THE BIZOP NEWS

Several days ago, I attended along with twenty or so of my clients, a meeting with Chief of Police, a Crown Attorney, and senior Detective. The purpose of the meeting was to explain why fraud charges could not be brought against a noted franchisor fraud.

The key to the Chief/Crown's position was this: how could we prove to the Jury that the individual was a criminal as opposed to simply being a bad businessman?

However, in Grand Rapids, we have an excellent example of a Judge not buying the bad businessman excuse.

A judge did not buy John Sims' excuse that bad business led to the downfall of his ATM leasing company.

And his victims celebrated outside the courtroom after the judge exceeded sentencing guidelines and sent the once-prominent businessman to prison for up to 21 years.

'It shows crime doesn't pay,' said Steve Morin, who said his family lost more than $450,000. 'He deserves every day.'

Sims, 51, is headed to prison for 'lying, cheating and stealing' from people he was supposed to be working with in a legitimate enterprise, Kent County Circuit Judge Mark Trusock said Tuesday. State sentencing guidelines called for 10 to 28 months.

In all, Sims was charged with a series of scams that cost partners about $750,000.

'There is a pattern of criminality here,' Trusock said, referring to fake contracts Sims presented to partners. 'This is not someone going into business and, unfortunately, the business goes bad. It's lying, cheating and stealing, and that cannot be tolerated

ATM leasing frauds are ponzi schemes in which the fraudster shows fake leases to investors, which are supposed to be generating cash, and then uses the proceeds from new investors to pay out the old investors -hiding the fact that the leases were bogus to begin with.

Lying, cheating, and stealing. The three elements that push bad business practices into the realm of criminal behavior -in this case 21 years of criminal time.

Posted by michael webster at 7:42 AM | Permalink | Comments (0) | TrackBacks (0)

Here is a way to calculate the cost of due diligence for business opportunities, distributorship of vending machines in particular. Remember the adage that crime doesn't pay, when reading through the press release. The FTC's Press Release states that

Business Opportunity Marketers Pay $122,000 to Consumers to Settle FTC Charges: "Federal Trade An operation that was charged with deceptively marketing candy vending machine business opportunities will give back $122,000 to consumers who invested in it. The Federal Trade Commission charged that the operation lured consumers by falsely promising big incomes and prime locations for the machines, and hiring shills to reinforce the earnings claims.

The operation advertised that consumers could make “$1,710 per week” after buying its candy vending machine business opportunities and promised “prime locations” that had already been secured. Prices ranged from $7,000 to $59,000, and were supposed to include everything needed to start a business: vending machines; a recommended, professional locator service; and support to launch the business. The FTC’s complaint charged the operation made false earnings claims and deceptive representations about available locations, provided phony references, and did not provide complete and accurate required disclosure documents.

The orders announced today settle the charges against all of the defendants: Harvey Frank Milner, Richard M. Norcross, and Richard D. Norcross, as well as the companies – Route Wizard, Inc.; Liberty Routes, Inc.; Ready Routes, Inc.; RouteCrafters, Inc.; Ca$h Route$, Inc.; NovaStar Vending, Inc.; and Alliance Locating Co., Inc.

The orders prohibit the defendants from misrepresenting any business venture and prohibit false earnings claims or misrepresentations about locations. The orders prohibit the use of shills and prohibit the defendants from violating the Franchise Rule or the Business Opportunity Rule, including failing to provide a complete and accurate disclosure document to consumers, and failing to have a reasonable basis for any earnings claims.

Harvey Frank Milner and his wife, Janice Wood-Milner, will give up $42,000 – the total amount of money that they received from the scheme. Richard M. Norcross and his wife, Summer L. Norcross, will pay $30,000, based on their financial disclosures. Richard D. Norcross and his wife, Sasikant L. Norcross, will pay $50,000, also based on their financial disclosures. The wives of the defendants are not accused of wrongdoing, but have allegedly received ill-gotten gains and do not have a legitimate claim to them.

The orders for Richard M. Norcross, Richard D. Norcross, and the corporate defendants entered a judgment of $3,382,070.61 – the total amount consumers paid – against them, which is suspended, based on sworn financial disclosure documents. The order for Sasikant L. Norcross enters a judgement of $113,445 – the total amount she received – against her, which is also suspended. The suspended judgment amounts will be due in full, minus any payments already made by other defendants, if a defendant lied about his or her financial status.

I see, the fraud took in $3.3 m and the scammers paid .11 m, or about 3 cents on the dollar. Crime doesn't pay? Maybe not, but it sure seems rewarding.

Why do these frauds continue to exist? People will not pay $300 - $400 to do the proper due diligence -they know that there is only bad news.

How much would you have paid to have avoided losing 97% of your investment?

Posted by michael webster at 12:43 PM | Permalink | Comments (0) | TrackBacks (0)

Interesting story about recovering funds from non-parties.

Advance-Fee Credit Card Scammers Ordered to St...: "



Advance-Fee Credit Card Scammers Ordered to Stop, Pay Nearly $10 Million

This posting was written by Darius Sturmer, editor of CCH Trade Regulation Reporter.

In an FTC action, the federal district court in Chicago has entered several new orders against the Canadian operators of a cross-border advance-fee credit card telemarketing scam, permanently enjoining the corporate defendants and a principal from operating the scheme, directing them to pay nearly $10 million in consumer redress, and holding two other individuals in contempt of court for violating the terms of preliminary injunctions issued earlier in the case.

FTC Complaint

According to the FTC's September 2005 complaint, the defendants had, since at least 2004, used outbound telemarketing to contact consumers in the United States and offer them major credit cards for an advance fee of $249. The defendants typically claimed that the credit cards would have a $2,000 credit limit, zero percent interest, and no annual fees. They often targeted their offers at consumers with poor credit histories.

Consumers who provided their bank account information did not receive a major credit card, but instead were sent an application for either a 'stored value card' or 'cash card' that had no line of credit associated with it and could be used only if the consumer first loaded funds onto the card.

The complaint also alleged that the defendants violated the law by calling consumers on the FTC's National Do-Not-Call Registry.

In early May 2007, the FTC entered into a settlement of its charges with three of the individuals who allegedly ran the operation (CCH Trade Regulation Reports ¶16,007).

