and Ponzi Schemes used in Investment Fraud Scams
Columbia Pyramid Scheme Ponzi Scandal
12/08 - Once one of South America's most popular leaders, President Alvaro Uribe of Colombia has become embroiled in a hugely damaging scandal concerning a pyramid scam. The affair is denting his support and threatening his campaign to change the constitution so he can seek re-election for a third term.
The collapse of a series of pyramid schemes involving perhaps as many as 4 million out of 44 million Colombians has significantly reduced popular support for a controversial figure credited with driving leftist guerillas out of the cities and back into the countryside.
The sheer scale of the scandal has had consequences for the country's economy and politics and now the President's family after it was revealed that two of Uribe's sons were friends with one of the figures behind the worst of the scams.
According to the Washington Post last week, the Attorney General's office has reported that an estimated $1bn (£700m) has been lost in four southern states alone.
At the centre of Uribe's difficulties is the figure of David Murcia, a pony-tailed 28-year-old former travelling salesman, who set up DMG Group Holdings, described as a complex mixture between a pyramid scheme and a money-laundering vehicle.
One of several hundred similar schemes that offered quick and massive profits to often poor and vulnerable Colombians, it inevitably unravelled along with the others, ruining investors and prompting curfews across the country.
Murcia's empire, which stretched beyond Colombia's borders, was allegedly kept alive by bribes to politicians and law enforcement officials. Most embarrassing for Uribe is the relationship between his sons Tomás and Jerónimo and one of Murcia's key lieutenants, a friendship so toxic that Uribe was forced to call a press conference to declare that his sons were not corrupt.
Doubly damaging for Uribe - known as the 'Teflon President' - was the fact that there had been multiple warnings about the schemes, yet his government seemed wholly unprepared for the crisis as it began to unravel.
A poll on Uribe's governance last week showed that 77 per cent of Colombians in the country's south believe that things are going wrong.
Greater Ministry International
missionary church Greater Ministries International Church GMI took
in over $550 million dollars from over 27,000 believers and although
it promised great returns from heaven over one half of
the money has not been accounted for.
Many of the investors were fundamentalist Christians, including
Mennonites in rural Pennsylvania, Ohio and Virginia. They were
told their money would double in installment payments made over
17 months or less. Investors were quoted Luke 6:38: "Give,
and it shall be given unto you."
Greater Ministries officials told investors that state and federal
securities laws did not apply to them because the investments were "gifts" to
the Church and the payments from the church to investors, called "blessings," were
not subject to taxes.
In their efforts to lure contributors to make more donations to
the Greater Ministry ponzi scheme after regulatory complaints,
officials of the organization spoke of a "mother lode" of
gold worth $40 billion that they found in Liberia a mere 15 feet
below the surface.
In addition to assurances that the money would circle around every
20 days, it was said that the Holy Ghost, not the U.S. Postal Service
( which was laying charges ), would be the 'mailman' delivering
the cash, even on Sundays.
While the head of the Greater Ministry International Gerald Payne
and several of his associates were given long-term sentences in
Florida on charges of conspiracy and fraud, the company also had
officials in Liberia, Niko Shefer and Felix Kramer, who insisted
they were providing humanitarian aid to rural communities and that
their investment projects in the mining and banking sectors were
targeted at creating sources of revenue to be distributed within
They state that both GMI and The Tandan Group have not only propped
up the economy there but prevented civil strife through active
political input. This input must have helped because the former
Minister of State for Presidential Affairs, Ernest Eastman, appointed
the Greater Ministry Africa Foundation as its sole agent to monitor
and verify all donations and funding raised for humanitarian purposes
for that country.
Betty Payne, Patrick Talbert and David Whitfield were all convicted
of one count of conspiracy to commit mail fraud, wire fraud and
to transport in interstate commerce money taken by fraud, one
count of conspiracy to commit money laundering violations, four
counts of mail fraud, five counts of money laundering and five
counts of conducting unlawful monetary transactions. Gerald
Payne was also found guilty of three counts of unlawful structuring
of currency transactions. Haywood
Eudon Hall was found guilty of both conspiracies and of three
mail fraud counts.
mail fraud and structuring count carries a maximum penalty of
five years imprisonment and a $250,000 fine. The
money laundering conspiracy and each unlawful monetary transaction
count carries a maximum term of imprisonment of 10 years and
a fine of $250,000. The
maximum punishment for each money laundering count is 20 years
imprisonment and a $500,000 fine.
High Yield Ponzi Scheme Operators Arrested
07/06 - (Hawaii) - A former Maui resident pleaded guilty Wednesday in Portland, Ore., as a conspirator in an investment fraud scam that took in more than $125 million, the Internal Revenue Service said.
