50 Years for a Ponzi Scheme – Thomas “Tom” J. Petters has a lot of time to think ahead! My this sounds like the BizRadio scam…

April 13, 2010

Every choice has a consequence.  That is my opening sentence as I address groups all around the country on choices and consequences or business ethics.  As a speaker and fraud prevention consultant I seem to get the question asked often, “Are there more bad guys doing this type of thing these days?”

No…believe it or not there aren’t.  Rather, the access to money has dried up and the “bad guys” are starting to surface.

Take the example of Tom Petters of Wayzata, Minnesota, who was sentenced to 50 years in prison for running a $3.65 billion Ponzi-type investment fraud scheme, one of the largest ever. Convicted last December on all 20 criminal counts that he faced, including wire fraud, mail fraud and money laundering, Petters now faces a long time in prison for his choices.

Petters and his co-conspirators bilked investors who thought their investment money was being using to buy consumer electronics for resale to retailers such as BJ’s Wholesale Club and Costco. Several other executives of the company, including Deanna Coleman, Robert White, Michael Catain and Larry Reynolds, who have all previously pleaded guilty in the case.

Petters solicited billions of dollars in financing for PCI, telling investors he’d use their funds to buy and re-sell consumer electronics and other goods for a profit. Those transactions never occurred, and Petters used investor money to prop up his other, often legitimate, businesses and for his own personal use.

Now…for those who follow my blog this sounds painfully like, what I am referring to as the BizRadio scam.  Put in perspective, didn’t BizRadio investors put money into various investments thinking that they were either high yield bonds or real estate investments, when in fact, the money was diverted into BizRadio which had no practical purpose other than to grow Dan Frishberg’s investment portfolio.  And, now – stopped by the filing of an involuntary bankruptcy – BizRadio would have been sold back to Salem Communications and Dan Frishberg gained personally in that he got airtime out of the deal.  Let me repeat he got air time.  Not, the investors got the benefit of airtime which is an asset that could be sold, but Dan Frishberg got the airtime.

Something smells Frishy!

But back to Tom Petters…

U.S. Attorney B. Todd Jones said the sentence – the longest ever in Minnesota for financial fraud – demonstrated that authorities would not shirk from vigorously investigating and prosecuting financial crime.

Petters’ crimes first came to light last year, but prosecutors presented evidence that he was bilking investors as early as the mid-1990s. He defrauded a Twin Cities investment firm in 1996, lying to Data Sales Co. Inc. officials about his plans to use their funds to buy electronics from 3M Co. and re-sell the goods to retailers.

In 2000, he attempted to defraud GE Capital, which had extended him a line of credit. Petters submitted false purchase orders, fraudulent checks and other documents in an effort to convince the company he was using its capital to buy and sell goods.

To lure investors, Petters often talked of his “special” relationships with Costco and other discount retailers, witnesses testified in the case. When investors asked to talk to the retailers he did business with, or inspect the goods he claimed to be selling, Petters deflected them, saying prying would scare off buyers.

As investor money flowed into PCI’s accounts throughout the early- to mid-2000s, Petters funneled it elsewhere. He used hundreds of millions of dollars to support his other business ventures, such as Polaroid and Sun Country, which operated under the umbrella of his Petters Group Worldwide entity. He used millions more for personal gain.

Early investors in PCI reeled in significant profits, and PCI was at one time receiving more offers from investors than it needed to accept. But the scheme began to unravel amid the credit crisis of late 2007 and early 2008. At that time, it became increasingly difficult for PCI to lure new investors to cover high-interest payments owed to earlier investors, many of which were hedge funds.

Petters, his employees and associates grew increasingly desperate in early fall of 2008. It was then that PCI executive Deanna Coleman went to federal law enforcement officials, presenting them with evidence of the fraud. She agreed to secretly record conversations with Petters, gathering further evidence that was later presented at trial. Petters was arrested in fall of last year and jailed until his trial.

According to the Wall Street Journal: “The U.S. attorney’s office in Minnesota said Mr. Petters continued “to lull investors” even after agents executed search warrants on Sept. 24, 2008, for his home and office, also in suburban Minneapolis. On Oct. 3 of that year, he was arrested. The investigation was conducted by the Federal Bureau of Investigation, the Internal Revenue Service and the U.S. Postal Inspection Service.”

Apply this to the BizRadio – Dan Frishberg case and see the similarities.  The only dramatic difference is that Petters crimes have come to trial and sentencing and the other is still under investigation.  But…EVERY CHOICE HAS A CONSEQUENCE.

