Massive Affinity Fraud And Ponzi Scheme
Tri Energy: Massive Affinity Fraud And Ponzi Scheme
The Securities and Exchange Commission ("Commission") announced today that the Honorable Andrew Guilford, U.S. District Judge for the Central District of California, entered Final Judgments on August 9, 2007, as to defendants Tri Energy, Inc., H & J Energy Company, Inc., Robert Jennings, Arthur Simburg, and La Vie D'Argent (collectively the "Tri Energy Defendants"), and also against Daniel J. Merriman and his companies DJM, LLC, Financial MD, Inc., and Financial MD and Associates (collectively the "Merriman Defendants").
A final judgment was also entered against defendant Mildred Stultz on May 17, 2007, and against relief defendant, Nga Wing Lau a/k/a Adrienne Lau, on August 9, 2007. The Tri Energy Defendants, the Merriman Defendants, and Stultz were each permanently enjoined from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Tri Energy Defendants, the Merriman Defendants, and Stultz, who each consented to the entry of the judgments without admitting or denying the allegations of the Commission's Amended Complaint, are specifically enjoined from soliciting investments of the type at issue in the Commission's lawsuit. The Court also ordered the Tri Energy Defendants to pay civil penalties, disgorgement, and pre-judgment interest to be determined by the Court at a later date. The Merriman Defendants were ordered to pay disgorgement in the aggregate amount of $101,500 plus pre-judgment interest of $16,371 and a $75,000 civil penalty. Stultz was ordered to pay disgorgement of $174,100 and pre-judgment interest of $25,098.84, which were waived based on her financial condition. Finally, Lau was ordered to pay disgorgement of $200,000 plus pre-judgment interest of $20,000.
The Commission's Amended Complaint, filed on August 10, 2006, alleged that the aforementioned defendants, and others, perpetrated a massive affinity fraud and ponzi scheme involving a purported coal mine venture and a so-called international "gold deal." The Complaint alleged that defendants had been telling investors that these extraordinary profits were to be generated in part by helping an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates. In reality, according to the Complaint, although some money had been paid out to investors, those funds appeared to have come from new investor money, and substantial amounts of investor funds had been transferred to bank accounts controlled by some of the defendants and relief defendants. Defendants recruited potential victims through claims that their investments were aimed, at least in part, at raising money for humanitarian and religious efforts. The defendants promised their victims outlandish returns on their investments of 100-1000% in as little as 60 days. Over 500 investors lost over tens of millions of dollars in the scheme.
From the 2005 SEC press release;
"According to the Complaint, defendants have defrauded hundreds of investors of over $12 million by promising returns of 100% or more within 60 days. The Complaint alleges that defendants have been telling investors that these extraordinary profits were to be generated in part by helping an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates. In reality, according to the Complaint, although some money has been paid out to investors, these funds appear to have come from new investor money, and substantial amounts of investor funds have been transferred to bank accounts controlled by the proposed defendants and relief defendants. Defendants have characterized the purported gold transaction to religiously devout investors as "deistically inspired" and "divinely guided."
From the original complaint:
"Defendants are perpetrating a massive affinity fraud and Ponzi scheme,
which has resulted in millions of dollars of losses by over 300 victims. Posing as a
group of religious entrepreneurs who hope to earn phenomenal returns through
“deistically inspired” and “divinely guided” transactions, Defendants recruit potential victims through claims that their investments are aimed, at least in part, at raising money for humanitarian efforts such as alleviating poverty in Africa and the Appalachians. Defendants promise their victims outlandish returns on their investments of 100 – 200% in as little as sixty days with no disclosure of any real risks."
Here is usual tip-off:
"During the same time period, Defendants paid approximately $4 million to $5 million out to investors using funds deposited by other investors. Thus, in typical Ponzi scheme fashion, Defendants’ payments to existing investors were funded almost completely by money received from new investors to the scheme.
Moreover, Defendants diverted a significant portion of investor funds – approximately nine million dollars – into nominee accounts they control and used the funds in part for personal expenses such as the funding of unrelated businesses, hotel stays, jewelry and other retail purchases and personal services. Some of the nominees recovering these ill gotten gains are named as Relief Defendants herein.
As with all Ponzi schemes, once the ever-increasing flow of new investors stops, the
house of cards built by Defendants will collapse and most investors will be left
empty-handed."
This is always the critical key indicator to fraud - the diversion of funds from a corporation to pay for personal expenses.
Strangely, most Canadian police don't grab bank accounts when investigating alleged fraud.
Strangely, Canada is known to be a land congenital to fraud.
