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532 charged in huge fraud crackdown, involving $10 billion

- The Washington Times - Monday, December 6, 2010

A federal law-enforcement task force targeting financial fraud cases nationwide has led to charges against 532 criminal and civil defendants involving $10.4 billion in total losses for more than 120,000 victims, Attorney General Eric H. Holder, Jr., announced on Monday.

Mr. Holder said the task force initiative, known as "Operation Broken Trust," is the first national operation of its kind to target a broad array of investment fraud schemes that directly prey on the investing public. It was described as the largest ever nationwide crackdown on financial fraud.

"With this operation, the Financial Fraud Enforcement Task Force is sending a strong message," Mr. Holder said. "To the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur.

"And to anyone operating or attempting to operate an investment scam: cheating investors out of their earnings and savings is no longer a safe business plan  we will use every tool at our disposal to find you, to stop you and to bring you to justice," he said.

The interagency task force was established by President Obama to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. Beginning in August, within a three-and-a-half month period, Operation Broken Trust involved 231 criminal cases and 60 civil enforcement actions. Eighty-seven defendants have been sentenced to prison, including several sentences of more than 20 years in prison.

"This operation highlights the scope of this problem, and its impact on individuals from all walks of life," said FBI Executive Assistant Director Shawn Henry. "This one sweep alone involves fraud schemes that harmed more than 120,000 victims. The schemes may change, but the underlying greed does not.

"Working with our partners, we in the FBI will use all the investigative techniques in our arsenal, including undercover operations, to bring those responsible to justice," he said.

Enforcement actions taken by the task force, Mr. Holder said, involved a range of different investment fraud schemes, all of which preyed directly on the investing public. The operators of these schemes often promised high returns to investors, but engaged in little to no legitimate investment activity, he said.

The activities included ponzi schemes, affinity fraud, prime bank/high-yield investment scams, foreign exchange frauds, business opportunity fraud and other similar schemes. In some instances, operators of the schemes filed for bankruptcy in attempts to avoid claims by victim-investors.

The cases included an oil and gas investment scheme in Dallas that reportedly bilked 7,700 investors out of more than $485 million; a ponzi scheme in Chicago that targeted elderly Italian immigrants and hundreds of others after returns of up to 15 percent on their investments; and a ponzi scheme in Florida in which 75 investors lost $89 million.

Operation Broken Trust was conducted in conjunction with various Justice Department agencies, including the U.S. attorney offices, the FBI, the Criminal and Civil Divisions and the U.S. Trustee Program  as well as the U.S. Securities and Exchange Commission, the Internal Revenue Service, the Federal Trade Commission, the U.S. Secret Service and the National Association of Attorneys General.

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