Psychology of Compliance & Due Diligence Law

The Florida Department of Agriculture announced that "Florida Commissioner of Agriculture and Consumer Services Commissioner Charles H. Bronson has won a $2.2 million dollar judgment and a civil fine of nearly $1 million dollars against Global Resources, Inc., a now defunct business opportunity seller. The Department also took action against the owner, Stewart Pope of Pinellas County."

Global Resources, a spin off of fPantheon, was the typical new technology biz op scam - promises of locating or distributing internet kiosks. I have already explained before why there is no business of locating vending or internet kiosks.

Although, Commissioner Charles Bronson may be very happy with his paper judgment of $3.2 million dollars, those people who were robbed and waiting for real dollars are less than pleased. A number of them are trying to join together to try collect on these restitution orders.

But there was a simple due diligence test that would have alerted the potential investors that something was wrong. What was it?

Technorati Tags: internet kiosks, global resources, charles bronson, department of agriculture, florida department, business opportunity seller, defunct business, due diligence, judgment, pinellas county, biz op, restitution, pantheon, vending

Continue reading "Global Resources, A win for consumers?" »

Posted by michael webster at 09:15 PM | Permalink | Comments (0) | TrackBacks (0)

On June 5th, 2006 having satisfied the Court that he had no money for legal representation, Kirk Wright's criminal case is going to be defended by the public defender. The pre-trial is set for June 19th, 2006.

In the bankruptcy of IMA and the associated companies, the creditors meeting is at the end of month and almost 900 creditors have the ability to file a proof of claim. As far as I can tell, the receiver has not had his account passed or approved by the Court, yet. It will be interesting to review that account.

Technorati Tags: creditors, criminal matter, pre trial, public defender, money, criminal case, legal representation, kirk wright

Posted by michael webster at 04:39 PM | Permalink | Comments (1) | TrackBacks (0)

According to Court documents, the receiver for Kirk Wright's group of IMA companies obtained an order requiring production of documents regarding certain accounts held at Charles Schwab, production order. The documents are to be delivered by June 14th, 2006 to the receiver.

Technorati Tags: charles schwab, court documents, ima

Posted by michael webster at 04:44 PM | Permalink | Comments (0) | TrackBacks (0)

Was Steve Atwater a shill for Kirk S. Wright? I don't know the answer to this, but Mike Tierney's revealing article a few days ago would have me concerned for several reasons. As reported by Mike Tierney, Atwater received compensation of 1.5% per referral. Let us work some numbers here. If I gave Wright $1,000, expecting a the historical IMA return of 20%, then after Atwater took his take, Wright would have only had $985 to work with. If Wright could actually produce in one year a return of 20%, ie $1200, then Wright would have had to make $215, or roughly 43/197 or 22.3% return.

Is the difference between 20% and 22.3% significant enough to alert someone performing due diligence? Should have Steve Atwater known he was enabling, even innocently, scam?

Well, the master of this scam was Charles Ponzi., and he cut his sales force in for 10% - and with a 50% payout in 3 months. So Mr. Atwater's referral commission is not out of line, but was it disclosed to the investors? If so, did they realize the significance of how much more return and therefore risk IMA funds had?

Technorati Tags: steve atwater, charles ponzi, mike tierney, due diligence, received compensation, shill, ima, enabling, investors

Posted by michael webster at 10:44 PM | Permalink | Comments (1) | TrackBacks (0)

Some interesting details about Mr. Kirk Wright have emerged from the Court files in Miami, where Mr. Wright was arrested. As readers will recall, part of Mr. Wright's method was to give his investors phoney statements which showed large returns. Apparently as late as February 15, 2006 Mr. Wright was insisting that Ameritrade was holding the funds. Searches by the Ameritrade staff showed only funds of approximately $150,000, and not the $150 or $160 million Mr. Wright was claiming. It took the Director of Compliance for Ameritrade at little more than a week to confirm that Ameritrade only held $150,000 for Wright's companies. Amusingly enough, the 800 number of the Ameritrade statements used by Mr. Wright were also in error; no such number nor address is connected to Ameritrade. One other company was related to IMA, J&B Oxford & Company was also located by the Director of Compliance, but the account was closed.

How was Mr. Wright able to get away with not showing the investors what he invested in and where the money was? Was it a secret?

