ATM LEASEBACK SCHEMES-- any insight?

[The Observer]

They would rather Ed and Joel participate as distributors and buy their product for the purpose of resale.

Then... why... is there... no... indication... that they were... ever... "distributors"?

Consider worried's musings, above. Too many anomalies to explain away as coincidence, too intricate to dismiss with "Oh, Gillis and Wishner were idiot suckers."

Until the day that someone can show that FD was giving or holding money for Ed and Joel or gave them ownership in FD, all we have at this point is Ed and Joel giving money to FD. And at this point, the only conclusion available is that they got took.

[Tednewsom]

Your opinion is absolutely, 100% valid.

OK, sure, it makes no sense to me regarding basic human behavior, the Boyz' previous 20 years of informed psychological manipulation of thousands of suckers, and their clear knowledge of how to avoid a suckers' suspicion of a scam... but, uhhh... yeah, sure, they both simultaneously had lapses of intelligence for several years and became Supreme Rubes. Yeah. Yeah! It could happen. I guess.

[Gregg]

Never underestimate the combination of greed and stupid, which you can find in some people who are otherwise pretty smart. You may read some scam stories and think "what idiot fell FOR THAT?"

Mark Whitacre, a senior Vice President at ADM, PhD in biochemistry, his whole life a pretty smart guy. Until he fell for....wait for it...
.
.
.
a 419 scam. He sent everything he had (millions!) to them, and when he still couldn't get that last permit from Nigerian Customs he started embezzling from his company....

Dollars to donuts, Fuel Doctor is Joel and Ed getting took....

[Dead Man Walking]

Joel, believe it or not sold machines to his Father in law. In the end of this scheme he was having to issue his
Father in-law $20,000 + thousand a month based on the number of machines his Father in-law had purchased.

Lee, his father in-laws name, recently died leaving all to Joel's beloved wife, Carol. Carol took her inheritance and
bought a condo since her home in Woodland Hills is no longer hers.
( sale currently pending , check zillow.com, 4510 Winnetka, Woodland Hills)

So hear is the Question:

Can the receiver pursue a clawback against Joel's dead Father in-laws estate and chase down Carol's new Condo?????

[Tednewsom]

Well, Gregg... excellent point about Whitacre (if it's true. Actually, it's poetically terrific if it's true. IF.) But bear in mind: his being duped into an idiotic Nigerian scam predated his scamming of his employer for millions while simultaneously blowing the whistle on others' corruption. Also... Whitacre was pretty much nuts.

As for Dead Man's observation, my suggestion: throw the old hag out onto the street and sell the joint.

(And while we're at it, find out if in fact his Father-in-Law ever actually paid a dime for his ATMs-- or, instead. got them at the Special Friends of Joel Reduced Rate of no money down and no payments ever.)

[Dead Man Walking]

The boys definitely got taken by the Fuel Doctor scam. They bought in thinking this is a great way to make a bunch
of money legitimately . Mark So-so sold them lock stock and barrel. Initially it was just them owning 1/2 for a certain buy in
give or take a couple million. Joel went so far as to get some of the ATM flock to buy supposed non transferable shares, for a dollar a share and hyped it up as a pre sale position for an up and coming IPO. It took a big dump when consumer reports came out and basically said the whole thing was snake oil.

It had a slow sizzling death with the story being that they were hurt by the Consumer Report write up and were working
on putting the IPO in the European stock market. By this time Mark So-so was using the dough to take care of paying for
the gadgets being made in Asia and take care of his living expenses. Joel and Eddie kept getting coned via So-so that
more Money was needed etc. etc. etc. and thats how the bullshit goes.

Basically two Low life bottom feeding scum suckers getting coned by a con. I think they call it Karma.

[The Observer]

Can the receiver pursue a clawback against Joel's dead Father in-laws estate and chase down Carol's new Condo?????

It is a distinct possibility. Even if the clawback against the estate does not come about, if the judicial system were hold to Carol to be personally liable for restitution because it was shown that she benefited from the proceeds her husband was transferring to the community property, the condo could be sold to fund that restitution. This happened to spouses of the principles in the Madoff scam.

Of course the condo has to have such value that there is a equity position in it. If Carol only made a minimal down payment and has the rest of the condo in hock, it won't be worth pursuing.

[Tednewsom]

What indication is there that Joel Gillis and Ed Wishner ever put a dime into "Fuel Doctor," much less got snookered?

This is from an annual report of FD, which was pretty prompt and verbose about their ups and downs:

Notes 6 through 8

Related parties
Related parties with whom the Company had transactions are:
Mark Soffa
Significant Stockholder of the Company
Joel Gillis
Significant Stockholder of the Company
Ed Wishner
Significant Stockholder of the Company
Nationwide
An entity owned by two significant stockholders of the Company

Related Parties Notes Payable
The $1,000,000 line of credit is from Nationwide, an entity owned by Joel Gillis and Ed Wishner which bears interest at 10% and is due June 29, 2012. As of March 31, 2012 and December 31, 2011, the Company borrowed $883,520 and $442,000 on the line of credit.

