March continued the trend of way too many breaking news
stories in Ponzi scheme cases. Here is the summary of the stories that were
reported this month. Please feel free to post comments about these or other
Ponzi schemes that I may have missed. And please remember that I am just
relaying what's in the news, not writing or verifying it.
Amendola, 38, of Virginia, was sentenced to 84 months in prison
in connection with his $5 million Ponzi scheme involving the purported purchase
of a golf course that defrauded more than a dozen victims. Amendola had
persuaded investors to provide short-term funding that would be held in escrow
to fulfill a requirement by his lender. The money was to be returned to
investors with interest in a matter of days. Amendola impersonated an attorney
that supposedly controlled the escrow account and lead investors to believe
that they were wiring money into an escrow account, but they were in fact
wiring money into accounts controlled by Amendola. Jerry J. Mckerac, 61, was also charged in connection with the
scheme for similarly impersonating the escrow attorney.
W. "Bill" Bailey, 65, filed a notice of appeal of his 32 year
prison sentence which he received after pleading guilty in connection with a
Ponzi scheme that he ran through Southern
Financial Services. When sentencing Bailey to 32 years, the court took into
account the harm to Bailey's victims along with the lavish lifestyle financed
by the crimes, calling the theft of the investors' live savings "coldblooded."
Barkany, 29, was charged in connection with his role in a $50
million Ponzi scheme. Barkany allegedly concocted real estate deals as part of
the scheme and then spent investor funds for his personal benefit. He promised
"risk-free" investments in large real estate projects where he would supposedly
purchase properties in Manhattan, Queens, the Bronx and Atlantic City, and then
re-sell them at a large profit. An FBI press release stated that Barkany
promised that the sellers of these properties "would only close on the real
estate sales contracts after Barkany had located a purchaser who would be
willing to buy the property from Barkany at a higher price. In that way,
Barkany assured the victim that the real estate deals would be 'risk free.'"
Behrens, convicted and imprisoned for operating an $8 million
Ponzi scheme, filed a Chapter 11 petition for bankruptcy protection while in
federal prison. Behrens had been sentenced to 5 years in prison and was ordered
to pay $6.8 million in restitution to 20 victims. Behrens listed $475,000 of
property on his bankruptcy schedules, including two homes, and also listed a
$600,000 "employment contract" with 21st
Century Financial, the company he used to run his fraud.
Berkman, 71, a former Oregon gubernatorial candidate, was
accused by the SEC of defrauding investors of about $10 million by claiming to
have special access to pre-initial public offering shares of Facebook Inc. and
other social media companies. Berkman promised a 5% annual return until they
had received a 100% return of principal and interest. Berkman forged an
attorney's letter to demonstrate an interest in Facebook. Berkman also
solicited another $2.6 million in investments for another company called Face
Off Acquisitions, misrepresenting that he was going to purchase another fund
that owed a large number of Facebook shares.
continues to be the subject of much curiosity, concern and allegations that it
is a Ponzi scheme. Bitcoin calls itself "the world's first decentralized
digital currency." However, no one is certain who started Bitcoin, and the 3
individuals who have been linked to it deny any connection. Meanwhile the value
of Bitcoin currency is soaring, with a Bitcoin worth $40, and about 10 million
Bitcoins in circulation. News reports state that the currency is expanding at a
set rate of 25 new Bitcoins generated every 10 minutes. The currency is
exchanged on-line on a peer-to-peer basis.
Bravata, 45, former chairman of BBC Equities LLC, was convicted in connection with a Ponzi scheme that
he ran with his son, Antonio Bravata,
25, who was also convicted. Bravata collected $53 million from more than 500
investors in a scheme involving real estate purchases at the real estate
investment fund he co-owned with partner and company Richard Trabulsy. Trabulsy, 32, pleaded guilty last fall. Bravata,
through BBC Equities and Bravata
Financial Group LLC, offered real estate investments but the funds were
largely used to support the lavish lifestyle of the defendants.
