Michael Van Gilder, Insurance Executive indicted for Insider Trading – Van Gilder responds with profession of Innocence.

October 30, 2012

If your buddy or close friend shares information about what’s going on with their company, visit in your head (www.zipit.com – made up website) and keep your mouth shut.  You can’t know something that someone else does not know, act on it for personal gain, and expect to remain free.  Van Gilder, a young man, now faces substantial time in federal prison – something that is life changing.

Notice how simply his alleged crime started and how it mushroomed.  There is a lesson here for others to learn!

NEWS RELEASE

Insurance executive Michael Van Gilder, age 45, of Denver, was indicted by a federal grand jury in Denver on five counts of insider trading.  The U.S. Securities and Exchange Commission, which today filed a complaint charging Van Gilder with civil insider trading violations, conducted a parallel civil investigation and substantially contributed to the criminal investigation of the case as well. The defendant allegedly traded based on inside information regarding a Denver oil and natural gas company called Delta Petroleum Corp.

According to the indictment, Van Gilder was the chief executive officer and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.

From November 5, 2007 and continuing until at least January 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.

Specifically, on November 8, 2007, Delta publicly announced and filed with the U.S. Securities and Exchange Commission (SEC) a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended September 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.

The Barron’s article was brought to Van Gilder’s attention. Based on the article, the defendant called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to the defendant that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.

Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the November 8, 2007 third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.

In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with defendant Van Gilder, and that, on November 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.

As the indictment further relates, the Delta Executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on December 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.

On December 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.

On December 19, 2007, a representative of Tracinda contacted the Delta Executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on December 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”

On December 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On December 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, the defendant caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”

On December 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35% of Delta’s common stock for $19 per share. On Monday, December 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by January 4, 2008. On January 9, 2008, Van Gilder sold the 290 call options that he had purchased between December 19 and December 24, 2007, realizing a profit of approximately $86,100 on the transaction.

The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between November 6, 2007 and December 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.

“Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney John Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC, and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”

WORDS FROM MICHAEL VAN GILDER:

Saturday greetings,

If you are getting this e-mail you are a family member or a friend of mine. There is a massive amount of gossip and press as a result of my having been charged yesterday in an indictment, so I feel compelled and have wanted to reach out to you so you hear directly from me.

Yesterday was nothing short of a tough and bizarre day. Emotions included anger, humiliation, depression and gratitude. The last emotion was created by the outpouring support from family, friends and truly amazing employees at Van Gilder Insurance. For this, I am extremely humbled and thank each and every one of you for your love, friendship and support.

I never in my wildest dreams imagined I would be the cause of my employees fighting for our company and reputation. For this there is no end to my agony.

For starters please recognize that for legal reasons I cannot give you details regarding the assertions made in the indictment. I simply ask that you have faith in me, you know me, my character, and my family. This will be a grind but I’m confident you will see my side unfold as I strive to be exonerated.

I’m 45 years old, I’ve spent these years striving to build a sterling personal and business reputation, wow, did it hurt seeing what is in the press. . . . 100 years in prison and a $25,000,000 fine! Apparently reported by someone who has no clue about the federal sentencing process. While I feel I won’t spend one day in jail, “if,” I were guilty of these “allegations,” then it would be months of possible confinement, not years.

As you know, I have worked very hard to become C.E.O. of Van Gilder Insurance, an amazing 107 year old company started by my great-grandfather, Hal Van Gilder. During my more than 20 years with the company, our employees have become a family to me. As a leader it’s critical to recognize when change is needed. Knowing this legal situation was heating up it was critical that I separate what is personal from what is business, therefore I stepped down this past week as C.E.O. This indictment has nothing to do with Van Gilder Insurance; it is not named in the indictment because the company had absolutely nothing to do with any of the allegations contained in that document. This is strictly personal. I feel extremely fortunate to have a deep and talented leadership team and mature group of employees. Many of you know Don Woods, there could not be a better man to take the reins of Van Gilder. Of course my father Dell Van Gilder is our Chairman and remains highly active in the operations of our business.

By the way, I’m still working for our company and will continue to work to maintain its leadership status in our industry.