Rita L. Regale, 53, also known as Rita L. Brunges, faces a maximum sentence of 10 years in prison, a fine of $250,000 and a three-year term of supervised release for conspiring to commit money laundering, the IRS said. Regale served as the chief financial officer and director of First International Bank of Grenada between October 1997 and April 2000.
Regale's plea agreement calls for her to cooperate against other defendants in exchange for a sentencing recommendation in the range of 51 to 71 months. Her sentencing has been postponed pending trial of two remaining co-defendants — Douglas C. Ferguson and Laurent E. Barnabe, aka Larry Barnabe — in February 2007.
Gilbert A. Ziegler, founding chairman and CEO of First International Bank of Grenada, was indicted in January 2004 for fraud and money laundering related to the bank scam. Ziegler died of a heart attack in December 2005.
Ziegler and others, including Regale, persuaded people to deposit money by promising annual returns of up to 300 percent, according to the indictment.
Ziegler, who fled to Uganda and was arrested with Ferguson following a shootout, and Regale were the only figures in the case with ties to Hawai'i.
U.S. Assistant Attorney Claire Fay of Oregon told The Advertiser yesterday that many people were bilked by the promises of high returns and 100 percent guarantee against loss by the International Depositors' Reinsurance Corp., including "a lot of folks from Hawai'i who were investors." IDRC was established as a name-only insurer in December 1996 by Ziegler and Ferguson.
It was a common pyramid scam.
The bank, in fact, had no investment income and used new depositors' money to make purported interest payments to earlier investors, according to court documents. First International Bank of Grenada was taken over by the government of Grenada in August 2000 and the group went into liquidation in January 2001.
Ziegler came to Hawai'i from Oregon around 1994 and started a business, Wheatland Interests, which sold tax avoidance "pure trust organizations," according to court documents.
In August 1996, he purchased the paperwork of an offshore bank called Fidelity International Bank for $50,000 and created a Class I offshore bank in Grenada, West Indies, called First International Bank of Grenada, in October 1997, according to court documents.
Regale, a former real estate agent, health food store manager and fitness center co-owner, was hired in June 1997 as operations and accounts manager of Fidelity International Bank, which depended on management services of other banks and entities to operate. The bank was supposedly based on the Caribbean island of Nevis but was actually operated out of Kihei, Maui, by Ziegler and Regale, according to IRS and FBI investigators.
Fay said Ziegler and Regale used "independent contractors" to sell certificates of deposits in Hawai'i and paid them a commission.
"The First International Bank of Grenada is one of the crudest-ever examples of financial crime," said David Marchant, publisher of the Miami-based "Off-Shore Alert," which exposed the scam.
Marchant said Ziegler, with no banking experience, no money and a passport issued by a nonexistent country, "Melchizedek," was able to capitalize a bank using a photograph of a 10,000-carat ruby the bank did not own or possess, and take in more than $100 million in deposits.
Like many white-collar crooks, Ziegler specialized in "ripping off the elderly and the religious" and appeared to have "no conscience about doing so," Marchant said.
Hedge Fund Ponzi Scheme Investment Fraud
09/07 - (California) - The SEC has charged a San Francisco hedge fund manager with fraud, claiming he used a scheme that drastically overstated the fund's assets and returns. It also claims that the defendant, Alexander James Trabulse, misused fund assets.
In its suit, the Commission claims Trabulse’s lied to investors in his Fahey Fund, via account statements and other materials that included fictional returns. Those returns often exceeded the fund's real returns by as much as 200%. At the same time, he was spending the assets in the fund on cars and shopping sprees for his family members.
Trabulse, 60, created the Fahey Fund in 1997 and has since raised about $10 million from roughly 100 investors, according to the complaint. As part of his pitch, Trabulse told investors the fund invested in stocks, derivatives, and foreign currency. He also boasted of the fund's spectacular past performance
But, the Commission states, Trabulse began his deception at least as early as 1998. And the returns that the fund’s quarterly account statements and fund newsletter claimed bore no relation to its actual performance.
Those bogus materials claimed that the fund, through shrewd investing, had grown to $45 million by the end of 2006. But the SEC claims that the fund, which had initially taken in roughly $10 million, actually only had $13 million in assets at the time.
Trabulse used the false account statements to lure new investments from existing investors, and to get those investors to recommend their friends and relatives to the fund. He also gave prospective investors a list of current investors who would act as references.
"Trabulse encouraged his existing investors to serve as references for new investors. As a result, his false account statements not only lulled existing investors into believing their investments were hugely profitably, but lured new investors into the fraud," said Helane L. Morrison, Director of the SEC's San Francisco Regional Office.
