SENSATIONS, SCHEMES and SCAMS in the NEWS
By: David L. Boccagna
You and I have been approached by someone who had a “deal of deals”, a “chance of a life-time”, an “opportunity to get in on the bottom floor” or to enjoy the benefits of a “cash-cow investment program”.
It probably went something like this:
A friend who went to school with this son of a financier, (that turns out to be a variation of a s.o.b., perhaps, son of a banker) is involved with an investment consortium in Europe. This consortium is a special group of investors that trades in secret and private investment markets that offers very high market rates in high yield investment programs – or HYIP. Now this consortium is able to accomplish this by investing in special securities trading programs known as bank debentures and medium term notes (MTN’s) for a very small group of privileged customers in Europe. This is done in a “secret” secondary market that is so secret that even your own banker may not be privy to such information. If he did know he would be sworn to secrecy and not be able to share this information with just anyone.
Now this secretive program is very complex and it is quite difficult to express in layman’s terms, but this “son of a financier” will take time to explain it to you because he is a friend of your friend. Furthermore, he forewarned you that if you were to investigate this “once in a lifetime” offer, make waves, or, if word got out that you were asking too many questions about it, you would run the risk of being expelled from participating in these secret secondary markets – forever!
Your funds will never be at risk because they will be placed in a bank account jointly with a “trader”, “master programmer” or “trading facilitator”. Your funds will never be used and therefore never at risk. They will be used only for “show” since your bank will issue, on your behalf, a “blocked funds letter” advising that your funds are available in the account, that they are “clean and of non-criminal origin” and are free and clear of “liens or encumbrances”. Furthermore, they will only be blocked for a specific time frame because these funds will eventually be transferred to that joint account with that “trader”, “master programmer” or “trading facilitator”, and they could never be withdrawn without your signature.
Once your funds are transferred to that joint account with the “trading facilitator” he will immediately contact the consortium who will pool your funds with other esoteric “friend’s accounts” and begin to invest, without any risk whatsoever, in bank debentures, discounted standby letters of credit, bank guarantees, medium term notes and other financial instruments, that can be traded for a profit in this secret secondary market.
Also, one very large branch of this secret secondary market is hosted by the top 100 western European Prime Banks. These banks comprise such a huge segment of this secondary market that the US Federal Reserve, the United Nations, the US Treasury Department, the Comptroller of the Currency, the Bank of England, the Bank of International Settlements, and even the World Bank invest in this secret market. The International Chamber of Commerce even sanctions it. It is vast and it is secure. The US Federal Reserve actually has special “Master Collateral Commitment Holders” assigned to monitor these transactions just to insure the safety and to maintain the “no risk” factors in these secretive trades. Further to this, the Federal Reserve has even set up “safety check points” within this secondary market, viz., “Master Account Holders”, “Central Account Holders”, and “Grand Masters” to oversee each and every trade to insure the integrity and safety of the program.
Your friend’s friend even had the patience to explain to you some of the built in mechanisms that insure the safety of the trades. Just to help you gain your comfort level he introduced you to the concept of “buy/sell agreements”,”purchase/redemption”, “purchase/resell”, “enter/exit” guarantees that each trade is guaranteed before it is executed. “You see”, he told you, “before every trade is made there is a buyer lined up to buy at the very same moment your financial instrument is offered for sale." ”What better security can you have than that?" And, once you are in the program and you start to enjoy the yields of 2-8% per week, you can even re-enter at a much higher level. You could put your profits into a “roll program” so that not only will you be able to enjoy this enormously high yield at the level where you entered, but you could also “kick-it-up” to a much higher level without breaking the continuum. And, would you believe there is even another built-in security? This secret market guarantees 108% of the principal and interest with a bank guarantee or safekeeping certificate that assures a minimum of 2% per week. With this 108% mechanism, 100% of your principal is secured and with the 8% the principal is earning a respectable interest in addition to the exorbitantly high yields you will be earning with out risk from the investments you will be making in the secret secondary markets.
