David Kirkpatrick

April 28, 2009

One bit of Madoff fallout?

A Securities and Exchange Commission with bared teeth and an ax to grind.

From the link:

In the annals of Ponzi schemes, Shawn Merriman is small potatoes. But when the Securities and Exchange Commission announced April 8 that it had charged Merriman of Aurora, Colo. with fraudulently obtaining $17 million to $20 million, the agency’s new director of enforcement, Robert Khuzami, seized on the news. “We pursue Ponzi schemes with a great sense of urgency,” he said, “and bring cases swiftly and successfully to protect investors.”

During the first three months of 2009, the SEC has brought over two-dozen emergency enforcement actions to “halt an ongoing fraud,” added Khuzami. Nine of the cases announced by the agency this year were related to Ponzi schemes; over the same period in 2008, there were none. Observers haven’t had to look far for the reason for the sudden interest.

 

April 9, 2009

Yet another Ponzi scheme

Wow, it seems Ponzi schemes have been alive and well across our land and it took a financial crisis to expose those critters to legal trouble.

From the link:

In the latest in a string of alleged Ponzi schemes, civil fraud charges have been filed against a Colorado investment manager who operated a $20 million operation that allegedly victimized dozens of investors in at least three states.

Shawn Merriman, 46, used some of his investors’ funds for personal expenses, including purchases of Rembrandt masterpieces worth millions of dollars and other artwork, according to a lawsuit announced Wednesday by the Securities and Exchange Commission.

Operating through Market Street Advisors, an Aurora-based firm he owned, Merriman allegedly promised investors annual returns as high as 20% from stock trading. He lost about $400,000 through aggressive investments by the initial investment fund he launched in 1995, the SEC said.

March 30, 2009

BofA in on Ponzi action

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 2:22 pm

Not sure if this is opportunism or something serious. Seems the New York legal system really has is out for Wall Street and the financial sector right now.

From the link:

Bank of America effectively set up a branch in a Long Island office that helped Nicholas Cosmo carry out a $380 million Ponzi scheme, according to a class-action lawsuit filed in federal court.

The lawsuit, filed in Federal District Court in Brooklyn late Thursday, contends that Bank of America ”established, equipped and staffed” a branch office in the headquarters of Mr. Cosmo’s firm, Agape Merchant Advance. As a result, the lawsuit contends that the bank knowingly ”assisted, facilitated and furthered” Mr. Cosmo’s fraudulent scheme.

 

”Bank of America was at the epicenter of this scheme,” said the lawsuit, which seeks $400 million in damages from the bank and other defendants. ”Without Bank of America’s participation, the scheme would not have succeeded and grown to such an enormous size.”

SEC stops another Ponzi scheme

I guess it’s sort of like those 3D abstract imges from the early 90s. Once you are able to see the actual image in there, you can see them everytime …

The SEC’s release:

US SEC: SEC Halts $68 Million Ponzi Scheme Involving Caribbean-Based Bank and Swiss Affiliate
M2 PressWIRE via NewsEdge :

RDATE:26032009

Washington, D.C — The Securities and Exchange Commission has obtained an emergency court order halting a $68 million Ponzi scheme involving the sale of fictitious high-yield certificates of deposit (CDs) by Caribbean-based Millennium Bank.

The SEC alleges that the scheme targeted U.S. investors and misled them into believing they were putting their money in supposedly safe and secure CDs that purportedly offered returns that were up to 321 percent higher than legitimate bank-issued CDs. The SEC’s complaint alleges that William J. Wise of Raleigh, N.C., and Kristi M. Hoegel of Napa, Calif., orchestrated the scheme through Millennium Bank, its Geneva, Switzerland-based parent United Trust of Switzerland S.A., and U.S.-based affiliates UT of S, LLC and Millennium Financial Group. In addition to Wise and Kristi Hoegel and these entities, the SEC has charged Jacqueline S. Hoegel (who is the mother of Kristi Hoegel), Brijesh Chopra, and Philippe Angeloni for their roles in the scheme.

