Several of the people named in today’s nationwide crackdown in the U.S. known as “Operation Broken Trust” have been charged, and in some cases already convicted, of money laundering. Operation Broken Trust is the first national effort in the U.S. aimed at cracking down on investment fraud schemes. It involved enforcement actions against 343 criminal defendants and 189 civil defendants for fraud schemes involving more than 120,000 victims in the U.S. The criminal cases involved more than US$8.3 billion in estimated losses and the civil cases involved estimated losses of more than US$2.1 billion.
Some of the key indictments or convictions for, among other things, money laundering include:
- Louis Borstelmann, from Oregon, who was charged with money laundering, mail fraud and wire fraud in connection with a Ponzi scheme that is alleged to have defrauded investors of more than US$18 million. Borstelmann is alleged to have offered hard-money loans to investors through his company, Sunburst Associates, Inc., that were purportedly secured by fraudulent real estate deeds of trust by falsely promising high rates of return.
- Tamara and Kevin Sawyer, from Oregon, who were indicted on several charges, including money laundering and bank fraud, for allegedly using three companies to solicit investments of more than US$7 million in real estate. Investors were allegedly enticed with the false promise of high rates of return of up to 12% and security in the form of promissory notes. The defendants are alleged to have used investors’ money to build a vacation home in Mexico and to pay for personal luxury items.
- Kevin Harris, from Ohio, who pleaded guilty to charges of money laundering, wire fraud and conspiracy. He and other associates started two companies called Complete Developments LLC (CDL) and Investments International Inc., to attract investors to foreign exchange and currency trading at promised rates of return of up to 12%. Harris and his associates collected approximately US$20 million in funds from investors and are alleged to have used the money to finance the costs of the businesses and to travel internationally and purchase luxury cars.
- James Testa and Michael Rouse, from Texas. Testa pleaded guilty to money laundering in connection with raising US$2 million from an investment REIT that was not legitimate. According to a federal indictment, investors lost all of their money. Testa used part of the funds raised to purchase luxurious items, including a US$100,000 Mercedes Benz. Rouse is charged with money laundering, securities fraud and mail fraud, among other charges, and is scheduled for trial in April, 2011.
- Jesse Alvin Cripps, from California, who was indicted on 27 counts of mail fraud and three counts of money laundering. Cripps allegedly told investors that he would put their money in a real estate investment trust that could earn more than 10% a month. Instead of investing the money, raised from 2001 to 2008, Cripps used it to pay business and personal expenses, the FBI said. Many investors lost their entire savings in the scheme according to the FBI.