Entrust Group Accused in $27 Million Ponzi

BALTIMORE (CN) – The Entrust Group helped a bogus “investing guru” roll people for $27 million in a self-directed IRA Ponzi scam, a woman who says she lost $199,000 claims in a federal class action.
     Judith Sams sued Entrust Arizona LLC nka Vantage Retirement Plans, the Entrust Group Inc., Entrust Administration Inc. and Hugh Bromma
     All the defendants except Entrust Arizona work out of the same address in Oakland, Calif., according to the complaint. Entrust Arizona nka Vantage Retirement Plans is based in Phoenix.
     “Defendant Bromma, a self-described SDIRA ‘industry luminary,’ is an individual and believed to be a resident of San Raphael, California. At all times material hereto, Bromma was the CEO and owner of both TEG and ENTRUST ADMIN,” the complaint states.
     Sams claims she was roped into Entrust’s scam by Mike Watson, who is not a party to the case.
     Watson, of Provo, Utah, “was a self-described ‘real estate investing guru,’ author, and real estate investment seminar promoter,” Sams says in the complaint.
     “Watson charged attendees thousands of dollars to participate in his seminars, [and] solicited potential investors from 2004 until 2009 across the United States,” the complaint states in a footnote. “He used his real estate investment seminars to entice investors into his real estate deals. Watson told seminar participants he would compensate them for bringing in new investors into his ‘system.’ He also told potential investors that those who invested over $100,000 would receive a trust deed on a piece of one of Watson’s real estate ventures as security on the investment.”
     In the next footnote, the complaint states: “Watson convinced investors, including plaintiff and the other class members, to invest in fraudulent investment schemes which he controlled, bilking over 120 investors in 21 states of more than $27.5 million through issuance of promissory notes. Although Watson claimed his investments were backed by substantial real estate holdings and cash flow from his company properties, in fact, Watson never generated sufficient income to cover his investors’ interest payments or the redemption of investments. As with all Ponzi schemes, Watson relied on new investors’ funds to repay his prior investors because his investments were never profitable.”
     Watson was never licensed to sell securities, and “the purported investments that Watson sold to the plaintiff and other class members were either failing real estate or business ventures secured by worthless promissory notes or did not even actually exist,” Sams says in the complaint.
     “To ‘sell’ the victims, Watson frequently touted and emphasized Entrust’s size and experience as evidence of the credibility and stability of the investment. The affiliation between the defendants and Watson enticed inexperienced and unsophisticated investors (who might otherwise be more cautious) into an investment scam because the investors believed they were protected by large, purportedly well-funded and experienced companies with trustworthy names like ‘Entrust.'”
     Sams claims the defendants sent account statements that “reported the same value year after year unless, of course, Watson provided a greater value to the custodian. The custodian would then record the amount provided by the fraud promoter as the actual updated value of the SDIRA. This practice only further deceived plaintiff and the class members into believing their investments were increasing in value and secure.”
     After suckering the class members into investing, “Entrust created the illusion that the Watson investments were providing substantial returns and/or that the value of the SDIRAs was stable,” the complaint states. “In fact, Watson had absconded with the investment monies within days or weeks after the SDIRA funds were wired to bank accounts Watson controlled and then diverted to other accounts, never to be seen again, at least not by the rightful owner.”
     Sams says she invested $199,000 after attending one of Watson’s real estate seminars and was promised that the money was secured by promissory notes. However, she says, “there is no real estate or property identified as being held by Sams’ Entrust SDIRA, there are no stock certificates referenced, and the Entrust SDIRA statements do not identify any actual asset but simply list the name ‘Mike Watson Capital.’
     “From 2008 until the present, Entrust was the SDIRA custodian of nothing and Sams had to pay for the privilege of Entrust’s services for administering her worthless Entrust SDIRA with no assets.”
     The complaint adds: “While defendants may object to being grouped together, their own documents and practices demonstrate that they were inextricably intertwined with one another as part of a national SDIRA custodial network. Some examples of the intertwined nature of their acts and omissions include:
     “a. TEG and its franchisees and licensees referred to themselves collectively as ‘ENTRUST’ in their marketing and advertising documents, corporate email solicitations and newsletters to clients and prospective clients, their websites, their webinars and seminars, their SDIRA forms and documents, and their correspondence to SDIRA clients, including Plaintiff and the other Class Members; …
     “e. TEG and ENTRUST ADMIN maintained, housed, and controlled the information systems for all ENTRUST administrative and custodial functions; in order to access information about their own clients, licensees and franchisees had to access the TEG information system, input client account information there, and access forms and documents. These forms and documents were necessary for the licensees and franchisees to perform their functions as an ENTRUST SDIRA record keeper. ENTRUST’S internal policies required that each franchisee and licensee upload all SDIRA client information to the ENTRUST ADMIN/TEG information system; …”
     Sams seeks compensatory and punitive damages for conversion, fraudulent concealment and aiding and abetting.
     She is represented by Louis Leibowitz of Rockville, Md.

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