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MINNEAPOLIS—Today in federal court inthe District of Minnesota, a jury found three individuals guilty in connectionto a multi-million-dollar Ponzi scheme. Following more than a month-long trial,the jury convicted Jason Bo-Alan Beckman, age 43, of Plymouth, Minnesota;Gerald Joseph Durand, age 62, of Faribault, Minnesota; and Patrick Kiley, age74, of Burnsville, Minnesota, on 12 counts of wire and mail fraud, one count ofconspiracy to commit mail and wire fraud, and two counts of money laundering.In addition, Beckman was convicted on two counts of wire fraud, two counts ofmail fraud, two counts of filing a false tax return, and one count of taxevasion. Durand was also convicted on two counts of concealing a material factfrom the United States and three counts of filing a false tax return. Thedefendants were charged in a second superseding indictment on February 22,2012. All three are being detained pending sentencing.
The scheme, orchestrated by Minnesotaresident Trevor Cook, defrauded more than 900 individuals out of a collectivetotal of $158 million. In August 2010, Cook was sentenced to 25 years in prisonfor his role in the scheme.
Following the verdict, U.S. Attorney B.Todd Jones said, “People save money their entire lives for retirement or tosend their children to college. Fraudsters who choose to bilk them out of thatmoney by pretending to be their friends or advisors are some of the worst kindsof criminals. We take our obligation to prosecute them very seriously, and weare very pleased with the jury’s verdict in this particular case.”
The evidence presented at trial provedthat between 2005 and November 2009, the defendants, along with Cook andothers, defrauded investors by soliciting them to invest money in a foreigncurrency trading program, which they offered through entities known asUniversal Brokerage Services or bearing the acronym UBS. (The UBS entities hadno legitimate affiliation to the global provider of financial services, UBSAG.)
Cook operated the currency programthrough various foreign currency trading firms, including, but not limited to,one located in Chicago and another in Switzerland. To induce investors, thedefendants, Cook, and others, directly or through individuals acting undertheir direction, made false representations regarding the performance, safety,and liquidity of the currency program.
Specifically, they alleged that thecurrency program would earn a double-digit rate of return, typically between10.5 and 12 percent annually, with little to no risk to investment assets. Themen also claimed that investor assets could be withdrawn at any time and wouldbe held in segregated accounts. Those representations, however, were false.When soliciting victim investors, the men also made misrepresentations andomitted material information concerning their backgrounds and qualifications aswell as the backgrounds and qualifications of those working at their direction.
Once investments were made, investorsgenerally received statements from the UBS entities, and some receivedinvestment return checks, also from the UBS Entities. the defendants, Cook, andothers caused the production and transmission of those statements and checks.The statements gave the false appearance that the currency program wasperforming as promised, and that investments were held in individual,segregated accounts. Most investors, however, failed to receive statements orchecks from the custodians in actual possession of their funds.
In 2007, when UBS AG filed a trademarkinfringement lawsuit against Cook, Durand, Kiley, and others, the defendantsbegan operating their scheme under other names, including, but not limited to,those identified by the terms “Oxford” and “Universal Brokerage FX.” They thencontinued to solicit investors for the currency program, utilizingtelemarketing, media spots, and seminars in which they repeated the falserepresentations noted above.
While some investor assets were investedin foreign currency trading, most trading was high risk and often resulted insignificant losses. the defendants, Cook, and others concealed this fact frominvestors. Moreover, the defendants, Cook, and others concealed that thecurrency trading firm in Switzerland was in dire financial condition and,instead, continued to solicit investor assets to be sent to that trading firm.The defendants also concealed from investors their own concerns about Cook’soperation of the currency program and alleged illegalities relative to thecurrency program.
Between 2005 and July 2009, thedefendants, Cook, and others secured approximately $194 million in investmentsfor the currency program. Of that amount, only about $109 million was actuallysent to currency trading firms; approximately $68 million was lost inhigher-risk trading; and $52 million was paid to investors in the form oflulling payments (payments that purported to be returns on investments orwithdrawals of investments). Moreover, approximately $30 million in investmentswere diverted to fund the business and personal expenses as well as otherinvestments of the defendants, Cook, and others. This included compensationreceived by them. In addition, Cook used funds to pay gambling debts, purchasea real estate development in Panama, and acquire the Van Dusen Mansion inMinneapolis.
At the same time that Beckman wassoliciting investors for the currency program, he was also attempting topurchase a minority ownership interest in the Minnesota Wild hockey team.Beckman made misrepresentations to the National Hockey League, falsely claimingthat investments in certain trading accounts were actually his assets. He alsoclaimed an extraordinary amount of assets under management (AUM). Thismisrepresentation gave shared currency program agents and investors a falsesense of security as to the currency program.
In addition, Durand concealed $11,839from the court-appointed receiver, who was searching for assets of the currencyprogram fraud. Durand had the cash exchanged for Swiss francs and showed thatthe francs belonged to someone else. Durand also filed false individual incometax returns for tax years 2006, 2007, and 2008.
Beckman also filed false individualincome tax returns for tax years 2007 and 2009. In addition, he failed to filean individual income tax return for 2008. For that year, Beckman and his wifeowed more than $1.3 million in income taxes. In addition, in February 2008,Beckman caused two life insurance policies for an investor to be sold, stealingthe proceeds in order to prop up a currency trading account held in his name atPFG. That account had incurred a loss of approximately $15 million.
For their crimes, the defendants face amaximum potential sentence of 20 years in prison on each wire fraud and mailfraud count, 10 years on each money laundering count, and five years on theconspiracy charge. In addition, Beckman and Durand face a potential maximumpenalty of three years on each false tax return count, and Beckman faces apotential maximum penalty of five years on the tax evasion charge. U.S DistrictCourt Chief Judge Michael J. Davis will determine their sentences at a futurehearing.
On June 21, 2011, anotherco-conspirator, Christopher Pettengill, pleaded guilty to one count ofsecurities fraud, one count of conspiracy to commit wire fraud, and one countof money laundering for his involvement in the scam. He awaits sentencing. OnJuly 18, 2011, co-conspirator Jon Jason Greco pleaded guilty to two counts ofmaking false statements to federal agents, specifically, lying about assets hehad concealed in relation to this case. Greco was sentenced to 10 months inprison.
This case is the result of aninvestigation by the FBI and the Internal Revenue Service-CriminalInvestigation Division, with assistance of the Securities and ExchangeCommission and the Commodities Futures Trading Commission. It is beingprosecuted by Assistant U.S. Attorneys Tracy L. Perzel and David J.MacLaughlin.
Proceeds from the Cook fraud scheme arethe subject of an ongoing investigation and recovery effort led by R.J. Zayedof the law firm Carlson, Caspers, Vandenburg, and Lindquist. Zayed wasappointed Receiver by Judge Davis.
This law enforcement action is part ofefforts underway by President Obama’s Financial Fraud Enforcement Task Force(FFETF). President Obama established the interagency FFETF to wage anaggressive, coordinated, and proactive effort to investigate and prosecutefinancial crimes. The task force includes representatives from a broad range offederal agencies, regulatory authorities, inspectors general and state andlocal law enforcement who, working together, bring to bear a powerful array ofcriminal and civil enforcement resources. The task force is working to improveefforts across the federal executive branch and, with state and local partners,to investigate and prosecute significant financial crimes, ensure just andeffective punishment for those who perpetrate financial crimes, combatdiscrimination in the lending and financial markets, and recover proceeds forvictims of financial crimes. For more information on the task force, visitwww.stopfraud.gov.
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