This is a repost of a story that appeared yesterday on ksl.com.
December 16th, 2010 @ 7:33pm
SALT LAKE CITY — For much of his life, Eric Nelson had been a person who saved and planned for his family’s future.
After doing so diligently for more than 20 years, he now finds himself trying to recover from “acute financial stress” brought on by his dealings with an admitted fraudster — a man who turned the lives of Nelson’s family and many others upside down by stealing tens of thousands of dollars from each, not to mention their hopes for better lives.
On Dec. 20, Fasi Filiaga Jr., 49, is scheduled to be sentenced after pleading guilty to four counts of securities fraud. In March, Filiaga was charged with misusing over $2 million in funds from investors, including Nelson, who believed they would receive high returns using trading techniques they would learn from Filiaga.
Nelson said he lost thousands, which has put an intense financial strain on his family, though he is “solvent.”
“I’ve put myself in a bit of a financial crisis (and) I’m still in it,” the 46-year old Lindon father of four explained. “With … some hard work I’ve been able to do some restructuring.” Continue reading “Man dupes friend, others out of more than money – ksl.com”
Utah Division of Securities has just released a list of the “Top Ten Investor Traps” and I have some observations about it. First of all, here is the list:
- Exchange-traded funds
- Foreign exchange trading schemes
- Gold and precious metals
- Green schemes
- Life settlement investments
- Oil and gas schemes
- Affinity fraud
- Undisclosed conflicts of interest
- Private or special deals
- “Off the book” deals
The press coverage surrounding this list makes it sound like these are all types of investment scams, but clearly they are not. Is the Division intending to imply that an “investment trap” the same as an “investment scam”? Who knows, but I hope not. Continue reading “How Do you Distinguish Between a Scam and a Risky Investment?”
On July 15, the U.S. Senate passed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Act”) otherwise known as the Wall Street Reform bill. President Obama signed the bill on July 21, 2010 putting into place the most significant and sweeping changes to our country’s financial regulatory system since the Great Depression.
The Act includes a new whistleblower program that could pay potentially large cash rewards to individuals who report securities violations to the Securities and Exchange Commission (“SEC”). For the first time in history the SEC has been authorized to pay whistleblowers at least 10%—and up to 30%—of monetary sanctions obtained in a successful enforcement action by the SEC, as long as the sanction obtained is more than $1 million. It also contains new protections from retaliation by companies against whistleblowers. Continue reading “How to Make Money from Securities Fraud Without Actually Committing It”
If you or a family member have been affected by investment fraud, please call your Utah House and Senate representatives and urge them to support Senator McAdams‘ bills. I have met with him several times to discuss these bills and I think he is really on the right track. UPDATE: On September 17th The Salt Lake Tribune issued an editorial supporting these bills.
As reported by the Salt Lake Tribune today, State Senator Ben McAdams is proposing four bills designed to crack down on scam artists and securities fraud in Utah:
- A bill to strengthen penalties for defrauding a vulnerable adult such as someone with dementia and expand the scope of felony penalties for so-called affinity fraud to include relationships of “special trust,” including relatives, religious leaders, landlords, employers and doctors.
- A bill to reward whistle-blowers who have knowledge about companies that are defrauding people (similar to the whistleblower provisions in the new Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,).
- A bill to expand the fair-credit act to apply more broadly in mortgages to protect consumers.
- A Medicaid change allowing private litigation against health providers who bill for services they never provide, such as wheelchairs or crutches.
I think these are terrific ideas, and the Utah Division of Securities is supporting them as well. In particular I like the one that provides for enhanced penalties for religious leaders (among others) who use their positions of trust to perpetrate fraud on others.
Today there was yet another article about an individual who held a position of trust in the LDS Church and used that position to commit fraud. U.S. District Judge Marcia Krieger sentenced Shawn Merriman to 12½ years in federal prison this afternoon for defrauding 67 victims out of $21 million. Merriman was a Bishop in the LDS Church in Colorado and raised the money from friends, neighbors and fellow church members. The government seized roughly $4 million in fine art , antique cars, sports memorabilia and animal trophies collected on his safari trips when they arrested him.
One of my favorite parts of this story is the fact that before he was caught Mr. Merriman put together some sort of a traveling exhibit for his art called “The Renaissance of Faith in Art,” which included about two hundred prints by Renaissance artists including Rembrandt van Rijn, Albrecht Durer, Lucas van Leyden and Peter Paul Rubens. The exhibit was primarily displayed in LDS wards and stake centers in Denver. Even the Mormon Times wrote a glowing article about this guy and how his art collection promotes the Church. He has now been excommunicated.
