Minneapolis money manager Trevor Cook, who rose from sports bookie in college to multimillion-dollar commodities trader, choked back tears as he admitted Tuesday in federal court to running an international Ponzi scheme that defrauded more than 1,000 people out of at least $190 million.
Cook, 37, told U.S. District Judge James Rosenbaum in Minneapolis that he placed client money into a Swiss brokerage firm called Crown Forex SA even after he learned in 2008 that the firm was careening toward bankruptcy.
Cook had promised investors double-digit annual returns with no risk if they would participate in a currency investment program that he claimed relied on Islamic banks to forgo interest in the deals. While Cook said he did invest clients' money in currencies, federal regulators contend the rest of his pitch was fiction.
"I lied to investors about a number of things," including the claim to have $4 billion in assets under management, he told Rosenbaum.
Though dwarfed by the $3.65 billion Ponzi scheme spearheaded by convicted Minnesota businessman Tom Petters and the $65 billion scheme of Wall Street's Bernard Madoff, Cook's fraud was one of the largest centered on trading in foreign currencies. The U.S. Commodities and Futures Trading Commission described it in a November statement as "massive."
Cook pleaded guilty to one count of mail fraud and one count of tax evasion, charges that carry a maximum penalty of 25 years in prison, followed by up to three years of supervised release. The advisory sentencing guidelines for these charges, based on the number of victims and amount of loss, would have called for a sentence of 27 to 33¾ years in prison but for the statutory cap. The plea agreement requires Cook to pay restitution.
The U.S. Attorney's Office told Cook during the plea negotiations that he could be charged with enough crimes to produce a sentence of life imprisonment, according to an attorney familiar with the discussions.
The potential prison term was welcome news to Sally Carter, a farmer in Morton, Texas, who said she invested $40,000 in the program. "I'm 98 years old and blind as hell. They lied to me, so I want to see them put in jail whether I get my money back or not," Carter said. "That's a lot of money for an old woman."
Rosenbaum said he'd yank the plea bargain if Cook fails to help the government locate and return assets for investors.
"That's not a threat. That's not a promise. That's like saying it's raining outside -- it's a fact," he said.
Promoted on Christian radio
Cook planted the seeds for the scheme in 2003 after he came under investigation by the FBI for other, unrelated investment activities that resulted in regulatory sanctions but no criminal charges. It was then that Cook created Universal Brokerage Services in Plymouth. That firm spawned several offshoots with Universal Brokerage or UBS in the titles, and in 2005, the operation moved to a residence Cook bought on Tiffany Court in Burnsville.
Pat Kiley, a former appliance and gold salesman, and Jerry Durand, another former gold salesman, pitched Cook's investment program on Christian radio. Kiley's radio program, "Follow the Money," eventually drew a national following and was carried on about 200 radio stations.
In 2007, Cook, Durand and Plymouth financial adviser Christopher Pettengill set up shop as Oxford Global Advisors in the historic Van Dusen mansion, just south of downtown Minneapolis. Initially, the men were equal partners, along with Jason "Bo" Beckman, owner of The Oxford Private Client Group, an advisory firm that specializes in equities.
Durand and Pettengill broke away from Oxford Global in the summer of 2008, prompting Cook to rename his business Oxford Global Partners. Beckman moved out of the mansion last summer, after the currency program collapsed.
The mishmash of Universal Brokerage and Oxford business entities is what led attorneys for some spurned investors to describe the operation as "confusingly intertwined" when they filed a federal lawsuit last July alleging fraud.
Rosenbaum asked Cook if he directed the currency program. "I was one of the partners," Cook answered.
Only Cook has been charged with criminal wrongdoing.
Cook told Rosenbaum that, beginning in about 2006, he raised about $100 million to invest through Crown Forex SA, a firm he found on the Internet. Cook said he and his partners hired attorneys to check out the firm and he visited its offices in Switzerland and Jordan, where it had technology support. "At the time, I believed it was legitimate," Cook said.
In late 2008, Cook said he and his partners learned Crown Forex was in trouble with Swiss regulators. They met with the firm's executives, who proposed a solution, Cook said without elaborating.
Cook said he and his partners didn't tell their investors about Crown Forex's troubles and continued to raise money and take salaries and commissions. Rosenbaum asked how much.
"In 2008, about $5 million," Cook said. Although the plea agreement says he diverted investor funds for other purposes, Cook claimed the money he spent on cars, real estate and luxuries came from earnings.
A path of devastation
He denied that the roughly $13 million spent on land in Panama for a condominium tower and a hotel-casino project came from investors. "It was an investment my partners and I decided to do," Cook said, contradicting the findings of federal regulators.
That angered Barb Pefley, a former employee who also invested in the program. "All the while he was shoveling our money into a hole he claimed he was making profits."
Larry Paige of Robbinsdale left the hearing disappointed. "Anything under a thousand years is not enough," he said. Paige and his wife had invested about $100,000.
Mary Abrahamson of Brooklyn Center said she wanted Cook to identify his partners. She said she and her husband, Ralph, invested $750,000 in the currency program through Beckman.
Cook admitted to filing a false tax return for 2008, claiming income of just $100,000. "I cheated the government of approximately $2 million in taxes," he said.
Cook has already begun to cooperate with authorities. An associate delivered $363,700 in $100 bills that Wells Fargo converted into a cashier's check, payable to U.S. District Court. He also turned over some bejeweled purses that resemble Faberge eggs, and a few genuine Faberge pieces, as well as a watch collection.
Sarah Gorvin is a University of Minnesota student reporter on assignment for the Star Tribune.