“The defendants devised, and intended to devise, a scheme to defraud, the purpose of which was to obtain money and property by means of materially false and fraudulent pretenses, promises and omissions,” reads the indictment, filed in the U.S. District Court in Worcester, Mass.
Lawyers for Messrs. Merrill and Wanzeler couldn’t immediately be reached for comment Wednesday. However, the men have maintained their innocence since the original charges were filed. And in court papers, Mr. Merrill has specifically denied prosecutors’ claims that TelexFree illegally raked in hundreds of millions of dollars from a global network of investors.
Arrested in May, Mr. Merrill, 53 years old, was released on bail last month, on such conditions that he surrender his passport and wear an electronic monitoring bracelet. Mr. Wanzeler, 45, fled to Brazil before he could be arrested, but prosecutors on Wednesday issued a federal arrest warrant for him.
Photo courtesy of BehindMLM. Wanzeler (l) and Merrill (r)
Today, the Grand jury indicted James Merrill and Carlos Wanzeler on 9 Felony counts each:
18:1349 CONSPIRACY TO COMMIT WIRE FRAUD
18:1343 WIRE FRAUD
The document (70) also contains a “Forfeiture Allegation” which, if convicted on one or more of the charges, will forfeit any and all property, real or personal, that is traceable to the offenses. The list of assets that could be subject to forfeiture is quite literally staggering.
I started to add them all up, but it was over 7 pages of items listed, from “Item a”, to “Item rrr”. Reports are the seized accounts and checks total around $140 Million, not counting all properties in their “real estate empire”, all of which are thought to be the proceeds of criminal activity. It looks like Merrill will need that $4 million to pay his lawyers after all.
I have added this Grand Jury Indictment onto the Files website, click here.
ELECTRONIC Clerk’s Notes for proceedings held before Magistrate Judge David H. Hennessy:Motion Hearing as to James Matthew Merrill held on 7/22/2014 re 55 MOTION for Release of Funds filed by James Matthew Merrill. Case called, Counsel & Defendant appear, Counsel argue motion, Matter taken under advisement, Order to issue. (Attorneys present: Lelling, Murane, Goldstein.) Court Reporter: Digital Recording – 9:30 for transcripts/CDs contact Deborah Scalfani (email@example.com). (Belpedio, Lisa) (Entered: 07/22/2014)
Herbalife Plunges as Ackman Vows to Unveil Enron-Like Fraud
By Duane D. StanfordJul 22, 2014 3:03 AM CT
Herbalife Ltd. (HLF) shares fell the most in three months yesterday after billionaire Bill Ackman vowed to show Enron Corp.-like fraud at the seller of supplements and weight-loss shakes.
Ackman, head of Pershing Square Capital Management LP, said on Bloomberg Television that his firm has devoted $50 million of investors’ money to prove that Herbalife is a pyramid scheme. The results of the undercover investigation, which focuses on Herbalife’s nutrition clubs, will be released at a presentation today in New York.
“Trust me, when you see the stuff we have,” Ackman said in an interview on “Market Makers” with Stephanie Ruhle and Erik Schatzker, “you will conclude the money was well spent.” He suggested that the nutrition clubs — part of Herbalife’s direct-selling approach — resemble the fake trading rooms set up by Enron before accounting fraud led to that company’s bankruptcy in 2001.
Ackman has waged a battle to shut down Los Angeles-based Herbalife since December 2012. He has bet $1 billion against the company, saying it misleads distributors, misrepresents sales figures and sells a commodity product at inflated prices. U.S. regulators and law enforcement also are investigating allegations that the business is a pyramid scheme.
Herbalife’s stock fell 11 percent to $54.02 yesterday, marking the biggest decline since April 11. The shares have tumbled 31 percent this year. Herbalife shares traded at the equivalent of $54.01 at 10 a.m. in Frankfurt in trading of 573 shares.
Today’s presentation, which will be webcast starting at 10 a.m., will give new information to back up Pershing Square’s claims, the hedge fund said in a separate statement.
“An in-depth analysis and examination of these clubs — which Herbalife claims are simply social gatherings that bring people together to focus on good nutrition and exercise — reveal that they are a core driver of Herbalife’s pyramid scheme,” Pershing Square said.
