Boiler Rooms and Recovery Room Scams
Boiler rooms – the theme of the film of the name six years ago – attempt to persuade investors to purchase shares, but there are also scams involving options, futures and currencies. Some offer shares that promise huge returns but turn out to be  worthless; others sell shares in companies that do not even exist. Scamming people for money using the psychology of greed (which we all have in us to a certain degree) is most probably as old as prostitution. 500 years from now it will still be going on and I bet the foundations  will be basically the same.
What is a Boiler Room?
The term ‘boiler room’ originates from a time when pushy telemarketers would rent cheap office space in the basement of buildings. These offices were often close to, or actually in, the room where boilers were situated — hence their name. But today, a boiler room is a general term that refers to unregulated companies that use high-pressure selling tactics to flog dubious shares by providing false or misleading information. Basically a boiler room is a place full of salesmen (con men really), who are unregulated, and will cold call you to try and tempt you to part with your money and invest in some “amazing” company which will make you a millionaire. The stocks are usually unlisted and therefore difficult to sell once you have bought them. In reality they are likely to be worthless.  They tend to target people who already own shares, and will get your phone number/contact details from lists that they have bought, including shareholder lists. More often than not, they are based overseas. Whatever, you should NEVER deal with them, and NEVER deal with anyone who  cold calls you from a company who you have never dealt with before.Another boiler room scam are the newsletters (TODAY’S TOP PICKS!!!). The subway.com just got hit with a big fine for their pump-and-dump act.Also, any company with the word ‘Global’ in its name, especially  a financial one is a company best avoided. Case in point Argos Global Equities. Trade on fundamentals, not news. Make sure there is sufficient daily trading liquidity, otherwise the market makers are calling the shots. There is no way in hell I would buy a stock based on an unsolicited phone call, email, etc.Another scam targeting people ‘of a certain age’ revolves around manipulating people to invest in “Regulation S” shares (These are junk (?) shares that are too risky to be sold in the USA but can be pushed to foreigners like us). Regulation S shares come with the secondary scam of a  smooth talking lawyer contacting the victim and offering to take up their case and petition to have the shares made freely tradeable. In reality, shocking as it may seem, anyone can set up a company and sell shares to the public in it, you don’t need to be a broker, or to be in possession of a license,and as a result, you have absolutely no  protection at all. If a   company is genuinely going to float on an exchange, the issue would be handled by a brokerage house, the bigger the better from the company’s point of view. Also, you would see at least some independent press regarding their imminent floatation. Selling stock in an unlisted company is not illegal, neither is selling it without a license, under these kind of circumstances, it is down to the individual to do their own due diligence behind the company promoters.

The Typical Boiler Room Victim
Neil – a 54 year-old victim of a boiler room ‘broker’ comments – : “All I saw was an opportunity to invest in something risky but with a great up-side and the possibility of getting out if the share price dropped. They forgot to mention the shares were restricted until they had me well and truly hooked in. Naive – yes- but common to a lot of people with $$ in their eyes and little experience of share dealing. And you’re right – I’ve not seen a penny of the fantastic’profits’

Profile Victim
If you are male, over sixty years old, reside in the South East or London, and also have some experience in investing |then you’re already a possible target for boiler rooms.Thing to always take into account is the idea that boiler room operators are incredibly good at the things they do — persuade! In accordance with the FSA 15% of victims were swayed to purchase shares in the course of their first call. And nearly half of many victims succumbed because they were called four if not more times!The FSA emphasize that boiler room salesmen often won’t take ‘no’ for the answer.They are able to constantly call a target, attempting to build a relationship and obtain their confidence. They are able to appear knowledgeable and highly professional  though they are only attracted to taking your money. Additionally even if they purchased shares, six out of ten targets were pursued for about 30 days, and nearly a quarter said they have been receiving calls coming from the same boiler room for longer than half a year. That’s such that you could wear a lot of people down.

