Ponzi Scheme

Last week, the Alabama Supreme Court upheld a Jefferson County judge's ruling that a lawsuit against CVS Caremark Corp. can proceed as a class-action to represent roughly 70,000 investors who assert that they lost $3.2 billion in a securities fraud during the 1990s. The case arises from twenty-one lawsuits filed by investors in 1998 against MedPartners, which was founded by former HealthSouth CEO Richard Scrushy. In those suits, MedPartners was accused of making misrepresentations to the public regarding its financial well-being. The suits were consolidated and settled for $56 million after MedPartners was about to go bankrupt, and $50 million was the most that its insurance would pay. The company changed its name to Caremark in 2000 and merged with CVS seven years later. One original plaintiff, John Lauriello, filed a fraud claim in 2003 asserting that MedPartners was dishonest about how much its insurance would pay during settlement negotiations. He alleged that in October 1999, before the settlement was [...]

The Frankowski Firm is investigating a Ponzi scheme involving the owners of Fair Finance, which was once a legitimate company that had provided financial services since the Great Depression. The United States Court of Appeals for the Seventh Circuit last week upheld the convictions of the three owners--Timothy Durham, James Cochran, and Rick Snow--who turned the financial firm into a Ponzi scheme, taking $200 million of investors' money to fund their own extravagant lifestyles. While upholding ten convictions, the court did, however, overturn two wire fraud counts, stating that the government did not enter critical documentary evidence into the record. The Court of Appeals stated the government’s failure to enter the documentary evidence “was clearly an oversight, but the mistake leaves a crucial gap in the evidence in those counts.” It said the government used single-page printouts to establish the wire transfers were made to further the fraudulent scheme. This evidence showed that the wires were made but did not [...]

New York federal prosecutors have asked the U.S. Court of Appeals for the Second Circuit to dismiss an appeal by a federal prisoner who asserts that Ponzi schemer Bernie Madoff was convicted because the government used mind-control techniques to influence the court. In July, a handwritten motion seeking to dismiss the case was filed under Madoff's name by Frederick Banks, who is currently serving a sentence in a Youngstown, Ohio federal prison. Banks claimed that the government utilized "bio-electric sensors and sub-aural communicators voice-to-skull technology." Judge Denny Chin, believing the motion to be filed by Madoff himself, denied the motion in late July. Banks, however, was not deterred, subsequently filing two handwritten notices of appeal in which he made relate claims regarding "bio-electric sensors" and "voice to skull influence." In response, Southern District of New York prosecutor Michael Levy filed a motion to dismiss the appeal on August 27, stating that “Banks is a stranger to this case. He has [...]

Eliyahu Weinstein, a New Jersey Ponzi schemer already serving 22 years in prison for a $200 million real estate scam, confessed in federal court last week that he additionally defrauded potential investors in Facebook's initial public stock offering and other real estate transactions. He then admitted to laundering the illicit proceeds. Weinstein pleaded guilty to conspiracy to commit wire fraud, committing wire fraud while on pretrial release, and money laundering. According to U.S. Attorney Paul J. Fishman, the crimes occurred while he was awaiting trial for his previous crimes. Fishman stated, "Even while facing federal charges that eventually netted him decades in prison, Weinstein couldn't resist the buzz around the Facebook [initial public offering] and the opportunity to fleece unsuspecting investors. Shamelessly, he even used the money he stole to pay the legal fees he accumulated from the previous scam." Weinstein and his conspirators offered a pair of investors the opportunity to purchase blocks of Facebook shares prior to the [...]