3 guilty in $194 million Ponzi scheme

  • Article by: DAN BROWNING , Star Tribune
  • Updated: July 15, 2013 - 1:41 PM

Jurors convicted three men of helping convicted fraudster Trevor Cook to bilk 700 investors of $194 million in an international scheme.

Jurors in Minneapolis on Tuesday found three men guilty of helping convicted fraudster Trevor Cook pilfer the savings of more than 700 investors in an international Ponzi scheme that targeted conservatives and Christians and spoiled the retirement dreams of mostly elderly victims who have little chance of recovery.

All three were found guilty of all the charges resulting from the $194 million fraud scheme -- the second-largest Ponzi scheme in Minnesota history.

Jason "Bo" Beckman, a 42-year-old Plymouth man who claimed to be among the top portfolio managers in the nation, was convicted of a variety of fraud and money-laundering charges.

Beckman, a former Anoka High School hockey standout, also was convicted of attempting to defraud the National Hockey League on his failed effort to buy a $5 million piece of the Minnesota Wild; of defrauding an elderly Spring Lake Park couple out of nearly $4 million in life insurance proceeds that he used to bolster his NHL bid; and of several tax charges.

Faribault entrepreneur and former coin dealer Gerald Durand, 62, was convicted of fraud and money-laundering charges; of attempting to mislead the government about two foreign currency transactions; and of several tax charges.

Minneapolis huckster Patrick Kiley, 73 -- whose "Follow the Money" radio talk-show program lured the most investors -- was found guilty of fraud and money laundering counts.

Cook's Ponzi scheme is second only to the $3.65 billion, decade-long fraud of Twin Cities businessman Tom Petters, who's serving 50 years in federal prison for his crimes.

Unlike Petters, who sacked hedge funds, Cook and his cronies pinched the nest eggs of ordinary people. Their victims ranged from Margueritte Witte, 73, of Meadview, Ariz., who lives on Social Security and lost her entire $20,000 life savings, to Richard and Rita Myers, who lost their dream home in Gambrills, Md., to foreclosure after entrusting Cook with $3 million in cash plus $2 million in gold and silver coins -- the hard-won savings from running a moving and storage company.

Cook pleaded guilty in 2010 to fraud and tax evasion charges and is serving 25 years in federal prison.

Christopher Pettengill, an heir in the family that launched the Kroger grocery chain, pleaded guilty last July to conspiracy, fraud and money laundering in the case and awaits sentencing. He testified against his former business associates in hopes of a reduced sentence.

Islamic law, Christian sales

Cook's scheme evolved from currency swaps he was running through several commodities and futures brokers, where he lost millions on risky trades. He claimed in 2006 to have finally found the Holy Grail with two Swiss firms: Crown Forex SA and JDFX Technologies.

Cook said that Crown Forex, owned and operated by Jordanians, complied with Islamic sharia law and could not charge interest on the loans he took out to buy currencies. JDFX, he said, had high-speed computer technology that allowed investors to take advantage of momentary "inefficiencies" in the currency market.

By partnering with these firms and others, Cook and his associates claimed they could produce steady, double-digit returns with no risk to principal. The investment strategy was fully liquid, they claimed, because the transactions closed daily. And investor funds were safe, they said, because they were held in segregated accounts.

Kiley and Durand pitched the investment strategy on a Christian shortwave network and broadcast radio. Kiley, by far the most successful, bought time on more than 200 stations nationwide and brought in about two-thirds of the investors. Though he never graduated from college and eked out a living selling appliances, kit cars, hair replacements and other consumer products, Kiley told his listeners -- whom he called "truth seekers" -- that he had 40 years of experience in the financial services industry.

He said the currency strategy had previously been available only to banks and international corporations, but that he and his partners were making it available to individuals to save them from an impending economic collapse. The appeal worked especially well with retirees living on fixed-incomes. Kiley closed his programs with a prayer.

Durand also appealed to Christians. One investor said Durand sent him a book called the Prayer of Jabez, which links prosperity to religious faith, and told him to pray every day for wealth.

Scheme sold at seminars

Beckman solicited investors among the wealthy clientele of his investment advisory company, Oxford Private Client Group. He also made presentations at investment seminars, suggesting the currency program as a good alternative during a bear market. He and some associates in Minneapolis and Arizona raised about $47 million from 143 investors that way, according to court records.

In fact, the currency program was a fraud from top to bottom and Beckman, Durand and Kiley knew it but never informed their investors, prosecutors argued.

All withdrawals from Crown Forex had stopped in December 2008 when Swiss regulators began investigating the firm, which according to trial testimony had been "illiquid" for nearly a year by that point.

Several attorneys had advised Beckman in the spring of 2008 that the currency program likely violated a number of laws and urged him to shut it down immediately, return investors' funds and report the matter to U.S. regulators. Beckman, bent on his NHL bid, kept soliciting clients. He claimed that he believed in the program and followed his attorneys' advice, though his attorneys testified to the contrary.

Attorneys called against him

Chief U.S. District Judge Michael Davis let prosecutors break the attorney-client privilege and call the attorneys to testify after providing evidence that Beckman hired them in an effort to defraud the NHL. The NHL's investigators saw through Beckman's misrepresentations and he ultimately withdrew his application in the spring of 2009 as the currency scheme unraveled.

Crown Forex was locked down for good in May 2009 when Swiss regulators began liquidation proceedings. The U.S. Securities and Exchange Commission was already investigating by that point, and the FBI had an informant gathering evidence at the Van Dusen mansion in Minneapolis, where Cook and Beckman had their offices.

The scam became public in July 2009 when some Ohioans filed suit in a Minneapolis federal court to recover $10 million that they had invested. Cook and his cohorts had claimed to have $4.4 billion under management, but they couldn't scrape together enough cash to hold off the lawsuit and inevitable run on the accounts that followed.

Davis appointed a receiver in November 2009 to round up assets for investors, who've received just pennies on the dollar.

Dan Browning • 612-673-4493

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