The SEC’s Complaint against Mr. Merriman can be read here.
Copyright © 2010 by Mark W. Pugsley. All Rights Reserved.
There was a great article in the Las Vegas Review Journal today about the problems of affinity fraud among LDS Church Members titled “Thieves in the temple: How ‘affinity fraud’ hurts LDS church members.” Definitely worth a read. Among other things, he writes, “In Utah, fraudsters exploiting a connection to the LDS church and its close-knit families have separated an estimated $1.4 billion from victims in recent years, according to the state’s multi-jurisdictional Securities Fraud Task Force, which currently is working more than 100 cases. . . Fraudsters commonly start veiled sales meetings with prayers, sometimes spending as much as 90 percent of a pitch discussing Scripture before turning to the business at hand: separating squares from their savings by promising them, for instance, up to 10 percent monthly returns on their “risk-free” investments. In one case, a law enforcement source reports watching a rain of tears flow from one fraudster’s eyes as he described the profits investors might put to good use in their lives and their religion.”
A 10-count federal indictment was unsealed by the FBI and Thursday that charges Utah resident Christopher D. Hales with mail fraud, wire fraud, and bank fraud and with money laundering in an alleged mortgage fraud scheme. The indictment was one of many that have been investigated by Utah’s new Mortgage Fraud Task Force.
According to the FBI’s press release Hales and others conspirators “executed a scheme to produce income from false appraisals to artificially inflate the purchase price of the residences. Hales arranged to purchase the homes through straw buyers and took the false equity proceeds stemming from those sales for himself, the straw buyers, and the co-conspirators.” Continue reading “Why Mortgage Fraud Often Involves Affinity Fraud”
R. Dean Udy, 71, a former stake president and regional representative in Brigham City, Utah was sentenced to 1-to-15 years in state prison last week on securities fraud charges. He pled guilty to a scheme that ran for 12 years or more. According to the article in the Ogden Standard Examiner, “Udy’s victims total 1,500, with an estimated loss of $20 million.”
Prosecutors alleged that Mr. Udy “traded on his positions in The Church of Jesus Christ of Latter-day Saints, which included membership in a stake presidency and as a regional representative in Box Elder County” to gain people’s trust. “People felt Brother Udy would never do anything wrong.”
So what is the lesson here? If anyone uses their church position (explicitly or not) to gain your trust in connection with an investment pitch — run for the hills. Don’t trust anyone just because they are a church leader or even a church member. Do your homework and check out the individual, the company and everyone connected with the potential investment opportunity on the Utah Division of Securities, FINRA and the SEC databases.
Mr. Udy first entered into a Consent Order with the Division of Securities in 2002, but that didn’t slow him down. He was then charged criminally in 2005 and pled guilty to two felony criminal counts in 2007. However, that sentence was held in abeyance for 36 months after he agreed to pay full restitution to his investors and to provide accurate information to the State about those investors. But that didn’t happen, and it took several years for the judge to lose patience with him and send him to jail.
In June a federal grand jury indicted him and his son, Cameron, for charges alleging they ran a $11.4 million in bank fraud in Las Vegas, and they face trial on that charge in October.
Copyright 2010 by Mark W. Pugsley. All rights reserved.
Here is another case brought against a purported “commodities trader” based in Utah. According to the story, commodities trader Keith H. Debus “met the woman at a religious conference and misrepresented himself as a successful licensed manager of a high-yield fund that specialized in commodities trading.” Unfortunately for her, when she asked for the money back he told her it was gone.
Trading commodities (like foreign currencies or FOREX trading) is complicated, volatile and requires a high level of expertise. I have heard of stories of people who have lost substantial sums in a very short period of time in these markets. Even experts will tell you that trading commodities is highly risky. Continue reading “Commodities Trading – There’s No Such Thing as a Foolproof Trading System”
As a follow-up to my last post, my friend Lon Jenkins has just sued the LDS Church in a “claw back” lawsuit for the RCH2 receivership he is handling. Lon is seeking return of at least $160,306 plus interest from the Church that was paid as tithing. Virtually anyone who takes money from a Ponzi Scheme will eventually get sued (including law firms) and the LDS Church is no exception. From past experience I know the LDS Church is pretty good about returning money received from individuals who are perpetuating these schemes, and I assume they will do so here as well.
Perhaps the more interesting question is why are these people paying tithing on ill-gotten gains in the first place? Perhaps they don’t realize they are committing fraud, or perhaps they think that the Lord will somehow remove the taint on the money, or bless the scheme. It’s hard to say, but either way its better to give the money back.
© 2010 Mark W. Pugsley, all rights reserved.