Technorati Tags: ameritrade, phoney, 800 number, ima, kirk wright

Continue reading "Kirk Wright - The Miami Stopover" »

Posted by michael webster at 08:41 AM | Permalink | Comments (2) | TrackBacks (0)

According to documents filed in the bankrucptcy of IMA and its affiliates, "Funds from IMA accounts totaling $6,050,000 were invested by Kirk Wright in these [real estate] projects[in Los Angeles]. Negotiations are near completion and due diligence activities are underway between a potential purchaser of this Debtor's interests, GTO and the Trustee. The Trustee's intent is to present the offer to the Court in a motion and hearing for a section 363 sale as soon as the "stalking horse" purchaser's due diligence is complete. The Trustee has been contacted by other entities who have expressed an interest in acquiring the Debtor's interests in these projects."

The Trustee is also the federal receiver for the assets of Mr. Kirk S. Wright and reports "Assets recovered in the Receivership estate as of April 30, 2006 include the following: House, Marietta, GA. Loft Condo, Atlanta, GA, Duplex house, Fairburn, Ga, 2005 Bentley Continental GT, 2000 Jaguar XK8, Aston Martin, 1967 BMW 2000CS,Furniture, fixtures, artwork.These assets and others are being marketed and sold in the Receivership estate. The estimated liquidation proceeds of these items may be in the range of $1.5 million to $2.2 million."

So for those who are counting, $7.5 to $8.2 million found, and only another mere $172 or 173 million to go.

Technorati Tags: due diligence, trustee, kirk wright

Posted by michael webster at 09:41 AM | Permalink | Comments (1) | TrackBacks (0)

The SEC offered the following evidence that there should be a finding of either danger to the community or risk of flight which would be sufficient to detain the defendant pending trial.

a. "By way of proffer at the Florida detention hearing, the Government established that although approximately $100 million was deposited with IMA and IMAAG over the past several years, IMA's client assets during the Fall of 2005 and Winter of 2006 totaled less than $500,000."

b. "It was undisputed at the hearing that the defendant was made aware of the existence of the federal warrant since March 2006, never surrendered or made his whereabouts known, and operated under false identities. He was also advised by his former counsel that the FBI was actively looking for him, and that he must turn himself in. Defendant never did so. Ultimately, he was arrested at the Ritz Carlton Hotel in Miami Beach, Florida, where he had been staying with his wife under a false name (Mark Lakean) since May 14, and where he had been paying cash."

c. "At arrest, the agents discovered the defendant had bank debit cards under the alias Lakean. The defendant also stated that he had altered his own Georgia driver'slicense to bear the name Lakean, and he possessed a false identification card under a different name, Bryce Buchman. The agents also found an "Exacto" knife and laminating materials, of a sort that could be used to manufacture identity cards."

d. "The Government proffered that bank records show the defendant made two cash withdrawals - preceded by transfers of funds from IMA/IMAAG accounts – in the amount of $500,000 total, in January 2006."

e. "Moreover, the Government proffered that the arresting agents discovered approximately $30,000 in cash in the defendant's belongings at the hotel. The defendant also admitted that he had purchased a 2004 Mercedes with cash, and had put $40,000 in cash down towards the purchase of a Miami condominium. The remainder of the $500,000 cash hoard secreted by the Defendant in January 2006 is
unaccounted for. The agents also discovered real estate listings for a property in Puerto Rico. "

f. "The Government proffers that the defendant's wife was personally advised of the existence of the arrest warrant in March 2006. She told the FBI that she did not know of her husband's whereabouts, and had only one telephone number for him (which the FBI discovered was discontinued or inactive). She promised that she would contact the FBI if she heard from the defendant. She did not do so. Instead,
she was found by the defendant's side at the pool of the Ritz Carlton, when he was arrested. In the hotel room, the defendant had seven cellular phones in his possession. His wife also had multiple cellular phones. The Government submits that this activity indicates an intent to conceal their communications and ultimately the defendant's location. It also suggests the defendant was receiving assistance from his wife and/or that his wife was not cooperating with the FBI to the extent she assured she would. "

What was Mr. Wright's response to all of this?

Technorati Tags: mail fraud, atlanta based, defendant, wall street journal, cash withdrawals, miami condominium, hedge funds, fraud charges, florida judge, federal authorities, ima

Continue reading "Kirk Wirght and the SEC's Case for Stay of Pretrial Release" »

Posted by michael webster at 09:13 PM | Permalink | Comments (5) | TrackBacks (0)

A month ago, Amanda Cantrell, a CNNMoney.com staff writer, had a thoughtful piece on the difficulties in recovering assets from a fraud, in this case Kirk Wright's hedge fund fraud. She listed all of the standard difficulites, including trying to enforce a U.S. Judgment against offshore assets. Remember a judgment only allows the creditor to intercept funds owed to the debtor, if the jurisdiction which has the asset recognizes the underlying action as valid. Sometimes this can require a separate trial on the merits.

