Judge: Alzheimers-Stricken Attorney Unfit to Face Ponzi Scheme Charges

A federal judge ruled that a 78-year old Pennsylvania attorney suffering from advanced Alzheimer's disease is not competent to stand trial on charges that he masterminded a $6 million Ponzi scheme.  Anthony J. Lupas, a once-prominent local attorney, was facing mail fraud charges after he was accused of swindling millions of dollars from clients who thought they were investing in tax-free trusts.  After holding a competency hearing in August, U.S. District Judge Robert Mariani issued an order siding with Lupas's attorneys and agreeing that Lupas had "lost his perception of reality".  

Lupas is alleged to have offered clients the ability to earn a steady 5% return through an investment in tax-free trusts.  This continued for years, until Lupas suffered injuries in a 2011 fall that allegedly diminished his mental faculties.  After his injuries prevented him from maintaining scheduled investor payments, his son, a state court judge, allegedly discovered the scheme and alerted authorities.  After an investigation, the elder Lupas was arrested and charged with 29 counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering.

Last month, a Pennsylvania state fund supported by attorney registration fees announced it would pay $3.25 million to Lupas's victims in what Pennsylvania Supreme Court Chief Justice Ronald D. Castille remarked was 

one of the most egregious cases of attorney theft of clients' escrow funds that I have seen in the 20 years that I have been on the Supreme Court..."

In his order declaring Lupas unfit to stand trial, Judge Mariani made a point to clarify that Lupas had not "evaded the justice system by any means," and that his condition would be re-evaluated after he had spent several months in a local treatment facility.

Jetpack-Peddling Ponzi Schemer Faces Prison, Deportation

A Utah man who perpetrated a massive Ponzi scheme that caused nearly $7 million in losses was sentenced to a 5-year prison term - after which he will face deportation back to his native Great Britain.  John S. Dudley, 59, received the sentence from U.S. District Judge Robert J. Shelby after previously pleading guilty to a single count of wire fraud.  While wire fraud carries a maximum term of twenty years per count, Dudley's plea agreement included a recommendation by prosecutors for a five-year term. Dudley, a citizen of Great Britain, is expected to face deportation after serving his sentence.  

According to authorities, Dudley began pitching a variety of investment programs to potential investors as early as 2007.  These investments, including forex trading, mining speculation, and even a human jetpack rocket suit, were touted by Dudley at investment club meetings also known as "bounce nights" or "Tashi group meetings."  Investors were told that they could expect monthly returns ranging from 5% to 10%, that Dudley had not suffered a trading loss since 1978, and that their investments were protected from potential loss by a "senior life settlement policy."  Additionally, even if investors were low on available funds for investment, Dudley coached them on how to extract money from financial institutions through loans on houses or boats.  In total, Dudley raised more than $12 million from approximately 100 investors from January 2007 to March 2010.

Not surprisingly, Dudley's promises of steady and significant returns were possible only through perpetrating an elaborate Ponzi scheme that used new investor funds to repay older investors.  Instead of using investor funds for the various ventures he pitched, Dudley used investor monies for a variety of personal expenses including more than $2 million for the purchase of two homes, a down payment for a ski boat, and travel expenses.  After he was arrested in mid-2011, Dudley initially pleaded not guilty.  He later agreed to plead guilty in March 2013 to a single count of wire fraud.  

As part of his plea agreement, Dudley has also agreed to pay $6.8 million in restitution.  

Canadian Woman Charged in $40 Million Ponzi Scheme

A Vancouver woman is facing fraud charges after she was arrested and charged with masterminding a $40 million Ponzi scheme that is rumored to be the largest Ponzi scheme in Canadian history.  Rashida Samji - also known as Rashida Makalai - was charged with 28 counts of fraud and theft related to approximtely $17 million in losses suffered by 14 investors between 2006 and 2012, and police believe the charges are part of a much larger fraud with significantly higher losses.  

Beginning as early as 2003, Samji, a former Vancouver notary, allegedly solicited investor funds through her company, Samji & Assoc. Holdings Inc.  Investors were told that their funds would be safe in Samji's notary trust accounts at several financial institutions, including Toronto-Dominion Bank ("TD Bank"). These funds would then purportedly be used as collateral for investments by Mission Hill Winery in Kelowna, British Columbia.  In return, investors were promised hefty annual returns ranging from 12% to 30%.  In addition to Samji's solicitation efforts, a former financial planner at Coast Capital Savings, Arvin Patel, also helped recruit approximately 90 investors to the scheme.  In total, more than $80 million is estimated to have flowed into Samji's trust accounts.

However, rather than keep investor funds in notary trust accounts, Samji is alleged to have deposited investor funds into her own personal bank accounts, which she then used to make fictitious interest payments to existing investors - a hallmark of a Ponzi scheme.  None of the alleged wineries linked to the scheme claimed to have any knowledge of Samji, and authorities filed civil charges against Samji in 2012 after an investigation.

