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14 May – LAWFUEL – The Law News Network – Five people in Southern Ca…

14 May – LAWFUEL – The Law News Network – Five people in Southern California and three others in Costa Rica were arrested this week in a federal fraud and tax evasion case that alleges hundreds of victims were duped into investing tens of millions of dollars in a fraudulent offshore fund that claimed to invest money in highly-profitable foreign currency trading. The eight defendants, along with a ninth who is a fugitive, were affiliated with the Genesis Fund, a defunct private investment fund that the indictment calls a Ponzi scheme.

The arrests made pursuant to an 83-count indictment, which was unsealed this morning in Los Angeles, were announced today by Debra W. Yang, the United States Attorney in Los Angeles; Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; and Nancy Jardini, Chief, Internal Revenue Service, Criminal Investigation Division.

* Five defendants were arrested this morning in Southern California. They are:David L. Johnson, 66, an early investor, and later manager and promoter of the Genesis Fund, who lives in Walnut;
* William H. Nurick, 69, a founder and manager of the Genesis Fund, who resides in Camarillo;
* Denise Taylor-Fraser, 51, a Genesis Fund investor who later became a manager, who resides with her husband in Riverside;
* William Taylor-Fraser, 57, Denise’s husband, a Genesis Fund investor who became one of its managers during the summer of 2000; and
* Teresa R. Vogt, 51, a primary administrator and later a manager of the Genesis Fund, who resides in Anaheim.
* These five defendants are expected to make their initial court appearances this afternoon in United States District Court in Los Angeles.
* The three arrested in Costa Rica on Wednesday are:

* John S. Lipton, 58, a founder and the principal manager of the Genesis Fund, who resided in Mission Viejo and Laguna Hills, California, until about March 1998 when he relocated to Costa Rica;
* Richard B. Leonard, 71, another early investor, and later a promoter and manager of the Genesis Fund, who resided in Littleton, Colorado, until he relocated to Costa Rica in about June 2000; and
* Victor H. Preston, 64, a founder and manager of the Genesis Fund, who from about July 1994 to about June 2000 resided in Huntington Beach and Laguna Hills, California, after which he relocated to Costa Rica.
* A special agent with the State Department’s Bureau of Diplomatic Security assigned to the United States Embassy in San Jose, Costa Rica, working with the IRS attache in Mexico City, coordinated the arrests with the Costa Rican Judicial Police and Interpol. Lipton and Leonard were arrested in Tango Mar, and Preston was taken into custody in San Jose. They are currently in the custody of the Costa Rican Judicial Police, and the United States intends to seek their extradition.
* Still at large is Marlyn D. “Milt” Hinders, 65, a leading promoter and manager of the Genesis Fund who resided in Aurora and Parker, Colorado, from about July 1994 until about May 2004, when he moved to Mexico.
* The indictment alleges that between May 1998 and June 2002, Genesis Fund investors entrusted more than $80 million with the defendants. The defendants – through promotional materials, account agreements and other means – allegedly told investors that their money would be pooled and invested in foreign currency trading through a currency dealer in Hong Kong and Macau that had earned large profits for investors in the past. Instead, the indictment alleges, virtually all investor funds were used to make Ponzi payments to investors and to personally enrich the defendants.
* The indictment also alleges that in June 2002 – just weeks after advising investors that the Genesis Fund was worth $1.3 billion – investment, trading and payment activities in the fund were suspended. After the collapse of the Genesis Fund, the defendants presented investors with a new investment plan to lull them into believing that there was hope of recovering their money.
* The indictment also alleges that the defendants promoted the Genesis Fund as having no reporting obligations to the Internal Revenue Service. Bank accounts in the names of trusts and offshore bank accounts in Costa Rica and Belize, among other places, were allegedly used to receive distributions from the Genesis Fund that were not reported to the IRS. Some of the defendants allegedly created “disclosed” and “undisclosed” Genesis Fund accounts for themselves and certain Genesis Fund investors in order to conceal from the IRS all but a small portion of Genesis Fund distributions. In addition, some Genesis Fund investors were allegedly advised to create nominee offshore corporations and bank accounts to receive distributions from the Genesis Fund.
* The indictment further alleges that to obscure the operations of the Genesis Fund and to limit scrutiny of its operations by investors and the United States government, the defendants caused the Genesis Fund to maintain no financial statements or other statements of operation. The indictment also alleges that, in an effort to conceal the true nature of the Genesis Fund from investors and the government, the Fund’s administrative operations were relocated from Anaheim, California, to Costa Rica in April 2000. At this time, paper records and electronic data on computers were hidden or destroyed.
* The indictment was returned by a federal grand jury in Los Angeles on March 30. The indictment charges conspiracy, multiple counts of mail fraud and wire fraud, money laundering, obstruction of justice, obstruction of a criminal investigation, tax evasion and several other tax-related charges.
* The charges contained in an indictment are only allegations. A defendant is presumed innocent unless and until he or she is proven guilty in a court of law.
* This case was investigated by the Los Angeles Field Office of IRS-Criminal Investigation Division.

British MP George Galloway and his opponent the Daily Telegraph will leave no stone unturned to sort out what could be a spectacular libel case.