Actions Against Prime Bank Scam Investment Fraud
Scheme Examples Offering High-Yield Instruments
Consider all of the complaints listed to be condensed paraphrasing
of actual court documents, government advisories, or litigation
releases. They are to be taken as allegations even if not specifically
noted as such. All defendants are presumed innocent unless proven
otherwise in a court of law.
Numerous government agencies, including the Commission, the Federal
Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System, however, have warned the public that trading
programs in prime bank instruments do not exist and are fraudulent.
An excellent article by members of the SEC, John Reed Stark and
N. Blair Vietmeyer, in PDF format on Prime
Bank Securities Frauds.
02/01 - The SEC filed an action in federal court
and obtained an emergency asset freeze against Advance
Local Development, Edmund Burton of New
York, and Thomas Wescott, and Ralph Odom both
of Nevada for allegedly operating a prime bank fraud which from
February 1999 through April 2000 raised $16.5 million from investors
by promising annualized rates of return as high as 2,600 percent
per year, with no risk to capital.
Funds were to be placed into a federally approved "bank to
bank" trading program with Advance's share of the profits
used to promote humanitarian efforts but as no such program exists,
they simply made undisclosed payments to themselves, placed some
into a brokerage account where they financed unsuccessful day trading
activities, and made Ponzi payments to investors.
09/01 - The SEC instituted cease-and-desist proceedings
against John F. Smart, of Pennsylvania, the branch
manager and sole employee of a home-based branch of a registered
broker-dealer. A hearing will be scheduled to determine whether
the allegations are true.
They allege that during several months in mid-1999, he engaged
in a fraudulent offering scheme targeted against three nonprofit
and/or charitable institutions, including a church, a religious-based
family crisis center and a substance abuse center.
Essentially, Smart offered these charities an opportunity to obtain
between $5 million and $9 million each by jointly participating
in an alleged $15 million bond offering which was in reality a
prime bank scheme.
In order to participate in this program, each charity had to submit
a business plan and pay a $50,000 application fee if accepted into
the program. However, Smart was unable to raise any funds from
these charities.
He told the charities that a European charitable trust, with $3
billion in assets, raised money for charities worldwide through
the issuance of "5 year, AA rated" bonds, which were
guaranteed by a top 200 World Bank.
The proceeds from the bond offering were to be placed into a trading
account maintained by, or on behalf of, a European bank which could
then leverage these funds at ten times their face value in credit
facilities, overnight trading and short-term loans in much the
same way that United States banks can leverage money obtained from
the Federal Reserve.
By leveraging these funds, the banks could purportedly earn interest
on a principal amount ten times greater than the funds actually
possessed. Smart claimed that the banks, through this leveraging
and trading, could generate enough profits:
 |
(i)
to pay the principal amount (i.e. the face value of the bonds)
to the charities; |
|
(ii)
to repay the bond investors their entire investment plus
a reasonable rate of return; and |
|
(iii)
to pay the promoters of the program a fee equal to 10 percent
of the offering.
|
Who's Minding the Store?
Though he had kept none of the money, was himself a victim of
the scam, and was not a willing part of the core conspiracy, the
41 year old former chief financial officer of Australian exhibitor
Village Roadshow's US subsidiary, has been jailed for 30 months
for his part in a massive sting that cost the company $11 million.
Using his position of trust, he wired amounts of up to $20 million
out of the film company's account in Los Angeles on four occasions
thinking that he was putting the money into a "prime bank" scheme,
described to him as a "very close-knit network of high-worth
individuals" who invested parcels of $10 million with a guaranteed
return of 5 per cent a week for 40 weeks "at absolutely no
risk".
Instead, after he wired the millions out of Village's account,
it flew around the world from bank to bank, company to company,
and country to country until most of it vanished somewhere between
a Caribbean tax haven and Cyprus.
The frauds were not discovered until two months after he left
the company. For his part he pleaded guilty to federal charges
of wire fraud and "deprivation of honest services".
At least twelve people and companies in Australia and the US were
involved in the operation, including a retired US Federal Court
judge Quentin Morgan and Robert Wachtel,
a California finance broker with a long history of promoting failed
investment schemes.
