Article below written by Attorney Larry Becraft re: Patriot Scams http://fly.hiwaay.net/~becraft/Scams.htm
Having been involved with the organized "freedom movement" for 20 years, I have seen lots of scams go through our ranks, damaging greatly the people on our side. Because this has been and still is a very serious problem, I wish to relate some of these scams here so that others may learn what has happened and protect themselves.
A. Richard and Bridget Jones:
Back in about 1983, I heard various patriots talking about an arbitrage program operated by a man from Illinois named Richard Jones. He was supposedly an acclaimed international financier who was tired of what the government and the "big boys" were doing and he wanted to help the patriots. Jones' program involved taking people's money and successively rolling it over in some arbitrage scheme which allegedly had a very high rate of return. But this was not his only package; he also had a loan program whereby you could borrow money from some offshore banks at a very low interest rate, and the proceeds of this loan could then be invested in his arbitrage program. In a few years, the investment would pay off the original loan from the offshore bank and you would allegedly end up with a nice stash of cash. To get involved with his project, the patriot was required to invest an initial $4000.
Later, a new third program was started by Jones. He claimed that he had discovered some extremely rich Saudi Arabs who wanted to assist patriots with their battles against the government. These Saudis planned to distribute $10 million to every patriot who got involved with the program. The sale pitch was that you had to give Jones $5000 to show good faith, and then at a designated time, these Saudis would take their yachts to Panama, and the investors in the program would be flown to Panama where they would be aboard the Saudis' yachts and given $10 million each. Of course, the patriot investors had to use about 60% to 75% of the funds given to them to carry out worthy causes and battles. Needless to say, business was very brisk and some of the patriots who fell for the Jones program kept me regularly informed of the forthcoming date when the Saudis would give away these millions. But then again, this day always kept being extended month after month and year after year.
Jones died in April, 1986, and his wife stepped into his shoes. But that summer, she was indicted; she went to trial and was convicted, but she fled before being sentenced. After being on the run for 2 years, she was apprehended and sentenced. The below extract is a portion of the decision in her appeal, which explains the facts of this case regarding the Jones loan program; unfortunately, this decision mentions nothing about the "Saudi project" which apparently was not a part of the case against Bridget.
Extracts from United States v. Jones, 938 F.2d 737 (7th Cir. 1991):
"A loan procurement program' promoted to desperate or gullible persons generated over $11 million in procurement fees for Bridget and Richard Jones. No loans were ever procured and no taxes were ever paid on the fees received. Mrs. Jones was convicted of wire fraud, obstruction of justice and conspiracy. After failing to appear for sentencing, Mrs. Jones was apprehended and received a twenty-five year prison term. She appeals her convictions and sentence, raising a variety of arguments, and we affirm. "Bridget C. Jones and her late husband, Richard L. Jones, operated what was termed an advance fee loan program. For a $4,000 fee paid up front, they promised to arrange a $100 million loan for the applicant. From the standpoint of Bridget and Richard Jones the program was quite successful. By April 15, 1986, (the date Richard died) the couple had accumulated more than $10 million from procurement fees received from approximately 4,000 clients who joined their programs. The money generated from this scheme was placed in more than 100 banks located throughout the United States. No taxes were paid on any of the fees received by Mrs. Jones and her husband. Not incidentally, no loans were ever arranged.
"In early 1986, Bridget and Richard Jones learned that the government had been subpoenaing records from their bank accounts. This news prompted them to take steps to move the money in those accounts outside the United States. To accomplish this international transfer of funds Mrs. Jones and her husband sought the assistance of Joan McIntosh and a Swiss banker named Harry Wanke. McIntosh claimed to be in the business of protecting people's money from being taxed. A plan was developed whereby Richard Jones would write checks on all his bank accounts and make them payable to sham corporations. The checks would be given to McIntosh, who would deposit them in a bank account she controlled in Denver, commingling them with other funds in that account. From the Denver account McIntosh would then move the funds to New York where Wanke would deposit them with a bank having a correspondent relationship with Wanke's bank in Zurich, Switzerland. Wanke would then arrange for the funds to be wire-transferred from the New York bank to his Swiss bank. No reporting or disclosure of the actual ownership of the funds was to be made.