What do you bet a certain Mr. Fitzwilliam oversaw issuing this "line of credit"? You know, that same affable district bank manager Fitzwilliam who magically bought thousands of "ATMs" without ever putting down a dime, but got thousands of bucks per month, every month, for years?

In a world of phantom cash machines, complex shell games, bogus bookkeeping, crooked bankers and useless cigarette lighter gizmos... using the falsely-upheld credit status of one con (NASI) to collateralize another equally-crooked scheme (FD) in exchange for a cut of the ill-gotten gains (in the form of shares in the FD scam).... that's not even a stretch of the imagination. And the Big Con guys would not need to "spend" a dime of real money. Fitzwilliam juggles a couple of figures on a ledger, purjurously signs off on the deal, and all of his crooked clients are happy. Gillis & Wishner own a passive piece of Soffa's scam-- AND can probably deduct their "losses" on their own Nationwide taxes. Soffa's grift looks financially solid on paper and he's able to continue the game. And Fitzwilliam shaves his percentage off the top.

Given what's been documented about the lot of 'em, that makes a lot more sense and is far more in character for all of them than two experienced grifters suddenly going stupid (as well as their pal the banker not mentioning to his friends that it's a ridiculous waste of money.)

[The Observer]

And yet these two smart grifters, Joel and Ed, just go belly up, accept what are virtually life sentences, and don't volunteer to turn state's evidence against Fitzwilliam and Soffa in return for getting a reduced sentence? While FD gets a loan that cost them nothing - other than the possibility of returning the principal if the court orders restitution? And Fitzwilliam and Soffa walk off into the sunset, scot-free?

I don't know, Ted - your scenario makes Ed and Joel look even more stupid than you claim our scenario does.

[Tednewsom]

Well, Ob... unless you're privy to what the NASI boys told the prosecutors and the investigators, I'd say (ahem) the jury is still out on whether they went belly-up and were given a heavy sentence without negotiating. It's a "life sentence" only because of their age. They ought to have gotten twice the prison time to make sure they'll never get out.

Given the sunlight only now shining on both Fitzwilliam and Soffa, I should guess the disinfectant has not yet begun to clean.

[Arthur Rubin]

Amway does sell products. It's the upper-level IBOs (or whatever they are called, now), who sell support services and "distributorships", of which Amway knows

nothing.

[Tednewsom]

I don't think I said Amway doesn't sell stuff, or that there IS no stuff. Of course there's Stuff. What I meant was that the Stuff is unimportant in the big scheme of things. It's a cosmic version of the old Cloverine Brand Salve schtick which used to run their ads in every comic book in the world. It's Carter's Little Liver Pills. Plainly, it's carnival slum. It's not the product which is important, it's the process.

[Arthur Rubin]

Well, I tend to agree, but we don't want to state Amway is a scam....without proof.

[Tednewsom]

If it will keep domestic discord and the lawyers away, I won't refer to Amway as a transparent con game with soap.

[Tednewsom]

Joel, believe it or not sold machines to his Father in law. In the end of this scheme he was having to issue his Father in-law $20,000 + thousand a month based on the number of machines his Father in-law had purchased

The "sale" of ATM contracts to the father-in-law... I suspect this was like the "sale" of ATMs to Fitzwilliam the banker. A bargain price: nothing down, and nothing owed, ever. And those "profit" checks magically roll in every month, right on time.

Recall that Gillis' wife advised some close friends not to invest in the scheme. I doubt she'd then turn around and say, "Dad, do it! Buy ten. Buy 20! It can't lose! And Joel goes to Temple every Friday!"

[CJOHNSON]

We amended our complaint in the ATM case. You can find it here: http://www.hbsb.com/wp-content/uploads/ ... s-1-26.pdf The complaint is 57 pages, the exhibits are 187 pages, so it may take a while to download.

[Tednewsom]

A lot of work. I like the theory. City National Bank's not going to be happy about it, and I expect they'll take the fast track and, after their initial requests for dismissal get shot down, they'll offer to settle just to stop the bad press and tarnish to their reputation. Y'know, it might just be that this time, some Ponzi victims get more that 2 cents on the dollar.

[worried]

We amended our complaint in the ATM case. You can find it here: http://www.hbsb.com/wp-content/uploads/ ... s-1-26.pdf The complaint is 57 pages, the exhibits are 187 pages, so it may take a while to download.

On page 7/57, there are some conflicting statements you might want to fix:

Betty Saleh would never unknowingly
invest in a Ponzi scheme. Betty Saleh would knowingly invest in a Ponzi
scheme. Fitzwilliam and Betty Saleh knowingly invested in the NASI Ponzi
scheme and made a handsome profit.