Final Orders

The final orders—which concern all 13 of the corporate defendants, as well as the individual defendant—barred the defendants from: (1) making, or assisting anyone else in making, any false or misleading statements concerning any fact material to a consumer's decision to buy any program, product, or service; and (2) violating, or helping anyone else to violate the Telemarketing Sales Rule.
The orders also held the defendants jointly and severally liable for $9.89 million (the total amount of consumer injury associated with the scam), froze their assets until they have satisfied the judgment, and barred them from selling their customer lists. Finally, the orders contained provisions designed to ensure future compliance with the FTC Act and the orders themselves.

Contempt Order

Civil contempt orders had been entered against one individual defendant and a non-party, for violations of the preliminary injunction issued by the court in January 2006, the FTC announced. In papers submitted to the court, the Commission demonstrated that just a few months after entry of the preliminary injunction, the individual defendant began a new telemarketing venture that falsely promised consumers they would receive at least $5,000 in government grants in exchange for an application fee of several hundred dollars.

The non-party, who along with his employees provided customer service for the venture, withdrew these fees from consumers' bank accounts, in total taking over $650,000 from consumers, approximately $550,000 of which he transferred to the individual defendant and the rest of which he kept in fees for himself. The court found that this conduct violated the preliminary injunction.

Among other things, the preliminary injunction froze the defendants' assets and prohibited them from engaging in deceptive conduct. It prohibited third parties who received notice of the order from assisting the defendants in violating it. Because the non-party customer service provider had been notified of this order, he was therefore bound by it. The court ordered the two individuals to return the $657,648 that they took from U.S. consumers victimized by their grants scam, and it imposed a fine of $5,000 per day for each day the amount remains unpaid.

The case is FTC v. Centurion Financial Benefits, LLC, U.S. District Court for the Northern District of Illinois, Civil Action No. 05C 5542. The consent decrees and civil contempt order were filed on July 5, 2007. Further details appear at the FTC web site and CCH Trade Regulation Reporter ¶16,026."

(Via Trade Regulation Talk.)

Posted by michael webster at 10:06 AM | Permalink | Comments (0) | TrackBacks (0)

Some idoit is attempting revive 12 Daily Pro, too bad the pyramid scheme crashed a year ago and recently the victims were paid out by the receiver with gift cards.

The Night of the Living Dead

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Autosurf programs are the new big online moneymakers. For people who have always wanted to earn money online with very little effort autosurfing is the new king.

What is autosurf and how can you make money with paid auto surf programs ? Companies that have web sites will pay for traffic. They will pay to have people visit their sites and hopefully buy what they are selling. Autosurf web sites are the go-between, the connection between you and the companies looking for more traffic. They will pay you to view web sites and online content specifically targeted to web promotion professionals like yourself.

Some people are making hundreds of dollars every day in just a few minutes of time. And maybe you want to do the same thing. "

Posted by michael webster at 3:50 AM | Permalink | Comments (0) | TrackBacks (0)

According to the SEC's press release about the Universo FoneClub Corporation

"The Securities and Exchange Commission ("Commission") announced today that, on May 16, 2007, the Honorable Mark L. Wolf of the United States District Court for the District of Massachusetts entered Final Judgments against Universo FoneClub Corporation, Sanderley R. De Vasconcelos and Victor Sales in connection with a pyramid scheme targeting members of the Brazilian-American community that raised approximately $3.2 million. The final judgments, entered by consent, enjoin De Vasconcelos and Sales from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the final judgments hold De Vasconcelos and Universo FoneClub jointly and severally liable for $3,269,459 in disgorgement plus $151,928.49 in prejudgment interest but waive payment of all but $1,805,612.66 of that sum and do not impose a civil monetary penalty against De Vasconcelos or Universo FoneClub based on the sworn representations made in their Statements of Financial Condition and other documents and information submitted by them to the Commission. The final judgments also require Sales to pay, over a seven month period, $9,423.80 in disgorgement plus $437.92 in prejudgment interest and a $25,000 civil penalty.

On May 30, 2006, the Commission filed a complaint alleging that De Vasconcelos and Sales were promoting a pyramid scheme known as AFoneClub@ that targeted Brazilian-Americans. The complaint alleged that the defendants falsely promised members of the Brazilian community that they would earn substantial sums of money by paying approximately $2,000 to $5,000 to become members of a company (referred to as the FoneClub) that purportedly sold prepaid telephone calling cards through a multi-level marketing structure. However, the complaint alleged that the defendants, who had emphasized to potential investors that neither they nor the company would earn profits from the sale of phone cards, were in reality luring victims into a pyramid scheme in which its members would only make money through the recruitment of new members. The complaint further alleged that the defendants emphasized in their sales pitches, which were made in Portuguese, that God wanted the Brazilian community to prosper financially and that FoneClub would provide the opportunity for it to do so."

So God wanted the SEC community to also prosper by granting them this consent order? As I reported earlier, "the defendants actually told the individuals they were recruiting that there was no way to make money by selling the FoneClub products and they could only make money by bringing in new marks, or sorry, new recruits." Does stupidity among the organizors explains why this scam lasted only from April, 2006 or several months.

Posted by michael webster at 5:40 PM | Permalink | Comments (0) | TrackBacks (0)

The FTC announced, May 15th, 2007 they had recovered $160,000 for Franchisees Who Bought Web Services Businesses. Although the press release doesn't say so, it is unusual for the FTC to recovery anything from a business opportunity fraud -by the time they get sufficient complaints, the fraud has run its course and the "sales" criminals have scurried back into their holes.

What is interesting about this case is it shows how a simple exercise in proper due diligence could have saved the day.

According to the press release,

"A company and its owner will return $160,000 to consumers and are banned for life from promoting or selling franchises or business opportunities. The Federal Trade Commission charged that they used bogus earnings claims to lure franchisees into buying their Web services businesses, and failed to tell customers that the owner was under a previous FTC order for deceptively promoting rare coins.

The FTC charged that Netvertise, Inc. and Elliot Krasnow violated federal law when they sold franchises for Web site design and promotion services to businesses. The franchises, which cost between $20,000 to $100,000, offered various Internet services to small and medium-sized businesses, including the construction and promotion of Web sites, use of e-mail marketing, and off-site data protection. The franchise included Netspace's Search Engine Optimizing software, which they claimed would allow franchisees to create high-quality Web sites for clients that would appear on the first page of results from an Internet search engine.