There are even special situations with International Chamber of Commerce (ICC) London Short Form Letters of Credit (ICC 3034) and the London Long Form Letters of Credit (ICC 3039), that carry the integrity and sponsorship of the prestigious ICC. Of course, this special opportunity carries the ICC Investment Programme Approval.
Your commissions will be guaranteed by Irrevocable Bank Purchase Orders (IBPO) and Irrevocable Bank Pay Orders (IBPO), the former stands by ready to “buy” your financial instruments and the latter immediately issues a “pay order” for the arbitrage you made from each sale and deposits your “profit” into your special account. These profits and your original funds are furtherly protected with “safekeeping certificates.”
“…and, you know when you are dealing with high finance you must be very careful and suspicious”, he warned you. Just to let you know some of the inner workings of the “Grand Masters”, they require from all potential buyers, even those who are prestigious, that they must issue Ready, Willing and Able (RWA), Ready, Willing and Able to Deliver (RWAD) and Ready, Willing and Able to Perform (RWAP) documents in order for them to facilitate smooth transactions.
Now this son of a financier was really helpful. He even explained how these top 100 Western European Banks deal in Prime Bank Notes (PBN’s), Prime Bank Guarantees, Prime Bank Debt Obligations, Prime Bank Securities, between and amongst themselves, and the principals want to remain anonymous. However, secrecy prevails even amongst them. He had you promise, on your honor, that the information he was sharing with you was very private and privileged. Then he went on to explain that when these top banks are dealing with PBN’s that they go to specially assigned “Cutting Houses”, those that have been nominated by the US Federal Reserve System, to issue three different categories of new PBN’s; “Live”, “Fresh Cut” and “Seasoned”. The Live PBN’s meant that they were being traded at a fixed rate of discount, Fresh Cut that they were being issued for specific transactions and Seasoned meant that they have been around for some time and were available at a lower discount. He also gave you a second version of these PBN’s. The trading of these PBN’s, deals primarily with very large notes, those with values of US$100 million or more. So, the trading process includes a large instrument that is divided into smaller denominations by a “cutting house”, the smaller denominations are “fresh cut” and later are referred to as “seasoned”.
As your friend’s friend leaves, you begin to soliloquize, “How fortunate you are to have met your friend’s friend and to be given this “chance of a life-time” opportunity to invest with the “big boys”. Your money will be invested in a HYIP program that is 100% guaranteed with zero risks. This is truly a dream come-true!”
As you begin to identify with this magnificent investment opportunity and vicariously weave yourself into this program, it is suggested that you step back and read some of the informative articles cited in the link below.
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Dr. Boccagna is the founder of Investment Evaluative Services Corporation, which evaluates and critiques investment offers for fraud, scams and deceptive practices. He also offers seminars/symposiums to bankers, lawyers, accountants, investment advisors, counselors and to investor groups. These seminars focus on the structure, functionality and proper application of letters of credit and bank guarantees. He has a course entitled, "A Study of Bank Instruments in Legitimate, and Fraudulent Applications" that has been approved and accredited by the California, Florida, Missouri, New York, Pennsylvania and Texas Bars for 5.5 CLER credits. Approval by other state bars is pending.
After observing an increasing rate of fraudulent activity with a significant number based on Ponzi schemes and the manipulation of bank instruments, he felt compelled to use his experience gained in the Middle East to create an informative two-volume guide for investors, "Inside the World of Investment Fraud, Scams and Deceptive Practices" and "Mastering the World of Investment Fraud, Scams and Deceptive Practices".
Read more about bank debenture scams at
http://www.fraudreport.com/article.cfm?id=126&month=06&year=2001
SUMMARY
Arlene Diamond, in a sometimes rambling fashion, recently told her side of the Omega Trust and Trading story. Testifying in her own defense, Diamond denied ever soliciting money from people for the Omega program. She said she believed it was a real offshore trading venture, as organizer Clyde Hood described it to her and others.
The first time Diamond heard Hood admit it was a scam was when he testified as the first prosecution witness against her. Diamond, 63, of Los Angeles, is one of 19 people indicted on federal charges stemming from the Omega Trust and Trading program.The indictment said people were promised payouts of 50-to-1 within 275 days with the opportunity to roll over their money.
