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Recent SEC Releases

Tennessee Woman Gets 30-Year Sentence For Role In $20 Million Ponzi Scheme

A Tennessee woman - the only of six charged by authorities to stand trial rather than plead guilty - learned that she will spend the next 30 years in federal prison for her role in a Ponzi scheme that duped investors out of more than $20 million.  Joyce Allen, 67, received the sentence after a federal jury convicted her of ten fraud charges following a September 2014 trial.  The sentence is one of the longest ever handed down to a woman in a Ponzi scheme prosecution.

Allen operated J. Allen & Associates ("JA&A"), a Tennessee company which offered tax planning and preparation services.  In addition, JA&A was accused of soliciting its clients to purchase various annuity investments called offered through Benchmark Capital, Inc. ("Benchmark"), a company operated by Charles D. Candler.  According to authorities, Allen would identify current clients with significant assets, such as real estate or retirement accounts, and suggest that they could realize greater returns through an investment with Benchmark.  In many instances, investors were told that they could take out a loan against the equity in their real estate and use the resulting investment proceeds from a "Home Equity Annuity" to cover their monthly mortgage payments.  In total, the scheme took in $46 million from investors.

However, Candler and Benchmark were not operating a legitimate investment company, but rather were using incoming investor funds to pay returns to existing investors in a classic Ponzi scheme.  After funds began to dry up in early 2012, multiple federal agencies began an investigation.  Candler committed suicide in March 2012 in a Tennessee cemetery, and five individuals including Allen were indicted later that year.  In addition to Allen, authorities charged Sharon Thomas, an employee at JA&A; Brian Murphy, a former pastor who solicited investors; Tiffany Thompson, a Benchmark employee; Paulynn Wright, a Knoxville mortgage broker; and Dona Rector, also a Knoxville mortgage broker.  All five pleaded guilty, and received the following sentences:

  • Wright: 4 months
  • Rector: 2 years probation
  • Thomas: 25 months
  • Murphy: 45 months
  • Thompson: TBD

Allen was also ordered to pay over $20 million in restitution.  Her ability to pay restitution is unknown.

The original indictment against Allen is below:


Indictment of Joyce Allen and Sharon Kay Thomas (1)



Madoff Victims That Invested $1 Million Or Less Will Soon Be Even

The court-appointed bankruptcy trustee overseeing the recovery of assets in Bernard Madoff's massive Ponzi scheme is seeking approval to distribute more than $1.25 billion to the notorious con man's victims - an effort that, if approved, will result in the full repayment of losses suffered by victims with allowed claims of $1.13 million or less.  Irving Picard, the court-appointed trustee, filed a motion seeking court approval to distribute more than $1 billion that had previously been held in reserve pending a decision on whether Madoff victims were entitled to an interest- or inflation-based adjustment on their claim amounts.  A decision earlier this year by the U.S. Court of Appeals for the Second Circuit sided with Picard in ruling that victims were not entitled to an upward adjustment to account for interest or inflation.

To date, Picard has returned over $7.2 billion to Madoff's victims through five distributions that began in September 2011.  Combined with an initial advance of up to $500,000 per victim through Madoff's broker-dealer's insurance through the Securities Investor Protection Corporation, many Madoff victims have been made completely whole - an unprecedented outcome for a fraud of this magnitude.  Not including the SIPC distributions to victims, Picard will have returned nearly 56% of each victim's approved loss if the sixth distribution is approved - a recovery which ranks as one of the highest recoveries on record. (For a list of the highest recoveries, click here).  

According to Picard, 2,552 claims have been approved relating to 2,213 accounts with Madoff's brokerage firm, Bernard L. Madoff Investment Securities LLC ("BLMIS").  Following the approval of the contemplated sixth distribution, 1,252 allowed claims will have been fully satisfied (including the SIPC advances) - including any customer claim of $1.126 million or less.  The amount of the distributions range from a low of $1,082 to the largest distribution of $168.5 million.

As distributions continue to Madoff's victims more than six years after the world learned of his massive Ponzi scheme, it is becoming increasingly possible that all victims could recover 100% of their allowed losses - a feat that has happened only twice in recent memory and certainly not in the magnitude of Madoff's scheme.  To date, Picard and his team have recovered approximately $10.5 billion out of the estimated $17.8 billion in principal lost by Madoff's victims.  Additionally, government forfeiture and recovery efforts have secured an additional approximately $4 billion that is being separately administered by a special master.  These funds are not subject to diminution to satisfy the vast amounts of legal and professional fees incurred by Picard and his team, as these fees are covered by SIPC.  Thus, coupled with the advance made by SIPC, it is entirely possible (and increasingly likely) that Madoff's victims will recover most, if not all, of their losses.  Six years ago, such a scenario seemed nothing more than a fantasy.

