3 PONZI/FRAUD CAPSULES: (1) Washington State Woman Jailed In Alleged $126 Million Ponzi Scheme; (2) Charity, Church, Investors In Metro Washington, D.C., Allegedly Scammed In $27M Ponzi; (3) South Florida Man Sentenced To More Than 12 Years In $29.5M ‘Gold’ Scam
EDITOR’S NOTE: This information is presented in the form of briefs, with links to external sources.
1.) Doris E. Nelson, arrested/jailed in Spokane, Wash., region, last week after federal raid in April 2010. SEC filed civil charges in September 2011.
The allegations against Nelson and multiple companies in Nevada, Utah and Canada are alarming, but also somewhat standard fare if you’ve been observing how schemes form and then explain away problems when trouble develops.
Among the core allegations are these:
- Nelson, of Colbert, Wash., ran a payday-loan business called “The Little Loan Shoppe” in the area of Spokane. The firm was linked to multiple LLCs in the United States and multiple LTDs in Canada. The business started out in the Canadian province of British Columbia in roughly 1997, and moved to the United States “in or about 2001.” Investors were told they could earn enormous profits from the spread between the loan shop’s expenses and what it charged customers for a short-term loan.
- The Ponzi scheme took in “at least” $126 million and caused losses of more than $40 million — losses that affected “at least” 800 investors.
- Federal prosecutors say they have identified “victim investors” in multiple Canadian provinces and multiple U.S. states. The indictment also lists a victim from Spain.
- The payday loan business was not profitable. Investors were getting paid through a complex shell game that lasted for years and involved the formation of new companies, including marketing and “leads” arms.
- Nelson and some of the defendants engaged in wire fraud, mail fraud and money-laundering.
- Nelson lied to the Manitoba Securities Commission and advised certain parties to lie to the British Columbia Securities Commission (BCSC).
- Nelson used investor funds to purchase a motor home valued at nearly $127,000, a Chevrolet Corvette valued at more than $61,000, a Mercedes Benz valued at nearly $112,000. She purchased more than $220,000 in clothing at the St. Johns Knits store and $217,000 at other stores, including Nordstrom.
- Nelson lost $400,000 of investors’ funds gambling at various Las Vegas casinos.
- Nelson spent investors’ money on luxury sea cruises, including nearly $29,000 on a Royal Caribbean cruise in which she also spent $23,500 in investor funds to gamble.
- The promissory-notes scheme showed classic signs of collapse in October 2008. (More details below.) Nelson slashed payouts to investors — from an anticipated rate of between 40 percent and 60 percent to 10 percent. The 10 percent payouts collapsed by March 2009.
- Nelson claimed Little Loan Shoppe bought the building it used in Spokane, but that was a lie. In truth, the company was paying rent to a company owned by Nelson’s husband.
- In February 2008, leading up to the beginning of the end in October 2008, Nelson forecast “an explosion of profit.” In May, she announced that “our industry is thriving.” She then opened a new window for investments, telling marks that she was “excepting” new money, as opposed to “accepting” it. “[T]his window of opportunity will probably not be open again due to the expected surplus of income . . .” she wrote.
- Between late June and late July of 2008, Nelson announced a “massive marketing campaign” that would turn the operation into “one of the largest loan companies.”
- Millions of dollars flowed to the teetering scheme after Nelson’s various hype fests.
- In October 2008, Nelson lied to BCSC about how she was making interest payments to investors, denying that the money came from “newer” investors and claiming the cash came from loan profits.
- BCSC ordered Nelson to stop issuing promissory notes. Nelson then told investors that changes to U.S. lending laws had “dramatically reduced our profits . . .”
- In February 2009, Nelson advised investors to quit contacting her about their investments because the inquiries were distracting her. She then announced a purported account review. In March 2009, Nelson told investors that the account review was behind schedule and perhaps would not be completed until the middle of April.
- In March 2009, Nelson traveled to Florida to try to get more money from existing investors.
- The scam then collapsed in its entirety and investors experienced ruin.