YOUR COMMENTS ARE WELCOME…


Gordon Grigg – How a massive Ponzi scheme fraud was exposed – Part Two

March 31, 2010

Having been there, I completely understand the impact that choices have – not only on the individual that makes them – but also on the lives of others who are connected.  Whether a spouse, a child, a mother or father – whether a brother or sister – or whether a defrauded investor – everyone connected with the individual who perpetrated the fraud is a victim and, for most, the pain can run deep.

I was told that my earlier blog about Gordon Grigg was filled with lies…that it was slanderous and/or libelous.  I take those claims seriously.  To be clear, my objective is to open a dialogue regarding how a Ponzi scheme is perpetrated and how victims are lured in.  But for a moment let’s look at the allegation of slander and/or libel.

According to Wikipedia – slander refers to a malicious, false and defamatory spoken statement or report, while libel refers to any other form of communication such as written words or images. Most jurisdictions allow legal actions, civil and/or criminal, to deter various kinds of defamation and retaliate against groundless criticism. Related to defamation is public disclosure of private facts, which arises where one person reveals information that is not of public concern, and the release of which would offend a reasonable person.

Hum…well my words are written and the facts that I reveal are provided either from the public domain or are provided by people who have been directly affected by the crime committed by Gordon Grigg.  Further, as best I can tell, none of the comments made or disclosed are private facts that are not of public concern or should offend a reasonable person.  Rather, it would seem that what is disclosed has great public benefit.  If facts related to the commission of a crime can, upon public exposure, potentially protect otherwise unsuspecting individuals from being victimized – then their disclosure is for the public good.

Does it mean that victim perceptions and comments made at trial are not painful when retold.  NO!  No doubt they are to anyone affected.  And while it is not my intent to cause pain, I also know that complete transparency is one of the only ways that true healing can take place.  To say that Gordon Grigg has received his punishment and now the discussion should cease is more an attempt to quietly sweep under the rug the crime he committed rather than expose the true nature of the actions he took and seek to understand them for what they are.

AUGUST 6, 2009 – SENTENCING

According to the FBI the following took place at sentencing:

United States Attorney Edward M. Yarbrough announced that Gordon B. Grigg (“Grigg”), Franklin, Tennessee financial advisor and owner of ProTrust Management, Inc. (“ProTrust”), was sentenced today in federal court to ten (10) years in prison for perpetrating a Ponzi scheme that resulted in a loss of more than $6 million to more than sixty (60) investor – victims.

United States District Court Judge Aleta Trauger, in sentencing Grigg, stated “This case has a more vicious twist than the Madoff case.” Judge Trauger described Grigg’s crimes as “ . . . preying on vulnerable victims in crisis,” noting that Grigg’s scheme “ . . . destroyed families, relationships, marriages, and wreaked incredible havoc.” Prior to imposing sentence, Judge Trauger heard from seven (7) victims who testified as to the devastation Grigg’s fraud had caused to their lives and the lives of their families.

Notes taken at the sentencing hearing reflected the following:

The judge started by saying there were several factors she took into consideration when sentencing Grigg. They were the nature of the crime and the circumstances. This was not a violent crime, but violence was done in many ways. It was similar to the Madoff case but with a vicious twist. It was done in an aggravating way. Two factors keep arising in the pattern that Mr. Grigg worked. The first was that he preyed on vulnerable people and the second was the way he brought religion into the scheme.

People who commit a fraud (most of you who read my blog regularily know I committed a fraud back in the mid ’80’s – not proud of that fact, but it is a fact), typically have a pattern of behavior – a mode of operation if you will – that becomes successful and natural as they seek out victims and attempt to sell them on their scam.  More than one victim has said that Gordon Grigg used his faith as an effective lure.  Clearly stated, I wasn’t there, but it seems to be born out in testimony at sentencing that this is true.

The FBI new brief goes further to say:

Grigg pleaded guilty on April 29, 2009, to mail fraud and wire fraud. Grigg admitted during the plea hearing that, between 1996 and 2009, he operated an elaborate Ponzi Scheme designed to defraud investors who deposited more than $11,000,000 in funds with his company, ProTrust Management. Grigg promised clients that he would invest their money in pooled-client purchases of fixed-term certificates of deposit, private placements, corporate notes and debentures, with the accounts being titled collectively in the Protrust company name. Grigg further promised to personally manage client funds, and promised investors that he would generate and sustain high rates of annualized returns on investment. However, Grigg admitted that it was never his intention to invest the client funds he solicited. Instead, Grigg stated that he used the money placed with ProTrust for his personal benefit and expenses, to operate ProTrust, and to maintain the Ponzi scheme by disbursing “fictitious” earnings and return of deposits to clients who cashed out or closed their ProTrust investment accounts.

