Four Star Financial Services Fraud

Four Star Executive Sentenced to Prison

According to newly filed court records, Four Star executive Ronald I. Anson has been sentenced to two years in prison for his role in an alleged tax evasion scheme. The sentence also includes three years of supervised release and restitution of $1,853,282. Anson is scheduled to begin serving his sentence on January 11th of 2010. Federal authorities are recommending Anson be imprisoned at the Taft Correctional Institution near Bakersfield, California.

Another Delay In Anson Sentencing

There's yet another postponement in the sentencing of Four Star executive Ronald Anson. Anson's sentencing is now scheduled for Monday November 16th at 11 am before U.S. District Court Judge George H. King, Courtroom 650, Roybal Federal Building, 255 East Temple Street, Los Angeles. The reason for the latest change in sentencing date was not disclosed in court papers. Anson was scheduled to be sentenced on November 9th.

New Sentencing Date Set For Ronald Anson

According to court papers, a new sentencing date has been scheduled for Four Star executive Ronald Anson. Anson will now be sentenced on Monday November 9th at 11 am before U.S. District Court Judge George H. King, Courtroom 650, Roybal Federal Building, 255 East Temple Street, Los Angeles.

Cohn motion to modify probation rejected

Mark Cohn's bid to modify his probation has been rejected by a federal court Judge. Judge Frederick Martone's order denying Cohn's request was issued last week in U.S. District Court Arizona. Cohn had sought to either eliminate the remainder of his two year home detention sentence or have it modified to allow any overnight travel (including trips abroad) credited toward his home detention term. Among other things, Cohn argued the modification would help him in his efforts at recovering money for victims of the Four Star fraud. But in his order, Judge Martone brushed aside Cohn's argument, writing: "We are of the view that the 'changed circumstances' are insufficient to justify a modification of the home detention term. While the deletion of that term may promote some of the objectives of sentencing, it would defeat others."

4Star & Garrett Bankruptcy Updates

According to court documents filed August 13th, the Judge overseeing the Four Star bankruptcy case has upheld the Trustee’s objection to a priority unsecured claim filed by the U.S. Department of Justice. The DOJ had filed a priority unsecured claim of more than $1 million that resulted from a judgment penalty it obtained in the Four Star telemarketing fraud conviction. The Judge’s order upholding the Trustee’s objection means the DOJ’s million dollar claim will become subordinate to general unsecured claims filed by other creditors in the bankruptcy.

Meantime, all Four Star investors are finding their claims in the Jack E. Garrett bankruptcy case objected to and disallowed. The Trustee overseeing Garrett's bankruptcy estate says Garrett is not personally liable for company actions and damages caused by Four Star – even though Garrett signed investor agreements.

Comerica bank seeks to dismiss investor-victim lawsuit

Comerica bank has filed a motion seeking to dismiss a lawsuit filed against it by a group of victims of the Four Star fraud. The suit by Four Star investors accuses the banking giant of complicity in the Four Star Ponzi. In court papers filed August 28th, Comerica disputes the allegations and says the investor-victim claims are barred by statute of limitations. A court hearing on the move to dismiss the complaint has been scheduled for October 30th.

Four Star executive seeks to modify terms of probation

According to newly filed court papers in U.S. District Court Arizona, Mark F. Cohn is seeking to modify his probation sentence in the Four Star Ponzi case. Cohn was sentenced to five years probation and two years home detention last year for his role in the Ponzi.

According to court documents, Cohn wants the home detention requirement of his sentence dropped or, alternatively, modified to allow any overnight travel (including trips abroad) credited toward his home detention term.

The Four Star executive says the probation modification is needed, in part, to help support his efforts (which involve travel) at earning and recovering money for victims of the Four Star fraud.

U.S. prosecutors are opposing Cohn’s motion. If any Four Star victims wish to comment on the Cohn motion they can contact Evan J. Davis at the Office of U.S. Attorney: Evan.Davis@usdoj.gov

S.E.C. Madoff Inquiries Were Incompetent, Report Says

By THE ASSOCIATED PRESS
Published: September 2, 2009

WASHINGTON (AP) -- The watchdog of the Securities and Exchange Commission has found that three agency exams and two investigations of Bernard Madoff's business were incompetent, despite ample warnings of the multibillion-dollar fraud.

But SEC inspector general David Kotz's report found no evidence of any improper ties between agency officials and Madoff.

Despite speculation that senior SEC officials may have tried to influence the probes, a summary of Kotz's report released Wednesday also found no evidence of that.

The SEC enforcement staff, conducting investigations of Madoff's business, "almost immediately caught (him) in lies and misrepresentations, but failed to follow up on inconsistencies" and rejected whistleblowers' offers to provide additional evidence, the report says.

One of the most striking points in the report is that the investigations actually may have made things worse.

"Madoff proactively informed potential investors that the SEC had examined his operations" and found nothing amiss, it says. The fact that three SEC inspections and two investigations failed to detect the fraud gave credibility to Madoff's operations and encouraged more people to give him their money.

Revelations in December of the agency's failure to uncover Madoff's massive Ponzi scheme over a decade touched off one of the most painful scandals in the agency's 75-year history.

Between June 1992 and last December, when Madoff confessed, the SEC received six "substantive complaints that raised significant red flags" regarding Madoff's operations. But "a thorough and competent investigation or examination was never performed," the report says.