Under questioning by defense attorney Diana Lenik, Diamond said she previously participated in an offshore trading venture in which she got back her principal investment but made no profit. Diamond testified she learned of Omega through some friends in 1997 and made her own first "loan" of $50 through a friend, with another friend paying the other half of the $100 minimum. The money was sent to Michael Kodosky, who also faces trial next month.
Diamond said she frequently talked to Kodosky or checked with Omega update message lines to follow the progress of Omega. She later became unhappy with him and demanded to speak to Hood, so a meeting was arranged in Chicago in 1998. Diamond then got copies of private party loan agreements which spelled out terms of the 50-to-1 promise. She sent those to people who wanted to get involved and began keeping records, forwarding the papers and money to Hood or Kodosky.
Diamond came to Mattoon in February 2000, expecting to fly overseas with Hood "to complete the Omega funding," but it never happened. According to the indictment and prosecution witnesses, none of the people who sent money to Omega ever got the money they were promised, and people were bilked out of at least $12.5 million.
Full Article
http://www.newsgazette.com/story.cfm?Number=9624
Full Background and Details of the Case
http://www.jg-tc.com/NEWS/news4.html
Charges included fraud, money laundering; over 500 investors affected
SUMMARY
Three men pleaded guilty Thursday in federal court to charges stemming from a $56 million Ponzi scheme that defrauded more than 500 investors, primarily in the Carolinas and the Southeast.
Phillip Mark Vaughan of Charlotte, Philip Greer of Southaven, Miss., and John Reaser entered guilty pleas in connection with a federal probe of a Charlotte company called Banyan International Ltd. and other businesses. Vaughan, 46, pleaded guilty to charges of money laundering, money laundering conspiracy, and conspiracy to commit mail, wire, bank and security fraud. Reaser, 44, pleaded guilty to conspiracy to sell unregistered securities and to defraud the Internal Revenue Service through the use of abusive trusts.
A Ponzi scheme is one in which early investors are paid off with money received from later ones to prevent discovery, attract more customers and lull them into believing their investments are safe and profitable.
The defendants allegedly led investors to believe their investments carried little or no risk, but Banyan trading activity alone resulted in more than $14 million in losses.
http://www.charlotte.com/observer/local/pub/ponzi0615.htm
SUMMARY
The Grenada government has revoked the licences of six more offshore banks operating in the country.
A statement in press on June 25 press named the banks as Anglo-American Limited, Rahab Trust and Management company, Wellington Bank and Trust, Caribbean Merchant Bank, Crown Meridian Bank and Bern Savings. The action against the banks comes about two months after a statement from the Grenada International Financial Services Authority (GIFSA) that several banks were being closely monitored. Wellington and Crown Meridian Banks are well known for their parts in the $100 plus million dollar fraud perpetrated by the First International Bank of Grenada.
The brief statement from Finance Minister Anthony Boatswain did not give reasons for closing the banks, but the action is seen as part of a continuing drive by the government to clean up the sector. Government has been stepping up its due diligence of the offshore sector ever since First International Bank collapsed last year in a major scandal. Earlier this year government shut down 17 locally registered offshore banks, most of them affiliated to First Bank.
Revoking the licences of another six is the latest in a series of new measures that include new committees to police the sector, amendments to four pieces of offshore legislation and the release of anti-money laundering guidelines.
http://globalarchive.ft.com/globalarchive/articles.html?id=010626006586&query=offshore
Bloomberg - June 10, 2001
Regulators in at least twelve different jurisdictions in the US and Canada have warned investors about Tri-West Investments and its investment arm Haarlem Universal Corp. run by Alex Haarlem believed to be Alyn Richard Waage. Since Waage's arrest in Mexico with approximately US$4.5 million in checks and money orders made out to Haarlem Universal, Tri-West has suspended payments to investors. Reported in lesser known publications until recently, the story has now been picked up by the 'majors.'
SUMMARY
Tri-West Investment Club, which raised an estimated $50 million over the Internet by offering 10 percent monthly returns, halted payments to its 6,000 investors after the arrest of its founder.