According to the FTC's complaint, the defendants misrepresented that franchisees were likely to earn substantial incomes and overstated the value of the Netspace software. The complaint also charged that the earnings claims were unsubstantiated and that the defendants provided consumers with defective disclosure documents. In 1990, an order entered against Krasnow required him to pay $400,000 and prohibited misrepresentations when dealing in rare coins. The franchise disclosure documents did not disclose this to franchisees as required by law. The defendants also did not provide franchisees with an earnings claim document even though they made earnings claims to potential buyers. In fact, even though they made oral representations, the defendants' basic disclosure document said no earnings claims were made."

Here is the simple secret: 1) Figure out who all the directors of Netvertise, Netspace and the other related companies are. 2) Simply search at www.sec.gov, or at www.ftc.gov searching for information about the directors. In this case, you would have found the 1989 FTC case against Elliot Krasnow. A huge red flag!

Is this all way too easy, after the fact research? No. Look at this thread, in franchise-chat, started in February, 2005 shows exactly how and in real time I saved two investors from losing their money. A simple secret, which you ignore at your peril.

Posted by michael webster at 9:59 AM | Permalink | Comments (0) | TrackBacks (0)

The Fidelity ATM * Fidelity Bankard Business Opportunity Fraud is causing quite a stir over at a thread in scam.com.

Imagine how outraged the individuals might be on hearing that the defendants in this case have asked for $10,000 a month for living expenses from money that is currently frozen.

First, some background. According to the FTC Press release:

"The FTC charged that these scammers, selling ATMs, misrepresented the basic facts of their business opportunity: that purchasers would earn substantial profits; that the company had, or would have, secured locations for the ATMs within 45 days; that the ATMs would be installed and operational in the same time period; and that the company would provide substantial assistance, such as relocating underperforming machines. The complaint also alleges that they did not make required Franchise Rule disclosures and had no substantiation for their earnings claims."

(In a marked departure from the previous business opportunity sweeps, the FTC has actually published some of the material from the website.)

The defendants did not contest the injunction, and according to the Receivers' First Report approximately $900,000 was frozen. The Receiver calculated that approximately 100 distributors lost a total of $4.2 million, or an average of $40,000 per distributor. This is roughly slightly above the average take in a business opportunity fraud, but not that much above the norm.

On February 5th, 2007, the defendants sought to modify the consent order. The defendants' brought a motion to vary the injunction, in order to pay their living expenses, calculated at $10,000 a month. The defendants wanted $50,000, or living expenses for five months in order to tide them over until they found honest work. One of the defendants, Allison Steinberg, has a law degree. The defendants claimed to have no other sources of income and that some of the frozen funds were not as a result of their fraudulent activity.

The presiding Judge denied their motion, finding that their request was unreasonable and also denied the request for payment of attorney fees. Perhaps Allison will be her own first client?

Posted by michael webster at 6:48 AM | Permalink | Comments (0) | TrackBacks (0)

The English version of Chinaview.cn, Xinhua reported on a very interesting story, which raised the question of how to classify economic crimes.

The story is that: "The chairman of a trading company in northeast China has been sentenced to death after he was found guilty of raising 3 billion yuan (380 million U.S. dollars) from gullible investors for a bogus ant-breeding project between 2002 and 2005.

Wang Zhendong, board chairman of Yingkou Donghua Trading (Group) Co., Ltd. in Liaoning Province promised returns of 35 to 60 percent for the fictitious project under the name of Donghua Zoology Culturing Co., Ltd and Donghua Spirit Co., Ltd."

It is unfortunate that the mainstream press version of the story only reports the absurd side, content to focus on the bogus ant-breeding project.

For example, the focus in the Guardian is on why the bogus ant-breeding project is not so ludicrous, "Wang Zhendong tricked people into buying packages of ants for far more than they were worth, with promises that their owners would reap huge profits by using them to make wine, tea and medicines, the local media reported. Mr Wang's claims were not considered outlandish at first. In the southern province of Guangxi, bags of black ants are soaked in alcohol or steeped in tea and sold as natural remedies for such ailments as arthritis."

But this is not the real issue. The more serious and real issue is: when should an economic crime be treated no different than that of violent physical crime? China appears to have thought through the issue since it death penalty, "though usually reserved for violent crimes, it is also applied for nonviolent offenses that involve large sums of money or are deemed to have a pernicious social impact."

The AP story, which can be read at the Boston Globe, does mention in passing that "Fake investments and pyramid investment schemes have become common during China's transition from a planned economy to a free market. Chinese leaders have tried to eradicate the scams, fearing widespread losses could add to already percolating social unrest." But there is nothing more to the AP story about how the Chinese decided to include economic fraud as a capital punishment.

Michael Katz's article, over at the www.street.com, also makes passing reference to our own corporate villains. "If Bernie Ebbers and Jeffrey Skilling think the punishments for their corporate misdeeds were harsh, they should be glad they're not Wang Zhendong."

But, again, there is virtually no discussion about what makes an economic crime worthy of the same type of reprobation that we have for a violent crime.

In this case, was the suicide of an investor a factor?

How was the possibility of social unrest a factor?

Was the size of the fraud, $380 million, a significant factor? If so, does anyone want to verify that there was every that amount stolen?

It is time that we consider seriously the question of when an economic crime is in fact a violent crime, in principle no different than rape or murder.

Posted by michael webster at 9:20 AM | Permalink | Comments (0) | TrackBacks (0)

TheTexas Attorney General Greg Abbott today stopped a Dallas-based pyramid scheme from illegally marketing the so-called "top secret gas pill" that it falsely claimed would increase fuel efficiency in automobiles. The Attorney General's settlement with BioPerformance and its owners, Lowell Mims and Gustavo Romero, prevents the defendants from continuing to deceptively market their products and ends the State's eight-month legal action against the company.

How are the consumer defendants going to get paid? Is this one of judgments that is simply a piece of paper?

No, apparently "A combination of the defendants' frozen assets and the dissolution of two trusts created by Mims and Romero will provide more than $7 million in compensation to deceived consumers. Mims and Romero may continue to operate any legitimate enterprise, but may not deceptively market BioPerformance pills or similar fuel additive products."

This is a terrific result for consumers, $7 million in real money.

According to the press release, "Attorney General Abbott added: "Texans will not tolerate con artists who prey upon unsuspecting consumers. Though we will continue aggressively cracking down on fraudulent pyramid schemes that profiteer from worthless products, consumers should always be dubious when offered 'miracle' products that are long on hype but short on credible proof." (my emphasis)

Now how do consumers determine that a product is long on hype but short on credible proof?

