MRI International Officers Indicted for $1.5 Billion Fraud Affecting Thousands of Victims

Las Vegas-based MRI International Inc.’s former president/chief executive Edwin Fujinaga, Asia-Pacific executive vice president Junzo Suzuki, and general manager of Japan operations Paul Suzuki, have all been indicted on eight counts of mail fraud and nine counts of wire fraud in connection with a Ponzi scheme that defrauded thousands of victims, according to a Fox News article.

According to U.S Attorney Daniel Bodgen, the men told thousands of overseas investors that their investments were safely managed by a third party escrow agent in Nevada. Nevertheless the men are accused of using investors’ funds to pay for gambling, a private jet, and other personal expenses. The government alleges that this Ponzi scheme preyed on new enrollees’ money that they turned and used to pay early-stage investors and to give other investors incentive to take part.

According to the indictment filed by the U.S. District Court, the scheme was exposed in April 2013 after four years of operation and individually charges Fujinaga with three counts of money laundering. The document also seeks from the defendants the forfeiture of proceeds from the alleged crime. As a result the defendants could also face decades in prison if convicted.

Money placed in a Ponzi scheme is typically difficult to recover directly from the primary wrongdoers, as that money has often been spent. However, Ponzi schemes often involve a number of other players who may have both liability to the victims and the ability to pay damages. Victims should consult with an experienced fraud recovery attorney to discuss their options.

Investors Need to be Careful About Who Has Custody of Their Money

The Securities and Exchange Commission recently filed fraud charges against a Fort Lauderdale, Florida-based investment advisor and related funds in the federal district court for the Southern District of Florida. The SEC’s complaint names Frederic Elm (formerly known as Frederic Elmaleh), his unregistered advisory firm Elm Tree Investment Advisors LLC, and three funds: Elm Tree Investment Fund LP, Elm Tree “e”Conomy Fund LP, and Elm Tree Motion Opportunity LP.

According to the SEC, Elm perpetrated a Ponzi scheme – in effect recycling new investor money to earlier investors, and using investor funds the funds for personal expenses, such as a $1.75 million home, luxury automobiles, and jewelry. In this way, Elm allegedly stole at least $17 million from unsuspecting investors. This kind of misconduct violates the anti-fraud provisions of federal securities laws and SEC rules.

The investors sent their investment funds to Elm by wire transfer or by mailing a check. Elm deposited the funds in various bank account that he controlled. In this way, Elm had custody and control over the investors’ funds, and was able to misappropriate the funds.

Investors should be wary of sending money anywhere other than to an account set up for them at a well-known, trustworthy financial institution. Normal operating procedure is for investment advisors to manage a client’s money held in an account at a reputable firm, which would have actual custody of the funds and safeguards in place to prevent the kind of theft alleged by the SEC.

Prosecutors Say Financial Fraud is On the Rise

As if ISIS terrorists, ebola, militarized police, and race riots are not enough, we now read in the Atlanta Business Chronicle that white collar crime is on the rise (“White Collar Crime Wave,” by Dave Williams, August 22-28, 2014). Prosecutors report a significant increase in white collar criminal activity, according to the article. One former federal prosecutor was quoted as saying: “It’s a national trend.”
White collar crime includes various forms of financial fraud. Examples include Ponzi schemes (think Madoff, where cash flow from newer victims was used to pay previous investors until the house of cards collapsed) and affinity fraud. In an affinity fraud scenario, the investment promoter gains credibility and hooks victims by playing up things they have in common.
Perhaps the most common and outrageous example of affinity fraud that is the proverbial “wolf in sheep’s clothing” who preys on church members. The article mentioned the sad case of Ephren Taylor II, the purported wealth builder who defrauded members of a prominent Atlanta church out of millions of dollars.
Elder financial exploitation is another tragic and infuriating example of the kind of white collar criminal activity that is on the rise.
Victims of financial fraud, through no fault of their own, undergo a kind of vertigo similar to that experienced by a pilot, who, in a crisis, must decide whether to trust his or her own strong instinct (which is typically the tragic mistake) or what the instruments are showing, which seems to be counterintuitive. Similarly, victims of financial fraud often report that they experienced conflicting signals: the signal from the fraudster, who is often a polished and convincing confidence (con) man versus an internal warning bell that something is not quite right about this opportunity or the person conveying it.
When it comes to deciding whether to invest, especially in an alternative or unconventional investment, investors are well-advised to be skeptical, and act accordingly. If the business is so great, why do they need financing from investors like me? Why haven’t banks or professional venture capitalists provided financing? If the opportunity is so great, why is the promoter selling instead of buying?
The Doss Firm represents people from all walks of life who are victims of financial fraud. If you have fallen victim to financial fraud, you should consult with attorneys who have experience representing investors, because you may be able to recover some or all of your losses. You should do so promptly, because time limits, such as statutes of limitation, can bar some or all of your claims.

