Affinity Scam, Part 5 - The Beginning of the End

“There are two mistakes one can make along the road to truth...not going all the way, and not starting.”
-Buddha, Hindu Prince Gautama Siddharta
founder of Buddhism
563-483 B.C.

“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.”
-T.S. Eliot
American born English Editor, Playwright, Poet and Critic,
1888-1965

“He who chooses the beginning of the road chooses the place it leads to. It is the means that determines the end.”
-Harry Emerson Fosdick
American clergyman
1878-1969

UPDATE: According to the most recent article in the excellent series by Dan Browning, Trevor Cook has not provided any information leading to the recovery of funds swindled from investors in his Ponzi Scheme / Affinity Scam, contrary to the intention of his plea bargain agreement.

If Cook is actually telling the truth, for a change - and it would be reasonable to be VERY skeptical of any statement from him - then he doe not have any of the missing money that should be returned to the victims. Even allowing for the egregious excesses of Cook's lifestyle, there is no indication of which I am aware that suggests Cook personally spent all of it.

Given the content of Cook's emails included in the contempt filing, which assert that Durand and Pettengill split from the Ponzi scheme over a theft from the scam funds, the logical question is to wonder if the alleged co-conspirators, Pettengill and Durand might account for at least some of the missing funds, and further, to wonder if those funds may have financed the radio shows used by Durand and Pettengill to draw in new 'investors' (or as I would characterize them - victims) for their later investment schemes promoted on the radio.

The latest Dan Browning article in the Minneapolis Star Tribune can be found here : http://www.startribune.com/business/92145979.html?elr=KArks:DCiU10iP:DiiUiacyKUnciaec807EyUr

On April 13th, 2010 Trevor Gilson Cook submitted his plea bargain guilty plea to one count of mail fraud and one count of tax evasion in front of Judge James Rosenbaum in U.S. District Court in Minneapolis. In the plea bargain, Cook admitted to defrauding upwards of 1,000 people of upwards of $190 million dollars, aided and abetted by others who have yet to be indicted for criminal activity. For the crimes to which he pled guilty, Cook agreed to accept imprisonment for 25 years, and to pay restitution, and to assist authorities in recovering the remaining money which is missing - an amount far smaller than the amount he swindled. Cook admits his actual crimes far exceed the crimes to which he pled guilty. Cook, who had been in jail on contempt charges for not cooperating with civil court orders, cried in court, tears not so much of remorse apparently, as for being caught and punished. If Cook fails to cooperate as promised, Judge Rosenbaum made it unavoidably clear that he will face jail time for all of the crimes he committed, which would probably, as with Madoff and other scam criminals, result in life behind bars.

For those who have not followed this story on Penigma or in the excellent series of articles in the Minneapolis Star Tribune by Dan Browning, the announcement on the Minneapolis FBI web site (http://minneapolis.fbi.gov/dojpressrel10/mp041310.htm) outlines the events. I would draw reader's attention to the last two paragraphs which represent progress over previous years:

Man Pleads Guilty to Orchestrating $190 Million Ponzi Scheme

MINNEAPOLIS—A 37-year-old Apple Valley, Minn., man pleaded guilty today in federal court in Minneapolis to orchestrating a $190 million Ponzi scheme. Appearing before U.S. District Court Judge James M. Rosenbaum, Trevor Gilson Cook pled guilty to one count of mail fraud and one count of tax evasion in connection to his crime. Cook was charged on March 30, 2010.

In his plea agreement, Cook admitted that from January 2007 through July 2009 he, aided and abetted by others, schemed to defraud no fewer than 1,000 people out of approximately $190 million by purportedly selling investments in a foreign currency trading program. In reality, however, he diverted a substantial portion of the money provided him for other purposes, including making payments to previous investors; providing funds to Crown Forex, SA, in an effort to deceive Swiss banking regulators; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses, including substantial gambling debts; and acquiring the Van Dusen Mansion in Minneapolis.

