Syndicated financial/conservative talker Pat Kiley (“Follow the Money”) has been charged with conspiracy, mail fraud and money laundering counts in connection to his friend and money manager Trevor Cook’s Ponzi scheme. An indictment unsealed in federal court 7/19 also charged two additional Minnesotans in connection to the $194 dollar Ponzi scheme. Jason Bo-Alan Beckman and Gerald Joseph Durand were charged with eight counts of wire fraud, three counts of mail fraud, one count of conspiracy to commit mail and wire fraud, and separate counts of money laundering.
If convicted, the defendants face a potential maximum penalty of 20 years in prison on each wire fraud and mail fraud count, ten years on each money laundering count, and five years on the conspiracy count.
Kiley claims he was just reading from a script when he told his worldwide radio audience in weekly broadcasts that he was a senior financial adviser and they could avoid financial Armageddon by entrusting him and his business partners with their money. His program, “Follow the Money,” aired on more than 200 stations nationwide, including KSTP-AM Minneapolis, and on the Worldwide Christian Radio network. He called his listeners “truth seekers” and drew them in, rich and poor alike, with promises of financial security, just as the bottom began to drop away from the stock market.
Kiley insists that he believed in the currency investment program he promoted for Cook, his longtime friend and Minneapolis money manager who was sentenced in August to 25 years in federal prison on fraud and tax evasion charges. But federal authorities say he did much more than that. In the indictment Kiley was portrayed as an integral figure in the scheme that defrauded more than 700 investors.
According to DOJ’s US Attorney’s Office, District of Minnesota filing, between 2005 and July 2009, the defendants, Cook, and others secured approximately $194 million in investor assets for purported investment in the currency program. Of that amount, only about $109 million was actually sent to currency trading firms; approximately $68 million was lost in higher-risk trading; and $52 million was paid to victim investors in the form of lulling payments (payments that purported to be returns on investments or withdrawals of investments). Moreover, approximately $30 million in investors’ assets were diverted to fund the business and personal expenses as well as other investments of the defendants, Cook, and others. This included compensation received by the defendants, Cook, and Christopher Pettengill. Kiley initially solicited investors for a firm Cook started called Universal Brokerage Services. Durand, Beckman, Cook and Pettengill had been equal partners in a separate Minneapolis firm called Oxford Global Advisors. The two firms spun off related entities with either Oxford, Universal Brokerage or UBS in their names. Each man has denied any wrongdoing.
The indictment further alleges that between 2005 and November of 2009, the defendants, along with Cook and Pettengill, defrauded victim investors by soliciting them to invest money in a foreign currency trading program, which they and others offered through entities named Universal Brokerage Services or bearing the acronym “UBS.” The UBS Entities had no affiliation to the global provider of financial services, UBS, AG. Cook operated the currency program through various foreign currency trading firms, including and not limited to one located in Chicago and another in Switzerland.
They allegedly told victim investors the currency program would earn a double-digit rate of return, typically between 10.5 and 12% annually, with little to no risk to investors’ investment assets. The men also allegedly claimed that investor assets could be withdrawn at any time and would be held in segregated accounts. These representations were material and false.
Once investments were made, victim investors generally received purported statements from the UBS Entities, and some received purported investment return checks, also from the UBS Entities. Cook, and Pettengill allegedly caused the production and transmission of these statements and checks. The statements gave the false appearance that the currency program was performing as promised, and that victim investors’ assets were held in individual, segregated accounts. Most investors, however, failed to receive statements or checks from the custodians in actual possession of their funds.
In 2007, when UBS, AG, filed a trademark infringement lawsuit against Cook, Durand, Kiley, and others, the defendants began operating their scheme under other names, including and not limited to those identified by the terms “Oxford” and “Universal Brokerage FX.” They then, according to the indictment, continued to solicit investors for the currency program, utilizing telemarketing, media spots, and seminars in which they repeated the false representations.
While some investors’ assets were invested in foreign currency trading, the trading actually conducted was high risk and often resulted in significant losses. The defendants, Cook, and others allegedly concealed this from the victim investors. Moreover, the defendants, Cook, and others concealed that the currency trading firm in Switzerland was in dire financial condition, and they nonetheless, purportedly continued to solicit investor assets to be sent to that trading firm. The defendants also purportedly concealed from investors concerns they had about Cook’s operation of the currency program as well as information about alleged illegalities relative to the currency program.
As noted above, Kiley told The Minneapolis Star-Tribune that Cook prepared the scripts and that he had no choice but to go along. He has told federal authorities that he believed in Cook’s currency investment strategy and just wanted to help investors. Pettengill pleaded guilty in June to charges of securities fraud, wire fraud, conspiracy and money laundering. He’s cooperating in the investigation and awaits sentencing.
Kiley and Beckman were released on unsecured bonds of $100,000 and placed on special restrictions barring them from making financial transactions without the government’s approval, and barring them from contacting investors.
In court, Kiley told U.S. Magistrate Judge Jeffrey Keyes that he had “probably $9 to $10” in the bank, $11 in cash and an as-yet uncashed Social Security check, “which I live off of.”
