Former Sheriff Pleads Guilty to $1.2 Million Ponzi Scheme That Duped Fellow Cops

“If it sounds too good to be true it probably is. People should diligently check out claims of unusually high rates of return before investing. Don’t become a victim of an investment scam,”

- Stephen Boyd, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office.

A former Denver sheriff's deputy agreed to plead guilty to charges that he operated a Ponzi scheme promising 100% annual returns to fellow law enforcement officers and their families.  David Hawkins, a former El Paso County deputy sheriff, entered into a plea agreement with prosecutors in which he pled guilty to one count of wire fraud and one count of money laundering.  Wire fraud carries a maximum sentence of twenty years in prison, while money laundering carries a maximum ten-year term. Hawkins could also face criminal fines, and will likely be required to pay restitution to his victims.

Hawkins was hired by the El Paso Sheriff's Office in 2001, and soon thereafter was sworn in as a sheriff's deputy.  In or around 2006, Hawkins began attending training courses on how to trade foreign currencies ("forex") in 2006.  Using this knowledge, he began to hold himself out as a sophisticated currency trader, telling colleagues, family, and friends that he had several years of experience in achieving consistent gains - sometimes as high as 62% - from forex trading.  Unbeknownst to his employer, Hawkins told potential investors that an investment in his PD Hawk Investment Fund would yield consistent 10% monthly returns - an annual return of over 100%.  Based on these representations, Hawkins raised more than $1 million from over 70 investors.

However, according to the FBI, "at no time were [Hawkins'] investments ever profitable."  Instead, Hawkins ran the classic Ponzi scheme, using investor funds to repay earlier investors and to make purported interest payments.  Hawkins used investor funds as his personal piggy bank, purchasing multiple automobiles, paying personal expenses, and even buying two semi-professional indoor football franchises in Illinois and Texas.  These teams never became operational, and authorities began investigating after Hawkins abruptly cancelled the 2012 season.  Authorities estimate that total losses to investors exceeded $200,000.  

Hawkins is scheduled to be sentenced on June 7, 2013, at 11:00 a.m.

Authorities: Florida Man Ran Ponzi Scheme Touting Pre-IPO Access to Facebook, Groupon Shares

Authorities unveiled civil and criminal charges against a Florida man, accusing him of soliciting over $8 million from investors who thought they were purchasing discounted pre-IPO shares of popular social media companies such as Facebook and LinkedIn.  However, instead of purchasing those shares, Craig L. Berkman, 71, allegedly misappropriated investor funds for his personal benefit and to partially satisfy a previous $28 million fraud-related judgment.  The United States Attorney's Office charged Berkman with two counts of securities fraud and two counts of wire fraud, each of which carry a maximum term of twenty years in prison.  Additionally, the Securities and Exchange Commission instituted administrative proceedings against Berkman, accusing him of violating multiple federal securities laws.

In late 2010, as investors salivated over the prospect of initial public offerings for popular companies such as Facebook, Groupon, and LinkedIn, Berkman began telling potential investors that he had special access to acquire pre-IPO shares.  Berkman solicited investors to invest in various entities he had formed which would purportedly purchase these shares, promising a "5% annual simple interest return on the investment until 100% of [the investor's] principal and accumulated interest has been returned."  Investors were told that Berkman had unique access to a variety of sources to purchase these shares, and that all proceeds would be used for this purpose.  

In February 2012, a potential investor (who also happened to be a securities attorney) requested written assurance that Berkman's fund had already acquired the Facebook shares it purported to own. Berkman had previously obtained a letter from a law firm attesting to his 3.1899% interest in a fund that did own Facebook shares (the "Facebook Fund") - an interest which in actuality would have equated to an indirect interest in approximately 22,000 shares.  However, Berkman or one of Berkman's associates used the letter to craft an elaborate forgery, altering the letter to show that the Facebook Fund had allocated nearly 500,000 shares to Berkman's the company.  