Brown, 58, retained criminal counsel in response to an
investigation of allegations that he was running a $12 million Ponzi scheme. Brown
is in poor health and not available to attend the meeting of creditors in his
bankruptcy case. By telephone from his hospital bed, Brown, a former tax
preparer, confessed to running a Ponzi scheme while a
crowd of creditors listened in the Bankruptcy Court. Reports are that Brown sounded
frail and confused and that he contradicted himself when asked about the
location of thousands of dollars that he took from widows and the elderly. Brown
admitted that he took some money in the form of personal loans, sometimes in
cash, and sometimes as investments. He said that some money went into an
E-Trade account, while other money went to pay back creditors and investors.
E. Cilli saw his stock trading license revoked by the CFTC for
his role in a Ponzi scheme that defrauded investors out of $506,000. Cilli was
convicted in 2011 and was sentenced to 3 years in prison. In addition to the
Ponzi scheme, Cilli conspired to defraud KeyBank of Cleveland of more than $1.5
million in student loans and also failed to make more than $150,000 in tax
69, on the third day of his trial, entered a surprise guilty plea in connection
with charges that he had stolen $9.5 million from more than 40 clients in a
scheme that targeted the Wilton Manors' gay community. Elia's scheme promised
investors high returns through his company, International Consultants & Investment Group Ltd. Corp. Elia
changed his plea after having listened to the testimony of four of his victims.
James F. "Jim" Ellis, also involved
in the fraud, pleaded guilty and faces up to 5 years in prison.
David Eizelman, 69, was ordered to pay $387,000 in
connection with his Ponzi scheme that targeted seniors. Eizelman pleaded guilty
in 2012, and will be incarcerated if he fails to make his quarterly payment in
connection with the restitution order.
Farahi, 55, was sentenced to 10 years in prison and ordered to
pay about $24 million in restitution to 59 victims for running his $20 million
Ponzi scheme in Beverly Hills through his company Newpoint Financial Services. Farahi had pleaded guilty last year.
R. French, Jr., 26, pleaded guilty to one charge in connection
with his $10 million Ponzi scheme. French ran his scheme through
Boca-Raton-based D3 Capital Management,
promising returns of up to 50% per year with investments in foreign currencies,
emeralds and a solar-energy project in Italy. French has admitted to using his
"gift of gab" in convincing investors to invest. French used the money to
relocate to Rome, buy luxury cars, travel around the world, and on gambling.
Galan, 62, was arrested and charged in connection with an
alleged Ponzi scheme that defrauded at least 10 investors through his company, S&G Unlimited Services. Galan
would take investments in the form of loans and mortgages and would issue
promissory notes that promised returns of 13% or greater.
Wesley Groves, 71, and Donald Charles Mann, 56, were sentenced to 10 years and 17 years 6
months, respectively, for their role in a Ponzi scheme run through Money Growth Solutions. The two men had
raised $4.8 million for 642 investors by promising high rates of return (up to
4,000%) on secretive investments into international bank trades. They invested
in a Florida battery company that was later found to be a scam and they backed
a Liberian presidential candidate using the investors' funds. The men then each
received an additional year, to be served consecutively to the previous
sentences, for putting four fraudulent liens on properties belonging to the FBI
agents who investigated the case and two liens against the federal prosecutor's
and Benton Hall were arrested for
their role in the silver Ponzi scheme operated by Ron Wilson and Wallace
Lindsey Howell. An unsealed indictment revealed that Howell allegedly hid
and transferred assets from the Ponzi scheme by transferring them to the Halls.
It is alleged that at least $1.5 million, along with title to two properties, a
truck, gold coins, and a bag of silver were transferred to the Halls. It is
further alleged that the Halls agreed to pay Howell's legal bills and provide
him a guaranteed monthly payment for life in exchange for the assets
transferred to them.
