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 Business News | May 2005 
Judge Delays Restitution
 Denny Walsh - Sacramento Bee
| | The con artists throw around a lot of buzzwords, terms you have a vague notion of hearing in connection with finance, but the truth is it's just a bunch of gobbledygook. |
In a massive Internet investment fraud, a Sacramento federal judge has ruled that, given the magnitude of the case, it is impossible to order restitution for about 15,000 investors worldwide who lost $60 million.
U.S. District Judge Edward J. Garcia ruled last week that the number of investors, the amount of money involved and a referral program that paid investors 15 percent make it nearly impossible "at this time, or in the near future, for ... the government ... to ascertain each victim and the amount of each victim's loss."
The mind-boggling scope and complexity of the Tri-West Investment Club, with investors from 59 countries that included nearly 100 people living in the jurisdiction of the Sacramento U.S. attorney's office, prevents Garcia from crafting a fair and intelligent restitution order, prosecutors said.
Tri-West, which federal law enforcement officials believe is the largest Internet investment fraud perpetrated, offered investors a 120 percent annual return and lucrative referral fees on a Web site that directed them to mail a cashier's check or money order to a mail drop in Belize or Jamaica.
While prosecutors are still seizing Tri-West funds and property in Mexico, Costa Rica and Latvia, and continue to seize and sell the symbols of its operators' lavish lifestyles - a helicopter, a yacht, showplace homes, luxury automobiles, expensive jewelry - other members of the U.S. Department of Justice have begun the tedious task of sorting out who is owed and how much. When that is completed, victims will be reimbursed to the extent possible.
"We've recovered millions of dollars and hope to recover millions more," Assistant U.S. Attorney John Vincent, who heads the criminal division of the U.S. Attorney's Office in Sacramento, said in an interview this week.
Tri-West was the brainchild of Alyn Richard Waage, who was sentenced in March to 10 years in prison. Waage, 49, created Tri-West in 1999 in the Caribbean after he jumped bail while charged in a real estate fraud in his native Canada. He fled to the Bahamas and started Tri-West, at first using faxes to solicit investments.
By the end of 1999, Waage had moved the base of Tri-West operations to his palatial home in Puerto Vallarta, Mexico, where he met James Michael Webb.
The 43-year-old Webb, who was sentenced in February to nearly five years in prison, designed the Web site that helped morph Tri-West into a huge Internet-based Ponzi and money laundering operation.
After acquiring investors' money, Waage laundered it through one of several Latvian bank accounts before mailing "dividend" checks to select investors to give the false impression of profitability.
Meanwhile, Waage and his small group of insiders, including his sister, his son and another Canadian, were purchasing properties in Mexico and Costa Rica in the name of more than 30 shell corporations, living and traveling in high style and transferring millions of dollars to themselves.
Skeptical investors were kept on the hook by people working the phones from Waage's cliff-side mansion in Puerto Vallarta.
"One of the big things fraudsters like this have going for them is the reluctance on the part of a lot of people to appear ignorant by asking questions," said Vincent, who prosecuted the case with Assistant U.S. Attorney Courtney Linn, a specialist in property forfeiture, and Assistant U.S. Attorney Robin Taylor.
"The con artists throw around a lot of buzzwords, terms you have a vague notion of hearing in connection with finance, but the truth is it's just a bunch of gobbledygook," Vincent said.
It took a team of Internal Revenue Service agents several years to follow the paper trail that finally led to the forfeiture and sale of millions of dollars in assets.
Things started sliding downhill for Waage in April 2001, when he was arrested by Mexican authorities. He was detained when his leased private jet landed on a flight from Belize. He was carrying more than $3 million in undeclared money orders, cashier's checks and other financial instruments obtained in connection with the operation of Tri-West.
The club halted payments to investors after this "unfortunate event," as the Web site described it.
"A Tri-West courier with investment checks and payroll experienced trouble en route for deposit in our Latvian payment account," a message on the site said. "The courier had to make an unscheduled layover and didn't know he had to declare checks in excess of $10,000."
Waage made $2 million bail in August and skipped to Costa Rica.
But his freedom was short-lived. Based on a tip, the U.S. Attorney's Office and the FBI in Sacramento had opened an investigation of Tri-West in May 2001. That probe led to Waage's arrest in Costa Rica on Sept. 6, 2001. At the same time, an army of Costa Rican and U.S. law enforcement personnel executed five search warrants in five separate locations in Costa Rica.
Also on that day, more than 3,000 miles away in San Francisco, a federal judge granted an application from the Securities and Exchange Commission for a temporary restraining order that, among other things, froze the assets of Tri-West and its officers.
Several U.S. states and Canadian provinces had already issued cease-and-desist orders barring Tri-West from doing business in their jurisdictions.
Waage and Webb, a U.S. citizen, were eventually extradited from Costa Rica to Sacramento, where they faced a multicount indictment for wire and mail fraud, conspiracy and money laundering. Both pleaded guilty in 2003.
Waage's son, Cary Alyn Waage, 29, was arrested in December 2001 at the Dallas-Fort Worth International Airport, where he was changing planes en route from Canada to Costa Rica. He pleaded guilty in 2002 to mail fraud and conspiring to launder Tri-West proceeds and was sentenced last year to four years, two months in prison.
A fourth man, Keith Nordick, 42, was expelled from Mexico on immigration violations a year ago, and FBI agents took him into custody when his international flight landed in Los Angeles. Nordick, an erstwhile saloonkeeper from Calgary, Canada, and the former boyfriend of Alyn Waage's sister, pleaded guilty in November to mail fraud and conspiring to launder money. He was sentenced in February to five years, five months in prison.
Alyn Waage's sister, Lynn Waage Johnston, 56, was charged in Sacramento federal court in a 2001 criminal complaint with mail and securities fraud. She is described in the complaint as Tri-West's bookkeeper.
Johnston is a fugitive. |
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