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Recent SEC Releases
Friday
Mar082013

Former Model Pleads Guilty To $7 Million Construction Ponzi Scheme

A single mother and former model agreed to plead guilty to charges that her promises to double investors' money through financing construction projects was, in reality, nothing more than an elaborate Ponzi scheme.  Tina Louise Mangiardi, pictured below in her former days as a model, will plead guilty to one count of mail fraud and one count of wire fraud in a plea agreement reached with federal prosecutors in Orlando, Florida.  Both mail fraud and wire fraud carry maximum terms of up to twenty years in federal prison, as well as criminal monetary penalties.  However, under federal sentencing guidelines, Mangiardi will likely face a much lighter term.

Mangiardi, a former model and single mother, was the principal of two Orlando businesses, T.L.M. Builders & Design, LLC, and Tlm Design and Construction, Inc.  Beginning in or around 2008, Mangiardi began pitching potential investors to invest in "bid bonds" for various Orlando-area projects, including restaurant chains, local hospitals, and even Disney.  A bid bond, which is not considered investment grade, are used to guarantee the financial viability and amount of a bid given by a construction company, and are typically issued by insurers.  In return for this authentication, the contractor usually must pay a small fee to the insurance company.  Mangiardi explained that she could double or triple investors' money within weeks, and lured investors by stressing her strong Christian faith and explaining that her gender would allow her to qualify as a minority in bidding for government contracts.  

Based on these promises, Mangiardi raised millions of dollars from at least 40 Orlando-area victims.  Many of these victims, according to authorities, were male business associates.

However, complaints soon began mounting when scheduled payments fell behind, and at one point the U.S. Secret Service began an investigation.  Court records show at lest eight lawsuits against Mangiardi and her companies since 2010, with $1.4 million in judgments obtained to date.  This week Mangiardi confirmed those suspicions by admitting that, rather than obtaining lucrative gains by financing bid bonds, Mangiardi was operating a classic Ponzi scheme using funds from new investors to fund payments to older investors.  Interestingly, before pleading guilty, Mangiardi had a series of exchanges with The Ledger, a Lakeland, FL area newspaper, in which she maintained her innocence, blasted those who had sought repayment of their loans, and even maintained that she was in possession of agreements that provided that any investor "talking or defaming me and my company causes instant void of payment plans and forfeit of payments."

A sentencing date has not yet been set.

Tuesday
Mar052013

Guilty Plea Expected By 26-Year Old 'Jet-Setter' Accused of $10 Million Ponzi Scheme

A 26-year old south Florida man is expected to plead guilty to criminal charges that he masterminded a $10 million Ponzi scheme that financed a his worldwide jet-setting lifestyle.  Donald R. French Jr., 26, is scheduled to appear before a Florida federal judge on March 15, 2013 to enter a plea agreement to at least one of the criminal charges he currently faces, which include single counts of conspiracy to commit mail and wire fraud.  Each charges carries a maximum sentence of up to twenty years in prison as well as criminal penalties.  

French formed D3 Capital Management, LLC ("D3") in early 2008 (when he was just 21 years old) in the upscale Mizner Park shopping area of Boca Raton, Florida.  The company advertised itself as the 'premier provider of global investment management,' and told potential investors they could expect annual returns of up to 50% through a variety of unconventional investments including the purchase and resale of precious stones, solar energy, and foreign currencies.  In total, nearly 30 investors entrusted French and D3 with approximately $10 million - including nearly $2 million from one single investor.

However, the supposed address in Mizner Park was nothing more than a mailing address and phone number designed to appeal to the wealthy contingent of south Floridians no doubt familiar with the implications such an upscale address carried.  Instead, French invested only a small amount of investor funds, using the majority of funds to fund a playboy lifestyle that included residences in Boca Raton and Rome, frequent foreign travel, and hundreds of thousands of dollars in gambling losses at popular Las Vegas casinos.  French later bounced more than $600,000 in checks in attempts to pay off gambling losses at the Cosmopolitan casino, which resulted in the filing of bad check charges.  

Authorities arrested French this past summer in South Africa on the outstanding Nevada bad check charges, where French later pled guilty in exchange for a 30-month prison sentence.  He was then extradited back to South Florida.

French is expected in court on March 15, 2013 for a change of plea hearing.  

Sunday
Mar032013

Gospel Singer Gets 14-Year Sentence For $8 Million Ponzi Scheme

A former gospel singer and member of the famous Winans family was sentenced to serve nearly fourteen years in prison for a massive Ponzi scheme that duped more than 1,000 investors out of at least $8 million.  Michael Winans, 30, received a 165-month sentence from United States District Judge Sean F. Cox, who took the rare step of upwardly departing from prosecutors' recommended 12.5 year sentence and highlighted the widespread devastation suffered by victims.  Winans pled guilty to a single charge of wire fraud in October 2012, and faced up to twenty years in prison.

According to authorities, Winans operated the Winans Foundation Trust (the "Trust"), telling potential investors that the Trust was involved in a lucrative venture investing in Saudi Arabian crude oil bonds. Between October 2007 and September 2008, potential investors were told that the bonds yielded exorbitant short-term returns of up to 100% in just two months, and that these returns were 'guaranteed'.  Winans initially recruited a group of eleven investors, who served as "shareholders" and recruited other investors on a large-scale basis. In all, at least 1,000 victims invested more than $8 million in what they thought were Saudi Arabian crude oil bonds.  

However, in reality, there were no Saudi Arabian crude oil bonds with exorbitant returns.  Rather, Winans operated the classic Ponzi scheme by using new investor funds to pay 'returns' to existing investors.  Investor funds were also used to pay Winans' personal expenses.  

