Pottapaug1938 wrote:Oooh. No more Mr. Nice Guy from Judge Friot.
Sounds like the legal equivalent of "payback's a b*tch"....[/quote]
There's also an expression about giving someone enough rope.
Meanwhile, I think Stilley might finally give up fighting the disbarment thing.
Dan Evans
Foreman of the Unified Citizens' Grand Jury for Pennsylvania
(And author of the Tax Protester FAQ: evans-legal.com/dan/tpfaq.html)
"Nothing is more terrible than ignorance in action." Johann Wolfgang von Goethe.
Pottapaug1938 wrote:In addition to being labeled "predators", they were also labeled "frauds".
The judge wanted to silence them and discredit them because they were getting too close to the truth.
Dan Evans
Foreman of the Unified Citizens' Grand Jury for Pennsylvania
(And author of the Tax Protester FAQ: evans-legal.com/dan/tpfaq.html)
"Nothing is more terrible than ignorance in action." Johann Wolfgang von Goethe.
I wish there were more sources of information regarding what happens to "white collar" convicts in the Federal system; the news media tends to portray the whole experience as just a really bad dorm experience.
The public at large, some who may fall into the schemes perpetrated by Stilley, etc., may have a myopic view of the criminal justice system and what life is really like during incarceration.
Most people don't even realize there is no such thing as parole in the Federal system; there seems to be a commonly-held view that if you get five or ten years you'll be out in one or two with good behavior including time served.
And no one seems to talk about what "supervised release" is in their later life. The check-marks on the form apparently don't adequately alarm these fools in regard to what they've given up in terms of personal freedom after they walk out of the facility.
Granted, the guy who comes out after serving time for tax fraud isn't exactly the first guy on the list of persons of interest in kidnappings, drug smuggling, car thefts or assault, but there is a stigma - one that does not go away. Ever.
Amazing that the ego of some of these people can cloak the criminal acts in some misguided "patriotism" so as to not have to realize they've become little more than part of the criminal population.
The Honorable Judge Roy Bean The world is a car and you're a crash-test dummy. The Devil Makes Three
Judge Roy Bean wrote:
Amazing that the ego of some of these people can cloak the criminal acts in some misguided "patriotism" so as to not have to realize they've become little more than part of the criminal population.
Just for the heck of it, I checked the Federal Bureau of Prisons web site this morning -- the inmate locator -- for Stilley and Springer, not expecting to find any accounts set up for them yet.
03/18/1998 MINUTES: by Magistrate Claire V. Eagan; deft appears in response to arrest on warrant for civil contempt; Case No. 97-5458, ED/Pennsylvania; ct finds deft has purged himself of the civil contempt and is ordered released from custody of USMS. (CVE-MJ)j tape 21 (sjm, Dpty Clk) (Entered: 03/23/1998)
Demosthenes wrote:03/18/1998 MINUTES: by Magistrate Claire V. Eagan; deft appears in response to arrest on warrant for civil contempt; Case No. 97-5458, ED/Pennsylvania; ct finds deft has purged himself of the civil contempt and is ordered released from custody of USMS. (CVE-MJ)j tape 21 (sjm, Dpty Clk) (Entered: 03/23/1998)
Yeah, I saw that too. But look at the dates.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Name Court Case No. Filed NOS Closed
2 SPRINGER, LINDSEY K azdce 2:2000cv00147 01/26/2000 850 07/07/2000
Wiggins, et al v. Holt
3 SPRINGER, LINDSEY K flndce 1:2000cv00170 09/19/2000 190 06/11/2001
MAGRO, et al v. BEVRE, et al
4 SPRINGER, LINDSEY K okwdce 5:2005cv00466 04/25/2005 870 10/06/2005
Springer v. Internal Revenue Service et al
5 SPRINGER, LINDSEY K okwdce 5:2005cv01075 09/15/2005 870 08/07/2006
Springer v. Internal Revenue Service et al
6 SPRINGER, LINDSEY K cacdce 8:1999cv01379 11/05/1999 190 12/14/2000
Lindsey K. Springer v. Larry Flynt
7 SPRINGER, LINDSEY K azdce 2:2000cv02424 12/20/2000 190 10/29/2001
Wiggins, et al v. Holt
8 SPRINGER, LINDSEY K mowdce 6:2007cv03448 12/06/2007 380 01/23/2009
Springer v. Springfield Business Journal
9 SPRINGER, LINDSEY K. flmdce 8:1998mc00008 01/16/1998 890 01/16/1998
Securities & Excha. v. Infinity Group Co., et al
10 SPRINGER, LINDSEY K. txwdce 1:2000cv00190 03/23/2000 441 03/27/2000
Springer v. Balough, et al
11 SPRINGER, LINDSEY K. gandce 1:1999mi00203 08/03/1999 890 11/02/1999
In Re: Magro and Springer v.
12 SPRINGER, LINDSEY K. gandce 1:2000cv00305 02/04/2000 850 05/25/2000
Magro, et al v. Bevre, et al
13 SPRINGER, LINDSEY K. dcdce 1:2001cv00574 03/19/2001 360 03/09/2004
SPRINGER v. SUPREME COURT/U.S.