"Bridget and Richard Jones had various bank accounts in Bloomington, Illinois, the base of their operations. Prior to his death and consistent with the plan to move the funds out of the country, Richard Jones depleted his bank accounts outside of Bloomington by writing multiple checks in amounts of less than $10,000 payable to dummy corporations. These checks totalled nearly $6 million. In late March and early April of 1986, Mrs. Jones and her husband sent $500,000 of the checks made payable to the sham corporations to McIntosh. On April 12, 1986, Bridget and Richard Jones, McIntosh, Wanke and others met in Chicago. Mrs. Jones and her husband decided that of the $500,000 sent to McIntosh, $200,000 would be used to test the system devised for getting the money to Switzerland. The balance of the $500,000 would be used to establish trusts.
"Three days later Richard Jones died. A week later, a federal grand jury subpoena was served on Mrs. Jones directing her to produce records relating to the loan program. After receiving the subpoena Mrs. Jones directed that the subpoenaed records be removed from her house, microfilmed and then burned. Although she was given immunity for the act of producing the records of the loan program, Mrs. Jones stated that she had no intention of turning the records over to the grand jury.
"During this time, the Internal Revenue Service made two jeopardy assessments against Richard Jones' estate. The first assessment in the sum of $3.8 million was made in middle or late April of 1986. The second assessment for $10.25 million was made in the middle of June of 1986. Bridget Jones received notifications of the levies and was heard repeatedly to say that she wanted to move the money outside the United States to avoid seizure.
"After Richard Jones' death, Bridget Jones assumed sole control over the operations of the advance fee loan program. She also pursued the scheme to move the untaxed money outside the United States to prevent its seizure by the Internal Revenue Service. On May 7, 1986, Mrs. Jones met with McIntosh in Denver, Colorado, and gave McIntosh an additional $239,000. Mrs. Jones directed her to funnel $100,000 to the overseas bank accounts and to retain $139,000 as an escape fund for Mrs. Jones and her family.
"Seven days later on May 14, 1986, Mrs. Jones met with Rupert Henry and Robin Baily in Miami, Florida. The purpose of this meeting was to arrange the transfer of approximately $290,000 out of the country to bank accounts in Panama.
"On May 21, 1986, Mrs. Jones divided the remaining checks written to the dummy corporations into two groups. Mrs. Jones directed that one group of checks totalling $2,841,172.10 be given to Rupert Henry for deposit in the Panamanian bank accounts. The second group of checks, totalling $3,024,627.48 was given to McIntosh for deposit in the Swiss bank accounts.
"The advance fee loan program continued to generate fees. On May 27, 1986, Mrs. Jones received an additional $1 million from the loan program brought in subsequent to her husband's death. Of this income to Mrs. Jones, approximately $800,000 was in the form of checks. Mrs. Jones directed that the checks be converted to cash without the filing of any Currency Transaction Reports with her name on them. However, the transfer of the cash to Panama could not be arranged and Mrs. Jones decided to move the cash outside the United States through McIntosh and Wanke. At Mrs. Jones' direction, $500,000 in cash was given directly to Wanke in New York. Wanke agreed not to disclose Mrs. Jones' identity on any Currency Transaction Reports. Wanke received the $500,000 in cash in New York and was arrested.
"Mrs. Jones was charged with one count of conspiracy in violation of 18 U.S.C. Sec. 371; four counts of wire fraud in violation of 18 U.S.C. Sec. 1343; and one count of obstruction of justice in violation of 18 U.S.C. Sec. 1503.
"After trial, the jury found Mrs. Jones guilty on all six counts. The district judge set the case for sentencing and agreed to release Mrs. Jones pending sentencing. Mrs. Jones fled and remained at-large for over two and one-half years. After being apprehended and returned for sentencing, the district judge sentenced her to twenty-five years imprisonment."
I have seen mimics of the Jones program since then, so scam artists continue to thrive. But what happened to the money in the Jones program?