In handing down his sentence, Judge Cox focused on the fact that many of the victims were recruited using Winans's religious appeal and family reputation.  The Winanses are widely known in the gospel music arena; Winans's uncle, Marvin, gave a eulogy at Whitney Houston's funeral, and Winans is the nephew of Marvin Winans, a Detroit pastor who is known nationally for gospel music.  Indeed, Winans himself also dabbled in gospel singing, even releasing an album in September 2011.  None of Winan's relatives were implicated in his scheme.  

Winans was also ordered to pay $4.8 million in restitution, and remains free on bond until his prison location is determined. 

Friday
Mar012013

Zeek Receiver Issues Update, Will Seek Court Approval For Claims Process By End Of March

The court-appointed receiver overseeing the recovery of funds for victims of the $600 million ZeekRewards Ponzi scheme issued an update today to address several pending issues.  Kenneth D. Bell, the Receiver, posted a three-page letter on the court-approved website, www.zeekrewardsreceivership.com, in response to 'many' requests for an update on his efforts.  In the letter, Bell provided a brief update that addressed the claims process and potential third-party litigation.  

Claims Process

The first item addressed by Mr. Bell, and arguably the most important, was the eventual claims process that would be avaialble to victims.  Because of the large number of potential victims and the likely costs that would accompany any attempt to conduct the claims process through the postal service, Mr. Bell indicated that the claims process would be carried out electronically "with few exceptions."  On or before March 31, 2013, Mr. Bell will file a motion seeking Court approval of the proposed claims process, which includes the proof of claim form that will be provided to all potential claimants.  

Once approved by the Court, Mr. Bell indicated that he would provide notice to all affiliates within fourteen (14) days that will contain a website address where a proof of claim form may be filled out and submitted.  Upon receipt, the proof of claim forms will be analyzed to first determine whether the claimed losses match up with the losses determined by the Receiver's forensic team.  Each claimant will then be notified of the Receiver's determination.

In the event that the Receiver disagrees with any affiliate's claimed amount, that individual will then have thirty (30) days to respond to the Receiver's determination.  If no response is received within that thirty-day period, the amount of loss determined by the Receiver's team will be deemed correct, and the Receiver will proceed with a distribution based on that amount.  If an objection is received, the Receiver will attempt to resolve the dispute with the claimant, and if that attempt is not successful, the Receiver will submit the dispute for the court's determination.

While the Receiver has not provided an exact estiamte of the total losses suffered by victims, he did indicate that he had recovered more than $300 million to date.  While it is unlikely that an initial distribution would include the entire amount to date, as the Receiver must maintain some reserves, the first distribution is likely to be close to 50% of approved losses should previous estimates of $600 million in losses prove correct.  After the Receiver has recovered all possible assets, including those through "clawback" litigation, he will then proceed with a final distribution.

Potential Litigation Claims

According to Mr. Bell, 'clawback' lawsuits against those 'net winners' that profited from the scheme will commence "in the next few months."  Mr. Bell issued his strongest statements to date concerning the substance of those lawsuits, stating that those winnings currently held by 'net winners' were "really just other peoples' money."  Many of those net winners are currently in negotiations with Mr. Bell's team to amicably resolve their situation without litigation, and Mr. Bell encouraged other net winners to contact his office.  While it is estimated that nearly $300 million is currently in possession of these 'net winners', Mr. Bell stated that he was unable to estimate with specificity any potential future recoveries.  In addition to clawback claims, litigation is also being considered against insiders, such as employees, contractors, and other third-parties that provided services to the scheme.  

Mr. Bell also addressed the ongoing efforts "fending off what we believe to be unnecessary and meritless motions brought before the Court by large 'net winners.'"  Labeling these efforts as nothing more than "delaying tactics," Mr. Bell indicated that a great deal of time and money had been spent to respond.  Unfortunately, the money expended to fight these efforts is a dollar-for-dollar reduction in the total amount of funds eventually available to victims.

Mr. Bell expects to file his motion seeking court approval of the claims process on or before March 31, 2013.  

A link to Mr. Bell's letter is here.

Monday
Feb252013

Former Pastor Pleads Guilty in Multi-Million Dollar Jewelry Ponzi Scheme 

A Virginia man and former pastor entered a guilty plea to charges that he operated a Ponzi scheme under the guise of a legitimate jewelry business.  Matthew James Addy, 34, of Lancaster, Pennsylvania, pled guilty to a single charge of securities fraud, which carries a maximum sentence of up to twenty years in prison.  His jewelry store, LaPorte Jewelers, has since shut down.

After serving as a youth pastor in Scotland for several years, Addy founded wholesaler Edward J. & Co, which also operated LaPorte Jewelers ("LaPorte").  Beginning in 2010, Addy began seeking investors for what he described as the purchase and resale of wholesale jewelry and loose precious stones.  In exchange for their investments, individuals were given promissory notes carrying above-average rates of interest that purportedly were linked to specific jewelry transactions entered into by Addy.  In seeking investors, Addy relied on his affiliations with various religious organizations, and a majority of the 40-plus total investors were recruited from these groups.  In all, Addy raised more than $3 million.

However, according to the FBI and as admitted by Addy, LaPorte was nothing more than a front for an elaborate Ponzi scheme that used investor funds to make Ponzi-style payments and for a variety of other unauthorized uses.  When LaPorte originally closed down in June 2012, Addy blamed the store's bad fortunes on mounting monthly losses due to declining revenues.  

Addy is scheduled to be sentenced on May 10, 2013.