“As alleged in our complaint, the defendants disguised their Ponzi scheme as a legitimate offshore investment and made promises about exuberant returns that were just too good to be true,” said Rose Romero, Director of the SEC’s Fort Worth Regional Office. “This case demonstrates that investors need to be especially cautious when placing money with entities that may be outside the reach of U.S. regulators.”

According to the SEC’s complaint, at least $68 million was raised from more than 375 investors since July 2004. Millennium Bank, a licensed St. Vincent and the Grenadines bank, solicited new investors for its CD program through blatant misrepresentations and glaring omissions in its online solicitations and in advertising campaigns targeting high net-worth individuals. For example, in offering materials, Millennium Bank claimed that its parent, United Trust of Switzerland S.A., provides Millennium Bank with “over 75 years of banking experience, correspondent banking relationships, decades of knowledge in privacy and confidentiality as well as extensive training for our customer services professionals.” In fact, the SEC alleges, United Trust of Switzerland S.A. is not a Swiss-licensed bank or securities dealer. Potential investors visiting Millennium Bank’s Web site also were falsely informed that Millennium Bank is not affected by the global financial crisis and has a 100 percent client satisfaction record going back close to 10 years, and has its own affiliate asset management company with highly seasoned professionals who invest meticulously.

The SEC alleges that investor funds were not used for legitimate banking or investment activities. Instead, to create the appearance of a legitimate offshore investment, investors purchasing the CDs were instructed to deliver their investment checks to the offshore bank. The SEC alleges that the checks were then packaged and delivered to UT of S LLC’s office in Napa, Calif., where the checks were electronically deposited by a remote deposit machine into a UT of S, LLC account. The account, which is held at a U.S. financial institution, also received millions of dollars of investor funds via wire transfer. From that account, the SEC alleges, the defendants misappropriated a vast majority of the investor funds to enrich themselves and pay personal expenses, while making relatively small Ponzi payments to investors.

Judge Reed O’Connor, in the U.S. District Court for the Northern District of Texas, granted the SEC’s request for an asset freeze and emergency relief for investors.

The SEC charges that the defendants violated the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint also alleges that the defendants violated the registration provisions of the Securities Act. The complaint seeks permanent injunctions, disgorgement together with prejudgment interest, and financial penalties.

Additionally, the SEC’s complaint names four individuals and four entities as relief defendants: Lynn P. Wise of Raleigh, N.C. (the wife of William J. Wise); Ryan D. Hoegel of Lincoln, Calif. (the brother of Kristi Hoegel); Daryl C. Hoegel of American Canyon, Calif. (the husband of Jacqueline Hoegel), Laurie H. Walton of Raleigh; and United T of S, LLC, Sterling I.S., LLC, Matrix Administration, LLC, and Jasmine Administration, LLC. All four entities are based in Las Vegas. The SEC’s enforcement action seeks an order compelling them to return funds and assets traceable to the Millennium Bank fraud.

http://www.sec.gov/news/press/2009/2009-68.htm

 

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<<M2 PressWIRE — 03/30/09>>

February 10, 2009

Linda Thomsen leaves SEC

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 2:49 pm

Good riddance.

From the link:

The SEC says Linda Thomsen is leaving to pursue opportunities in the private sector, but did not provide further details. She has been the agency’s enforcement director since May 2005.

Thomsen became a lightning rod for criticism over the SEC’s failure to detect the $50 billion Ponzi scheme allegedly run by money manager Bernard Madoff, despite red flags raised to the agency staff by outsiders over the course of a decade.

February 6, 2009

The full list of Madoff victims

Filed under: Business — Tags: , , , — David Kirkpatrick @ 1:40 pm

Here’s the entire list of victims in Bernie Madoff’s Ponzi scheme. It’s a PDF, it contains 162 pages of names and the print is tiny.

Enjoy

Upate 2/7/09 — Er, I forgot to post the link to the list and this page has been taking some traffic. So sorry — here’s the link to the PDF.

February 5, 2009

SEC fighting House in Madoff probe?

Looks like the House thinks so.

