North Carolina Man Ordered To Pay $5.2 Million For $1.8 Million Ponzi Scheme

A federal judge ordered a North Carolina man to pay over $5 million in penalties and restitution for operating a commodities Ponzi scheme that took in nearly $2 million from investors.  Michael Anthony Jenkins and his company, Harbor Light Asset Management, LLC ("HLAM"), were ordered by U.S. District Judge James C. Fox to pay $1.3 million in restitution and $3.9 million in restitution for operating a commodities Ponzi scheme that solicited at least $1.8 million from nearly 400 investors.  Jenkins and HLAM were also permanently banned from commodities trading as well as enjoined from future violations of federal securities laws.  

Beginning in January 2011, Jenkins began soliciting investors for HLAM in person, in small groups, and by phone.  Jenkins told potential investors that HLAM was engaged in the business of investing in E-mini S&P 500 futures ("E-mini Futures"), and promised potential lucrative trading gains.  Investors were assured that their funds would be immediately wired to a specific trading account where they would be used to trade E-mini futures, and were provided with near-monthly account statements from Jenkins showing significant profits.  In total, Jenkins and HLAM raised at least $1.8 million from approximately 377 investors.

However, of the approximately $1.8 million raised, only $138,825 - less than 10% of the total - was transferred as promised to a specific account to trade E-mini futures.  This trading did not result in the hefty gains advertised in investors' monthly statements, but rather a total loss of approximately $3,500.  The remainder was diverted by Jenkins for a variety of unauthorized uses, including trading in gold and oil futures, cash withdrawals, payment of personal expenses, and payments of principal and purported trading profits to investors.  Additionally, of the payments made to investors, more than $400,000 was paid to certain investors in excess of their invested principal.  

Of note, Jenkins was the subject of discipline by the National Association of Securities Dealers in 1989, who barred him from associating with any of its members and imposed a $5,000 fine after Jenkins was found to have misappropriated a $5,000 customer check for his own personal use.   Additionally, while Jenkins had applied for registration with the CFTC as an associated person in April 2011, the application was subsequently withdrawn without Jenkins having obtained registration.

The order imposing relief is below:

Order by jmaglich1

Rothstein Colleague Found Guilty, Judge Hints At Perjury Charge

A Florida jury took just two hours to deliver a guilty verdict in the trial of a former attorney in convicted Ponzi schemer Scott Rothstein's now-defunct law firm.  Christina Kitterman, who attracted national headlines for her decision to call Rothstein to the stand in her defense, was found guilty of three counts of wire fraud after being accused of assisting Rothstein with his scheme by posing as a Florida Bar official during a meeting with investors.  Prosecutors have indicated they will likely seek a nine-year sentence, while Kitterman's attorneys are hoping for five years or less.  Interestingly, after allowing Kitterman to remain free on $250,000 bond, U.S. District Judge Daniel T. K. Hurley suggested that Kitterman may have committed perjury during her trial testimony.

Kitterman was indicted last summer, along with south Florida attorney Douglas Bates, on charges that she was a participant in Rothstein's scheme while employed as an attorney at his former firm, Rothstein Rosenfeldt Adler ("RRA").  There, according to authorities, Kitterman agreed to participate in a meeting with Rothstein investors posing as a Florida Bar official, telling investors that Rothstein's bank accounts had been frozen as the result of a pending bar association.  Kitterman was indicted on three counts of wire fraud.

Kitterman's attorneys successfully argued that Rothstein should be compelled to testify at her trial, and they may now question their decision after Rothstein testified for 1.5 days and generally was not observed to have bolstered Kitterman's defense.  In his testimony, Rothstein claimed that he and Kitterman had a "friends with benefits" relationship and that Kitterman was aware of her actions in assisting him.  

Judge Hurley allowed Kitterman to remain free on $250,000 bail until her sentencing, to which he cautioned Kitterman against failing to appear.  Prosecutors indicated that Kitterman will likely ask for a nine-year prison sentence for Kitterman, while her defense attorneys insisted a sentence below five years was appropriate.  However, Judge Hurley insinuated that Kitterman may have committed perjury during her trial testimony which, if true, could result in a sentencing enhancement or even perjury charges.

According to the Sun-Sentinel, sentencing is expected later this year.

Former Sheriff Gets 30-Month Sentence For $1.2 Million Ponzi Scheme

A former sheriff's deputy will spend the next thirty months in federal prison for orchestrating a Ponzi scheme that raised more than $1.2 million from victims that included fellow law enforcement personnel.  David N. Hawkins, 46, received the sentence from U.S District Judge Robert E. Blackburn, who also ordered Hawkins to serve three years of supervised release following completion of the sentence.  Hawkins pleaded guilty last year to one count of wire fraud and one count of money laundering.

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").  Beginning in 2009, Hawkins used this knowledge 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 was also ordered to pay restitution of $204,348.91 to the remaining victims.