So what’s an indictment? As explained to me, an indictment is purely the vehicle in which accusations are brought against an individual in federal court. An indictment is just that, it is merely an accusation. It has absolutely no evidentiary value and is not considered evidence of any charge alleged in the indictment.

An indictment is returned after a limited and selected amount of information is presented by the government attorney to a grand jury, which consists of up to 23 citizens. The grand jury meets in secret, and the government prosecutor exclusively decides who he will call as a witness in order to obtain an indictment. No judge presides over this limited presentation of evidence and no attorneys for any witness or targeted accused can be present during the grand jury proceedings. Thus, my attorney was not permitted to attend these proceedings and cross examine any witness who testified. Finally, it takes only 12 of the 23 grand jury members to agree to the returning of an indictment.

In order for me to better understand the nature and quality of evidence needed to obtain an indictment versus unanimously convicting 12 jurors at trial beyond a reasonable doubt, this is what has been explained to me. It may take the relatively low weight of a 10 – pounds of selected evidence to convince 12 out of 23 grand jurors to return an indictment, but it will require the much heavier weight of a 100 – pounds of legally admissible evidence to convince each and every one of the 12 trial jurors to render a finding of guilt.

Until the 100 – pounds of evidence convinces 12 jurors unanimously of my guilt, I am presumed innocent of each and every charge in the indictment. This constitutional presumption of innocence is one of our bedrock constitutional rights. No one in the world, except the 23 grand jurors, has even heard the 10 pounds of selected evidence presented by the government, which is why I am hopeful that no one will prejudge me on the mere basis of an indictment but instead allow the judicial processes to unfold so I can have the right to my day in court. It goes without saying that I will defend this vigorously and fully expect to be exonerated.

I’ve been dealing with my situation for months now, I’d like to share with you how I’ve made a massive mental shift in the way I look at adversity.

No great man, woman, or company has achieved greatness without going through massive adversity.

Two examples:

Nelson Mandela spent 27 years in prison before becoming president, leading the people. During that time in prison a white man taught him the white man’s language. Because of this, when he was released he was able to speak to all the people, thus allowing him the ability to be elected president. When asked don’t you wish you could have become President w/out the 27 years in prison? His response: NO! I needed every day to enable me to become president!

Steve Jobs founded Apple in his basement, later he was FIRED as C.E.O.! What did he do? He founded Pixar Entertainment. In the meantime Apple was spiraling down when he was asked to come back. You know the rest, Steve Jobs built the greatest company our planet has ever seen.

Through adversity comes growth, strength and determination!

Regardless of what happens to me, I am going to grow, get stronger, be smarter. I will become a better son, brother, father, friend, and leader.

You might think I’m going to stay home and hide, stay invisible? Wrong, I plan to be as visible as ever, I won’t let this beat me down.

Your outpouring of support has been nothing short of amazing, I am truly blessed.

Warm Regards and Love,

Michael

COMMENTS:  I have been to federal prison and served time with people who have been accused and convicted of doing less.  That said, I respect Van Gilder’s comments above and know first hand the emotional trauma that he’s experiencing (even as I write this article).

Now comes the hard part: (1) Generally the US Attorney wins their case.  Rarely do they bring an indictment that they do not win.  Their job is to win and they pride themselves on their winning percentage.  So with that said, while Van Gilder professes his innocence, all it takes is one of the allegations listed above to be found accurate and Van Gilder will be found guilty.  (2) Based on years of experience, negotiate a settlement!  If you fight for your innocence, know in advance that is a losing battle.  The statistics are not in your favor.  And, frankly, if you make the Fed’s spend money trying the case, they will work hard (very hard) to make your life a living hell and your prison time (if found guilty) substantial.

I believe in our system of justice and the fact that you are innocent till found guilty.  Likewise, I know from experience that they don’t indict unless they are fairly confident they will win.  Keep in mind, two things: (1) Martha Stewart did not go to prison for insider trading (and likely she had less info that Van Gilder had).  (2) Martha did go to prison for lying.  So now is the time to be squeaky clean.  Be careful what you say and make sure if you say it that it is the provable truth.  When the feds are out for you…they often win.  Just ask Wesley Snipes.

YOUR COMMENTS ARE WELCOME!