B. The "railroad bonds" scam:
Many gullible people within the last few years succumbed to the "railroad bond" scam and lost tons of money. This scam involved the contention that the bonds of some old, bankrupt railroad companies organized back in the 19th century were still today valuable. The promoter of this scam has in the past been actively involved with the tax movement. This promoter got Richie Mack to move from Arizona to Provo, Utah, so that he could run for sheriff of Utah County. Richie did this, only to suffer on the eve of the election a raid by the feds against this promoter of the railroad bond scam. Below is an article which appeared in the local Utah papers:
By Edward L. Carter, Deseret News staff writer PROVO Controversial Utah County sheriff candidate Richard Mack a self-proclaimed opponent of the federal government contends that the FBI, CIA and local politicians may be conspiring to help incumbent David Bateman defeat him at the polls in Tuesday's Republican primary. But another scenario is that a search warrant served at American Institute for Research, the company where Mack has worked since August, was connected to a Securities and Exchange Commission lawsuit filed Thursday in federal court.
The suit alleges three Utah bond dealers Albert E. Carter of Provo, Eunice Polatis of South Jordan and her son, Kelly Polatis of St. George reaped millions of dollars selling allegedly worthless bonds over the past several years. Carter operates American Institute for Research, which is also known as American Institute of Reboundology.
Mack, whose 1994 lawsuit challenged the background check requirements of the Brady gun law all the way to the Supreme Court, said a dozen FBI and CIA agents Thursday served a search warrant at his company. Mack has worked as a consultant, primarily selling mini-trampolines and asset-protecting trusts, at the company since he moved to Provo from Arizona in August. "When you go around, as I have, slamming the federal government, you're going to offend some people in high places," Mack said Thursday night at a hastily called news conference.
Mack said the agents arrived at the Provo business Thursday at 10 a.m., while he was in Springville putting up campaign signs. They stayed for approximately six hours, including an hour long interview with Mack, and confiscated files and computer hard drives, Mack said. He alleged that the serving of the search warrant was motivated by a desire on the part of federal officials to see him lose to Bateman Tuesday. Mack also said that Utah County sheriff's detective Jeff Robinson and Utah County Attorney Kay Bryson somehow were involved in a conspiracy against him. Bryson called the charge ridiculous. "He apparently has a very active imagination," Bryson said. "It's not something we have done. We know nothing about it."
Sheriff's Lt. Doug Witney, a former candidate for Utah County sheriff who lost to Mack and Bateman at the Republican nominating convention several weeks ago, said that neither he nor Robinson both of whom are assigned to the white-collar crime investigative division of the Utah County Attorney's Office is involved in an investigation of Mack. "Where does he get the idea that we've got the power to orchestrate this?" asked Witney. "The guy is delusional."
Mack did not offer details about his relationship with Carter, although both apparently were named on the search warrant. Mack said he has not been charged with any crimes in connection with his work at American Institute for Research.
Carter is a ardent tax protester. In the early 1990s, he ran a business called the American Institute for the Republic, a company that helped people research the IRS and the Federal Reserve to "protect your rights as sovereign citizen." Carter compiled an 88-page resource book titled "The Internal Revenue Service Investigated," which urges people to declare themselves "nontaxpayers" and be prepared to defend their position. Carter also ran an unsuccessful campaign for Provo mayor in 1993. Attempts to reach him Friday were unsuccessful.
Mack said federal agents questioned him about details of the company and about federal income tax evasion. "I said, 'How could that possibly involve me?' " Mack said. Mack told the Deseret News several weeks ago that he pays his income taxes grudgingly and does it primarily to avoid going to jail. He said the federal agents then asked him about some "worthless" bonds that were connected to American Institute of Research. When Mack told the agents he thought the raid was politically motivated and was orchestrated to thwart his bid for sheriff, they told him that was not correct. Given the fact that Carter was named in the SEC complaint filed the same day as the raid, Mack's claims of political persecution seem far-fetched.
"I just find it ludicrous that there could be a conspiracy involving all the people (Mack) has named," Bateman said. "I think all you have to do is think about it for a minute or two. It's ludicrous." Bateman said Mack's conspiracy charges are consistent with a pattern of grandstanding the former Graham County, Ariz., sheriff has exhibited in the past. Mack typically tries to deflect responsibility and place blame on others to his own benefit, Bateman said.
