Affinity Scam, Part 9: Finally! Durand, Kiley and Beckman Are Indicted, Pettengill Plea bargains

My co-blogger Penigma and I have been following this since this affinity scam which targeted the religious right came to our attention in 2009, a scam we argue was accomplished by the assistance OF the political right to exploit their own base.  Affinity scams, like the Ponzi scheme perpetrated by a group of men which included Trevor Cook and Chris Pettengill, gain the trust of people in order to get their hands on their money, by claiming to be similar to them, in religious and political conviction.

Many of these scams operate in part through the broadcasts of religious radio networks, and through political oriented talk radio, as was the case with this particular scam.

Growing up, I was taught that rip off artists are usually only successful against people who are greedy, or foolish, or both.  I no longer believe that to be true; rather, these scams, at least THIS scam persuaded mostly relatively unsophisticated investors by using fear as a motivator, poitical-oriented fear, instead of greed, using very clever outright fraud. 

I have had the pleasure of getting to know some of these investors, and Pen and I came to like and respect them.  The victims are honest, principled people; the scam targeted many elderly people, some of them well educated, others patriotic career military veterans, but all of them had been frugal and hard working all their lives in building up the funds they invested.  They did try to do what they could to follow caveat emptor, to check out the legitimacy of the scam operators.  The scammers did a very clever job of faking data to persuade the investors they were legitimate, (unlike other notorious scammers like Bernie Madoff, who largely relied on a policy of discouraging questions).

On June 21, 2011 Chris Pettengill made a plea agreement in exchange for a 10 year sentence, based on admitting his guilt in the scam, and cooperating in the prosecution of his co-conspirators.  You can read the Department of Justice news release, here.

On July 20,2011, those individuals identified as his co-conspirators, Patrick Kiley, Gerald Durand, and Bo Beckman were arraigned on a federal grand jury indictment.  You can read that indictment in full, here.

The part of the Grand Jury indictment that caught my attention was this, from page 3 (emphasis added by DG):  COUNTS 1-11

(Wire and Mail Fraud)

10. From in or about 2005 through in or about November 2009, in the State and District of Minnesota and elsewhere, the defendants,
JASON BO-ALAN BECKMAN,
a/k/a Bo Beckman,
GERALD JOSEPH DURAND,
a/k/a Jerry Durand, and
PATRICK JOSEPH KILEY,
a/k/a Pat Kiley,

along with COOK, PETTENGILL, and others known and unknown to the Grand Jury, each aiding and abetting the other, engaged in mail fraud and wire fraud by devising and intending to devise a scheme and artifice to defraud and to obtain money and property by means of materially false and fraudulent pretenses, representations and promises and concealment of material facts, and knowingly:

a. transmitted and caused the transmission in interstate commerce, by means of wire communications, certain
signals and sounds, for the purpose of executing such scheme and artifices, in violation of Title 18, United States Code, Sections 2 and 1343; and
b. caused the sending, delivering, and moving by the United States Postal Service and interstate commercial carrier various mailings for the purpose of executing such scheme and artifice, in violation of Title 18, United States Code, Sections 2 and 1341.

and on page 12, at the end of item 27.

"From August 2008 through July 2009, DURAND AND PETTENGILL obtained payments from the Oxford/UBS Entities and/or Cook of at least $625,000.00"

This indictment follows the serving of a search warrant earlier this year, which asserted that Pettengill and Durand were engaging in new scam investment presentations, dating from 2005 "to present".  Pettengill and Durand appeared to be engaging in new scams, investigated by the FBI.  My understanding of all the available information is that Pettengill and Durand were continuing to run versions of the earlier investment schemes, with variations, during that entire span of time. 

As we have written previously, I will be watching for the rumored receiver's office to be pursuing a claw back of the affinity scam funds that are alleged to have been used by Pettengill and Durand to promote what were characterized by the FBI in search warrants as subsequent scam investment seminars, on the radio stations in the twin cities belonging to Salem Communications.

The two most recent articles in the Star Tribune, by the excellent investigative reporter Dan Browning, can be found here.

Last year, in a filing that had unintentional comedic elements, Pat Kiley tried to sue Dan Browning and the STrib, along with other defendants for libel, claiming he had damaged his character and reputation through the series of articles on this affinity scam Browning had written.  We covered that here in an earlier segment of the Affinity Scam series, part 6. When that effort failed due to Kiley's incompetence, he insisted he was going to refile.  Just a hunch, but I'm guessing that isn't going to happen now.