Washington Developer, Wife, and Mistress Indicted in Multi-Million Dollar Real Estate Ponzi Scheme

Federal authorities arrested a Spokane businessman as he was about to board a plane, charging him, his wife, and his apparent lover with running a massive real estate Ponzi scheme described in in a 73-count indictment.  Greg Jeffreys, his wife Kimberly Jeffreys, and Jeffreys' girlfriend Shannon Stiltner were charged with multiple counts of conspiracy to commit bank fraud, bank fraud, theft of government property, wire fraud, and money laundering.  Each of the charges carries extensive possible prison terms as well as criminal penalties.  The three each entered a not guilty plea to the charges.

According to the indictment, Jeffreys began soliciting investors to finance the construction of various government and residential properties across the United States, such as a Military Entrance Processing Station in Denver and a condominium project in Idaho.  Jeffreys had received government stimulus funds for some of the properties, and had also obtained loans from several banking institutions including Washington Trust and Wells Fargo using the stimulus money as collateral.  Investors were promised above-average rates of return on the ventures, and received regular updates from Jeffreys' girlfriend about the progress of various projects.

Investors were not told that Jeffreys had received government stimulus money on some of the projects.  Additionally, several of the described properties did not even exist.  For example, Jeffreys' pitched projects such as a 200-unit condominium project in Seattle, a 100-unit apartment building in Louisiana, and a Military Entrance Processing Station in Denver.  However, not only were the Seattle and Louisiana projects nonexistent, but Denver already had a processing station, and the address investors were given for the Denver processing center was actually a federal office building.  The banks from which Jeffreys obtained construction loans also suffered losses, as, apparently unbeknownst to them, each loan was secured by the same collateral.  When the scheme collapsed, the banks foreclosed and suffered substantial losses.  

Instead, the Jeffreys and Stiltner ran the classic Ponzi scheme, diverting millions of dollars in investor funds to their bank accounts to pay various personal expenses, such as gambling debts in Las Vegas and gifts to their children. While authorities have yet to estimate total losses, the various incidents described in the indictment indicate the figure could be in the tens of million.

While purely speculation at this point, the inclusion of Stiltner in the indictment (and the sheer number of criminal charges) is likely an attempt to encourage her to cooperate with authorities.

The three remain in custody on $150,000 bond.

Cactus Theft Lands Convicted Ponzi Schemer Back in Prison

An Arizona man who spent nearly 7 years in federal prison for a $64 million Ponzi scheme is headed back to prison after pleading guilty to cactus theft.  Kenneth Cobb, 46, admitted to stealing eight saguaro cacti from Arizona federal land, and pled guilty in September to plead guilty to one count of theft of government property and one count of violation of the Endangered Species Act.  According to the agreed-upon sentence, Cobb will not only spend weekends in jail for the next eight months, but spend five years on probation and pay $32,000 in restitution.   

Cobb was involved in a "world-wide" Ponzi scheme that brought in over $64 million from investors that was uncovered in the early 2000's.  While not the ringleader of the scheme, he admitted that he acted as a promoter and sought to "bring as much money to the table as possible to line everyone's pockets.  He was sentenced in 2001 to a 78-month prison term, and also ordered to pay $23 million in restitution.  

Since being released from prison, Cobb apparently took a fancy to the Arizona saguaro cactus, stealing eight cacti that he then resold for $2,000 apiece to locations as far away as Austria.  Cactus theft is apparently a serious problem in Arizona

High-Flying 'Prodigious Gambler' Indicted for $190 Million Ponzi Scheme; Gambled Away $175 Million

Authorities indicted a Las Vegas businessman on charges that he operated an elaborate Ponzi scheme that took in nearly $200 million from investors - $175 million of which was gambled away at various Las Vegas casinos.  Ramon DeSage, also known as Ramon Abi-Rached and Raymond Antoine Abi-Rached, was indicted by a federal grand jury on four counts of wire fraud - each of which carry a maximum prison term of twenty years.  Additionally, authorities are seeking the forfeiture of $191 million in scheme proceeds.  DeSage's attorney indicated he would plead guilty at his upcoming arraignment.  