14 SPRINGER, LINDSEY K. dcdce 1:2000cv01992 08/16/2000 440 04/30/2002
SPRINGER v. LORSON
15 SPRINGER, LINDSEY KENT okndce 4:1999cv00003 01/04/1999 950 11/09/1999
Springer v. Alabama, State of, et al
16 SPRINGER, LINDSEY KENT okndce 4:2008cv00004 01/07/2008 890 04/10/2009
Springer v. United States
17 SPRINGER, LINDSEY KENT okndce 4:1994mc00012 04/12/1994 999
USA v. Springer
18 SPRINGER, LINDSEY KENT okndce 4:2006cv00110 02/17/2006 890 06/21/2006
Springer v. Internal Revenue Service
19 SPRINGER, LINDSEY KENT okndce 4:2006cv00156 03/14/2006 890
Springer vs. Horn, et al
20 SPRINGER, LINDSEY KENT okndce 4:2000cv00191 03/01/2000 440 09/29/2000
Springer v. Marcelino, et al
21 SPRINGER, LINDSEY KENT okndce 4:2008cv00278 05/09/2008 870 03/16/2010
USA v. Springer et al
22 SPRINGER, LINDSEY KENT okndce 4:2008cv00278 05/09/2008 870 03/16/2010
USA v. Springer et al
23 SPRINGER, LINDSEY KENT okndce 4:1998cv00299 04/21/1998 320 08/25/1998
Springer v. Infinity Group Co., et al
24 SPRINGER, LINDSEY KENT okndce 4:1994cv00350 04/08/1994 890 02/22/1995
Springer, et al v. IRS, et al
25 SPRINGER, LINDSEY KENT okndce 4:1998cv00740 09/28/1998 110 05/05/1999
Springer v. Hustler Magazine, et al
26 SPRINGER, LINDSEY KENT okndce 4:1996cv00838 09/11/1996 440 02/19/1998
Springer, et al v. USA, et al
27 SPRINGER, LINDSEY KENT okndce 4:1996cv00838 09/11/1996 440 02/19/1998
Springer, et al v. USA, et al
28 SPRINGER, LINDSEY KENT okndce 4:1996cv00893 09/30/1996 890 01/24/1997
Springer v. USA, et al
29 SPRINGER, LINDSEY KENT okndce 4:1999cv00977 11/15/1999 440 03/21/2000
Springer v. Balough, et al
Criminal Cases
Name Court Case No. Filed Closed
30 SPRINGER, LINDSEY KENT okndce 4:1998mj00020 03/18/1998
USA v. Springer
31 SPRINGER, LINDSEY KENT okndce 4:2009cr00043 03/10/2009
SPRINGER, LINDSEY KENT
Appellate Cases
32 SPRINGER, LINDSEY K. 10cae 95-0719 07/27/1995 1 09/05/1995
SPRINGER v. ELLISON
33 SPRINGER, LINDSEY K. 03cae 98-1065 02/18/1998 2850 08/17/1998
US SEC, et al v. INFINITY GROUP CO, et al
34 SPRINGER, LINDSEY K. 03cae 98-1215 03/24/1998 1850 05/04/2000
US SEC, et al v. INFINITY GROUP CO, et al
35 SPRINGER, LINDSEY K. 03cae 98-1216 03/24/1998 1850 05/04/2000
US SEC, et al v. INFINITY GROUP CO, et al
36 SPRINGER, LINDSEY K. 03cae 98-1217 03/24/1998 1850 05/04/2000
US SEC, et al v. INFINITY GROUP CO, et al
37 SPRINGER, LINDSEY K. 08cae 09-1410 02/25/2009 4380 02/04/2010
LINDSEY SPRINGER v. SPRINGFIELD BUSINESS JOURNAL, et al
38 SPRINGER, LINDSEY K. 03cae 00-1899 06/21/2000 2850 02/14/2001
US SEC, et al v. INFINITY GROUP CO, et al
39 SPRINGER, LINDSEY K. 03cae 06-4158 09/26/2006 2850 04/05/2007
US SEC, et al v. INFINITY GRP CO, et al
40 SPRINGER, LINDSEY K. 10cae 01-5005 01/05/2001 3440 08/15/2001
SPRINGER v. RANCOURT, et al
41 SPRINGER, LINDSEY K. 10cae 09-5011 01/21/2009 3890 03/24/2009
SPRINGER v. SHERN, et al
42 SPRINGER, LINDSEY K. 10cae 09-5013 01/26/2009 3890 03/24/2009
LINDSEY SPRINGER v. DOUGLAS HORN, et al
43 SPRINGER, LINDSEY K. 10cae 10-5037 03/17/2010 1870
UNITED STATES v. SPRINGER
44 SPRINGER, LINDSEY K. 10cae 98-5056 04/16/1998 2440 06/15/1998
SPRINGER, et al v. USA
45 SPRINGER, LINDSEY K. 10cae 98-5057 2440 02/04/1999
WILLIAMS, et al v. USA
46 SPRINGER, LINDSEY K. 10cae 00-5071 04/25/2000 3440 10/30/2000
SPRINGER v. BALOUGH, et al
47 SPRINGER, LINDSEY K. 10cae 95-5072 04/19/1995 2890 04/08/1996
SPRINGER, et al v. IRS, et al
48 SPRINGER, LINDSEY K. 10cae 09-5088 06/16/2009 3890
SPRINGER v. ALBIN, et al
49 SPRINGER, LINDSEY K. 10cae 97-5093 05/20/1997 2890 10/16/1997
SPRINGER v. USA, ET.AL., et al
50 SPRINGER, LINDSEY K. 10cae 97-5095 05/21/1997 2440 10/16/1997
SPRINGER, ET.AL., et al v. USA, ET.AL., et al
51 SPRINGER, LINDSEY K. 10cae 99-5117 06/11/1999 4110 10/28/1999
SPRINGER v. HUSTLER MAGAZINE, et al
52 SPRINGER, LINDSEY K. 10cae 06-5123 06/27/2006 2890 05/01/2007
SPRINGER v. INTERNAL REVENUE
53 SPRINGER, LINDSEY K. dccae 04-5140 04/16/2004 2360 10/18/2004
SPRINGER, LINDSEY K. v. SUPREME COURT OF US
54 SPRINGER, LINDSEY K. 10cae 95-5142 07/13/1995 2890 04/08/1996
SPRINGER, et al v. USA, et al
55 SPRINGER, LINDSEY K. dccae 02-5159 05/16/2002 2440 09/20/2002
SPRINGER, LINDSEY v. LORSON, FRANCIS
56 SPRINGER, LINDSEY K. 10cae 09-5165 11/30/2009 1 12/04/2009
IN RE: LINDSEY K. SPRINGER
57 SPRINGER, LINDSEY K. 10cae 98-5182 09/30/1998 4320 08/26/1999
