PonziScams.com Schemes & Due Diligence

Court Grants Summary Judgment Against Creator and Principal of Fraudulent Foreign Currency Option Scheme

On August 1, 2007, the Honorable Jane Boyle, United States District Judge, Northern District of Texas, issued an order granting the Commission’s Motion for Summary Judgment against Defendant Gerald Leo Rogers (”Rogers”), the architect of a fraudulent Ponzi scheme that collected more than $11 million from over 100 investors, many elderly or investing retirement savings. The Court permanently enjoined Rogers from future violations of the securities registration and anti-fraud provisions of the federal securities laws. The Court also ordered Rogers to pay disgorgement in the amount of $10,959,000, plus prejudgment interest, and imposed a civil penalty of $120,000.

In its Complaint, filed on March 3, 2005, the Commission alleged that Rogers, a twice-convicted felon, whose criminal and securities fraud history spans nearly four decades, started this scheme shortly after being paroled from a 35-year prison sentence for mail and securities fraud. The Commission alleged that from January 2004 through the present, Rogers and the other defendants, operating principally through Premium Income Corp. (”PIC”) engaged in a deliberate scheme to defraud investors with promises of “guaranteed profits” and “safety of principal.” The complaint alleged that the defendants falsely claimed that PIC would use “100% of investor funds” to write covered call options in the foreign currency market. In fact, according to the complaint, the defendants operated a “Ponzi” scheme, using new investor funds to pay “interest” to earlier investors, and made undisclosed payments to Rogers and PIC salesmen. Based on evidence presented to the Court on March 3, 2005, Judge Boyle granted the Commission’s request for a temporary restraining order, the appointment of a Receiver, an asset freeze and other equitable relief to halt the ongoing scheme

In her order granting summary judgment, Judge Boyle concluded that the Commission established that there was no genuine issue of material fact that: (1) the PIC foreign currency program was a security; (2) Rogers recruited and trained 140 sales agents to offer and sell the security and encouraged them to disseminate false and misleading information about the PIC investment; (3) Rogers and his sales force materially misrepresented the risks involved in covered call options; (4) Rogers falsely touted his credentials and experience in legitimate international commerce, while failing to disclose to the sales agent or investors his long history of criminal convictions and regulatory injunctions; (5) Rogers, in fact, did not use investor funds to write covered calls, but rather risked investor funds in speculative foreign currency trade, resulting in the loss of millions of dollars; and (6) PIC operated as a Ponzi scheme, using funds supplied by new investors to pay the monthly returns promised to existing investors.

On January 18, 2007, the Court issued final judgments against PIC, Inforex Ltd. and Tri-Forex International, Ltd., based on their failure to appear or otherwise defendant the case. The Court’s summary judgment against Rogers should clear the way for the Court-appointed Receiver to petition the Court to distribute Receivership funds to the victims of the fraud.

The Commission acknowledges the assistance and cooperation of the Texas State Securities Board and the Commodity Futures Trading Commission in this matter.

For additional information, please see Litigation Release No. LR-19115 (March 3, 2005).

http://www.sec.gov/litigation/litreleases/2007/lr20235.htm

SEC Files Charges Against Ponzi Scheme Operators in $20 Million Mining Claim Securities Fraud

On August 9, 2007, the Securities and Exchange Commission filed charges against two Nevada companies and their officers for perpetrating a $20 million Ponzi scheme involving mining claim interests. The Commission filed charges against Earthly Mineral Solutions, Inc. (”EMS”), Natural Minerals Processing Company (”NMPC”), both based in Henderson, Nevada, and their three principal officers, Roy D. Higgs, age 65 of Henderson, Nevada, Frank L. Schwartz, age 43 of Henderson, Nevada, and Rick Lawton, age 60 of Reno, Nevada, (collectively, “the defendants”).

Also on August 9, 2007, the United States Attorney for the Eastern District of Missouri filed criminal charges against EMS, Higgs, and Schwartz for conduct alleged in the Commission’s complaint.

The Commission’s complaint alleges that between 2003 and 2006, the defendants offered and sold investors mining claims interests based on false and misleading information. As alleged in the complaint, the defendants claimed that investors’ funds would be used to expand EMS’ and NMPC’s mineral processing and fertilizer production businesses. The defendants guaranteed investors a 7% to 9% annual return their on investment, which was to be paid out of the operating revenue from the mining and fertilizer businesses. In reality, the defendants were running a Ponzi scheme; neither EMS nor NMPC operated a functioning mining or fertilizer business, and the returns promised to investors were paid using the investments of new investors. The complaint further alleges that the defendants’ scheme raised approximately $20 million from over 100 investors nationwide, many of whom had been saving for retirement and liquidated their personal Individual Retirement Accounts (”IRAs”) to invest in the mining claims.

