NOWADAYS, it is so hard to make a buck. In the good old days, that’s prior to 2007 before the real estate bubble bust and the subprime mortgage meltdown began, all that you had to do to make a buck was buy a house zero down, wait two months, sell it, and as if by magic, you pocketed $10,000. But for a select few, those lucky enough to meet the right investment gurus, like the clients of Madoff, instead of investing in houses and flipping them, you could have invested your money in a PONZI business. Never heard of a PONZI business? This is how it works.
You invest your money with your local Mr. Madoff who tells you that he is involved in a very lucrative business, i.e. importing dinosaurs from Galapagos and selling them to the LA zoo, or making wigs from the hair of celebrities that he gets from the salons that they go too in Beverly Hills, or making uniforms from palm tree fibers. It does not matter how strange or logical the business is, the common denominator of a PONZI business is that the business is making a ton of money but it needs cash to operate and it is willing to pay you, the investor or the lender, very high returns on your money. When you can only get 1% annual return on a CD, you can invest your money in the dinosaur import business where you are guaranteed a return of 10% a month, payable interest and principal, every month, with option to rollover your money every month at the same rate of returns. Wow! It sounds like a great investment that is too good to be true. So, eager to build your retirement account, you get a home equity loan of $100,000 and invest in the dinosaur business, expecting to double your money in ten months.
In truth, there is no dinosaur or celebrity wig or uniform from palm tree business. What is really happening is you are getting paid from new money that comes in from new investors who get paid from subsequent investors. When no new investors come in, the PONZI business collapses, and you are left with unfunded checks. If you are lucky enough, you got out before they ran out of dinosaurs, and actually made a bundle. But what happens to the bundle that you made in the PONZI business if you later file for bankruptcy relief?
In Re Parise, debtor filed for Chapter 7 bankruptcy protection on July 7, 2008. Debtor and her husband invested $115,000 with a company called Global Trading Investments. A great PONZI business which gave debtors profits of $429,000 from an invention of our current President that converts bat dung roasted on Solyndra coils into electric power. Every bat that takes a dump creates a job for an American citizen was the rally cry of Global Trading Investments. Global Trading subsequently filed for Chapter 7 bankruptcy protection when they ran out of bats. On August 24, 2006, a judgment was entered against Parise requiring her to return the profits she made from her investments in the scheme. Instead of returning the $429,000, Parise is alleged to have taken numerous steps to conceal a significant amount of funds and assets from the bankruptcy trustee, including making false statements and omissions during a deposition in the bankruptcy proceedings. The Feds say that Parise, from September 14, 2006, through December 8, 2006, withdrew at least $455,850 in cash from the bank accounts which had not been disclosed to the trustee. During this time, Parise made 67 cash withdrawals, all of which were below the $10,000 threshold for the filing of currency transaction reports. “What a busy little bee she was hiding money from the trustee,” the court said.
Instead of getting a bankruptcy discharge, Parise was indicted by a federal grand jury for her role in refusing to return the profits she made from a PONZI business and the stealth withdrawal of money from bank accounts.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.
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