Village has obtained two judgments in the Supreme Court of Victoria
against Australians involved in the scheme: $1 million against
interests associated with Sydney investment broker, William Stanley
McKay, and $846,000 against Queensland financial advisers Raymond
and Phyllis McGregor.
The SEC estimates that more than $8 billion has been stolen using
this concept in the past decade.
No WIN Situation
The World Investment Network (WIN) Ltd and its
promoter, Mr. Theodore O Pollard of Palo Alto California are under
investigation by the SEC for suspected fraud in connection with
the sale of Prime Bank Securities on the WIN website.
Supersonic Scammers
Concord Capital Enterprise(s), dba Concord Capital
Inc., of Cerritos, California, and Scott Yoshizumi,
a twice-convicted felon, are alleged to have raised at least $1.5
million from at least 25 investors nationwide in a fraudulent scheme
involving an investment in a Bank Debenture Program.
It was said to involve the "top 200 world banks" and
that investors, who were told that their funds will be placed in
a "special account" until sufficient funds were accumulated
to enter into the program, would receive two or four percent profit
per month.
In fact, their Bank Debenture Program was a fraudulent investment
scheme and investor funds were commingled into several Concord
accounts and immediately withdrawn for various business expenses
and personal uses including the purchase of a $1.3 million home
for relief defendant Ann Ta and a $145,869 Mercedes Benz automobile
for relief defendant Dionisia Pappas. About $800,000 was paid as
sales commissions.
In addition to the preliminary relief, which imposes a freeze
on their assets, the Commission also sought a judgment of permanent
injunction, disgorgement and civil penalties.
11/24/00 Civil Action No. SA CV 00-1131 AHS (EEx) (C.D. Cal.)
Scam At"TAC"k
02/00 - From the summer of 1996 until August
of 1997, TAC International Ltd., a Bahamas corporation,
and its senior officers sold over $12 million in fraudulent "prime
bank" securities which duped thousands of United States residents
out of at least $1,500 each.
Douglas R. Walker, TAC's former president and
owner along with Larry B. Richardson and Jan
Harry "Jack" Wilde, national vice presidents,
represented that by buying a Bahamian International Business Corporation
("IBC"), investors could participate in certain securities
trading programs not available in the United States.
These trading programs supposedly enabled investors to obtain
phenomenal returns, as much as $20,000 from the original $1,500
investment -- an annual return of over 1,300%, at no risk to principal,
by participating in purported trading in high yield debentures
between and among banks.
They did not however engage in any trading, but instead used the
money to pay for their lifestyle expenses.
Craig Southwood, TAC's current president and
owner, supervised operations at its headquarters in the Bahamas
and created a second fraudulent investment scheme which he named
the "Southwood Program" under which
investors were required to wire a minimum of $50,000 in return
for a promised return of 600% within thirty days of the initial
investment.
TAC, Southwood and Walker were each required to account for and
disgorge $8,419,367, representing profits gained as a result of
the alleged conduct, together with prejudgment interest of $2,579,087,
for a total of $10,998,454 along with civil penalties of $550,000,
$110,000 and $110,000, respectively.
Walker and Southwood were indicted for 17 felony counts each,
for federal conspiracy, mail fraud, wire fraud and money laundering.
Wilde, who, along with Richardson, trained TAC's United States
sales force to market the fraudulent programs and supervised the
marketing efforts, consented, without admitting or denying the
allegations, to a final judgment permanently enjoining him from
this conduct, waiving disgorgement and declining to impose a civil
monetary penalty based on his demonstrated inability to pay.
Better Than Raising Taxes
It was alleged by the SEC that Louis Bethune, Charles
Howard and John Jackson, participated
in a fraudulent scheme to pledge $300 million in revenue bonds
purportedly secured by prime bank securities and issued by the
Redevelopment Authority of White Hall ("Authority")
in an attempt to obtain a $255 million margin loan from a Sarasota,
Florida office of Smith Barney, Inc.
