Hayim Regensberg Investment Advisor Indicted – $11 Million Ponzi Scheme!

They always collapse. Always! Some have lasted for over ten years – others not nearly that long, but in the end they collapse and the perpetrator pays a significant consequence. And while an indictment does not mean guilt, rarely in my experience has the government brought an indictment that they didn’t prove.

Named after Charles Ponzi, a ponzi scheme is a fraudulent investment operation where high returns are promised to investors and usually paid out of other investors money rather than from profits generated from the investment promised.

According to the US Attorney’s news release: HAYMIN REGENSBERG engaged in a scheme to defraud multiple investors by falsely promising to invest their money in one of two ways. One method involved his claim that he had access to IPO issuances on foreign stock exchanges before the general public, and that he would invest money in international IPO stock that would be sold in the public market at the earliest possible moment thereafter, thereby obtaining for his investors quick returns of between approximately 5 percent and 15 percent within weeks of the IPO, with little or no risk to the invested capital. REGENSBERG told investors that he had used the same international IPO investment strategy successfully in the past, and had a consistent and highly positive investment track record in such investments. In fact, REGENSBERG did not invest the investor funds as represented.

This is classic Ponzi at work. As a white collar crime speaker, I address groups nationwide on issues related to fraud, theft and white collar crime. The first thing tell any group is – if it sounds to good to be true – it is likely a fraud. Most people understand that and agree, but the seduction of fast money and winning seems more powerful that common sense. Likewise, those who offer such fabulous returns are often trusted advisers – so the trust factor is already built into the equasion – thus making the ploy easier to achieve.

REGENSBERG also claimed to employ a second investment strategy in which invested funds would be “loaned” to trading
firms, which would use those funds merely as collateral relating to leveraged investments made by those trading firms (the “Lending Product”). REGENSBERG also represented that these funds would not be further invested by the trading firms, but rather would remain in the trading firms’ accounts. REGENSBERG promised each Lending Product investor a high, fixed annual rate of return of up to 18 percent per year, and told investors that funds invested in the Lending Product would be subject only to the low risk that a trading firm might collapse. In fact, REGENSBERG made no such investments.

Again, a classic Ponzi scheme at work. Promises of low risk and outstanding return by someone trusted is a tell tale sign of “something” not right with the picture. As this indictment is explored, the question is – how did the Ponzi scheme collapse?

Apparently, REGENSBERG invested large portions of the funds obtained in highly speculative and risky trading, including options trading. I suspect (only my opinion) that REGENSBERG felt that he could – through speculation – beat the market and hence have funds to repay the original investors. Rarely does that happen and if it did – it would only fuel the fire that “he was the smartest man in the room” and hence perpetuate the continuation of the scheme.

True to a classic Ponzi – REGENSBERG also sent investors money he claimed represented the proceeds of their investments. REGENSBERG paid out to earlier investors money he took in from new investors, thereby perpetrating a “Ponzi” scheme. REGENSBERG also diverted significant amounts of investor funds to himself and his relatives.

When certain investors confronted REGENSBERG about the fact that they had stopped receiving regular payment of promised investment returns, and asked him whether their invested proceeds were safe, REGENSBERG provided the investors with a forged bank document purporting to show he still maintained approximately $9 million in a bank account he controlled, when in fact that account contained only approximately $9,000 at that time.

Every choice has a consequence! While I am not proud of my next statement – I, too, was a white collar criminal convicted of a similar scheme and served time in federal prison as appropriate punishment – the fact remains that I understand the crime and concept behind how it is committed. Today, my role as a national speaker is to help businesses and individuals understand the nature of white collar crime and how to avoid it – if possible.

Just like the law of gravity that we all live with daily without thinking – so is the law – YOU REAP WHAT YOU SOW. How true.

Your comments are welcome.

Tax Fraud – 65 Year Old Man Sentenced to Federal Prison – White Collar Crime Speaker Chuck Gallagher Comments

Death and taxes – mama always said that they were the two facts of life. It seems as we enter the 2008 tax season, we are seeing more convictions for tax evasion or fraud. Just like in the Wesley Snipes trial – the one he was convicted for not filing his tax returns – people seem to think that they have a right to not file – that somehow it is not legal to require filing and payment of taxes. Regardless of the arguments, the reality is people are seemingly convicted weekly for the same thing brother Wesley did – not file tax returns.

Big mistake!

David M. Turpin, age 65, was sentenced to one year and one day in prison for not filing income tax returns. Turpin pleaded guilty on Oct. 9, 2007, to two counts of failing to file income tax returns for the years of 1999 and 2000. According to court documents, Turpin had failed to file tax returns from 1996 to 2000, and the amount of tax he owed for those five years was in excess of $100,000.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While the Turpin avoided the “tax man” for a time – he did not avoid the consequences. You do reap what you sow.