FBI Charges Two With $110 Million Real Estate Ponzi Scheme

Authorities unveiled criminal charges against two men on charges they masterminded a real estate Ponzi scheme that swindled victims out of more than $110 million.  Michael Stewart, 66, of Phoenix, and John Packard, 63, of Long Beach, California, were arrested earlier this week after a grand jury returned a 16-count indictment charging each of the men with 11 counts of mail fraud, three counts of bank fraud, and two counts of bankruptcy fraud.  If convicted of all charges, the men face hundreds of years in prison and millions of dollars in criminal penalties.  

The men owned and operated Pacific Property Assets ("PPA"), a company they formed in 1999.  The two used PPA to purchase, refurbish, and eventually resell apartment complexes in Southern California and Arizona, financing the acquisitions through mortgages and raising money from potential investors to fund property renovations.  While the operation generally was not profitable, PPA was able to benefit from a booming real estate market and skyrocketing property values to raise cash by constantly refinancing the properties.  From 1999 to 2009, PPA acquired more than 100 properties and raised tens of millions of dollars from investors. 

As property values began slowdown and eventual collapse in 2007, PPA was facing large debt payments to its mortgage lenders and private investors.  The men allegedly misrepresented PPA's financial condition, and continued to raise tens of millions of dollars from investors that were used to make payments to lenders and investors, and even Steward and Packard themselves.  Eventually, PPA and several other related companies filed bankruptcy in June 2009, indicating that it owed approximately $90 million to hundreds of investors and approximately $100 million to various banks.  After going through the bankruptcy process, private investors received nothing, while banks lost at least $24 million.  

The charges also accuse Steward and Packard of bankruptcy fraud for their alleged transfer of hundreds of thousands of dollars in PPA funds to the mens' personal bank accounts for their use and to pay their personal attorneys, and thus out of the reach of their creditors.

The Securities and Exchange Commission previously brought civil fraud charges against the pair in May 2012. 

A copy of the SEC's complaint is below:

comp22365 2

Rothstein Testifies About Office Relationships, Political Influence

"I don't deserve to die in prison for what I've done.”

- Scott Rothstein

Having been conspicuously absent from the South Florida scene for several years while serving his 50-year sentence for orchestrating a massive $1.4 billion Ponzi scheme, Scott Rothstein certainly made a splash as he re-emerged to testify at the trial of one of his former colleagues facing charges she assisted his fraud.  Rothstein, sporting handcuffs and leg irons and looking noticeably thinner after having dropped 70 pounds from his pre-incarceration weight of 230 pounds, took the stand in a West Palm Beach federal courtroom Wednesday morning - this time as a witness, not a defendant.  Rothstein was called by attorneys for former colleague Christina M. Kitterman, who is facing three counts of conspiracy to commit wire fraud for her alleged role in his scheme.  

While his figure was noticeably thinner, Rothstein wasted no time in reverting back to his former larger-than-life persona, testifying with considerable latitude about his scheme that rocked the Fort Lauderdale community and resulted in the bankruptcy of his former powerhouse firm, Rothstein Rosenfeldt Adler ("RRA").  While at RRA, Rothstein hired Kitterman after meeting her during his stint as an adjunct professor at a local law school.  It was during her tenure at RRA that prosecutors allege she agreed to assume the identity of a Florida Bar Association official during a meeting with investors who were concerned about Rothstein's failure to make timely interest payments.  According to Rothstein, Kitterman told those investors that Rothstein's RRA accounts had been frozen in connection with a pending bar investigation.

But the allegations over Kitterman's status as a co-conspirator soon took a back seat as Rothstein willingly began providing other details about his scheme that were previously unknown.  For example, Rothstein volunteered that he and Kitterman had a "friends with benefits" relationship that even featured an instance out of work where Kitterman "pulled me into a bathroom stall to make out with me."  

Rothstein also regaled jurors with tales of the considerable influence he had amassed from his rising stature.  This included his claim that the Sheriff's office made an unlawful arrest of the ex-wife of his friend, Douglas L. Bates, at his request.  Bates was charged alongside Kitterman and is awaiting trial.  Additionally, Rothstein bragged of his close friendships with well-known politicians, including former Florida governor Charlie Crist and Senator John McCain.  By making large contributions to their campaigns and hosting numerous fundraisers, Rothstein was able to add to his aura of legitimacy by appearing close with those politicians.  This also earned Rothstein a coveted appointment by Crist on a local judicial nominating commission.  

Rothstein was also not shy about the true motivation for his cooperation, and readily listed off his contributions that he hopes will one day result in a reduction in his 50-year prison sentence.  This cooperation included testimony that has resulted in convictions of former friends and associates, including his wife, as well as his claim that he helped the government recover $350 million for his victims. 

Rothstein is not currently scheduled to be released until approximately 2053 - when he will be nearly 90 years old.