They were said to be "Bank Guaranteed," and backed by "Prime
Bank Securities, issued by a an acceptable institution in good
standing."
John Jackson, the Mayor of White Hall, Alabama, consented to the
entry of a permanent injunction against him without admitting or
denying the allegations of the complaint.
Civil Action File No. CV 95-2509-S (September 29,1995)
Prime Candidates For Firing Squad
An SEC Complaint of 11/21/96 alleged that Joseph A. Bremont and Jimmy
B. Sanchez, directly or indirectly, falsely represented
to investors that they and Comcar International Ltd.
and Commercial Capital Resources, Inc. would
use investors' money to arrange for the purchase and sale of
so-called "prime bank securities" which would yield
enormous profits for the investors.
They fraudulently obtained more than $2.1 million since 1993 from
investors, including residents of New Hampshire, Indiana, and a
group of cadets at the U.S. Military Academy at West Point. At
least $97,000 of that was paid to RPS Financial Group, Inc. as
compensation for Michael J. Spector's services as a finder of investors
and more than $1.7 million was diverted overseas.
They promised investors that upon completion of the transaction
they would be paid a percentage of the face value of the prime
bank securities sold, thereby earning returns of up to 2000 percent
on their initial investment plus the opportunity, as "collateral
providers", to share in additional profits from subsequent
resales of the prime bank security in a secondary market. No such
market for prime bank securities exists.
In each instance, they fraudulently withdrew the investors money
from an escrow account by either fabricating a default by the investors
or arranging for the issuance of a counterfeit purchase order.
Soaked By The Oak
05/11/99 - Since at least early 1998, Richard
J. Briden, a Massachusetts business consultant and his
two corporations, Empowerment Funding Group, LLC and Infopro
Group, Ltd, offered fraudulent prime bank trading programs
which required a minimum $1 million investment.
Briden falsely promised investors as much as a 100% return per
week in risk-free trading programs which he advertised on websites,
electronic bulletin board postings and e-mails. He claimed that
no funds would leave the investor's bank account. His commission
was to be based on up to 30% of the investor’s return.
He actually convinced at least three individuals to provide him
with proof of $1 million to invest and the signed powers of attorney
giving him the authority to "commit" the funds in a prime
bank trading program but never successfully invested any funds
in these "Million Dollar Programs."
Seven other investors invested $295,000 in another "risk-free" prime
bank trading program, known as "Acorn," symbolic
of the fact that it was willing to accept investments of less than
$1 million. Here he promised the investors a return of 640%
per 40 week period, with his take the standard 30% of any returns.
In October 1998, he wired their money to a bank account in the
name of Mutual Assets Limited in Guernsey in
the Channel Islands. The investors have since not received any
of their promised return, only excuses which range from bank holidays,
the sickness of some of the traders, bank mix-ups and various other
reasons. According to the Commission’s Complaint the funds
are now beyond Briden’s control and will never be invested
in any legitimate manner for the benefit of the investors.
Time to Think About Talking
On December 20, 2000, a Final Judgment ordered Relief Defendant C.
Kelly Olsen to pay disgorgement in the amount of $1,827,933,
plus prejudgment interest in the amount of $333,990 based on
his participation in a fraudulent Ponzi scheme involving the
offer and sale of nonexistent "prime bank" securities.
After being fined $50,000, having his filed pleadings struck,
and held in a federal detention center since May, on December 12,
2000 Olsen finally purged himself of contempt and was released
after providing a detailed statement, under oath, concerning his
present assets and his use of investor funds.
The scheme, developed and operated chiefly by Benjamin
Franklin Cook of Carefree, Arizona doing business as Dennel
Finance Limited, raised more than $45 million from approximately
300 investors throughout the United States, targeting religious
groups and persons investing retirement funds.
Cook was also indicted August 30, 2000 by an Arizona grand jury
on 37 counts of racketeering, fraud and theft in connection with
the scheme. He was previously incarcerated for contempt after being
arrested in a Las Vegas casino.