Mortgage Fraud scheme by former SunTrust Mortgage leads to guilty plea by Javier Siveroni

August 10, 2011

ALEXANDRIA, Va. – Javier Siveroni, 48, of Springfield, Va., pleaded guilty today to using his position as a loan officer to help carry out a multi-million dollar mortgage fraud scheme involving more than 15 homes in Northern Virginia.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after the plea was accepted by United States District Judge Liam O’Grady.

Siveroni pleaded guilty to one count of an indictment charging him with conspiracy to commit wire fraud.  Siveroni faces a maximum penalty of 20 years in prison when he is sentenced on Nov. 4, 2011.

According to court documents, Siveroni, a former loan officer at the Falls Church branch of SunTrust Mortgage, prepared and submitted false, fraudulent, and misleading mortgage loan applications for unqualified buyers – individuals who lacked the finances, credit rating, or legal status to obtain a certain loan amount.  The fraudulent mortgage loan applications contained false information regarding applicants’ employment, income, assets, immigration status, and intent to live in the property as a primary residence.  As part of the fraud scheme, Siveroni created, and taught his co-conspirators how to create, fake documents in order to corroborate false information contained in the loan applications.  The total amount of mortgage loans approved through the conspiracy exceeded $6.5 million.  The total loss attributable directly to Siveroni is over $2.5 million.

In related matters, three loan officers have pled guilty for their roles in the alleged conspiracy: Preston Cherouny, 45, of Washington, D.C.; John Leone, 44, of Vienna, Va.; Alejandro Alquinta, 35, of Springfield, Va. Maria Teresa Sanchez, 44, of Burke, Va., and Yolanda Salazar Camacho, 35, of Alexandria, Va., also pled guilty for their roles as loan officer assistants in the conspiracy.

This ongoing investigation was conducted by the FBI’s Washington Field Office.  Assistant United States Attorney Uzo Asonye prosecuted the case on behalf of the United States.


Buusiness Ethics and Fraud Prevention Speaker Chuck Gallagher addresses FBI Conference

July 11, 2011

CHOICES: Negative Consequences – Positive Results

Chuck Gallagher Shares the Impact of Choices

at a Time when Ethical Choices seem to be missing from Business Culture

 CHARLOTTE, NC.  July 7, 2011.  From Prison to Promise, Chuck Gallagher’s presentation:  CHOICES: Negative Consequences – Positive Results –  exposes the power of choice and the negative consequences or positive results that can follow.   Selected to present to the 2011 FBI CPA Conference in Denver, Colorado, this annual FBI conference generally focuses on economic and other white-collar crimes.  Recognizing the importance of ethics and their practical application, Gallagher, as a speaker, is a natural fit for this national conference as he shares from experience how a life can change and the course of history can be altered by one unethical choice. In today’s environment, with so many lives turned “topsy turvy,” CHOICES  – provides a meaningful and practical framework for understanding how an otherwise ethical person can make unethical and potentially illegal choices.  CHOICES –  exposes the impact of unethical choices and the power that ethical choices can have.  As a business ethics and fraud prevention speaker, Gallagher’s presentations provides a foundation for business ethics training that goes beyond case studies and focuses on real life issues.

Chuck Gallagher, author of the new book Second Chances, has lived through it and he has come out a better man, husband, and father.  As a nationally recognized CPA, Gallagher lost it all when he made unethical choices by creating a Ponzi scheme and defrauding his clients and it all began with one bad decision.  He chronicles his fall from a wonderful life of success into the inside of a prison cell and how he managed to take the steps to rebuild his life to one full of meaning, purpose, and promise.

Shortly before his sixth month in prison, Gallagher asked himself, “Where from here?” This ultimately becomes his personal call to action upon which this book is premised. Gallagher states, “You may make a mistake, but YOU ARE NOT A MISTAKE.” So what’s next? What do you do next? How will you put one foot in front of the other to manifest the power over the choices you make now and in the future?

Gallagher’s presentations offer nuts and bolts information relevant to anyone from Main St. to Wall St. It packs hard-hitting, no-nonsense tools that the audience member can actually manifest into the power of ‘choice intelligence’. Through his transparent heart felt presentations, Gallagher says to the his audience, “Take what I’ve learned and apply it in your life and you will transform your destiny.  Explore every God-given opportunity and, in the process, you’ll develop a higher level of consciousness through better choices and a higher purpose. Honor your life, make wise choices, you will make a difference in your own life, the lives of others, and in society.”

