ATM LEASEBACK SCHEMES-- any insight?

[wserra]

This case - 14cr712 (CDCA) - was a done deal before it was filed.

The charging document is an information. Since the charges - conspiracy, mail fraud - are felonies, Gillis and Wishner had the right to be indicted by a grand jury. They had to consent in order for the prosecution to be by information. Ninety-five percent of the time, the reason a defendant will consent is that a plea deal is in the works. Moreover, on Friday the following minute order appears in the docket:

SCHEDULING NOTICE OF SETTING CHANGE OF PLEA HEARING by Judge S. James Otero as to Defendant Joel Barry Gillis, Edward Wishner. With consent of counsel the Court sets a Change of Plea Hearing as to Defendants Gillis and Wishner on Tuesday 1/13/2015 @ 09:00 AM before Judge S. James Otero.

This was all worked out in advance.

Ted - I glanced through the last couple of pages of this long, long thread. As someone who has gone down this road many times, I see no reason to believe that the situation involves anything more than just two elderly defendants who realize that the jig is up and would like to avoid dying in jail. Occam's Razor is indeed a powerful tool.

[notorial dissent]

Not a pretty picture of a not at all pretty story.

[Tednewsom]

They were scum from the beginning.

Hey, as for others involved in the scheme, nahhh, I was just spitballing ideas for fun. There's no indication anyone else was involved. These's not even the suggestion of anything beyond these two middle-aged mooks coming up with this deal and running it by their own little crooked selves. The boys did it all on their own.

B. (4) Beginning as early as in or about 1999 and continuing to in or about September 2014... defendants GILLIS and WISHNER, together with unindicted co-conspirator NASI and others known and unknown to the United States Attorney... (emphasis mine)

[Repeated in paragraphs C. (5 )(a), D. (6), 7. A. (8), and 11. (A) (12).]

Of course, those goofy US Attorneys are famed for their supernumerary verbiage and pointless inclusions. They probably just figured their indictment didn't have enough words 'n'stuff.

[Judge Roy Bean]

...
Of course, those goofy US Attorneys are famed for their supernumerary verbiage and pointless inclusions. ...

Actually there's a grain of truth to that. Hence common phrases like "upon information and belief" and "others known and unknown" and of course the infamous "Doe" parties.

[Tednewsom]

Point taken, judge. However, "known and unknown" is self-explanatory. It's not "... and suspected others" or "... and probably a whole lotta people we can't identify or catch, just trust us on that."

The otherwise-terse document (terse for a legal document anyway) explicitly states that the US Attorney is aware of others by name and/or record, and also that it suspects other, unidentified players on top of that. Now, that could simply mean the couple of secretaries who rolled over immediately, but that's unlikely. It might refer to 2nd-party salespersons pedaling the scam. Or... oh, well, heck, who knows?

[wserra]

Or... oh, well, heck, who knows?

In point of fact, I know.

Based on personal experience, in excess of ninety percent of the hundreds of conspiracy indictments that I've seen contain "others known and unknown". It's what lawyers call "boilerplate".

[Tednewsom]

Well, then, I guess that settles it, since the rest of the indictment is all so vague and boilerplate and everything.

[Judge Roy Bean]

Point taken, judge. ... oh, well, heck, who knows?

Exactly. It's all speculation.

But I'm trying to understand your point/motive in positing that there have to be some kind of major criminal enterprise connections for these two to have gotten as far as they did.

Granted, if they were actively laundering money they could not have accomplished it on their own, but if they didn't find a need to clean up cash and use it to buy undiscoverable assets from parties willing to deal in cash, they are more likely to be just what they seem to be - a couple of schmucks who's luck finally ran out when sales didn't generate enough cash flow to cover expenses.

[JamesVincent]

B. (4) Beginning as early as in or about 1999 and continuing to in or about September 2014... defendants GILLIS and WISHNER, together with unindicted co-conspirator NASI and others known and unknown to the United States Attorney... (emphasis mine)

[Repeated in paragraphs C. (5 )(a), D. (6), 7. A. (8), and 11. (A) (12).]

