Ponzi Schemes

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.

James P. Lewis Jr. Ponzi Schemes

05/06 - SANTA ANA, Calif. - (AP) -More than 50 former investors packed the courtroom Friday at the sentencing hearing for an Orange County man charged with running a $311-million fraud scheme over nearly two decades.

Ten of the victims testified against James P. Lewis Jr., who faces up to 30 years in prison for defrauding about 1,600 investors.

Lewis, 59, pleaded guilty to one count of money laundering and one count of mail fraud last October after he was arrested in Houston in 2004 following a nationwide manhunt. Prosecutors agreed to drop 12 of 14 counts in exchange for the pleas.

Former investor Collene Campbell testified she and her husband lost the money they were saving for a down payment on their granddaughter's first home, a grandson's college savings, and the contents of a scholarship fund for another grandson.

"James Lewis did not make a mistake in investing our money, he didn't invest it at all. ... He just stole it," Campbell said, fighting back tears. "We are suffering and yet all those thousands of nights (Lewis) could sleep and carouse while he was sucking the life blood from his victims."

Jenny Jackson said she and her husband depended on their investments with Lewis' company to supplement their retirement income.

"The money for our retirement is entirely gone. Our dreams for the future are crushed," she said.

Lewis, who wore a prison jumpsuit and was shackled at the wrist, was expressionless during the testimony.

During the hearing, federal prosecutors and Lewis' attorney argued about the value of the net loss, which is a key element in deciding his sentence.

Brick Kane, the court-appointed receiver for Lewis' holdings, testified that Lewis took in $311 million between 1985 and 2003.

U.S. District Judge Cormac J. Carney asked how Lewis could keep up his scheme for nearly two decades.

"As long as you're able to raise money and keep paying the promised annual or monthly payments, you can keep going until you implode," Kane said. "And Mr. Lewis was about to implode when he was arrested."

Lewis told investors he was earning returns of 18 percent to 40 percent by leasing medical equipment, financing purchases of medical insurance, making commercial loans and buying and selling distressed businesses.

But prosecutors alleged that instead Lewis was using money from new investors to pay off the original ones - something known as a Ponzi scheme.

Kane testified that some early investors did receive money back, leaving the total loss at $156 million.

Defense attorneys, however, have argued that the net loss to investors was much lower.

The company that is liquidating Lewis' property holdings issued a report last year that he lost $35.5 million in unprofitable businesses,$22 million in the foreign currency market and spent at least $15 million on his wife, two girlfriends and their families.

Financial Advisory Consultants nothing but Ponzi Schemes Run by Scammer

05/06 - Orange County money manager James P. Lewis Jr. was sentenced today to 30 years in prison for defrauding investors - many of them fellow Mormons whom he met through church contacts - through a Ponzi scam that cost his clients $156 million over two decades.

Lewis, 59, who had given up his right to a trial, pleaded guilty in October before U.S. District Judge Cormac Carney to one count of mail fraud and one count of money laundering.

Many of Lewis' estimated 1,600 victims flooded the court with letters urging a long prison term.

A 72-year-old man, once retired, wrote that he now "must work until life ends" because he lost his savings. Another aggrieved investor told how he retired early to do missionary work based on his faith in Lewis - and now must sell his home to survive. Yet another, no longer able to afford gasoline, clothes or lunch with friends, said in a letter that Lewis "imprisoned me for lack of money."

"Many victims are elderly who lost their entire retirement savings to a man who spent their money on cars, houses and jewelry for himself, his wife, and girlfriends - while holding himself out as a man of morals and righteousness," Assistant U.S. Atty. Gregory W. Staples said in a sentencing memorandum.

Prosecutors had argued for a 30-year-long sentence, given the scope of the crime. Defense attorney Scott M. Schlegel argued for a 10-year sentence, and said prosecutors had wrongly portrayed Lewis as "a one-dimensional villain."

A 30-year sentence, he said, was the same as life in prison for Lewis, who turns 60 next month.

Lewis has been held without bail since January 2004, when he was arrested after a nationwide manhunt at a budget motel in Texas, where he had used a senior discount card to knock $6 off the room rate.