Business Opportunities frauds or scams are no different, but the recovery rate, at least from the FTC figures, is notably less. I estimate, using data that the FTC produced from 1993-2000, that the actual recovery to the public from Bizop scams is around 5 cents on the dollar. If the Bizop is a scam or fraud, then you are likely going to lose all your money. Think about that - Bizop frauds or scams are so bad that you might as well be throwing your money away -burn it, buy lottery tickets for non-existent lotteries, or buy swamp land. You are simply going to lose your money, if the scheme is a fraud or scam.

What is a even scarier number than 5 cents on dollar?

Technorati Tags: scams, fraud, cnnmoney, offshore assets, frauds, ftc, judgment, money, hedge fund, debtor, intercept, merits, enforce, business opportunities, jurisdiction

Continue reading "Recovery of Funds From a Fraud" »

Posted by michael webster at 04:31 PM | Permalink | Comments (0) | TrackBacks (0)

The Wall Street Journal is reporting that the FBI arrested Kirk S. Wright, the missing hedge fund manager who allegedly "misplaced" $100 million of his clients money. Very little of the money has been recovered, around $200,000. According the article, "Mr. Wright's arrest may offer some optimism to former clients. "The hope is that Mr. Wright will now lead us to the tens of millions of dollars that are still missing," said Timothy Mungovan, an attorney with Nixon Peabody LLP in Boston who represents former investors in Mr. Wright's funds."

Now perhaps we might see an fight between the state receiver and the private investors looking for the missing loot. This should prove to be interesting.

Technorati Tags: nixon peabody llp, wall street journal, private investors, hedge fund manager, money, fbi, loot, optimism

Posted by michael webster at 09:24 PM | Permalink | Comments (5) | TrackBacks (0)

The mail fraud allegation stems from Mr. Wright sending false asset statments to an investor Mr. Atwater. Mr. Atwater and other have sued Mr. Wright civilly.

Several other investors had previously asked to replace the state's receiver with Kroll Associates. Judge Charles A. Pannell has yet to rule on this request, but has allowed challenges to the receiver's expenses to be made by other parties.

Technorati Tags: mail fraud, arrest warrant, fbi, kroll associates, atwater, united states attorney, sec action, allegation, ima, stems, allegations, counsel, investors

Technorati Tags: mail fraud, sec action, united states attorney, arrest warrant, technorati, kroll associates, atwater, fbi, allegation, ima, stems, allegations, counsel, investors

Continue reading "Kirk Sean Wright Declared Fugitive" »

Posted by michael webster at 03:27 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by michael webster at 09:16 AM | Permalink | Comments (0) | TrackBacks (0)

On February 27th, the SEC brought their own action against Kirk S Wright but did not include all the defendants in the two civil cases. William Perkins was again appointed the receiver for the Federal case.

Why are Laird and Baker complaining? Surely the SEC and the Receiver are up to recovering the missing funds?

Continue reading "Public and Private Batlle for the remains of IMA" »

Posted by michael webster at 07:52 AM | Permalink | Comments (0) | TrackBacks (0)

Exhibit 1: The pages from 2001 through to early 2005. I guess I would have wondered why the website was not updated past March 7, 2005?

Exhibit 2: Two medical doctors were the CFO and COO of IMA. Doctors and high finance, hmm. What qualifications do these two have, other than knowing a lot of other individuals with money?

Exhibit 3: A bar graph showing the alleged profits. Now why does the chart refer to "reinvestment of interest earned"? Interest earned?

Posted by michael webster at 09:10 PM | Permalink | Comments (0) | TrackBacks (0)

One of the best and worst features of the Net is the ability to do "instant" research. Could the investors in Kirk Wright's hedge fund done sufficient due diligence to avoid his alleged scam or fraud? A search on "hedge fund due diligence" revealed this checklist from a website called "credit market risk advisors":

The following are good general risk questions for beginning a dialogue:

* How do you insure the separation of front and back office?
* Who marks the book to market? Who reviews? Who has market authority and override? Who receives report overrides?
* Do you have written policies and procedures? May I please see them?
* How do you manage risk?
* Do you have a designated risk manager?
* Do you include risk limits in your guidelines?
* If someone breaches his or her limits, what happens?
* What are your backup and recovery plans? Have they ever been tested? Where are copies of the plans maintained?
* How do you define leverage? What is the max leverage you are allowed? How often are you at or near the max? If you were max leveraged and your prime broker doubled your haircuts, how much would that cost to fund?
* How much of your borrowing is O/N? Short term? Long term? How has that changed over the past 12 months?
* What is risk? Do you have a risk conscious culture? What defines your culture?
* What is your attitude towards transparency?
* Since you trade in multiple time zones, how do you calculate your NAV?
* Evaluate ongoing appropriateness of strategy versus initial premise.