On page 8/57, there it is, the reason new banks accounts were set up and a flurry of checks sent out in the final days:

Fitzwilliam made a substantial profit on his
investment in the Ponzi scheme, and received a final preferential $60,000 return
of principal days before NASI collapsed.

... it was the banker making sure he got as much as he could, not Joel/Ed


Starting at numbered paragraph 88 on page 38 of 57, the story is told about compliance personnel at CNB attempting to verify that NASI was not a scam:

88. On or about May 19, 2010 (and annually, according to Fitzwilliam),
the CNB compliance personnel requested that Fitzwilliam obtain for the NASI
account under Fitzwilliam’s supervision:
 Documents establishing ownership of the ATMS; and
 Documents showing the number and locations of client’s ATMs
(Exh. 24.)
89. Based on the language in the request for documents, it appears as
though CNB compliance believed NASI owned all of the ATMs from which it
derived the income it deposited at the bank. In Exhibit 24, Fitzwilliam transmits
Gillis’ email response to compliance and, thereby knowingly approves, endorses
and ratifies Gillis’ false representations that NASI installs and purchases ATMs,
when Fitzwilliam knows NASI sells ATMs to investors and then leases them
back, including, at the time, at least 20 machines still allocated to Fitzwilliam’s
Bribet Services.

The complaint goes on to describe how it's obvious that Fitzwilliam knew he was helping to deceive the bank's internal compliance regulators, BUT,... (now, again, I'm not a lawyer so take my criticisms/comments accordingly), I think I would have added a paragraph stating that it seems patently obvious that the compliance regulators were pretty negligent in just accepting NASI's assertions through Fitzwilliam that 'everything is fine'. In fact, in the next paragraph this is stated:

Therefore, according to
Fitzwilliam in Exhibit 24, all of NASI’s thousands of ATMs – the ATMs it owns
outright and the ATMs it sells to investors – are processed by the ATM
processing companies utilized by NASI. Therefore, if compliance needs evidence
of NASI’s ownership of ATMs, the documents sent to NASI each month by the
processors, as independent third parties, would be the natural source of unbiased
information on the issue.

Here is where I would have injected the obvious: the banking regulators should have told Fitzwilliam "wait a minute, we're not in the business of just taking people's word for it, we want to see the actual processor paperwork at least". It's the regulator's job to ask those questions and scrutinize paperwork for authenticity, correctness (dates, numbers, etc.), and if need be, follow up him/herself by contacting 3rd parties independently.... How do I know this? Because I do a VERY similar thing in the technical world. I am not in the business of just taking somebody's word that they've calculated or tested something properly, I have to see ACTUAL, OBJECTIVE, UNBIASED EVIDENCE. Now, I KNOW it has to work the same way in the money world. I know they take all the same math classes I did, and there is a lot at stake in both worlds. This is just my half-baked, non-lawyer opinion, but, it seems to me that this is a real smoking gun in terms of CNB liability. After reading exhibit 23, I think it's even more obvious that the bank's internal regulators absolutely did NOT do anything close to what they were REQUIRED to do. That points to management and supervision as well as the other things that are already spelled out in the complaint.

It will be very interesting to see the bank's side of the story (rebuttal), if they don't just settle instantly....

Exhibit 26 at the very end of the amended complaint is one of the best. Joel/Ed collected ~$15M(!) in cash in the last 2 months AFTER the SEC subpoena, but the net bank balance went from $4M to ~$190k. So, basically, they kicked in the NO2 and burned the motor out sucking up all the money they could while sending it out...

[Dead Man Walking]

From what I can Gather the recent complaints filed are via private parties that have engaged there own lawyers.
The case on the surface sounds very destructive for the bank . If only 1/2 of the complaint is provable then the bank will not want this to drag out in the press (-).

Questions:

1.) If these cases settle will they become a precedent for the receiver to pursue like settlements or do you think the settlement would pull the receiver and his data into the mix and create a once and for all resolution for the Bank?????

2.) If the bank settles with the receiver on all outstanding loses, by the investors, will clawbacks continue??

[Tednewsom]

I think there's already a case where a bank was held responsible, cited somewhere above. Madoff, maybe?

If it's settled, it won't establish a precedent, just a nasty habit (nasty, if you're a banker). And this one is more clear-cut, possibly not even precedent-setting. Here, the bank (via its chief branch officer) isn't just a passive performer but an actor in the scam. Most of these things (and heaven knows I'll be corrected if I'm wrong) aren't lucky enough to have their own guy overseeing the flow of funds.

As for the clawbacks-- I don't know why this would affect them. It's two separate actions. So far I see no action by the official receiver against the bank. And if I were rep'ping the bank, I'd argue, "Wait! WE weren't the big profit maker here, it was Gillis, Wishner, and the investors. Why should WE pay back millions that was never ours?"