Hawkins, 43, a former El Paso County sheriff's deputy, pleaded
guilty to charges in connection with a Ponzi scheme that victimized fellow
members of the sheriff's department and other law enforcement officers. Hawkins
defrauded about 73 investors of more than $1.2 million, promising them a return
of 10% per month. Hawkins did not invest the funds in foreign currencies as
promised, but instead spent investor funds to buy two cars, to purchase franchises,
and to set up operations for two semi-professional indoor-arena football teams.
Heckmann, 54, turned himself in to Hawaiian authorities in
connection with charges that he allegedly operated a $1.2 million Ponzi scheme.
Heckmann is a German national, who then pleaded not guilty and agreed to remain
in custody without the opportunity for bail.
Higgins, 28, pleaded guilty to charges in connection a Ponzi
scheme and was sentenced to 5 years of probation and ordered to pay $130,000 in
restitution. He also agreed to testify truthfully against Clifford Puterbaugh, 50, who allegedly lured investors into a
securities investment program. Puterbaugh has been charged with various crimes
against more than 20 victims.
Anthony Gonzalez pleaded guilty to mail fraud in a Ponzi
scheme case that defrauded more than 40 investors of over $1 million. Gonzalez
told investors that he would use their money to buy specific California
municipal bonds which would pay specific rates of return. Instead of buying the
bonds, however, Gonzalez used the money to pay for his own living expenses and
to make payments to other investors. He failed to disclose his disciplinary
history including bars issued by the New York Stock Exchange and the National
Association of Securities Dealers. He also lied to investors, claiming that he
was associated with a New York-based registered broker who provided investor
protection through the Securities Investor Protection Corporation.
Lagona was sentenced to 11 years for his role in a $6 million
Ponzi scheme run through Watermark M-One
Financial Services, a company owned by Guy
Gane. Watermark promised investors returns of 10% per year to be generated
from waterfront real estate investments. Lagona was an employee of Watermark,
maintained his innocence, but chose to stand trial with Gane and
co-conspirator, Ian Gent. Gane
testified against the other two, and all three were convicted. Gane was
sentenced to 13 years, and Gent was sentenced to 8 years.
Langguth was sentenced to 48 months in prison and ordered to pay
$10,253,203 in restitution for his Ponzi scheme that defrauded about 250
victims of between $7 and $20 million. Langguth had pleaded guilty to charges
in connection with the Ponzi scheme run through Langguth's Capital Finance Company.
Louis Mangiardi, 50, a former model, pleaded guilty to
charges in connection with a $2.5 to $7 million Ponzi scheme she ran in Florida
in which she promised investors that she would double their money from
financing construction projects. Mangiardi, through her Orlando-based
businesses, T.L.M. Builders & Design
LLC and Tim Design and Construction,
Inc., convinced investors to invest in "bid bonds" for projects including
restaurant chains, local hospitals and Disney. Mangiardi defrauded over 40
investors of millions of dollars. One of Mangiardi's investors, Adam Pollack,
was jailed this month after he supposedly attacked Mangiardi when she came to
Pollack's "No Holds Barred Fighting" gym to pay a debt to Pollack. It is
alleged that Pollock put on boxing gloves, brandished a knife and threatened to
cut off her fingers and toes as collateral for his investment. His sentence
could exceed Mangiardi's.
Martin, 61, of Florida was sentenced to 10 years and ordered to
pay $31.7 million in restitution and more than $28 million to the government in
connection with a $32.5 million Ponzi scheme. Martin pleaded guilty last year
in connection with his role in luring victims into the scheme by, among other
things, telling investors that Queen
Shoals Consultants LLC had over 20 years of experience in financial
services. Sidney Stanton Hanson, who
started QSC, was previously sentenced to 22 years in prison. Investors in the
scheme were promised returns of 8% to 24% plus an additional 1% to investors
who rolled over their IRA balances, but the funds were not used for the
promised "risk-free" investments. Rather, Hanson spent the money for personal
expenditures such as an 88-acre farm, private plane rentals and luxury vacations.
