zayed now says that federal prosecutors, the FBI and the IRS found the hidden loot July 23.

    Seized from Graham Cook were “$202,600.00 in cash, 2891 gold and silver coins, 27 watches, some sports memorabilia cards and other personal property belonging to the Receivership,” Zayed said yesterday.

    “A rough estimate of the value of the coins is approximately $200,000.00 to $225,000.00,” Zayed said.

    Read the Star Tribune story.

    Read this PP Blog story from April in which victims said they believed Cook was lying about the whereabouts of assets.

    Read this June PP Blog story in which Cook victims said they sought a meeting with prosecutors to delay Cook’s sentencing until more facts emerged. Victims said they feared he stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

    Read this July 12 PP Blog story in which a source told the PP Blog that Cook would be subjected to a lie-detector test.

    Read Zayed’s remarkable statement and see photos of the loot.

  • Clawback Actions Begin In Trevor Cook Case; Receiver Says Millions Of Dollars Of ‘Preferential Transfers’ To Investors Occurred After SEC Paid ‘Surprise’ Visit

    EDITOR’S NOTE: R.J. Zayed, the court-appointed receiver in the Ponzi and Forex fraud case brought by the SEC and CFTC against Trevor Cook and Pat Kiley, has said many investors were made destitute by the scheme. Not all investors lost their money, however. Yesterday Zayed filed petitions to claw back millions of dollars in “preferential transfers”  made to investors as the scheme allegedly was unraveling.

    Zayed, who is seeking to make victims as whole as possible, also filed actions against two banks to recover mortgage payments made by Cook on two Minnesota properties. All in all, the clawback actions are targeted at 22 individuals or entities on the legal theory they are not entitled to benefit from proceeds that flowed from Cook’s illegal scheme. The precise number entities or people who allegedly received tainted money is not known. One of the investors named in the clawback actions was the grandmother of a Cook employee, according to court filings.

    Chief U.S. District Judge Michael J. Davis has given Zayed the authority to pursue “any third party recipient of asset transfers from Cook or any named Receivership entity,” meaning more clawback actions could be in the offing as the probe by the receivership continues.

    Here, now, the clawback story . . .

    Acknowledged Ponzi swindler Trevor Cook knew in 2008 that Crown Forex S.A., a Swiss entity in which the CFTC alleged Cook held a majority ownership stake, “was insolvent and incapable of paying its investors,” according to new petitions filed by the court-appointed receiver in the case.

    And Cook also knew that the Financial Industry Regulatory Authority (FINRA) was asking questions as early as April 2009. “No later” than May 2009, according to receiver R.J. Zayed, Cook knew Swiss regulators had placed Crown Forex S.A. in “liquidation.”

    On June 22, 2009, according to Zayed, “the SEC conducted a surprise investigation of the scheme’s headquarters and personally served Cook with a subpoena.”

    Up to six SEC attorneys and accountants were poking around in Minneapolis for five days in June 2009. The clamor surrounding the scheme set in motion a series of events in which certain investors with links to Clifford Berg, a carpet salesman and Cook’s father-in-law, suddenly began to receive back their money, according to court filings.

    Neither Berg nor the investors has been accused of wrongdoing. Events in the case demonstrate the risks that confront both investors and individuals who drive business to Ponzi schemes and other forms of investment fraud. Neither Ponzi principal nor interest is safe because the money comes at the expense of other investors, not as a result of legitimate commerce. Zayed is seeking to force Berg, his wife and the investors to return money traced to the scheme. The Bergs already have agreed to return $948,848.36.

    Clifford Berg worked as a Cook recruiter and brought investors’ money into the scheme, according to court filings. The Bergs also were investors.

    One of Cook’s investors is believed to be the husband of Berg’s dental hygienist, who learned of the purportedly profitable trading program from Berg. Other investors are believed to have known Berg from the carpet business, according to Zayed.

    On June 29, seven days after the SEC appeared unannounced in Minneapolis, the investor married to the dental hygienist received two checks totaling $916,570 from the scheme, according to court filings. The investor had placed $785,162.44 in the program and did not complete paperwork for the withdrawal.

    Some of the investors received calls from Berg. One of the investors placed $147,233 in the program. Although he did not request a withdrawal, he received a check for $360,700 on June 29, 2009, a week after the SEC appeared, according to Zayed.

    Another investor believed to be an acquaintance of Berg placed $1,519,999.51 in the program. This investor called Cook “during the last week in June 2009” to inquire about investing money for his nephew, according to court filings.

    Cook told the investor that there were problems in “another part” of the company, according to Zayed.

    On the very next day, according to Zayed, the investor called Cook and requested withdrawal of his money, but did not complete paperwork for the withdrawal.

    Regardless, Berg “delivered” a check to the investor at his place of business “[s]everal days later,” according to Zayed. The investor’s wife also was an investor and also received a check. Together the couple had placed more than $1.62 million in the program. The total paid to the couple exceeded their outlay, according to Zayed.

    Another investor believed to be a Berg acquaintance from the carpet business placed $618,000 in the program. This investor — in late June 2009 — received a call from Berg during which Berg told him that there were “problems with the company,” according to Zayed.

    “Berg also mentioned a possible investigation,” Zayed said.

    The investor then went to Berg’s house to pick up a check for $747,500, according to Zayed. The check was dated June 29, a week after the SEC came to town. The investor then received three smaller checks, including a check for $2,200 drawn on a gold and bullion business, a check for $2,100 drawn on the bank account of Cook’s brother and a check for $2,100 drawn on the account of Oxford Global Partners LLC.

    Another married couple believed to be acquaintances of Berg invested $243,500 in the program, according to Zayed. Although the husband and wife requested no withdrawals, Berg contacted them in late June 2009, telling the husband that accounts had been closed and that checks were in the mail, according to Zayed.

    This couple received a total of $280,950 in three separate checks after the SEC came to Minneapolis, Zayed said.

    On June 28, another Berg acquaintance received a call from Berg. This person had placed $375,000 in the program and did not complete paperwork for a withdrawal.

    Berg told this investor that there was going to be “some sort of investigation,” according to Zayed. The investor later received a check for $413,600. The check was dated June 29, seven days after the SEC appeared in Minneapolis.

    Yet another investor believed to know Berg from the carpet business plowed $752,134 into the program, according to Zayed.

    This investor had “received a call from Berg” and was told  “that there was some kind of investigation” and that Berg had “cashed everyone out,” according to Zayed.

    Berg then “delivered” two checks totaling $795,911.53 to the investor, according to Zayed.

    It appears as though Berg’s supervisor also was an investor, and placed $250,000 in the program, according to Zayed. The grandmother of a Cook employee also was an investor, placing $102,000 in the program.

    When the grandmother “saw a newspaper article regarding the Receivership Entities and mentioning lawsuits filed against them,” she called her grandson  “and told him to get her money out,” according to Zayed.

    Each of the investors named clawback targets “received payments preferentially over hundreds of other investors who were defrauded by Cook and unable to withdraw the money they had invested in the Trading Program,” Zayed said in court filings.

    Read the clawback petition filed by Zayed against 20 investors. Read an earlier filing against the Bergs.