These People will not take No as an Answer

Bligh comments…My parents that are both in their 70s were recently cold called by Argus Global Equities Limited (from Nevis within the Caribbean) and that they spent approximately 1 hour at the phone before convincing my father to put money in GBP1500. They sent him the application  forms by email which he was unable to open on account of some virus restriction – this meant Argus needed to post the forms. This gave him a while to discuss with myself in regards to the investment as well as for me to perform a certain amount of digging – after discussing with a financial adviser and forwarding him the resulting information he decided not to go for it in the investment. Naturally, the sales person called back to verify that my father had received the forms and was disappointed that my father was not going ahead in the investment but apparently quite pleasant regarding this – informing my father he ought to keep a close watch on a certain one of many recommended stocks understanding that he should remember GBP1500 have not been a big sum of money too invest.I had been firstly concerned that somebody would consider selling higher risk investments to retired people in their 70′s who  probably cannot afford to take a position with this sum of money, and secondly if GBP1500 is taken into account along side them not to be a big sum of money and then it made me think that perhaps my parents will be asked to put money in further sums sooner or later. Having done a Google search It is possible to not find any feedback from investors for this company. What exactly are your ideas for this?Bligh this effect is what could have happened. Basically he invests £1500, the trade surprise…surprise… is quite a winner (although if he decides to profit you will find there is a 99% chance he will never be capable of getting his hands on the ‘profit’ not to mention the first£1500).So say the £1500 travels to £3000. Then he’ll be told to purchase another stock which can likely be another excellent winner. Then comes the best play; ‘Hey Mr Bligh Snr, am I a great broker or what? All you have to do gramps is listen to me and I’ll help you to a ton of money, but let’s not mess around with such small money anymore, what about putting up £20k or perhaps £50k, {just imagine|imagine what you are able to do after i double your hard earned cash, which in turn stock ABC which we’re getting ready to obtain will probably go ballistic, they’ve just found a cure for cancer,will probably be the following google, have developed newer and more effective something etc…Avoid seeking to find feedback, obtain a check of both your along with your father’s greed all humans have it in us) and NEVER send money abroad especially to a tin pot crappy country within the Caribbean. And of course the salesperson all sound very friendly and therefore are very professional simply because firms employ {a number of the world’s best salesman, Why? Since they are capable  to as greedy suckers coming from the world throughout are sending them multi millions of pounds a year. As a matter of fact I’d reckon these scammers together rake in between $100-$300 million of profit a year…of course you intend to report them to the FSA use this link
I actually have friends who’ve lived in South East Asia in which a great deal of the boiler rooms can be found. They may be very creative in how they generally do business. The way in which they acquire data bases will amaze you – bribing people in banks, five star hotels, clubs, air lines, accountants, lawyers……….anybody who has usage of lists  of individuals with cash to shell out are potential targets. Advertising in magazines is yet another way they generally do it and then they will get responses from those who are curious about investing.They even create legitimate front companies in places like the united states of america or Europe and set up websites as a way to design the picture of the ‘opportunity’ they need and want to sell you. Other areas from where boiler rooms conduct business would be the    Philippines (a great deal) South Africa (a considerable increase opening shop), Thailand (not exactly many nowadays), Indonesia and Malaysia (smaller operations). They are in countries where they will be able to bribe the relevant authorities that provides a layer of safeguard against them. I recall once meeting a man who worked in a single one of these boiler rooms and he was pleased with it – bought 3 houses together with the money he made out of robbing people blind and felt nothing whilst functioning.The way in which to not get stung by these folks would be to only put money into shares of companies which are listed on large exchanges just like the FTSE…etc. The next time someone desires to sell you pre IPO stock that’s set to explode and you really are tempted, then take that money to a race track, purchase a drink and figure out if your horse wins – at the very least you’ve got a slight chance of winning and still have some good times whilst performing.Please don’t kill yourself, many of us} live and learn, Treat this being a valuable lesson,  to examine things first in small quantity in addition to become more careful. Never become involved in anything you don’t understand, most especially when people you do not know call you unintentionally offering you easy money…In closing, this is a posting coming from the now defunct IC Forum, circa December 2004. You will need to excuse the language, however still the message is the same. Boiler Rooms HURT PEOPLE.