Today, Gallagher is COO of a national company and speaks internationally on business ethics – choices and consequences. Chuck openly and candidly shares the lessons his roller coaster ride in life has taught him.  Described as “creative..,” “insightful…,” “captivating…,” and a person that “connects the dots” between behavior, choices, and success, Chuck Gallagher provides his clients, readers, and audiences with what they need to turn concepts into actions and actions into results

Chuck’s presentations drive home the very real issues involved in businesses today.  One unethical errant choice and the media fallout can have an immediate impact on business results.  For information about Gallagher’s ethics presentation contact Chuck at chuck@chuckgallagher.com ,call him at 828.244.1400 or visit his website:  http://chuckgallagher.com.


John Wiley Price – Innocent till proven Guilty or a Crook whose been nabbed by the FBI? Is there a Sprint to Judgment by the Media?

July 4, 2011

So far no one has been accused of any crimes!  You couldn’t tell it however from the media hype which most certainly will have racial overtones in this Dallas story.  So…some may ask why deal with it here – is this an ethics issue?  Good question and yes, but not perhaps for the reasons you might think.  The question I have relate to the ethics of sensationalism when no one has been accused of anything…at least not yet.

Not one to shy away from controversy…John Wiley Price will take on a fight and tell it like he sees it.  Example…in the following video Price says, “All of you are white; go to hell.”  Guess there’s a bit of a discriminatory feeling on his part.

But Mr. Price’s ethnic inclinations and hateful words are not what is driving the media today.  According to a report by Brett Shipp, “…at least six federal agents made their way inside the Millenium 2000 Gallery, where they stayed most of the day searching for records, taking photographs and looking for evidence of a crime.”  Shipp’s entire report can be seen here.

His report goes on to say:

Over the past four years, Price has used his campaign funds to purchase $46,000 in gifts and services from Manning.

Among the gifts was a $2,150 Kwanzaa gift for indicted former Constable Jaime Cortes, a $1,200 gift for mega-church pastor Ricky Rush and $2,525 in gifts for an unnamed constituents.

Among the services were campaign vehicle repairs, one of which was for $300 and another for $700 and $1,800 for vehicle wrap art.

The FBI won’t say exactly what they are looking for in Manning’s store and there is no indication that such gifts were improper.

WHAT’S ALL THE FUSS ABOUT?

With all that said and no charges filed…what’s all the fuss about?  I mean from my vantage point it seems much ado about nothing.  But, the buzz of FBI officers looking is enough to create attention…just ask Patrick Williams the author of another story on Mr. Price.

Entitled: John Wiley Price: Give the Devil His Due – Williams states:

Expect a lot of quote-trolling, thumbsucking and rumor-mongering in the weeks ahead, as hungry reporters scramble for crumbs of hard information. Nature abhors vacuums, and the 24-hour blogosphere hates them too. And since FBI agents aren’t the chattiest bunch—the local field office has a Tumblr called “We’re Not Saying Shit”—it’s going to be speculation city for a while. Did Price’s collection of questionably attained vintage cars stir the feds? Was it KwanzaaFest, Price’s charity event? What about the inland port, that transport hub Price attempted to jack? WFAA reported that Price has bought a lot of real estate lately. Ah-ha! What sort of person buys cheap real estate in a down market?

QUESTION:  Is there a Sprint to Judgment by the media in this case much like the in the Strauss-Kahn case or is there truly a smoking gun behind the actions of the FBI?

YOUR COMMENTS ARE WELCOME!


Major Ponzi Scheme Indictment handed down for Tim Durham of Fair Finance and National Lampoon fame. Choices and Consequences…

March 16, 2011

According to an indictment handed down on March 15, 2011 – Tim Durham, James F. Cochran and Rick D. Snow – all have been charged in what is reported as the largest fraud case in the state of Indiana.  The 23 page Grand Jury indictment alleges that Durham, business partner James F. Cochran and former Fair Chief Financial Officer Rick D. Snow devised and executed a scheme to defraud investors in the Akron, Ohio-based  Fair Finance.  The actual indictment can be seen here:  durham_indictment

The alleged fraud is over $200,000,000 and that, if proven, equals a long time in prison.