SPRINGER v. THE INFINITY GROUP, et al
58 SPRINGER, LINDSEY K. 10cae 99-5213 10/29/1999 1 11/08/1999
IN RE: L. SPRINGER v. -
59 SPRINGER, LINDSEY K. 10cae 99-5227 11/23/1999 3950 04/05/2000
SPRINGER v. STATE OF ALABAMA, et al
60 SPRINGER, LINDSEY K. 10cae 06-6268 08/24/2006 2870 05/01/2007
SPRINGER v. INTERNAL REVENUE, et al
61 SPRINGER, LINDSEY K. 10cae 05-6387 12/09/2005 2870 05/01/2007
SPRINGER v. INTERNAL REVENUE, et al
62 SPRINGER, LINDSEY K. 03cae 97-8157 12/02/1997 1 01/06/1998
IN RE: SPRINGER
63 SPRINGER, LINDSEY K. 10cae 08-9004 03/17/2008 1 08/31/2009
SPRINGER v. CIR
64 SPRINGER, LINDSEY K. 10cae 97-9008 05/09/1997 1 10/15/1997
SPRINGER v. CIR
65 SPRINGER, LINDSEY K. 09cae 01-55201 01/30/2001 4190 09/24/2001
SPRINGER v. FLYNT
Springer's "The Infinity Group" was caught running a Ponzi scheme.
SECURITIES AND EXCHANGE COMMISSION
v.
The INFINITY GROUP COMPANY, et al.
Civil Action No. 97-5458.
United States District Court,
E.D. Pennsylvania.
Feb. 6, 1998.
Securities Exchange Commission (SEC) commenced enforcement
proceedings against company involved in securities investments,
and their principals. The District Court, Dalzell, J., held
that: (1) defendants violated Securities Act prohibition on
interstate sale of unregistered securities; (2) defendants
violated antifraud provisions of Securities Act and Securities
Exchange Act; (3) promoters had joint and several liability;
(4) permanent injunction was warranted; and (5) third
parties receiving proceeds from securities fraud without
providing consideration would be required to disgorge them.
Order accordingly.
Kingdon Kase, C. Annette Kelton, Michael Novakovic, Philadelphia,
PA, for S.E.C.
Klehr, Harrison, Harvey Branzburg & Ellers by Richard A. Levan,
Philadelphia, PA, for Geoffrey P. Benson.
Saul, Ewing, Remick & Saul by James M. Becker, Philadelphia, PA,
for Geoffrey J. O'Connor.
Montgomery, McCracken, Walker & Rhoads by Richard L. Scheff,
Philadelphia, PA, for Futures Holding Co.
Lindsey Springer, Tulsa, OK, pro se.
Dilworth, Paxson by J. Bradford McIlvain, Philadelphia, PA, for
Robert F. Sanville.
MEMORANDUM
DALZELL, District Judge.
Together with our Memorandum issued yesterday, this will constitute
our findings of fact and conclusions of law in this nonjury action
under Fed.R.Civ.P. 52(a). We concluded a four-day Final Injunction
hearing yesterday.
As set forth in our Memorandum and Order yesterday denying
defendants' suggestion of lack of subject matter jurisdiction,
we have jurisdiction over the subject matter of this proceeding
pursuant to Section 20(b) of the Securities Act of 1933, 15
U.S.C. § 77t(b), and Section 21(d) (1) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78u(d)(1).
The numbers in this case demonstrate why Congress adopted the 1933
and 1934 Securities Acts. Through the Account of Mr. Robert Sanville,
the very able Trustee of The Infinity Group Company ("TIGC"), we have
learned that TIGC raised over $26.6 million from more than 10,000
investors nationwide, $24,597,386.29 of which (we have calculated)
TIGC raised through an "Asset Enhancement Program" which began in
September of 1996 that is the subject of this SEC enforcement action.
What happened to this money? Only $11,863,424.01--or approximately
48% of the total received from investors--went to anything that might
be characterized as an investment. From that $11.8 million in
putative investments, the evidence is uncontroverted that TIGC
earned not one cent of interest, dividend, or return of any kind.
Indeed, shortly after TIGC began what might pass as an investment
program, its investments began defaulting at the rate of nearly
three-quarters of a million dollars a month. It now appears
likely that the Trustee will be unable to recover even the
principal on these so-called investments, many of which are
now frozen or shut down by federal law enforcement authorities.
TIGC also used over $2 million in so-called downline commissions
to keep the engine of this enterprise humming like a new Mercedes
on the autobahn. [FN1] In the time-dishonored tradition of Charles
Ponzi, TIGC substituted new investors' money for real investment
return on old investors' funds.
FN1. We refer to the 1997 Mercedes 420 E relief defendant Lindsay
Springer bought with $50,000 of the funds TIGC gave him as "Bondage
Breaker Ministries."