The pattern is so common!  NOTE: If an investment adviser promises sustained high rates of returns (something special that you can’t get anywhere else) – RUN!  There is a better chance than not that a fraud is somehow – somewhere – in the works.  And, more times than not, the illusion created is so great that people close to the fraudster have no clue.  Spouses, children and relatives often experience some of the most severe pain when the find that their trust has been broken – no shattered.

Notes from the trial showed the following:

Investors not only lost money themselves, but they got their friends, families and bosses to also invest with Grigg. He caused financial ruin to these investors. They lost college funds for their children and grandchildren, retirement funds were lost or diminished. He destroyed families and marriages. He wreaked havoc with investors. The investors are not only sad, angry and guilt ridden, but are probably in need of counseling. They have suffered great mental anguish because of the nature of this crime and the circumstances.

From a personal perspective I know I will receive criticism for what I am about to say, but Gordon did not destroy families and marriages.  Rather, the choice to blindly invest money with Gordon and the repercussions that followed from his fraud had that effect.  I have a problem with being a “victim”.  Although I use that term (it’s one that people can understand and connect with) – the reality is – EVERY CHOICE HAS A CONSEQUENCE.  Gordon made choices that had direct and far reaching consequences.  Investors also made choices that had a consequence.  In my earlier article Steve Wieland stated that he did not do his due diligence.  That failure had a consequence.  Every choice does have a consequence!

To conceal and sustain the Ponzi scheme, Grigg admitted that he fabricated documents, including invoices, forged correspondence, and fraudulent account statements purporting to reflect client ownership of non-existent securities. To deceive investors into believing that their investments were safe, Grigg admitted that he falsely claimed to have negotiated partnerships and special business relationships with several of the nation’s most successful investment firms, including Berkshire Hathaway, Inc., Goldman, Sachs & Co., Morgan Stanley & Co., Incorporated, and Kohlberg Kravis Roberts & Co. However, as Grigg admitted to the Court, no such business relationships ever existed, and Grigg used counterfeit corporate letterhead and the forged signatures of national investment firm executives to create fictitious documents and correspondence that appeared to confirm unique pooled investment opportunities between ProTrust and national investment firms.

Grigg further admitted that, between November 4, 2008 and January 28, 2009, he repeatedly solicited funds from investors by falsely representing that he had access to “government-guaranteed commercial paper and bank debt” available as part of the newly-created Troubled Assets Relief Program (“TARP”). Grigg told investors that he had committed more than $5,000,000 in ProTrust pooled client funds towards purchase of TARP guaranteed debt as part of a private placement partnership between ProTrust and the investment firms Berkshire Hathaway, Inc. and Kohlberg Kravis Roberts & Co. However, no such private placement partnership had ever existed between ProTrust, Berkshire Hathaway, Inc., and Kohlberg Kravis Roberts & Co., and no such TARP-guaranteed investment opportunity had ever been offered or made available to individual investors or national investment firms.

The finding of fact reflected in the FBI’s news release is quite interesting.  FOR THE RECORD, rarely does the Federal Government (or an Agency thereof) catch a criminal.  The crime is typically exposed by either an unsuspecting investor or a dramatic change of circumstance that forces what is done in the dark to be brought to the light.

Almost as this was happening (or at least soon thereafter) I received a call from Steve Wieland who shared with me a profound revelation that he uncovered related to his investment with Gordon and the investment of friends he recommended.  His comments follow:

I had advised a third friend, another medically retired airline pilot, of what a good job Gordon had done for us. He was selling his house, moving from Pennsylvania and had some extra money. This was the end of 2008.

The end of 2008 was the beginning of the massive financial meltdown.  I have been asked over and over why the proliferation of Ponzi schemes.  My response was – there are no more than usual.  The Ponzi schemer (and I speak from personal experience) is a bit like a bottom feeder fish.  You can’t see them till there is a major drought.  When the water is low the bottom feeder seems to come to the surface.  So as Steve said –  it was the end of 2008…that makes perfect sense…especially since it takes new money to prop up a Ponzi scheme.

Looking back now I can see how it all fell apart for Grigg. Money was so tight he was scrambling to get new Ponzi victims to placate the ones he already had. He became pushy. My friend in Pennsylvania called me very upset because Gordon wanted the money immediately.  My friend was uncomfortable. That night, December 16, 2008, I called Grigg and ask him to kindly verify my investments with him.  I asked him to provide the phone number for the investments or anything that would make my Pennsylvania friend want to invest with him. I knew that would not be a problem, until Grigg questioned as to why I would want that information. The discussion then started heating up to the point where I knew down in my stomach something was very wrong.