Alyn Richard Waage, 55, was arrested carrying $4.5 million in cashiers checks and money orders after he landed at Puerto Vallarta on a leased Lear Jet in April, Mexican police officials told Bloomberg News. Waage was arrested along with two other men traveling with him, described as a Canadian and a former Mexican police official.
At least six states have ordered Tri-West to halt the sale of its investments to their residents over the past year, beginning with Kansas in May, 2000. Because the company operates over the Internet from Belize City, Belize, state regulators found regulating the firm's activities difficult. Tri-West halted payments to investors on May 1, following an ``unfortunate event,'' according to an ``urgent notice'' recently added to its Internet site, which doesn't mention Waage by name.
A message posted on the Tri-West Website at www.triwestinvest.com dated June 14, stated that the club is still working to have the club offices opened by July 2, 2001. There is no mention where the offices are physically located. Meanwhile payments to members have been suspended.
``The courier had to make an unscheduled layover and didn't know he had to declare checks in excess of $10,000 USD.'' The courier was Waage, said Corporal John Lovie of the Royal Canadian Mounted Police in Edmonton, Alberta.
Waage has been a fugitive from Canadian judicial authorities since 1998, when he jumped bail following his arrest on 30 counts of fraud related to an Edmonton mortgage scam, said Lovie, who added that Canada will seek to extradite Waage for trial.
According the Tri-West's site, ``This is a rather complicated investment vehicle, normally only available to large investors.'' Authorities refer to such operations as ``prime bank instrument'' scams.
``It's a typical prime bank Ponzi scheme,'' said Lovie, who estimated $50 million in US dollars was invested in Tri-West.
The pyramid collapses when the flow of new money is interrupted or exhausted, making it impossible to continue paying investors.
NO CURRENT LINK AVAILABLE FOR ARTICLE
Bloomberg News
The Nigerian Scam has removed billions from the accounts of unsuspecting victims since the 1970s. Why do seemingly intelligent people continue falling for this old con?
Sitting in your inbox is a seductive offer marked "urgent and confidential."
A Nigerian chief writes that he has acquired $60 million in kickback money that he needs to transfer to a "safe" bank outside his country. If you let him access your account, he'll let you keep $10 million for yourself. You will be required to pay a small "technical bribe" for the transaction, which should be completed in 10 days. Instead of finding their bank accounts padded with dough, victims find their savings drained dry. And all they can offer law enforcement as evidence is an e-mail exchange with one "Chief Mukaka" and their own willingness to participate in an illegal money laundering scheme -- victims, alas, of their own greed.
SUMMARY
"The Internet makes it so easy to reach such a huge pool of potential victims very, very cheaply," said Susan Grant, director of the National Fraud Information Center/Internet Fraud Watch.
Grant says the number of complaints her office has received regarding the Nigerian scam this year has already more than doubled the amount received last year. She said she first learned of the con 25 years ago while handling complaints for the County District Attorney in Massachusetts.
The scam has many variations, according to the U.S. Secret Service, the agency mandated to protect U.S. currency and financial institutions.
In the kickback scheme, the victims must pay certain processing "fees" or bribes before the money is transferred to their bank account. Therein lies the rub -- the fees keep adding up and the millions are never deposited.
In another iteration, victims are invited to Nigeria to explore business opportunities, then separated -- often violently -- from their money. At least 15 foreigners have been killed in Nigeria after being lured there by con men. In another iteration, victims are invited to Nigeria to explore business opportunities, then separated -- often violently -- from their money.
The Secret Service recently established a beachhead in Nigeria to investigate ongoing financial fraud.
Con artists use letterhead stolen from established institutions, including the U.S. Embassy or bribe Nigerian bureaucrats to let them "borrow" their offices for meetings.
Nigeria is ripe for rip-off artists, because the country is plagued by poverty, high unemployment and a tradition of official corruption, the Commerce Department official said.
The foreigners who fall for the scam are frequently those with substantial disposable income -- businesspeople and the retired. Lured by a promise to make a quick $5 million, he found himself in Amsterdam and London meeting Nigerian mobsters.