Lynn McDuff, 58, of Texas, was convicted, after a six
minute jury deliberation, of charges relating to a Ponzi scheme he ran with
co-conspirator Gary Lancaster, 61,
of Oregon, and co-conspirator Robert
Reese of California, who is now deceased. The men solicited investments
through Lancorp Investment Fund for investment
in A+ or A1 rated bonds. Investors were told that their investments would be
insured and their money would not be at risk.
"Steve" Merchenthaler, 42, already charged in connection with a $2
million Ponzi scheme that defrauded about 200 investors in a scam run though PhoneCard USA, has now been linked to
60 pipe bombs discovered in a storage locker room in Merchenthaler's name in Philadelphia.
Although Merchenthaler has not been charged in connection with bombs, the
timing of the discovery coincided with new charges related to his alleged Ponzi
scheme. The scheme involved misrepresentations that he had "lucrative
contracts" with Walmart, 7-Eleven, and BJs Wholesale Club. While free on bail,
Merchenthaler allegedly stole a 2012 Jeep Grand Cherokee and a 2013 Dodge
Charger. He is now in federal custody. Back in 2004, Merchenthaler had been
arrested in Brazil on charges of trafficking 20kg of cocaine. Merchenthaler has
used as many as 8 aliases.
Montecastro, 40, and his mother, Helen Pedrino, 61, were convicted in connection with the $142
million Stonewood mortgage and securities investment scam. Other
co-conspirators who have previously been sentenced in connection with the
scheme are James Duncan, Maurice McLeod,
Thuan Nhan Du, Cindi Gayle Kelly, and Charlie
E. Morrisett, 53, pleaded guilty to charges in connection
with his oil and gas Ponzi scheme. Morrisett agreed that he owes more than $6.8
million in restitution to investors, who number between 50 and 250.
Palladino, 55, and his wife, Lori
Palladino, 52, were charged in connection with the operation of a
multi-million Ponzi scheme through their company, Viking Financial Group, Inc., in Boston. They borrowed money from
investors and told them the funds would be used to provide loans at a higher
interest rate. Fake loans were entered in the company's books, and the funds
were instead used to fund a lavish lifestyle for the Palladinos, including a
vacation in the Bahamas, rent on an apartment for Steven Palladino's mistress, a
$13,000 Rolex watch, and gambling. Some of the money was also used to pay
$350,000 to satisfy a condition on his probation from a 2007 Superior Court
conviction for defrauding an elderly relative. Steven Palladino has more than
two dozen theft-related convictions on his record. The couple's son, Gregory
Palladino, was later arrested for operating a motor vehicle with a suspended
license, but has not been charged in connection with the Ponzi scheme.
Pascua, 38, was charged in connection with a $1.4 million Ponzi
scheme that he allegedly operated in Hawaii. Pascua ran the scheme through J2 Marketing Solutions and allegedly
defrauded 29 people by posing as a concert and nightclub promoter in Honolulu
and Las Vegas and promising investment returns of 25% to 50%. Pascua, now
living in Arizona, has not yet been arrested but is returning to Honolulu to
surrender to authorities.
Ponte, 59, Robert
Rivernider, 47, and Loretta Seneca,
50, each pleaded guilty in the midst of their trial relating to a $20 million
Ponzi scheme. It was alleged that Ponte and Rivernider used the internet to
sell investors on a "No More Bills" debt repayment program, where the investors
would typically borrow funds from the home equity lines or their 401(k)
retirement plans with the promise of 7% to 10% returns. In a second scheme, all
three defendants recruited borrowers to take out financing in a real estate
scheme to purchase investment properties in Tennessee and Florida. They would
mark up the price and falsely represent that the properties would produce
income sufficient to cover the expenses and reduce the borrower's debt burden.
an international company that operates Profitable
Sunrise, was the subject of a cease and desist order. The Maryland Attorney
General sought to shut down Profitable Sunrise, which is said to offer
implausible "risk-free" investments to people. The company pitch, which uses
quotes from the Bible, offers investors short-term, high-interest investments
and offers a bonus if an investor lures in other investors.