However, the law firm that authored the letter soon got wind of the fabrication, and wrote Berkman to advise him that his interest in the Facebook Fund had been terminated, and that his "misconduct is consistent with a general pattern of deceit." While Berkman's lawyer, who was also charged by the SEC, threatened legal action against the law firm, none such legal action was taken, and Berkman's interest in the Facebook Fund was terminated.

In total, Berkman raised nearly $10 million from investors who thought they were purchasing highly-coveted pre-IPO shares.  Additionally, Berkman also solicited investments for another company he owned called Face Off Acquisitions ("Face Off"), telling investors he planned to purchase another fund that owned a large number of Facebook shares.  Investors contributed approximately $2.6 million to Face Off, despite the fact that negotiations to purchase the fund never got past formalities.  Indeed, Berkman was advised that the fund's purchase price would be $28 million - an amount that was not disclosed to investors and which greatly exceeded the amount raised by Face Off.

Rather than actually purchase pre-IPO shares of Facebook, Groupon, or LinkedIn, the only legitimate purchase made by Berkman was the $600,000 interest in the Facebook Fund, which was later rescinded after the forged letter was discovered by the issuing law firm.  Berkman misappropriated the remainder of investor funds, transferring over $5 million to his personal bank account to pay legal fees and creditors from an earlier fraud judgment entered against him, as well as making large cash withdrawals to fund lavish trips and other unrelated personal expenses.  Additionally, Berkman used nearly $5 million to make payments to earlier investors, a classic hallmark of a Ponzi scheme.  

If convicted of all charges, Berkman faces up to 80 years in prison.

A copy of the SEC Order instituting administrative proceedings is here.

Boston Couple Charged With Multi-Million Dollar Ponzi Scheme

Boston authorities have charged a West Roxbury man and his wife with orchestrating a Ponzi scheme that may have duped its victims out of millions of dollars.  A grand jury indicted Steven Palladino and his wife, Lori, on numerous charges including four counts of larceny over $250, three counts of making false entries in corporate books, and three counts of usury, commonly referred to as loan sharking.  The Suffolk County District Attorney's office disclosed that Steven Palladino was being charged as a 'common and notorious thief' as a result of his more-than 24 prior larceny convictions.  If convicted of the charges, the couple could face decades of prison time.

According to authorities, the couple owned and operated Viking Financial Group ("Viking") along with their 28-year old son.  Potential investors were told that Viking profited by making loans that carried exorbitant interest rates.  However, Viking made very few loans, and of these loans, many were made in violation of a state statute prohibiting loan interest rates exceeding 20%.  Indeed, three of the loans extended in 2007 and 2008 carried interest rates exceeding 60% - resulting in three charges of usury.

The Palladinos attempted to evade suspicion by falsifying company books and records to make it appear as if Viking was making legitimate loans.  However, in reality, investor funds were used primarily to sustain a life of luxury for the couple that included Bahamas trips, rent for Steven Palladino's mistress, and hundreds of thousands of dollars in gambling losses.  Additionally, nearly $400,000 in investor funds were used to satisfy a condition of Steven Palladino's probation stemming from a 2007 conviction for, ironically enough, defrauding an elderly relative.  

While Steven Palladino is scheduled to be arraigned today, Lori Palladino and Viking are not expected to appear in court until April 4, 2013.  

Ponzi Scheme Victim Arrested After Allegedly Attacking Schemer, Threatening to Cut Off Fingers and Toes

A Florida man is in jail after authorities say he attacked the woman who conned him through a multi-million dollar Ponzi scheme.  Adam Pollock, the owner of Kokopelli's Gym and Fitness Center in Longwood, Florida, was arrested after an encounter at his gym with Tina Mangiardi, a former model who admitted earlier this week to masterminding a Ponzi scheme that duped investors out of millions of dollars.  Pollock is being held without bond on multiple charges, including felony battery by strangulation, kidnapping/false imprisonment, aggravated assault with a deadly weapon, and battery.  Ironically, if convicted, it is possible that Pollock's sentence could exceed that handed down to Mangiardi.

