Financial Fraud Enforcement Task Force Announces Regional Results of Operation Broken Trust, Targeting Investment Fraud
|U.S. Attorney’s Office December 06, 2010|
DALLAS—Following an announcement today by Attorney General Eric Holder in Washington, D.C., representatives of the Financial Fraud Enforcement Task Force in Dallas, including U.S. Attorney James T. Jacks, of the Northern District of Texas; Robert E. Casey, Jr., Special Agent in Charge, FBI Dallas; Randy Till, Postal Inspector in Charge, U.S. Postal Inspection Service; Andrea Whelan, Special Agent in Charge, IRS-Criminal Investigation; Kathleen Hickman, Assistant Special Agent in Charge, U.S. Secret Service; and Rose Romero, Regional Director, U.S. Securities and Exchange Commission (SEC); announced the regional results of Operation Broken Trust, a nationwide operation which targeted investment fraud in the Northern District of Texas and throughout the country. Operation Broken Trust is the first nationwide operation of its kind to target a broad array of investment fraud schemes that directly prey upon the investing public.
The interagency Financial Fraud Enforcement Task Force was established by the President to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. Starting on Aug. 16, 2010, to date Operation Broken Trust has involved enforcement actions against 343 criminal defendants and 189 civil defendants for fraud schemes involving more than 120,000 victims throughout the country. The operation’s criminal cases involved more than $8.3 billion in estimated losses and the civil cases involved estimated losses of more than $2.1 billion. In the Northern District of Texas, the operation’s criminal cases involved more than $202.1 million in estimated losses and 2651 victims.
“With this operation, the Financial Fraud Enforcement Task Force is sending a strong message,” said Attorney General Holder. “To the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur. And to anyone operating or attempting to operate an investment scam: cheating investors out of their earnings and savings is no longer a safe business plan—we will use every tool at our disposal to find you, to stop you, and to bring you to justice.”
“With the leadership of the Financial Fraud Enforcement Task Force, in concert with our strong network of state and local partners, this District will continue its aggressive efforts in investigating and prosecuting financial crimes,” said U.S. Attorney Jacks. “For the many victims whose dreams have indeed been broken, we empathize with them and pledge to doggedly pursue those fraudsters who commit financial crimes, robbing them of their life savings.”
The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit StopFraud.gov.
The Financial Fraud Enforcement Task Force in the Northern District of Texas includes representatives from the FBI, U.S. Postal Inspection Service, IRS-Criminal Investigation, U.S. Secret Service, U.S. Securities and Exchange Commission (SEC), Texas State Securities Board, Texas Attorney General, FDIC Office of Inspector General, Commodity Futures Trading Commission, Federal Reserve Board of Governors, Office of Thrift Supervision, Comptroller of the Currency, Financial Industry Regulator Authority, and National Futures Association.
Operation Broken Trust cases in the Northern District of Texas include:
United States vs. Alan Todd May
Alan May was indicted in June 2010 and charged with one count of wire fraud and two counts of mail fraud. May was the mastermind of a criminal Ponzi scheme that defrauded more than 150 investors of more than $8 million. He used his company, Prosper Oil & Gas, to set up an investment scheme in which Prosper sold oil and gas royalty interests that it did not own, oversold royalty interests for leases it did own, and overstated production revenue from its existing leases to impress investors and increase sales. May executed a classic Ponzi scheme in which new investor funds were used to make supposed “royalty” payments to older investors. In March 2010, the SEC successfully filed suit against Prosper Oil & Gas to have the company placed in receivership. May pleaded guilty to one count of mail fraud; a sentencing date has not been set. The case is being investigated by the U.S. Secret Service and the SEC.
United States vs. Eldon A. Gresham, Jr.
Eldon Gresham was indicted in September 2010 and charged with 10 counts of mail fraud in connection with a foreign currency exchange (Forex) trading scam. From January 2004 through June 2009, Gresham recruited at least 90 investors to invest in his Forex trading business, the Gresham Company. He falsely represented to potential investors that he generated consistent returns of up to 10 percent per month on investments. In fact, Gresham was actually losing money on his Forex trading. Gresham also concealed from investors that he used their investment funds for personal reasons or as payments to earlier investors. Over the life of the scheme, Gresham obtained nearly $15.8 million from unsuspecting victims.