From the link:

House lawmakers on Wednesday accused the Securities and Exchange Commission of impeding their probe into the agency’s failure to uncover the alleged $50 billion Bernard Madoff fraud.

The clash between lawmakers and high-ranking SEC officials at a House Financial Services subcommittee hearing came after the man who waged a decade-long campaign to alert the regulators to problems in Madoff’s operations denounced the agency for its inaction. Whistleblower Harry Markopolos also said he had feared for his physical safety and would turn over new evidence that Madoff had not acted alone.

In loud, angry exchanges, lawmakers threatened to issue subpoenas to SEC officials to compel their testimony in the case.

January 19, 2009

17 years of t-man failure with Madoff

Filed under: Business, Politics — Tags: , , — David Kirkpatrick @ 4:07 pm

This story really is amazing. Quite the juggling act from Madoff, that’s for sure.

From the link:

Seventeen years ago, federal investigators questioned for the first time whether Bernard L. Madoff was connected to a Ponzi scheme. Their inquiry centered on Frank Avellino, an accountant who had been funneling investors to Mr. Madoff since the 1960s.

The investigators did not get far. Within days, Mr. Avellino agreed to return to investors the money he and his partner had raised and to pay a small fine to the Securities and Exchange Commission. The inquiry petered out, and Mr. Avellino — represented in the case by Ira Lee Sorkin, the same lawyer who now represents Mr. Madoff — kept sending money to Mr. Madoff.

 

Now questions have again arisen about the ties between Mr. Madoff and Mr. Avellino. A lawsuit claims that Mr. Avellino warned his housekeeper, who had invested with him, that her money was lost 10 days before Mr. Madoff’s fraud became public.

Through his new lawyer, a former federal prosecutor, Mr. Avellino declined to comment on his relationship with Mr. Madoff.

But archived court documents from the 1992 case reveal numerous red flags that raise questions about the S.E.C.’s failure to examine Mr. Avellino and Mr. Madoff long before Mr. Madoff’s apparent Ponzi scheme spread worldwide. The documents show that Mr. Avellino and Michael Bienes, his business partner, kept almost no records at Avellino & Bienes, a firm that oversaw $440 million. When court-appointed auditors asked Mr. Avellino to prepare a balance sheet, he responded that ”my experience has taught me to not commit any figures to scrutiny.”

December 20, 2008

Madoff, Ponzi schemes and the current financial crisis

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 5:20 pm

An entertaining and interesting take by Peter Schiff at Taki’s Magazine.

From the link:

The United States Government runs its own balance sheet based on the Ponzi principal as well. Our national debt always grows and never shrinks. As existing debt matures, proceeds are repaid by issuing new debt. Interest payments on existing debt are also made by selling new debt to investors. The whole scheme depends on an ever growing supply of new lenders, or the willingness of existing lenders, to continue to roll over maturing notes. Of course, as was the case with Madoff, if enough of our creditors want their money back, the music stops playing.

In Madoff’s case, the rug pulling was provided by the huge financial losses suffered by some of his clients in other non-Madoff investments. When enough of these clients looked to sell some of their apparently well-performing Madoff assets to help offset such losses, the scam collapsed. The same thing could befall the United States Government. Now that China and our other creditors are looking to spend some of their U.S. Treasury holdings to stimulate their own economies, look for a similar outcome with even more dire implications.

The main difference is that while Madoff took elaborate steps to conceal his scheme, the U.S. government operates in broad daylight. It truly is amazing how faith in government is so pervasive that many can believe that politicians will succeed where private individuals fail, and that governments are somehow immune to the economic laws that govern the rest of society. Like those unfortunate to have been duped by Madoff and Ponzi, the world is in for a rude awakening.

December 12, 2008

$50B Ponzi scheme

Filed under: Business — Tags: , , — David Kirkpatrick @ 1:29 pm

Yes, fifty billion dollars. Just wow.

From the link:

Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion “Ponzi scheme” in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that “it’s all just one big lie” and that it was “basically, a giant Ponzi scheme,” with estimated investor losses of about $50 billion, according to the U.S. Attorney’s criminal complaint against him.