FRAUD INC.

DO REGULATORS NEED CROOKS TO STAY IN BUSINESS?

On October, 9, 2012, US Attorney Melinda Haag along with other US Attorneys and representatives from FBI and the SEC hosted an Investor Fraud Summit at the Rossmoor retirement community in Walnut Creek, California - many are planned across the country.  All the speakers pounded on the need for investor education stating at the same time that "crooks will always be a step ahead". Haag also confirmed it costs millions to run these summits while law enforcement complained they don't have resources to prosecute every scammer.  Replying to an obvious question about this misguided waste of funds, she proclaimed:"We won't stop the educational program".

Victims of the biggest financial fraud in California's history involving over a thousand investors who lost about $750 million in an unscrupulous scheme said they had no hope of ever recovering their losses.  in spite of the ongoing class-action suit, FBI investigation and SEC and FINRA regulations that are supposed to protect the public.(Financial Industry Regulatory Authority, or FINRA, is a self-regulating body of broker-dealers collecting fees and penalties from members)

History repeats itself BECAUSE THE SYSTEM THAT PROTECTS THE PERPETRATORS REMAINS IN PLACE. Case in point, Zanett Inc. based in NY has been selling promissory notes to unsuspecting seniors. Instead of using its own subsidiary, Zanett Securities Corporation, Zanett hires an outside agency, Sumner Harrington Ltd. , to push its notes to the public (and to shield itself from regulations and future repercussions?) SH had the experience selling Sten, Onyx and other collapsed notes since 2000, the head of the agency Ed Elverud was barred in IL, had multiple violations and disciplined by Nasdaq.   Zanett was not deterred. This cooperation continues to this day in spite of Elverud's ongoing SEC investigation, his loss of license, unpaid previous 200K judgment (Stender v.Elverud) and bankruptcy.

CFO Dennis Harkins admits Zanett owes over $3 million to its note investors and is maxed out on credit .  Yet Zanett's CEO Claudio Guazzoni parties in his mansion's ballroom and attends high society events such as NY Fashion Week  (Zanett Inc. (ZANE): Their Revenue/Press Release Games & Their CEO Who Likes To Party  )  Harkins will not tell you that Zanett has worthless stock, revenue losses and no cash. It has been in trouble for years, but unless you're a savvy investor with access and understanding of market reports, you can rely only on your agent who must inform you by law. Rosy PR from Harkins, illegal stock manipulations (pump-and-dump) and no truth forthcoming from neither the agent nor CFO duped elderly investors who lost everything.  Yet, Zanett management travels the country attending trade conferences (7 in 2013) and continues business as usual even in California where it has Forfeited status (meaning unpaid taxes and/or fees) and cannot do business with CA residents.

Conference organizers do not check the background of its participants - after all, they pay to play - so whistleblowers' alerts are ignored.   Warned about Zanett pariticpating in its SF conference, the head of Government Finance Officers' Association, GFOA,  Jeff Esser told a whistleblower "to stop bothering" him.  Apparently, the proclaimed "..purpose of the Government Finance Officers Association ...to enhance and promote the professional management of governments for the public benefit." does not include protecting it from fraud.

Zanett  remains an Oracle corporation's Platinum partner and participates every year in Oracle Open World conference pushing its services to unsuspecting potential clients. A  notice to Oracle was pointless - they'll make a deal with anyone willing to sell their products.  Zanett also lists Microsoft and other internet giants as its partners (zanett.com)

In spite of its shaky history and warnings published by Indiana Business Journal, Zanett was chosen by the mayor of Indianapolis to overhaul its aging computer networks. This project was completed in Jan.2012 while Zanett was refusing to pay back its investors.  Moreover, Zanett sold assets worth over $3 mil.and, according to Harkins, it signed contracts with some California hospitals. Yet, its investors are still waiting for their cash.

Why do Zanett and Co. continue doing what they do? Because they can. Because the "punishment" from regulators is either ridiculous or non-existent - only a fool would stop.  Zanett's Forfeited status and its business activities in CA were reported to the CA lieutenant-governor Gavin Newsom whose office suggested to contact the Attorney General who suggested the Department of Corporations who referred the case to SEC.  Any actions taken?  Guess again...

In one of Nasdaq's disciplinary measures, Elverud was fined $60K and "suspended from association with any NASD member in any capacity for 20 days (!) and "suspended from acting in any supervisory capacity or as a trainer of personnel with any NASD member for nine months"(!)  If you can loot 10 times the fine amount and never pay back your victims, would you stop? FINRA finally revoked Elverud's license, but said he doesn't owe any money to anyone in spite of his unpaid judgment.  Buyer beware, Everud's site is still active,Sumner Harrington Ltd and he is still selling other notes - Twin Cities Power and CPS - in spite of an active SEC investigation.