MIAMI (AP) — A federal jury decided Wednesday that Toronto-based TD Bank owes an

investment group $67 million due to it’s role in a $1.2 billion Ponzi scheme which was

operated by a now disbarred attorney, Scott Rothstein.The decision came in a lawsuit filed

by Coquina Investments, operating  out of Corpus Christi, Texas. It was the first to go to trial

of several pending lawsuits filed by wronged investors against the bank among others.

Coquina attorney David S. Mandel said the jury “sent exactly the right message to TD

Bank.”Once a prominent South Florida attorney, Rothstein is serving a 50-year prison

sentence after pleading guilty to running a massive scam involving investments in phony

legal settlements that imploded in 2009 The 49-year-old lawyer has been cooperating

extensively with federal prosecutors, and more people are expected to face criminal

charges; seven besides Rothstein have already been charged.The scheme wasone of the

largest frauds in South Florida history and triggered the failure of the once high-flying Fort

Lauderdale law firm Rothstein Rosenfeldt Adler. Rothstein has boasted about paying bribes

to unnamed politicians, judges and law enforcement for the campaigns of many state and

national politicians.Testimony and court documents show that Rothstein used an account at

a TD Bank branch as an integral part of the scheme. Conspirators in his scheme allegedly

posed as TD Bank employees, and one of Rothstein’s associates devised a fake TD Bank

website on which fake account balances were posted for investors. “This bank was integral to

the fraud,and fact is that it could not have succeeded without their active participation in the

Ponzi scheme,” Mandel said. “TD Bank was Rothstein’s partner in crime.”Spokeswoman

Rebecca Acevedo said TD Bank would explore its legal options and insisted the massive

fraud should be blamed squarely on Rothstein.”We will continue to defend the bank against

claims of wrongdoing,” Acevedo said.TD Bank, a subsidiary of Toronto-Dominion Bank of

Canada, operates 1,280 branches in 15 states and Washington, D.C., according to the bank’s

website. It had $160 billion in total deposits and $202 billion in assets as of Oct. 31.

Mandel said key TD Bank employees knew of the fraud and assisted Rothstein in assuring

investors their money was sound. In a lengthy sworn deposition in December, Rothstein

claimed he gave former TD Bank vice president Frank Spinosa more than $50,000 to ignore

obvious signs of illegal activity .Called to testify in the Coquina trial,  Spinosa invoked his

Fifth Amendment right against self-incrimination. His attorney has repeatedly denied

Rothstein’s accusations, contending that Rothstein is falsely implicating other people in

hopes of winning a sentence reduction recommendation from federal prosecutors.Rothstein,

however, insisted during the 10-day deposition that his only hope of eventual freedom was

to tell the full truth.”I would be a fool to lie,”  he stated, according to testimony transcripts.