White Collar Crime Speaker – Chuck Gallagher – signing off…

Rev. Noah Thomas – Indicted – Stealing Church’s Hurricane Katrina Relief Funds – What Ever Happened To ‘Thou Shalt Not Steal?’

Regardless of religious belief, all are tempted. Pastors are no different. But it says in the Bible – You will reap what you sow. From personal experience, I can testify to that statement as true. Now, it appears that Rev. Noah Thomas, age 42, will get a chance to understand that short truth first hand as he has been recently charged with mail fraud for stealing his church’s hurricane relief funds.

Thomas was the pastor of Pilgrim Missionary Baptist Church. The church building, located in the 2200 block of South Liberty Street in New Orleans, was devastated by flood water following Hurricane Katrina. Since the church did not have flood insurance, the congregation applied for and received a $252,000 SBA loan and a $35,000 grant from the Bush-Clinton Katrina Fund.

According to the US Attorney’s office, the Bill of Information alleges that Thomas created a scheme to defraud the Church of the grant funds for his own personal benefit by having the $35,000 check from the Bush-Clinton Katrina Fund mailed to his house and then deposited into a bank account that he established and controlled. It is also alleged that Thomas created a similar scheme to defraud the Church of the SBA loan money by having the SBA wire the initial $10,000 disbursement of the disaster loan into the same bank account.

If convicted, Thomas faces a maximum term of imprisonment of twenty (20) years, a fine of $250,000.00 and three (3) years of supervised release following any term of imprisonment. Keep in mind an indictment is not a guilty verdict and Thomas is assumed to be innocent until proven guilty. Thus far no date has been set for his trial.

Every choice has a consequence. It seems that the occurrence of natural disasters like “Katrina” open the flood gates for unnatural choices. As a white collar crime and business ethics speaker, I am often asked to speak about why people make the choices (wrong choices) that they make. At times that is easy because it is obvious – at other times, not so easy. But, one thing is for sure, there are three components to most any financial fraud – (1) need; (2) opportunity and (3) rationalization.

While I can’t speak for sure in this case to #3 for Thomas – it seems clear that #1 and #2 were clearly present. Hurricane Katrina created a need that most people can’t imagine. Likewise, in most small churches the pastor is also the head of the church and with their membership scattered, it would be obvious that Thomas had the opportunity as there was likely very little oversight by other church leaders.

From an overview, it appears that the courts have been tough on those who abuse the relief efforts stemming from Hurricane Katrina. We’ll follow this – so more to come.

Your comments are welcome!

White Collar Crime speaker – Chuck Gallagher – off for now…

Avoiding Income Tax – Kentucky Couple Plead Guilty!

Whether it is coincidence or not, it sure seems that we are seeing many guilty pleas or verdicts when it comes to tax evasion and white collar crime here in 2008.  On of the most recent that goes back to a plan in 1994, involved Richard Thronton Burks, III and his wife, Norma Ball Burks.

According to a news release by the US Attorney,  Richard and Norma Burks admitted that they conspired with each other to create corporate and trust entities and to transfer money between the entities so they could conceal Richard Burks’s income from the IRS.  Richard Burks also pleaded guilty to a separate charge of tax evasion.

The specifics of the Burks actions are as follows as reported in the US Attorney’s news release:

In 1994, Richard Burks directed his employer, Paladin, Inc., a Lexington engineering consulting company, to classify him as a contract employee and to make payments for his services to a company that he and Norma Burks had created. After Paladin would pay his salary to the Burks’ company, Richard Burks further concealed his income from the IRS by transferring money from their company to a trust they controlled. Richard Burks then transferred money from the trust to himself.

In 2000, Richard and Norma Burks purchased Paladin, and they concealed the purchase from the IRS by placing Paladin in the name of another company that they had created. From 1999 through 2001, using their companies and the trust, Richard and Norma Burks concealed Richard Burks’s income of over $480,000 from the IRS. As a result, Richard Burks failed to pay over $84,000 in federal income taxes.

When IRS agents later interviewed Richard Burks, he falsely stated that he only occasionally worked in Paladin’s office, that he did not know when the trust was formed, and that his wife paid his personal expenses with her own funds. During his guilty plea, Richard Burks admitted that he made these false statements to the IRS to conceal his income from Paladin and also to evade the payment of prior unpaid tax assessments of nearly $150,000. Richard Burks agreed that he owes over $233,000 to the IRS in addition to penalties and interest.

Every choice has a consequence.   As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences.  Reality is – no one escapes the consequences of their choices.  While the Burks avoided the “tax man” for a time – they did not avoid the consequences.   Not only will they have to pay the back taxes along with penalties and interest, but both face a maximum sentence of 5 years in federal prison.  They will be sentenced on June 20, 2008.