The final judgment enjoined him from further securities violations,
ordered him to pay disgorgement in the amount of $36,724,494 plus
prejudgment interest of $5,616,807, and imposed a civil penalty
of $110,000. On April 2, 1999, a Preliminary Injunction appointed
a Temporary Receiver to take control of the assets for the benefit
of investors.
Also named were Gerald Lee Pate, Ellsworth Wayne McLaws, Alan
Clagg and relief defendants FPC-1 Limited Partnership, Samuel Limited
Partnership, Alliance Investments Corp., Cornerstone Management
LLC, International Business Consultants Limited and Highlander
Limited Partnership.
07/01 - The SEC has alleged that from 1997 through
March 1999 Ellsworth Wayne McLaws and Alan
Clagg were acting as unregistered brokers and they along
with others raised more than $30 million through the offer and
sale of unregistered securities in a nonexistent "prime bank" trading
program. The Complaint alleged that investment funds were misappropriated
for personal and unauthorized uses, such as making Ponzi payments.
Investment Horror Story
On March 2, 2001, Richard J. Fulcher was sentenced
to two years in prison for his role in a prime bank/Ponzi scheme
conducted by Terry V. Koontz, Jeffrey A. DeVille, Mykael
Deville and others.
The charges arise out of a vast prime bank Ponzi scheme in which
they induced more than 80 individuals in 16 states to invest over
$20 million in a fictitious "international bank debenture
trading" program called Private Pool, LLC.They
promised investors a return of 1% per week for a forty-week period,
that their funds would be secured by government bonds in a two-to-one
ratio, and that they would receive a security interest in the bonds
evidenced by a UCC-1 financing statement filed with the State of
New York.
Koontz falsely represented himself to be affiliated with Barclays
Bank and that he traded "international bank debentures" which,
in fact, do not exist. He provided others with various fraudulent
documents for distribution to investors then used the invested
funds to pay Ponzi distributions, sales commissions and at least
$9.9 million for personal purposes, including the purchase of homes,
jewelry, and automobiles, including Cadillacs, BMWs, and a Mercedes
Benz.
Koontz, formerly a registered representative associated with World
Marketing Alliance, Inc., pled guilty in Tampa to charges
of conspiracy, securities fraud, and wire fraud relating to the
$20 million Private Pool scheme and a follow-up prime bank/Ponzi
scheme in which he orchestrated the sale of an additional $3
million of fraudulent securities, and was sentenced to 15 years
and eight months in prison. He also agreed to forfeit various
assets purchased with proceeds of the fraud.
He is the fifth defendant to be charged as a result of this scheme.
Fulcher (mail fraud), DeVille (securities and wire fraud), Stewart
Koral (false statements), and Joseph Papasidero (misprision
of a felony), have all entered guilty pleas and been sentenced
in U.S. District Court in Tampa, Florida.
Richard J. Fulcher, of Virginia, Thomas J. Dolan,
of New York, Lawrence E. Seppanen, and Walter
G. Lapp, both of New Jersey, all former registered representatives
with World Marketing Alliance, Inc. consented
to the entry of permanent injunctions. The four sold a total of
over $7.7 million of unregistered securities of Private Pool to
approximately 39 investors.
While Fulcher agreed to pay disgorgement of $660,553 plus interest
and a civil penalty of $75,000, the Court waived payment and did
not impose a civil penalty against Dolan, Seppanen, and Lapp based
on their demonstrated financial inability to pay.
The Commission also entered an administrative order permanently
barring Jeffrey DeVille from associating with a broker or dealer.
The DeVilles consented, without admitting or denying the allegations
of the Commission's 09/98 complaint, to the entry of final judgments
permanently enjoining them from further violations. On January
31, 2001, Jeffrey DeVille was sentenced to two years in prison
for his role.
Although the Court ordered the DeVilles, along with relief defendant
Purr Trust, to pay disgorgement, which includes the forfeiture
of various assets the DeVilles purchased with proceeds of the fraud, based
on their demonstrated financial inability to pay, the Court waived
partial payment of disgorgement and prejudgment interest by the
DeVilles and Purr Trust and did not impose a civil penalty against
the DeVilles.
