Posted on 03/08/2008 8:45:49 AM PST by DogByte6RER
FBI searched Murrieta businessmen's homes in investment probe
Friday, March 7, 2008
By LESLIE BERKMAN The Press-Enterprise
The FBI confirmed Friday that it searched the Murrieta homes of James Duncan and Hendrix Montecastro for documents and computer data as part of a criminal investigation.
Contents of the search warrant indicate that the FBI is looking into the investment schemes that already have made the two Murrieta businessmen and their colleagues the targets of lawsuits by the U.S. Securities and Exchange Commission and irate investors.
The U.S. attorney's office, acting on behalf of the FBI, obtained the search warrant from U.S. Central District Court in Riverside two weeks ago. A copy of it is contained in the proceedings of a civil lawsuit brought by 74 investors.
Those investors allege that Duncan, Montecastro, their colleagues and affiliated companies, including Pacific Wealth Management, Stonewood Consulting Inc. and Total Return Fund LLC, defrauded them of an estimated $200 million in cash and equity through real estate and other investment programs.
Paul Runes, an attorney for some of the defendants, recently submitted into court records a copy of the warrant that the FBI served Feb. 23 on Duncan and Montecastro. The warrant gave the FBI authority to seize a wide variety of financial logs, phone records and other paperwork and computer data at Duncan's home at 37925 Avenida La Cresta and at Montecastro's home at 25863 Bay Meadows.
Thom Mrozek, spokesman for the U.S. attorney's office, said the search warrant was executed. He said in order for the court to issue the warrant, the magistrate would have to be convinced there was "probable cause to believe some crime had occurred." He said the affidavit explaining the reason for the searches has been sealed from the public.
Runes declined to comment Friday. In a Riverside County Superior Court filing, he said the search warrant proves that his clients face potential criminal prosecution. He also said the securities violations alleged by the U.S. Securities and Exchange Commission in a Feb. 27 lawsuit against Duncan, Montecastro and a third Murrieta resident, Maurice E. McLeod, also are criminally punishable.
Because of the potential for criminal prosecution, Runes is asking the court to continue a stay on discovery in the civil litigation to avoid providing prosecutors with legal ammunition for a criminal case.
The Riverside County district attorney also is conducting a criminal investigation into the far-ranging activities of the three Murrieta business partners and their colleagues and various affiliated businesses.
Richard Ackerman, a Temecula lawyer representing the investors in their lawsuit, said a number of his clients have been interviewed by the FBI in its investigation that he believes has been under way since 2005.
Ackerman said the FBI's decision to pursue search warrants "shows a level of confidence in their ability to get somewhere in this case. The beauty of it is that this confidence is tied to evidentiary standards that they have to convince a magistrate of. And obviously they have."
Reach Leslie Berkman at 951-893-2111 or lberkman@PE.com
Temecula is the home of a good transducer company I buy from.
The allegations leveled by the SEC...
SEC Charges Three Promoters for Victimizing Military Families in Real Estate Investment Scheme During Military Saves Week, SEC Reminds Military Personnel and Other Investors to Protect Themselves From Affinity Frauds
FOR IMMEDIATE RELEASE
2008-23
Washington, D.C., Feb. 27, 2008 - The Securities and Exchange Commission today charged three promoters who targeted military families in a multi-million dollar investment scheme that forced victims into personal bankruptcy and their homes into foreclosure. The scam also targeted other affinity groups, including the Southern California Filipino community and fellow church members.
The SEC’s complaint names James B. Duncan and two others — Hendrix M. Montecastro and Maurice E. McLeod — who solicited investors in Southern California, Arizona, and elsewhere using sham investment seminars and “referral partners” including a member of the Air Force who solicited his fellow servicemen. The complaint alleges they gained control over investors’ finances by offering them securities in the form of real estate investment contracts, and purporting that the money investors earned would help make mortgage payments on investment homes purchased on their behalf. Instead of investing client funds as promised, they operated a Ponzi-like scheme by using money from new investors to make mortgage payments on previously purchased investment homes. When the scheme unraveled, it cost more than 75 investors an estimated $10 million.
During the Military Saves Week public service initiative taking place from February 24 to March 2 to highlight the Department of Defense’s ongoing financial readiness campaign, the SEC is reminding military personnel and other investors to beware of affinity frauds.
“The SEC will do everything in our power to pursue con artists that aim to cheat the honorable men and women who serve our nation and risk their lives to protect our freedom. We owe it to our military personnel to ensure that their personal finances are guarded from fraudsters that prey upon their trust,” said SEC Commissioner Paul Atkins, who will speak to military personnel at Naval Station Norfolk during Military Saves Week and has helped educate military families on investing during his visits to military bases around the country and abroad.
Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, said, “We remain vigilant in our effort to fight affinity frauds, and this case is an especially egregious example of promoters taking advantage of anyone willing to trust them. We remind military families and all investors to exercise appropriate caution regardless of the relationship they may have with someone who approaches them with an investment opportunity.”