The rest of TIGC's expenditures were even less investment-related.
More than $816,000 was spent on real estate, a significant portion
of which went to the purchase and development of a personal residence
for Geoffrey and Susan Benson. The Bensons also appear to have
furnished and maintained their new house at TIGC's expense:
$55,511.10 went to the purchase or lease of cars for their garage,
including a new Ford Explorer for the Bensons' son; a $6,133.46
spending spree at Circuit City; more than $2,000 spent at television
retailers; over $50,000 in "household expenses"; $5,000 to pay off
a home mortgage; $10,000 to pay off personal credit card bills;
$10,000 for school tuition for the Bensons' son; as well as hundreds
for jewelry, bowling equipment and membership fees, groceries.
In short, the Bensons used TIGC as their personal checking account.
In addition, Geoffrey Benson made an undisclosed donation of $1.265
million of investor funds to Lindsey K. Springer, d/b/a Bondage
Breaker Ministries.
In addition to all this, defendants Geoffrey Benson and Geoffrey
O'Connor paid themselves nearly $300,000 in cash from TIGC's funds,
none of it reported to the Internal Revenue Service or even documented
on TIGC's books-- which did not exist. Lastly, more than $1.9 million
remains unaccounted for, due partly to the incomplete and irregular
records defendants kept, and partly, we infer, from defendants' and
relief defendants' lack of cooperation in the Trustee's tireless
accounting efforts.
The parties, of course, differ over the legal consequences of this
financial train wreck. Defendants argue that, whatever the ultimate
consequences of their actions are, they do not include answering to
the SEC in this forum. We disagree. Undoubtedly TIGC's members had
faith in TIGC. They certainly had hope that its extravagant
guarantees would be fulfilled. But TIGC was no charity--investors
were defrauded for defendants' and relief defendants' personal gain.
For that, defendants must answer under the securities laws.
By Memorandum and Order yesterday, we found that TIGC's investment
offerings were securities as defined by the Securities Act of
1933 and Securities Exchange Act of 1934. Thus, we move to
the substantive securities violations charged in the complaint.
The SEC first claims that defendants TIGC, Geoffrey Benson,
and O'Connor violated sections 5(a) and 5(c) of the Securities
Act of 1933, 15 U.S.C. § 77e, by using the means or instrumentalities
of interstate commerce to solicit, sell, and convey their
investment contracts. In order to establish a violation of
section 5, the Commission must show that: (1) no registration
statement was in effect as to the security; (2) defendants
offered to sell or sold the security; and (3) defendants used
the means of interstate commerce in connection with the offer
or sale. See SEC v. Spence & Green Chemical Co., 612 F.2d
896, 901 (5th Cir.1980), cert. denied, 449 U.S. 1082, 101 S.Ct.
866, 66 L.Ed.2d 806 (1981); SEC v. Continental Tobacco Co.,
463 F.2d 137, 155 (5th Cir.1972). Once the Commission has
made this showing, the burden shifts to defendants to demonstrate
that the securities were exempt from the registration
requirement. See SEC v. Ralston Purina Co., 346 U.S. 119, 126,
73 S.Ct. 981, 985, 97 L.Ed. 1494 (1953).
The defendants admit that they did not file any such registration
statement. Nor do they dispute the evidence of record which
shows that (a) they mailed and faxed a blizzard of materials
--personally signed, at various times, by O'Connor and Geoffrey
Benson--soliciting investment contracts/capital units from
potential investors, and (b) they received checks and other
valuable assets that several thousand investors from all over
the country mailed to them. Thus, the burden is on defendants
to demonstrate that their securities offering was exempt from
registration pursuant to Section 4 of the 1933 Act, 15 U.S.C.
§ 77d. Given the size of TIGC's offering (nearly $24.6
million), as well as its scope (more than 10,000 investors
nationwide and abroad), and the means of offering--a fax on
demand line, voluminous mailings of marketing materials, a
website linked to TIGC's offices, a nationwide network of
telephone operators [FN2] and a proselytization program that
rewarded TIGC members for snaring new investors--we have no
difficulty finding that this was a public offering by TIGC as
issuer which is not exempted from registration. Thus, we find
that defendants TIGC, Geoffrey Benson, and O'Connor each
directly violated Section 5 of the Securities Act of 1933.
FN2. Page 17 of the "Financial Resources Special Report" that is
part of P-499, for example, invites investors to "call any of our
Professional Management team Members today", and lists individuals,
and their phone numbers, in New York, Wisconsin, Nevada, Kansas,
Texas, and Puerto Rico. This statement also lists Geoffrey O'Connor
and three others, and gives their Ohio telephone and fax numbers.
We now consider whether defendants TIGC, Geoffrey Benson, and
O'Connor violated the antifraud provisions of the securities
laws found in section 17(a) of the Securities Act of 1933,
15 U.S.C. 77q(a), Section 10(b) of the Securities Exchange
Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5, 17 C.F.R. 240.
10b-5 thereunder. In order to establish a violation of these
antifraud provisions, the Commission must show that defendants
(1) used interstate commerce, (2) made material false and
misleading statements or omissions, (3) in connection with
the offer, purchase, or sale of securities, and (4) with scienter.
See Aaron v. SEC, 446 U.S. 680, 697, 100 S.Ct. 1945, 1955, 64
L.Ed.2d 611 (1980). Although we think the astonishing and instant
response to the asset enhancement program by itself demonstrates
reliance by thousands of victims, actual reliance by investors
is not a necessary statutory element under either section 17
or 10b. N. Sims Organ & Co. v. SEC, 293 F.2d 78 (2d Cir.1961),
cert. denied, 368 U.S. 968, 82 S.Ct. 440, 7 L.Ed.2d 396 (1962).
