FBI: Investment frauds cost $500 million

WASHINGTON, March 7 (UPI) -- FBI agents around the country Friday executed arrest and search warrants targeting 100 individuals in a crackdown on high-yield investment frauds, the bureau said.

The banking schemes allegedly defrauded Americans out of about $500 million.


The operation involved investigations in FBI offices in Boston, Columbia, S.C., Dallas, Denver, Houston, Jacksonville, Fla., Kansas City, Mo., Las Vegas, Los Angeles, Memphis, New Orleans, New York, Oklahoma City, Phoenix, Portland, Ore., Salt Lake City and Sacramento. Twenty-four additional offices helped execute the warrants.

In a prepared statement, FBI Director Robert Mueller called the initiative a "half a billion-dollar victory for hard working Americans, legitimate investment bankers, and the nation's economy."

Mueller said that the series of actions "sends a strong message that even though the FBI is preoccupied with tracking down terrorists, we are not going to let individuals empty the pockets of unsuspecting investors. Putting an end to high-dollar frauds and other white-collar crimes continues to be one of our top priorities."

The FBI said "prime bank" and "high-yield" investment frauds, or PBIFs and HYIFs, are a significant problem both in the United States and internationally.


"As sluggish investment markets in the United States and overseas make the promise of high yields attractive to aggressive investors," the bureau said in a statement announcing Friday's operation, "con artists promoting PBIF and HYIF scams have found a ready pool of potential victims."

"Prime bank," or PBIF, schemes involve sale of fraudulent, often non-existent, investments, and "typically involve false claims of a secret market, being risk-free, having extremely high or guaranteed return rates, and containing formats purportedly approved and/or sanctioned by the Federal Reserve, the International Chamber of Commerce, the World Bank, the International Monetary Fund, or other known international organizations," the FBI said.

The financial instruments may be sold as bank notes, guarantees, letters of credit, debentures, bills of exchange, roll programs or trading programs, foreign currency trading programs or blocked funds certificates.

"Perpetrators of these schemes tell potential investors that they have unique access to a trading program and that by pooling their money with that of other investors they can participate," the FBI said. "These opportunities are allegedly only available because the fraudulent solicitor has high-level contacts in the banking world. Investors must often abide by a non-disclosure agreement to protect the secret arrangement. In the end, the investor realizes that there are no such arrangements and what is essentially a Ponzi (or pyramid) scheme collapses, costing victims their investment."


The bureau said many PBIF crimes have an international aspect. The base of operations of the con artist may be overseas while the victims are in the United States. "Proceeds are often moved to foreign bank accounts, such as the Bahamas or Switzerland," the FBI said. "Subjects also fraudulently represent that the investment is insured against loss or non-performance by a foreign insurance entity."

The FBI said one such case, known as the "Sweet Tea Masquerade," was part of Friday's crackdown. FBI agents in Columbia and Greenville, S.C., conducted an undercover operation, acting as potential investors to target 27 groups of subjects who defrauded other innocent investors of more than $31 million.

The investigation began in June 2001 and culminated Friday with the filing of criminal complaints and the issuance of arrest warrants involving 51 individuals.

The warrants were to be executed in 22 states and Washington, D.C. Thirteen of the targeted individuals are in six foreign countries -- Canada, England, Germany, Greece, South Africa and Mexico -- and provisional arrest warrants for extradition will be sought where appropriate, the FBI said.

In Los Angeles, Nicholas Roblee, also known as Nicholas Richmond, the operator of Premier Marketing and Investments Inc., was arrested on wire fraud and money laundering charges.


The FBI said Roblee allegedly solicited more than $4.5 million from investors, promising returns up to 200 percent per month through the trading of medium-term notes, real estate-related bridge loans, and investments in gold, gold concentrate and other precious metals.

One alleged victim of Roblee's scheme was a 62-year-old Baptist minister from Ohio who invested and lost his entire retirement savings of $1 million, the FBI said. Allegedly, Roblee diverted the funds for his own benefit and to pay back prior investors through Ponzi-type payments.

The FBI cited a similar case in Jacksonville, Fla., where agents executed a search warrant on the residence of Gregory Smith Friday.

Acting through Tri C Holdings, Smith allegedly solicited investors in a high-yield investment program which promised rates of return ranging from 15 percent to 20 percent every 35 to 70 days, with no risk to the investors' principal. The approximately $1 million that investors sent to Tri C Holdings was never invested and was allegedly diverted by Smith, the bureau said.

Other warrants were executed Friday in a Denver-based investigation that extended into 33 states and 14 foreign countries.

Also Friday, a number of indictments related to PBIFs were unsealed, including two indictments in Dallas involving a fraud worth $17 million, and another indictment in Phoenix for a fraud worth $23 million.


The FBI urged potential investors to watch out for PBIF "red flags" -- investment opportunities that have one or more of the following characteristics:

"Secret" trading; risk free; guaranteed and/or high rates of return; investments only used as collateral; not licensed; not offered by legitimate brokerage firms.

Also a "red flag" are "complicated, legal looking documents" with errors; non-disclosure, non-circumvention clauses; confidentiality agreement; non-solicitation agreement; letter of intent/proof of funds, and "good, clean, clear funds of non-criminal origin."

The FBI also urged investors to access several Web sites where notices are posted describing investment fraud schemes, including:

The Treasury Department's; the Federal Reserve's; the International Monetary Fund's; the Federal Reserve Bank of New York's; the World Bank's; the International Chamber of Commerce's; the Security and Exchange Commission's; the Office of the Comptroller of the Currency of the United States'; and the FBI's

The FBI site also contains a fraud hot line toll-free number.

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