SEC v. Terry V. Koontz, et al., Civil Action No. 98cv11904NG
Darker Motives
On September 3, 1997, the SEC sued Rob Nite,
age 46, Philip L. Thomas, age 43, and David
V. Sims, age 47, alleging that from July 1994 through
October 1994, they offered and sold interests in a bogus program
to trade securities purportedly issued by major international banks,
amassing approximately $3.7 million.
For their investment, victims were guaranteed that for an initial
investment of either $50,000 or $150,000, they would receive returns
of $1 million per week for 40 weeks, or $40 million. Contrary to
the promises, they did not invest the funds, but instead
misappropriated most, if not all, of the funds for their own personal
benefit.
Nite is currently in federal prison in Arizona serving a 44 month
sentence for mail fraud, wire fraud and conspiracy, conduct unrelated
to this lawsuit. Sims, who resides in Beverly Hills, has previously
been sued administratively by the Commission for causing a public
company to file false financial statements.
Jerked Around By The Juniors
On February 8, 2001, Edward J. Paradis, Jr.
and Walter R. Snyder, Jr., of Massachusetts,
were arrested on charges of mail fraud, wire fraud and conspiracy
in connection with a prime bank scheme conducted between January
1995 and March 1998 in which they raised more than $600,000 from
four individuals.
They falsely represented that they could obtain funding for business
projects by acquiring letters of credit from international "prime
banks" but that these could only be obtained if the applicants
made substantial up-front payments, as high as $200,000,
to pay issuance fees charged by the "prime banks".
Applicants were assured that the payments would be maintained
in escrow accounts administered by Snyder, an attorney in Massachusetts,
and refunded if the promised financing did not materialize within
seven to thirty days.
Contrary to these assurances, the funds were withdrawn from the
escrow accounts shortly after being deposited and used for their
own benefit.
Final judgments against them required them to disgorge their ill-gotten
gains and imposed monetary penalties. In addition, Snyder was disbarred
as a lawyer.
The Six of Us Keep Your Capital
On November 12, 1997 the SEC entered an order of permanent injunction
against Six Capital Corporation and Anthony
Bukovich, its president and controlling shareholder from
further violations of the Securities Act relating to prime bank
fraud.
The complaint alleged that Bukovich, Six Capital, Jerome
C. Pinckney, Richard L. Arnold, Donald E. Elder, Fernando Cruz and Shaun
K. R. Maxwell violated the antifraud statute by offering
for sale investment contracts which were part of a prime bank
scheme which involved trading in supposed "bank guarantees" issued
by the top 15 banks in western Europe, that the investment in
the bank guarantee program was a "clean, neat, safe, legitimate
transaction", and that they had sold prime bank instruments
in the past.
More Like Profane
The SEC filed a complaint against W. Ralph Wills, III and ProFinancial
Advisors, Inc., a registered Investment Adviser and
are also seeking disgorgement of all ill-gotten gains, prejudgment
interest thereon, and civil penalties.
Two Investment Clubs run by ProFinancial and Wills, the president,
sole shareholder and only employee of ProFinancial came under scrutiny.
Additionally, Wills, through ProFinancial, violated the antifraud
provisions of the securities laws while offering and selling investment
contracts in early 1994.
His scheme supposedly involved the purchase of prime bank notes
with a face value of $200 million which would be purchased at a
discount and then resold for a profit. He said they were virtually
risk-free while offering unrealistic predictions of the exorbitant
profits to be made.
Combining Cheat and Steal Gives No Relief
02/00 - A temporary restraining order and asset
freeze was issued by the SEC against Nancy J. Cheal based
upon allegations that she operated a Prime Bank-like investment
fraud. She was also arrested on seven criminal charges, including
five counts of mail fraud and two counts of wire fraud then released
on a $100,000 secured bond.
Since at least October 1999, Cheal, doing business as Relief
Enterprise, fraudulently offered and sold investments
in a bank debenture trading program by making baseless promises
of a 100% weekly return for twelve weeks on a website and through
other means of solicitation.