Many of the SEC staff who conducted the investigations were "inexperienced," according to the report.
It cites examinations of Madoff's business done in 2004 and 2005 by the agency's inspections office. In both exams, the staff "made the surprising discovery" that Madoff's mysterious investment business was making far more money than his well-known wholesale brokerage operation. "However, no one identified this revelation as a cause for concern," the report says.

Even more surprising, the two exams were being conducted at the same time in different SEC offices without either location being aware of the other's action. It was Madoff himself who told one of the inspection teams that he'd already given the information they sought to the other team, according to the report.

Madoff pleaded guilty in March. He is serving 150 years in federal prison in North Carolina for a pyramid scheme that destroyed thousands of people's life savings, wrecked charities and gave already-rattled confidence in the financial system another jolt. The legions of investors who lost money included ordinary people, Hollywood celebrities and scores of famous names in business and sports -- as well as big hedge funds, international banks and charitable foundations in the U.S., Europe and Asia.

Anson Sentencing Postponed

According to newly filed court papers, Ronald Anson's sentencing (scheduled for Monday August 31st) has been postponed again. No date has been set yet for a rescheduled court sentencing. And no reason was given for the last-minute postponement.

Four Star victims sue Comerica Bank

More than 40 victims of the Four Star Ponzi scheme, representing at least $50 million in investor losses, have joined together and filed suit against Comerica bank in federal district court in Northern California. The plaintiffs accuse the banking giant of complicity in the Ponzi fraud which resulted in upwards of $129 million in total losses to investors. According to the lawsuit:

“Four Star would not have been able to operate the Four Star Ponzi Scheme but for the active and knowing cooperation and assistance of Comerica and DOES 1-100…”

A copy of the complaint has been posted here on the documents page of the website.

Comerica, a Dallas-based bank, took $2.25 billion from the U.S. government bank rescue fund.

Garrett sentenced

According to recently filed court papers, Four Star executive Jack Garrett received the following sentence for his role in an illegal hotel partnership tax scheme: Garrett was sentenced to three years of probation and will serve 12 months in home detention. His whereabouts will be monitored by an electronic device that the Four Star executive will have to wear. In addition, Garrett has been ordered to pay $357,906 in restitution, which the government alleges is the total amount of government tax loss from Garrett preparing and signing a false tax return.

Trustee Reaches Proposed $4.9 Million Settlement With Roberts

According to recently filed court documents, the Four Star Trustee has reached a proposed settlement in his litigation against Four Star insider David Roberts. The proposed settlement shows Roberts agreeing to pay $4.9 million to settle the dispute without any admission of liability.

If approved by the court, attorneys hired by the Trustee to pursue the case as well as creditor Credit Suisse bank will both net huge payments -- more than $3 million in fees and net recovery proceeds.

According to court filings, here’s a breakdown of the proposed attorney payments and net proceeds from recovery:

- $926,111.61 contingency fee to Trustee litigation counsel, Frandzel, Robins, Bloom & Csato.
- $269,311.97 to creditor Credit Suisse for reimbursement of expense payments.
- $1,852,223.21 to creditor Credit Suisse per agreement to split with Trustee any net proceeds of recovery by 50%.

According to the court filing, the Trustee currently has $2,395,978.18 of funds on hand that he has recovered in the bankruptcy case. The $4,900,000.00 from the Roberts’ case is being held in a segregated Trust account pending court approval of the proposed settlement and release of funds.

Four Star Trustee Files Objection To DOJ Claim

In newly filed court papers, the Four Star Bankruptcy Trustee is objecting to a “priority unsecured” claim filed by the U.S. Department of Justice. The DOJ's claim stems from a $1,019,136.97 criminal fine it obtained against Four Star in the federal telemarketing fraud case. Four Star and former Four Star executive Mark Cohn were prosecuted and convicted in that criminal trial. Now the Four Star Trustee is seeking to disallow the “priority status” of the DOJ claim, which is one of hundreds of creditor/investor claims filed in the bankruptcy action. In its filing, the Trustee states:
“…while, this Objection does not seek to disallow the Claim, it does seek a determination by the Court that its priority is subordinate to tardily-filed general unsecured creditors pursuant to 11 U.S.C. Section 726(a)(4) on the grounds that the Claim is based on a criminal fine and is not compensation for actual pecuniary loss.”

A hearing on the objection has been scheduled for July 17th at 10 am before federal bankruptcy Judge Thomas B. Donovan.

Four Star Update

In a sign that the Four Star bankruptcy is now close to wrapping up, the Trustee overseeing the case is in the process of hiring special counsel to help finalize creditor claims. In court papers, the Trustee included the following key figures about the claims filed in the Four Star bankruptcy:

General unsecured claims - $205,384,200.89
Priority unsecured claims - $7,633,200.89
Secured claims - $24,639,706.81
Unknown claims - $149,000

The Trustee noted in his filing that the only remaining major litigation to be resolved is a lawsuit filed against Four Star insider and investor David Roberts. The Trustee is seeking to recover as much as $12 million in the Roberts case, which went to a court trial earlier this year. The Judge has yet to issue a verdict in the case.

SEC – Madoff – Four Star

It’s unfortunate that no one has challenged the Securities and Exchange Commission over its handling of the Four Star matter. Like in the Madoff case, Four Star was investigated by government regulators at the Securities and Exchange Commission back in 2000 and 2001 and cleared of any wrongdoing. Had the SEC been doing its job competently and aggressively many victims would have been spared losing their life’s savings in the Four Star fraud. Let's hope the Obama Administration is serious about reforming an agency that's grown too cozy with deal-making financiers. The SEC needs to be back in the business of truly protecting investors.