Convicted $110 Million Ponzi Schemer Seeks Reduction In "Crushing" Sentence

A New Zealand man who holds the distinction of having perpetrated the country's largest financial fraud in history is back in court to argue that his 65-month "minimum non-parole period" - or time that he must serve before he is eligible for parole - was "crushing" and warranted a reduction.  David Ross, 68, was sentenced to a 10-year prison term last year after pleading guilty to operating a Ponzi scheme that took in hundreds of millions of dollars and resulted in approximately $110 million of losses to victims.  Due to the relatively lax sentencing guidelines for New Zealand fraud offenses, Ross's 10-year term was widely believed to have been the longest of its kind.

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.  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 to sort out RAM's finances, a preliminary investigation showed that while RAM reported investments of nearly $450 million to nearly 1,000 investors, only $10 million remained in RAM's accounts.  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RAM took in over $300 million since 2000, keeping nearly $30 million kept as management fees while $290 million was withdrawn or paid to investors.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 concluded 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.

While Ross would be eligible for parole in approximately five years, his lawyer is now arguing that the original term was "manifestly excessive."  Citing Ross's elderly age, New Zealand's Sentencing Act, and the theory that rehabilitation is a cornerstone of sentencing, Ross's lawyer has asked the court to reduce the minimum non-parole period to four years - meaning Ross would be eligible for parole in December 2017.  As Ross's lawyer put it,

"This is not a get out of jail free card, it is simply lowering the threshold of eligibility."

Predictably, this did not sit well with Ross's victims, many of whom had expressed outrage at the original 10-year sentence.  Indeed, a New Zealand prosecutor addressed Ross's elderly age argument by countering that many of Ross's victims were also elderly and faced difficulty recouping their investments.  

A written decision is expected from the Wellington High Court on Ross's request.

Remaining Rothstein Partner Pleads Guilty To Conspiracy

The remaining name partner in the once-storied law firm operated by convicted Ponzi schemer Scott Rothstein has reached a plea agreement with prosecutors.  Stuart Rosenfeldt, 59, pleaded guilty in a Miami federal court to a single conspiracy charge that he committed bank fraud, violated a prostitute's civil rights, and made illegal campaign contributions.  Rosenfeldt, a former name partner in Rothstein Rosenfeldt Adler ("RRA"), could face up to five years in federal prison when he is sentenced on September 24.  Rothstein is currently serving a 50-year prison sentence after pleading guilty to operating his $1.2 billion Ponzi scheme, while Russell Adler pleaded guilty to a conspiracy charge back in April.

Despite insinuations by Rothstein that Rosenfeldt had to have been aware of his massive scheme, prosecutors never alleged that Rosenfeldt was involved or aware of the scheme.  However, Rothstein's extensive participation with authorities implicated Rosenfeldt in other criminal acts, including (1) making hundreds of thousands of dollars of illegal campaign contributions; (2) participating in a check-kiting scheme to cushion the firm's finances when needed; and (3) the use of law enforcement officers to force a prostitute and her boyfriend to leave Florida after Rosenfeldt believed the prostitute would expose their relationship.  

At its peak, Rothstein's firm employed seventy lawyers - the vast majority of whom have not been accused of any wrongdoing in connection with Rothstein's scheme.  Indeed, many of those lawyers lost their jobs when the firm declared bankruptcy after Rothstein's scheme unraveled.  Rosenfeldt marks the fifth former RRA lawyer to be convicted, and joins over a dozen other individuals that have been convicted for their role in the scheme.  

Previous Ponzitracker coverage of the Rothstein scheme is here.

Indiana Man Receives 18-Year Sentence For $1.5 Million Ponzi Scheme

An Indiana man received an eighteen-year prison sentence for operating a Ponzi scheme that duped victims out of at least $1.5 million.  Rudolf “Rudi” Pameijer, of Johnson County, Indiana, received the sentence from Johnson County Judge Mark Floyd, who also ordered Pameijer to pay $1.8 million in restitution to his defrauded victims.  Judge Floyd suspended eight years of the sentence, meaning Pameijer will serve ten years of his sentence.  Pameijer previously pleaded guilty in February 2014 to three securities fraud charges.  

Pameijer held himself out as an expert financial advisor through his company, Plan America, LLC ("Plan America"), and also recruited investors for Rykoworks Capital Group, LLC ("Rykoworks") which was operated by Ryan Koester.  In soliciting potential investors, Pameijer not only promised above-average rates of return but also guaranteed their initial investment.  According to authorities, Pameijer also convinced some victims to surrender their existing annuities or utilize their retirement account to fund their investment.  In total, Pameijer raised more than $1.5 million from at least twenty-four investors that included family and friends.  