Previous Ponzitracker coverage of Madoff's scheme is here.

Picard's Motion is below:





Former NFL Player Charged With Multi-Million Dollar Ponzi Scheme

For the second time in as many weeks, a former National Football League player faces charges for operating a multi-million dollar real estate Ponzi scheme.  Stu Voigt, 66, who previously played football for the Minnesota Vikings during the 1970s and played in three Super Bowls, was indicted on multiple criminal fraud charges along with Jeffery Gardner, 61, for the pair's involvement with Gardner's business, Hennessey Financial LLC.  Voigt and Gardner each face two counts of conspiracy to commit mail fraud, four counts of mail fraud, five counts of bank fraud, and seven counts of giving false statements on a loan application.  Gardner and Voigt were also charged with making monetary transactions in criminally-derived property.  If convicted of all charges, each of the men could face a maximum sentence of decades in prison.

According to authorities, Voigt and Gardner solicited investors for Hennessey Financial LLC, a company operated by Gardner that touted lucrative yet safe returns through investments in commercial real estate and similar projects.  In exchange for an investment, potential investors were promised potential annual returns ranging from 10% to 20%.  Voigt is accused of using his position as chairman of First Commercial Bank (the "Bank") in Bloomington, Minnesota, to secure loans for Gardner without disclosing Gardner's true financial position. Investors were told in 2008 that they could invest with a new corporation in exchange for abandoning their claims related to Hennessey, when in reality the new venture was nothing more than a bank account from which Gardner paid "interest" payments to investors.  In total, Gardner and Voigt raised millions of dollars from investors.  Gardner was previously indicted in February 2013 on multiple fraud charges.

The Federal Deposit Insurance Corporation ("FDIC") instituted proceedings involving the Bank in 2011, alleging that Voigt had committed misconduct by voting in favor of a loan and failing to disclose the extent of his involvement with borrower Hennessey and a guarantor identified as "Mr. X" who is believed to be Gardner.  The FDIC alleged that Voigt took actions as an officer of a Hennessey-related company to transfer the Bank's collateral for the loan out of the reach of the Bank, including the formation of a company to take a security interest in Mr. X's assets to the Bank's detriment.  These actions, alleged the FDIC, resulted in "substantial loss to the Bank and in gain to" Voigt.  Voigt, while denying wrongdoing, later agreed to a banking ban and a $15,000 fine.

Voigt is the second former NFL player to be charged for involvement in a Ponzi scheme in as many weeks.  Earlier this month, the Securities and Exchange Commission filed civil fraud charges against former Miami Dolphins player Will Allen, alleging that he and a business partner operated a $33 million Ponzi scheme touting extraordinary returns to investors through profitable loans extended to professional athletes.  


Facing Potential Clawback, Church Asks Members To Donate

A Michigan church that received approximately $300,000 in donations from a convicted Ponzi schemer has spurned a request by authorities to return the funds, instead announcing the creation of a fund that parishioners could donate to and which ultimately would be used to help the fraud victims.  Resurrection Life Church, located in Grandville, Michigan, received multiple donations and tithes from David McQueen, who is currently serving a 30-year sentence in federal prison after being convicted of operating a $46.5 million Ponzi scheme.  

McQueen promised investors monthly returns of 5% through his investment in a Florida company known as Maximum Return Transactions ("MRT").  MRT promised investors monthly returns ranging from 5% to 11% from trading in foreign currencies, with McQueen pocketing the difference between the 5% promised return and the actual return received from MRT.  McQueen's entity, Accelerated Income Group ("AIG"), also recruited insurance agents to sell the investment to their clients.  For a short period of time, this form of arbitrage was successful.

However, in mid-2007, MRT stopped making payouts to investors (and was later alleged to be a Ponzi scheme in a civil enforcement action filed by the Securities and Exchange Commission).  However, rather than notifying AIG's investors of the failure of MRT, McQueen continued soliciting investors with promises of the lucrative monthly returns.  In an attempt to reconstruct the returns from MRT, McQueen placed nearly 1/3 of investor funds in a variety of speculative investments that resulted in severe losses.  Despite these losses, investors continued to receive falsified account statements showing consistent account gains. The scheme later collapsed, as all Ponzi schemes do, and ultimately resulted in losses of $46 million to approximately 800 investors.

As part of his scheme, McQueen assumed a larger-than-life persona in his community that included outlandish displays of wealth coupled with a self-professed claim that he was "blessed to be a blessing" to sympathetic causes.  From 2005 to 2009, McQueen contributed approximately $300,000 to Resurrection Life Church through various tithes and donations.  However, those funds were not McQueen's personal funds, but rather were funds belonging to investors.  