We shall address each element in turn.
As discussed before, the Commission has satisfied element one
of Aaron, that is, the use of the means and instrumentalities
of interstate commerce.
As to whether defendants made material false and misleading
statements or omissions in communicating with prospective
investors, a misrepresentation is material under the securities
laws if there is a substantial likelihood that a reasonable
investor would consider it important in deciding whether to
purchase or sell securities. See, e.g., Staffin v. Greenberg,
672 F.2d 1196, 1204-05 (3d Cir.1982). The Commission has more
than carried its burden here. Borrowing in equal parts from
the scripts of Wall Street, Conspiracy Theory, and perhaps
even The Apostle, defendants claimed special access to a
rarefied financial world of high-yield/low-risk investments.
For example:
. "If you know someone who is highly sophisticated in
international finance, and Western European banking structures,
you just may want to ask that person for some details.
These programs are very real, and very lucrative, but not
too many people in the USA are privy to them [sic ] Even
though there are a handful of U.S. banks that participate,
they do not advertise, especially to their employees. These
"trading" programs are run by a very tight knit inner circle
that requires an invitation by the right person and a large
amount of cash, for you to get even a hint of what is
transpiring." [FN3]
FN3. P-499 "Financial Resources Special Report", vol. 3, p. 1
(this page is headed "Too good to be true?").
. "Over the past several years I have been researching the
banking and investment industry. Along the way, We have had
the good fortune to become associated with some wonderful
people. What we have learned from these people has literally
changed my way of life forever. We learned all about "the
system" and how "big business" controls the money. And how it
is almost impossible for the "little guy" to do anything more
than exist. I also learned that making 5% to 10% on my money
was a waste of time and energy."
"Now, we (the Trust) earn high yields annually on every dollar
that we invest. And these are guaranteed returns ... Where the
principal is secured. The real important thing here is: We have
locked in, unlimited dollar amounts, that we can invest with
these guarantees. This is exactly what your bank does ... But
it is very likely that they will never tell you these things.
The banks and stock brokers are making a fortune using your
money." [FN4]
FN4. Id., No. 1, p. 2 (page headed "Your Success is Guaranteed ...
100%") (bolding in original).
Virtually every material statement TIGC made was false. To
take just a few examples:
. There is no evidence that TIGC had a Dun & Bradstreet rating,
as stated at least four times in their solicitation materials.
. There is no evidence that all of TIGC's funds "are guaranteed,
[sic ] by one of the largest banks in the world," as stated in
Geoff O'Connor's January 30, 1997 letter to a prospective investor
(P-503), or "guaranteed by a top 100 World Bank" as stated in a
Geoff Benson epistle general for TIGC. [FN5]
FN5. P-499, TIGC "Member Manual and Materials", tenth unnumbered
page (page headed, "By Invitation only ... The Infinity Group of
Companies ...").
. There is no evidence that TIGC had "established investment credit
lines of over $700,000,000 with top world banks," as stated on
page four in the "TIGC Private Member Material and Manual," ex.
499.
. TIGC's representation in "Financial Resources" vol. 3, issue
8, that their "lead attorney" was Lindsey Springer is
categorically false.
. TIGC's materials represent that the company invests in "prime
bank instruments", which "do not exist," SEC v. Lauer, 52 F.3d
667, 670 (7th Cir.1995). To the contrary, according to the
unrebutted testimony of Prof. Byrne, the Commission's expert
on international banking instruments and investments, references
to such bogus instruments is widely considered to be a red flag
of securities fraud.
. Perhaps most importantly, TIGC's guarantee of 138% to 181%
annual returns on investment, with zero risk, which appears on
nearly every page of its materials, was absolutely untrue.
P-499, passim.
Defendants dispute that they misrepresented that the principal
and return of their investments were 100% guaranteed with zero
risk, pointing to the few statements in their materials that
purport to disclose that "there is the element of risk" in
their investments. But even in making those statements, TIGC
talked out of both sides of its mouth:
. "1.) There is a risk. Anytime you give your money to a bank,
stock broker, investment counselor, your money is at risk.
As a matter of fact, if you keep your money under your
mattress, it is at risk. The Trust does invest in Private
Placement Programs where the principal amount is secure, and
we do guarantee the return. But do not confuse these
guarantees with no risk." [FN6]
FN6. P-499, "Financial Resources Special Report", Vol. 3, p. 2
(page headed, "What you should know before you decide").
Congress did not intend that those charged with securities
fraud could be exonerated by elaborate double speak like this.
Even if we were, however, to consider defendants' so-called
disclosures of risk, we find the disclosures defendants cite
to be inexcusably diluted and thus inadequate. Exactly what
types of risk does TIGC mean to warn of?
. "... please do not interpret guarantee as meaning absolutely
no risk. There is no such thing. There's a risk in getting
out of bed in the morning. Or ... a big rock could fall on
Ohio and wipe out TIGC and everything else in the state." [FN7]
FN7. Id., p. 4 (page headed, "Introduction").
Given TIGC's actual investment activities, these half-hearted
disclaimers-- such as they are, buried in mounds of no-risk
language--fall well short of curing TIGC's pie-in-the-sky
guarantees.
