Monthly Archives: March 2013

The Sneeze: Guide to Avoiding Illegitimate Investments

photo credit: iStockphoto

photo credit: iStockphoto

Elaine and George Butcher, a couple in their late 60s, live outside of Spokane, Washington. Elaine is a retired teacher and her husband George, a retired principal. When George is diagnosed with terminal cancer he suddenly realizes he doesn’t have enough money to provide for Elaine after his death.

During his weekly chemotherapy treatments he confides in his doctor that his investments are not making enough money to leave behind anything substantial for his wife.  Dr. Lewis mentions he is investing in a company called Resource Development International (“RDI”) that is providing guaranteed returns of 6% per month. Desperate to increase his nest egg, George jumps at the opportunity.  The doctor says he will have his broker give him a call.

The next evening, Gary Roberts, an insurance broker in Spokane, meets the Butchers at their home. They sit around the kitchen table and Gary says he offers only his most affluent and aggressive investors the chance to invest in RDI.  He says the minimum investment is $100,000 and interest is guaranteed at 6% per month.  Gary hands the Butchers a booklet about the investment and elaborately and confusingly explains their investment will be pooled with other investments until $12 million is raised and that $12 million will be deposited into foreign banks and transferred between banks as collateral for various loans that will generate enough interest to pay investors the guaranteed return.

This discussion makes Elaine very nervous.  The minimum investment of $100,000 is nearly half of their entire savings and the process is too complicated for her to understand.  She prays for a sign they should make the investment. Just then the broker lets out a huge sneeze. This was the sign!

With the affirming sneeze from Gary, the Butchers invest $100,000 in RDI. One month later the Butchers receive a check from RDI for $6,000 and a statement showing their principal investment of $100,000. George and Elaine celebrate their good fortune. Continue reading

Categories: Fraud, Ponzi schemes

Alabama Judge Rules Show Must Go On for Tommy Tuberville

College football practice is apparently not a great reason for a continuance. Alabama U.S. District Court Judge Myron H. Tompson has ruled that a civil securities fraud suit against former Texas Tech (and current Cincinnati) head football coach Tommy Tuberville will start in early August, as previously scheduled.

According to Scheef & Stone Partner J. Mitchell Little, Coach Tommy Tuberville faces a variety of very serious obstacles. “When your business partner faces criminal charges and gets sued by the CFTC for fraud, he has problems. When your business partner pleads the 5th Amendment in your civil case and refuses to show up for his deposition, you have problems,” Little said. In civil cases, when a witness pleads the 5th Amendment, an adverse inference

Tommy Tuberville coaching Texas Tech. Photo courtesy of

Photo courtesy of

arises. “In a civil lawsuit, pleading the 5th Amendment forces the Court to view your response in the most negative light possible toward your case. When a defendant’s business partner does so, it tends to spread the blame.”

There are also a variety of evidentiary issues that are likely to impinge upon Tuberville’s ability to defend himself in the $1.7 million investor lawsuit arising from the collapse of TS Capital Partners. “Tuberville was the ‘T’ and Stroud was the ‘S” in TS Capital. How will Tuberville’s counsel avoid being painted with the same brush as his partner Stroud, especially if he is convicted next month of crimes related to these sales? Will the Court allow the jury to hear about Stroud’s potential conviction, the CFTC lawsuit, and his refusal to testify? It’s extremely problematic for Coach Tuberville,” explained Little.

Continue reading

Categories: Fraud, Securities litigation

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