All three men are facing felony charges of 10 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud and securities fraud.  Each faces a maximum of five years in prison for the conspiracy count, 20 years in prison for each wire fraud count and 20 years in prison for the securities fraud count. In addition, each could be fined $250,000 for each count upon which they are convicted.

Separate civil securities charges were filed by the SEC against the men in federal court.

The indictment alleges that between February 2005 and November 2009, Durham and Cochran directed Fair to loan money to themselves and other insiders “which caused a steady and substantial deterioration in Fair’s financial condition.” The three men then allegedly deceived and defrauded investors through misleading statements about the company’s finances.

Durham and Cochran also “used a significant portion of the proceeds of these loans to maintain their lifestyles and to pay for personal expenses,” which, according to the indictment include:  $250,000 in Fair money in 2007  wired to remodel his garage, another $150,000 the following year to use at a casino and Cochran wired $50,000, also in 2008, to pay country club fees.  This is the tip of the iceberg according to the formal indictment.

FROM A HIGH TO A LOW…

CNBC did a report on Tim Durham sometime back.  Take a look

How high one can fall when life is based on an illusion.  I know…I’ve been there.  For now, Tim and cohorts face an uphill battle.  Rarely does the US Attorney unseal an indictment unless the US Attorney feels that a win is inevitable.  Advice to Tim – cop a plea…otherwise a conviction will result in a far greater sentence than he’d get today.  Further, although I doubt he’d receive it…I think the three could gain some benefit in reading my new book – SECOND CHANCES.  Perhaps one day – just not this day – they will find that they could use their intellect in a well placed endeavor that will help instead of hurt people.

WHAT ARE YOUR THOUGHTS?


Fair Finance – Seems that beneath the surface it was anything but FAIR!

May 18, 2010

Fair Finance.  When I first heard that name I was confused.  I thought it might be a non-profit organization – left leaning perhaps – that fought for or advocated “fair finance” for the underprivileged.  Man…isn’t if funny what’s in a name.  Was I sure wrong!

Below is an article written by By Jim Mackinnon – Beacon Journal business writer.  Turns out Fair Finance was nothing more than massive Ponzi scheme. Read the great article by Mr. Mackinnon and you’ll get a clearer picture of what “Fair Finance” really was all about.

The court-appointed trustee for Fair Finance Co. has his eyes on lots of fancy cars and artwork that he believes were purchased with money from the under-investigation Akron finance and loan business.

There are three Bentleys, an antique Duesenberg, Mercedes and Jaguar cars, even a Lamborghini. The possible value is in the millions — same thing for the art, primarily paintings purchased by Fair Finance co-owner Timothy Durham, said the trustee, Cleveland attorney Brian Bash.

Bash on Tuesday said he is looking into the sale of more than $1 million in antique and exotic cars by an affiliated company in Indiana, Diamond Investments LLC, as he works to preserve assets for the bankrupt Akron business.

Bash said he is placing liens on perhaps as many as 100 vehicles listed under Diamond, which does business as Diamond Auto Sales. The business is owned by Durham.

”These are pretty fancy cars,” Bash said. Most of the vehicles are in storage, while the Duesenberg and three Bentleys were among vehicles sold recently in Indiana, he said. The vehicles were not ”on the books” of Fair Finance, he said.

Bash talked about the cars and artwork during a monthly status report in federal bankruptcy court in downtown Akron.

”Those are unique assets,” said Marilyn Shea-Stonum, chief judge of U.S. Bankruptcy Court for the Northern District of Ohio, who is overseeing the Chapter 7 liquidation process.

Of the more than $1 million from the car sale proceeds, ”it looks like a number of law firms were paid over $908,000,” Bash said. ”We’re going to be investigating that.”

Bash gave his report over a telephone conference call in open court; just six Fair Finance certificate holders attended. Bash’s monthly update took place less than a week before he will hold a creditors meeting at 1 p.m. Monday at Akron City Centre Hotel, 20 W. Mill St. in downtown Akron. Bash booked the hotel’s Salon A ballroom because he said he anticipates a large turnout.