Only a few days before, the California friend and myself had received notice that Grigg could place us in an investment with the company by the name of KK and R. This investment would yield 12.5% guaranteed by the national T. A. R. P. Guaranteed by the federal government paying 12.5% interest. The only catch was that we had to roll over our existing investments for yet another three years. He sent us documents to this effect.

That’s another tell tail sign…if asked to extend your investments you might begin to question – why.  In order to a Ponzi scheme not to collapse you either need new funds or at a minimum keep existing funds longer so as not the erode the ability to maintain the illusion.

The following day I called my friend in California to tell him of my concerns. Like most victims of Ponzi schemes, they don’t want to believe it. So I set about doing the work myself. I contacted KK and R. They had never heard of Grigg or Pro-Trust management. However if I would kindly fax a statement showing that I had previous investments with them, as well as the new potential federally backed investment they would be sure to investigate and get back to me right away. I then contacted Goldman Sachs and told them of the potential investment with KK and R.  Goldman Sachs was supposed to be the administrator of this investment. The gentleman at Goldman Sachs immediately told me it was bogus and to contact an attorney.

It only takes one slip – one request – one inquiry – to cause the house of cards to collapse.  Most of the time the fraudster is the one who slips up stating something or producing something to maintain the illusion – only to find that he/she (in this case “he”) is not the smartest man in the room.  Once the card is pulled – the house of cards is destined to collapse because the foundation of illusion is pierced.

“Mr. Grigg’s crimes were not merely irresponsible manipulations of the financial system without consequences, they were acts of extraordinary destruction to his victims,” United States Attorney Edward M. Yarbrough said. “Grigg defrauded investors by repeatedly and falsely promising them ‘safe’ growth based on ‘unique’ pooled-investment opportunities, including promises of access to TARP guaranteed funds. Instead, the investors lost their ‘nest eggs’ and retirement savings as part of an elaborate Ponzi scheme. The effect of Mr. Grigg’s crimes was devastating to his victims. The United States Attorney’s Office will continue to diligently and aggressively prosecute the perpetrators of such schemes.”

Steve Wieland continued…”Two days later, the federal S.E.C. contacted me about the information I had sent regarding K. K. and R. They wanted to talk to me. I hired an attorney, who told me this was an outright Ponzi scheme. She could sue on my behalf and win every judgment. She also told me there would probably be no money for me. This would be throwing good money after bad. After a week my friend in California knew I was telling the truth.”

Was this the origination of the downfall of Gordon Grigg’s scheme?  I don’t know.  Many media reports share essentially the same story, so I have to believe that (short of being reputed) the call made by Mr. Wieland to the investment firms was the incident that represented the removal of the card from the house of cards that Grigg built.

Once pulled…the consequences began and continue to this day.  Is there more to this story?  Certainly, but for now…perhaps…readers can begin to understand how easy it is to be drawn into the illusion of a fraud and how simple it is to find that one day the card is pulled that begins the collapse.

More to come…but for now…YOUR COMMENTS ARE WELCOME…


Dan Frishberg – David Wallace: Anatomy of an investment scam? LAFFER FRISHBERG WALLACE ECONOMIC OPPORTUNITY FUND

March 16, 2010

Diversify!  That’s what one of the investors thought he was doing when he invested hundreds of thousands of dollars in an investment solicited by David Wallace and Daniel Frishberg.  Frishberg “The Money Man” – preached diversification on his show on BizRadio.  Little did this investor as well as scores of others know that the fund they were being lured into was nothing more than a primary source to fund the money losing venture of Daniel Frishberg – BizRadio.

Before we get into the scam…let’s look at what generally it takes for something that might have started out legitimately to become rank and foul – nothing more than a fraud.  The three components are: NEED, OPPORTUNITY and RATIONALIZATION.  As we look at how this scam unfolded – think about these three parts and perhaps it will become clear just how simple it was for Frishberg et al to move from the intelligence of the light into the dark shadows of scams and, what I believe to be, fraud.

THE OFFERING: The investor (who called me and agreed to an interview) was introduced to an investment called the LAFFER FRISHBERG WALLACE ECONOMIC OPPORTUNITY FUND apparently promoted by David Wallace, Daniel Frishberg and Art Laffer.

Art Laffer was interviewed in an article in Equities Magazine which can be read here.  In the article Mr. Laffer references BizRadio.  I have to wonder now with SEC investigations swirling if Mr. Laffer is still pleased with his affiliation with Frishberg?  But that is another topic for another day…

Initially contacted by Al Kaleta (since busted by the SEC), it was David Wallace who impressed the investor with the returns shown on other prior real estate funds.

