Make Millions Leasing A Line Of Credit Or Go To Jail

August 14, 2012

For starters, I want to make something very clear: The three individual defendants named in this article have merely been indicted, which means nothing more than that the prosecutors have alleged a number of criminal acts and now have the burden of proving guilt beyond a reasonable doubt in a court of law.  That disclaimer having been made, let's consider the allegations in this case. 

The Defendants And The Enterprisesutor

Thomas Bannon, 80,  and Robert Bardey, 79, New York, NY; and Theodore Sweeten, 59, Ashland, OR are charged in federal court in Brooklyn, NY in an 11-count Indictment dated July 20, 2012, with: 
  • one count conspiracy to commit wire fraud;
  • nine counts of wire fraud; and
  • (Bardey only) one count of perjury.
Bannon was purportedly the president of something called Overseas Investors LLC., which, according to the Indictment: 

[O]verseas Investors purportedly set up funded accounts in its clients' names at large, reputable banks in exchange for a substantial fee.  BANNON represented that the money Overseas Investors used to fund these accounts came from wealthy investors who were willing to lease their funds to Overseas Investors' clients in exchange for a fee. . . 

[R]epresented to the Victim and other clients that Overseas Investors collaborated with hedge funds and wealthy investors who were willing, in exchange for a substantial fee, to lease funds and set up bank accounts in its clients' names that contained the leased funds.  BANNON represented to clients that Oerseas Investors provided clients with proof of the existence of these accounts by issuing clients "Proof of Funds" letters. . 

[T]he defendant THOMAS BANNON further represented that the Victim's $5 million fee for the leased-funds account would be held in the defendant ROBERT BARDEY's attorney escrow account pending the opening of a bank account with the leased funds and the delivery of the Proof of Funds letter, which would demonstrate that sucah an account had been opened.

Sweeten was the supposedly the president of Symtech International Inc. , which is characterized in the Indictment as a Wyoming corporation with its principal plae of busines[s in Ashland, OR; and Symtech "purportedly had expertise in various investment programs that SWEETEN referred to as "Special Investment Programs." 

Bardey is described in the Indictment as a senior partner at the NY law firm of Bardey & Associates and the holder of an attorney escrow account at Wachovia Bank. 

In The Beginning

According to the Indictment, between June 2007 and May 2012, the three defendants  and others fraudulently induced an investor (whose identity is not revealed in the Indictment) into investing $5 million via a Joint Venture Agreement.  As with many of these cases, that's a tidy sum  - particularly for two senior citizens such as Bannon and Bardey, both of whom may have been pondering an idyllic retirement on some sunny, far-away beach.  And into just what fancy, sophisticated vehicle was this supposedly duped investor convinced to put his millions?  Ah - the ever-popular $100 million line of credit, which apparently was available via lease or outright purchase. 

An Idiot Lawyer's Questions

Now, pardon me, I'm just another idiot lawyer and former stockbroker with a mere 30 years experience on Wall Street, so, okay, who the hell am I to know anything about investments. Allowing for my ignorance, I'm sort of struggling with the concept of "leasing" a $100 million line of credit.  Now, explain that to me, once again, but a bit more slowly - just how do I lease hundreds of millions of dollars in credit?  Apparently, the explanation offered by the three defendants was that they had access to hedge funds that would lease the credit lines for a fee.

Really?  Wow! Imagine that. Someone in business will lease you millions of dollars for a fee. My, what a novel idea.  Almost as edgy as someone opening a store and agreeing to sell you merchandise from that store's shelves for a posted price.  Where will all this innovation end?

Except, here's what I don't get - what I never get. Why do these hedge funds always need to retain a middleman to place their millions?  Why bother paying that intermediary a fee?  Given how desperate folks and companies are for money, you'd think that there would be so much banging on the hedgies's doors that they could just hire someone for less money than a fee, and arrange for these leases or loans on their own.  After all, with Madoff having been in financial straits, with MF Global needing some bucks, with Peregrine going down for the count, with JP Morgan having taken quite the billion-dollar hit, with Knight on the ropes, with NASDAQ facing payouts over the Facebook IPO- why wouldn't those industry players have gone running to lease a line of credit and patch up their financial wounds?  And while we're asking such silly questions, how come Bank of America or Citibank hasn't gone into this line of credit business?

