As predicted:
"TelexFree owners charged with fraud, conspiracy" by Beth Healy | Globe Staff July 23, 2014
A federal grand jury on Wednesday charged the owners of TelexFree Inc. with nine counts of wire fraud and conspiracy to commit wire fraud, alleging the two Massachusetts residents misled investors in a vast scheme to enrich themselves and others involved in the business.
James Merrill of Ashland and Carlos Wanzeler of Northborough knowingly devised “a scheme and artifice to defraud” in the alleged $1 billion global pyramid scheme, according to the indictment, filed in federal court in Boston.
If found guilty, each man faces up to 20 years in prison. The indictment also identifies $140 million in assets that could be available to alleged victims if Merrill and Wanzeler are found guilty, including bank accounts, 30 properties in Massachusetts and Florida, plus several luxury cars and boats.
The indictments are the first stemming from the case involving TelexFree. Based in Marlborough, the company sold Internet phone service plans, but that business accounted for just a tiny slice of the company’s revenue, the indictment said. The company allegedly made the vast majority of its money by recruiting tens of thousands of people around the world to invest with it, and relied on a steady stream of newcomers to help pay prior participants.
Merrill and Wanzeler said they did nothing wrong.
Merrill’s lawyer, Robert M. Goldstein, said, “Mr. Merrill steadfastly maintains his innocence and, in the strongest terms possible, disputes the government’s allegations.”
Wanzeler’s lawyer, Paul Kelly, said in a statement, “There is nothing new in this indictment that we were not already aware of or prepared to defend. These are allegations only, and when the actual evidence is produced, it will demonstrate that the government’s theories are unsupported and that Mr. Merrill and Mr. Wanzeler are not guilty.’’
Then why is he hiding out in Brazil?
“Our clients are genuinely concerned for their customers and business partners, and look forward to working with them to once again offer the company’s valuable telecommunications products to the public,” Kelly added.
The indictments come three months after TelexFree filed for federal bankruptcy protection and state and federal securities regulators filed civil fraud charges against the company and its principals. In May, Merrill and Wanzeler were charged with criminal fraud, and federal agents arrested Merrill. But Wanzeler had fled to his native Brazil, where he remains today in his hometown of Vitoria and is considered a fugitive by US authorities.
They spy on them so the U.S. officials should know where is he.
Merrill, who has deep ties to the Worcester area, was released in June on $900,000 bail with a GPS tracking bracelet, plus his promise to be home every night by 8.
The owners’ lawyers have insisted the business was legitimate, and participants from Boston to Brazil and as far away as Uganda were persuaded the model worked. But the grand jury found the owners misled TelexFree’s promoters about the true nature of the company, and later deceived regulators investigating the operations.
Participants were promised 200 percent returns for investing $1,375 — without having to sell any phone plans, according to the indictment. People merely had to click several online ads each day, purportedly to help promote the company.
They could also earn bonuses and other payouts for recruiting new members.
From February 2012 to April of this year, the indictment said, “TelexFree took in substantial sums, not from genuine retail sales of its [voice over Internet protocol] product, but from new promoters buying into the TelexFree system.’’
Even as TelexFree was unraveling, court papers said, it continued to lure investors. At company extravaganzas like one on a cruise ship in Brazil last December, Merrill and Wanzeler were treated like celebrities, promising their members riches if they only worked hard.
TelexFree started in Brazil, but Merrill and Wanzeler’s Brazilian partner, Carlos Costa, was not named in the US indictment. The company also is under investigation in Brazil, where its operations were shut down by a judge in 2013. But Costa, who recently filed papers to run for public office in Brazil, has often appeared in YouTube videos rebutting stories about the company’s problems.
The business took off in the United States once it was shut down in Brazil. In Massachusetts alone, victims are believed to have lost $90 million. Most of those people are in Brazilian and Dominican immigrant communities here. Across the United States, the Securities and Exchange Commission has said, alleged victims believe they lost $300 million.
But investors will be lucky if they can recoup the sums they originally put into TelexFree. It is unknown whether the $140 million in assets identified by federal authorities will cover those losses.
But as with the Bernard Madoff Ponzi scheme, prosecutors may be targeting other parties for assets as well.
Haven't seen his name very much since prison.
For instance, eight of the wire fraud charges in the indictment involve money transfers to Merrill or Wanzeler through Fidelity Bank, a Leominster institution where Merrill’s brother is president.
Secretary of State William F. Galvin, who is overseeing the state’s investigation, said the banker, John F. Merrill, is to appear in his office Thursday for further questioning.
“We’re very interested in the bank,’’ Galvin said. “The transactions couldn’t have occurred without the cooperation of the bank.’’
But Karen Schwartzman, a spokeswoman for Fidelity Bank, said, “This is simply not true. The bank had no knowledge of any fraud at any time. The accounts were treated according to the bank’s normal banking procedures and they were opened and closed within a very short period of time.”
--more--"
Also see: TelexFree execs’ homes searched
TelexFree co-owner pleads not guilty in alleged fraud
Enough wandering.