The Commission charged EMS, Higgs, Schwartz, and Lawton with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 (”Securities Act”). In addition, the Commission charged EMS, NMPC, Higgs, Schwartz, and Lawton with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 (”Exchange Act”) and Rule 10b-5 thereunder. The Commission also charged Higgs, Schwartz, and Lawton with violating the broker-dealer registration provision of Section 15(a) of the Exchange Act. The Commission seeks a permanent injunction, disgorgement with prejudgment interest, and civil penalties against all of the defendants.

The Commission acknowledges the valuable assistance the United States Attorney’s Office for the Eastern District of Missouri, the Bureau of Land Management, and the Federal Bureau of Investigation in bringing this case.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/2007/lr20237.htm

Commission’s Seniors Summit to Be Held Sept. 10

Washington, D.C., Aug. 7, 2007 — Securities and Exchange Commission Chairman Christopher Cox announced today that the agency will hold its second annual Seniors Summit on Sept. 10, 2007, at the SEC’s Washington, D.C., headquarters. The event will further examine how regulators, community organizations, and others can increasingly coordinate efforts to protect older Americans from abusive sales practices and investment fraud.

AARP, the Financial Industry Regulatory Authority (FINRA), and the North American Securities Administrators Association (NASAA) will be other leading participants at the Seniors Summit.

“Americans are living far longer than ever before. As the Baby Boomers reach retirement age, more than 10,000 Americans are turning 60 every day – and the net worth of older Americans is growing to historic proportions. That has made seniors the prime targets for scam artists and securities swindlers. So the SEC is attacking the problem of senior fraud from all angles, with aggressive enforcement efforts, targeted rules and examinations, and investor education focused not only on seniors but their caregivers and pre-retirement workers as well,” Chairman Cox said.

“Our Seniors Summit will bring together regulators, law enforcement officials, and community groups from around the nation to join forces in protecting older Americans from investment fraud,” Chairman Cox added.

Chairman Cox noted that the SEC has brought more than 25 enforcement actions during the past year aimed specifically at protecting elderly investors. Many of these were coordinated with state authorities. Chairman Cox also noted that the SEC’s nationwide examination and inspection program plays a critical role in protecting seniors by conducting targeted examinations to detect fraud and other violations of securities laws.

Furthermore, the SEC has devoted a portion of its Web site specifically to senior citizens (http://www.sec.gov/investor/seniors.shtml), linking to detailed warnings about common scam tactics and other critical information about investments that are commonly marketed to seniors.

The Seniors Summit will take place in the Auditorium at SEC Headquarters, 100 F Street, N.E., Washington, D.C. The agenda, panelists, and registration instructions for the Seniors Summit will be announced at a later date.

http://www.sec.gov/news/press/2007/2007-160.htm

First BanCorp Settles Financial Fraud Charges With SEC and Agrees to Pay $8.5 Million Penalty

The Securities and Exchange Commission today filed financial fraud charges against First BanCorp, alleging that former senior management of the NYSE-listed, Puerto Rico-based bank holding company concealed the true nature of more than $4 billion worth of transactions involving “non-conforming” mortgages from 2000 until 2005. Non-conforming mortgages have income verification and credit history standards that are generally more flexible than those required for sale or exchange under Fannie Mae and Freddie Mac programs and can constitute “subprime” mortgages.

The Commission’s complaint charges First BanCorp with aiding and abetting violations of the federal securities laws by Doral Financial Corporation, another NYSE-listed, Puerto Rico-based bank holding company. Doral Financial previously consented to the entry of a court order enjoining it from violating the antifraud, reporting, books and records and internal control provisions of the federal securities laws and ordering that it pay a $25 million civil penalty [LR-19837 (Sept. 19, 2006)].

According to today’s complaint, First BanCorp, which purportedly purchased the non-conforming mortgages from Doral Financial, profited from the transactions by earning more than $100 million in net interest income at little or no risk. Doral Financial, which purportedly sold the mortgages to First BanCorp, improperly recognized income on the transactions. According to the Commission, the mortgage-related transactions were not true sales under generally accepted accounting principles because senior management of Doral Financial agreed orally and in emails to extend the recourse provision beyond the 24-month period included in the written agreements to recourse for the duration of the mortgages.

The Commission’s complaint, which was filed in the United States District Court for the Southern District of New York, charges First BanCorp with aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20 13a-1 and 13a-13. Without admitting or denying the Commission’s charges, First BanCorp consented to being permanently enjoined from violating those antifraud, reporting, books and records and internal control provisions of the federal securities laws and to paying an $8.5 million civil penalty.

The Commission acknowledges the assistance of the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Company.