Herbalife responded to the statements yesterday on Twitter, saying it was confident in the integrity of the company and that “the truth will prevail.”
“Ackman’s theatrics are increasingly desperate,” the company said through its HerbalifeTruth account. Herbalife “is proud of role that nutrition clubs play in helping people lose weight and stay healthy.”
Ackman said on Bloomberg Television that his firm will turn over its findings to regulators.
“Our goal was to catalyze regulatory interest in the company,” Ackman said. “We spent the last year with undercover investigators in multiple countries and in the United States participating and trying to figure out — and ultimately figuring out — how nutrition clubs work and we have hundreds of hours of recorded conversations.”
TelexFree (14-cv-11858) – James Merrill filed an answer to the Amended Complaint today, and there is not too much difference between this Answer and his previous answer. He denies everything and demands a jury trial.
Zeek Rewards (14-cv-00091) – Three defendants in the civil case against Todd Disner and fellow promoters filed an Amended Answer and Counterclaim to the original complaint in the case. These three defendants are:
I have uploaded these documents onto the Files website.
BREAKING NEWS: Trustee has no intention of reorganizing or reactivating TelexFree Businesses!!!!
This was filed today in the SEC case, 14-cv-11858, in Massachusetts District Court: (experts from the filing; emphasis added)
Stephen B. Darr, as he is the Trustee (“Trustee”) of the Chapter 11 Estates of Telexfree, Inc., Telexfree, LLC, and TelexFree Financial, Inc. (collectively, “the Debtors”), submits this Answer to the Amended Complaint of the Securities and Exchange Commission
Based on information currently available to the Trustee, the Trustee admits that the individual defendants operated a Ponzi/pyramid scheme as evidenced by, among other things, the revenues from the retail sales of the VoIP were less than one (1%) percent of the amounts needed to satisfy the promises to the investors who had placed the Internet ads. Further, based upon the information available to the Trustee, it appears that the early investors were paid not from sales of the VoIP services but rather from the money received from the later investors, thus evidencing a classic Ponzi/pyramid scheme.
As to the Defendants TelexFree, Inc. and TelexFree, LLC, the Trustee denies those allegations since the Trustee has assumed control over each of those entities’ estates, they have ceased operation, and the Trustee has no intention of reorganizing or reactivating their businesses.
Almost too weird to imagine, Todd Disner has filed a Pro Se pleading asking the Judge to set aside the Default issued by the Clerk for Disner’s failing to file the required response within the prescribe time period. Soon after this Clerk’s Default was entered, Kenneth Bell, the receiver, filed a motion for a Default Judgement against Disner and several others who also failed to response by the deadline.
Disner is asking for an additional two weeks in which he can file the belated response, using the following as his reasons for failure to do so:
Another fly in the ointment is that since Disner is also listed as representing “Kestrel Spendthrift Trust” as a Trustee, does this rise to requiring representation by counsel because of it being a company and not an individual? This has been the case in many other federal schemes related cases followed by most of the blogs.
Whether this applies to a trust is yet to be officially determined by the Court, but I bet it will be established soon enough.
NOTICE of Scheduling Conference Scheduling Conference set for 9/5/2014 02:00 PM in Courtroom 4 before Judge Nathaniel M. Gorton. COUNSEL SHALL BE PREPARED TO ARGUE THE PENDING MOTIONS AS LISTED DOCKET ENTRY NO. 217.
The above is related to the Electronic Order (217) below:
Judge Nathaniel M. Gorton: ELECTRONIC ORDER entered. A scheduling conference and hearing will be held on Friday, September 5, 2014 at 2:00 P.M. The Court will hear oral arguments on the motions to dismiss filed by defendants Faith Sloan, Santiago de la Rosa, Randy Crosby and Sanderley Rodrigues de Vasconcelos and will set a discovery and trial schedule for all defendants.
Defendants TelexFree, Inc., TelexFree, LLC, James Merrill, Joseph Craft and TelexFree Financial, Inc. are reminded that their responses to the amended complaint are now overdue and are directed to submit responsive pleadings forthwith.