E. Rhodes, 61, was sentenced to 63 months in prison and ordered to
pay about $1.9 million in restitution in connection with a $2.5 million Ponzi
scheme where he promised investors high rates of return but in reality invested
and earned very little. He spent the investors' funds on himself and to pay
false returns to investors.
Ripley, 60, and Danny
Lee VanLiere, 61, pleaded no contest to charges in connection with the
Ponzi scheme they operated through API
Worldwide Holdings LLC. The scheme, which involved the sale of unregistered
securities, defrauded more than 100 victims of thousands of dollars.
Sepero, 40, pleaded guilty to charges in connection with a $3.5
million Ponzi scheme that Sepero ran with Carmelo
Provenzano and Daniel Dragan.
The three claimed to run numerous hedge funds under the names of Caxton Capital Management and CCP Pro Consulting Inc. Sepero
defrauded an elderly paraplegic woman out of her entire life savings,
misrepresenting to her family that he was authorized to manage her annuity
account and that checks should be made payable to his company, Casa Nostra Enterprises. Sepero and his
co-conspirators used investors' money to pay credit card bills of more than
$25,000 per month, bar tabs exceeding $18,000, luxury vehicles, and travel to
Smith, 50, of Indiana, was sentenced to 65 months in prison
and ordered to pay about $5.4 million in restitution to victims and about
$72,000 in restitution to the IRS for his role in a Ponzi scheme run with Jason Snelling, 48. Smith and Snelling
operated bogus day-trading entities known as CityFund Advisory LLC and Dunhill
Investment Advisors, which were nothing more than bank accounts into which
investors deposited their funds. Snelling was previously sentenced to 131
M. Taylor, 54, was indicted and pleaded not guilty in connection
with an alleged $25 million Ponzi scheme that defrauded 130 investors. Taylor
was one of six people charged in connection with a scheme that promised
investors substantial returns by using a sophisticated securities trading
strategy that protected against loss. Taylor allegedly used $5 million in
investor funds to pay family and friends and for his personal use, including
$73,000 to his children's private school.
Tropeano, 47, of New Jersey, was sentenced to 12 years in prison
in connection with his mortgage refinance Ponzi scheme that he ran through his
company, Hawthorne Capital Corporation.
Tropeano defrauded more than 40 homeowners out of more than $7.5 million. Tropeano
and his father, Silvano Tropeano
established fraudulent bank accounts in the names of two attorneys and listed
them as settlement agents on mortgage refinances without their knowledge or
James Turnock, 68, has settled a civil lawsuit by the SEC
in connection with a Ponzi scheme to which Turnock had previously pleaded
guilty. Under the settlement, the SEC will seize profits and fines totaling
$12.6 million. Turnock's company, Bridge
Premium Finance LLC, had promised returns as much as 12% in connection with
the $15.7 million Ponzi scheme. Turnock and BPF had admitted to violating
securities laws when soliciting investments with guaranteed returns when BFP
represented that it loaned investor money as insurance premiums to small
businesses at high interest rates.
Welke was ordered to pay $400,000 to settle claims brought by
the CFTC and was barred for life from the commodities industry. Welke allegedly
operated companies called Elite
Management Holdings Corp. and MJM
Enterprises, which collected up to $4.7 million from about 130 investors.
Investors were promised large returns and low risk for investments in
commodities, metals and foreign currency. Welke's partners, Omaha lawyer Michael Kratville, and Jonathan Arrington were also named in
Viktoria Wilson, 24, was arrested in Michigan for allegedly
providing misleading information to investigators trying to locate her husband,
Joel Wilson, 30, who has been
charged with running a $7 million real estate Ponzi scheme that defrauded about
120 investors. Joel Wilson operated Diversified
Group Partnership Management LLC and American
Realty Funds Corporation, through which Joel Wilson promised investors
annual returns of 10% supposedly derived from the purchase, renovation and
resale of real estate in Michigan. The Wilsons spent the money on a lavish
lifestyle, include the purchase of a rival securities broker, Viktoria's
business, sporting event tickets and travel. Joel Wilson is presently residing
in Germany with no apparent plans to return to face the criminal charges.
