Investment Scheme Promoter Indicted on Tax Evasion, Mail Fraud and Wire Fraud Charges

Los Angeles – LAWFUEL – This morning, in United States District court in Los Angeles, an investment scheme promoter who solicited investments in purported internet start-up companies pleaded not guilty to charges of tax evasion, mail fraud and wire fraud.

Appearing before United States Magistrate Judge Rosalyn M. Chapman, Chase Norwood, also known as Thomas Gray, entered a plea of not guilty to two counts of tax evasion, five counts of mail fraud, and eight counts of wire fraud detailed in an indictment returned previously by a federal grand jury in Los Angeles.

According to the indictment, Norwood solicited individuals to invest directly in purported internet start-up companies including Undertherapy.com and Cal Broadband. In addition to soliciting direct investments, Norwood also solicited individuals to invest indirectly in purported start-up companies through an investment company that purported to invest in companies selected by Norwood.

The indictment details that Norwood used investor funds to support an extravagant lifestyle, including part-time residence in luxury hotels, as well as paying personal expenses for his family and friends. Further, Norwood used investor monies to hire several unlicensed brokers / telemarketers to identify individuals to invest in companies he promoted. Norwood also would use his former name, Thomas Gray, and the names of third-parties as officers and directors of the companies he promoted.

Overt acts engaged in by Norwood, detailed in the tax evasion counts in the indictment, specified that, in 2000, Norwood used investor deposited into company bank accounts, removing significant funds by writing checks to cash as well as using funds to pay a relative’s rental payments at a condominium complex. Additionally, Norwood used investor funds to pay his credit card bills which included his long-term rentals at luxury hotels in Los Angeles and Beverly Hills. In 2001, Norwood is alleged to have opened bank accounts in the names of nominees as well as having deposited investor funds into these accounts. Norwood personally used deposited investor funds in these accounts by writing checks to cash and for rent payments on his mother’s condominium. In total, the indictment indicates that Norwood received at least $117,496 in taxable income in 2000 and $183,991 in 2001, upon which he owes taxable income to the United States of $33,808 and $57,662, respectively.

With respect to the promotion of investment in the purported start-up companies, Norwood and the unlicensed brokers represented to investors that their money was to be used to enable those companies to go public. As a part of their solicitation, Norwood and the unlicensed brokers would send business plans and executive summaries and other materials that misrepresented the facts. For example, Norwood’s business plans for Cal Broadband falsely misled investors into believing that it was company that that had been in business for years and was recognized as a national and international wireless high-speed internet provider when in fact the company was merely a business name created by Norwood using his former name. Norwood also indicated in his business plans provided to investors that Cal Broadband had licensing agreements and business affiliations with large computer and telecommunications companies when in fact there were no such agreements or affiliations. Additionally, Cal Broadband had no paid subscribers.

If convicted of all the charges contained in the indictment, Norwood faces a statutory maximum 75 years in federal prison and fines totaling $3.75 million. Norwood is scheduled to go to trial on May 13, 2008.

The investigation of Norwood was conducted by IRS – Criminal Investigation and the Federal Bureau of Investigation in Los Angeles.

An indictment is a charging document which contains allegations of violations committed by defendants. All defendants are presumed innocent until and unless proven guilty before the court.

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