However, the returns promised to investors were funded not through Pameijer's trading prowess, but rather by funds from incoming investors in typical Ponzi scheme fashion.  Pameijer also diverted investor funds for his own use, including sustaining a lavish lifestyle that included luxury cars, a 30-foot boat, his son's college tuition, and his daughter's wedding and honeymoon in St. Lucia.  

The Securities and Exchange Commission initiated a civil enforcement action in September 2012 accusing Pameijer, Pameijer's daughter, and Koester of violations of federal securities laws.   Authorities also filed criminal charges against Koester, who was recently sentenced to a two-year prison term for his role in the scheme.

"Bamboo Cyclist" Pleads Guilty To $2.5 Million Ponzi Scheme

A Utah man who once billed himself as the "Bamboo Cyclist" as he cycled across the country has entered a guilty plea to federal charges that he operated a Ponzi scheme that caused at least $2.5 million in losses to victims.  James Ronald Donahoo, II, 36, pleaded guilty to wire fraud, money laundering, and failure to file a tax return in a Utah federal court last week.  According to the plea agreement, Donahoo and prosecutors stipulated to a 48-month prison sentence, which must still be approved by U.S. District Judge Dee Benson.  The agreement also calls for a three-year period of supervised release following completion of the sentence, as well as payment of approximately $2.8 million in restitution to victims.

Donahoo exercised control over Paradigm, Inc. ("Paradigm"), a Utah corporation that Donahoo represented was in the business of making bridge loans or "hard money loans" to small businesses. Donahoo told potential investors that they could earn monthly returns ranging from 1% to 3%. The safety of the investment was touted by Donahoo, who told investors that each dollar invested was secured by a corresponding amount in the bank.  Investors were also shown monthly bank statements for Paradigm that purportedly reflected their investment growth.  In total, Donahoo raised at least $2.5 million.

However, while Paradigm did invest approximately $1.5 million in various businesses, none of investors' funds were used as represented.  Further, the various businesses that received investments from Paradigm were operated by various family, friends, and acquaintances of Donahoo. Approximately $267,000 was used to make Ponzi-style payments to existing investors, while Donahoo also misappropriated funds to sustain a lavish lifestyle that included the purchase of more than $11,000 in fur coats, trips to Hawaii, jewelry, and a Mercedez Benz.

After several investors obtained judgments against Donahoo following the scheme's collapse, he reportedly began traveling the country by bicycle billing himself as the "Bamboo Cyclist" as he promoted various philanthropic causes.  Donahoo promoted his cause through various social media sites, including YouTube.  One website apparently formed by one of Donahoo's victims suggested that these efforts, including Donahoo's claim that he was soliciting "micro loans" for 3rd world countries, were simply a continuation of Donahoo's deceit.  One of the YouTube videos is embedded below:

Sentencing is scheduled for October 7, 2014 at 2:00 P.M.

New York Man Faces Criminal Charges For $17 Million Ponzi Scheme

A New York investment advisor is facing criminal charges over allegations that his investment fund was, in reality, a massive Ponzi scheme that raised more than $17 million from dozens of investors.  James M. Peister, 62, was indicted on five charges of securities fraud, mail fraud, and wire fraud.  Each of the charges carries a maximum 20-year prison term, as well as varying criminal monetary penalties.  Peister was scheduled to be arraigned this afternoon on the charges.

Peister owned and operated several commodity pools, including Northstar International Group, Inc. ("Northstar"), North American Globex Fund, L.P. ("Globex"), and North American Globex Group, Inc. ("Globex Group") (collectively, the "Funds").  Beginning in 2000, Peister solicited potential investors by representing, among other things, that the Funds had achieved positive monthly returns in all but four months over a seven-year period, and that their funds would be invested in a variety of safe securities, including stocks, commodity futures contracts, and fixed income instruments. Investors were provided with regular monthly statements showing purported consistent gains in their accounts.  In total, at least 74 investors entrusted more than $17 million with Peister and the Funds.

However, according to authorities, a majority of investor funds were transferred to the Globex Group, which was not audited and did not issue regular statements.  Authorities allege that Peister and the Funds began experiencing trading losses immediately, which were not disclosed to investors.  Additionally, Peister allegedly misappropriated investor funds for a variety of unauthorized purposes, including to sustain a lavish lifestyle that included expensive real estate and a Hummer vehicle.  In June 2009, after making redemptions to investors that totaled more than $10 million despite concealing the underlying trading losses, Peister announced that the Funds were dissolving and that financial statements previously provided to investors likely contained material inaccuracies.

Following Peister's announcement, both the Securities and Exchange Commission ("Commission") and the Commodity Futures Trading Commission ("CFTC") filed civil enforcement actions in 2011 accusing Peister of violating federal securities and commodities laws.  Peister resolved both of those cases, including a settlement with the CFTC that called for an $11 million payment.

The Commission's 2011 Complaint is below:

SEC Complaint