To carry out his scheme, Cook caused false statements to be made to potential investors, including promises that the investment program would generate annual returns of 10 to 12 percent, and that trading would present little or no risk to investors’ principal. He also caused material information to be withheld from investors, such as the precarious financial position of Crown Forex, SA, in Switzerland, an entity through which he traded. In addition, he withheld the fact that trading at PFG in Chicago generated losses in excess of $35 million between July 1, 2006, and Aug. 31, 2009.

In furtherance of the scheme, Cook caused an account to be opened in the name of Crown Forex, LLC, at Associated Bank, which he used for depositing investor funds that he subsequently diverted for his personal use as well as the personal use of others. He also caused statements to be sent to investors that misrepresented the status of their investments. In addition, he caused due-diligence letters to be prepared that falsely represented Oxford Global Advisors as having more than $4 billion in assets under management, and that all accounts were liquid.

Specific to the charges, Cook admitted that on Jan. 29, 2009, he caused a $50,000 check to be sent through the U.S. mail from Arizona to Minnesota for investment in his foreign currency trading program. He also admitted that on April 15, 2009, he filed a false and fraudulent U.S. Individual Income Tax Return, Form 1040, for calendar year 2008, by failing to report taxable income of at least $5,285,719, upon which there was tax due in the amount of at least $1,844,571.

For his crimes, Cook faces a potential maximum penalty of 20 years in federal prison on the mail fraud charge and five years on the tax evasion charge. Judge Rosenbaum will determine his sentence at a future date, yet to be scheduled.

This case is the result of an investigation by the FBI and the Internal Revenue Service-Criminal Investigation Division, with the assistance and support of the U.S. Securities Exchange Commission and the U.S. Commodity Futures Trading Commission. It is being prosecuted by Assistant U.S. Attorney Frank J. Magill.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It 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, 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.
For those readers who have not followed our affinity scam series, or who have forgotten the details, the above is a fair summary of the events of the scam. Trevor Cook joined, according to charges in civil court litigation for the fraud, with Pat Kiley, Gerald Durand, Chris Pettengill, Bo Alan Beckmann and others, to create a dozen entities to use in conducting the transactions to which so far only Cook has pled guilty.

In the course of following these court actions, Pen and I have come to know something more of the 1,ooo victims of this swindle, and to care about what happens to them, and have attempted to be of help to them. We came to follow this story from its connections to Christian Right Wing Radio, the means used to attract many of the victims to the scam.

We also followed very closely the activities of two of the colleagues of Trevor Cook who had ostensibly separated from Cook and Kiley, Durand and Pettengill. Durand and Pettengill were continuing with some of the dozen or so false entities used to commit the fraud to which only Cook so far has pled guilty. And they were further continuing the pattern of conduct revealed in the fraud allegation documents currently in court, devising some 18 new entities with similar names. By similar names, I mean names similar to each other, but also similar to more legitimate and recognized business organizations, both here and in Europe.

Durand and Pettengill also continued the same pattern of using radio shows on Christian and Right wing stations, primarily two stations locally that were part of Salem Communications, WWTC and KYCR, to attract new people for their investment schemes. Those programs were Wealth Survival, on KYCR, and subsequently on The David Strom Show on WWTC from January 2009 through September 2009.

Our next two parts in the Affinity Scam series will focus on Durand and Pettengill, and on David Strom and his radio program. As we publish those additional segments in the series, I hope we will have additional news about the criminal indictments of those who, in the words of the Cook plea bargain "aided and abetted" these crimes. The segment on Durand and Pettengill will focus on their credentials - and lack thereof, and on the kinds of statements they made on the David Strom show, as well as the statements from the court documents in the amended complaints and in the Cook contempt filing to round out a portrait of these individuals. The segment on David Strom will focus on our direct observations from his radio program and on the interview conducted primarily by Penigma and Dan Browning, and my smaller contribution to that interview.

I hope readers will notice the quotations I use at the beginning of most of my writing; I intend the quotes to be a focus through which my writing is understood. In this case, I found the third quotation to be particularly apt, as it was the means to the end of satisfying greed which actually led to the end in jail for Cook. As I hope it will end for those who aided and abetted his schemes and his scam.