"In short, the reason people fall for them is that everything they check checks out until, poof -- then after they get the victim's money nothing (checks out)," said Charles A. Pascale, the coordinator of the 419 Coalition, a group created to raise public awareness about the Nigerian scams.
For example, your contact tells you he works at the Central Bank of Nigeria. So you dial directory assistance to verify this, and the operator puts you through to his office. Or say the bigwig official whose mug you've seen in pictures actually attends a meeting with you.
http://www.wired.com/news/business/0,1367,44138,00.html
It has been associated with such scams as StockGeneration, Le Club Prive and Life Club. Now the bank has been declared insolvent by the Bank of Latvia and the losses are being blamed on the drop in US stock markets. However, this excuse could just be the tip of the iceberg.
Problems at "Paritate" bank due to investments in U.S. securities markets
RIGA, June 25 (LETA) - The joint-stock bank "Paritate's" problems with capital adequacy are due to the drop in prices on the U.S. stock market, where the bank had placed a good deal of its assets, LETA was told by Teodors Tverijons, president of the Latvian Commercial Banks Association.
Tverijons explained that the problems with capital adequacy at the bank are due to making of accruals for prospective losses following investments into the U.S. stock market, which prompted the Bank of Latvia to decide on launching insolvency procedures at "Paritate".
Tverijons said that if the bank's equity is increased, the Bank of Latvia might decide not to turn to the courts on the bank's insolvency, as in fact, the bank has no problems in covering its liabilities.
Tverijons said that the bank's shareholders have been negotiating with both local and foreign potential investors for the past two-three months, who would like to invest money into "Paritate". "It is possible that the decision of the Bank of Latvia will spur shareholders and potential investors of the "Paritate" bank, who are now negotiating about the price for the bank's shares," said Tverijons.
Tverijons explained that in the current situation, the bank faces two options - if its equity is increased, the Bank of Latvia will withdraw its decision and "Paritate" will be able to carry on with its operations, otherwise the central bank will revoke the bank's license.
Tverijons says that the situation at "Paritate" is an emergency situation, such problems could hardly occur at other commercial banks in Latvia.
http://www.leta2000.com/eng/news.asp?NewsID=2001062515191700CB00008088405DC6
Bank of Latvia files petition in court on "Paritate" insolvency
RIGA, June 26 (LETA) - The Bank of Latvia has filed a petition in Riga Regional Court, requesting it to designate the Bank "Paritate" insolvent, LETA was informed by Bank of Latvia Press Secretary Edzus Vejins.
The central bank also requested the court approve attorney Lauris Liepa as the bank's administrator.
As LETA reported yesterday, the decision on insolvency by the Bank of Latvia was made due to the fact that "Paritate's" liabilities exceed assets.
"Paritate" reported to the press today that its management is interested in rehabilitating the ailing bank, and that it hopes that the appointed administrator and the Finance and Capital Market Commission will also be interested in renewing the bank's operations.
All transactions at "Paritate" were halted yesterday. A majority of the bank's customers are non-residents.
The bank's problems arose from making accruals on investments in U.S. securities. As a result it could not meet legal norms on capital adequacy.
Bank "Paritate" points out that the Bank of Latvia has not revoked its banking license and the bank's executives have been instructed to continue their duties.
http://www.leta2000.com/eng/news.asp?NewsID=2001062617422302B43BA153FCE15D17
Old Link to Paritate Bank (Website not found when we tried)
The U.S. government has charged four companies with using the Internet to con consumers around the globe out of about $175 million in a massive pyramid scheme.
SkyBiz.com, based in Tulsa, Oklahoma, and three partner companies promoted a work-at-home business, charging $125 for an educational software package and the opportunity to earn money by recruiting others to buy the packages, the Federal Trade Commission said Monday.
SUMMARY
The recruits would have to buy one or more packages and then could recruit still more people and so on, earning commissions for those above them in the recruiting chain, the agency said, announcing the details of sealed civil charges filed on May 30.