“It was a very impressive real estate holding.   And so based upon that and based upon the offering memorandum they provided to me, I went ahead and invested $XXX hundred thousand dollars.”

Starting from the year 2008 they had reported, per the investor, a pretty significant loss from the operations of BizRadio because a portion of the money that had been collected from the investors had been invested in BizRadio.

“I started to look into to it and I read the offering documents and/or partnership documents and I notice that the partnership document strictly stated that they cannot and will not invest any more than 20% of the funds or capital into any investment account.”

It was June 2009 when they released the interim financials.

“As of June 30th I noticed the amount of money they had invested in BizRadio was like 66% of the total contributed capital.  As an example, the total funds collected from the investors was something like $6.8 million dollars and they have invested something like $4.8 million in BizRadio.”

NEED and OPPORTUNITY:  Perhaps it is speculation or perhaps it is circumstance, but what is fact is that monies collected for the LFW Economic Opportunity Fund were substantially siphoned off and funneled into the operations of money losing BizRadio.  When you address the two major components of a FRAUD you see NEED and OPPORTUNITY.

NEED seems to be clear in this case.  BizRadio could not financially survive without an influx of cash – cash raised from apparent unsuspecting investors.  Trading on the good name of David Wallace (who in my opinion now has an SEC target on his back) and the charm of Al Kaleta (now busted by the SEC), investors felt they were getting in on a good deal only to find out that not only was their investment unsafe, but that the terms of their investment agreement were apparently violated.  But back to the interview:

“I asked David Wallace…David why have you done this?”  The investor interviewee stated that about that time was when it became clear that the SEC had an interest in Kaleta and BizRadio/Frishberg.  “He tried to give me a round about answer saying really you’re comparing apples to oranges.  The BizRadio investment – the 20% – has to be compared to the market value of the real estate in all the funds.”

STOP…it appears again, if the investor interviewee is accurate in his recollection of his conversation, that at this point David Wallace is trying to cover up an inequity and perhaps therefore makes him complicit in a fraud coverup – something that has criminal implications.

“But I said that this Wallace fund is a very separate entity, you cannot combine all of the other entities fund market values to do that.  But moreover if the losses are incurred it would be reported into this fund account, not into every fund account.  Then I wrote him a very detailed letter asking for an explanation which remained unanswered.”

SURPRISE, SURPRISE, SURPRISE: The request for information or an explanation went unanswered.  What legitimate answer could be given.  An investment agreement was violated, an investor asks why, and no answer.  At this time it seems clear that the legitimate investment (?) turned scam or fraud was beginning to come unraveled.  At least Wallace was smart enough not to put his answer in writing as that might be construed as mail or wire fraud – punishable by prison.

“Then I called Dan Frishberg, as he was one of the BizRadio persons and he asked me to come over for a meeting.  Dan Frishberg now came up with the same theory as David Wallace that it was based on market value and I was just not understanding.  So I showed them my partnership agreement and I don’t know what you are saying, but here is what the partnership agreement is saying.  After that we retired to talk to David Wallace.  David Wallace then came into the room and basically told me that he really does not have to say anything.  This is how it happened and I could offer to file a lawsuit and they would respond to my lawsuit.”

WOW: Seek an investors money – fail to answer legitimate questions when called on the carpet – then suggest a lawsuit.  To the readers of this blog – what does that tell you?  When I heard these comments from the gentlemen who so kindly contacted me I was amazed!  Not only was Kaleta busted by the SEC, but David Wallace seems to be kneed deep in it with Dan Frishberg which by my calculations is unfortunate for both men.

“Why have you exposed us to something like this?”  He said back, “Well this is how it has happened.  You will obviously tell your attorney and they will ask some questions and we will answer.” Dan Frishberg said as we were leaving, “Well there is nothing much we can do.”

WHERE FROM HERE? The investor interviewee said, “I don’t know what to do.  Where do we go from here?”  In his voice I heard anguish and concern.  He, along with many others, are figuring out that the bulk of their investments have vanished.  Vanished not from a seriously declining real estate market, but vanished from a mismanaged fund that appears to have violated the terms of the agreement.  So where from here?  My guess…and please note it is only a guess…  The SEC will investigate.  Investment fund organizers will find a fate similar to that of Al Kaleta.  And, I predict that eventually the FBI or US Attorney’s office will get involved.

Was this a legitimate investment gone bad or a scam from the outset?  Perhaps that question is best left to federal investigators…but as I’ve said before – something smells “frishy”!

YOUR COMMENTS ARE WELCOME!


