By Bill Singer,
A few years back I attempted to help a number of defrauded investors who had been scammed into buying so-called "pre-IPO" shares of Securetee International, Inc. In a nutshell, Securetee was a bogus offering sold mainly to unwary European investors by unregistered brokerage firms. Prominent among the phony broker-dealers was an outfit called Jackson Cole Investments. Briefly, SecureTee appeared to have been incorporated in Nevada. However, the State of Nevada advised me that the company was no longer a corporation in "good standing." The original address the company provided upon incorporation was in Czechoslovakia (alas, even the country now no longer exists) and was probably a bogus address. SecureTee did have a California address but said address was no longer valid. When calling the California office number, I found it was the number for a company that rents out office space to other tenants. I was advised that SecureTee no longer had an office there and left no forwarding information. Jackson Cole Investments was not a registered broker-dealer in the U.S. There is no record of such an entity on file with either the United States Securities and Exchange Commission ("SEC") or, at the time, with the National Association of Securities Dealers, Inc. ("NASD").
Far from being a fraud that none of the defrauded complained about, the Securetee scam was well-documented during 2003-2005 on a number of internet forums, and foreign regulators issued belated warnings but did little else. Bad enough that individuals were scammed out of their savings by investing into non-publicly tradable shares. As President Bush so woefully attempted to state during one of his speeches: Fool me once, shame on you. Okay, so those investors learned a hard lesson about not verifying what they bought and whom they dealt with. I don't hold any regulator or prosecutor accountable for that. You need some reasonable warning, some decent notice before a regulator should move into action. Frankly, bogus sales are too often quick hit-and-runs. Chalk the pre-IPO sales up to a well designed scam.
However, the second part of the maxim is: Fool me twice, shame on me. No sooner had Securetee's pre-IPO sales been concluded then the scamster rolled into action with a second phase of their fraud. Those same foreign investors who bought the crap were now getting calls from allegedly U.S.-based broker-dealers promising to "legend" the pre-IPO shares and offering significant profits through sales to motivated buyers that they claimed to be representing (all somewhat hush hush, doesn't want his identity known, wants to close quickly)--of course, there was the polite request for the ever popular up-front fee of thousands of dollars to legend the shares. Among the firms making these calls was one known as Great American or Great Lakes Securities.
Great American Securities or Great Lakes Securities, a purportedly Illinois broker-dealer and the company that solicited an up front payment in exchange for finding a seller for the pre-IPO shares, was not registered as a broker-dealer with the state of Illinois, the SEC, or the NASD. There had been a Great American Securities, which was a member of the Chicago Board of Options, but that firm dissolved in 1992. Great American purported to be a member of SIPC, but it was not. Great American also described itself as a member of the Chicago Board of Acquisitions. Okay, I'm not sure how to even address that--unless, someone, anyone, can tell me what the hell the Chicago Board of Acquisitions is. I never heard of it. There is no such listed organization. Funny thing is that some of the folks I spoke to about this case seemed uncomfortable about not having intimate knowledge of the good-old (not!) CBA and suggested that they were slightly familiar with the organization. Only goes to show you that even veteran industry members--even regulators--can easily be scammed. No one ever likes to admit ignorance. That's the first thing a good fraudster latches on to.
So...what steps did my law firm take a few years ago to track down this mess?
For starters, we spoke with a Jim Daly of the Securities and Exchange Commission (SEC) who said he was very familiar with SecureTee and Jackson Cole. He did not know about Great American/Lakes. Because the SEC is not permitted to reveal the existence of ongoing investigations, we couldn't get much feedback. However, from our numerous conversations with Mr. Daly, he did express interest in the situation, was grateful for the additional information, and there was an implication at least of some ongoing inquiry. Mr. Daly's contact information was (202) 551-6551 or by e-mail to firstname.lastname@example.org.
We also contacted the Illinois Securities Department, because Great American/Lakes purported to operate its business from Chicago. That department investigates potential fraud and determines if and when to refer the matter to the state's Attorney General's office (criminal authority). At their request, we faxed to them some of the forms Great Lakes wanted investors to complete. The Department advised that they would "look into the matter." After a number of conversations with Cheryl Weis of that office, she advised us that the Department lacked jurisdiction to pursue the company. Moreover, she noted that even if the Department were conducting an investigation, they would not be permitted to disclose an ongoing inquiry. Nonetheless, Ms. Weis seemed quite troubled by Great American and said that she would go to her Director about issuing an Order to at least make people aware of Great American's shenanigans, but she offered no guarantees. Ms. Weis' contact number was (312) 793-9643.
In addition, we contacted the Nevada Securities Department at (702) 486-2440, which also investigates fraud and determines if that state's Attorney General should be involved. Unfortunately, after looking into the matter, that Department advised us that they have no jurisdiction because neither SecureTee nor the investors were residents of that state. The fact that SecureTee was incorporated there was apparently not sufficient to grant jurisdiction to conduct a fraud investigation, or so we were told.
Finally, we contacted the Federal Bureau of Investigation's ("FBI")
California office. SecureTee had an office in that state. We were advised that
the matter would be referred to the FBI's Fraud Division; however, the FBI noted
that it was "backlogged" and it could take some time to get to this
case. No one with whom we spoke would reveal their names. That office could be reached
at (310) 477-6565.
To those of you familiar with the Internet, I'm sure this second phase of the SecureTee scam (send us money to clear things up) sounds like to ongoing Nigerian Scam. Okay, so not so clever. However, you don't need to be too clever these days. All those sheep to be fleeced. And they line up so willingly. Sadly, despite many calls by me to every regulator with apparent jurisdiction, the foreign regulators declined to take further action because they said the second wave of the fraud emanated from the U.S., and the U.S. regulators declined to take action because the scam mainly involved foreign investors and a defunct U.S. entity. The crooks had crawled into the penumbra between foreign and U.S. regulation and frolicked there with delight. No one with power cared. Clearly, the bad guys counted on this.
Yesterday, one of my clients from England notified me that he was contacted a few days ago by a U.S. broker-dealer offering to legend the shares and to refer him to U.S. "solicitors" for the purpose of completing the transaction. Once again, I have reached out to the U.S. regulatory community. Perhaps this third wave of fraud will not come crashing down upon our shores and send a tsunami back to the Old World. Then again, tell me, does anything really change when it comes to regulatory somnambulism?