Promissory
Notes
Promissory notes, promoted as "commercial
paper", are often sold by unwitting insurance agents,
financial planners and others —lured by high commissions —who
may know nothing about the promoters of the investments beyond
what they're given in the promoter's materials.
Your agent may say that a "well-established" company
is looking to expand its business and needs to raise capital. Instead
of borrowing money from a traditional lender, such as a bank, it
is offering investors an opportunity to purchase "promissory
notes," typically with a maturity of nine months and an annual
interest rate between 12% - 18%, far more than you could get elsewhere.
These "notes" arebeing sold by
insurance agents who have been encouraged to market them by out-of-state
commercial marketing firms who are not properly advising the
agents of their legal obligations under the securities laws. If
asked by their clients, the agents often claim that the notes
are exempt from securities laws, when in fact
they are subject to a high degree of securities regulation.
Beyond investing new money, inept agents often recommend that
investors can avoid stock market volatility by liquidating or "cashing-in" other
financial assets such as stocks, mutual funds, annuities or life
insurance policies and "roll" them into these notes.
The agent's rationale is that the notes are very secure while offering
interest rates that are extremely attractive.
You would be wise to remember that a promissory note is only as
good as the promise which backs it. Investors often
receive fabricated promissory note certificates complete with fiscal
and legal-sounding terminology and gold embossed seals. You
may also get stuck with high-risk junk bonds from speculative
startup operations which prove to be just as worthless. These
investments are often established as window-dressing for a ponzi
scheme.
Our Scams Are Guaranteed
10/01 - Hendrik Rienstra, 72, the principal owner of New England
International Surety Co. Inc., was among six people arrested
in the United States and Belgium after being criminally indicted
in Louisiana and Texas.
Proceedings will now take place to extradite him to the United
States, where he has been accused of massive securities fraud by
state and federal authorities. Others who have been charged include
Richard Rienstra, 45, of Belgium; Craig L. Brown, 52, of Minnesota;
Jed Karpinski, 40, of Pennsylvania; and Jean Noel Pineau, 46; Cedric
Vaumoron, 28; and Joseph J. Aguda, 62, all of Louisiana.
In one indictment, Rienstra was charged with operating a Ponzi
scheme in connection with the sale of Omne Taormina SRL promissory
notes guaranteed by New England International Surety. It has been
alleged that Rienstra obtained $7 million from 145 Texas investors
alone and may have issued more than $100 million in worthless guarantees
nationwide.
Indicative of his career, New England International Surety Co.
Inc. was incorporated in Panama on September 9, 1982 with Hendrik
Rienstra listed as the owner of the company.
03/19/03 - United States District Judge Kurt D. Englehardt
sentenced New England International Surety, Inc., Omne SRL, and
OMNE SRL, Inc., to five (5) years probation and ordered the corporations
to pay restitution in the following amounts:
New England International Surety, Inc., $23,405,000;
OMNE SRL $8,772,761; and
OMNE Srl, INC., $14,632,240.
In addition, all three corporations were ordered to forfeit to
the United States $23,405,000 for the benefit of the victims of
the fraud. Also sentenced was Jed Karpinski, 41, of Lancaster,
Pennsylvania, to twelve months and a day imprisonment, for conspiracy
to commit mail fraud. Karpinski was also ordered to make restitution
to the victims of the fraud. Mr. Karpinski was also ordered to
self-surrender on May 5, 2003.
The case stems from a joint federal-state investigation of an
elaborate Ponzi scheme involving the sale of $18.8 million dollars
in fraudulent promissory notes for the renovation of the Imerpiale
Hotel in Taoromina, Sicily and an additional $4.5 million in promissory
notes for the financing of an Azerbaijan oilfield clean and recovery
business.
The superseding bill of information alleged that the defendants
recruited financial advisors and insurance brokers and agents to
sell promissory notes in a number of states by representing that
repayment was guaranteed by New England International Surety, Inc.,
and Omne RE S.A., when they knew these companies were insolvent
and had previously failed to fulfill guarantees on earlier projects.
A large portion of the money received from the sale of promissory
notes for these two projects was either siphoned off by defendants,
used to pay sales commissions, or used to pay earlier investors.
In addition, a large portion of the proceeds generated through
the sale of these promissory notes was sent out of the United States
to foreign accounts in order to place the funds beyond the reach
of claimants and policyholders. The defendants also used money
raised on these later projects to pay earlier investors in other
projects in order to perpetuate and promote the ponzi scheme.
Karpinski was one of the largest dealers in New England-backed
promissory notes. By making false representations about these projects
and the ability of New England to pay the promissory notes it was
guaranteeing, Karpinski sold the notes to a large number of his
clients.
On January 18, 2002, Karpinski plead guilty to one count of conspiracy
to commit mail fraud, in violation of Title 18, United States Code,
Section 371, a felony offense. During the sentencing hearing, it
was revealed that Karpinski has already made restitution to victims
in the amount of approximately $190,000.