There’s a whole class of sneaky behavior that’s designed to move money from one pocket to another under false pretenses. These con games are often just greedy and dishonest, but can sometimes be clever and creative as well.
I’d feel worse about making a big deal about these crooked schemes if there weren’t such a cross-pollenation between the most dishonest bamboozles and the sales pitches that fall like rain in every part of the world where mass media and commerce tryst.
After all, the U.S. $45 radionic amulet or the environmentally-safe EuroWash Laundry Ball in the new age catalog, “free trade” agreements, website privacy policies, nature shows, public opinion polls, “reduced fat” food, the evening news, expert testimony and advertisements disguised as money all use a language of bogus claims and deceptive advertising that they share with more amusing and more blatant scams.
Capitalism, with its perpetual shell-game of paper money, plastic credit and the like, has been susceptible to con artists from the beginning. Check out such extraordinary popular delusions as The South Sea Bubble, Holland’s remarkable 17th Century Tulip Mania, The Mississippi Scheme, and the fabulous internet stock bubble — seems like only yesterday!
Perhaps you’ve heard of Charles Ponzi’s famous scheme. The classic bubble has been repeated in various forms ever since, the chaos left in their wake toppled the government of Albania in 1997, and yet more recently, caused no end of trouble in South Africa.
Ivar Kreuger built a marvelous bubble out of a match company early in the last century, but it collapsed in dramatic fashion in the wake of the 1929 stock market crash.
Pyramid Schemes (like the “Make Money Fast” epidemic) — Ponzi on a Xerox budget — are only a percentage of the many scams to proliferate on-line. An early favorite: the Sexygirls Scam, in which a “free” program for viewing naughty pictures quietly took over the users’ modems to call pricy toll-numbers in Moldova.
Did someone say Enron? WorldCom? Just two in a long line of respectable, white-collar thefts. Ask Joe Bob Briggs how they pulled it off.
Not that employees of crooked companies are completely helpless.
HELP I HAVE BEEN SCAMMED WHAT CAN I DO?  CONTACT US HERE AT CLIENT FIRST LLC
The 419 Coalition has a good page with information about the “Nigerian Scam.” You know — the one where you get an email from a relative of some corrupt government official in a troubled foreign land who wants you to help her smuggle an enormous amount of money out of the country in exchange for a sizeable share of the loot. Sure enough, many dishonest people fall for this rewarmed Spanish Prisoner con.
But read what happened when some wise guy led the fraudsters on for a while — and if you liked that, you’ll like this one and this one too — and if you liked those, you’ve got to read the one where the pranksters actually got the con artists to cough up some up-front money, or to carve a wooden replica of a Commodore 64 computer! If you want to get in on this sport of baiting the scammers, take a look at the 419 Eater site for some tips.
Check out Quatloos: Cyber-Museum of Scams & Frauds for a good look at some of today’s most common too-good-to-be-true get rich quick scams.
You can also read up on how Barry Minkow has capitalized on his conviction for the ZZZZ Best bubble by going on the business ethics lecture circuit. A tip of the hat as well to the scam artists who called themselves the Baron and Baroness von Bressensdorf and were able to afford a titled lifestyle by keeping an investment house bubble going for almost 50 years before their recent arrests in North Carolina.
A fellow named James Reavis used patient cunning to plant documents hither and yon which seemed to give him an open and shut legal claim to almost the entire state of Arizona. He almost got away with it. Read the amazing and amusing story of The Man Who Stole Arizona — you won’t be disappointed.
Mel Spillman falsified wills and other documents, using his position as a probate consultant to skim $5 million (U.S.) from the estates of over a hundred people who died without other heirs.
Governments are swindles of the crude “protection racket” style that use the Stockholm Syndrome with panache to transform themselves from resented to wildly popular. They don’t even play by their own rules — for instance, the local government of Washington, D.C. double-billed people for parking and traffic tickets, threatening to withhold auto registration or “boot” the cars of owners who did not pay up. Since 1981, D.C. has raked in (U.S.) $17.8 million with 829,000 illegitimate fines.