TIGC's material omissions, which we may also consider under
section 17 of the 1933 Act and 10b of the 1934 Act, are just
as damning as TICG's affirmative misrepresentations. Among
the legion of material facts which TIGC failed to disclose
in describing their investments was: (1) the fact all of
that the investments they made were, in fact, unsecured and
unguaranteed; (2) the reality of accumulating defaults, or
outright failures, of numerous major investments, such as
the $4.5 million default of the Amberley Group, and the
$725,000 monthly accumulating default of First Equity Resources;
(3) TIGC's use of investor funds, and not profit, to cover
obligations to its members; (4) TIGC's diversions of investor
funds to non-investment entities, such as Lindsey Springer
d/b/a Bondage Breaker Ministries, and paying personal
expenses for, and exorbitant "salaries" to, defendants,
and so on and so on. TIGC's materials abound with such
material misstatements and nondisclosures.
Element three of the antifraud provisions under Aaron is
also easily satisfied. A cursory review of TIGC's
literature reveals that its predominate purpose was to
peddle defendants' fantasy securities. In addition, every
investor who testified at the hearing stated that they
reviewed TIGC's materials and relied on them in making
investment with the company. Even Geoffrey Benson's sole
witness, Linda Christian, herself testified that she waited
to receive her membership materials before deciding whether
to invest her money in The Infinity Group. Thus, we find
that defendants' material misstatements and omissions were
without question made in connection with the offer and sale
of securities.
Lastly, we turn to defendants' scienter. Our Court of Appeals
has held that the required mens rea under section 17 of the
1933 Act and section 10b of the 1934 Act includes recklessness.
See Coleco Industries, Inc. v. Berman, 567 F.2d 569, 574
(3d Cir.1977)(per curiam ), cert. denied, 439 U.S. 830, 99
S.Ct. 106, 58 L.Ed.2d 124 (1978). "[R]eckless conduct may
be defined as ... highly unreasonable [conduct], involving
not merely simple, or even inexcusable negligence, but an
extreme departure from the standards of ordinary care, and
which presents a danger of misleading buyers or sellers that
is either known to the defendant or is so obvious that the
actor must have been aware of it." Sharp v. Coopers & Lybrand,
649 F.2d 175, 193 (3d Cir.1981)(quoting McLean v. Alexander,
599 F.2d 1190, 1197 (3d Cir.1979)). In closing argument,
defendants Geoffrey Benson and O'Connor seem to acknowledge
that their conduct was negligent, perhaps even grossly or
inexcusably so, but ask us to stop just short of finding
that they acted recklessly with the investor funds entrusted
to them.
Defendants' actions were, at the barest minimum, squarely
within the definition of recklessness. First, defendants
used TIGC's accounts as their own personal slush fund,
spending hundreds of thousands--perhaps millions--for their
own personal benefit. To say the least, in accountant's
parlance, these were non-performing assets. Second, defendants
performed no meaningful due diligence for the money they
actually did invest. They requested no financial statements--
certified or otherwise--did not inquire whether the investments
were backed by bank guarantees or otherwise insured, sought
no opinions of counsel, obtained no good standing certificates,
no third-party financial analysis, made no Dun & Bradstreet
inquiry. In short, defendants invested on a flyer and a
phone call.
A colorful example of defendants' deficient investment judgment
was the Marietta & Northern Georgia Railway Bond TIGC
purchased for $302,000. Apparently, it was of no moment to
defendants that: (a) the bond was issued in 1889; (b) the
face value of the bond was $1,000; (c) the railroad had been
out of business for almost a century; or (d) they could
readily have taken the bond to a historical securities analyst,
like the Commission's expert, Edward Borer, who would have
valued the bond at around $100. We suspect that even a
complete neophyte in finance, accounting, or economics would
suspect, when confronted with such an investment, that
defendants' business was on the wrong track. Instead, TIGC
chose in its materials to value the ancient bond at $107
million!
O'Connor seeks to distance himself from his co-defendants'
financial misadventures by arguing that he was essentially an
employee of TIGC, and had no knowledge that the statements
contained in TIGC's securities offering materials were
fraudulent. We decline, however, to accept his empty-vessel
defense. In light of (1) the many documents which expressly
state that he is a trustee of TIGC, (2) the evidence that he
personally authorized the wire transfer of a half-million
dollar block of TIGC funds for investment purposes, and (3)
his central role in TIGC's member referral, or "downline" program--
the very engine of this scheme which forestalled its collapse
at the cost of millions in new investor contributions--we
think that there is ample evidence which shows that O'Connor
was no unwitting dupe of TIGC, but knew exactly what he was
going: defrauding thousands of people.
Likewise, we reject Geoffrey Benson's proffered defense that
he was ignorant of the falsity of TIGC's statements, and in
all events he acted in good faith in soliciting investor funds
and pursuing investments on behalf of TIGC. Even assuming that
those statements are true--and we do not, given the mountain of
evidence of invidious motive here--ignorance provides no
defense to recklessness where a reasonable investigation
would have revealed the truth to the defendant. See United
States v. Henderson, 446 F.2d 960, 966 (8th Cir.), cert.
denied, 404 U.S. 991, 92 S.Ct. 536, 30 L.Ed.2d 543 (1971);
United States v. Schaefer, 299 F.2d 625, 629 (7th Cir.),
cert. denied, 370 U.S. 917, 82 S.Ct. 1553, 8 L.Ed.2d 497
(1962); Stone v. United States, 113 F.2d 70, 75 (6th Cir.
1940). Similarly, good faith is no shield to liability
under the antifraud provisions of the Securities Acts.
Greenhill v. United States, 298 F.2d 405 (5th Cir.), cert.
denied, 371 U.S. 830, 83 S.Ct. 25, 9 L.Ed.2d 67 (1962);
Frank v. United States, 220 F.2d 559, 564 (10th Cir.1955);
United States v. Oldenburg, 135 F.2d 616, 617 (7th Cir.1943).