Vikktoria posted $10,000 bond but was required to surrender her passport. Joel
Wilson subsequently set up a defense fund entitled The Wilson Family Victory
Gene Wilson, who ran a $90 million Ponzi scheme and is
currently serving a 19 year sentence, saw his personal items and home put up
for auction. Proceeds from the auction will go toward paying back Wilson's
victims who were defrauded in the Atlantic
Bullion and Coin Ponzi scheme.
INTERNATIONAL PONZI SCHEME NEWS
Chodorowski, 41, was sentenced to 6 years in prison and ordered
to pay $1.65 million in restitution to his victims in connection with a Ponzi
scheme in which he took more than $2.5 million from investors. Chodorowski had
previously pleaded guilty to charges in connection with a scheme that he ran
through Assante Wealth Management.
Peter Sbaraglia, a Toronto dentist who participated in a $40
million Ponzi scheme run by Robert Mander, has been banned for life from
trading by the Ontario Securities Commission. Sbaraglia operated C.O.
Capital Growth and raised more than $21 million from 25 to 30 investors. Most
of that money was funneled to a company called E.M.B Asset Group Inc.,
owned by Mander.
Wolfgang Joseph Friedrich, 62, and Monique Adriana Friedrich, 52, have
been charged in connection with an alleged Ponzi scheme that they were running
through Allrich Investments.
Carmelita Del Rosario, 42, was charged in connection with a $1.8 million
Ponzi scheme that defrauded 49 investors. Rosario allegedly used her position
at the Workers' Compensation Board and her connections to the Filipino
community to convince investors to putting money into a WCB investment fund that
did not actually exist.
Eli Heckscher, a Danish attorney, was criminally indicted for his
role in a scheme that took more than $26 million and was funneled to Europe by
convicted con artists John and Marian Morgan of Sarasota. Heckscher also
continues to face indictment in Tampa federal court as part of the Morgans'
case and their Morgan European Holdings Ponzi scheme. The Morgans
solicited funds from at least 100 investors, offering high yields, and then
wired the funds to Hacksher, who allegedly moved the money around the globe
while sending a lot of the money back to the Morgans for their private use.
John Morgan, 54, was sentenced to 10 years in prison in connection with a plea
deal, and Marian Morgan, 58, was sentenced to 35 years in prison following her
conviction at trial.
Jolan Saunders, 36, Michael Strubel, 51, and Spencer
Steinberg, 43, were arrested in connection with allegations that they
engaged in a conspiracy to defraud investors in a £40 million "Ponzi-style" investment fraud
related to electrical contracts in the hotel sector. It is alleged that their
company, Saunders Electrical Wholesalers Ltd., misrepresented that they
had high value contracts with blue chip hotel chains and the London Olympics
Athletes Village that required investment funding.
Nicholas "Beano" Levene, 48, was ordered to pay £1 in compensation in
connection with his £32 million Ponzi scheme. Levene is serving a 13 year
prison sentence and his assets were seized by the trustee in his bankruptcy
case. The court found, "As there is nothing available, I direct that he should
pay the nominal sum of £1 within seven days." Levene had taken about £15
million from investors, promising to invest the money in lucrative
rights-issues releases from companies such as HSBC, Lloyds TSB and mining firms
Xstrata and Rio Tinto.
Mannheim Regional Court
sentenced Ulrich "Richie" Engler, who lived in Florida and Nevada and
was extradited by the US authorities to Germany, to 8½ years imprisonment. The
court found Engler guilty for having swindled 1,100 investors out of $32
million. According to the trustee of the US bankruptcy proceedings, investors
invested approximately $171 million into Engler's fraud scheme. Only $78
million was returned by Engler to the investors. The court used provisions in
the German Criminal Procedures Act to limit the indictment to the cases of
approximately 1,100 investors in order not to overload the proceedings.