News broke last week that Mangiardi would plead guilty to charges of mail and wire fraud in a plea agreement with federal prosecutors.  Several days later, Mangiardi appeared at Pollock's gym, which advertises itself as a "Thai Kickboxing" gym specializing in "No Holds Barred Fighting".  According to Mangiardi, she showed up to pay a debt to Pollock.  However, once she entered the gym, she alleged that Pollock put on a pair of black gloves and brandished a knife, threatening to cut off her fingers and toes as collateral for his investment.  Pollock also admitted to pushing Mangiardi, adding that he also may have slapped her.  Mangiardi fled, as evidenced by surveillance video captured by WFTV 9:

Mangiardi, a former model and single mother, solicited 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, as admitted last week, this was nothing more than a Ponzi scheme, with Mangiardi using new investor funds to pay older investors.   

Wife of Suspected Ponzi Schemer Charged For Lying to Investigators

The wife of a suspected Ponzi schemer on the lam is facing criminal charges in Michigan after authorities alleged that she provided misleading information to investigators about the whereabouts of her husband.  M. Viktoria Wilson, 24, was charged with a single count of lying to a police officer during the investigation of a crime, which carries a four-year maximum prison sentence.  Authorities allege she lied to investigators during a January 8, 2013 interview in which authorities were attempting to determine the location of her husband, Joel Wilson, who has been charged with running a real estate Ponzi scheme that raised nearly $7 million from over 100 investors.  Joel Wilson, who is currently believed to be living in Germany, faces numerous felony charges in connection with the scheme.

According to authorities, Joel Wilson operated Diversified Group Partnership Management, LLC and American Realty Funds Corporation.  Beginning in 2009, investors were solicited to invest with Wilson's companies, with Wilson allegedly promising annual returns of nearly 10% that were obtained through the purchase, renovation, and resale of real estate in Bay City, Michigan. Investors were told that they would be repaid with the payments made by the purchasers of the renovated houses.  In all, approximately 120 investors entrusted Wilson and Diversified Group with nearly $7 million.  

However, authorities allege that Wilson's real estate businesses simply did not raise enough money to pay the returns promised to investors.  Wilson did not disclose these facts to investors, and instead used new investor funds to pay these purported "profits".  Additionally, over $500,000 was used to support Wilson's lavish lifestyle, including:

• $75,000 to purchase a rival securities broker;
• $35,000 on his wife’s business, 
• $7,914 to buy Detroit Red Wings tickets, 
• $13,160 to purchase tickets and sponsor the Saginaw Sting, a professional indoor football team, and 
• $46,780 on travel.

In January 2013, Wilson was charged with multiple felonies, including racketeering, selling unregistered securities, larceny, fraudulent sale of securities, and conversion.  If convicted of all charges, Wilson could face decades in prison.  However, before the charges were unveiled, Wilson had moved to Germany, where he remains today.  He has remained defiant in maintaining his innocence, including his active presence on online newspaper comment boards taunting authorities.  While authorities have suggested that efforts are underway for Wilson to return to the United States to face the charges, Wilson has indicated he plans to remain in Germany, as evidenced by this quote attributed to him:

I guess now is as good a time as any to let the world know I will not be returning from Germany.  I have developed an intense and irreconciable hatred for what America has become.  Fascists run rampant and unchecked.  An opiated populous continues to vote away more and more freedom.  Freedom will die in my lifetime.  I'm going to do what I can from here to try and wake  up as many people as I can and try and prepare as best as I can for the long dark night that is coming.  If my words hold weight, begin your own preparations.  A 30 year old man has just been turned into a slave.  Sure there are no chains, but I opened an account in Germany two weeks ago.  The US government knew about it.  They are not made of iron, but these chains are just as real.

A copy of the SEC's complaint is here.