Rosalind R. Tyson, Acting Director of the SEC’s Los Angeles Regional Office, added, “These men refused to provide any written agreements to investors and pressured them into thinking they would lose out on a major investment opportunity if they failed to trust them. Investors should be wary of salesmen who do not provide specific information or documentation.”
In affinity frauds, con artists infiltrate tight-knit groups by showcasing a respected member of that community as one of their successful investors, giving the false illusion of a safe and secure investment opportunity and conning new investors into their Ponzi-like schemes. The SEC has resources available at www.sec.gov/investor/military.shtml to help military families understand the nature of these frauds and take steps to protect themselves.
The SEC’s complaint, filed in U.S. District Court in Riverside, Calif., alleges that between October 2004 and June 2006, the three defendants operated through Murrieta, Calif.-based Pacific Wealth Management, LLC (PWM) and Stonewood Consulting, Inc., to defraud investors from several affinity groups. The complaint alleges that Duncan, Montecastro, and McLeod falsely promised investors that their funds would be invested in real estate and various other investments that would subsidize their investment homes. The SEC’s complaint further alleges that Duncan, a recidivist, raised $1.2 million in a separate offering of preferred membership units in Total Return Fund, LLC, to approximately 20 investors. The complaint alleges that the proceeds raised in both offerings were commingled and used to run a Ponzi-like scheme that fell apart and left investors with homes in foreclosure and forced some investors to declare bankruptcy.
According to the SEC’s complaint, the defendants failed to disclose several key facts about the purchase of the investment homes. The defendants charged exorbitant real estate transaction fees financed by the investors, and submitted false mortgage loan applications on behalf of investors. The complaint also alleges that Duncan, who was touted as a financial genius, failed to disclose his prior securities laws violations.
The SEC’s complaint further alleges that Duncan and Total Return Fund misrepresented how investor money would be used. Specifically, the complaint alleges that while the Total Return Fund offering documents stated that 95 percent of investor funds would go towards the purchase of real estate, business assets, or accounts receivable, in fact, investor funds were used to pay returns to prior investors, and were used as part of the PWM fraud.
The SEC’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws, and seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties. The complaint also names Christopher J. Oetting, Anthony M. Contreras and Biocybernaut Institute, Inc., as relief defendants, alleging that they received ill-gotten gains from the defendants’ fraudulent conduct.
The SEC acknowledges the assistance of the Arizona Corporation Commission.
Military Saves Week is an effort to help and support military members and their families by bringing the entire military community together to focus on financial readiness and build personal savings to provide for their immediate and long term financial needs. More information is available at www.militarysaves.org. Among the resources that the SEC provides military families at www.sec.gov/investor/military.shtml are brochures about how to recognize and avoid affinity fraud, facts to know about periodic payment plans, and a set of questions to ask a financial professional before making any investment. Military personnel also are encouraged to call the SEC’s Office of Investor Education and Advocacy at 1-800-SEC-0330 to have an Investor Specialist answer questions and provide information about investing.
* * *
NOTE: The SEC’s complaint charges Murrieta-based Pacific Wealth Management, LLC, a Nevada limited liability company. It does not charge San Diego, Calif.-based Pacific Wealth Management, LLC, a California limited liability company that is not related to any of the defendants named in the complaint.
http://www.sec.gov/news/press/2008/2008-23.htm
” targeted military families in a multi-million dollar investment scheme that forced victims into personal bankruptcy and their homes into foreclosure.”
What low-lives, targeting the military! Any fraud is bad, but targeting the military makes it even worse, taking advantage of their lack of financial sophistication.
The lesson here for everyone is to remember the old saying “If something sounds too good to be true, it usually is” and “there is no such thing as a free lunch”.
I don’t know anyone who lost money in this scam, but I have talked to people who are reluctant to invest in a mutual funds, stocks, because the financial advisors explain that there is a risk and also a downside to every investment, but then they go and take their life’s savings and invest every penny in a fraudulent investment, because those salespeople only paint the pretty picture of stellar return and lie about the risks.
They should teach budgeting, investing in high school, so we wouldn’t have so many naive people who fall for the snake oil salesmen.
As someone who saw their investments go from $100+/share to less than a dollar while the company officers all walked away with millions (and not a thing anyone could do about it) I can see how it would be hard to tell the difference.
“As someone who saw their investments go from $100+/share to less than a dollar “
Well, that can happen with anything, but if you only has 1% of your nestegg in such company, you lost money, but you are OK. But people who went for the “big return” ignoring risks and put ALL their money in such a stock lost everything, but it’s their greed is to blame. What did you want, the government to guarantee everyone’s investments at 20% return per year? If you want 100% security, invest in T-bills.
Massive Mortgage frauds is the underlying cause of the “Mortgage Crisis” that the media won’t talk about.
And it’s killing the banks and mortgage insururs...
Ping.
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