Report by Bernd H. Klose, www.raklose.de
Member of FraudNet, www.icc-ccs.org/home/fraudnet
The house registered in the
name of Laura Haude, the daughter of David Leigh, was attached as having
been purchased with money from a Ponzi scheme. Leigh is said to have defrauded
more than 200 wealthy businessmen to invest in a scheme known as the Frankel
Scheme, believed to be the largest commercial crime matter in South Africa.
The scheme is said to have lured in about $800 million (R7.444 billion). Leigh
was an agent of Barry Tannenbaum, who is the son of one of the founders
of Adcock Ingram pharmaceutical group, which had initiated the Frankel Scheme
in 2004. Tannenbaum was offering returns of up to 216% per year.
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI
A judge ruled that St.
Anselm Exploration, an oil and gas company, and its principals - Anna
Wells, Mark Palmer and Michael Zakroff - were not operating a Ponzi scheme. The
SEC had alleged that they were operating a Ponzi scheme, using new investments
to pay off old ones. The judge disagreed, stating, "What this court
perceives from the evidence presented in this case is not fraud, whether
intentional or reckless, or even negligence," he wrote, "but a
company that got too far out over its skis."
In the $1 billion Ponzi scheme
case of Medical Capital Holdings Inc., Wells Fargo Bank has asked the
district court to dismiss a consolidated class action which alleged that the
bank had breached its contract with noteholders by disbursing their funds to
MedCap. Wells Fargo argued that it was not contractually required to notify
investors of irregularities until the accounts had defaulted. In the meantime,
Bank of New York Mellon has agreed to pay the MedCap receiver a settlement of
The Attorney General of New
Jersey reached a settlement with RBC Capital Markets LLC, a Canadian investment
bank, in connection with conduct in the Ponzi scheme of James Hankins, Jr.
It was alleged that RBC did not follow its own procedures and did not perform
monthly reviews of accounts opened by Hankins. Hankins operated a $19 million
Ponzi scheme and is currently serving a 20 year prison sentence. RBC has agreed
to pay $450,000 in connection with the settlements.
A judgment of $2.88 million was
entered against investment adviser Maxam Capital Management, which had invested
money from the retirement fund of the Town of Fairfield, Connecticut, in the Bernard
Madoff Ponzi scheme. Fairfield had contended that Maxam, along with other
investment advisers, either knew that Madoff's investment strategy was fraudulent
or failed to adequately investigate the soundness of the program.
Claims were dismissed against
M&I Bank in a $1 billion lawsuit that accused the bank of conspiracy for
its role in allegedly assisting Thomas Petters. However, even though
claims for conspiracy, aiding and abetting fraud, negligent misrepresentation
and gross negligence were dismissed, $250 million of claims still remain in the
lawsuit on fraudulent transfer theories.
Victims of the Scott
Rothstein case objected to the Chapter 11 plan filed by the trustee of the Rothstein
Rosenfeldt Adler PA, which included a settlement with TD Bank that the
investors claimed as "unfair and inequitable" because it includes a bar order
against other litigation against TD Bank. A group of creditors is moving to try
to convert the case to Chapter 7.
The receiver over the Ponzi
scheme case run by David Salinas, 60, has said that he can verify 175
claims and $30.6 million of lost funds in the scheme that involved several
high-profile college basketball coaches. Salinas, a one-time Texas financial
adviser, committed suicide in 2011 while under investigation.
The trustee of the Ponzi scheme
case of Wesley A. Snyder won her appeal over the dismissal of her
lawsuit against 26 banks in the bankruptcy court. The trustee had sued the
banks for fraudulent transfers, but the lower court dismissed the cases,
finding that the banks had established a good faith defense. Snyder, 76, had
run a wrap around mortgage Ponzi scheme through his firm, Personal Financial
Management, by telling customers to borrow more than they needed from the
banks and to give Snyder the extra, which he would supposedly repay to the
banks. Snyder pleaded guilty in 2008, was sentenced to 12 years, and has
appealed the sentence 3 times.
