Financial Fraud Enforcement Task Force Announces Results of Operation Broken Trust, Targeting Investment Fraud
|U.S. Attorney’s Office December 06, 2010|
LOS ANGELES—Following an announcement today by Attorney General Eric Holder in Washington, D.C., representatives of the Financial Fraud Enforcement Task Force in Los Angeles, including United States Attorney André Birotte Jr., announced the regional results of Operation Broken Trust, a nationwide operation that targeted investment fraud here 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. Since August 16 in the Central District of California, approximately one dozen cases were charged as part of Operation Broken Trust, and an additional six cases resulted in convictions or sentencings. These cases together involved approximately two dozen defendants, and losses of approximately $344 million to well over 2,000 victim-investors.
Nationwide, 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.
“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.”
“The dominant theme in all of these investment fraud cases is that perpetrators made promises that sounded too good to be true,” said U.S. Attorney André Birotte Jr. “Investors must beware of any promise involving guaranteed high rates of return, keeping in mind that this lure is frequently used by fraudsters. My office and our federal partners act whenever appropriate to shut down such schemes and to punish those responsible.”
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.
In achieving these results, the U.S. Attorney’s Office worked closely with the Federal Bureau of Investigation, the U.S. Postal Inspection Service, IRS - Criminal Investigation, the Securities and Exchange Commission, the U.S. Commodities Futures Trading Commission, and other agencies.
Operation Broken Trust cases in the Central District of California included:
United States vs. Ruben Juan-Gonzalez: A West Covina man was sentenced this morning to 135 months in federal prison for running a Ponzi scheme that took in almost $4 million from more than 100 victims who were lured to the scheme with promises of guaranteed interest rates up to 120 percent per year. Ruben Juan-Gonzalez, who advertised his investment program in Spanish-language newspapers and on radio stations, claimed that victims’ money would be used to invest in commodities like gold and silver, real estate developments and a gold mine in Mexico. Juan-Gonzalez, who operated New Golden Investments Group in West Covina, caused more than $2.2 million in losses.
United States vs. Rosi Ray: On December 1, a federal grand jury returned a multi-count wire fraud indictment against Rosi Ray, of Beverly Hills. Ray solicited investments from victims who were told their money would be used to purchase court-ordered, monetary settlement annuities from accident victims at a discount. Ray told victims that their investments were guaranteed to earn a substantial monthly return, anywhere from 10 to 200 percent over a period of two to 12 months. In reality, Ray spent investors’ money to pay earlier investors, and to finance her son’s drag racing career and a purse consignment business. As a result of the fraud scheme, Ray caused approximately 180 investors to invest approximately $10.9 million.
United States vs. Emmanuel Onwuzulike: On November 29, a Nigerian man, Emmanuel I. Onwuzulike, was sentenced to 14 years in federal prison for bilking mainly elderly victims out of more than $2.7 million with promises of huge winnings in international lotteries. United States District Judge Dale S. Fischer also ordered Onwuzulike to pay full restitution to his victims across the United States. Onwuzulike pleaded guilty in July to one count of mail fraud. From 2004 through 2006, Onwuzulike helped operate several lottery companies from London, England. Victims would be told by telephone, mail, or email that they had won a lottery prize, but that in order to collect the “winnings,” they would have to pay taxes or other fees to receive “prizes” that never materialized.
United States v. Peter Frommer: On November 23, Peter Jerald Frommer, 35, of Santa Barbara, pleaded guilty to wire fraud, money laundering, and three counts of failing to file federal income tax returns for the tax years 2004 through 2006. Frommer operated a bogus investment scheme under the names “Cap Exchange” and “Cap X,” companies that he falsely claimed traded in surplus property of defunct companies. From January 2004 until August 2006, Frommer solicited approximately $12 million from more than 50 victims throughout the United States, by promising “guaranteed” returns of up to 15 percent in as little time as six weeks. Instead, Frommer used the victims’ money to maintain a lavish personal lifestyle and to make Ponzi payments to victims.
United States v. Chad Peter Smanjak: On October 27, a federal grand jury returned an 11-count indictment against Chad Peter Smanjak, of Long Beach, for running a “pump and dump” scheme that allowed him to artificially generate market demand for penny stock issued by a sports drink company. The indictment alleges that Smanjak and others obtained millions of shares of stock in Rudy Nutrition (RUNU and RUDN) and then “pumped” the stock by issuing false and misleading press releases and by trading RUNU stock among themselves. Smanjak and others then “dumped” approximately 600 million shares of RUNU on the market, fraudulently realizing a profit of approximately $5.2 million. Smanjak is a fugitive after fleeing to his native South Africa earlier this year after authorities executed a search warrant.
United States vs. Bruce Fred Friedman: On September 20, a federal grand jury returned a 23-count indictment against Bruce Fred Friedman. Through his company, Diversified Lending Group, Friedman lured investors with promises of high returns from investments in distressed properties. In reality, Friedman used newer investor money to make payments to earlier investors, in a classic Ponzi scheme. Friedman collected as much as $228 million from hundreds of investors across the country. Losses are estimated to be approximately $190 million. Friedman was arrested in France and is in the process of being extradited to the United States.
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.