REGULATOR RACKET

We all know about "political theater", but its reach is more extensive than you might think. All the government and self-regulating bureaucracies created to "protect consumers" are like theater decor: impressive fronts only..

If you ever tried to get justice and got pounded down by unreasonable procedural demands, ping-pong referrals, answering machines, unresponsive and ignorant services, "sorry-cannot-help-you"s etc. and gave up trying, the system reached its goal. It was set up by those who benefit from fleecing, not by its victims. All the "tough" regulations, sanctions, fines and other decorative measures sound great to reassure the public, but if you, the victim, want justice, persist and refuse to go away, regulators put up a wall of silence.  Who got time,strengh and often money to persist?! Once again, the system worked as intended.

Even when they do start an investigation, all the agencies that should be cooperating with each other, don't, despite the scandal after 9/11 when non-sharing of data led to tragedy.  In rare occasions, though, the bureaucracy shows what it can do. Bernie Madoff was finally jailed, but don't get your hopes up yet: swindled millionaires forced the system to do its job. SEC's excuse: they get hundreds of complaints per day (!) from duped consumers, but no resources to go after every swindler so the investigators pick scams with the highest dollar amount involved.  Which means your measly life savings looted by "small-scale" crooks don't even get a second look. Higher amounts involved bring higher penalties and fines that pour back...to you, defrauded investor? No, back into the system.

When a TV repairman pretended to fix my bad TV focus that was not broken, a quick call produced a quick action - I got my money back! Turned out, he was unlicensed and my report helped the authorities to get him pay for it in fees and fines that went to city coffers. In these cases, some victims get compensated as well.  In big crimes?  Many small Madoff investors are still waiting to get something in spite of multimillion dollar fines paid to SEC.  FINRA has the nerve to boast in its own pamphlet that in 2011 it "collected $63 million in fines and ordered or secured agreements to return nearly $19 million in restitution to investors"(!) The main page of the pamphlet proclaims:"Putting investors first". 

RACKET ROULETTE


In response to an occasional scandal, a new bureaucracy is created (Consumer Financial Protection Bureau is the latest); untrained front line workers with low pay placed to fend off complaints and business continues as usual. There are hundreds of agencies - government, non-profit, private - that have great sounding names that claim to protect consumers, elders etc., but in reality, they're referral middle-men at best.  All these clusters of agencies then create umbrella organizations with lectures, symposiums, publications etc. etc. wasting precious few resources on themselves.  They may provide info where you can file a complaint and the ping-pong begins...You need a personal secretary to navigate this useless maze where you hit a brick wall on every turn. How about pooling all these resources, set up one powerful and responsive agency that will say:"We'll take it from here" when you complain. It will cater to YOUR needs, the consumer and the taxpayer...oh well, one can dream...

In spite of all the glamorous proclamations about their goal to protect you, when you actually try to get help, all the regulatory authorities state the same thing: "WE DO NOT HELP INVESTORS RECOVER THEIR LOSSES", even due to fraud.  Want to file a complaint? Sure, that's the first thing you'll hear. Results? SEC won't even tell you IF they will investigate let alone disclose the results. You can find out by searching public records years after you filed - that's how long it takes. FINRA will not even acknowledge the receipt of your complaint and it takes them 3 months just to open it. Attorney General's office ping-pongs you to the Department of Corporations where you must collect all docs and send your complaint by snail-mail. Meanwhile, the time is ticking away at your statutes of limitations. Moreover, why bother if all of them repeat their mantra: "WE DO NOT HELP INVESTORS RECOVER THEIR LOSSES!"

Just to make sure to nail the last nail in your coffin: sometimes, the statutes of limitation start ticking not when you discovered the fraud, but from the first day you started doing business with the company. That means if the swindler managed to keep his scam hidden for  years  he's off the hook, especially considering how long it takes to bring someone to justice, After looting just long enough to assemble a fortune, the scammer can roll into court and say;"Time's up!" or hide under bankruptcy protections as soon as he is discovered.

VICTIMOLOGY

Yes, there is such a word now.  It had to be created to reflect American reality of victim blaming.  If someone sells you a lemon car, no one will tell  you it's all your fault, but if you're a fraud victim, you're greedy and stupid.  Criminal prosecutions are still a drop in the bucket in white color crime that's been widely acknowledged as the fastest growing crime in the country.  Authorities' attitude: it's only money. A pick-pocket is sent to jail, but the crook who looted millions walks with a fine or no repercussions at all.

As a result, victims rarely, if ever, come forward.  Self-blame and shame are common, instilled into them by the society.  Outcomes can be devastating:  financial ruin, broken families, even suicides.  Just check forums such as this one WJFA, or  ScamVictimsUnited, but even in forums there are (paid?) trolls who try to discourage victims to organize and fight back - not an easy task considering no one, under the excuse of privacy,  will share any info about other victims even if you want your contact to be passed on to others.