Reverend Raleigh Trammell – Southern Christian Leadership Conference Dayton head – home raided by FBI on Embezzlement concerns!

February 11, 2010

Early this month, national officials of the Southern Christian Leadership Conference requested criminal investigations by authorities in Georgia and Alabama, alleging embezzlement from the civil rights organization by Dayton’s Rev. Raleigh Trammell, the national board chairman, and SCLC Treasurer Spiver Gordon.

Today, Agents with the Federal Bureau of Investigation seized a computer and several boxes from the home of Reverend Raleigh Trammell, according to Dayton police.

Agents searched the Dayton offices of the SCLC looking for any information or evidence that could like Trammell to the alleged misuse of the group’s funds. They also raided the home of Trammell’s daughter Angela Goodwine, taking boxes and a computer from her house as well.

Trammell declined comment after the agents left his home. However, neighbor John Wilkins said: “After all of the accusations, I’m not surprised (by the searches). I feel sorry for the family that they have to go through this. Mrs. Trammell is a very nice person and I feel sorry that she has to go through this — she and her husband both.”

According to reports, the group’s treasurer, Spiver Gordon of Alabama, is also under investigation for involvement in the case.

U.S. Justice Department spokesman Fred Alverson said the searches are in relation to an investigation in to SCLC financial activities. No criminal charges have been filed.

“I don’t have any reaction to that nonsense,” said Trammell, chairman of the board of SCLC’s Dayton chapter. “I have nothing to do with the finances of the organization.”

He said the SCLC finance committee is investigating the allegations.

“I’m sure when they make their report it will clearly exonerate me. Until then I’m just prepared to say it’s a bunch of hogwash,” said Trammell, who also is executive director of the Interdenominational Ministerial Alliance in Dayton.

Trammell and Gordon are accused of unauthorized expenditure of SCLC funds in excess of $560,000 since 2006, according to a Jan. 29 letter to Fulton County District Attorney Paul Howard. The letter was written by Dexter M. Wimbish, who is on temporary paid leave as SCLC general counsel.

“The embezzlement includes the use of a board account with Citizens Trust Bank (in Georgia) whereby personal expenses have been paid as well as loans to Raleigh Trammell,” Wimbish wrote in the letter.

“As these persons have been reinstated, there is a fear they will continue to mismanage funds and destroy or alter records to cover up their theft and conversion.”

According to an internal review of the SCLC national board account obtained by the Dayton Daily News in a report issued earlier this month, SCLC officials questioned payments of more than $27,000 to Trammell and the Dayton SCLC chapter he leads between 2006 and 2009, including two wire transfers to a Trammell-controlled National City Bank account.

“I’ve never been paid any $27,000,” Trammell said.

In a Jan. 19 interview he denied the allegations and said “I have absolutely no knowledge” of transfers of SCLC funds to his control and “I don’t believe any such bank accounts exist.”

In a phone interview, Gordon said he only signed checks from the national SCLC account after the expenditures were approved with vouchers signed by other officials, including Trammell.

“Some of the allegations that are being made are just ridiculous,” Gordon said.

In presenting the documents in Alabama, Rocker said he was joined by Wimbish and Ron Woods, who is on temporary leave as SCLC executive director.

The two were placed on leave by the Fulton County judge who on Jan. 20 granted a temporary restraining order restoring Trammell and Gordon to their jobs until the SCLC board could meet. Trammell and Gordon had agreed last year to step aside while the SCLC investigated complaints of financial impropriety against them.

Three SCLC board members, including Rev. Wilburt Shanklin of Dayton, sought the restraining order after the investigation was publicly announced in December. Shanklin is president of the IMA and a member of Dayton Mayor Gary Leitzell’s Leadership Council.

The Dayton SCLC and IMA in 2009 received at least $304,952 in taxpayer funding for local programs, including money from the Montgomery County’s human services levy; county job and family services money funneled through the Dayton Urban League and federal funding for food and emergency shelter, a program administered by the United Way of Greater Dayton.

Every choice has a consequence.  Keep in mind people are innocent until proven guilty.  However, where there is smoke there is fire…so if guilt is established there will likely follow a prison sentence.

COMMENTS ARE WELCOME.


Sujata “Sue” Sachdeva pleads not guilty by reason of a “Spending Disorder?”

February 4, 2010

With her attorney again signaling that he will mount a mental-illness defense, a former Koss Corp. executive pleaded not guilty Friday to accusations that she embezzled $31 million from her longtime employer.