Leverage And Special Investment Programs

Assuming that the three silver-tongued defendants allegedly worked their spiel upon their targeted investor, it seems that the gist of this deal was "leverage;" whereby the investor would use the $100 milion credit line to generate millions of dollars in profits through some special investment program.  According to the Feds, the defendants touted their  expertise in special investment programs

What exactly is a "special investment program?"  Good question.  Sort of like trying to figure out just what that meat was they served us at lunch in High School.  And what exactly is "expertise" in this field of "special investment programs?"

Oh, puhlease, if you really have to ask then you're far too stupid to be given this amazin' opportunity. Like we told you, it's about leverage and leased lines of credit and escrowed funds and humongous international banks - and if you don't want to get with the program, lemme know and we'll bring this opportunity to someone else with more brains. Look, here's the deal - stop worrying so much.  Hand to God, on my kids' eyes - your funds will be held in Bardey's attorney escrow account pending confirmation of the posting of $100 million in the leased-funds account.

If you ask me, an attorney, why that's as good as gold.  I mean, seriously, as long as you've been promised by three guys that your investment will be held in an attorney escrow account, I see no reason to doubt that this is on the level. Plus it's about a special investment program. And don't forget the whole leverage thing. 

Omigod - seriously?  That's all it took to separate an investor from millions of dollars? 

Dividing Up The Kitty

The Indictment alleges that instead of putting the investor's $5 million into the ironclad attorney escrow account, the three defendants allegedly divvied up the proceeds among themselves and co-conspirators.  Of course, for appearance's sake, it appears that the millions were first deposited into an account set up by Bardey; and, sure, Bardey was a lawyer; and, sure, he may even have created the account under the name of some "escrow" thingamajig; and, sure, allegedly, Bannon  sent the investor a confirmation that a $100 million account had been created at HSBC .  Except, according to the Indictment, the supporting bank documentation was fabricated, along with a fake proof of funds letter on HSBC letterhead. 

As the Indictment sets forth:

In or about April 208, the defendant THOMAS BANNON provided the defendant THEODORE SWEETEN with a Proof of Funds letter, purportedly from HSBC Bank, confirming that an account with $100 million in leased funds had been opened at HSBC Bank in the name of Symtech.  However, this leased funds account was never opened, and the Proof of Funds letter was fraudulent . . . 

Grand Jury

At some point, the Feds starting nosing around and a grand jury got involved.  On top of the alleged investment fraud, Bardey is also charged with one count of perjury for allegedly giving false testimony about his release of the supposedly escrowed funds. 

Bardey was arrested and arraigned on July 30, 2012. Sweeten was arrested on August 10, 2012, and arraigned on August 13, 2012. Bannon is a fugitive. 

If convicted, the maximum term of imprisonment for each count of wire fraud is 20 years, and the maximum term of imprisonment for perjury is five years.


As Announced in "Purported Environmental Product Inventor And Developer
Sentenced To 48 Months In Prison For $5 Million Fraud Scheme ((United States Attorneys' Office for the Eastern District of New York Press Release, January 7, 2014):

Theodore Sweeten, the president of Symtech International, Inc. ("Symtech"), was sentenced today in federal court in Brooklyn, New York, to 48 months in prison to be followed by three years of supervised release. As part of the sentence, Sweeten was ordered to forfeit more than $600,000 to the government and pay $5,001,949 in restitution to the defrauded investor. Sweeten was remanded into federal custody. In June 2013, Sweeten pleaded guilty to a charge of wire fraud for defrauding an individual investor of $5 million through, among other things, false representations about his investment and environmental expertise. . .

As announced in "Self-Described Investment Fund Manager Sentenced to 57 Months' Imprisonment in $5 Million Fraud Scheme / Schemers Used Phony HSBC Documents and Purported Attorney Escrow Account to Dupe Lone Victim" (United States Attorneys' Office for the Eastern District of New York Press Release, November 07, 2014):

Earlier today, Thomas Bannon, the president of Overseas Investors LLC and Overseas Investors International, Ltd. (collectively, "Overseas Investors"), was sentenced in federal court in Brooklyn, New York to 57 months' imprisonment and ordered to pay $5,001,949 in restitution. In June 2014, Bannon had pleaded guilty to wire fraud for defrauding an individual entrepreneur of $5 million through, among other things, false representations about his access to hedge funds and wealthy investors. Co-defendant Theodore Sweeten pleaded guilty in June 2013 to wire fraud and was sentenced to 48 months in prison in January 2014. Co-defendant Robert Bardey was convicted by a federal jury on all counts, including wire fraud and perjury, on October 28, 2014, and is scheduled to be sentenced on February 11, 2015. . .