Well consider this, "The Attorney General further alleged that the worthless product, combined with the defendants' downline marketing scheme, constitutes a product-based pyramid scheme, which violates the Texas Pyramid Promotional Scheme statute. By the defendants' own admission, they recruited 50,000 participants within six months of their scheme's inception."

This type of growth is typical of a product long on hype but short on credible proof. Fast and out of control growth is more likely a cancer than a real sustainable business.

Technorati Tags: texas attorney general, mims, fuel additive products, greg abbott, pyramid scheme, consumers, bioperformance, gustavo romero, fuel efficiency, legitimate enterprise

Posted by michael webster at 10:45 PM | Permalink | Comments (0) | TrackBacks (0)

DVD vending machines business opportunity scam busted.

Grigorian was a sales representative at American Entertainment Distributors, Inc. ("AED"), a company based in Hollywood, Florida, which fraudulently sold more than $19 million of DVD vending machines to more than 400 consumers across the United States in 2003-2004. To sell the machines, AED used wildly exaggerated profit projections, falsely promised to secure good locations for the machines, falsely claimed that the machines were reliable and easy to use, exaggerated the company's longevity, and used phony references.

After a two-week trial in October 2006, a jury found Grigorian guilty of two counts of mail fraud, three counts of wire fraud, and one count of conspiracy.

The AED prosecution is part of a crackdown by the U.S. Attorney's Office, Department of Justice, Postal Inspection Service, and Federal Trade Commission on business opportunity fraud. "Business opportunities" are generally advertised on cable television commercials and classified newspaper ads as pre-packaged businesses in which the offering company will provide the buyer with a machine, a good location for the machine, technical support, and other assistance in operating the business. During the last two years, forty-six individuals have been convicted in the crackdown".

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Avid readers of this blog will recall that Mr. Wright is being sued by the SEC regarding matters both civil and criminal, while at the same time he and his numerous companies are in bankruptcy.

Mr. Wright allegedly swindled investors out of $180 million, and the facts are now beginning to seep up through the mud.

Civil Action by SEC

In August, 2006 Wright asked for a stay of the civil proceedings, which were being conducted as Wright's criminal action proceeded. In the criminal proceeding, Mr. Wright need not testify, while in the civil proceeding the discovery process may require Wright's attendance.

On October 27th, 2006, Judge Charles Pannell Jr. denied Wright's request for a stay. As a result, the SEC's motion for default judgment will proceed. The evidence that the SEC will rely upon for default judgment is contained in the the affidavit of the receiver.

According to the receiver, Wright converted approximately $17 million of the investors' money to his own use. The rest of money, approximately $150 million, is described as either returned to investors, lost through trades, or converted for Wright's and other principals for their personal use.

I suspect that this means that the receiver has no clear idea where the money is.

Criminal Action by SEC

Wright has withdrawn his motions for the suppression of evidence and the matter is now certified ready for trial, see the following order.

Bankruptcy of Wright and his Companies

The receiver and legal fees are approximately $1.8 million; while the recovery for the estate is $1.6 million, with possibly another $4 million to come from the sale of some of IMA's real estate in California.

The rest of any recovery will have to come from lawsuits against third parties, apparently. The transcript from the fees hearing doesn't make it entirely clear what these causes of action are. Perhaps the legal theories for recovery are clearer in the receiver's mind?

I would simply follow the money: find out where each investors's cheque was cashed. Go to that bank and ask where that money went - continue until all $150 million accounted for. But then again, I am not clever enough to be in a position to bill and collect from the bankrupt estates $1.6 million.

Posted by michael webster at 6:53 AM | Permalink | Comments (0) | TrackBacks (0)

By coincidence, I purchased 60 Minutes' book "Con Men" just a day before the tawdry ending of one of the largest pyramid U.S. based pyramid scheme International Heritage and Stan Van Etten.

As announced yesterday,

"United States Attorney George E. B. Holding announced that Stanley H. Van Etten, 45, of Windemere, Florida, has been sentenced to ten years in federal prison for bilking thousands of investors out of over $165 million dollars. On Tuesday, November 21, 2006, United States District Judge Terrence W. Boyle ordered Van Etten to serve two 60-month terms in prison and to make restitution in the amount of $14,339,820 to the victims of the now defunct Mayflower Venture Capital Fund III."

"The prosecution involved two schemes. The first scheme was the multi-level marketing company International Heritage (IHI), involving over 150,000 individuals and gross receipts of over $150,000,000 at its peak. The second scheme, Mayflower Fund III, a Raleigh-based capital venture fund was supposed to invest in the BuildNet IPO. It was discovered that 120 investors were defrauded of over $15,000,000 when Mayflower funds were used for other purposes without the investors knowledge. United States Attorney Holding said of the convictions, "Stanley Van Etten's Raleigh-based pyramid scheme, International Heritage, and his other frauds have finally come to an end with a 10-year sentence in federal prison. Federal regulators previously called International Heritage one of the biggest pyramid schemes they'd ever seen. Today's sentence is a just end for the man who, with the help of his co-conspirators, built his pyramid and investment schemes on the backs of over 150,000 victims."

Stan Van Etten was prominently covered in "Con Men", a term which should be replaced by "Con Criminal". I had planned on doing some research about him, just prior to reading the SEC's news release.

Although Van Etten had reached a settlement agreement in the civil action by the SEC, in which he was ordered, " barred from association with any broker or dealer" for two years, the criminal action dragged on for nearly ten years; here is the original SEC complaint against International Heritage and Stan Van Etten.

Now, why does a pyramid scheme attract participants? Evidence against the viability of this scheme seemed overwhelming, according to this list from the http://www.cageyconsumer.com/ihilinks.html. So how in the face of this overwhelming evidence, could Van Etten and his chums continue to recruit?

I believe that the answer lies in Leon Festinger's concept of cognitive dissonance. Roughly, we can expect social proof -usually in the form of cheering, emotional testimonial revivals - to overwhelm an individual's gut feeling of wrongness, when:

1. The individual has committed irrevocable actions consistent with his/her belief in the pyramid scheme. The more irrevocable, the deeper the commitment.
2. The individual perceives and is aware of real world events which disconfirm his/her belief. This induces uncertainty in the individual.
3. The individuals in the scheme deal with the dissonance produced by real world events by trying to rally more people to their side, since as Cialdini put it, "The principle of social proof says: The greater the number of people who find any idea correct, the more the idea will be correct." If the facts on the ground cannot be ignored, then look to facts in the air.