The ballad of Billie Sol Estes is an entertaining one. He manipulated federal farm aid programs and investors with a phantom fertilizer company back in the day, and evidently he’s still up to no good.
P.T. Barnum’s many scams were often more whimsical and entertaining than cynical and dishonest, which is not to say that he didn’t pocket the cash at day’s end with a smile on his face.
A Korean fellow named Cho sent form letters to hundreds of more-or-less randomly selected corporate executives, threatening to expose their adulterous behavior unless they paid him off. Nine execs paid up, but then Cho got greedy and overreached. “I thought it would be a success if I got wired 5 million won, and kept sending the letter after receiving 9 million won,” he said after getting caught.
Enter Norman Tweed Whitaker, international chess master and con-man of mystery — tried to squeeze money out of the Lindberghs during the kidnapping of the Lindbergh baby, ended up doing time in Alcatraz.
Wanted con-man David Stanley changed his name to “Michael Fenne,” and did what any good sneak-on-the-make in the ’90s would do — he decided to create an internet start-up.
Snake-oil salesmen have been a colorful part of the landscape since the beginning. Check out the weight-reduction eyeglasses and the foot-pumped breast enlarger at The Museum of Questionable Medical Devices.
One of the best and brightest was Dr. John Romulus Brinkley whose name will be forever associated with the goat glands he surgically installed in the scrota of men who wanted to be as horny as the hooved ones. He rode the goat gland craze to media and political power, and remains perhaps the king of American quacks and con men.
Madison Priest created a revolutionary technology that would allow ordinary phone lines to transmit data into people’s homes at unprecedented rates — faster by far than fiber optics. He staged stunning demonstrations that convinced private investors and companies like Blockbuster and Intel to pitch money into the project. But he was taking them for a ride.
The town of Palisade, Nevada nurtured a tourist-attracting reputation as the toughest town in the American West for years by staging realistic gunfights for out-of-towners. And speaking of tourist attractions, a crash-landing flying saucer turned out to be just the thing to boost the economy of Roswell, New Mexico.
The royally appointed court jester of the island nation of Tonga allegedly ran off with the equivalent of half the government’s annual budget when he was trusted to invest the royal trust fund. What kind of king goes to his jester for investment advice anyway?
You can find out plenty on-line about The Dominion of Melchizedek, a wannabe island nation and home to many a sweet little fraud — perhaps a distant cousin to Drunvalo Melchezidek, who’s on-line hawking holy super-ionized water (see also: laundry balls).
A group of con artists in China told hundreds of people that, for a small fee, they would officially witness their death-defying feats for the Guinness Book of World Records. “One man bungee-jumped from a helicopter, another spent 25 days perched on a steel wire suspended across a gorge,” but the “witnesses” just took the money and ran.
And on the scam front also, though it ended up being a better media hack than a money maker, was www.ourfirsttime.com, which advertised that it would let web surfers watch two teenagers lose their respective virginities in live streaming video.
Which reminds me a bit of Coïncidence Design — a site that promises to collect intelligence on your prospective lover and coördinate a “chance” meeting.
VirginMe.com promises a “doctor-approved scientific breakthrough that will transform a non-virgin girl into a complete virgin! Experience the pain and bleeding on the first night as if you were a real virgin!”
Also on-line is the FBI report on Harold Jesse Berney, who in the 1950s managed to get various people to invest over (U.S.) $50,000 in his plans to manufacture amazing machines he’d learned about on one of his trips to the planet Venus.
Scams are so fun that even the U.S. Securities and Exchange Commission has gotten in on the act. The SEC, which, despite the similarity of its name to Ponzi’s Securities Exchange Company, is allegedly in the business of trying to keep things clean, set up a number of fake companies on-line, which made grandiose claims in order to lure gullible investors (who then get this punchline).