Unregistered Investments Are Almost Always Unsuitable, and Are Often Fraudulent

Private placements are investments that have not been registered with the United States Securities and Exchange Commission. The lack of registration is either unlawful, or lawful due to an exemption from registration under the securities laws. Private placement investments are always high-risk investments that are complex, not transparent, and illiquid (cannot be readily sold) – despite the fact that they are often presented as having little or no risk, and are sometimes fraudulent.

Issuers of private placement investments often employ unregistered brokers and financial advisers to sell them to individual (or retail) investors. The sellers of private placements typically receive outsized commissions, and thus do very well indeed. On the other hand, many investors who could ill afford it have lost a substantial portion of their life savings by investing in private placements.

The SEC recently published an Investor Alert identifying 10 red flags that an unregistered offering (private placement) may be fraudulent. The red flags include such things as promises of high returns with little or no risk; involvement of unregistered sales people; high-pressure sales tactics; amateurish, sloppy or no documentation; absence of the “usual suspects” involved in “legitimate” private placements (lawyers, accountants, etc.); the old “mail drop as corporate address” trick; cold call solicitations; and phony backgrounds of managers or promoters.

While it is true, as the SEC indicates, that some private placements may be used by legitimate businesses to raise capital, it is also true that private placements may be fraudulent investment schemes. Even if a private placement is legitimate, it is always improper for an investment adviser or broker to recommend that an individual investor invest a substantial percentage of his or her liquid net worth in such investments due to the risk of losing everything you invest.

The laws requiring registration of securities offerings are designed to protect investors, though that protection may be illusory. Generally, unregistered securities can only be sold to so-called “accredited investors.” For an individual to be considered an accredited investor, he or she must either have annual income of over $200,000 for the prior two years (or $300,000 jointly with a spouse), or have a total net worth of over $1 million above the value of the primary residence and any loans secured by it.

Now, it is still true that $1 million is a lot of money, but it is not nearly as much as it used to be back when these “accredited investor” rules were written. The “accredited investor” requirement is supposed to protect investors but, arguably, the income/net worth cut-off is too low. It is based on a false premise that anyone with $200,000 or $300,000 annual income or a net worth of $1 million is wealthy and, therefore, able to bear the loss of his or her entire investment, even if that investment is all or a substantial portion of that person’s net worth.

The bottom line is that private placements (even if they are not outright frauds) are almost always unsuitably risky and illiquid for individual investors. They should not be recommended to most individual investors by brokers or investment advisers, and would not be recommended were it not for the high sales commissions. If such an investment is presented to you, the best response is to “just say no.” If the opportunity was so great, venture capitalist investors would invest and the issuer would not need to be raising money from people like you and me. More appropriate, liquid, and less risky investment alternatives that do not pay the seller high fees or commissions are usually available.

If you are stuck in one of these investments, you may be able to get your money back by undoing the sale (a legal remedy called rescission). We would be glad to discuss your options with you, so feel free to give us a call.

J. P. Morgan Chase Avoids Criminal Prosecution for Hosting Madoff Fraud

Banking giant J. P. Morgan Chase has reached a deal with federal prosecutors to avoid criminal prosecution for its role in the Bernard Madoff Ponzi scheme. According to the prosecutors, J. P. Morgan, which had custody of Madoff accounts, witnessed suspicious money transfers, too-good-to-be-true investment returns, unverifiable trading activity, and the use of a one-man accounting firm. But while the bank connected the dots, filed a suspicious activity report with British officials, and was concerned enough to withdraw its own money from Madoff feeder funds, it failed to protect investors in that it “never closed or even seriously questioned Madoff’s Ponzi-enabling 703 account,” according to U. S. Attorney Preet Bharara.