Samji has since posted a $100,000 bail, and is subject to a variety of bail conditions while the case remains pending.

New Zealand's "Madoff" Receives 10-Year Sentence For $300 Million Ponzi Scheme

(Editor's Note: While fraud never sleeps, the blog is now back after a 12-day hiatus necessitated by the editor's recent nuptials and honeymoon.  Many thanks for your continued support of the blog.)

A 63-year old man known as New Zealand's "Madoff" was handed down a 10-year sentence - the most severe sentence handed down to anyone involved in a Serious Fraud Office investigation - for perpetrating a massive Ponzi scheme that took in hundreds of millions of dollars from unsuspecting citizens.  David Ross was labeled a "liar" and a "thief" by Judge Denys Barry of Wellington District Court, who handed down the record sentence.  Under New Zealand laws, Ross must serve a minimum sentence of nearly six years before becoming eligible for parole.

Ross was the director of Ross Asset Management ("RAM"), which he used along with numerous associated entities to solicit investors with the promise of guaranteed and lucrative returns - including annual returns of up to nearly 40%.  Investors received regular returns, and Ross was generally perceived as an astute investor.  Indeed, between June 2000 and September 2012, investors believed that Ross had accumulated a collective $351 in "profits" by trading securities.  

However, in late 2012, many investors began complaining about delays in scheduled payments, and in November 2012, authorities from New Zealand's Financial Markets Authority raided RAM's offices.  After a Receiver was appointed and began sifting through RAM's finances, it was discovered that only $10 million remained in RAM's accounts despite previous claims of over $450 million under management.  The Receiver, John Fisk, estimated that RAM took in over $300 million since 2000, keeping nearly $30 million kept as management fees while $290 million was withdrawn or paid to investors.  Fisk also found that the fund was insolvent since 2007 - that is, fund outflows exceeded new investor inflows, sometimes by $60 million.  When authorities raised RAM's offices in November, the scheme was on the verge of collapse.  Fisk later estimated that the total losses to victims exceeded $115 million.  

Ross pleaded guilty to several fraud charges in August 2013, including four false accounting charges and one charge of theft by a person in a special relationship.  

Many victims decried the sentence, claiming that the term was much too lenient to discourage the scourge of financial fraud that has recently plagued New Zealand.  While the 10-year term is much smaller than similar sentences across the globe - and many times smaller than the scheme perpetrated by Bernard Madoff whose name has been used as a nickname for Ross - the sentence is said to be the longest ever handed down to a failed investment company official or to anyone involved in a Serious Fraud Office prosecution.  Indeed, one former SFO prosecutor speculated that the sentence was the longest he could recall for a fraud-related prosecution.

State Fund Will Pay $3.25 Million to Victims of Lawyer's Ponzi Scheme

A Pennsylvania state fund supported by attorney registration fees will pay $3.25 million to victims of an elaborate Ponzi scheme masterminded by a prominent Pennsylvania lawyer.  Anthony Lupas, a former long-time school district solicitor and father of a local judge, was arrested back in May 2012 and charged with bilking dozens of victims who thought their funds were being invested in tax-free trusts yielding 5% annually.  Criminal proceedings against Lupas remain on hold while his attorneys fight efforts to declare him competent for trial.

According to authorities, Lupas offered clients the ability to earn a steady 5% return through an investment in tax-free trusts.  This continued for years, until Lupas suffered injuries in a 2011 fall that allegedly diminished his mental faculties.  Lupas's injuries resulted in his inability to keep up with investor payouts, and his his son, Judge David Lupas, would later contact authorities after discovering certin suspicious circumstances surrounding his father's investment operations.  After an investigation, the elder Lupas was arrested and charged with 29 counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering.

The Pennsylvania Lawyers Fund for Client Security is a fund created by the Pennsylvania Supreme Court in 1982 to compensate clients whose funds were misappropriated by their attorneys.  The fund is wholly funded by state lawyers, who pay an annual fee towards upkeep of the fund, and each award is limited to a maximum of $100,000. A total of 47 of Lupas's victims will share in a $3.25 million award from the fund.

While Lupas's lawyers recently argued that he suffers from an advanced stage of Alzheimer's disease and suffers hallucinations, prosecutors argue that Lupas is likely faking his condition in an effort to continue to dupe others to win his freedom.  Both the government and Lupas's defense team called medical experts to support their cause, and U.S. District Judge Robert D. Mariani is expected to issue a decision shortly.  While a conviction on just one of the thirty-one charges he is facing would effectively be a life sentence for Lupas, he potentially faces hundreds of years in prison if convicted on all counts.