Faughn et al v. JPMorgan Chase Bank, NA

Filing 1

COMPLAINT against All Defendants filed by Rick D. Holtsclaw on behalf of All Plaintiffs. Filing fee $400, receipt number 0866-3874608. Service due by 7/14/2014. (Attachments: # 1 Exhibit A - Oct. 8, 2008 Report, # 2 Exhibit B - Hunter Declaration, # 3 Exhibit C - Stein Declaration, # 4 Civil Cover Sheet )(Holtsclaw, Rick) Modified on 3/14/2014 to correct receipt number (Jones, Robin). Modified on 3/14/2014 to restrict complaint and exhibits to case participants pending ruling on emergency motion (Jones, Robin).

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Hunter
Declaration

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
WICHITA FALLS DIVISION

SECURITIES AND EXCHANGE COMMISSION, §

v. § BANK, §
MILLENNIUM
§

Plaintiff, §
§
§

UT of S, LLC, §

UNITED TRUST OF SWITZERLAND S.A., §

Case No.:

MILLENNIUM FINANCIAL GROUP, §

WILLIAM ADMINISTRATION,§
J. WISE, §
d//a STERLING
d//a STERLING INVESTMENT SERVICES, §

d/b/a MILLENNIUM AVIATION, §

alk/a BESSY LU, §

KRSTI M. HOEGEL, alk/a KRSTI M. CHRISTOPHER, §
JACQUELINE S. HOEGEL, alk/a JACQULINE S. HOEGEL, §

alk/a JACKIE S. HOEGEL, §

PHILIPPE ANGELONI, and BRIJESH CHOPRA, §

~d §

§

Defendants, §
§

UNITED T OF S, LLC, STERLING I.S., LLC, §

MATRIX ADMINISTRATION, LLC, §
JASMINE ADMINISTRATION, LLC, LYN P. WISE, §

DARYL C. HOEGEL, RYAN D. HOEGEL, and §

LAURIE H. WALTON, §
§

Relief Defend~ts. §
§

DECLARATION OF KEITH J. HUNTER
I, Keith J. Hunter do hereby declare under penalty of

perjury, in accordance with 28

U.S.C. § i 746, that the following is true ~d correct, and that I am competent to testify as to the
matters stated herein:

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1. I am over 21 years of age. I am employed by the United States Securities ~d

Exchange Commission ("Commission") as a staff account~t ~d have been employed in this
capacity since April 1999. Prior to joining the Commission, I was previously employed by the

Texas as ~ Investigative Auditor

United States Attorney's Offce for the Northern District of

from September 1991 to April 1999. I am a certified public accountant (License# 54262),
licensed by the Texas State Board of

Public Account~cy.

2. As a staff accountant with the Commission, my responsibilities include review of

public comp~y fin~cial statements for compli~ce with Generally Accepted Accounting
Principles, as well as review of independent audit workpapers for compliance with Generally

Accepted Auditing St~dards. I also analyze fin~cial records of non-public corporations,
parnerships, ~d individuals. This process involves tracing financial transactions to determine

their disposition ~d how those transactions occurred. Finally, I summarize such information

into various schedules ~d charts, and testify to such at hearings ~d trials.
3. I became involved in a Commission investigation into Milennium Bank

("Milennium") on or about March 3,2009 to ~alyze various bank account activity involved in
the umegistered offering of bogus "high-yield" certificates of deposit ("CDs") by Millennium

and its parent comp~y, United Trust of Switzerl~d, S.A. ("United Trust of Switzerl~d"), also
known as UT of S, LLC ("UT of S"). Milennium, located in the West Indies islands of St.
Vincent ~d the Grenadines ("SVG"), marketed its CD's on Milennium's website at
ww.mlnbank.com. and through various internet baner ads ~d lavish lifestyle magazines with

interest rates of 7% to 8%. However, according to h~d-written comments on investor checks
obtained by the staff, Milennium also offered interest rates ranging from 6.75% to 10%. These
CDs were primarily offered by Milennium's two principals, recidivists Wiliam 1. Wise

