PonziScams.com Schemes & Due Diligence

Jury orders U.S. Bancorp to pay $17.6 million in Ponzi scheme
The Associated Press
Article Launched: 12/14/2007 12:02:22 PM PST

SANTA ANA, Calif.—A jury has ordered U.S. Bancorp to pay $17.6 million in a civil lawsuit brought by the trustee overseeing the bankruptcy of a company that defrauded investors out of $45 million.

The Orange Country Superior Court jury concluded last week that the bank should have known about fraudulent accounts that it opened for operators of Newport Beach-based DFJ Italia Ltd.

Seven people have pleaded guilty to federal charges stemming from the financial scam, which ran from 1996 to 2000.

The company promised annual returns of 24 percent, but investors’ money was instead directed to the people who ran the scam and to pay other investors. Among those who lost money in the scheme was former pro football star running back Eric Dickerson.

DJF Italia sought Chapter 7 bankruptcy protection in 2000.

Bankruptcy trustee Thomas H. Casey sued U.S. Bancorp, Wells Fargo Bank and City National Bank two years later, claiming the financial institutions aided and abetted DFJ Italia’s operatives by failing to discover their bogus bank accounts.

Wells Fargo Bank and City National Bank earlier reached settlements in the suit.

During last week’s trial, two of the men behind the scheme testified they had bribed employees of Minneapolis-based U.S. Bancorp and opened accounts at the company’s retail bank branches without proper documents.

U.S. Bancorp attorneys argued it shouldn’t be held responsible for the actions of criminals and urged jurors not to believe the scammers’ testimony.

The bank plans to appeal the jury’s verdict.

Washington, D.C., August 23, 2007 - Continuing its crackdown on financial fraud against senior citizens, the Securities and Exchange Commission today filed an emergency action to shut down a $25 million Ponzi scheme that victimized hundreds of senior and other investors nationwide who bought fractional ownership interests in life insurance policies.

The SEC asked a federal district court in Sacramento, Calif., to grant the SEC’s request for an order temporarily prohibiting further sales of the products, freezing the assets, and appointing a receiver to take control of operations in order to manage and preserve remaining investor funds.

The SEC has brought more than 40 enforcement actions over the past two years against frauds targeting retirees and other older investors, which will be a focus of the Commission’s second annual Seniors Summit in Washington, D.C., on Sept. 10. The Summit also will include the release of findings from regulatory examinations of 110 firms offering “free lunch” investment seminars aimed at seniors.

In the latest action, the Commission alleges that Donald Neuhaus of Redding, Calif., his daughter Kimberley Snowden, and their company Secure Investment Services, Inc., orchestrated the Ponzi scheme that falsely promised safe, secure and profitable interests in life insurance policies known as “viaticals” while failing to disclose the dire financial condition of the investment venture. Many of the investors were elderly and invested their retirement savings. The Commission also alleges the father-daughter fraudsters pocketed $700,000 for their personal use while the scam was on the verge of collapse.

“Moving to shut down this Ponzi scheme reaffirms the Commission’s overall commitment to aggressively investigating and stopping those who prey upon the retirement funds of older Americans,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “These perpetrators lined their own pockets and deliberately disguised the serious risks that investors faced, misleading senior citizens and others to believe they were making safe and secure investments when, in reality, they were being lured into a financial crisis.”

Helane L. Morrison, Regional Director of the Commission’s San Francisco Regional Office, added, “The defendants engaged in a predatory scheme, making promises that they knew they could not keep to senior citizens and other investors. The requested court order temporarily halting this fraud is a critical step in protecting these investors and preserving their remaining assets.”

According to the Commission’s complaint, Neuhaus and Snowden sold shares of life insurance policies, calling them “bonded life settlements.” They persuaded investors to buy the securities by representing that their money would be used to purchase and pay the necessary premiums on the life insurance policies. They promised returns up to 125 percent when the person insured by the policy died.