More than 5,300 people and organizations that include churches bought investment certificates totaling about $200 million from Fair Finance, a small investment and loan company founded decades ago in Akron. The Fair family sold it to Durham and Jim Cochran, two Indiana-based businessmen, in 2002. Most of the certificate holders are in the greater Akron area.

The FBI in late November raided Fair Finance and a related business in Indiana, with court records showing investigators suspected the business was being operated as a Ponzi scheme. Then some investors earlier this year forced Fair Finance into bankruptcy as means to recover assets. The investment certificates, which promised to pay high interest rates, were not government insured.

Bash said he and the team he has assembled continue to look for Fair Finance assets.

Besides the cars, Bash told Shea-Stonum that he is in discussions to have ”a number of pieces of artwork” turned over to him.

Afterward, Bash said Durham had estimated the value of his art collection in the millions of dollars.

The pieces that he does have are ”secured, stored and insured” but he wants the entire collection, Bash said.

”I don’t even have half of it,” he said. ”I’m hopeful they will start cooperating more.”

There also might be as much as $5 million in Fair Finance equity in accounts overseen by two firms, Fortress Investment Group LLC and Duvera Financial, that did business with Fair Finance, Bash said. He said he has asked for an accounting of the money and that the two firms said the information is in more than 80,000 pages of documents.

And in what would be a significant move in the bankruptcy proceeding, Bash said he also expects to shortly have all the assets of Fair Holdings, which is Fair Finance’s Ohio corporate parent, and those of DC Investments — the Indiana corporate parent — assigned over.

”My view right now is, I’ve heard them [Fair Holdings and DCI’s representatives] wanting to cooperate but I haven’t seen the actions follow the words,” Bash said.

The FBI is continuing to scan Fair Finance documents, Bash said. ”My accountant goes out to Indianapolis to review those records,” he said.

It does not look as if any former Fair Finance employees will testify or answer questions at Monday’s creditors’ meeting, Bash said.

”It’s my understanding none of the individuals are willing to testify because of the ongoing investigation by the FBI,” he said.

In addition, the Indianapolis law firm representing Fair Finance, Taft Stettinus & Hollister, told Bash in writing and the judge during the conference call that it intends to withdraw as Fair Finance’s counsel. The firm did not give a reason.

Shea-Stonum said investment certificate holders and other creditors who have questions about the case need to go online and review court documents. She said the bankruptcy court clerk’s office is not in a position to respond to questions about the case.

The judge also said certificate holders need to guard themselves from scam artists who claim that they can recover their money from Fair Finance. Scam artists have taken advantage of people in other cases, she said.

”It appears to me the certificate holders in this case have been the victims of what appears to be, well, I’m not going to characterize it. People have been parted from their money,” she said. ”I do not want to see this case become a hotbed for scam artists.”

Shea-Stonum asked Bash to use the trustee’s Fair Finance Web site to post information on how creditors can legitimately find ways to recover assets.

The trustee status report is available online at http://www.kccllc.net/fairfinance.

Here’s another link to Fair Finance articles.

One more time it seems that we see the reality behind the Ponzi scheme…fancy living, fast cars, a lifestyle that cannot be supported by a real business enterprise.  Sadly, what started out as a legitimate business enterprise that helped many, became a vehicle for fraud.  And while I have not been following this active investigation it appears that I sure should be…so look for more information to come.

OF COURSE, YOUR COMMENTS ARE WELCOME!


Another Ponzi Scheme – Nevin Shapiro – from the FBI website no less!

May 11, 2010

To make the FBI’s web site takes a lot.  But what is listed below in BLUE is directly from their site.  Once you finish reading…check out the comments.  It’s amazing how simple the fraud takes place and how easy it is for folks to get sucked into the PIT.

He was living the high life—taking up residence in a Miami Beach mansion worth more than $5 million, cruising around in a million-dollar yacht and his leased Mercedes-Benz, shelling out more than $400,000 for floor seats at Miami Heat basketball games, and donating thousands of dollars to the athletic program of a local university (the school was so appreciative it named a student athlete lounge after him).

But it all came crashing down on Florida businessman Nevin Shapiro last month, when he was charged with orchestrating a multi-million-dollar Ponzi scheme involving about 60 victims throughout the United States.