Among the personal expenses Trabulse spent investors’ money on were cars, a home theater system, jewelry, real estate in France and Panama, and a $650,000 allowance for his ex-wife overseas. He used investor assets to start a golf company and to buy a BMW for an employee of that golf company. He also went so far as to give his daughter access to the fund's bank accounts for personal use, according to the Commission.
The Commission's complaint alleges Trabulse violated the antifraud and registration provisions of the federal securities laws. It seeks disgorgement, penalties, and other relief. The regulator also has named as relief defendants several entities associated with Trabulse that received assets through Trabulse's fraud.
"Trabulse betrayed the trust investors placed in him by fabricating performance figures and treating the hedge fund as if it were his own personal bank account," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "The Commission is determined to hold hedge fund managers accountable when they deceive investors."
The SEC’s suit seeks disgorgement, penalties, and other relief from Trabulse. In addition, it has named several entities associated with Trabulse's fraud, namely the Fahey Fund, Fahey Financial Group, International Trade & Data, and ITD Trading, as relief defendants.
When the SEC began its investigation of his hedge fund, Trabulse invoked his Fifth Amendment rights and refused to answer its questions.
Investment Fraudster Lives Well on Ponzi Schemes
05/06 - (Australia) - A COAST judge, yesterday sentencing an “incorrigible fraudster” to 10 years in prison for an $18 million investment scam, called for a register flagging convicted swindlers to investors.
Judge John Robertson yesterday recommended a better information flow between state and commonwealth regulators to stop convicted fraudsters like Wayne Edward Cross duping trusting investors out of hard-earned savings and retirement funds.
Mr Cross had twice spent time behind bars for fraud and was on parole when he conned people to invest in a “Ponzi-style’’ scheme between July 2003 and April 2005.
The Maleny 51-year-old was not allowed to handle other people’s money as a condition of parole but cautious investors were told there were no “red flags’’ against his name when they inquired with the Australian Securities and Investment Commission.
Ponzi schemes — named after American Charles Ponzi who ran the scam in the 1920s — pay dividends entirely out of the incoming funds of new investors entering into the scheme.
Mr Cross promised investors 25%-32% interest after he pooled their money for short-term lending to merchant banks through his business ACE (Australian Currency Exchange).
He falsely told investors he was experienced in currency exchange and merchant banking after learning his skills on Wall Street in New York.
But that money was never invested — simply funding “a profligate, luxurious lifestyle” for Mr Cross.
While close to $10 million was returned to investors through the scheme; receivers discovered about $9.4 million outstanding, including interest.
Mr Cross had about $2 million sitting in two bank accounts and had skimmed $3million to $4 million for himself.
In an ironic twist of fate, Mr Cross only came to police attention when he reported the theft of a $235,000 Porsche Cayenne four-wheel-drive, $4700 109cm plasma television, $1000 of electrical goods and $500 cash from his Minyama “weekender”.
The receivers appointed by the Brisbane Supreme Court to wind up Mr Cross’ investment scheme found he owned $600,000 worth of motor vehicles, was sparing nothing on a house and land package that would total more than $1 million, owned $386,000 in boats and a marina berth, and had loaned the troubled Mooloolaba Yacht Club $200,000.
Judge Robertson said Mr Cross was “not remorseful or the least bit sorry” for the devastation he caused, pleading guilty to 32 fraud charges at the last minute.
Buddina investor Carol Goulter said she lost several hundred thousand dollars and would have to return to work.
(Sunshine Coast Daily)
Nationwide Ponzi Schemes Offer Scammer Penal Retirement Plan
02/08 - LOS ANGELES - (AP) - An 81-year-old man was sentenced to 29 years in prison Friday in an investment scam that prosecutors say seeped across half the country and bilked 1,800 people, many of them elderly, of about $190 million.
John Heath, who was convicted last month alongside his son Daniel Heath and another man, also was ordered to pay $117 million in restitution to the clients who invested directly through him. He dabbed at his eyes during the hearing and left court in a wheelchair.
Jurors found the three guilty of running a Ponzi scheme that funneled money from new investors to pay off people who had already pumped in cash. John Heath was convicted on 52 counts including grand theft, selling false securities and theft from the elderly.
About 100 letters from victims were sent to the Riverside County Superior Court, and about a dozen of them were read to Judge Ronald Taylor, said Ingrid Wyatt, a spokeswoman for the district attorney's office. The notes talked about how the victims' lives had been affected after learning their investments with Daniel W. Heath & Associates had been lost.
