A Geneva investment salesman—along with a former president of four Las Vegas companies named "Crook"—has been indicted by a federal grand jury on charges that the two men scammed more than $5 million from investors.
The 10-count indictment was returned by a federal grand jury Wednesday, said Patrick J. Fitzgerald, U.S. attorney for the Northern District of Illinois, and Robert D. Grant, special agent-in-charge of the Chicago Office of the Federal Bureau of Investigation.
The Illinois Department of Securities assisted in the investigation.
Michael Crook, 52, of Los Angeles, was the president of Z Touch Systems, Inc., Global Payment Solutions, Inc., Bluko Information, Inc., and Smart Restaurant Solutions, Inc., all of which had offices in the same location in Las Vegas. The businesses purported to operate interactive kiosks, prepaid debit cards, and restaurant reservation software.
Roderick Rieman, 66, of Geneva, held himself out as a director of Z Touch, Global Payment and Bluko Information, as well as the owner and operator of Innovative Financial Services, Inc., formerly an insurance and investment business in suburban St. Charles.
Each defendant was charged with 10 counts of mail fraud and will be arraigned at a later date in U.S. District Court.
According to the indictment, as part of a fraudulent financing scheme between 2004 and August 2007, Crook and Rieman obtained more than $5 million from investors in the four companies by misrepresenting the expected return on investments, the risks associated with the investments, the existence and value of collateral, the use of proceeds, the source of funds used to make promised payments, the status of investments, and the financial condition and business transactions of the companies.
The indictment alleges that the defendants misappropriated a part of the funds raised to make Ponzi-type payments to investors and to benefit companies and individuals other than those directly relating to the particular investment.
A Ponzi scheme is a little like a pyramid scheme. Wikipedia describes it as "a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors."
As an example of one of the fraudulent investments, the indictment alleges the defendants offered and sold investments in interactive kiosks called “ODIEs” (On Demand Interactive Environments), purportedly manufactured and sold by Z Touch.
The investments offered an annual return of 18 percent in monthly payments, repayment of principal in 36 months and a security interest in a particular ODIE. Although the defendants offered and sold more than 250 of these investments, only a small number of ODIEs were ever built, none were successfully placed in businesses and no revenues were generated.
As a result of the scheme, according to the indictment, more than 100 investors in Z Touch, Global Payment, Bluko Information and Smart Restaurant lost their entire investments, except for the Ponzi-type payments made to them as a part of the scheme.
Each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or the court may impose an alternative maximum fine totaling twice the loss or twice the gain, whichever is greater.
If convicted, restitution is mandatory and the court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.
The government is being represented by Assistant United States Attorney Edward G. Kohler.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
According to the "Ripoff Report" website, Rieman moved from Naperville to St. Charles in 2007, where he joined Riverside Community Church. The indictment and press release name him as a resident of Geneva.
Information for this article was provided from a press release by the U.S. Department of Justice.