Federal regulators said the bonds sold by Carter and two others were issued by a railroad that went belly up last century. They say bonds issued by the Chicago, Saginaw & Canada Railroad Co., which filed for bankruptcy 122 years ago, might be worth around $30 to those who collect old certificates but not the $150,000 that some people allegedly have been paying. The same goes for notes issued in 1870 by the East Alabama & Cincinnati Railway Co. and in 1838 by Mississippi. "These bonds were being sold all over the place, not just in Utah," said Ken Israel, who heads the SEC's Salt Lake office.
Carter allegedly told investors that each Saginaw bond was worth approximately $91 million, each Alabama bond was valued at about $400 million and each Mississippi bond $79 million. According to the SEC, Carter told investors that the issuers remained obligated to pay on the bonds and the notes continued to accrue interest.
Deseret News staff writer Dennis Romboy and The Associated Press contributed to this story.
***********************************************************************
Friday, June 19, 1998
SEC Claims Utahns Cheated Gullible Investors
BY STEVEN OBERBECK
THE SALT LAKE TRIBUNE
For those who have not heard, the Chicago, Saginaw & Canada Railroad Co. filed for bankruptcy 122 years ago. That means the bonds once issued by the defunct railroad are not worth a lot of money -- as little as $30 to those who collect old stock and bond certificates. Saginaw bonds are certainly not worth the $150,000 that some people have been paying. The same goes for notes issued in 1870 by the East Alabama & Cincinnati Railway Co. and in 1838 by Mississippi.
Federal regulators Thursday cracked down on what they contend was a scheme to peddle virtually worthless old railroad bonds to gullible investors, who were told they were potentially worth millions. The Securities and Exchange Commission (SEC) in a lawsuit filed in Utah federal court said three Utah bond dealers -- Albert E. Carter of Provo, Eunice Polatis of South Jordan and her son, Kelly Polatis of St. George -- reaped millions of dollars selling the notes the past several years. "These bonds were being sold all over the place, not just in Utah,'' said Ken Israel, who heads the SEC's Salt Lake City office.
One of the dealers, Carter, allegedly told investors that each Saginaw bond was worth approximately $91 million, each Alabama bond was valued at about $400 million and each Mississippi bond $79 million. According to the SEC, Carter told investors that the issuers remained obligated to pay on the bonds and the notes continued to accrue interest.
Carter could not be reached for comment. Salt Lake City lawyer Max Wheeler, who is representing Eunice Polatis, said his client only sold the bonds as collectible memorabilia. "She provided an affidavit to buyers that said the bonds did not have any value other than as historical documents,'' Wheeler said.
For whatever reason, a thriving market seemed to be developing for Chicago, Saginaw bonds. An affidavit from a Texas collector, David Beach, said he bought a box of up to 800 bonds from a museum in Grand Rapids, Mich., paying about $25 each. Several years ago, Polatis bought them from him for $35 each, he said. "I have been contacted by people offering several thousands of dollars for each [bond],'' he said. "I was told by people I considered middlemen that some of the bonds were possibly being used by foreign companies to prop up their financial statements.'' About 18 months ago, said Beach, Polatis called saying she was looking for more Chicago, Saginaw bonds, and he sold her two for $12,000 each.
In another affidavit, George H. LaBarre, a New Hampshire dealer in historic and collectible stock and bond certificates, said that in 1996 he sold Eunice Polatis 10 different samples of bonds issued by old railroad and mining companies. LaBarre said he also sold her 207 "pieces'' of Chicago, Saginaw bonds for $175 each for a total of $36,225. "That is what she does,'' Wheeler said, "she buys and sells old stock and bond certificates as collectibles.'' Wheeler said Polatis sold bonds to Carter, but "we really do not know what he did with them.''
The SEC's lawsuit contends Polatis and her son made more than $3.5 million selling Saginaw bonds through a company in California that authenticated and valued the notes. Federal regulators are asking that the three defendants be barred from violating federal securities laws and return any illegal gains they realized from the sale of the bonds. Wheeler said the old certificates, despite the SEC's contention, are not securities. "Maybe the SEC should have investigated Mark Hoffman for selling securities,'' he said of the notorious historic documents dealer, turned forger and bomber serving life in prison.
) Copyright 1998, The Salt Lake Tribune