The indictment is the latest in a string of legal troubles for DeSage.  He was arrested in July 2012 as the result of an investigation by the Internal Revenue Service that culminated in the filing of charges of wire fraud.  According to the IRS complaint, DeSage used his company, Cadeau Express, to solicit funds from investors with the promise of high returns.  The company, whose website is still active, describes itself as a "unique company that caters to hotels and casinos who roll out the red carpet for selective guests and high-end gamblers."  

Specifically, DeSage told investors that he was in the wholesale distribution business, and that their funds were used to purchase and resell items such as hand soap and luggage.  DeSage was accused of using Cadeau Express to defraud at least four wealthy investors and using those funds to pay off over $20 million of gambling debts owed by DeSage.  While details remain scarce, the IRS investigation indicated that DeSage's investors were owed at least $75 million.

One shocking revelation from the indictment reveals that, of the approximately $190 million raised from investors, approximately $175 million was sent to various casinos for gambling purposes.  According to the evidence presented for one fo the wire fraud charges, at least one of these hotels was the Hard Rock Casino.  Not suprisingly, DeSage's penchant for gambling continued even after his arrest in July 2012, when a federal judge was forced to change the terms of DeSage's electronic home monitoring after it was discovered he visited casinos over 26 times over an eight-week period while he was awaiting trial.

DeSage's arraignment is scheduled for February 8, 2013.  

A copy of the indictment is here.

Zeek Receiver Releases Preliminary Claim Form and Details on Claims Process

As promised in his quarterly report filed yesterday, the court-appointed Receiver for ZeekRewards has filed his Final Liquidation Plan ("Plan") that details his plans to liquidate the assets of the entity behind the scheme.  In the Plan, Kenneth Bell, the Receiver, provides the clearest indications to date as to how he plans to administer what is thought to likely be the largest claims process in the context of a Receivership action with nearly 1,000,000 victims having a possible claim to recovered funds. Additionally, the Receiver has also released 'screenshots' of the expected claim form that will soon be provided to victims once the Court has approved the claims process.

One of the biggest questions surrounding the institution of a claims process for such a staggering amount of victims concerned the process by which such an undertaking would proceed.  Perhaps anticipating the sheer amounts of paper that would be involved in mailing and overseeing close to one million claim packets, the Receiver indicated he would seek approval of electronic noticing procedures and an online claims submission process.  Noting that the underlying nature of Zeek was an internet business, the Receiver expects to use investor email addresses both previously provided to him and those retrieved from the computer systems maintained by Zeek.  Interested parties would be provided the address to a unique and customized claims website.

The screenshot attached to the Plan contains the depiction of a multi-step process to file a claim.  After filling out claimant information and registering various contact information, a claimant would identify the type of claim they have from seven listed categories.  For affiliate claims, which are believed to be the majority of the claims, the claimant would be required to provide a variety of specific details related to various purchases made, including subscription fees, sample bids, retail bids, auction items purchased, and training materials.  Once the total amount of each category is listed, the claimant will then be required to list the date, amount, and reason for each payment and the corresponding payment type.  Cnce all payments to Zeek have been provided, the claimant will then be required to list all payments the received from Zeek, the reason, and the payment type.  

After this information is provided, the Claimant will be required to answer several questions relating to their involvement in Zeek.  This includes:

• A list of all usernames they created;
• A list of all lawsuits or legal proceedings they are involved in;
• Whether they were an employee or officer, or related to any employee or officer of, Zeek;
• Whether they sponsored or assisted any entity or person become an affiliate; 
• Whether they paid cash to Zeek on behalf of any other entity or person;
• Whether another person or entity paid cash to Zeek on their behalf or transfer bids to their account; and 
• A listing of their upline/downline.

Importantly, the Receiver requires not only that the submission of the claim form constitutes consenting to the jurisdiction of the Court, but also that the answers are submitted under penalty of perjury.  Some or most of these answers are likely to have a direct effect on whether a claim is rejected or accepted.

Each claimant will have the ability to upload supporting documentation, and upon completion will receive a receipt by email indicating that the claim was received.

While engaging the services of an attorney is certainly not required, it may be recommended to ensure not only that victims receive the maximum amount they would be entitled to, but also to monitor compliance with court deadlines which are historically strictly enforced.  Those with questions are encouraged to contact Jordan D. Maglich at jmaglich@wiandlaw.com.  

