MORRISON ORDERS ALLEGED PONZI SCHEME TO SHUT DOWN
Montana Woman Named As Perpetrator In Multi-Million Dollar Investment Scam
HELENA, Mont., May 24, 2005 - Montana State Auditor John Morrison has taken action to end an alleged Ponzi scheme operating in Montana that promised investors a 100 - 300 percent return on their investment in 30 to 60 days. Morrison issued a Cease and Desist order prohibiting Tri Energy, Inc., H & J Energy Company and Marina Investor's Group from conducting investment business or acting as sales agents in Montana. Debbie Loveless of Kalispell is among the six defendants named in the order.
"We believe that at least $257,000 was solicited from nine Montana investors to help fund an alleged coal mining operation and a Middle East 'gold investment'," said Morrison. "There may be additional victims out there and I urge any one who has been contacted, or may have information concerning any of these entities to call the investigations team at my office."
Morrison's order alleges that TRI Energy Inc. and H & J Energy Company both of Nevada and Marina Investors Group of California violated Montana law by committing securities fraud. The allegations in the complaint indicate these groups are promoting an illegal Ponzi scheme.
The order also alleges that Montana promoter Debbie Loveless offered securities to participants without specific authority. According to the order, Loveless convinced members of her church to invest in the scheme. In one case, Loveless solicited a member of the congregation to invest $100,000 for a return of $300,000 in 30 days.
Earlier this month, the Securities and Exchange Commission filed a suit against the same group alleging that the scheme fraudulently raised $12 million to $18 million. The federal suit said the defendants posed as "religious entrepreneurs" who believed "deistically inspired" and "divinely guided" profits would enable investors to raise money to alleviate poverty in Africa and Appalachia.
The SEC said investors were told huge profits could be made by helping an Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates. Instead, the suit alleged, much of the investors' money was transferred to accounts controlled by the defendants. Investors who did get money back were paid with other investors' funds, not genuine profits, the suit alleged.
Ponzi schemes get their name from Charles Ponzi, who in the early 1900s bilked investors out of millions of dollars by promising a 40 percent return on their money. Operators of this variety of investment fraud use funds from previous investors to pay new investors. When the operator inevitably runs out of new people to buy into the scheme, the scam collapses and its investors lose their money.
"First of all, no one can absolutely guarantee a profit from any investment," Morrison said. "But Ponzi schemes are especially hard to unravel because they take the income from new investors to pay off earlier investors. This builds up public credibility, but like pyramid schemes, eventually the scam falls apart and the majority of investors are left with nothing."
Montanans should look for specific warning signs of a Ponzi scheme when presented with an investment opportunity. Red flags include: 1) "Guaranteed" double-digit returns, 2) Promises of high yields consistent over a long term, 3) "Risk-free" investments and 4) Salespeople emphasizing the exclusivity of an investment opportunity and the importance of keeping the investment a secret from your friends and family.
If you have been contacted, or have information concerning any of these entities, please contact the Investigations Division at the State Auditor's Office at 1-800-332-6148.