But we need not rely on either the ignorance defense, or the
existence of recklessness, in Geoffrey Benson's case. His
actual intent to defraud may be inferred from his wholly
successful, and carefully-crafted, offering materials. As
Professor Byrne mentioned in his testimony, the materials
at length depict a mysterious cabal into which only the
initiated, like TIGC's trustees, could enter. Benson's texts
weave visions of risk-free, high-return investing in a clever
tapestry of anti-government, individualist fervor. Although
the offering materials often speak of mysteries and the need
to maintain secrecy, in fact Geoffrey Benson and his
colleagues well knew that the reason these secrets were not
mentioned is because there were none. As Geoffrey Benson and
O'Connor allowed their offering materials to be disseminated
around the country--by fax on demand, through a legion of
downline representatives, and via the mails--they had to
know that they were funding payments to early investors with
new investors' money rather than with investment return. In
short, Geoffrey Benson and Geoffrey O'Connor knew precisely
what they were doing in these materials, and that was
engaging in a hugely successful interstate fraud.
At best, defendants' investment enterprise began as a
reckless financial enterprise, and evolved into an intentional
scheme to defraud investors of their money when that money
became necessary to prevent TIGC's collapse. At worst,
TIGC's Asset Enhancement Program was from its inception a
Ponzi scheme, calculated to bilk investors of funds by
preying on their excessive greed, their feelings of exclusion
from America's current prosperity, and their fears of
jackbooted government intrusion. Under either scenario, the
conduct of defendants' TIGC, Geoffrey Benson, and O'Connor
violates § 17 of the 1933 Act and § 10b of the 1934 Act.
Therefore, we hold each to be jointly and severally liable
for disgorgement of the full amount of their ill-gotten gains.
We also find that unless enjoined--indeed, perhaps in spite
of being enjoined, in light of their apparent lack of
compliance with our preliminary injunction--defendants will
continue to violate Section 17(a) of the Securities Act of
1933, Section 10(b) of the Securities Exchange Act of 1934,
and Rule 10b-5 thereunder. Defendants have to date operated
under the apparent assumption that their beliefs in the
illegitimacy of federal and state government grant them carte
blanche to pick and choose which of our laws to heed. We
make clear, however, that contrary to their protestation,
they must heed federal securities laws that Congress adopted
and whose constitutionality the Supreme Court has never
questioned. Accordingly, we will enjoin defendants from
further violation under the securities laws, as TIGC or
under any other guise.
As to relief defendants, it is axiomatic that we may
impose equitable relief on a third party against whom no
wrongdoing is alleged if it is established that the third
party possesses illegally-obtained profits but has no
legitimate claim to them. SEC v. Cherif, 933 F.2d 403,
414 n. 11 (7th Cir.1991). We have jurisdiction "to decide
the legitimacy of ownership claims made by [third- parties]
to assets alleged to be proceeds from securities laws
violations." Id. citing Tcherepnin v. Franz, 485 F.2d 1251
(7th Cir.1973), cert. denied, 415 U.S. 918, 94 S.Ct. 1416,
39 L.Ed.2d 472 (1974); SEC v. Wencke, 783 F.2d 829
(9th Cir.), cert. denied 479 U.S. 818, 107 S.Ct. 77, 93 L
.Ed.2d 33 (1986).
Relief defendant Lindsey K. Springer d/b/a Bondage Breaker
Ministries admits that he received $1.265 million of
TIGC's unlawfully-obtained investor funds, for which he
received no consideration at all and to which he has no
legitimate claim. Accordingly, we will order him to
disgorge those funds.
From September 1996 until August 1997, relief defendants
Futures Holding Company received $1,425,900, SLB Charitable
Trust received $2,488,515.94, and JGS Trust received
$125,000 from TIGC. Susan L. Benson, in her capacity as
trustee of these trusts, alleges that she rendered
consideration in the form of administrative and clerical
services to TIGC, although she has neither testified nor
produced evidence which affirmatively demonstrates that she
did any work for TIGC. Moreover, to the extent that Susan
Benson earned any of the funds which were transferred into
these trusts, she did so in the service of the very unlawful
offering and sale of securities which is the subject of these
proceedings. It would be contrary to the securities law to
allow Mrs. Benson to launder the proceeds of a securities
fraud by billing bilked investors for services rendered in
furtherance of that fraud. Illegal consideration is invalid
consideration and thus cannot shield ill-gotten gains from
disgorgement.
Finally, although we think that the record evidence alone
is amply damning of defendants' conduct under the 1933 and
1934 Securities Acts, we note that defendants Geoffrey O'Connor
and Geoffrey Benson, as well as relief defendant Susan Benson,
exercised their Fifth Amendment right against self-
incrimination as to all of TIGC's activities, which profoundly
hinders our ability to determine the true nature of TIGC's
operations. "[T]he Fifth Amendment does not forbid adverse
inferences against parties to civil actions when they refuse
to testify in response to probative evidence offered against
them...." Baxter v. Palmigiano, 425 U.S. 308, 318, 96 S.Ct.
1551, 1558, 47 L.Ed.2d 810 (1976); see also Rad Serv., Inc.
v. Aetna Cas. & Sur. Co., 808 F.2d 271 (3d Cir.1986). Thus,
to the extent that we have any doubts--and we harbor none--
as to whether a massive securities fraud took place here,
whether and to what extent defendants participated in it,
and whether defendants and relief defendant Susan Benson
improperly benefitted therefrom-- we resolve those doubts
against defendants and relief defendant Susan Benson.