A copy of the Claim Form screenshots is here.

A copy of the final plan is here.

Zeek Receiver Issues Quarterly Report; Claim Form Expected Today

The court-appointed receiver for the $600 million ZeekRewards Ponzi scheme filed a quarterly report yesterday that provides a clear recap of his efforts to date, including asset recovery, the ongoing investigation, and clawback litigation.  The Receiver, Kenneth Bell, was appointed on August 17, 2012, and has since been tasked with the Herculean effort of reconstructing a complex Ponzi scheme that counts over one million investors as victims and over 80,000 that were fortunate enough to realize a profit.  A key part of the report, in what is undoubtedly a topic of interest for these victims, outlines Bell's progress on establishing a claims process by which victims may be able to recoup some or more of their losses.  Of note, a sample claim form is expected to be filed today.

Asset Recovery Efforts

Bell first outlined the progress of his asset recovery efforts, indicating that Receivership bank accounts under his control held approximately $310 million.  This amount includes $221 million that had previously been seized by the United States Secret Service and was transferred to Bell's control on January 15, 2013.  All cashier's checks in Bell's possession have been cashed, and efforts are ongoing to recover funds held by various third parties including E-Wallets and various foreign bank accounts.  At least one foreign entity is believed to hold over $12 million belonging to the Receivership and has resisted the Receiver's efforts thus far to return those funds.  Bell indicated that he has enlisted the assistance of the Secret Service, the SEC, and the U.S. Attorney's Office for those recovery efforts.

Clawback Litigation

Clawback lawsuits remain ongoing, and Bell clarified that he had filed proper paperwork in each of the 93 federal districts where he believes Receivership assets may be located and subject to recovery.  Bell's investigation has revealed that at least $295 million may have been fraudulently transferred to "net winners" and thus subject to clawback claims.  In the clearest indication of how he intends to pursue clawback actions against the estimated 80,000 potential clawback targets, Bell indicated that

the Receiver’s clawback litigation is likely to be a combination of individual actions, group actions, defendant class actions, and possibly administrative damages hearings. Such proceedings will establish the key findings applicable to most, if not all, recipients of fraudulently transferred funds (findings such as the existence of a Ponzi and/or pyramid scheme). They will also separately provide a forum for the efficient determination of the proper amount of each net-winner’s repayment obligation.

The Report also states that foreign "net winner" will also be pursued, both as parties to domestic litigation based on their connections to Zeek in the United States and through foreign litigation where necessary.  Many of the foreign litigants' countries of residence are signatories to the Hague Convention, which provides an established method to provide service of process.  Bell also indicated that he is considering claims against not only Zeek's 'insiders' such as employees and contractors, but also third-party advisors that "knew or should have known of the inappropriate nature of [Zeek's] activities and yet facilitated those activities for their own gain."  While Bell did not expand further on the potential third-party targets, the potential claims he identified suggest that Bell may pursue law firms, accounting firms, and/or payment processors.  

Claims Process

During a public conference call held on December 17, 2012, Bell devoted substantial time to providing information about an upcoming claims process by which victims could submit claims for their losses and receive future distributions.  While Bell had hoped to make these submissions by the end of January 2013, he indicated in the Report that, due to the extensive and time-consuming efforts to reconstruct receivership records that will form the basis for the claims process, he now hopes to make these filings at the conclusion of March, 2013.  With more than one million potential victims, Bell estimates that "the claims process may comprise the largest single expense for the Receivership Estate."  

Bell did say that he intended to file "screenshots" of the draft online claim forms that will be an exhibit to the Final Liquidation plan which Bell plans to file today, January 31, 2013.  Assuming the Final Liquidation plan is not filed under seal, these forms may provide the first indication for investors as to both the information Bell currently has relating to investor claims and the required information needed to dispute or affirm these calculations.  Ponzitracker will be providing both coverage and guidance as to these claim forms.

As indicated above, the Receiver's Final Liquidation Plan is due to be filed today.  

A copy of the Quarterly Report is here.

Previous Ponzitracker coverage of Zeek is here.