If Cialdini is correct, then we may be able to contain the viral outbreak of cancerous pyramid schemes, not by educating the irrational consumer, but by breaking down their irrevocable actions which lead to commitment. How can we do this?

Noah Goldstein, www.influenceatwork.com, has an intriguing observation. In discussing advertising, Noah notes that cigarette advertising was banned from the airwaves about 30 years ago, a ban enthusiastically supported by the cigarette companies. Why?

Prior to the ban, "The Federal Communications Commission had enacted the "fairness doctrine," which ordered radio stations and television networks that broadcasted controversial messages of public importance to also provide free air time to those with opposing views. Anti-tobacco groups capitalized on this ruling by initiating an ad campaign that provided viewers with effective counterarguments that refuted each purported benefit of cigarettes "demonstrated" in Big Tobacco's commercials. The anti-tobacco commercials' potency was further enhanced by the ads' inclusion of mnemonic links to easily recognizable characters, settings, themes, and narrations that were appearing in cigarette ads at the time. The counter-advertisements proved to be enormously successful; per capita cigarette consumption dropped almost 10 percent in the following three years, most of which has been attributed to the counter-ads."

One clever example cited is the counter ad in which, "one Marlboro Man-type saying to another, "Bob, I've got emphysema." The next time individuals see a real life ad for Marlboros, they are more likely to automatically conjure up the counterargument and therefore become more resistant to the cigarette ad's message."

To effectively combat pyramid schemes we need more "Poison Parasite" advertising. We do not need educate individuals about the mathematics of pyramid schemes because although the math is correct, math challenged consumers are not problem. Unchecked deceit is the problem.

Posted by michael webster at 12:25 PM | Permalink | Comments (0) | TrackBacks (0)

I have been critical about the failure of the adversarial system when it comes to reviewing receivership fees in the Kirk Wright and IMA bankruptcies. There seemed to be only a pro-forma review of fees, which in my opinion seemed excessive.

Is the situation any different in Ontario?

Well, in Pandya v. Simpson, 2006 CanLII 19443 (ON S.C.) the receiver's counsel presented a fee schedule of some $400,000, with respect to the receivership of an alleged mortgage fraud scheme.

How much was at risk? "Counsel for the Receiver attended before Farley J. on December 13, 2005 and filed the First Report of the Receiver of the same date. That report summarized the nature of the two alleged frauds. At that time the Receiver estimated that there were eighteen victims of the deposit scheme fraud owed approximately $3.6 million and at least 54 victims of the Ponzi Scheme/mortgage fraud with a total loss of approximately $11 million."

What did the receiver's counsel accomplish, in order to have earned the $400,000 fee? How should a Court determine whether, after the fact, what the value of the receiver's efforts should be?

In the leading case in Ontario, it was said that "in determining what is fair and reasonable remuneration, Borins J.A. observed that there is no guideline controlling the quantum of fees as there is in respect to a trustee's fees. He referred to what he described as the "leading case" in the area of receiver's compensation, Belyea & Fowler v. Federal Business Development Bank[4], a decision of the New Brunswick Court of Appeal, and adopted with approval the observations of Stratton J.A. in Belyea that compensation is

usually allowed either as a percentage of receipts or a lump sum based upon time, trouble and degree of responsibility involved. The governing principle appears to be that the compensation allowed a receiver should be measured by the fair and reasonable value of his service and while sufficient fees should be paid to induce competent persons to service receivers, receiverships should be administered as economically as reasonably possible."

In Pandya v Simpson, the Judge found that the Recevier's"First Report estimated the equity in real estate to be anywhere from $654,000 to $1.3 million. The claim by Pahwa had been asserted and the position of RECO was known. Although further information on the assets and claims became known to the Receiver and its counsel as the receivership progressed, it was certainly clear from the outset that subject to litigation with RECO, the assets of the estate were modest, particularly relative to the quantum of the claims.

The numbers have not changed that much. Based on the statement of assets and liabilities filed before Mesbur J., the estimate of the net assets to be realized from the defendants is approximately $1.8 million."

And for this work, counsel for the Receiver wanted $400,000 in fees. They didn't get it, but in my opinion given the cooperation of the defendant in this case, the amount of fees that were awarded, $260,000, was not justified either.

We cannot have receivers simply stripping the estate of most of its liquid assets and committing a double fraud on the hapless investors. Time to tender out these recoveries.

Technorati Tags: ponzi scheme, mortgage fraud, adversarial system, receivership

Posted by michael webster at 7:03 PM | Permalink | Comments (0) | TrackBacks (0)

In the American Entertainment Distributors business opportunity fraud, the U.S. Attorney announced that "a jury convicted Edmond Grigorian and Cesar Menendez after a two-week trial before United States District Court Judge Jose E. Martinez, in Miami, Florida. The defendants were convicted of fraud charges in connection with a scheme to sell a business opportunity involving DVD vending machines."

The two were jailed immediately and held over for sentencing, scheduled for January 4th, 2007. There is a mandatory restitution order, and it will be interesting to see what monies, if any were recovered for the investors.

American Entertainment Distributors was the classic business opportunity scam. "Evidence introduced during the trial showed that AED sold the DVD vending machine business opportunity by using baseless and wildly exaggerated profit projections. In addition, AED falsely promised to secure good locations for the machines, falsely claimed that the machines were reliable and easy to operate, falsely promised to provide long-term customer service, and referred prospective buyers to phony references. Undercover tapes introduced during the trial showed that both defendants knew that they were using false information to lure people into the deal. Most of the consumers paid $36,500 to AED for the machine and the promised services."

It would be interesting to listen to the tapes, but they are unavailable on the Pacer system.

I suspect the DVD Kiosks will become the weapon of choice for business opportunities frauds as the use of DVD Kiosks become more common in the marketplace.

For very interesting reading, on the other hand, regarding the legitimate Kiosk marketplace, I highly recommend Davis Freeberg's blog.

Technorati Tags: vending machine business, business opportunity fraud, business opportunity scam, vending machines, american entertainment, mandatory restitution, aed, fraud charges, jose e martinez, profit projections, classic business, sell a business, menendez, united states district court, edmond

Posted by michael webster at 5:33 PM | Permalink | Comments (3) | TrackBacks (0)

Salvatore Favata's $30 million Ponzi scheme admitted to according to SEC. Now this was a very clever mix of a legitimate business, mortgage brokerage, with the standard ponzi scheme based upon a real estate investment.