What good is this list, if you are unsophisticated investor?

Continue reading "Due Diligence on Kirk Wright" »

Posted by michael webster at 06:44 PM | Permalink | Comments (1) | TrackBacks (0)

Apparently, Mr. Wright while not hiding, is available by cell phone, giving instructions to his lawyer and conducting interviews with the Wall Street Journal. The article claims:

Some of Atlanta's African-American business leaders express anger that the city's biggest black-owned hedge fund may have taken advantage of the city's black professionals to gain legitimacy early on, letting the fund build a broad client base later. "In all candor, what he did was say, 'I can wine and dine African-Americans who are not sophisticated in the investment field and get their money,' " says Reuben R. McDaniel III, the African-American co-chairman and president of Jackson Securities Inc., an investment bank founded by former Atlanta Mayor Maynard H. Jackson, who died in 2003. (my emphasis)

Although the WSJ lists the usual red flag suspects available in hindsight, "unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager", these red flags could describe any successful hedge fund. Why are these red flags available only the fund has collapsed?

There is an accompanying video which is well worth watching. One of the new anchor suggests to the Wall Street Journal reporter that of course 27% returns in the last couple of year is a huge red flag. Implying only fools could believe in such increases. Really? Do you think that news anchor knew what Berkshire B's return from 2003 to 2005? Care to guess?

Continue reading "Social Proof and Kirk S Wright" »

Posted by michael webster at 08:09 AM | Permalink | Comments (1) | TrackBacks (0)

In a similar action against three unregulated hedge funds, the SEC alleged:

that from approximately 1999 to the present, the Defendants have raised at least $81 million from investors nationwide by boasting annualized returns of 125 to 150% over the last several years and by sending false account statements to investors showing similar gains. According to the complaint, the hedge funds were suffering tremendous trading losses and only about $11 million remains of the more than $81 million that investors put into the hedge funds. (my emphasis)

One of the defendants in the above case agreed to a permanent injunction and a disgorgement penalty should soon be decided upon.

What is striking in this: how can false account statements be detected?

Continue reading "The SEC and False Reporting" »

Posted by michael webster at 05:13 PM | Permalink | Comments (0) | TrackBacks (0)

Kirk Wright apparently has more than unhappy investors: he is alleged to have also not paid his ex-wife the million dollars he owes her.

Lars Toomre when commenting on this scandal suggests that:

"Sadly, in this case, approximately 500 investors are finding out the hard way that due diligence needs to be performed before investing and at least every year thereafter, not after the cow has left the proverbial barn" (my emphasis)

Which year did they miss? Only the year that they were robbed?

Posted by michael webster at 11:26 PM | Permalink | Comments (0) | TrackBacks (0)

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"it filed a complaint and an emergency application for a temporary restraining order and other relief in the Northern District of Georgia to halt an ongoing offering fraud involving the sale of investments in seven hedge funds by an Atlanta-based promoter and investment advisers controlled by him. The defendants are Kirk S. Wright (Wright); International Management Associates, LLC (IMA) and International Management Associates Advisory Group, LLC (IMA Advisory) and seven hedge funds; International Management Associates Platinum Group, LLC (Platinum I), International Management Associates Emerald Fund, LLC (Emerald Fund), International Management Associates Taurus Fund, LLC, International Management Associates Growth & Income Fund, LLC, International Management Associates Sunset Fund, LLC; Platinum II Fund, LP (Platinum II), and Emerald II Fund, LP. IMA and IMA Advisory are investment advisers in Atlanta, Georgia, owned and operated by Wright and others."

The allegations are that $155 million is missing. False statements were allegedly prepared in order to deceive the investors. You wonder how this can happen. But it is far more common than believed. And as usual, Charles Ponzi had a pretty good angle on why this happens.

Continue reading "SEC and Kirk Wright

For updates.

Posted by michael webster at 05:42 PM | Permalink | Comments (1) | TrackBacks (0)