She falsely told investors that the extraordinary investment return
would be paid using the profits from the trading activity of a
licensed bank debenture trader with whom she was purportedly associated
while assuring investors that their funds were not at risk and
were 100% guaranteed by the U.S. Government when in fact a substantial
amount of the money raised was simply used to pay various expenses,
including debit card withdrawals at a casino.
Operating from two of her mobile homes in Florida she obtained
more than $2.1 million from hundreds of investors in forty-eight
states and ten foreign countries. A substantial amount of the money
raised from investors was deposited to a bank account controlled
by Richard L. Birmingham.
During the hearing, the Court held a non-party, Lindsey Springer
in contempt for violating a prior asset freeze after he admitted
spending travel expenses to appear.
03/00 From just April through August 1998, Kay
L. Cahill, a convicted felon, and other defendants,
raised approximately $9.5 million from 10 investors nationwide
for a purported "trading program" in foreign bank instruments
promising returns of as much as 1,000%.
In reality, the trading program did not exist and investor funds
were used to make "Ponzi" payments and for personal use
such as his purchase of an 11,000-square-foot house, at a cost
of approximately $1.2 million, along with furniture and automobiles.
In a related matter, the SEC entered a Final Judgment of Permanent
Injunction and Other Equitable Relief against Robert H. Alberding,
50, which ordered him to pay disgorgement of $125,000, prejudgment
interest of $4,986 and a $10,000 civil penalty.
As a self-employed sales and marketing consultant in Arizona conducting
business under the name CanAmerican Business Capital, Inc.
he solicited investors for the scheme on a commission basis.
10/00 - The SEC entered a summary judgment in
Utah against Anthony J. Marino, Mousa International, AJM
Global, and Consortio Intranacional which
permanently enjoins them from violating the Securities Act and
orders them to disgorge $28 million in ill-gotten gains, plus prejudgment
interest of $3,480,098, for a total of $31,480,098.
The complaint of April 20, 1999, alleged that they raised money
from the sale of interests in "investment enhancement programs" in
which funds were to be pooled and invested in "prime bank
instruments" through a "prime bank" or a "major
world bank in Europe."
Investors were promised rates of return of as high as 20% per
month, and were falsely told that their investments were not only
approved by the Federal Reserve Board but were risk-free in that
Lloyds of London would issue an insurance policy on the programs.
Marino also failed to mention his prior conviction for securities
fraud in Nevada.
A civil bench warrant for the arrest of Anthony J. Marino, who
is in prison in Costa Rica, remains outstanding. The case remains
pending against defendants Gregory C. Johnson and Richard
Ames Higgins.
The "Commission" of a Crime
A prime bank scheme operated out of southern Ontario by Warren
and Joan Wall got more than forty people to invest a
total of $1.5 million dollars - some of them their life savings.
The Ontario Securities Commission charged them with making "misrepresentations
to investors" so they possibly face fines of up to $2 million
each and jail sentences up to four years but they're still operating
a financial services business in Barrie.
The Walls were introduced to the whole idea of prime bank instrument
schemes and paid $150,000 by Allan Huppe of Oakville,
Ontario who was charged with two prime bank instrument frauds where
investors lost over two million dollars.
He was recently convicted in New York State and is facing a jail
sentence for using a prime bank fraud to embezzle $750,000 U.S.
from the Highland Nursing Home in Massena employee's pension plan
part of which went towards a palatial home west of Toronto.
The case involved transfers of the retirement plan's funds to
banks in Canada and Bermuda, which Huppe and others later transferred
to other banks and partnerships in Nigeria, Japan, and elsewhere.
On repeated occasions Huppe provided written confirmation to the
trustees of the retirement plan that deposit balances at his company, Navy
Street Bancorp were in excess of $750,000 when in reality
the funds had been disbursed for personal purposes.
The maximum penalty for the embezzlement and wire fraud violations
is five years' imprisonment. Sentencing was scheduled for November,
1999.
Ironically, back in 1997 Warren Wall was head of the Better Business
Bureau of Toronto.
