Burnsville man may spend rest of his life in prison for Ponzi scheme
Patrick Kiley convicted of fraud, money laundering charges
A 74-year-old Burnsville man along with two other men were found guilty of money laundering and wire and mail fraud in connection to the multi-million-dollar Ponzi scheme orchestrated by Apple Valley resident Trevor Cook.
Following more than a month-long trial in U.S. District Court, Patrick Kiley was convicted on Tuesday on 12 counts of wire and mail fraud, one count of conspiracy to commit mail and wire fraud, and two counts of money laundering.
He is being detained pending sentencing at a future hearing, when he could receive a potential maximum penalty of 20 years in prison on each wire fraud and mail fraud count, 10 years on each money laundering count, and five years on the conspiracy charge.
“People save money their entire lives for retirement or to send their children to college,” U.S. Attorney B. Todd Jones said. “Fraudsters who choose to bilk them out of that money by pretending to be their friends or ‘advisors’ are some of the worst kinds of criminals. We take our obligation to prosecute them very seriously, and we are very pleased with the jury’s verdict in this particular case.”
The scheme, which defrauded victim investors by soliciting them to invest in a foreign currency trading program, was orchestrated by Cook, who pleaded guilty and was sentenced last August to 25 years in prison.
Convicted along with Kiley were Jason Bo-Alan Beckman, 43, of Plymouth, and Gerald Joseph Durand, 62, of Faribault.
The defendants were charged in a second superseding indictment on Feb. 22.
The evidence presented at trial proved that between 2005 and November of 2009, the defendants, along with Cook and Christopher Pettengill, defrauded investors by soliciting them to invest money in a foreign currency trading program, which they and others offered through entities known as Universal Brokerage Services or UBS, which had no legitimate affiliation to the global provider of financial services, UBS, AG.
Between 2005 and July 2009, the defendants, Cook and others secured approximately $194 million in investments for a currency program. Of that amount, about $109 million was sent to currency trading firms; approximately $68 million was lost in higher-risk trading; and $52 million was paid to investors in the form of lulling payments (payments that purported to be returns on investments or withdrawals of investments).
Approximately $30 million in investments were diverted to fund the business and personal expenses as well as other investments of the defendants, Cook, and others. This included compensation received by the defendants, Cook and Pettengill.
To induce investors, the defendants, Cook and Pettengill, directly or through others acting at their direction, made false representations regarding the performance, safety, and liquidity of the currency program.
They alleged that the currency program would earn a rate of return typically between 10.5 and 12 percent annually, with little to no risk to investment assets. The men also claimed that investor assets could be withdrawn at any time and would be held in segregated accounts. Those representations were false. When soliciting victim investors, the men also made misrepresentations and omitted material information concerning their backgrounds and qualifications as well as the backgrounds and qualifications of those working at their direction.
Once investments were made, investors generally received statements from the UBS entities, and some received investment return checks, also from the UBS Entities. The defendants, Cook and Pettengill caused the production and transmission of those statements and checks. The statements gave the false appearance that the currency program was performing as promised, and that investments were held in individual, segregated accounts. Most investors failed to receive statements or checks from the custodians in actual possession of their funds.
In 2007, when UBS, AG, filed a trademark infringement lawsuit against Cook, Durand, Kiley and others, the defendants began operating their scheme under other names, including but not limited to those identified by the terms “Oxford” and “Universal Brokerage FX.” They then continued to solicit investors for the currency program, utilizing telemarketing, media spots, and seminars in which they repeated the false representations.
While some investor assets were invested in foreign currency trading, most trading was high risk and often resulted in significant losses. The defendants, Cook and others concealed this fact from investors. The defendants, Cook and others concealed that the currency trading firm in Switzerland was in dire financial condition and continued to solicit investor assets to be sent to that trading firm. The defendants also concealed from investors their own concerns about Cook’s operation of the currency program and alleged illegalities relative to the currency program.
– Tad Johnson