On non-federal offenses, North Carolina shows a "Lindsey Kent Springer" (born in 1965) residing in Raleigh, North Carolina in 1985, who was charged (in 1985) with misdemeanor "driving while impaired." But the record I see does not expressly indicate that a judgment of conviction was entered against him on that.
"Our" Springer has been in Oklahoma for a while. I don't know if the Lindsey Kent Springer in North Carolina in 1985 is the same Lindsey Kent Springer in Oklahoma in 2010. The birth date in the Oklahoma record does seem to correlate to "our" Springer's age of 44.
I know you have to be careful with names and birth dates, even when they match. We live in Texas, and some years ago we discovered that a pharmacy in Kentucky was charging our insurance for prescriptions for a child in Kentucky who has the same name and same exact birth date as our son. (It was an innocent mistake.)
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Famspear wrote:Lindsey Kent Springer
# 02580-063
Age 44
white male
released March 13, 1989
Why is Springer already listed as having been a guest of the Federal Bureau of Prisons?
If he was released in 1989, then the conviction would pre-date the PACER system.
A previous conviction should have been mentioned in the pre-sentencing investigation report, but it doesn't show up on the docket and I don't see any reference to any previous convictions in the sentencing papers filed by the USA and Springer.
Also, I believe that the "Age 44" is Springer's current age, which means that he was 23 years old when he was released from federal prison 21 years ago, which means we're talking about a rather youthful offense.
Dan Evans
Foreman of the Unified Citizens' Grand Jury for Pennsylvania
(And author of the Tax Protester FAQ: evans-legal.com/dan/tpfaq.html)
"Nothing is more terrible than ignorance in action." Johann Wolfgang von Goethe.
I love appeals - the panel sometimes reveals things from the transcript that the original rulings and docket texts don't, for example:
48. The defendants concede that no profits were ever realized from the funds that were actually invested. Appellant's Br. at 11. One need look no further than one example of an investment that TIGC made to understand why no profit was ever realized and to appreciate the specious nature of the denials of recklessness. In October 1996, TIGC purchased a bond of the Marietta and Northern Georgia Railway that had been issued in 1889. TIGC paid $302,000 for that bond, apparently based upon "unsubstantiated boasts of value ranging from $35 million to $107 million, and without performing any meaningful type of due diligence inquiry to clarify the $72 million discrepancy." Appellee's Br. at 28. TIGC paid $302,000 even though the bond had a face value of only $1000. Despite the unique investment acuity proclaimed in the Trusts' materials, the defendants missed a little glitch in this investment bonanza. The railroad that issued the bond had gone bankrupt in 1895, and it had ceased to exist in 1896. Supp. App. 1-4. The bond was therefore "worthless except for its modest value as a collectible (which [was] estimated at $80-100.)." Appellee's Br. at 29. Thus, TIGC used a portion of those funds that it did not divert to personal use to pay $302,000 for a bond with a face value of $1,000 that had been issued by a railroad that had gone out of business 100 years ago.15 In referring to this investment the district court stated: [W]e suspect that even a complete neophyte in finance, accounting, or economics would suspect, when confronted with such an investment, that defendants' business was on the wrong track. Instead, TIGC chose in its materials to value the ancient bond at $107 million!
I'd be willing to bet a bottle of decent reposada tequila the person who "sold" them that bond was somebody's close friend.
Springer's involvement becomes more clear from this footnote:
5. The SEC sought disgorgement from the following relief defendants: Futures Holding Company (controlled, in part, by Benson); SLB Charitable Trust (a charitable trust established in the name of Susan Benson, Benson's wife); Susan L. Benson (trustee of SLB and TIGC); JGS Trust (a "family trust" controlled by Benson); Lindsey Springer (manager and "legal representative" of TIGC and controller of Bondage Breaker Ministries); and Bondage Breaker Ministries.
And here's a jewel - this footnote reveals something sent from TIGC to their "investors"/victims DURING the trial:
20. The record indicates that Infinity investors received the following correspondence from the "Freedom For America Ministry and Friends of Infinity":
The SEC, government, the Judge, or Trustee (It's hard to tell any of them apart) has approved an `allowance' out of YOUR `MONEY' to be paid to us to live on. . . . Each and everyone of you can help with your gift to FAM, along with the completed form provided. Your gift at this time is important because the government has frozen [NOT SEIZED] all assets of TIGC and related entities which makes it impossible at this time for them to fund a Member Law Suit against the government, or to adequately finance their own offense. Your gift will be used for the following: Administrative and operating . . . expenses . . . 15%, Private Member Law Suit . . . 25%, legal offense fund for TIGC . . . 25%, and investments . . . 35%. If the average gift is $100.00, FAM would have about $175,000 to fund a TIGC Member Suit, $175,000 to help TIGC with their legal costs, and $245,000 for investment purposes over a period of time.
A quick calculation from that tells us that there were approximately 6,000 victims/idiots who fell for the scheme and then got asked to send them more money.
The Honorable Judge Roy Bean The world is a car and you're a crash-test dummy. The Devil Makes Three
The whole thing looks a lot like an early version of a HYIP or Autosurf scam, especially the appeal for more money to help get the original money free from the ebil govment...
google "ASD Andy Bowdoin" and "ASDMBA Bob Guenther" to see a more modern version.
Supreme Commander of The Imperial Illuminati Air Force
Your concern is duly noted, filed, folded, stamped, sealed with wax and affixed with a thumbprint in red ink, forgotten, recalled, considered, reconsidered, appealed, denied and quietly ignored.