Of course, those goofy US Attorneys are famed for their supernumerary verbiage and pointless inclusions. They probably just figured their indictment didn't have enough words 'n'stuff.

Wes may have to correct me but, if memory serves, the short of it is that it allows the prosecutor to name others later in the investigation. If the charges were leveled against just Wishner and Gillis and , later on, there were found to be others involved it might make it harder to press charges since the two were solely charged with the crime. Again, may be off, just remembering a conversation with an attorney I worked for a long time ago.

[wserra]

the short of it is that it allows the prosecutor to name others later in the investigation

Depends on what you mean when you say "name". No one else could be charged without a superseding indictment - that pesky Fifth Amendment - or, of course, his/her consent. However, it allows prosecutors to prove the acts of other persons for Pinkerton liability and to use their statements against the named defendants as made in furtherance of the conspiracy (FRE 801(d)(2)(E)). That's why it's boilerplate - and means little in an individual case.

[JamesVincent]

Depends on what you mean when you say "name". No one else could be charged without a superseding indictment - that pesky Fifth Amendment - or, of course, his/her consent. However, it allows prosecutors to prove the acts of other persons for Pinkerton liability and to use their statements against the named defendants as made in furtherance of the conspiracy (FRE 801(d)(2)(E)). That's why it's boilerplate - and means little in an individual case.

That was what I was remembering. Thanks Wes.

[Tednewsom]

I explored the possibility because someone else suggested it two pages back: none other than the eminent Judge Roy Bean, the Law West of the Pecos:

Spending cash on large-ticket items isn't as simple as it sounds, either - unless you're connected to some other criminal enterprise who is willing to help you get around the factoring issue. For a percentage, of course.

One has to wonder if these two yahoos were "connected" to certain resourceful fellows.

Yes: it could be as simple as two schmucks running a grift too long and their luck ran out. Nice and tidy. I hope that the victims see a little something out of this mess, and that the con men spend their few remaining years in a cell with a big drooling fella named Bubba.

Given the entire situation, however, there are a number of odd questions raised by the operation and the "leaseback" schemes as a whole. First, the specific scenario of the grift. These guys did not have a history of criminal behavior, though one could say insurance salesmen are legalized grifters. Yet NASI (and its corporate predecessor, ATM Holdings) functioned precisely according to a pattern which can be seen in every prior "ATM leaseback" scheme. They dived in and followed the script.

Where'd they come up with the idea? Spontaneously, on their own? Doubtful; they don't seem to have the imagination. Copied it from news reports of other ATM leaseback scheme busts? Weird, because every one of them ended with the principals in jail, which they could certainly anticipate by the large number of highly-publicized busts and prosecutions. Why would you want to end up in jail? Or was it presented to them, laid out as a sure-fire plan, a no-lose proposition-- "sold" to them in the same devious way they in turn "sold" the ATM contracts?

Second, the rat-on-a-treadmill situation of the latter part of the scam. Even given the real situation as we know it now, there was still a lot of work involved. Wishner the accountant may well have kept eight sets of books, but juggling 2500 versions of reality, falsifying 30,000 sets of paperwork, dummying up phony individual spreadsheets and reports and making sure 2500 people received checks every month is a full time job. Gillis: hustling people at seminars all over the country, giving suckers the pitch at yacht clubs, dodging suspicious investors and representatives, prowling through phone books to find real ATM locations to use as cut-outs for NASI, doubling and redoubling his desperate search for more suckers as the monolith grew -- again a LOT of work for a guy who probably thought NASI was his own personal 401-K.