Sujata “Sue” Sachdeva, 46, of Mequon, Wisconsin, pleaded not guilty yesterday to charges she embezzled as much as $31 million from Koss Corporation, a publicly traded head phone manufacturer where she had been employed as Vice President of Finance, Secretary, and Principal Accounting Officer. According to the indictment, Sachdeva authorized numerous massive wire transfers of funds from company bank accounts to pay for her American Express credit card bills and obtained cashier’s checks to pay for personal expenses, among other things. The scheme dates back to at least 2004, according to reports.

Michael F. Hart, her Attorney, said in a brief interview, “As this case proceeds . . . we intend to show that Ms. Sachdeva’s mental and emotional health played a significant role in her conduct.”

Asked whether that was the basis for Friday’s not guilty plea, Hart declined additional comment. Later, he issued a statement reiterating his remarks in the interview and added, “This is the beginning of an ongoing process, and our focus will be on the arguments we make in court. However, the issues of Ms. Sachdeva’s mental and emotional health are essential to this case.”

In court, Hart agreed to a new condition of release requested by prosecutors that prevents Sachdeva from disposing of assets that might be confiscated if she is convicted. According to the indictment, the government will attempt to seize her $800,000 Mequon home, her 2007 Mercedes Benz E350, a Hawaiian vacation timeshare and other assets if she is convicted.

The U.S. Marshals Service also is working to inventory approximately 22,000 items FBI agents gathered at the Sachdeva home and from local luxury stores and resale shops.

Several stores kept paid-for clothing in their storerooms for Sachdeva. She also sold thousands of dollars’ worth of merchandise through local resale shops, according to several retailers.  The government expects to sell the items, probably in an online auction, and return the proceeds to Koss.

Sachdeva also was ordered Friday to refrain from using alcohol and to submit to drug and alcohol testing.

If Sachdeva is convicted, she faces up to 120 years in prison plus fines, restitution and forfeiture of merchandise.

Her trial is scheduled for April 19th.

COMMENTARY:

I know there is a vast difference, but Sachdeva’s defense is a bit like the fellow who killed the abortion doctor – there is a justifiable reason?  Clearly stated…I am unaware that using a spending disorder as a defense has been successful in achieving a verdict of “not guilty”.   Certainly this case will be watched closely, as there are many white collar criminals who have either embezzled or created Ponzi schemes and lived lavish lifestyles who would welcome the opportunity to be found not guilty by reason of a “spending disorder.”  If this defense wins…I would suspect that Bernie Madoff would be regretting his guilty plea.

IF I were a betting man, I’d bet she’ll face time in prison…but?

YOUR COMMENTS WELCOME!


FBI Posts Warning about Haiti Relief Contribution Scams – Tips to avoid being Ripped Off

January 14, 2010

How unfortunate, but at a time when folks need help the most – at that same time – there are those who find the greatest opportunity to take advantage of those kind enough to offer help.  SCAMMERS are in full force concocting schemes to take money that you would give to help and instead help themselves.  Whether it’s 9/11 or Katrina – the disaster makes no difference – Scammers have one goal – DEFRAUD YOU.

More than 400 Internet addresses related to Haiti have been registered since Monday’s devastating quake, Internet security expert Joel Esler said. The names reference Haiti and words such as “earthquake,” “help,” “aid,” “victims” and “survivors.”

Here are tips offered by the FBI, Better Business Bureau and Scam.busters.  Also click here for a video on the subject.

SUMMARY TIPS:

  1. Be skeptical of email through Social Networking sites.  Don’t click on Links or attached files.
  2. Ask for the name and phone number of the charity or request that they put information in writing.
  3. Do Not give personal financial information – You’d be vulnerable to identity theft.
  4. Don’t be mislead by a “Sound Like” Charity name
  5. Ask if the Charity is registered with any organization and get the registration number.  Check with CharityNavigator.org.
  6. Ask what percentage of your gift actually reaches the needy.
  7. Don’t ever donate cash and DO NOT give out your credit car number to telemarketers or use it with a charity you have not checked out.
  8. If the person asks for more…that may be a sign something is wrong

If there is ever a time that the Haitian people need help it is now.  That is not true for Scammers.  Don’t fall prey to a scam.  Make sure your heart felt contribution goes directly to those who need it the most.

Here’s a link to a list of charities that are providing relief to the Haiti effort and have been signed off on by charitynavigator.org.  HAPPY GIVING TO YOU!

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Bernie Madoff in Jail! It’s Not “Club Fed” I Know – I’ve Been There…

March 12, 2009

madoff-cp-6397978There was cheering from the crowd when Madoff was immediately taken to jail.  Emotions are running high and will do so for years to come.   But this is not a joyous day.  Many victims lives have been radically transformed by the financial crime Madoff effected.  Likewise, Madoff’s life as he knew it is over.  Leaving the comfort of normal life to go to prison is a radically different experience as well.

