CA AG Busts Another Ponzi Scheme. Yeah!

By
Real Estate Agent with 1st Action Real Estate

attorney general

And the beat goes on - or maybe I should say the beatings continue. Always good to see miscreants get their come-uppance. Unfortunately for more than a thousand people the come-uppance comes up too late to save their 'investment' and, in some cases, their retirement.

It's precisely this variability that makes this type of fraud so difficult to prevent. Although the two articles I posted earlier also involved Ponzi schemes and affinity fraud, the crimes are as different as night & day. In one, people with Hispanic surnames convinced other people with Hispanic surnames they could get them into homes they couldn't afford - sometimes multiple homes at once - and made money off them. In the second case, African Americans took gross advantage of other African Americans by promising returns of up to 50% a month for investing in a scheme to help others avoid default. 

In this case we have rich white dudes taking advantage of other (formerly) rich folks in a scheme that is pretty sophisticated. Of course if it's going to be based out of Irvine and the perps live in Coto de Caza you know it's going to be an upscale scam. No use wasting that opportunity just to scam a few million when your are surrounded by 'fat mooches'. This caliber investor would be less likely to be suckered in by a two-bit scam so you tailor the scam to the client and -viola - $52 million to spend on vacations, Beemers, airplanes, etc. Hey, if you're going to go - go large eh? 

Hopefully they'll be going large for the next decade in the Greybars Hotel & Spa with a close companion named Bubba.

News Release

January 23, 2009
For Immediate Release
Contact: Scott Gerber or Christine Gasparac, (916) 324-5500

Attorney General Brown Files Criminal Charges in $52 Million Ponzi Scheme

FOR IMMEDIATE RELEASE
January 23, 2009
Contact: Christine Gasparac or Scott Gerber (916) 324-5500 or Special Agent Supervisor Randall Hew (323) 855-4743

Attorney General Brown Files Criminal Charges in $52 Million Ponzi Scheme

ORANGE COUNTY – Attorney General Edmund G. Brown Jr. yesterday filed 89 criminal charges against 6 men who “callously conned” more than a thousand people, including retired senior citizens, out of $52 million through sham real estate projects, using the investors’ money to buy planes, expensive cars and lavish vacations.

“These six men callously conned hundreds of people into investing $52 million into a company that they treated as their personal bank account,” Attorney General Brown said. “They fraudulently took investors’ money and spent it on an array of luxury items, relying on a Ponzi scheme to keep investors at bay.”

From 2001 to February 2006, Irvine-based Carolina Development Company peddled $52 million worth of stock to more than a thousand investors. The company claimed the proceeds would be used to buy and develop luxury resorts and upscale communities adjacent to golf courses designed by Arnold Palmer, Jack Nicklaus, and Greg Norman. Investors bought anywhere from $15,000 to $1 million in stock, including senior citizens who invested their retirement funds. The company bought some land, but did nothing to develop it, despite its claim that 85% of the $52 million invested would be used for land acquisition and development.

To persuade investors to buy shares of Carolina Development Company, the defendants claimed that Arnold Palmer had partnered with them. The defendants promised that investors would reap huge dividends and assured those who invested a minimum of $100,000 that their investment would be secured by deeds to specific parcels of land. None of these claims were true.

The defendants diverted more than $24 million for extravagant bonuses, personal medical bills, airplanes, fancy meals, BMWs, concert tickets and luxury vacations. To keep investors at bay, the defendants engaged in a Ponzi scheme, paying some investors “returns” on their investment using money from the new investors.

Department of Justice agents served arrest warrants against the following six defendants, who were charged with grand theft and securities fraud in Orange County Superior Court:

Lambert Vander Tuig, 50, of Santa Margarita, currently held in the Orange County Sheriff’s Department.

Jonathan Carman, 45, of Laguna Hills, currently held in the Orange County Sheriff’s Department.

Mark Sostak, 50, of Ladera Ranch, currently held in the Orange County Sheriff’s Department. Bail is set at $4.5 million.

Scott Yard, 47, of Costa Mesa, remains at large.

Soren Svendsen, 43, of Coto De Caza, is currently being held in the Orange County Sheriff’s Department. Bail is set at $2.2 million.

Robert Waldman, 48, is scheduled to turn himself in to authorities.

On Wednesday, representatives of the Attorney General’s Office obtained arrest warrants from Orange County Superior Court Judge Selim Franklin.

These criminal charges were preceded by civil actions brought by the U.S. Securities and Exchange Commission (SEC). The SEC in 2007 won a $29.2 million judgment against Lambert Vander Tuig, the president of the company, and a $2.1 million judgment against Jonathan Carman, vice president of the company.

If convicted, defendants Vander Tuig and Carman could receive sentences in excess of 10 years in state prison. The remaining defendants would be subject to lesser prison sentences.

The criminal complaint and affidavit are attached.

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  1. Cathy Worrilow 01/23/2009 01:28 PM
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Comments 26 New Comment

Rainmaker
224,999
Gene Wunderlich
Realtor & Legislative Liaison
1st Action Real Estate

Lenn - Love that line. I've been using a similar one for years - a sucker born every minute and 10 grifters born to fleece him. same concept - same result. Some people are just born victims, others just take a little convincing. After all, right now there are only two kinds of real estate market, those where fraud schemes have flourished and those where it soon will.

January 23, 2009 10:08 PM
Rainmaker
442,153
TIM MONCRIEF #1 KW Grp '07-'12; AUSTIN-nwmc
Four Points Specialist, #AustinRealEstate
Keller Williams Realty/Bartlett Real Estate Group

The schemes continue to increase through the tough times. We just lost a realtor in town with a guaranteed return program on buying lease properties. And we wonder why socialists are sick of capitalism.

January 24, 2009 12:44 AM
Rainmaker
275,251
Jerry Murphy
Anthem AZ Real Estate
Long Real Estate

Arrgggh! I hate hearing more stories like this.  It only deteriorates American's confidence in our economic system.  But at heart we're all to blame.  We as a society need to get out of the get rich quick mentality.  The old adage, "if sounds too good to be true it probably is" needs to be screamed from the mountain tops.  And people like these guys, Bernie Madoff, John Thain, and numerous others need to be locked up for a VERY long time.  In my opinion they are far worse than the two bit burglar that holds up a convenience store. That burglar only affects one person.  These white collar criminals affects hundreds, sometimes thousands of peoples lives.  And they erode the foundation of our economy.  Thank you for the post and best of luck in 2009.

January 24, 2009 10:44 AM
Rainmaker
84,067
Simon Mills
Mills Realty

50% a month...come on...if it is too good to be true then it simply is too good to be true.  I'm glad to see that these guys are stopped, but the preying on ethnic groups by their own kind is a real problem that I've seen happen over and over again.  This is a real problem that needs attention.

January 24, 2009 05:23 PM
Rainmaker
325,145
Esko Kiuru

Gene,

Looks like Madoff juniors are on it again. Ponzi started something that is never going to die because there unfortunately always will be enough people who'll buy into this kind of stuff.

 

January 24, 2009 05:38 PM
Rainmaker
224,999

Gene Wunderlich

Realtor & Legislative Liaison
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