Observer here used Bernie Madoff as an example of an individual who just kept it up because he didn't want people to be mad, or disappointed, or whatever. First off, I cannot imagine his sons & workers were that naïve. More importantly, the size of the investments Madoff handled was not the sort of money people like to lose. Jail is the least of one's worries. If a client can afford to bet a half million bucks, or a million, or $10,000,000 on something, one can certainly afford 50 G's for a one-eyebrowed thug named Mahroot to break a couple of arthritic kneecaps. That's a far more direct method of collecting a debt than a strongly-worded email or dropping dime to the authorities. (So I don't buy into the "poor embarrassed little old man who did it all by himself and didn't want to be embarrassed" take on Mr. Madoff.)

Thirdly, the official description and the dismissal here of the "boilerplate" phrase (which is something which had not even come up when I wove my fanciful tale of other hands involved, thanks to the eye-opening hint by Judge Roy Bean). That's a legal document, signed by and attested to under oath by the US Attorney(s). It is the basis for all further action against Gillis and Wishner. If there are elements of it which are untrue-- that there are no "... others known and unknown to the United States Attorney" -- then the document hands the scam artists & their attorneys a procedural Out. "It wasn't Gillis and Wishner, they were just pawns. It was those others that did it-- and the US Attorney knows who they are!" Or, conversely, "The document contains falsified and inaccurate information, with at least a half dozen lies. The US Attorney's office knows there are no others involved, yet stated there were directly in the charge. The entire document is suspect." That sheds doubt on the entire charge.

And it actually is a tersely-worded document, without a surfeit of legal-ese. Boilerplate or not, it specifically and repeated mentions "... others known and unknown to the United States Attorney," which means at the very least NAS's working salespeople and cooperative brokers, possibly their spouses & children-- or the "certain resourceful fellows" to whom the honorable Judge Bean alluded.

[Judge Roy Bean]

Ted - I think you confused the topic of the need to move/spend large amounts of cash with the idea of them operating the scheme with or on behalf of organized crime.

[The Observer]

First, the specific scenario of the grift. These guys did not have a history of criminal behavior,..

Where is there a prerequisite of someone having a history of criminal behavior in order to start a Ponzi scheme? Madoff never had a hint of criminal behavior in his background when he started his scam.

et NASI (and its corporate predecessor, ATM Holdings) functioned precisely according to a pattern which can be seen in every prior "ATM leaseback" scheme. They dived in and followed the script

Guess that Joel and Ed looked around and studied some of these earlier scams and thought they could get away with it. Given the right amount of hubris - and Joel seemed to be cursed with a extra helping of it - they might have thought they could run this scam until they died.

Where'd they come up with the idea? Spontaneously, on their own? Doubtful; they don't seem to have the imagination. Copied it from news reports of other ATM leaseback scheme busts? Weird, because every one of them ended with the principals in jail, which they could certainly anticipate by the large number of highly-publicized busts and prosecutions. Why would you want to end up in jail? Or was it presented to them, laid out as a sure-fire plan, a no-lose proposition-- "sold" to them in the same devious way they in turn "sold" the ATM contracts?

There is so much information and history out there on Ponzi schemes that it wouldn't take that much effort to come up with a particular variation. Why? Because it is the same freaking plan - promise the marks the sky and then give them a little bit back to keep them happy and quiet. It plays on our inherent sense of greed and self-satisfaction so there is an abundant pool of victims. There is a reason that Barnum said that suckers are born every minute.

And it doesn't matter that they knew what the prior results were. Every Ponzi scammer knows what the stakes are - they just think they are going to be the first to get away with it. But while you are it, why not ask why do people keep robbing banks when they know that prior bank robberies in the majority of cases ends up with the robbers being eventually caught, convicted and sentenced to prison. Apparently for the same reason: because they think they won't get caught.

Second, the rat-on-a-treadmill situation of the latter part of the scam. Even given the real situation as we know it now, there was still a lot of work involved.

Shrug, every criminal enterprise involves a lot of labor. There is no simple turnkey criminal operation that results in easy money. And some operations are so hard and difficult that in time the crook realizes that he worked harder for less money than if he had just gotten a minimum wage job. I read a economist's study of a "successful" drug dealer in one of big cities and the analysis he did showed that most of the dealer's "employees" effectively were working for less than minimum wage. And the drug dealer himself shut down the operation after realizing, on his own analysis, that he was not really making a lot of money, once he had to factor in bribes, protection money, hiring bodyguards to protect his dealers from other gangs, bail, and other "unexpected costs."