After McQueen was ordered to pay $32 million in restitution to his defrauded victims, the U.S. Attorney's Office began contacting third parties who had received funds from McQueen seeking the voluntary return of those funds to be used to compensate victims.  One of those third parties that received such a request was Resurrection Life.  However, in a letter dated February 16, 2015, Resurrection Life secretary Bernard Blauwkamp informed the U.S. Attorney's Office that while it had "prayerfully considered your request," the Church would "respectfully decline" to return the $300,000.  A subsequent post on Facebook by Pastor Duane Vander Klok elaborated on the Church's position:

Regarding the recent request to voluntarily return the funds that were donated years ago by McQueen, we unfortunately do not have those funds. The money was dispersed to various charitable causes many years ago according to the requirements of the law. Because so much time has passed since the donations were made, it is impossible to find those dollars now. The orphanages, missionaries, even local businesses who actually received portions of that money have all long since put it to good use, and so have the businesses where they spent it and so on.

If Resurrection Life Church had been aware of the nature of the funds at the time they were received, or even before the funds were dispersed to charitable causes, we would have gladly returned them to the investors. Sadly, we never had that opportunity because no one had any knowledge of the illegal circumstances surrounding the gifts until many years later.

Any attempt to take our current donations and redirect them to the investors would create an ethical and potentially legal dilemma because, not only do we not have an equivalent sum available but, what we do have was donated recently and not for that purpose. Redirecting donated funds to a purpose other than what they were donated for is a very serious legal matter. We do not desire to be unethical, or commit a crime today, in reaction to the crime committed by someone else many years ago.

The Church also announced plans to create a fund to accept donations which would be used to compensate victims.  As Pastor Klok explained,

Since for both ethical and legal reasons we cannot simply redirect funds to the investors, we have been exploring what we can do for them. We are in the process of establishing a special fund account to benefit the investors who lost their funds. Our church community can donate to the account and all the monies received into that fund will be put towards the restoration of the investor’s loss. An independent attorney will oversee the escrow fund and will coordinate with the US Attorney for eventual distribution of all funds received to victims. Details of how to give to that account will be made available to our congregation through our website and social media as soon as they are finalized.

The U.S. Attorney's Office has not publicly commented on the Church's position.  While receivers have been successful in bringing similar suits around the country, here the lack of a receiver over McQueen's entities as well as the length of time that has elapsed since the donations took place back in 2005 - 2009 suggests it is unlikely that the church could face a clawback action seeking return of the donations.  It remains to be seen whether the Church's efforts to collect funds for victims will have any meaningful result, but those efforts will likely include the complex task of attempting to administer a claims process including hundreds of victims.  

The Church's February 16, 2015 Letter is below:

Resurrection Life Church Letter by jmaglich1


Son-In-Law Of New York Lawmaker Charged With $7 Million Ponzi Scheme

The son-in-law of New York lawmaker Sheldon Silver was indicted on charges that he operated a Ponzi scheme through his investment fund that duped investors out of at least $7 million.  Marcello Trebitsch, also known as Yair Trebitsch, was charged with a single count of securities fraud and a single count of wire fraud in a recently-unsealed complaint filed in the Southern District of New York.  Notably, Trebitsch's father-in-law, Sheldon Silver, was recently the subject of criminal corruption charges also filed in the Southern District of New York.  If convicted, Trebitsch could face up to twenty years in prison for each count.  

According to the complaint, which was filed under seal on April 10, 2015 by way of a sworn affidavit by a Federal Bureau of Investigation special agent, Trebitsch began soliciting investors in or around 2009 for Allese Capital, LLC ("Allese"), which Trebitsch touted as a successful investment fund that he operated with his wife.  Trebitsch, whose wife Michelle is a certified public accountant and is the daughter of former New York Assembly Speaker Sheldon Silver, told potential investors that Allese employed a successful trading strategy through the day-trading of large cap stocks that resulted in annual returns ranging from 14% to 16%.  Trebitsch assured investors that little to none of their funds would remain invested in the market overnight, and also claimed that he cleared his trades through a major Wall Street investment bank that also had agreed to invest $50 million in Allese.  In total, Trebitsch raised at least $7 million - a majority of which was raised from a single victim.

After Trebitsch's largest investor requested a partial redemption of his investment in June 2014, Trebitsch ultimately disclosed through his attorney that he had experienced significant trading losses and that, after accounting for Trebitsch's $400,000 "fee," no money remained.  

The Complaint alleged that a forensic review of Trebitsch's bank accounts demonstrated that only a small portion of investor funds were used to engage in trading, and that Trebitsch suffered net trading losses.  A subsequent search warrant executed at Trebitsch's house apparently turned up a handwritten note that appeared to be authored by Trebitsch and stating that he "reckognize [sic] the tremendous pain along with financial," followed by the crossed-out word, "pain."  

The Complaint is below:


US v Trebitsch