The Commission’s complaint alleges that Neuhaus and Snowden instead used investors’ money for their own personal use and to cover the premiums on other insurance policies owned by other groups of investors. Their conduct constituted a Ponzi scheme in which every new investor was being defrauded to provide the cash needed to conceal the misrepresentations to an earlier group of investors. They failed to inform investors that the enterprise was on the brink of collapse, and that investors risked losing everything if life insurance policies expired due to lack of payment.

The Commission further alleges that Neuhaus and Snowden misled investors by providing them with life expectancy estimates supposedly certified by a physician who was, in reality, a convicted felon falsely holding himself out as a physician. They falsely claimed that the investments were protected by bonding companies. But these were, in fact, unlicensed overseas firms with no assurance of actually repaying investors.

The Commission’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws, and seeks permanent injunctions, disgorgement, and civil penalties. The Commission acknowledges the assistance of the United States Attorney’s Office for the Eastern District of California, the California Department of Corporations and the Criminal Investigation Division of the Internal Revenue Service.

Washington, D.C., August 13, 2007 - The Securities and Exchange Commission today announced the distribution of approximately $55.6 million in Fair Funds to more than 200,000 investors who were harmed by fraudulent market timing in certain Banc One mutual funds (One Group Funds). The Fair Fund resulted from a settled enforcement action in which Banc One Investment Advisors Corporation (BOIA) agreed to pay $10 million in disgorgement and $40 million in civil penalties to settle charges of unlawful market timing. The entire Fair Fund, plus accumulated interest, has been distributed to investors.

“Returning money to investors injured by the unlawful market timing in this and other matters marks the continuation of the SEC’s efforts to remedy the harm suffered by investors,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.

The Sarbanes-Oxley Act of 2002 gave the SEC authority to increase the amount of money returned to harmed investors by allowing civil penalties to be included in Fair Fund distributions. Prior to SOX, only disgorgement could be returned to investors. To date, the SEC has distributed more than $2.5 billion in Fair Funds to injured investors.

On June 29, 2004, the SEC brought settled administrative and cease-and-desist proceedings against BOIA and Mark A. Beeson, former President and CEO of One Group Funds. Both consented to the settled order without admitting or denying the SEC’s findings. The SEC found that BOIA improperly allowed market timing in One Group Funds between June 1999 and May 2003, failed to charge required redemption fees in One Group Funds’ international funds, and improperly released confidential portfolio holdings. In addition to disgorgement and civil penalties, BOIA also consented to a cease-and-desist order and a censure, and agreed to undertake certain compliance and mutual fund governance reforms.

The Fair Fund Administrator responsible for distribution is Boston Financial Data Services, Inc. (BFDS). Investor questions regarding the distribution may be directed to BFDS at (800) 261-0282. Information regarding the distribution can also be obtained at the BOIA Web site: http://www.settlementbanconeia.com.

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For further information, contact:

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

Distribution Plan
Order Approving the Distribution Plan and Appointing an Administrator
June 29, 2004 Order Instituting Administrative and Cease-and-Desist Proceedings

http://www.sec.gov/news/press/2007/2007-165.htm

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.

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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

Securities and Exchange Commission v. Global Finance & Investments, Inc., Charles R. Davis, Lucre Fund, LLC, JTA Enterprises, William H. Clark, Level Par Investments, LLC, Kelly G. Rogers, Sterling Meridian LLC, Ronald J. Linn Glenn Maske and William F. Dippolito, Defendants, and USAssets & Funding Corp., Nevada Sentry Service Corp., Wells Ventures LLC, Triquestra Management Corp., and CMR Mngt. Group, LLC, Relief Defendants. Civil Action No. 4:07cv346, (United States District Court; Eastern District of Texas; Sherman Division)
SEC Sues Promoters of High Yield Investment Programs For Fraud and Seeks Appointment of a Receiver on Behalf of Investors
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