Operators of Ponzi Scheme Involving Non-Existent ATMs That Cost Victims More Than $135 Million in Losses Sentenced to Up to Decade in Prison
LOS ANGELES—Concluding one of the largest Ponzi schemes ever seen in Southern California, two men who operated a Calabasas firm at the center of a scam that cost victims approximately $135 million were sentenced today, with one man being ordered to serve nine years, and the other a decade, in federal prison.
Joel Barry Gillis, 75, of Woodland Hills, was sentenced to 120 months in federal prison, and Edward Wishner, 77, also of Woodland Hills, was sentenced to 108 months in prison in relation to a 13-year-long scheme they operated through their company, Nationwide Automated Systems, Inc. (NASI).
Gillis and Wishner used NASI to collect hundreds of millions from thousands of investors who were falsely told their money would be used to purchase profitable automated teller machines that would generate annual profits of at least 20 percent. More than 1,300 investors lost money when the scheme collapsed last year.
United States District Judge S. James Otero sentenced the two defendants, citing the “staggering losses suffered by the victims.” Taking into account the “major magnitude” of the scheme, Judge Otero said he issued sentences less that those called for under the United States Sentencing Guidelines after considering the defendants’ ages, their early guilty pleas in the case and their attempts to help a court-appointed receiver identify remaining assets that could be used to repay victims.
Judge Otero scheduled a restitution hearing for February 1, 2016 and ordered the defendants to begin serving their sentences on December 28.
Gillis and Wishner each pleaded guilty in January to conspiracy, two counts of mail fraud and one count of wire fraud.
“This scheme had a devastating effect on hundreds of victims who lost their hard-earned money to the two defendants,” said United States Attorney Eileen M. Decker. “The lies and deception used by these defendants have earned them long prison sentences. Today’s significant sentences should be a warning to those who make false promises to rob victims of their livelihood and retirement funds.”
According to documents filed in United States District Court, Gillis and Wishner owned and operated NASI, which they claimed would place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores. NASI claimed that it operated approximately 31,000 ATMs and was involved in more than $1 billion in ATM transactions every month.
Victim-investors paid a flat amount—typically $12,000, but in some cases as much as $19,800—to buy a specific ATM that was to be installed at a specific location. Gillis and Wishner told victim-investors that NASI would lease back the ATMs and pay investors 50 cents for each transaction performed at their particular ATM, guaranteeing annual returns of at least 20 percent on each ATM.
NASI did make monthly payments to investors, but that money came from other investors. While NASI did operate a small number of ATMs—no more than 250, which were owned by the company and not investors—the overall operation was a sham.
“These sentences should serve as a deterrent to other would-be white-collar criminals, yet it cannot rectify the damage done to the lives of over 1,300 victims,” said David Bowdich, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “I strongly urge investors to question and do their due diligence when the stated returns are seemingly too good to be true.”
Gillis and Wishner prevented investors from discovering the fraudulent nature of the business by providing bogus monthly reports to the investors that falsely detailed the supposed performance of the investors’ ATMs. Gillis and Wishner also included a “non-interference” provision in the lease agreements that prohibited victim-investors from visiting the locations where their ATMs were supposedly located.
But, even as the Ponzi was collapsing, Gillis and Wishner continued to raise another $15 million from victim-investors.
“When Gillis and Wishner’s Ponzi scheme collapsed, the victim-investors suffered irreparable financial harm, leaving them struggling to make ends meet, facing retirement bereft of assets, and unable to pay for necessary health care or provide for family members’ medical expenses, education, and other needs,” prosecutors wrote in a sentencing memorandum filed with the court. “These victims included individuals from whom Gillis and Wishner had solicited ‘investments’ even after the Securities and Exchange Commission had served NASI with a subpoena signaling NASI’s imminent shut-down.”
Several victims testified during today’s lengthy sentencing in United States District Court. “Because of their excessive greed, they elected to hurt many people,” one victim said to Judge Otero. Another victim broke down when describing how he and his family has lost their life savings and were forced to sell their home of 20 years, concluding: “We were stripped of our sense of community and dignity.”
This case was investigated by the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission provided substantial assistance in the matter.
The SEC filed a civil lawsuit in relation to the NASI scheme in October 2014 September (see: http://www.sec.gov/litigation/litreleases/2014/lr23106.htm).