Observer here used Bernie Madoff as an example of an individual who just kept it up because he didn't want people to be mad, or disappointed, or whatever.

He kept it up for a number of reasons, but I think the primary reason was so that the money would keep coming in and he wouldn't have to end up being embarrassed in front of his family. I would hazard that Madoff had hoped he would be in his grave first before this all came to light, and then his family could deal with the mess.

First off, I cannot imagine his sons & workers were that naïve.

Perhaps. Madoff really never cooperated with the investigation, never tried for a plea bargain and, in fact, plead guilty outright, thereby causing some speculation that by doing so he was hoping to protect others from prosecution. Judge Chin thought Madoff had lied in some areas or was not being cooperative, thus one of his reasons for throwing the book at him. Give all of that, it may be entirely possible that Madoff took a dive for his sons - and it would be understandable. There were a few other people who went down with Madoff, however.

More importantly, the size of the investments Madoff handled was not the sort of money people like to lose. Jail is the least of one's worries. If a client can afford to bet a half million bucks, or a million, or $10,000,000 on something, one can certainly afford 50 G's for a one-eyebrowed thug named Mahroot to break a couple of arthritic kneecaps. That's a far more direct method of collecting a debt than a strongly-worded email or dropping dime to the authorities.

Really? How many times has Bernie had his kneecaps broken since this all came to light? After all, there were quite a few people in that $18 billion loss zone that could afford to do that. Well, there was that one time that Bernie was alleged to have gotten injured in prison in a scuffle with another senior citizen prisoner, but everyone, including Madoff has denied in an affidavit that he got injured that way. So apparently someone hired an old codger to go after Madoff and missed his kneecaps entirely. So they threw even more money away.

(So I don't buy into the "poor embarrassed little old man who did it all by himself and didn't want to be embarrassed" take on Mr. Madoff.)

Of course not. Far better to believe in stories about old washed-up hitmen being hired to go into prison and try their damnedest to see if they still have what it takes to take out Bernie's kneecaps. By the way, his kneecaps are doing fine, but his kidneys are apparently having some problems with cancer. We'll see if those go first before his kneecaps.

[Timehasrunout]

What I found interesting from the receiver's online survey for investors was the question "Who recruited you for this investment." Not who told you about it? or how did you find out about it? Which by word of mouth standards, implicates a lot of people; Family, friends and co-workers.

I found the wording challenging to answer because I didn't want to name the individual who told me about Nationwide, not because they are blameless but, because I know they were deeply and heavily invested themselves and lost incredible amounts of money.

The first time I spoke with Joel (and not his secretary) was when the checks started bouncing, as he was reciting his cheat sheet on why this "freak" occurrence happened he actually snorted, SNORTED like even he couldn't believe the amount of verbal manure that was coming out of his mouth. Not the sort of behavior one would expect from a company raking in millions of dollars, I knew in that instant, feces was about to fly.

Could this be bigger than two senior citizens? I am open to what Ted's theories are mainly because I owe him a round of thanks, I came across this thread just as I was about to invest further. Nationwide did not respond to my written or verbal requests to buy back,
but at least I avoided getting in any deeper.

[Tednewsom]

Could this be bigger than two senior citizens?

Nahhhh. Dey dood it all by dere widdle seffs. The US Attorney was pulling everybody's leg about that "persons known and unknown" stuff, those big boilerplate kidders. What a bunch of cards, those government lawyers. Anything for a laff, I tell ya.

Madoff really never cooperated with the investigation, never tried for a plea bargain and, in fact, plead guilty outright, thereby causing some speculation that by doing so he was hoping to protect others from prosecution. Judge Chin thought Madoff had lied in some areas or was not being cooperative, thus one of his reasons for throwing the book at him.

