April 20, 2010 - Two separate indictments returned by the federal grand jury in Seattle charge a Seattle resident and a Sammamish, Washington resident with operating Ponzi schemes based on phony business plans. JAMES LIDDELL, 55, of Seattle, is being sought by law enforcement, and LORENZO V. MOLINA, JR., 49, of Sammamish, will make an appearance today at 1:30 in U.S. District Court in Seattle. The indictments were returned under seal last week.
“As these indictments demonstrate, Ponzi schemes are not limited to financial advisors,” said U.S. Attorney Jenny A. Durkan. “Investment brokers such as Bernie Maddoff and Rhonda Breard make headlines, but in these cases it was literally ‘the guy next door’ who bilked friends and neighbors. Each took in millions for a purported business plan, and then fraudulently used the money for his own benefit.”
LIDDELL is charged with six counts of wire fraud for a scheme in which he induced 13 different investors to provide him with more than $3,000,000 for his alleged business. Between 2003 and 2009, LIDDELL claimed his business was rehabilitating point-of-sale machines and selling them to a large area drug store chain. LIDDELL represented to the investors that they would “own a series of contracts” with the machine purchasers. LIDDELL provided promissary notes to investors outlining high rates of interest on the loans and promising investors would receive up to 50 percent of the profits from the sales of the machines. The indictment alleges no machines were ever bought or sold to the Seattle retailer, and there were no contracts for any such sales. Some of the money was used to pay “returns” to earlier investors, but LIDDELL used $1.2 million for his own benefit. Agents are actively looking for LIDDELL.
MOLINA is charged with mail fraud, six counts of wire fraud, making a false statement, and wrongful use of a government seal. According to the indictment, he induced his neighbor and others to invest in a business that purchases aircraft parts, has them rehabilitated by third party companies, and then resells them to airlines for their fleets. MOLINA had previously been employed by Boeing. He provided forged documents to make the investors believe he had been purchasing and reselling the rehabilitated equipment, when in fact no such activities had never occurred. Between 2006 and 2009, MOLINA fraudulently obtained more than $3.6 million. He returned approximately $1.7 million to early investors as “profits,” but used the rest of the money for things such as a grand piano, private school tuition for his children, horses, and real estate in Issaquah, Maple Valley, Fall City, and Arizona. MOLINA appeared in court last week, and will have a detention hearing today at 1:30.
In addition to the indictments returned today, two other cases involving business opportunity Ponzi schemes are being prosecuted in the Western District of Washington. KEVIN HALVERSON, 51, of Bothell, Washington, has been indicted for a Ponzi scheme involving alleged investments in high profile event tickets. Between 2003 and 2006, HALVERSON induced investors to provide him with $10 million, for a business purchasing tickets to high demand events, and reselling them at a substantial profit. HALVERSON purchased a small number of tickets to make the business appear legitimate, but primarily used investor money to pay off earlier investors in the manner of a typical Ponzi scheme.
In October, ROBERT MIRACLE, 49, of Bellevue, Washington, will be sentenced in U.S. District Court in Seattle for mail fraud and tax evasion. MIRACLE pleaded guilty in September 2009. MIRACLE represented to investors in his companies that they were making money from oil field development and services on oil and gas fields in Indonesia. In fact, the proceeds of later investors were used to pay off the investments of earlier investors. Between September 2004 and October 2007, MIRACLE took in more than $65.3 million and paid out $36.7 million as dividends to investors. The remaining monies—some $28.6 million was used in part for efforts to develop oil and gas on fields in Indonesia, as well as to pay for a lavish lifestyle for MIRACLE and his cohorts.
Wire fraud and mail fraud are punishable by up to 20 years in prison and a $250,000 fine. Making a false statement and wrongful use of a government seal are punishable by up to five years in prison and a $250,000 fine.
The LIDDELL case is being investigated by the FBI White Collar Crime Section with significant assistance from the Washington State Department of Financial Institutions (DFI) and the Seattle Police Department. The MOLINA case is being investigated by the U.S. Postal Inspection Service (USPIS). The HALVERSON case and the MIRACLE case are being investigated by the Internal Revenue Service Criminal Investigation (IRS-CI).
These cases are being prosecuted as part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The cases are being prosecuted by the U.S. Attorney’s Office Complex Crimes Unit headed by Assistant United States Attorney Carl Blackstone. Assistant United States Attorney Norman Barbosa is prosecuting LIDDELL. Assistant United States Attorneys Aravind Swaminathan and Andre Friedman are prosecuting MOLINA.
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