He had raised $311 million from investors who often forked over the money after hearing family members, friends or fellow churchgoers describe his returns - nearly 20% a year on an "income" fund that paid dividends, or 40% on a "growth" fund that did not. Billing his operation, Lake Forest-based Financial Advisory Consultants, as perfect for individual retirement accounts, Lewis lulled the investors with payments of "dividends" and sometimes return of their invested funds.

But as he admitted in October, the payments were made using funds from other investors in a classic Ponzi scheme.

Lewis' fraud succeeded for so long by attracting retirement money that the investors wouldn't need for years, said Barry Minkow, a former fraud perpetrator who recently testified before the U.S. Senate about Lewis and other scams targeting the elderly.

Minkow, a former teen tycoon who spent seven years in prison for defrauding investors in his Reseda-based ZZZZ Best carpet cleaning company, is now an anti-fraud consultant and tipped authorities to Lewis' scam. He said investors were reassured by how long the operation had been in business, and law enforcement officials were hard to convince that a fraud could have lasted so long.

Most would say: "If this were not real, how could he be up and running for close to 20 years with the income fund and the growth fund?" Minkow said.

Lewis told his victims he was turning big profits by buying and selling distressed businesses, leasing equipment to medical offices and financing medical insurance premiums. In fact, prosecutors said, he made only a few tiny investments, lost $22 million trading foreign currency futures, and squandered millions on cars and expensive homes for his ex-wife in Laguna Niguel, a girlfriend in Villa Park, and another girlfriend in Greenwich, Conn.

Under a court order obtained by the Securities and Exchange Commission, receiver Robb Evans & Associates of Sun Valley has been liquidating Lewis' assets and suing hundreds of clients who were paid more than the money they invested, hoping to reclaim some for the losing investors.

So far, Evans has recovered nearly $11 million, of which investors will get $9.5 million after legal and accounting fees and other expenses, Evans' deputy Brick Kane said.

(LA Times)

Mormon Investors Victims of Affinity Fraud Ponzi Schemes

05/06 - An Orange County man was sentenced to 30 years in prison and ordered to pay back the $156 million he bilked from about 1,600 people in a Ponzi scheme that spanned over two decades.

U.S. District Judge Cormac Carney imposed the maximum sentence on James P. Lewis Jr. Friday, describing the scheme as a "crime against humanity." The judge also acknowledged it was unlikely he would be able to pay back the money.

Lewis pleaded guilty to one count of money laundering and one count of mail fraud last October after he was arrested in Houston in 2004 following a nationwide manhunt. Prosecutors agreed to drop 12 of 14 counts in exchange for the pleas.

Defense attorney Scott Schlegel called the punishment a "death sentence" for Lewis, who is 59.

Many of Lewis' victims were fellow Mormons whom he met through the church. More than 50 of the former investors packed the courtroom during the sentencing hearing.

Former San Juan Capistrano Mayor Collene Campbell testified she and her husband lost the money they were saving for a down payment on their granddaughter's first home, a grandson's college savings, and the contents of a scholarship fund established in memory of another grandson, who died in 2001.

"We are suffering and yet all those thousands of nights (Lewis) could sleep and carouse while he was sucking the life blood from his victims," Campbell said, fighting back tears.

Lewis, who wore a prison jumpsuit and was shackled at the wrist, remained expressionless during the testimony. He told the judge he felt "sorry and shame and deep remorse as I stand before you."

Prosecutors said Lewis raised $311 million between 1985 and 2003 by telling investors he was earning returns of 18 percent to 40 percent by leasing medical equipment, financing purchases of medical insurance, making commercial loans and buying and selling distressed businesses.

In fact, prosecutors said, he made only a few investments and lost $22 million trading foreign currency futures, and spent millions on cars and expensive homes for his ex-wife, two girlfriends and their families.

Lewis kept the scheme going for nearly 20 years by using money from new investors to pay off the original ones — something known as a Ponzi scheme.

Brick Kane, the court-appointed receiver for Lewis' holdings, testified that some early investors did receive money back, leaving the total loss at $156 million.

Defense attorneys, however, have argued that the net loss to investors was much lower.

(San Fransisco Chronicle)