Three Individuals Sentenced in Connection with Trevor Cook Ponzi Scheme
|U.S. Attorney’s Office January 03, 2013|
MINNEAPOLIS—Earlier today in federal court, United States District Court Chief Judge Michael J. Davis sentenced three individuals in connection with the multi-million-dollar Ponzi scheme orchestrated by Trevor Cook.
Jason Bo-Alan Beckman, age 43, of Plymouth, was sentenced to 360 months in federal prison on 17 counts of wire and mail fraud, two counts of conspiracy to commit mail and wire fraud, four counts of money laundering, two counts of filing a false tax return, and one count of tax evasion. Because the federal criminal justice system does not have parole, Beckman will spend virtually his entire sentence behind bars. He and the other co-defendants sentenced today were also solely and jointly ordered to pay $155,359,411.77 in restitution to the victims of their fraud scheme.
Gerald Joseph Durand, age 61, of Faribault, was sentenced to 240 months on 12 counts of wire and mail fraud, one count of conspiracy to commit mail and wire fraud, and two counts of money laundering, two counts of concealing a material fact from the United States, and three counts of filing a false tax return.
Christopher Pettengill, age 56, also of Plymouth, was sentenced to 90 months in federal prison on one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of money laundering.
The sentencing of Patrick Kiley, age 74, was rescheduled for January 18, 2013, after he requested and received a continuance following the appointment of a new lawyer. Kiley will be sentenced on 12 counts of wire and mail fraud, one count of conspiracy to commit mail and wire fraud, and two counts of money laundering.
Beckman, Durand, and Kiley were charged in a second superseding indictment on February 22, 2012, and were convicted on June 12, 2012, after a near-two-month trial. Pettengill was charged on June 13, 2011, and pleaded guilty on June 21, 2011.
In sentencing Beckman, Judge Davis called him a central figure in the fraud scheme, adding that the harm he caused was worse than using a gun because he “used the English language to violate so many.” Beckman and his co-conspirators defrauded more than 725 people during the course of their fraud scheme.
Following the sentencings, U.S. Attorney B. Todd Jones said, “We are very pleased with today’s sentences. These are the types of cases this office will vigorously pursue—cases where defendants prey on vulnerable populations, such as the elderly, or use special relationships, like those established through faith communities, to commit financial fraud that devastates thousands of people, crushing their dreams of retirement or college for their children.”
Kelly R. Jackson, Special Agent in Charge of the Internal Revenue Service-Criminal Investigations’ St. Paul Field Office, added, “IRS-Criminal Investigation is committed to unraveling complex financial transactions and money laundering schemes and will continue to vigorously pursue those individuals who victimize their investors and violate the public trust. Today’s sentencings demonstrate the government’s determination to restore and ensure that trust.”
The evidence presented at trial proved that between 2005 and November 2009, the defendants, along with Cook, defrauded investors by soliciting them to invest money in a foreign currency trading program that they alleged would earn a double-digit rate of return, typically between 10.5 and 12 percent annually, with little or no risk. They also claimed investor assets would be held in a segregated account and could be withdrawn at any time. Those representations were false.
The defendants and Cook made the investment offers through entities known as Universal Brokerage Services or bearing the acronym “UBS.” (The UBS entities had no legitimate affiliation to the global provider of financial services UBS, AG.) Cook operated the currency program through various foreign currency trading firms, including but not limited to one in Chicago and another in Switzerland.
To induce investors, the defendants and Cook, directly or through others, made false representations regarding the performance, safety, and liquidity of the currency program. They also omitted material information concerning their own backgrounds and qualifications, as well as the backgrounds and qualifications of those working for them.
Once investments were made, some investors received UBS account statements that indicated that the currency program was performing as promised, while others received checks for “returns on their investments.” Both the statements and checks, however, were actually produced by the co-conspirators, the purpose being to lull investors or encourage them to make additional investments. At the same time, most investors received nothing from the true custodians of their funds.
Although some investment funds were invested in foreign currency trading, most of that trading was high-risk in nature, often resulting in significant losses, none of which was disclosed to investors. Moreover, the co-conspirators concealed that the currency trading firm in Switzerland was in dire financial condition and, instead, continued to solicit investor assets to be sent to that trading firm. Co-conspirators also concealed from investors their own concerns about Cook’s operation of the currency program and alleged illegalities relative to the currency program.
In 2007, when UBS, AG filed a trademark infringement lawsuit against Cook, Durand, Kiley, and others, the defendants began operating their scheme under other names, including but not limited to those identified by the terms “Oxford” and “Universal Brokerage FX.” They then continued to solicit investors for the currency program, utilizing telemarketing, media spots, and seminars in which they repeated the false representations noted above. Kiley, a Christian radio host, solicited investors for the scam through his radio talk show, which was carried on more than 200 stations across the country. On those programs, he regularly warned listeners to avoid financial ruin by giving their life savings to his company for investment.
Between 2005 and July 2009, the defendants, Cook, and others secured approximately $194 million in investments for the currency program. Of that amount, only about $109 million was actually sent to currency trading firms. About $52 million was paid to investors in the form of lulling payments, and approximately $30 million was diverted to fund the business and personal expenses of the defendants, Cook, and others.
While Beckman was soliciting investors for the currency program, he also was attempting to purchase a minority ownership interest in the Minnesota Wild hockey team. He made misrepresentations to the National Hockey League that investments in certain trading accounts were his alone. He also claimed an extraordinary amount of assets under management and lied about the management of his grandfather’s estate and other acts reflecting dishonesty.
Moreover, Beckman filed false individual income tax returns for tax years 2007 and 2009 and failed to file a tax return for 2008. For that year, Beckman and his wife owed more than $1.3 million in federal income taxes. In addition, he caused two life insurance policies of an investor to be sold and stole millions of dollars in proceeds in order to prop up currency trading accounts held in his name.
For his part, Durand concealed more than $20,000 from the court-appointed receiver, who was searching for assets of the currency program fraud. Durand had another individual exchange the Swiss francs for U.S. currency, thereby concealing from law enforcement that he was in truth the source of the funds. Furthermore, Durand filed false individual income tax returns for tax years 2006 through 2008.
In his plea agreement, Pettengill admitted that from February through September 2008, he concealed material information from investors concerning the foreign currency program sold by Pettengill, Cook, and others known as the Oxford Entities Currency Program. He also conducted numerous wire transfers during the course of the conspiracy and made a personal credit card payment of $11,369.19 with funds derived from proceeds of the fraud scheme.
In August 2010, Cook was sentenced to 300 months in federal prison for his role in the scam. On July 18, 2011, Jon Jason Greco pleaded guilty to two counts of making false statements to federal agents, specifically lying about assets he had concealed relative to this scam. He was sentenced to 10 months in prison for his crimes.
This case was the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigations, with cooperation from the Securities and Exchange Commission and the Commodities Futures Trading Commission. It was prosecuted by Assistant U.S. Attorneys Tracy L. Perzel and David J. MacLaughlin.
Proceeds from the Cook fraud scheme are the subject of an ongoing investigation and recovery efforts led by R.J. Zayed, of the law firm Carlson, Caspers, Vandenburg, and Lindquist. Zayed was appointed receiver by Judge Davis.
This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort in investigating and prosecuting financial crimes. It 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, will 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.