Kane County Man and Co-Defendant Sentenced to Federal Prison Terms in $6.6 Million Financing Fraud Scheme

CHICAGO—Two defendants who engaged in a fraudulent financing scheme involving the offer and sale of investments in four Las Vegas companies were sentenced to three-and-a-half and four years in federal prison, respectively, for defrauding approximately 125 investors of about $6.6 million, including some victims who lost some or all of their retirement or college savings funds.

Roderick Rieman, 69, of St. Charles, who owned and operated Innovative Financial Services Inc., a former insurance and investment business in St. Charles, was sentenced to four years in prison and ordered to begin serving his sentence on May 27. Michael Crook, 55, of Los Angeles and formerly of Chicago and Las Vegas, the former president of the Las Vegas companies, which purportedly engaged in interactive kiosks, prepaid debit cards, and restaurant reservation software, was sentenced to 42 months in prison and ordered to begin serving his sentence on June 24.

U.S. District Judge Harry Leinenweber, who sentenced both men yesterday, also ordered each to pay $6.6 million in restitution.

Crook, was president of Z Touch Systems Inc., Global Payment Solutions Inc., Bluko Information Inc., and Smart Restaurant Solution, Inc.; and Rieman, through his company and salesmen working for him, was primarily responsible for making the offers and sales of investments in Crook’s companies. Crook cooperated with the government’s investigation, and both defendants pleaded guilty to mail fraud after they were indicted in 2011.

According to court documents, between 2004 and August 2007, Crook and Rieman misrepresented the expected return on investments, the risks associated with the investments, the existence and value of collateral, the use of proceeds, the source of funds used to make promised payments, the status of investments, and the financial condition and business transactions of the companies. They misappropriated a part of the funds raised to make Ponzi-type payments to investors and to benefit companies and individuals other than those directly relating to the particular investment.

For example, the defendants offered and sold investments in interactive kiosks called ODIEs (On Demand Interactive Environments), purportedly manufactured and sold by Z Touch. The investments offered an annual return of 18 percent in monthly payments, repayment of principal in 36 months, and a security interest in a particular ODIE. Although the defendants offered and sold more than 250 of these investments, only a small number of ODIEs were ever built, none were successfully placed in businesses, and no revenues were generated.

One victim, a retired school teacher, made two separate investments totaling $500,000 of her retirement funds in what Rieman purported were 27 ODIEs, and, ultimately, she lost more than $400,000 of her investment.

The government was represented by Assistant United States Attorneys Edward G. Kohler and Kruti Trivedi.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois Department of Securities assisted in the investigation.