To further promote his scheme, Gresham targeted members of the Christian faith who were elderly and particularly vulnerable to Gresham’s enticements. Gresham often told potential investors that he believed his success in Forex trading was a blessing and gift from God, and Gresham considered his investment business to be “his ministry.” Gresham also encouraged people to invest by telling them they could use their investment gains to “further God’s work.” Although not alleged in the indictment, Gresham was formerly on staff of the Fellowship of Christian Athletes (FCA). He was also a former TCU football player, and referred to in the Fort Worth Star-Telegram as a former TCU football “standout.” The case is being investigated by the U.S. Postal Inspection Service. Trial is set for March 7, 2011.
United States vs. John Arthur Apple, Jr.
The investigation into fraudulent securities offerings by Western Pipeline Corporation culminated with the November 16, 2010 indictment of John Arthur Apple, Jr., on eight counts of securities fraud and one count of conspiracy. To date, the investigation has resulted in securities fraud and conspiracy pleas by four officers of Western Pipeline: Chris Jent, Cliff Stahl, Mickey Horn and T.J. Nealy, all of whom are awaiting sentencing.
The allegations against Apple include a “bogus reference” scheme designed to defeat investors’ due-diligence efforts. Western Pipeline officers used fake names and pretended to be investors in earlier Western Pipeline offerings. Boiler room salesmen directed prospective investors to these individuals, who then claimed they had made money on Western Pipeline securities and been satisfied with their investments. The scheme concealed from prospective investors that previous Western Pipeline offerings had yielded only negligible profits and resulted in extensive litigation by investors against Western Pipeline and its officers. The indictment also accuses Apple of diverting investor funds to undisclosed and improper purposes. The case is being investigated by the FBI and the U.S. Postal Inspection Service. Trial is set for February 7, 2011.
United States vs. Michael R. Rouse
During 2003 and 2004, Michael R. Rouse and James Testa were the trustees and founders of the Golden Gate Real Estate Investment Trust. During that period, according to a pending federal indictment, Testa and Rouse, acting personally and through brokers, raised approximately $2 million from investors by claiming that the REIT was a safe investment in real estate and real-estate-related assets. In fact, according to the government’s allegations, none of the money was ever invested in anything connected with real estate. The only investments Testa and Rouse ever made were in foreign currency trading, and those investments failed completely. The investors lost most or all of their money, while Testa and Rouse paid themselves handsome salaries and spent the investors’ funds on business and personal expenses, including Mercedes Benz automobiles that cost more than $100,000 each. Testa pleaded guilty to one count of money laundering in 2009, and Rouse is set for trial in April 2011 on nine felony counts, including securities fraud, mail fraud, conspiracy, and money laundering. The case is being investigated by IRS-Criminal Investigation and the Texas State Securities Board.
United States vs. Brion Gary Randall
Brion Gary Randall operated a fraudulent investment scheme in which, over a period of five years, he collected more than $6 million from 30 victims. Randall, who was a part owner of Titan Home Theater, also purported to act as an investment advisor under 2Randall Consulting Group. Randall convinced his victims to make substantial investments in what he described as tax-free and secure accounts at Chase Bank and AllianceBernstein. Some victims invested their entire retirement savings. He also offered investments in short-term business loan participation programs, usually lasting for a 45 or 90-day period and returning a high rate of interest to the investor. However, the accounts at Chase Bank and AllianceBerstein, and the short-term loan programs promulgated by Randall were entirely fictitious.
Randall maintained the scheme by creating and distributing fraudulent account statements and portfolio summaries. He persuaded victims to rollover their purported profits in their account. If a client persisted in a return of funds, Randall would make the classic Ponzi-style payment by paying the investor with money received from a new investor. Randall’s victims included his neighbors, friends, customers of Titan Home Theater and social and business acquaintances. He continually emphasized the safety of the investment, and by using his personal appeal and projecting empathy toward his clients’ financial needs, established a trust relationship with his victims. Randall cloaked the scheme as legitimate through an outward appearance of material success and by invoking the reputation of his father, who was a successful businessman widely-known in the community.
The scheme ultimately collapsed when two suspicious investors visited AllianceBernstein’s office and discovered no accounts existed. Randall pleaded guilty to one count each of wire fraud and bank fraud, and was sentenced in September 2010 to 15 years in prison. The case was investigated by the FBI and the U.S. Postal Inspection Service.
As a part of Operation Broken Trust, the task force is making the public aware of resources available to protect against these types of fraud and how to report fraud when it occurs. To learn more about investment scams, how to take steps to protect yourself from scams, or how to report investment fraud if you believe you have been victimized, the task force recommends that you visit its website, StopFraud.gov, which includes links to a wide array of task force member resources.