The nation’s largest bank faced two felony charges of violating the Bank Secrecy Act because it did not file a Suspicious Activity Report after witnessing red flags about Madoff and did not have appropriate anti-money laundering compliance procedures in place. The charges come on top of other legal woes at J. P. Morgan, including a $13 billion settlement with the U. S. government in connection with its mortgage practices that led up to the financial crisis.

Madoff reportedly perpetrated his Ponzi scheme through accounts at J. P. Morgan from 1986 up until his arrest in 2008. Almost all of his clients’ funds were deposited at J. P. Morgan, and money flowed into and out of those accounts. In October 2008, one of J. P. Morgan’s analysts wrote a memo indicating that the bank could not verify Madoff’s trading activities or custody of assets. It also questioned Madoff’s “odd choice” of using a small, unknown accounting firm. Also in October 2008, J. P. Morgan filed a report with British regulators that stated in part that Madoff’s purported investment returns were “too good to be true.”

J. P. Morgan will pay approximately $2.24 billion to settle criminal charges plus another $350 million in civil penalties. In return, the U. S. will defer prosecution of the bank for two years as long as the bank complies with certain provisions, including reforming its anti-money laundering policies and cooperating with ongoing investigations. No individual executives at J. P. Morgan Chase were charged with a crime.

In addition to the criminal case settlement, the trustee for the liquidation of Bernard L. Madoff Investment Securities, LLC (“BLMIS”) appointed by the Securities Investor Protection Act (SIPA), Irving H. Picard, announced recovery agreements with J. P. Morgan totaling approximately $543 million for the benefit of BLMIS customers, for which bankruptcy court approval is being sought. The SIPA trustee has recovered approximately $9.783 billion for the BLMIS Customer Fund, or about 56% of the $17.5 billion that was lost in the Madoff ponzi scheme, according to a press release from the office of Mr. Picard.

While $1.7 billion is reported to be the largest bank forfeiture in history, investor advocates have been critical of the criminal case settlement. In particular, they criticize the failure to charge individual bank executives, who may have turned a blind eye to Madoff’s fraud, with a crime. They also criticize the leniency of the settlement terms as amounting to an ineffective deterrent.

Former Life-Settlement Executives Sentenced to 10-Years in Prison for Ponzi Scheme

Howard G. Judah and Gergory F. Jablonski, former executives at National Life Settlements LLC, were each sentenced to 10 years in prison for their parts in a $30 million investment scheme that utilized insurance agents to sell products. In 2009, the Texas Securities Board uncovered their securities fraud and selling of unregistered securities. They have since pleaded guilty.

National Life Settlements, LLC solicited money from both active and retired state employees and teachers by having funds rolled out of retirement funds and into National Life Settlements investments. According to the Texas Securities Board, the company quickly grew by using insurance agents to sell products. Agents, many of whom were not licensed to sell securities, earned more than $4 million in commissions.

However, the company never acquired the necessary life insurance policies needed to pay investors. They just paid new investors with money from earlier investors (i.e. Ponzi Scheme) and told investors that the company had received billions of dollars from the Federal Reserve.

Following the probe in 2009, the company was placed in receivership, and investors received about two-thirds of their investments back.

The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. If you believe that you may be a victim of investment fraud and would like to speak with us, please call our firm for a free consultation.

Investors May Have a Path to Recovery in Cay Clubs Resorts and Marinas Ponzi Scheme

On January 30, 2013, the SEC charged five former real-estate executives with defrauding investors in an investment scam. The investors were led to believe that they were funding the development of five-star destination resorts in Florida and Las Vegas when they were actually buying into a ponzi scheme.

The SEC alleged in the complaint that Cay Clubs Resorts and Marinas raised more than $300 million from nearly 1,400 investors nationwide through a network of hundreds of sales agents, marketing seminars, and podcasts that touted the profitability of purchasing units at Cay Clubs resort locations. The executives charged in the complaint promised immediate income from a guaranteed 15% return and a future income stream through a rental program that Cay Clubs managed. However, the Cay Clubs executives “used new investor deposits to pay leaseback returns to earlier investors.” Additionally, the executives “paid themselves exorbitant salaries and commissions totaling more than $30 million, and investor funds also were misused to buy airplanes and boats.” The scheme began in 2004 and Cay Clubs abandoned its operations in 2008, but still continued its scheme.