"The Commission's complaint alleges that from 2001 through 2006, Favata, acting through NCM, operated a massive Ponzi scheme, which raised more than $30 million from over 200 investors by offering rates of return from 30-60 percent on the investment. In fact, investor funds were used to pay Favata's gambling debts in excess of $10 million, personal debts and monthly living expenses, including leased luxury vehicles, lavish house parties and community music festivals."

Presented in this stark light, the investors were surely mad with greed to invest looking for a 30-60 percent return. But, the whole story is more interesting because it explains how "Sal our Pal", who apparently has a criminal background, was able to steal $30 million from 200 investors.

According to this newspaper story, the investors were holding unsecured promissory notes with an interest component of 8 -12%. Hmm, not exactly too good to be true material.

Now, I can offer everyone a verified return of 30% on their money, but with an undisclosed risk of 50%+ chance of losing the entire investment and have this scheme run forever - play black consistently at the roulette table. Now if I could just find a way to get rid of that sub-tree of losing bets! It is never too good to be true, but it might be too risky to afford.

How did NCM gain the necessary trust of the investors, given that Fatava apparently had a criminal background? Well, the NCM's website is still up and running and promises to match up lenders with borrowers, which apparently they did for several year successfully. Home borrowers would then want to renew their mortgages, using the NCM. My guess is that NCM targeted primarily one year mortgages.

According to the court documents filed by the trustee of NCM, this is when the trouble began. In 2002, Fatava created a "Private Money" division of NCM. Fatava alleged in written documents that he was looking for investors money for residential homes and could offer between 30 -50% return, but with apparently no specified risk. (The documents are not filed on the Pacer system, so I cannot evaluate their effectiveness as influence scripts.) Homeowners, flush with new mortgage money, in a rising real estate market were easily persuaded to take out larger mortgages and "invest them in even more real estate deals".

There are some other interesting issues in this fraud. As reported in the White Collar Crime Blawg, Favata's own lawyer appears to have turned him in. And while "many states, and now the ABA, permit disclosure of client fraud, California appears to apply the older approach limiting disclosure only if there is a risk of death or serious harm by the client. It may be that the attorney represented the mortgage company rather than Favata personally, so it might have waived the privilege when the misconduct came to light. The release, however, states that it was "Favata's attorney" and not the company's counsel."

Finally, it would be very interesting to know how many of these individuals realized that the promissory notes that they were purchasing were unregistered investments.

Posted by michael webster at 9:50 AM | Permalink | Comments (0) | TrackBacks (0)

The SEC announced on September 27th 2006 that

"it has filed a Complaint and Application for Emergency Relief in the United States District Court for the Northern District of Georgia to halt an ongoing pyramid-scheme fraud by William M. Osterhout ("Osterhout") of Citrus Heights, California and his company Prosperity Network, Inc. ("PNI"), also located in Citrus Heights, California. In the Complaint, the Commission charges that, since at least July 2005, Osterhout and PNI, an entity he controls, have conducted an unregistered and fraudulent offering of securities through the sale of membership interests in the so-called Prosperity Automated System ("PAS") - a supposed web-based "marketing portal" that Osterhout and PNI have claimed to investors will generate "substantial passive income" with "[n]o prospecting," "[n]o advertising," and "[n]o selling." In fact, PAS is nothing more than a fraudulent pyramid-scheme that is destined to collapse and leave the vast majority of investors with substantial losses. The Complaint alleges that the defendants, using a series of approximately 25,000 interconnected PAS websites, have sold more than $15 million in PAS memberships to more than 5,000 individual investors."

This once again demonstrates the weirdly undead aspect of pyramid schemes. In June of 2001, the FTC shut down a similar scheme called Skybiz. From the FTC's press release, June 18th 2001: 'In papers filed with the court, the FTC alleges that since late 1998, the defendants have promoted a work-at-home business opportunity with claims of quick riches. One SkyBiz presentation claimed, "This system was put together by a gentleman named Eric Rasmussen who basically joined SkyBiz and six months later was able to retire with an income of about 400,000 a month. Currently, [he] lives in the Gold Coast of Australia and he's making 76,000 a week and growing." In in-person sales presentations, seminars, teleconferences, Web site presentations and in other marketing material, the defendants touted the opportunity to earn thousands of dollars a week by recruiting new "Associates" into the program. They provided CD-Roms, computer disks, videos and books promoting the SkyBiz programs and they provide a PowerPoint presentation on their website that can be downloaded to aid in recruiting new members. The cost to join the SkyBiz Program is $125, ostensibly used to buy an "e-Commerce Web Pak," but in reality was to purchase the right to receive compensation for recruiting additional participants. Participants were urged to invest in more than one "Web Pak," to maximize their earning potential."

Why are pyramid schemes so attractive? One of the initial attractions is the apparent low entry cost, and the easy rationalization of the scheme using a variant of Pascal's wager. "Well, it is possible that I could make hundreds of thousands against an initial "investment" of only $125 or $300. I don't want to be greedy even, tens of thousands would do." Having talked oneself into the possibility that their personal phantom dream is about to come true, it becomes easier to justify the increased investment as "maximizing earnings potential."

Pyramid schemes are attractive for the same reason that gambling is attractive. We are not sure why some human brains seem to be hardwired to enjoy gambling, but there is no doubt that for a significant percentage of the population gambling is an intrinsic pleasure, not something enjoyed as a means to an end. Professional gamblers will tell you that their work is actually hard, long and boring in trying to exact their small technical advantages. But for others gambling seems to be an intrinsic pleasure, which can override common sense.

Now many people who would not gamble can be tricked into experiencing the same hedonistic delight by dressing the scheme up as an "investment" . Currently, the biggest schemes are on the internet, variants of the 12Daily Pro autosurf program. These autosurf, paid to read, and other variants are nothing more than simple gambles, with the odds stacked against most the individuals. If the current mood in the United States wasn't so hostile to online gaming, they would realize that it would make more sense to legalize this autosurf gambling programs and run them as state or federal lotteries.