Current Ops Using Prime Bank Fraud Terminology:
Broadway Capital - e-moneybrokers.com
worldwide-investment.com - THIS IS A GUARANTEED NUMBER ONE PAYING
OFFSHORE PRIVATE PLACEMENT OPPORTUNITY! PROFIT FROM EXPERIENCE
OF PROFESSIONALS, WHO EARN MILLIONS A DAY! (#1 principal
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04/02 Wisconsin - Gerald J. “Jay”Stock,
35 of Manitowoc is one of five men named in an SEC lawsuit filed
in U.S. District Court in Dallas, Texas pertaining to the defrauding
of about 1,300 investors of nearly $100 million in a Prime Bank
scheme.
Stock and Kevin W. Lynds from Texas own Blackwolf
Holdings, LLC, a Nevada business through which they
convinced investors to invest more than $100,000 each in bogus “high
yield trading programs.”Lynds is
registered with Wichita County under the assumed business name
Capital Ideas.
Resource Development International,
or RDI - a now-defunct limited liability corporation
- is also named as a defendant and the principal entity through
which the the Tacoma, Wash.-based father-son duo of James Edwards
and David Edwards and other defendants conducted business.
In all, six individuals and nine corporations, one of which
is located in Nevis, West Indies, were named as defendants.
They falsely claimed that investors’ money would be used
in Europe to trade financial instruments with “top 25”or “top
50”banks in a “prime bank”program sponsored by
the Federal Reserve and global organizations, generating annual
returns of 48 percent to 120 percent.
While initial investors may have received high interest rates
paid from the investments of subsequent participants they eventually
found that the instruments do not exist despite being told the
money in their accounts was unavailable because of restrictions
on money transfers from foreign countries imposed after the Sept.
11 terrorist attacks.
In addition to violating the SEC antifraud
provisions the Edwardses, Lynds and two other defendants, Gerald
Stock and William Whelan, violated the broker-dealer registration
provisions of the Securities Act.
The SEC accuses Lynds of acting as Gerald Stock's partner in raising
funds for RDI through three defendant corporations, Intercoastal Group
I, Intercoastal Group II and Blackwolf Holdings. He is accused of being
a managing member of the two Intercoastal companies and the managing
partner of Blackwolf.
In a letter to the SEC attorney, Lynds claims not only to reside
in the "Texas Republic" but to have a copyright and trademark
to his own name, "Kevin Wadsworth Lynds" and issued cease
and desist orders against the usage of his name and threatened
a $500,000 fine for each occurrence of infringement of his copyright.
While referring to himself as "the living, breathing, sentient
man known by the appellation 'Kevin Wadsworth; Lynds,' hereinafter
Secured Party" he claims that "Secured Party" is "indemnified
and held harmless by 'Kevin Wadsworth Lynds' ... against any and
all claims, legal actions, orders, warrants, judgments, demands,
liabilities, losses, depositions, summonses, lawsuits, costs fines,
liens, levies, penalties, damages, interests and expenses whatsoever
... as might be suffered by, imposed on, and incurred by 'Kevin
Wadsworth Lynds' for any and every reason, purpose, and cause whatsoever."
The Republic of Texas made headlines in 1997, when West Texas
separatist Richard McLaren declared himself chief ambassador of
the Republic of Texas and spearheaded a revolution of sorts that
led to a highly publicized standoff with law enforcement officials
near Fort Davis.
Now an inmate, he has described himself as a "political hostage."
Several of Lynds' co-defendants have invoked the "Republic
of Washington" name in court filings alleging that the SEC
doesn't have jurisdiction over the case although this argument
hasn't held much merit in the past.
Take ( Better ) Care Investing
After reading your informative web site I have some concerns over
a possible investment opportunity which a close friend got involved
with two years ago. The promoter was selling the Global Prosperity
(scam) and is now working with New-Shore, but the investment vehicle
my friend chose is called "TCI Investments" www.tciinvestments.com.
This investment, run by a Charles Gordon, is doing extremely well,
rates of between 4-10% per month. My friend has received all of
his initial investment back and the TCI Investment Club has made
strong claims they are not affiliated with Global at all.