The SEC’s complaint filed in U.S. District Court for the Southern District of Florida charges the following former Cay Clubs executives:

• Fred Davis Clark, Jr. – president and CEO • David W. Schwarz – chief accounting officer • Cristal R. Coleman – manager and sales agent • Barry J. Graham – sales director • Ricky Lynn Stokes – sales director
More often than not, the perpetrators of ponzi schemes spend money as fast as they steal it. As a result, victims looking to recover their losses typically must sue third parties who were involved in the unlawful transactions. As stated above, the fraudsters here defrauded nearly 1,400 investors through a network of hundreds of sales agents.

These sales agents may be the key to recovering investor losses because any person that sells securities must be a registered representative of a brokerage firm. In addition, sales agents and their firms are required to conduct their own due diligence about the investments they recommend.

It is imperative for victims of this ponzi scheme to begin collecting documents and information to help identify all parties that were involved in the unlawful transactions. These documents include but are not limited to:

• All contracts signed by the customer,
• All marketing material that the sales agents provided to the investors,
• All subscription agreements or offering memorandums that describe the investments at issue,
• All emails and correspondences between the investor and any party that they spoke to in connection with the investments,
• All calendar entries of meetings and notes of conversations.

Furthermore, investors need to be careful before drafting any complaint letters to regulators because that document constitutes evidence that can be used against the investors in subsequent legal proceedings. As a result, it is recommended that investors contact an attorney to draft any complaints.

The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. If you believe that you may be a victim of investment fraud and would like to speak with us, please call our firm for a free consultation.

The Doss Firm Quoted In On Wall Street Regarding FINRA Barring Ex-ING Broker Michael J. Dimare

The financial publication On Wall Street published an article today discussing the fate of Michael Dimare, a former ING Financial broker who was recently permanantly barred by securities regulator FINRA for scamming approximately 22 victims out of approximately $2 million between 2001 and 2008.

Accoding to Dimare’s CRD report, a report that tracks customer complaints made by customers and securities regulators, ING Financial has compensated some investors who have come forward. In the article, Jason Doss, an attorney with The Doss Firm was quoted, “The question is whether everyone will come forward.”

FINRA’s investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

Victims who lost money prior to 2006 likely have legal claims that can be brought against John Hancock for failure to supervise as well as the depositary bank who accepted the checks for deposit for conversion. Victims who lost money between 2006 and 2008 likely have claims against ING Financial Partners and the depositary bank.

For more information, feel free to contact us for a free consultation.

FINRA Bars Former ING Financial Broker Michael J. Dimare From Ponta Vedra Beach, Florida For Running A Ponzi Scheme

FINRA anounced yesterday that it permanantly barred former ING Financial broker, Michael Dimare, from Ponta Vedra Beach, Florida for scamming approximately 22 victims out of approximately $2 million between 2001 and 2008.

FINRA’s investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

Victims who lost money prior to 2006 likely have legal claims that can be brought against John Hancock for failure to supervise as well as the depositary bank who accepted the checks for deposit for conversion. Victims who lost money between 2006 and 2008 likely have claims against ING Financial Partners and the depositary bank.

For more information, feel free to contact us for a free consultation.

Michael Joseph Dimare formerly with ING Financial Partners Pleads Guilty To Ponzi Scheme Fraud

According to First Coast News in Ponte Vedra, Florida, Michael Joseph Dimare pleaded guilty to mail fraud Monday for scamming about 22 people out of approximately $2 million. He worked as a registered representative of ING Financial Partners from October 2006 to May 2008. Based on the article, it appears that Mr. Dimare engaged in the ponzi scheme fraud while he was with ING Financial Partners and the firm he worked with before ING, Signator Investors, Inc. According to Mr. Dimare’s CRD report, a publicly available report that tracks customer complaints against financial advisors, it appears that only 11 customers have filed complaints thus far. One of the victims came forward in the article and stated that she received every penny of her money back from a financial firm. That firm is likely ING Financial Partners and/or Signator Investors, Inc.

Given that he pleaded guilty to defrauding 22 people, there are likely more victims who have not come forward yet.

The Doss Firm, LLC represents investors across the nation against financial firms and seeks to recover investment losses that result from fraud. If you believe you have been defrauded by Mr. Dimare, feel free to contact us.