An entire industry was formed to study who may fall prey to scammers.  Newly created Stanford fraud center  researches statistics and everything fraud related, but wouldn't these millions be better spent prosecuting the crooks?  If anyone really wanted to eradicate the problem, mandatory restitution to victims and putting them first in line for compensation would work wonders.

LEGAL RACKET

So, you're told, your only option is a civil lawsuit. Sure, if you got millions in free cash and ready to burn some to get your money back, good for you.  If you're a senior who lost your life savings, would you throw away the last few bucks to go after crooks who , most likely, will never pay you back, even with judgment in hand?  So you're looking for a contingency attorney who's willing to take your case - good luck with that.  If you got robbed by Google, they'll be lining up to help you, but with a mismanaged company or crooked individual who robbed you, you're out of luck - lawyers want their share of your refund and if they're not sure they can get it, they won't bother.

So you file a lawsuit yourself hoping the judge and jury will see your truth.  Turns out, over 80% of pro se cases (without legal representation) are dismissed for one reason or another - judges don't have the patience for your lack of legal knowledge.

Worst of all, you might not even get an opportunity to file a lawsuit.  Most broker agreements force you to waive your rights and agree to an arbitration.  Even conservative SF Chronicle exposed the plight of fraud victims unable to get justice in its article STOCKS / Brokers Who Take the Money and Run / Cheated California investors get no satisfaction - SFGate.   Even though the victim's lawyer ,  San Francisco attorney Jeffrey Feldman, said his client had a rock-solid case against the broker for choosing "unsuitable investments" the arbitration could not proceed because the stock exchanges controlling it did not like California's requirement to disclose arbitrators' conflicts of interest and sued to get a waiver.

BOTTOM LINE

There's logic to all of this. If pest or weed control companies really let you destroy all weeds and roaches, they would go out of business. If regulators do everything to PREVENT crime rather than deal with it after the fact or if they make fraudsters pay for their crimes dearly, the perps would think twice before swindling the public and the regulatory bureaucracies would be out of work. Besides, they're supported by the industry's fees and penalties so they do a double duty: protection racket, or "roof" as it is known in gangster world to let banksters continue their shenanigans and, at the same time, show the public the regulatory facade of imaginary enforcement.

Think it's not your problem? Think again. Who pays for this self-sustaining roulette? First of all, the victims who lose their savings then help regulators extract the fines from the perps without getting anything for themselves.  Second, it's you, the taxpayer. Besides wasting your tax dollars on maintaining these front regulatory agencies, the government will have to bail out some victims who will apply for welfare and other programs when they could have been using their own savings stolen by crooks.

Fraud victims are trapped in this stranglehold of the system with no real way to get justice and the crooks are enjoying the rewards of their looting.  No wonder someone said "the best way to rob a bank is to become its boss".

And this roulette is in perpetual motion..

2 comments:

Anonymous said...

If you really knew what went on at Zanett you would see the fraud is much deeper than what you described, and yet it was done in plain site. This was a classic pump and dump in which outside parties came in to increase the price of the stock, while all the while selling off shares they held. The shares were transferred over in a way that allowed all parties to circumvent laws on disclosure of stock sales by insiders. Just read the filings and you will see where a real estate agent in California received shares as a gift !!! That real estate agent Debbie Sutz, never mentions that she does PR work for small cap companies on her resume, but Zanett still sent her tens of thousands of shares. Debbie Sutz's father is convicted stock fraud criminal Barry Davis.

So all the Zanett exec's waive the flag and talk about how the company is saving the US from terrorism, while maggots like Debbie Sutz get shares to trade free and clear courtesy of Zanett's in-house counsel Pierre Georges Roy. With a high share price, the Zanett crew buys up small companies with a mixture of cash and pumped up stock. In the end the company sells to KPMG leaving the suckers that bought Zanett Notes on the hook. Criminal sentences should be issued for this activity, but instead these people just make more money. Are the actors worried about jail - hell no - Al Gore's son in law was on the board of this company and they bragged about the protection they had from the Clinton Gores because of this. Vote for Hillary!!!!!

Anonymous said...

Yes, Zanett somehow managed to sell and got 15M, but screwed 45 note investors most of whom got either nothing at all or pennies on the dollar provided they sign a gag order and release. In the meantime, Zanett's "watchdog" US Bank, paid to monitor the company, was asleep at the wheel or worse - cooperated with its crooked client and failed to protect investors. No doubt, Claudio Guazzoni (who bankrupted many of his previous endeavors) and co. are now on to another scheme.

Please, post if updates are available.