Litigation pending in the Allen
Stanford Ponzi scheme case, Janvey v. Proskauer Rose LLP, was stayed upon
the parties' agreement in light of other pending matters. The lawsuit accuses
of Proskauer Rose LLP and Chadbourne & Parke LLP of helping Stanford in the
$7 billion Ponzi scheme. There are motions to dismiss pending in a different
but similar lawsuit, and the parties agreed that if those motions are granted,
then they will move ahead with this lawsuit. The receiver, Ralph Janvey, has
also filed a motion to transfer the case to Washington, D.C. and, if that
motion is granted, the parties have agreed to continue the stay.
An agreement was reached in the
Allen Stanford case that will allow victims to see some returns in the
near future. An agreement was reached regarding control of about $300 million
in frozen foreign bank accounts and other assets once owned by Stanford in
Canada, Switzerland and the United Kingdom. The receiver is awaiting court
approval to make an initial distribution of $55 million. The receiver has
collected about $230 million to date. At this point, it is looking like victims
may only recover about 1% of the money they invested with Stanford.
The Ninth Circuit heard
argument in the case of USACM Liquidating Trust v. Deloitte & Touche, LLP.
In this case, the liquidating trustee of USA Commercial Mortgage Co. seeks
to reverse the decision of the lower court which found in favor of Deloitte
& Touche based on application of the in
pari delicto defense to the trustee's claims. The trustee argued that that
Deloitte & Touche should be liable for damages arising from its audits of
the company's financial statements and that the wrongful conduct of the CEO and
president of the USACM should not be imputed to the company. The lower court
found that the in pari delicto defense
barred the trustee's claims. The trustee's lawyer argued that Nevada state law
required an equitable look at the facts and that "Nevada law says that when
applying in pari delicto, you should
not be so enamored with a Latin phrase that you apply it to all situations of
illegality." (In the interest of full disclosure, the trustee's position in
this case was argued in front of the Ninth Circuit by my partner, Max Liphart
of Diamond McCarthy LLP.)
The trustee of the bankruptcy
estate of Gary Wilder and Toni Jo Wilder reported that most of
the creditors will get less than 2 cents on the dollar. A distribution of $5.2
million will be made on the $217 million of allowed claims. Gary Wilder is
currently serving 15 years and Toni Jo Wilder is serving 7 years for their role
in a $220 million Ponzi scheme that ultimately forced the closure of Wildwood
Industries, a leaf and vacuum-bag manufacturing business that once employed
The receiver of ZeekRewards,
Rex Venture Group, filed his report stating that he has recovered $312
million and that he has incurred $1.6 million in fees in connection with his
administration of the case. The receiver reported that his forensic accountants
have spent more than 1,800 hours in unraveling the company's finances. The
receiver also filed a motion seeking approval of a claims process which would seek
to compensate about 840,000 net losers. The receiver is proposing that claims
be submitted electronically using a claims portal on his receivership website, www.zeekrewardsreceivership.com, and that a bar date be set. The receiver believes that there are about
80,000 others who profited from the scheme and who may be subject to fraudulent
transfer claims as net winners.
Montana governor Steve Bullock
signed a bill designed to help victims of Ponzi schemes and other financial
scams to get some of their money back. House Bill 81 is designed to create a
steady stream of revenue into an account that will fund restitution to
Montanans who are affected by securities fraud. If the balance in the
restitution fund is sufficient, eligible victims can receive 25% of their
losses or $25,000, whichever is less. New Hampshire also has a similar bill pending
to provide funding for defrauded investors.
Read additional articles at The Ponzi Scheme
Kathy Bazoian Phelps is the co-author of The
Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes (LexisNexis
2012), along with Hon. Steven Rhodes. The Ponzi Book, recently reviewed by the ABI Journal and Commercial
Crime International, is available for purchase at www.lexisnexis.com/ponzibook,
and more information about the book can be found at www.theponzibook.com.
For more information about LexisNexis
products and solutions connect with us through our corporate site.