You Can't Cheat an Honest Man - James Walsh [44]
On March 13, 1995, while some of the state actions were just being announced, FBI agents and U.S. Postal Service inspectors seized Gold Unlimited’s assets and sent its employees home.
The U.S. Attorney in Louisville said Gold Unlimited and the Crowes “have knowingly devised a scheme or artifice to defraud or for obtaining money or property by means of false or fraudulent pretenses, representations or promises.”
The only way a Gold Unlimited representative could recoup his payment to the company is to recruit others who were, in turn, successful recruiters. Payments to representatives came from the cash sent in by new recruits. As the number of levels increased, more representatives would earn commissions on a set amount of business, requiring evergrowing profit margins and price markups just to cover the commissions.
Kentucky law enforcement officials said that Gold Unlimited was set up like an earlier Crowe venture, American Gold Eagle. That company had gone out of business in 1991, resulting in $367,000 in investor losses. But this record didn’t seem to bother many Gold Limited investors.
At a hearing on March 22, 1995, more than 200 investors, some from as far away as Arizona and Texas, packed a federal court in a show of support for the company. The court ordered the assets and bank accounts of Gold Unlimited frozen. The company would, effectively, stay closed. “We’ve got to keep a positive attitude,” said Kellan Lamb, the company’s executive vice president.
But the legal moves were just beginning. Worried state officials filed a civil lawsuit, charging the Crowes with operating a pyramid scheme. In June, U.S. District Court Judge Thomas B. Russell indefinitely suspended the civil suit, saying that there was “apparently grand jury activity” involved in the case (that is, a criminal prosecution was underway). Russell said that he would appoint a receiver in the case to preserve company assets and to try to pay some outstanding debts.
The Crowes were indicted on July 12, 1995, on 22 counts each of mail fraud, securities fraud and money laundering. The indictment alleged the company induced “individuals to invest money for the right to receive compensation for inducing others to join the scheme.”
Government prosecutors said the Crowes “perpetuated the scheme by paying ‘commissions’ to earlier investors, not from profits from the sale of...products but from the fees paid by new investors.” The criminal charges carried penalties of up to 145 years in prison and fines of $5.5 million. The Crowes were free on $50,000 unsecured bonds each. After consulting with their lawyers, they reached a plea bargain with the Feds.
A Silver Scheme and How Ponzi Perps are Punished
Con men are always a challenge for criminal courts. Since their investors are often willing, are they somehow less guilty than other criminals? Since they’ll often give some useful advice or counsel to their victims in the course of a greater theft, do they mitigate their crimes? A Ponzi scheme that made big promises about silver futures trading brought these questions into focus.
For more than six years, Richard Holuisa convinced investors to give him $11 million. His plan was to invest the money in silver futures and high-yield government securities. He told potential investors that he’d developed a computerized program for exploiting discrepancies in the silver futures and government bond markets. His company, Certified Investment Co., could put their money in either market.
In this way, Holuisa was like Carlo Ponzi. He was touting a Great Idea.
Funds were used to cover Certified’s operating expenses and were never invested in anything. Holuisa and a close circle of trusted associates sent investors fraudulent weekly and monthly statements detailing both the principal investment and the interest that had purportedly accrued.
And Holuisa lived high on the hog. He and his partner James Simpson had grown up together in gritty East Chicago, Indiana. They emphasized