And you see nothing odd about this? A guy who still has millions at his disposal for the best attorneys in New York instantly rolls over and says, "OK, yeah, yeah, it's me, look no further. Call off the chase, I did it all myself."

[JamesVincent]

That is enough. Talk about useless and baseless speculation. There is absolutely no reason to believe that this a grand conspiracy and that anyone other then Wishner/ Gillis are responsible. Would there have been people involved in the recruitment of others? Of course there were. That's how the business works. Is there any reason at this point to speculate that there was an entire 'nother organization involved? No, there isn't. As a Ponzi this wasn't a very original one nor was it a very good one. The simplest explanation often being the best one would lend me to believe that these were two overly cocky, greedy men who cooked up themselves a get rich, no fail plan and it failed miserably. If you go back to the beginnings of this thread you will see that outsiders thought from the get go that this entire system was flawed and deserved a good looking into. Not only did it make no sense financially, it made no sense as a business. For all the talk about the Mafia, the Mafia knows how to run a business much better then this. To speculate anything different is just that, pure speculation.

And to discount the advice of experts just because it does not fit into your theory is exactly why this website is here, to teach how the law really works and to show people why you should listen to the experts when it comes to law or finances. To ignore that completely is ridiculous.

[notorial dissent]

Well said and to the point. Unless and until the receiver gets around to publishing a detailed audit there is no way to know what happened or where the money went, and arguing about it serves no purpose.

At this point it is rather like the Titanic, it's sunk, gone, kaput, an ex-ship, not there any more, and isn't ever going to be there ever again, best to accept that fact and move on.

I'll quite freely admit, I'd like to know what happened and how it was done, but I'm not going to worry myself in to an ulcer about it. I'll either find out or I won't.

[The Observer]

And you see nothing odd about this? A guy who still has millions at his disposal for the best attorneys in New York instantly rolls over and says, "OK, yeah, yeah, it's me, look no further. Call off the chase, I did it all myself."

No, I see nothing odd about it all, if you will remember that you speculated that Madoff's sons could not have been so naive as to not know something funny was up. So let's go one step further and speculate that perhaps the sons had some involvement. In that event, Madoff's rolling over would make perfect sense since it would take away any leverage away from the prosecution in getting Madoff to provide evidence against his kids as part of a plea deal.

And to consider another angle, Madoff's rolling over could have simply been his attitude towards having to go through a long and lengthy trial that would result in a predictable end. He may have considered the fact that he had been running this scam since 1980, he was worn out keeping it going and just no longer had the heart or fortitude to endure another 2-3 years of stress and confrontation from all of the people who would be in court to testify against him.

...these were two overly cocky, greedy men who cooked up themselves a get rich, no fail plan and it failed miserably.

Well, in my humble opinion, this scam didn't fail miserably in terms of it not shutting down in the first year of the running. Of course, for the victims it was a miserable failure.

For all the talk about the Mafia, the Mafia knows how to run a business much better then this.

That is another good argument, although there were some "business ventures that the mob failed at as well. But Ted wants to put out the view that organized crime wasn't really running NASI as much as they were systemically robbing it for 19 years, with Ed and Joel working too hard and putting in late nights in sheer terror to make sure the vaults were full when the goons showed up. So in essence we should feel sorry for Joel and Ed because they were victims too.

[Tednewsom]

Guys... I made myself quite clear that the inference of some other entity involved was not limited to broken noses and vowels on the end of their names. I'm not pushing that agenda any more than the nice simple explanation that it's all these two guys' fault.

I would not agree that a scam which probably was taking in between ten and thirty million dollars a year was a failure, though. Doomed with absolute and predictable certainty, yes. But scarcely a failure.

Nor would I think anything I've written recently or in the past indicates I have sympathy for the two mooks at all. Considering I've referred to them publically as criminals, grifters, scam artists, con men, crooks, thieves, soulless vampires, embezzlers, rotten no-good sons of bitches, bastards and swindlers, I think I've made my point of view fairly clear.