Some of Heath's adult children spoke at the hearing, pleading for leniency for their father. Heath's attorney, Chad Firetag, asked the judge for probation, citing his client's age and failing health. Firetag has said the elder Heath wasn't aware of the scam and had enough trust in his son that he plowed his own commissions back into the investments.
Prosecutors said the company ran a scam dating back to the early 1990s that promised clients their money would go into fixed investments with little or no risk. Instead, it went to money-losing real estate and small business projects controlled by the company that had offices across Southern California.
Investors have had some money returned, but a court-appointed receiver said they will get only about 22 cents on every dollar.
Company president Daniel W. Heath, 51, was convicted of nearly 400 counts and could face up to 100 years in prison. A former business associate, Denis O'Brien, 53, could face up to 30 years in prison. Both men are to be sentenced in the coming weeks.
Another business associate, Larre Schlarmann, is serving a 15-year prison term after pleading guilty in 2005 to money laundering and fraud for his involvement in the scheme.
Real Estate Scam and Currency Exchange Ponzi Schemes Get Sued
Temecula, CA (PRWeb) January 14, 2007 -- The Temecula law firm of Ackerman, Cowles & Lindsley filed a 1.2 billion dollar claim against what are alleged to be the perpetrators of a vast real estate and currency exchange scheme taking place in Southern California.
Riverside County Superior Court Case No. RIC463483 (Anonymous Investor v. Jovane Investments, et al.) was filed by an investor who claims to have suffered $3,000,000 in damages on her case alone. The plaintiff seeks to have the matter certified as a class action later this year because there are another alleged 400 investors in the alleged scheme.
The amended complaint, filed on January 12, 2007, alleges that the operators of the Jovane Investment firm of Murrieta, and related businesses, including Stonewood Consulting, Inc., Pacific Wealth Management LLC (Nevada), Oetting Enterprises, and Sunburst Financial Systems, Inc., engaged in a real estate scheme involving perhaps as many as 5000 home loans in the Southern California region.
The defendants are alleged to have incited members of the general public. members of the military, and nursing staff at Rancho Springs Community Hospital in Southern California, to get involved in a real estate business whereby "investors" could each become the owners of multiple residential properties throughout the Temecula Valley and Northern San Diego County.
It is alleged in the complaint that defendants allegedly involved in the scheme would artificially inflate the values of the homes, complete 125% loan to value mortgages in certain cases, give escrow kickbacks to sellers who received as much as $100,000 more than an asking price, and sell the investors on the idea of giving up excess proceeds out of the sale to investment companies for a great profit over a period of years.
In some cases, $50-60k-a-year salaried employees had mortgage obligations that were more than $20,000.00 a month because they "owned" 5-8 homes. The defendant companies are alleged to have taken money from other investors to pay the mortgages on behalf of plaintiff and others. The scheme is alleged to be a traditional Ponzi scheme.
Additionally, other investors were alleged to have been duped into buying into Iraqi dinar investments where the alleged victims would pay more than sixty times the actual value of the dinars. The victims were allegedly not told about the true value of the dinars and the dinars were allegedly never delivered to the victims.
The allegations were referred to the Riverside County District Attorney's office back in November of 2006. However, according to lead counsel, Richard D. Ackerman, "I am quite certain that the district attorney's office is swamped with thousands of criminal cases and simply has to allocate investigation resources toward violent crime at this time. Justice will eventually prevail. Unfortunately, however, if action is not taken soon, our entire Southern California economy may suffer as a result of the type of practices alleged by the many victims in our case."
All told, it is alleged that the damage to investors, lenders, the county tax rolls, Southern California neighborhoods, and others is far in excess of the 1.2 billion dollars cited in the complaint.
The case has been assigned to Judge Dallas Holmes of the downtown Riverside Superior Court in Riverside, California, for trial. The plaintiff intends on working with alleged victim-lenders and governmental agencies in an effort to prevent hundreds of foreclosures and additional damage as a result of the alleged fraud.
The victim lenders are alleged to include Bay Capital Mortgage, Community First Bank, GMAC Mortgage, Suntrust Mortgage, Aurora Loan Services, Home Eq Servicing, and SLS Loan Servicing. Numerous credit card companies are alleged to be affected by the currency scheme as well.
Defendant Pacific Wealth Management LLC and defendant Maurice McLeod, a principal of Pacific Wealth Management LLC, have already been ordered by this same judge to stop all investments activities in California under the name of Pacific Wealth Management LLC.
The related case is captioned Pacific Wealth Management LLC v. Pacific Wealth Management LLC, Superior Court of California, Riverside Case No. RIC462505. The injunction order was entered on January 9, 2007.