On November 25, 2002, New England International Surety, Inc.,
Omne SRL, and OMNE SRL, Inc., plead guilty to one count of conspiracy
to commit mail fraud, in violation of Title 18, United States Code,
Section 371, a felony offense.
James, Hoyer, Newcomer & Smiljanich has received a default
judgment in a federal class action lawsuit filed against New England
International Surety. The suit alleges the following:
- New England International Surety guaranteed nine month promissory
notes of dozens of companies.
- Many of those companies had financial problems and didn't make
payments on the notes.
- Despite defaults on the promissory notes issued, New England
has failed to honor its obligation under the terms of its guaranty
agreements.
The Court has directed The Firm to file a motion for default judgment
against New England International Surety.
If you would like more information about the lawsuit, please contact
John Yanchunis at 1-800-651-2502.
The following companies issued promissory notes that were guaranteed
by New England International Surety:
 |
Pacific
Air Transport, Inc. |
|
Canko
Environmental Technologies, Inc. |
|
RMW/Corlogic,
Inc. |
|
Caffe
Diva Group Ltd. |
|
Technical
Support Services, Inc. |
|
Tri-
National Development Corp. |
|
South
Mountain Resort & Spa, Inc. |
|
Sun
Broadcasting Systems, Inc. |
|
Alumalex,
Inc./AutoShutter |
|
Sebastian
International Enterprises, Inc. d/b/a Real Life 101 |
|
World
Vision Entertainment, Inc. |
|
Ameritech
Petroleum, Inc. n/k/a Redbank Petroleum |
|
Lomas
De La Barra Development, Inc./Uruguay |
|
Apogenics,
Inc. |
|
Capitol
Communities Corporation |
|
Digizap
Technologies, Inc. |
|
Serengeti
Diamonds U.S.A., Inc. |
|
Phone
Buddies d/b/a Telecoach Network LLC, |
|
OMNE
SRL Taormina |
|
OMNE
SRL Azerbaijan Oil Fields |
|
And
others that have yet to be discovered |
Update for 4/3/03
Richard Rienstra is set to be sentenced 6/18/03 in U.S. District Court,
New Orleans. Cedric Vaumoron and Jean Noel Pineau set to be sentenced
4/23/03.
Update for 1/13/03
Jean Noel Pineau and Cedric Vaumoron pled guilty in U.S. District Court,
New Orleans on 1/13/03 and are awaiting sentencing.
Update for 11/25/02
Richard Rienstra pled guilty in U.S. District Court, New Orleans on 11/25/02.
Update for 6/21/2002
Richard Reinstra has been extradited back to the United States and is
currently out on bond awaiting trial. He is required to wear an ankle
bracelet while on bond.
Update for 5/2/2002
Hendrik Reinstra, his son Richard Reinstra and others were indicted by
a Federal Grand Jury in New Orleans, Lousiana. While out on bond and
awaiting trial, Hendrik Reinstra died in Belgium on April 20th, 2002.
For more information go to www.jameshoyer.com
The case number is 00-8234CIV.
Three men indicted in promissory note investment scam
06/06 - Hawaii - Three men who allegedly bilked more than 25 Hawai'i
residents out of $1 million by selling them fraudulent promissory
notes have been arrested in Florida and will be extradited to Honolulu
to face prosecution, the state attorney general's office said.
Robert Byrch, Richard Morris and Robert Mitchutka were indicted
by an O'ahu grand jury May 25 for securities violations and theft.
Each stands accused of selling unregistered securities, selling
securities as an unregistered person, engaging in prohibited securities
practices, securities fraud and theft in the first degree.
If convicted, the men face up to 20 years in prison for the securities
violations and up to 10 years for the thefts.
The 28 Hawai'i residents lost investments of between $10,000 and
$100,000 according to the attorney general's office.
"Basically, they never got their money," said Dwight
K. Nadamoto, the deputy attorney general prosecuting the case. "It's
a lot more common than people like to realize."
Byrch was president of 21st Century Satellite Communications Inc.,
the Florida company that sold the notes, according to the attorney
general's office.
Morris and Mitchutka sold the notes in Hawai'i with the help of
a certified public accountant who was indicted on four counts of
securities fraud here in 2003.
A promissory note is evidence of indebtedness, meaning investors
buy the notes assuming they will get their principal back plus
a percentage of interest after the note comes due.
According to the U.S. Securities and Exchange Commission, between
1997 and September 2000, Byrch's company sold promissory notes
and purchase-leaseback agreements worth about $23 million to more
than 700 investors across the country.
The company claimed to sell the notes to purchase satellite television
equipment that the company would use to install, maintain, and
service private satellite television systems for exclusive gated
communities in northern and central Florida, the SEC said.
The company also claimed the investments were fully secured by
the value of the equipment purchased with the investors' money
but the investments were not fully secured, the SEC said. The company
used $6.1 million of the investor money to pay undisclosed commissions
to the sales agents who sold the securities, according to the SEC.
Honolulu Advertiser
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