Actions Against Prime Bank Scam Investment Fraud Scheme Examples Offering High-Yield Instruments
A One Way Gate
04/01 - The SEC filed a civil fraud action against The Gateway Association Inc., an Illinois corporation, and The Gateway Association (Illinois) Inc., a Florida corporation, Richard J. Collins and Bill Wilson, both of Illinois; and Jerome Coppage of Indiana for the fraudulent sale of over $10 million in non-existent prime bank securities.
From approximately November 1997 through March 1999, Gateway, Collins, Wilson and Coppage solicited primarily Hispanic investors and induced approximately 400 investors to invest more than $10 million in the Gateway program.
At meetings held across the country, they described the Gateway investment as a guaranteed, risk-free, high yield trading program in which a $100,000 initial investment would yield $1.25 million in ten months. Promotional materials provided by Gateway representatives explained to investors that their funds would be pooled to invest in an overseas bank debenture trading program involving medium-term bank debentures issued by the "top one hundred world banks."
In fact, this type of investment program does not exist and the investors' funds were simply used to fund various individual and corporate accounts, to purchase cars, and to pay for various other personal expenses.
At least six relief defendants received investor funds from Gateway. David A. Morgenstern, of Florida, is alleged to have received $1.7 million of these funds; William J. Windsor, of Florida, $325,000; Linda A. Fehl, of Georgia, $1.7 million; Malcolm Silverman, of Illinois, $120,000; Janet Collins, Collins' wife, of Illinois, $325,000; and Christine J. Todd, Collins' daughter, $200,000, all amounts approximate.
In a related event, according to its liquidator, Bahamas-based Americas International Bank Corporation Ltd. is insolvent and was used primarily as "a vehicle to launder funds" received from investment fraud.
While the balance sheet indicated that the Bank had net assets of $2.56 million, it included loans and overdrafts totaling $4.36 million that are either unsecured or inadequately collateralized, including an overdraft of $1.19 million to Americas Fidelity Assurance Company, a company apparently controlled by David Morgenstern.
It is unlikely that these loans and overdrafts will be recoverable and the Bank's liabilities may exceed its assets by approximately $1.7 million.
05/01 - The SEC filed and settled a civil fraud action against Paul Shingeldecker of Michigan for his participation in a widespread fraudulent "prime bank" scheme known as The Gateway Association.
For about a year he offered and sold these non-existent securities to at least eleven investors and raised over $500,000 for Gateway for which he received approximately $140,000 in commissions.
Shingledecker participated in several meetings in the Michigan area, and at least one meeting in the Minnesota area, where he described to investors a 1,250% rate of return on a ten-month investment. He detailed a payout schedule promising a ten percent compounded monthly return on a $100,000 investment, with a $759,768 balloon payment at the end of the ten months.
Without admitting or denying the allegations in the complaint, he agreed to stop violating the Act and pay disgorgement in the amount of $140,000 plus prejudgment interest of $25,148 but then the court waived disgorgement in excess of $25,000 and did not impose a civil penalty based upon his sworn statements demonstrating his inability to pay.