The Commission’s investigation is continuing.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/2007/lr20227.htm

Washington, D.C., Aug. 9, 2007 - The Securities and Exchange Commission today announced the filing of a civil injunctive action against former senior officials of Nicor, Inc., a major Chicago-area natural gas distributor, alleging financial fraud lasting from 1999 to 2002. The SEC’s complaint alleges that former Chairman, CEO and President Thomas Fisher, former CFO and Executive Vice-President Kathleen Halloran, and former Treasurer and Vice-President George Behrens engaged in or approved improper transactions, and misrepresented Nicor’s gas inventory in order to meet earnings targets and increase the company’s revenues under a performance-based utility rate plan.

Linda Thomsen, Director of the Commission’s Division of Enforcement, said, “This action against three senior officers of Nicor demonstrates the Commission’s continued commitment to holding individual decision makers accountable for their conduct when it results in fraudulent financial statements.”

Merri Jo Gillette, Director of the Commission’s Chicago Regional Office, added, “Fisher, Halloran and Behrens engaged in a scheme to manipulate Nicor’s earnings through fraudulent transactions and mislead investors by making improper disclosures regarding Nicor’s financial performance. This case, like others, shows that the Commission will not tolerate accounting ploys and misleading disclosures by senior officers who are intent on making their numbers.”

The complaint alleges that in 1999, Fisher, Halloran and Behrens participated in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out (LIFO) layers of gas inventory. As a result, the former officers engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission. They also failed to disclose material information regarding Nicor’s rigged reductions in gas inventory levels that enabled it to improperly manipulate its earnings and to increase Nicor’s revenues under a performance-based utility rate plan. In addition, the former officers materially understated Nicor’s expenses during the first and second quarters of 2001 by improperly bundling a weather-insurance contract with an agreement to supply gas to Nicor’s insurance provider at below-market prices. Moreover, they caused the losses on the supply agreement with the insurance provider to be improperly charged to Nicor’s utility customers. These improper transactions enabled Nicor to understate its expenses and to manipulate its earnings to achieve its earnings targets. As a result of the manipulative scheme, Nicor materially overstated its reported income for the years ending 2000 and 2001, and for each of the quarters within those years and the financial statements filed with those reports.

Additionally, the former officers failed to make disclosures required by GAAP about the effects of LIFO inventory liquidations on Nicor’s reported income. Nicor, through Fisher, Halloran and Behrens, failed to disclose in either the Management’s Discussion & Analysis section of its 2000 and 2001 annual and quarterly reports, or in financial statements filed with those reports, that it had recorded material increases to income resulting from the liquidation of its LIFO inventory, and that the continued liquidation of Nicor’s low-cost inventory was not sustainable.

On March 29, 2007, Nicor consented to the entry of a court order enjoining it from violating the antifraud and reporting provisions of the federal securities laws and ordering that it pay a $10 million civil penalty (LR-20060).

The Commission’s action seeks injunctive relief, disgorgement, civil penalties, and officer and director bars against Fisher, Halloran and Behrens.

# # #

For further information contact:

Merri Jo Gillette
Regional Director
SEC Chicago Regional Office
(312) 353-9338

Robert J. Burson
Senior Associate Regional Director
SEC Chicago Regional Office
(312) 353-7428

Additional materials: Litigation Release No. 20233

http://www.sec.gov/news/press/2007/2007-164.htm

SEC Charges Global Asset Partners and Joseph C. Lavin For Defrauding Investors In $5 Million Ponzi Scheme

The Securities and Exchange Commission today filed fraud charges against Joseph C. Lavin and his company, Global Asset Partners, LLC (”GAP”), a purported Seattle-based investment fund manager, accusing them of misappropriating at least $5 million from over 100 investors nationwide. According to the Commission, Lavin, 41, of Woodinville, Wash., promised investors extraordinary returns of 18 to 36 percent per year from the GAP investments. Far from producing the promised returns, the Commission’s complaint alleges that Lavin used investor funds to pay for personal expenses for himself and his friends, including lavish trips, automobiles, a Seattle Mariners luxury skybox, and real estate in Costa Rica. Lavin also diverted investor funds to a now-bankrupt Texas real estate project known as Wildflower Resort Company.

The complaint alleges that Lavin told investors that their money would be placed into funds managed by GAP, where it would be invested in foreign currencies and asset-backed securities. Instead, Lavin converted the investors’ money to his own use. In addition, as in a classic Ponzi scheme, Lavin used money raised from new investors to pay purported returns to previous investors. The Commission further claims that Lavin sent false account statements to GAP’s investors showing ever-increasing account balances based upon accumulation of the promised returns. In reality, according to the complaint, the GAP funds never made any money and Lavin fabricated the account balances on the statements to fool investors into believing their investments were profitable and to induce them to make additional investments.

The Commission’s complaint, filed in federal district court in Seattle, seeks to enjoin Lavin and GAP from future violations of the antifraud provisions of the federal securities laws [Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act. The Complaint also requests that the district court order Lavin and GAP to disgorge their ill-gotten gains, plus prejudgment interest and to impose a civil monetary penalty.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/2007/lr20220.htm