Technorati Tags: fraudulent pyramid scheme, citrus heights california, pni, company prosperity, prosperity network, collapse, united states district court, passive income, states district court, marketing portal, membership interests, united states district, web based marketing, commission charges, emergency relief, vast

Posted by michael webster at 8:42 AM | Permalink | Comments (0) | TrackBacks (0)

According to the WSJ Law Blog, "William Ross, a professor at Samford University's Cumberland School of Law in Birmingham, Ala., calls it "the perfect crime." NYU legal ethics guru Stephen Gillers says there's a "general consensus" that the practice is on the upswing. The practice? Law-firm billing fraud, and the WSJ's Nathan Koppel takes a look at the issue through the lens of a series of incidents that allegedly took place in Holland & Knight's Chicago office." Here is the full story from the WSJ (subscription required). The whistleblowing letter by the lawyer can be read here.

Certainly the length of comments would indicated that the WSJ Law Blog's story has hit a real nerve. But it is one thing for real live clients to be annoyed about bill padding when they see the invoice, but what about when they don't see the invoice because a receiver is "representing their interests" and simply passes the invoice through the Court?

I wrote about this in connection with Kirk Wright and the receiver and legal fees, but now I want to turn my attention to that wonderful scheme,12DailyPro. Here is the interim report from the receiver.

What are the highlights of this report?

1. The scheme apparently involved over $500 million. (Can you spell "money laundering"?)
2. Charis Johnson only took a salary of $100,000 and did not benefit appreciably from the fraud.
3. One person made over a $1 million; the vast majority lost money.
4. The receiver has located only $6 million, in one of the Banks StormPay used.
5. That Bank gave the receiver $1 million, no strings attached and $5 million to be used somehow.

Whoa, now lets slow down here. There was $6 million dollars in one Bank account, which was the result of this Bank not sending money to Stormpay, correctly anticipating a run on the Stormpay Bank via chargebacks. This Bank account had $48 million, but was reduced to $6 million by the chargebacks! People running for the fences once the ponzi was discovered by the regulators.

As far as I can tell, the receiver never challenged any of these chargebacks despite having the legal authority to do so. For this legal victory, the receiver and its legal team want $1 million, plus. I don't know if their eventual legal bill will produce value for dollar charged, but it will not be challenged in an adverserial manner in our current court system. That is a serious problem, which indirectly enables fraud.

Technorati Tags: wsj, samford university, cumberland school, invoice, blog, nyu, william ross, billing fraud, holland knight, legal ethics, chicago office, whistleblowing, koppel, padding, annoyed, nerve, practice law firm, school of law

Posted by michael webster at 7:47 AM | Permalink | Comments (0) | TrackBacks (0)

According to documents filed by the Receiver in the Bankruptcy of Kirk Wright and his companies, the total bill to the bankrupt's estate, as of the end of July was $830,000 more or less. The dockets for the Kilapatrick Law Firm can be read here.

Now recall that a) Kirk Wright and his companies have no representation in the bankruptcy, b) the receiver had no role to play in securing Kirk Wright's physical custody, and c) the main assets of the estate are real estate located in Georgia and California. There has been an auction for the property in Georgia, which returned approximately $2 million to the estate, of which $1.7 remains for the investors, once the lawyers and receiver have been paid.

What concerns me, on behalf of the investors, is that there appears to be no effective mechanism for the creditors of the estate to challenge the value of what their $830,000 actually bought in legal services. It is of course the creditor's money that is paying for the receiver and the receiver's lawyers. How do they effectively challenge what they paid for?

What makes this a timely concern is the recent reports of law firms padding their legal bills. Of course, I am not saying that I have any knowledge of whether the receiver's interim demand for fees is reasonable or not. Nor do I have any knowledge about the dockets.

But, what I can say is, that the practice of law works only when the adversarial system is fully engaged. And I am concerned that the adversarial system is not engaged fully in the receiverships and bankruptcies.

Technorati Tags: bankruptcy, investors, georgia, physical custody, bankrupt, creditors, lawyers, auction

Posted by michael webster at 11:28 AM | Permalink | Comments (2) | TrackBacks (0)

Interesting story in the Wall Street Journal about one of Ameriprise's top stock broker, A Star Broker, 'Virtually Unsupervised,' Puts Ameriprise Arm Under Scrutiny.

According to the story, "David McFadden is one of the top brokers at Securities America. How he achieved this feat is now the focus of a National Association of Securities Dealers investigation and recently contributed to a $22 million arbitration award against the firm, a brokerage arm of Ameriprise Financial Inc.

For years Mr. McFadden courted employees of oil giant Exxon Mobil Corp. He boasted that he was a certified public accountant and told many of the employees they were set for retirement and promised impressive returns, according to documents filed in a 2003 arbitration claim.

His claims, however, didn't mesh with reality. His CPA certification had lapsed years ago, and several of his clients had to go back to work as he failed to deliver the rosy returns he promised."

The heart of the story appears to be Mr. McFadden's practice of putting his clients in mutual funds largely based upon how the fund would pay his compensation. Conflicts of interest is rife among professional advisors, but the current regulatory line of thinking is that if the conflict is disclosed, then there is no foul. We have already seen some academic work which calls into question this assumption. It will be interesting to see if this award is the beginning of a re-thinking about how to police conflicts of interest in the sale of mutual funds.

Technorati Tags: exxon mobil corp, david mcfadden, arbitration award, certified public accountant, wall street journal, stock broker, brokerage arm, top brokers, cpa certification, oil giant, rosy

Posted by michael webster at 11:00 AM | Permalink | Comments (0) | TrackBacks (0)

" The 10-year Consent Agreement, which is designed to remedy the competitive and consumer impact of the practices, requires Grafton-Fraser to:

* pay an administrative monetary penalty in the amount of $1,000,000;

* pay a portion of the costs of the Bureau's inquiry in the amount of $200,000;

* when making reference to regular prices on any in-store signs and advertisements, ensure that all current and future regular price representations comply with the Ordinary Selling Price provisions of the Competition Act;

* implement a comprehensive Corporate Compliance Program designed to ensure conformity with the false or misleading representations and deceptive marketing practices provisions of the Competition Act; and

* display a corrective notice prominently in its retail stores across Canada, on any of the company's Web sites, and in designated newspapers across Canada."

Well, what did the consumers who were ripped off get out of this deal? Apparently nothing. The Competition Bureau got 1 million dollars, with no obligation to pay any of that money to consumers who were deceived. Nice work.