I am contemplating investing myself based on the good record over
the last 24 months after having seen bank statements showing the
rate and accumulated interest.
Can good advice come from anyone involved with these groups? Any
information would be a great help. I will continue to read through
your site trying to educate myself.
Rich Bak 04/20/02
Reply: Read the Prime Bank and Ponzi Scheme sections
and save your money. To see the standard but clever application
form for this operation go to TCI Investment
Club.
7 accused of fraud costing
$56 million
Kris Hudson - Denver Post
03/19/04 - Victims of an alleged high-yield investment scam say
they are pleased but not comforted by the indictments of seven
people in Denver this week.
Some of the victims said they have postponed retirement because
they lost their savings in the alleged $56 million scam. Others
took second mortgages on their homes to make the bad bets. Many
had given up hope of recouping anything.
"We're pleased to hear that something's finally happening," Clyde
Thompson of McGregor, Iowa, said Wednesday. "It almost sounded
like it was going to be a complete loss for us. Hopefully, we'll
be able to recoup something from this experience."
Thompson's family invested $100,000 in the alleged scheme in 2000.
State and federal law-enforcement authorities on Tuesday indicted
seven people they say helped run a high-yield investment scam,
also called a prime-bank scam. About 1,000 victims were caught
up in the alleged scheme, in which investors were promised high
returns with little risk and insurance against losses.
Officials on Tuesday announced the indictments of Norman Eugene
Schmidt, 68, of Denver; his wife, Jannice McLain Schmidt, 66, of
Denver; Charles Franklin Lewis, 68, of Littleton; George Beros,
36, of Shaker Heights, Ohio; George Alan Weed, 68, of Benton, Ill.;
Michael Duane Smith, 40, of Colbert, Wash.; and Peter A.W. Moss,
62, of London. Each person faces 57 counts of fraud, conspiracy
and money laundering.
Suthers said some of the defendants have criminal records. A search
of Colorado Bureau of Investigations records shows a February 1998
arrest of Lewis on charges of securities fraud, and arrests of
Norman Schmidt on suspicion of driving under the influence of alcohol
in 1980, 1986 and 2001 and larceny in 1982.
Assets that federal authorities seized in the investment- scam
case are cumulatively valued at $24 million. Chief among them is
the Redstone Castle, which some of the those indicted and the late
Leon Harte bought at auction on April 1, 2000, for $6 million.
The 106- year old destination hotel in Redstone, south of Carbondale,
is listed on the National Register of Historic Places.
Racing cars, trucks and trailers operated by Smitty's Racing were
also seized. Norman Schmidt's son, Steve, is a professional racer.
The ability to liquidate those assets will determine how much
can be returned to the victims, which include people from around
the world and all walks of life. Their losses range from $5,000
to $500,000 each.
Roughly 200 of the victims live in Colorado.
"It was certainly a huge loss to us," said Orvalee Farris,
a registered nurse in Portland, Ore. She and her husband lost $200,000
in the alleged scam. "A lot of things were said that weren't
true."
Evil Incarnate Incarcerated
02/05 - James Edwards, 73, and his son, David Edwards, 49, both
of Washington state, have been sentenced to prison for the maximum
penalty they faced -- 27 years and 8 months -- after being convicted
in San Jose of swindling more than a thousand investors out of
more than $73 million.
The two were found guilty of 16 counts of fraudulently selling or offering
an investment security, six counts of first-degree burglary, and one
count of conspiracy.
The two were top officers of Resource Development International, which
conned people into buying so-called "prime bank notes."
In handing the father and son the stiff sentence, Santa Clara County
Superior Court Judge Rene Navarro noted they had spent years "stonewalling" authorities.
He called the Edwards "evil incarnate."
The Santa Clara County case -- one of several criminal and civil cases
against the Edwards by state and federal agencies -- involved local victims
who were persuaded to transfer money from retirement funds or home equity
loans to Resource Development International, based in Tacoma, Wash.,
or its predecessor, Dennel Finance Limited, based in Phoenix, Ariz.
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