Soldiers' families targeted in 'con'

Soldiers' families targeted in 'con'
SEC charges 3 in Ponzi-like scheme

Families of U.S. soldiers have been targeted in a multi-million dollar investment scheme that forced a number of people into personal bankruptcy and left them with foreclosure notices posted on their homes, according to the Securities and Exchange Commission, which filed charges against three people in the case.

"The SEC will do everything in our power to pursue con artists that aim to cheat the honorable men and women who serve our nation and risk their lives to protect our freedom," said SEC Commissioner Paul Atkins. "We owe it to our military personnel to ensure that their personal finances are guarded from fraudsters that prey upon their trust."

The announcement about the charges came during Military Saves Week, a public initiative running from Feb. 24-March 2 to highlight the Department of Defense's ongoing financial readiness campaign.

In an announcement, the SEC said its complaint names as defendants James B. Duncan, Hendrix M. Montecastro and Maurice E. McLeod, and alleges they solicited investors in Southern California, Arizona and other places using sham investment seminars and "referral partners," including a member of the Air Force who solicited his fellow servicemen.

The complaint alleges they obtained control over investors' assets by offering them securities in the form of real estate investment contracts, and purporting that the money investors earned would help make mortgage payments on investment homes purchased on their behalf.

Instead, the SEC alleges, the scheme was no more than a Ponzi, in which older investors are paid off with revenue from new investors.

"When the scheme unraveled, it cost more than 75 investors an estimated $10 million," the SEC said.

The scam targeted military members and two other affinity groups, the Southern California Filipino community and fellow church members, the SEC said.

"We remain vigilant in our effort to fight affinity frauds, and this case is an especially egregious example of promoters taking advantage of anyone willing to trust them," said Linda Chatman Thomsen, director of the SEC's enforcement division. "We remind military families and investors to exercise appropriate caution regardless of the relationship they may have with someone who approaches them with an investment opportunity."

Rosalind Tyson, of the agency's Los Angeles office, said the suspects "refused to provide any written agreements to investors and pressured them into thinking they would lose out on a major investment opportunity if they failed to trust them."

The SEC said in affinity frauds, "con artists infiltrate tight-knit groups by showcasing a respected member of that community as one of their successful investors, giving the false illusion of a safe and secure investment opportunity…,"

Military families are offered resources on an SEC website to understand the nature of such frauds and how to protect themselves.

The case was filed in Riverside, Calif., and alleges from October 2004 through June 2006 the suspects ran Pacific Wealth Management LLC of Murrieta, (not a San Diego company with the same name) and Stonewood Consulting Inc., which pursued the alleged fraud.

"The complaint alleges that Duncan, Montecastro and McLeod false promised investors that their funds would be invested in real estate and various other investments that would subsidize their investment homes," the SEC said.

They also allegedly raised $1.2 million by offering memberships in Total Return Fund LLC but all the funds were commingled and consumed in the "Ponzi-like scheme."

For example, the defendants "charged exorbitant real estate transaction fees financed by the investors," the SEC said.

The complaint seeks permanent injunctions, a return of "ill-gotten gains" and penalties.

The complaint also names Christopher J. Oetting, Anthony M. Contrerars and Biocybernaut Institute Inc. for allegedly receiving ill-gotten profits.