MINEOLA, N.Y. (CN) – New York State claims two men bilked 180 investors of $10 million in a Ponzi scheme they called a “Loan Warrantee Program” and a “Wealth Enhancement Club.” The leader of the scheme is a felon, having been convicted of attempted promotion of prostitution, and he insisted that his Ponzi schemes “be governed by the laws of Riga, Latvia,” Attorney General Andrew Cuomo says.
Cuomo claims that Andrew S. Mackey, convicted of the prostitution-related charge in 1987, led ASM Financial Funding Corp.’s Ponzi schemes with help from his vice president, Inger Jensen.
Both men live at the same address in Cedarhurst, N.Y., according to the complaint in Nassau County Court.
Mackey, Jensen and ASM lured their victims by promising 46 percent to 700 percent annual returns, Cuomo says.
The men claimed that through their Loan Warrantee Program, homeowners could pay off a 30-year mortgage in 3 to 5 years, if they paid 17 percent to 25 percent of the mortgage in advance, Cuomo says.
In return for this giant advance fee, “the consumer would receive a certificate from respondents.”
ASM promised the certificate would mature in 3 to 5 years, “with 46 percent interest per year, due to respondent’s sophisticated knowledge of private investment programs. The consumer could then cash in the certificate for the total amount of the loan, take this cash and pay off his mortgage and own his home free and clear,” according to the state’s complaint.
Cuomo says Mackey pushed his scheme with marketing material that stated: “Please note the true beauty of this program: Your total out of pocket expenses after 5 years is only $109,960 and you now own a $200,000 home. That’s right! YOU FINANCED $200,000, BUT ONLY PAID BACK $109,960!”
ASM assured its victims that “Loan Warranty is guaranteed so you risk nothing” and will “generate the amount of money you borrowed making this a win-win opportunity,” the complaint states.
The men pushed their Wealth Enhancement Club as a “High Yield Investment Program,” and promised that a $100,000 investment would generate 300 percent annual interest, Cuomo says. Their Wealth Enhancement Club II promised an eightfold return on interest, the attorney general adds: “A Wealth Enhancement Club II investor was promised that in 12 months, his initial investment of $100,000 would be valued at $892,000.”
Mackey and Jensen produced a fraudulent “Credential of Ownership” certificate claiming to be from the Bank of Venezuela, which allegedly showed that it had issued a $1 billion bond to ASM, Cuomo says.
“In one case, Mackey claimed the bond was also backed by another bank in Switzerland but that Mackey was not free to divulge the name of the bank,” the complaint states.
Cuomo adds that Mackey and Jensen had their victims sign an “Attestation” that they would keep all details “strictly confidential” for 5 years and tried to “evade governmental oversight” by making the contracts governed by the laws of Latvia.
When investors complained abut being duped, Mackey “invented excuse after excuse,” Cuomo says.
Mackey said, for example, that the money was taking so long to transfer because it was “coming from the Orient,” or that it was because “we are living in a Post 911” world, the complaint states.
Cuomo says that Mackey also warned his victims that if anyone tried to report him to government authorities, the government would take all the money and nobody would receive a return.
Cuomo seeks and injunction, restitution, disgorgement and damages for six counts of securities fraud.