"This is one of the biggest pyramid schemes we've seen," said Howard Beales, director of the FTC's consumer protection bureau.
He said the Internet is a "quick, cheap way to reach consumers around the world with whatever the latest con is, and here it has provided a forum to resurrect one of the oldest scams around."
The agency said in court papers that only people at the very top of the pyramid were successful and most investors lost money.
On June 6, U.S. District Judge Terry C. Kern froze the operation's assets and ordered the companies to halt any illegal activities until a hearing June 26, FTC attorney Jim Elliot said.
Elliot said the government is seeking to disband SkyBiz and return money to consumers.
The FTC charged that the SkyBiz companies and their officers violated federal laws by creating a pyramid scheme, making false claims that consumers would earn large incomes and failing to mention that most people in such schemes lose money.
The four Oklahoma companies named in the lawsuit are SkyBiz.com Inc.; World Service Corporation; Nanci Corporation International; and WorldWide Service Corporation.
Charges denied Joel Wohlgemuth, lawyer for most of the SkyBiz defendants, said the FTC's announcement of the charges was improper because the case is still in the courts.
The government said that SkyBiz since 1998 has used in-person sales presentations, seminars, teleconferences, Web site presentations and other marketing material to tout the opportunity to earn thousands of dollars a week by recruiting for the program.
The government started investigating the company after receiving complaints from American consumers and from people in Australia, Thailand, India, South Africa and other countries, Elliot said.
He added that Canadian authorities have brought criminal charges against four of the program's associates in their country; an Australian civil case is pending against one associate; and the Indian government has raided local SkyBiz offices and frozen their assets.
http://www.cnn.com/2001/TECH/internet/06/19/internet.pyramid.scheme.ap/index.html
SUMMARY
St Vincent and the Grenadines' prime minister, Dr Ralph Gonsalves, said on 26 June he had given approval for the licenses of two offshore banks to be revoked. He named the banks as Unit Credit Bank Limited and Balfour Cabot Bank Corporation. Unit Credit Bank Limited's registered agent here resigned last January, stating that they could not identify the bank's principals. Balfour Cabot Bank Corporation was operated by a United States citizen, Phillip Mark Vaughan, who was deported from St Vincent last April to the USA.
The prime minister and finance minister was making a statement to parliament on the 22 June report by the Paris-based Financial Action Task Force. The Task Force has kept St Vincent and the Grenadines on its list of countries which are non-cooperative in its fight against money laundering.
Gonsalves said it is instructive that the FATF declined to institute countermeasures on the jurisdiction and feels this has to do with their recognition that the new government is resolute and genuine in its move to clean up the offshore sector. He added that the government's early move to discontinue a controversial Economic Citizenship programme was also instrumental in demonstrating this jurisdiction's bona fides.
Gonsalves also said that the government of St Vincent and the Grenadines had named retired High Court judge Monica Joseph as the fourth member of a five-member board of the Offshore Finance Authority. He told parliament that the Grenada-born retired judge was selected from among five persons named on a list which he had asked the United States and British authorites to draw up and present to the St Vincent government.
A fifth person, the Offshore Inspector, is still to be appointed under an arrangement which the government expects to conclude with the International Monetary Fund.
http://globalarchive.ft.com/globalarchive/articles.html?id=010627003943&query=offshore
SUMMARY
Prosecutors charged three men with stealing millions from an offshore investment fund that is under investigation by the Justice Department and the Securities and Exchange Commission, the Manhattan district attorney, Robert M. Morgenthau, said yesterday.
The charges relate to Evergreen Securities, a $218 million fund that filed for Chapter 11 protection in January in Orlando, Fla.
Beginning in 1992, customers invested in Evergreen based on promises of government and mortgage-backed securities, interest rates of 9 to 12 percent and the privacy of an offshore account, prosecutors said.
New York investigators arrested Mr. Zylka, 64, and Mr. Conroy, 61, yesterday in New Jersey.
The two were charged with stealing $27 million from Evergreen from late 1999 to mid-2000.
Full article - Registration Required
http://www.nytimes.com/2001/06/09/business/09EVER.html
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