I know – regretably I have been there for exactly the same crime Madoff plead guilty to today.

Every choice has a consequence.  Many were victimized by Madoff et al and both the victims and Madoff, himself, are facing the consequences of choices made.

Madoff made the following comments in court today.

“I operated a Ponzi scheme.  I thought it would end quickly, but it proved impossible.  I am ashamed for these criminal acts. I always knew madoff_sketch_09031203this day would come.”

I was asked today on CBS radio – KRLD – by Ernie and Jay about the mentality of how something like this could happen.  Is it possible that Madoff just was out to steal from folks?  The answer is simply – NO.

While I don’t personally know Bernie Madoff, I know the thought process that ends in federal prison.  Madoff is a smart man.  In fact, I would say that he was brilliant in his ability to effect such a scheme successfully for so long.  That is rather amazing.  But, for a time, I suspect when he first got started, Madoff was legitimate.

To effect a fraud like this, there must be three components: (1) need; (2) opportunity and (3) rationalization.  My best guess is that Madoff had two needs that came together when he began this in the early 90’s – (a) emotional need – he would not admit that he was faliable; and (b) money – in that he likely lost money and was unwilling to admit that fact.  Hence, he entered into the second  part of creating such a fraud – he took advantage of his name and notariety to gain more money – more investors or more victims.

CNN reported: Madoff admitted that he never invested his clients’ money, and that he deposited the funds into a “Chase Manhattan” bank.

At that point, Madoff crossed the line of investing and became an outright fraud.  Amazingly, instead of continuing to invest clients money hoping for the big win, Madoff just deposited the money in the bank.  Of all revelations, that was the most amazing.  Effectively he just gave up, committed the crime and waiting until the house of cards fell.

TONIGHT FOR MADOFF:

As I type this I can speak first hand from experience, Madoff just entered a phase of life that is totally foreign and for which he is unprepared.  Likely, as he was removed from the court room, he went to processing where he removed his clothing and was issued prison issue clothing.  It is doubtful that he was madoff_jail_cell03allowed to keep much other than one set of “street” clothes that might be used for limited visiting privileges or meetings with legal counsel, etc.  He would have likely been handed his bed linens and escourted to his holding cell.   Unless because of his age he was assigned a lower bunk, he would be given the upper bunk as those with more time in the facility get the privilege of lower.  His meals would be a step above a Swanson’s TV dinner – maybe – and the routine is strict.

Counted multiple times per day, Madoff will soon find that he’s no more than anyone else incarcerated, an inmate.  Inmates will likely acknowledge him, but not consider him any more than they.  In fact, it is likely that many will avoid him fearing that what they might say to him will be used against them (they fear he’d become a snitch) in order to gain favor with the judge for a lighter sentence.

Tonight will be one of the longest nights of Madoff’s life.  He will wonder to himself – time and time again – what he has done and why.  Those thoughts will haunt him for the rest of his life, which from a free man’s perspective, has ended.

THE VICTIMS:

Now here’s where I should stop, but for whatever reason, I can’t.  I understand the anger, and desire for revenge that many feel.  It is natural as your trust has been violated.  This is no different than feeling that one has when a marriage ends with the distrust created by adultery.

Many would say that I am the least to offer advice.  Perhaps that is true, but I’m going to try.  First, from a practical perspective seek the legal help you need to recover what you can.  Know that there are possible sources for some recovery including the application of IRC Section 165(c)(2).  I am not an expert in that area, but I have a guest blog from someone who is.  Go there it might be helpful.

Beyond the legal recourse against Madoff and those involved – and I suspect that others will fall from this as well, may I say – with respect – put your loss into perspective.  We come into this world with nothing and leave that way as well.  Money – security – certainly are important, but it is afterall only material.  The longer one harbors anger or hate, the worse life becomes.  Finding the ability to recognize that Madoff will suffer and reap the consequences of his choices is significant.

Your life has changed – so has his.  No one walks away from this feeling good or whole.  The ultimate outcome, however, for you and your well being will, in large part, be a function of your ability to forgive.

IN THE LONG RUN:

Having been there, I know the pain of prison.  Some learn from their experience and others never get it.  In Madoff’s case we may never know what the true effect of his life changing experience will bring.  In my case, prison was life changing.  While I am thrilled with freedom, I understand that my time there changed my life and gave me an opportuity to do something positive today that, in fact, helps others.

Sometimes you can actually get lemonade from lemons!

As always – COMMENTS ARE WELCOME.

HERE is what Madoff read to the court.