FRAUD AND SCAMS

Seven men, including fund managers and analysts, were charged by the U.S. with forming a “criminal club” of friends and co-workers who reaped almost $62 million from insider trading in Dell Inc. (DELL) shares.
Manhattan U.S. Attorney Preet Bharara alleged that the scheme included one trade that earned a $53 million illegal windfall for Level Global Investors LP co-founder Anthony Chiasson and his fund. The insider-trading ring, which involved five different hedge funds and investment firms, is the largest identified by the U.S. to date to involve a single stock, federal authorities said.
Chiasson, Todd Newman, a portfolio manager formerly at Diamondback Capital Management LLC, Jon Horvath, a hedge fund analyst in New York, and Danny Kuo, a fund manager for Whittier Trust Co. in South Pasadena, California, were taken into federal custody yesterday, said Janice Fedarcyk, head of the Federal Bureau of Investigation’s New York office.
The charges “paint a stunning portrait of organized corruption on a grand scale,” Bharara said yesterday at a news conference. “It describes a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered lucrative inside information. It was a club where everyone scratched everyone else’s back.”
Galleon Group Scale
The U.S. said the illegal profits earned as a result of the scheme were almost of the same “magnitude of fraud we proved in the Galleon Group insider trading scheme,” Bharara said.
A five-year insider-trading probe by Bharara’s office and the FBI has resulted in charges against 63 people, Fedarcyk said. More than 50 have pleaded guilty or been convicted after trial since 2009, including Galleon Group LLC co-founder Raj Rajaratnam.
Rajaratnam, was found guilty in May and is serving 11 years in prison, the longest ever for insider trading. He made $72 million from his illicit tips, evidence showed. Several other technology company employees and fund managers have been convicted of receiving nonpublic information as a result of the probe.
At yesterday’s press conference, Bharara displayed a flowchart placing Sandeep Goyal, a former Dell employee, at the center of the ring. According to the U.S., an unnamed person in the Dell investor-relations department passed secret earnings information to Goyal, who passed it on to Jesse Tortora of Diamondback.
Circle of Friends for the SCAM ARTIST
Tortora, Horvath, Kuo and Spyridon “Sam” Adondakis, a Level Global analyst, were friends who shared inside information on public technology companies, including Dell, prosecutors said. The ring traded the information in 2008 and 2009, according to the U.S.
Tortora passed the inside information on Dell to Newman before the computer maker announced its first- and second- quarter 2008 earnings, according to the U.S. Newman made $3.8 million in illegal profits for his hedge fund from trading on the information, according to the U.S. Tortora also passed tips to Kuo, Horvath and Adondakis.
Adondakis passed the Dell information to his colleague Chiasson and others at Level Global, according to the charging documents. They allegedly traded on the tips for $57 million in illegal profits.
Adondakis, Tortora and Goyal pleaded guilty last year to securities fraud and conspiracy charges that were unsealed yesterday, Bharara said. They are cooperating with the government’s investigation, he said.
‘More Disturbing’
Robert Khuzami, the head of enforcement at the U.S. Securities and Exchange Commission, which filed a related suit yesterday against the defendants, said the cases describe actions “far more disturbing” than insider trading committed by someone who obtains one illegal tip.
The actions by the SEC and prosecutors “lay bare an organized network of analysts and fund managers who set up and used a corrupt network to obtain inside information,” Khuzami said. “These cases, along with Galleon and expert networking cases, reflect systemic dishonesty and exposes a deeply-embedded level of corruption.”
Horvath, 42, is an analyst at Connecticut-based hedge fund Sigma Capital Management LLC, said a person with knowledge of the matter who wasn’t authorized to speak because the information wasn’t public. He was arrested by the FBI yesterday at his home in Manhattan, the U.S. said, and released on a $750,000 bond after a court appearance before U.S. Magistrate Judge James Cott in New York.

FBI Searches
In November 2010, FBI agents from New York and Boston executed search warrants at the offices of Level Global and Diamondback, hedge funds founded by former employees of SAC Capital Advisors LP.
Level Global told clients last February that it was shutting down — eight years after David Ganek and Chiasson founded the hedge fund — because of the U.S. probe.
Steven Goldberg, a spokesman for New York-based Level Global, didn’t return a call seeking comment on the arrests.
Diamondback, in a letter to investors yesterday, said it has cooperated with U.S. authorities. It said Newman left the firm after the 2010 search and Tortora resigned in April 2010.
Civil Complaint
The SEC’s civil insider-trading complaint was filed in Manhattan federal court against all seven men, Diamondback Capital and Level Global. In addition to the alleged Dell insider trades, the SEC claims members of the ring traded on inside information about chipmaker Nvidia Corp. (NVDA) Level Global made at least $15.6 million in illegal profits on its Nvidia trades, the agency claimed.
Peter Neiman, of Wilmer Hale, a lawyer for Diamondback Capital, declined to comment on the SEC lawsuit. MaryJeanette Dee, a lawyer for Level Global, didn’t immediately return a voice-mail message left at her office seeking comment on the suit.
During the trial last year of James Fleishman, a former executive at Primary Global Research LLC, witnesses testified that he helped employees of technology companies pass nonpublic information to his expert-networking firm’s fund manager clients. Fleishman was convicted of conspiracy charges related to insider trading.
One witness, Mark Anthony Longoria, a former Advanced Micro Devices Inc. employee, described how he passed secret tips and other information about his company to fund managers, including Adondakis.
Primary Global
Bob Nguyen, a former Primary Global analyst who pleaded guilty and agreed to cooperate with the U.S., testified at Fleishman’s trial that Tortora was a client of Fleishman’s who got nonpublic information about technology companies through the Mountain View, California-based research firm.
Daniel Devore, a former global supply manager of Dell, pleaded guilty and is cooperating with the U.S. insider-trading investigation.
The criminal case is U.S. v. Newman, 12-00124, U.S. District Court, Southern District of New York (Manhattan). The civil case is Securities and Exchange Commission v. Adondakis, 12-00409, U.S. District Court, Southern District of New York (Manhattan).