Posted by michael webster at 6:52 AM | Permalink | Comments (2) | TrackBacks (0)

NFL Seeks Dismissal of Hedge Fund Suit, according to Forbes. According the the Forbes article, "The NFL and its union say a lawsuit filed by six current and former players seeking to recoup $20 million they lost in an alleged fraud scheme should be dismissed, arguing in part that league players are solely responsible for their own finances."

Actually, the main argument is more sophisticated and does not depend at all upon the interpretation of the clause in the collective bargaining agreement, quoted above.

The NFL's Player's Association's brief makes its clear that its main point is that a) whether the NFL and NFL Player's association owed the plaintiffs a duty can only be determined by interpreting the collective agreement, b) to determine the duties owed under the collective agreement requires the applicability of a Federal Law on Labour and not State Law on Negligence. Federal Law does not recognize a cause of action of mere negligence asserted against the Union for failing to ensure that screening program worked.

In essence, the NFL and NFL Player's association are saying that although the collective bargaining agreement established the existence of a screening program for financial advisors, nobody should have relied upon their screening duty as a matter of law because they could not have sued the NFL Player's association for negligence, only a failure of a duty of fair representation.

At the Daily Caveat Blog, they suggest a different issue "the NFL, for its part, is also in the crosshairs, but claims that the players bear sole responsibility for their finances. The League is asking for the suit to be dismissed and the NFL players' association is taking a similar tact. Both entities contend that they player contracts state that, in any case, arbitration - not litigation - is the remedy specified in player contracts. How the league will explain away the apparent total negligence of giving its endorsement to known fraudsters is a separate issue." The pleadings do not, however, claim that the NFL and NFL Player's association knew that Kirk Wright was a fraud. So I don't see that the Daily Caveat has accurately reported the legal issues.

None of this should obscure the fact that the NFL's screening program failed totally, and should be reviewed so that it can add to the SEC's compliance program and stand as a mere fig leaf.

Technorati Tags: nfl player, kirk wright, negligence, federal law, union, collective bargaining, hedge fund, fraud scheme, collective agreement

Posted by michael webster at 7:34 AM | Permalink | Comments (2) | TrackBacks (0)

In 1999, the SEC alleged that Martin A. Armstrong and his companies

"fraudulently offered and sold at least $3 billion in high-yielding, fixed-term promissory notes issued by subsidiaries of Princeton Economics to Japanese corporations. The Complaint alleges that Defendants told investors that the proceeds of the note sales would be deposited into segregated accounts at Republic New York Securities Corp. ("Republic"), a registered broker-dealer headquartered in New York, and invested conservatively. These accounts were to secure repayment of the notes. The Complaint further alleges that, in fact, investor funds were commingled in a Princeton Global account at Republic and that Armstrong lost hundreds of millions of dollars through risky trading. The Complaint also alleges that Defendants misrepresented Princeton Economics' prior investment results, and caused Republic to issue letters that concealed the trading losses in the Princeton Global account by materially inflating the value of the assets underlying the notes. The Complaint alleges that investor losses approach or exceed $1 billion."

Mr. Martin thought that he might simply play a waiting game with the SEC and not tell them anything. However, as Professor Peter Hennings observed:

Martin Armstrong has spent almost the entire 21st century in jail, having been sent there in January 2000 because he was found in civil contempt for refusing to turn over assets in an SEC securities fraud action. Armstrong was a money manager who founded Princeton Economics International, and he was accused in parallel criminal and civil cases of defrauding Japanese investors of over $700 million. Despite repeated attempts to get out of jail on the ground that the civil contempt was ineffective, U.S. District Judge Richard Owen -- backed by the Second Circuit -- refused to let Armstrong leave the Metropolitan Correctional Center in New York for over six years, no doubt a record for the longest civil contempt in federal court history. Now, Armstrong has finally entered a guilty plea to a charge of conspiracy to commit securities and wire fraud, and he will be sentenced in January 2007 by U.S. District Judge John Keenan, who presided over the criminal case that was set to go to trial in October.

Professor Peter Hennings correctly distinguishes between the time spent in jail for contempt of court and the resulting sentence for pleading guilty to the conspiracy charge and opines that it is unlikely that Armstrong's incarceration for contempt will count as time served counting against his upcoming sentencing.

The reason is simple: at any time Armstrong could have gotten out of jail by curing his contempt of court by providing the SEC with the assets he was ordered to turn over.

The lesson here for recoverying assets from a con criminal is that any effective litigation should have a plan for civil contempt, which can result in satisfying solution; either the con criminal stays in jail for an indefinite amount of time, or assets or information is turned over to the plaintiffs.

Technorati Tags: princeton economics, global account, republic, new york, martin a armstrong, japanese corporations, promissory notes, investor funds, issue letters, investment results, broker dealer, subsidiaries, proceeds

Posted by michael webster at 10:15 PM | Permalink | Comments (0) | TrackBacks (0)

The Wall Street Journal, paid subscription, has a very interesting story on failed hedge funds, WSJ.com - Failed Hedge Fund Haunts Celebrities.

According to the story, "A trustee liquidating Bayou Management LLC, a failed Connecticut hedge fund, is attempting to reclaim more than $100 million from investors, including a fund called Sterling Stamos in which the owner of the New York Mets baseball team, Fred Wilpon, has a stake. In a separate matter, a Long Island family is suing several fellow investors in a bogus hedge fund called Sterling Watters. Among defendants: a former official of the Securities and Exchange Commission. Those cases, like the Lipper case, are pending in state Supreme Court in Manhattan. Individuals who profited "should be sharing the pain," says Jeff Marwil, the federal trustee in charge of liquidating Bayou. "Our goal is to equalize in a fair and equitable fashion."

The basic legal theory here is restitution: those individuals who obtained benefits from a ponzis scheme, received a benefit which was mistakenly conferred upon them - the mistake being that the hedge fund was was solvent at the time it made the distribution. Ponzi schemes are insolvent from the get go, and any transfer of money from the later investors to the earlier investors is under the mistake, induced by the schemers, that scheme is solvent. There was no intention of the transferor to gift his or her money to the transferee, and so the proper legal theory for the later investors to recover their money from the earlier investors is restitution: restitution does not require that the transferee committed a wrong in obtaining the money, only that it would be wrong for the transferee to retain the money.

Technorati Tags: sterling stamos, new york mets, hedge fund, fellow investors, securities and exchange commission, wall street journal, wsj, trustee, lipper, hedge funds, fred wilpon, mets baseball, equitable fashion, management llc, baseball team, watters, haunts, restitution, suing