Read/view coverage of alleged Nelson scam at KXLY.com.
The Alleged Garfield M. Taylor Ponzi Scheme In Metro Washington, D.C.
2.) Garfield M. Taylor, others sued by SEC last week amid spectacular allegations of Ponzi fraud targeted at charities and people of faith, among others.
Outlined below are some of the core allegations in the alleged Garfield M. Taylor Ponzi scheme, which includes multiple defendants and multiple companies. The SEC brought the case last week, alleging a $27 million Ponzi scheme.
First, a quote from Stephen L. Cohen, the SEC’s associate director in the Division of Enforcement.
“Garfield Taylor and his partners in the scheme touted themselves as seasoned and trustworthy financial professionals offering a conservative but lucrative investment opportunity. In reality, they were gambling away investor assets in extremely risky trades and operating a classic Ponzi scheme.”
- Garfield Taylor, of North Bethesda, Md., formerly worked for Fannie Mae and “frequently” used its name in his fraud pitch. His companies, Garfield Taylor Inc. and Gibraltar Asset Management Group LLC, were charged by the SEC, as were five alleged “collaborators”: Maurice G. Taylor of Bowie, Md., who is the brother of Garfield Taylor; Randolph M. Taylor of Washington, D.C., who is the nephew of Garfield Taylor; Benjamin C. Dalley of Washington, D.C., who is the childhood friend and business partner of Randolph Taylor; Jeffrey A. King of Upper Marlboro, Md., whose sister is married to Maurice Taylor; William B. Mitchell of Middle River, Md.
- The scheme operated “at least” between 2005 and 2010, targeting “middle class” investors and charities.
- The FDIC’s name was used to sanitize the scam.
- Unregistered brokers were used to recruit investors.
- The firms themselves were not registered.
- Misleading PowerPoint presentations were used.
- A Baptist church in Maryland, a children’s charity in Washington and an investment club in Philadelphia were shown the PowerPoint presentations.
- Fancy language such as “proprietary strategy,” “covered call investment strategy” and “unparalleled downside protection” was used.
- The Baptist church also was shown a “fake ‘letter of recommendation’ from Charles Schwab.”
- “This letter was not prepared by anyone at Charles Schwab. Rather, it is a fabrication.”
- A retiree from Lanham, Md., plowed more than $780,000 into the scam, an amount that represented “nearly his entire retirement savings.”
- At least one investor in 2009 was worried about his/her nest egg in the post-Bernard Madoff environment, but Dalley reassured the investor that the opportunity had “taken the internal measures to strictly regulate our traders and accounting to ensure that our investor’s investments are safe.”
- When Dalley provided the assurance, he already knew that the opportunity “had not followed a covered call trading strategy and had instead engaged in highly speculative naked options trading.”
- Garfield Taylor actually was operating a “joint Ponzi scheme” through his companies.
- Garfield Taylor “convinced at least three individuals to give him the username and password to their online brokerage accounts in order for Garfield Taylor to place trades in those accounts on a discretionary basis in exchange for a share of any profits generated.” A Maryland woman duped in this fashion lost “nearly her entire account” originally worth $450,000 “in a matter of two months.”
- Garfield Taylor used investors’ money to send his children to private school at a cost of $73,000.
- At one point, one of the Garfield Taylor firms had “less than” $1,000 in its account, but an investor “wired approximately $590,000.” Garfield Taylor used the incoming money to make Ponzi payments.
Read the SEC complaint.
Gold Scammer Gets More Than 12 Years In Slammer
3.) Jamie Campany, 48, of Palm Beach County, Fla., sentenced to federal prison in $29.5 million fraud.
- More than 1,400 investors defrauded.
- Multiple companies operating in South Florida and elsewhere involved, including Global Bullion Exchange LLC of Lake Worth. Scam also used name of “Barclay.”
- Fraud fueled by telemarketing.
- FBI, U.S. Postal Inspection Service and Florida Office of Financial Regulation handled probe.
Read Feds’ statement announcing the Campany sentencing.