From January 2005 through November 2009, according to the criminal complaint filed in federal court in New Jersey (where one of his victims resides), Shapiro raised more than $880 million from his investors. These individuals thought they were investing in his wholesale grocery distribution business—Capitol Investments, a Florida corporation with offices in Miami Beach that Shapiro owned and ran as CEO.

In reality, there was no grocery distribution business. Shapiro allegedly used new investor money to fund principal and interest payments to existing investors—a textbook Ponzi scheme—while at the same time, taking tens of millions of dollars for his own use.

How did Shapiro convince his investors to give him their hard-earned money? According to the charges, he and others working for him showed potential investors fake documents that touted the profitability of his business, including:

  • Financial statements claiming that the business generated millions of dollars in annual sales;
  • Shapiro’s personal and business tax returns (also fraudulent);
  • Phony invoices revealing transactions that Shapiro’s business had supposedly entered into with other businesses; and
  • Promissory notes reflecting the amount of the victims’ investment, along with a schedule for a payment of interest (at anywhere from 10 to 26 percent on an annual basis) and the return of their principal.

The scheme eventually went the way of most Ponzi schemes—collapsing in on itself when it got too big to maintain financially. The criminal complaint alleges that Shapiro defrauded investors out of at least $80 million.

This particular case was brought in connection with the recently-established Financial Fraud Task Force, led by the Department of Justice, which investigates and prosecutes major financial crimes. And the case was definitely a multi-agency effort—in addition to the FBI, it was worked by the IRS Criminal Investigative Division and the Securities and Exchange Commission.

So how can you avoid being victimized by a Ponzi scheme? A few tips:

  • Be careful of any investment opportunity that makes exaggerated earnings claims.
  • Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework!
  • Consult an unbiased third party, like an unconnected broker or licensed financial advisor, before investing.

If you think you have already been conned in a Ponzi scheme—or are suspicious about a pending investment—contact your local FBI field office or local authorities.

COMMENTS:

There are three components of most frauds from the perspective of the VICTIMS:  (1) Promise; (2) Illusion and (3) Trust.

Let’s look at what the FBI reported and see if we can find those components.  ILLUSION – according to the FBI, Shapiro created fake financial statements, fake personal and business tax returns and phony invoices.  He went to a lot of trouble to solidify the illusion that what he represented was real.  Some might question what might have happened if he had invested half that much time and effort into a real business instead of his phony scam?

Ah, but the hook that gets VICTIMS in – in the first place – is the PROMISE.  Here the promise was a return (plus principle) of anywhere between 10 to 26 percent.  I can’t speak to why…but in every case it seems clear that “investors” seem to gravitate to something that “others can’t have” – some call it greed.  I think, rather than greed, we have a psychological desire to be above average and if someone offers something that seems real that is “off limits” to the average guy…then we are more apt to bite.  Guess it’s DNA to want what we can’t or shouldn’t have…just think of the apple.  (Some readers will get that!)

Now, let’s be honest.  A PROMISE of a 26% return is not reasonable and ANY PROMISE of a guaranteed return should give us a moment to pause and investigate further!

The funny part about a Ponzi Scheme is that the ILLUSION that supports the PROMISE actually creates the TRUST needed to perpetuate the scheme.  More times than not, the “investors” VICTIMS actually are the ones that turn others on to the “scam” without having any knowledge that they are luring others into the trap!

The Ponzi scheme only collapses when the source of funding dries up.  Most of the time, the scheme gets so large and top heavy (the need for additional funding becomes so great) that it collapses on itself.

So…the FBI suggests the following which is worth repeating:

So how can you avoid being victimized by a Ponzi scheme? A few tips:

  • Be careful of any investment opportunity that makes exaggerated earnings claims.
  • Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework!
  • Consult an unbiased third party, like an unconnected broker or licensed financial advisor, before investing.

BREAKING NEWS FOR NEVIN SHAPIROhttps://chuckgallagher.wordpress.com/2011/08/17/convicted-ponzi-fraudster-nevin-shapiro-provides-a-tsunami-of-evidence-against-the-university-of-miami-football-program/

YOUR COMMENTS ARE WELCOME!