Press Release
SEVEN CHARGED IN $120 MILLION NATIONAL TAX FRAUD SCHEME
December 6, 2011
FOR IMMEDIATE RELEASE
U.S. Attorney Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Tax Division Principal Deputy Assistant Attorney General John A. DiCicco, and Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), Miami Office, announce today’s arraignment of defendants Penny Jones, a resident of Rigby, Idaho, and Christopher Marrero, a resident of Davie, Florida, on an indictment charging them for their participation in a $120 million tax fraud scheme. The case has been assigned to U.S. District Judge William P. Dimitrouleas. Both defendants entered not guilty pleas this morning at their arraignments before U.S. Magistrate Judge Lurana S. Snow.
The indictment, recently unsealed, charges seven individuals – Jones, Marrero, Michael D. Beiter, Jr., formerly a resident of Coral Springs, Fla., David Clum, Jr., a resident of Whites Creek, Tenn., Dale Peters, a resident of San Mateo, Cal., Laura Barel, a resident of Lauderhill, Fla., and John Michael Smith, Jr., a resident of Hidden Hills, Cal. – with participating in a scheme to file false tax returns. Barel had been previously charged by a criminal complaint in May 2011. Arraignments are pending for Beiter, Clum, Peters, and Smith.
According to the indictment, the false return scheme was national in scope, causing the filing of tax returns for at least 180 clients from 30 different states, requesting more than $120,000,000 worth of fraudulent tax refunds. The indictment alleges that the defendants and clients of the scheme collectively filed more than 380 tax returns, mostly from tax year 2008 but also for other tax years, reporting the amount of their personal debt obligations as both income and as federal tax withholding.
The indictment alleges that the scheme was premised upon the fraudulent “redemption theory” argument that individuals are not responsible for their common, personal debt obligations such as home mortgages, unpaid credit card bills, and lines of credit, and may instead seek money from the IRS to repay these outstanding obligations. As part of the scheme, defendants prepared and caused to be prepared false IRS Forms 1099-OID, Original Issue Discount, and 1099-A, Abandoned Property, on behalf of the scheme’s clients.
According to the indictment, defendants held seminars in Florida and Tennessee in which they recruited potential clients. The indictment and other publicly filed documents allege that clients paid $750 to have defendants prepare a tax return reporting this type of “OID” income, and that clients agreed to share 10% of their tax refund with defendants.
Previously, in a separate case in Fayetteville, Ark., a client of the scheme, Philip Butcher, formerly of Rogers, Ark., was charged with filing false claims for tax refunds. According to the indictment in that case, Butcher filed two tax returns reporting his loans as OID income and tax withholding, claiming tax refunds totaling $1,456,696. The IRS paid Butcher $672,781.
Jones was previously enjoined by a federal court from preparing tax returns.
An indictment is only an accusation and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.
If convicted, Jones, Beiter, Clum, and Peters each face 215 years in prison, Barel faces 25 years, Marrero faces 30 years, and Smith faces 75 years. All of the defendants are also subject to fines and mandatory restitution if convicted.
These cases were investigated by Special Agents of the IRS – Criminal Investigation. Trial attorneys Jed Silversmith and Jonathan Marx of the Justice Department’s Tax Division, and Assistant U.S. Attorney Bertha Mitrani are prosecuting the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.
Technical comments about this website can be e-mailed to the Webmaster. PLEASE NOTE: The United States Attorney’s Office does not respond to non-technical inquiries made to this website. If you wish to make a request for information, you may contact our office at 305-961-9001, or you may send a written inquiry to the United States Attorney’s Office, Southern District of Florida, 99 NE 4th Street, Miami, Fl. 33132.

Almost every day consumers are confronted with a variety of scams including credit card fraud, identity theft, travel scams, medical fraud, counterfeiting and misrepresentation of products and/or services that are grossly misleading or down right fraud.

Do your due diligence-ITS SUPER IMPORTANT!

What is consumer fraud? Some definitions

Consumer fraud includes many fraudulent and misleading practices such as advertising, marketing, selling, or procuring goods or services. Consumer fraud occurs when a product or service does not perform as advertised. Another example of consumer fraud is overcharging for something or concealing a fee. Consumer fraud may also occur when a company compels you to agree to unfair terms and conditions in order to complete a transaction. You may also be a victim of consumer fraud if you purchased an item represented to you as safe when the seller had reason to believe otherwise. In this section we also inlude ID theft, banking, travel, medical and real estate fraud.

Recognizing Consumer Scams

For victims of fraud

10. Travel and vacations (Predicted as #9). As forecast, the Soccer World Cup in South Africa drew in thousands of ticket scam victims, while an increasing flow of travelers to China found themselves at the center of numerous tourist con tricks. However, the economic recovery we expected to see wasn’t as strong as everyone hoped and many Americans decided to vacation more safely at home.

9. Investment scams (Predicted as #10). In the wake of the Madoff scandal, more incredible Ponzi schemes were exposed and crashed, while art investment frauds targeted celebrities. Rock bottom interest rates lured more people into phony real estate and “green” investment projects (including the BP Gulf disaster clean-up) and foreign exchange funds promising unrealistically high returns.

8. Work from home schemes (Predicted as #7). Still a major source of crime, bogus home-working schemes received a lot of publicity throughout the year, so, although there were just as many crooks pushing these scams, slightly fewer victims may have fallen for them than we expected. One bit of good news!

7. Auctions and classified ad scams (Predicted as #8) move up one more place in our Top 10 scams list, as they did in the prior year. As much as anything, this reflects the growing use of the Internet for buying stuff, so we included bogus retail websites in our research this year, which, as you’ll see below, is likely to push the crime even higher up the charts in 2011.

6. Doorstep scams (Predicted as #6). We forecast that the 2010 Census back in April would attract scammers, mainly “phishing” (see #1 below) for information they could use for identity theft. And we were right. The annual crop of disasters, including floods and, this year, the San Francisco gas explosion, also brought out the bogus contractors in force.

5. Lottery scams (Predicted as #5). Sadly, as we reported a year ago, this crime targets the elderly. There’s apparently still no shortage of victims willing to pay up to hundreds of thousands of dollars in bogus fees to collect non-existent winnings.

4. Nigerian scams (Predicted as #4). The continuing efforts by the Nigerian government to clamp down on this scam seem to be having little effect. A TV documentary broadcast a few months ago showed how whole towns in that country have become dependent on the proceeds of scams.

3. Economy-related scams (Predicted as #3). Foreclosure and loan modification scams, together with bogus job offers — usually a prelude to identify theft or simply a means for charging an upfront fee — were the most common crimes in this category. The BP Gulf disaster added significantly to the number of phony job schemes.

2. Malware (Predicted as #2). This is the broad term for harmful software that installs on home and business computers to steal information, wreck hard drives, disrupt business activities and recruit computers into “zombie botnets” for sending out spam. Internet security specialists McAfee say they’ve identified 14 million unique malware programs, up by 1 million over the year as a whole.

1. Phishing and identify theft (Predicted as #1). The invasion by scammers of social networking sites, such as Facebook and Twitter, together with malware downloads (see above) kept this crime firmly in the top slot.

OIL AND GAS SCAMS-WATCH OUT!!!