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("Wise") and Krsti Hoegel ("K. Hoegel'') through entities that either one or both of them

control, including Milennium Bank, United Trust of Switzerland, UT of S, and Milennium
Financial Group. Wise was ordered to comply with Pennsylvania state securities laws in 2003 in
connection with the sale of

high-yield deposit agreements. Krsti Hoegel was ordered to cease

and desist from violating Minnesota securities laws in 2006.
4. My review of

records relating to Milennium's business included, but was not

limited to, Milennium's UT of S ban account (account# ending X648), maintained at
JPMorgan Chase / Washington Mutual Bank ("W AMU"). This account, located in Napa,
California, was opened by K. Hoegel and Jackie Hoegel in Las Vegas, Nevada, in July 2004 and
has been used since at least October 2005 to receive investor funds for the purchase of purported

certificates of deposit. My review consisted of a comprehensive analysis for the period October
i, 2008 through February 2009, as well as an expanded review that concentrated on locating

other investor deposits, and other withdrawals to key individuals affiliated with Milennium,
Wise, and K. Hoegel for the period October 2005 through September 30, 2008. I also reviewed
the original and updated signature cards for this account, which indicate that Wise and K. Hoegel
are current authorized account signatories, as well as the Pennsylvania and Minnesota orders,

referred to above.
RECEIPT OF INVESTOR FUNDS BY THE UT OF S ACCOUNT
5. Ban statements for the UT of S account at W AMU indicate approximately

$ i 06.6 millon in deposits from July 2004 through February 2009. The Commssion has been

able to obtain, on an expedited basis, detailed records (deposit and withdrawal items) for a
majority of

the transactions for the period October 2005 through Februar 28,2009 (the "review

period"). Based on this review period, at least approximately $68.6 milion was identified as

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investor funds raised from the offering of

staff

of

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Milennium's CD's. Investor checks obtained by the

typically listed "UT ofS" or "United Trust of

Switzerland" as the payee. The memo lines

the checks often referenced "CD," an interest rate, Milennium Bank, the name ofa

Milennum Bank CD salesman, and/or the term "investment."
6. These funds were raised from over 375 investors across the country - from

Alaska, to Texas (including Wichita Falls, Texas), to Florida to New York, as well as from some

foreign investors located in Canada and Shanghai, China. These funds appear to have been sent

by investors to Milennium at its location in St. Vincent and the Grenadines, packaged offshore
and then shipped to UT ofS's Napa, California office via FedEx or U.S. maiL. Federal Express

shipping records reflect shipments to 3432 Valle Verde Dr., Napa, Californa from Millennum

Ban. During 2008 and 2009, Wise, Jackie Hoegel, Brijesh Chopra, and Philippe Angeloni all

received and/or shipped packages biled to the Milennium Bank Federal Express account. In the
four month period from October i, 2008 through February 28,2009, UT ofS, LLC paid over
$24,000 in Federal Express shipping costs.
7. Once received in Napa, a significant portion ofthe checks were deposited into the

UT of S account via remote deposit machines from W AMU that Milennum had on-site at its
office in Napa. According to W AMU, remote deposit machines are offered for purchase by
W AMU and allow W AMU's customers and merchants greater flexibilty in conducting their
banng needs. These devices scan an investor check, causing it to be immediately deposited to

the customer's (UT of S) account. According to documents obtained from W AMU, the remote

deposit machines were requested by Krsti Hoegel and stationed at UT ofS's office at 3432
Valle Verde Dr., Napa, California. Under the agreement with W AMU, the customer (UT ofS /

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Case 7:09-cv-00050-O Document 7-4 Filed 03/26/09

Millennium) is required to properly dispose of

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the deposited item/check within approximately 30

days.

DISBURSEMENTS FROM THE UT of S ACCOUNT
8. During the relev~t period, all investor funds appear to have been commingled in

the UT ofS account at WAMU, used for operating expenses ofUT ofS, and subsequently
disbursed to Wise, K. Hoegel, Brijesh Chopra, and Philippe Angeloni; Wise and K. Hoegel's
relatives; and entities Wise ~d K. Hoegel control. Specifically, based on my review of

the ban

records and other documentation, it appears that the majority of investor funds were used by,

and/or tr~sferred to the following individuals ~d entities (shown with approximate amounts
received):

a. Wise (includinp entities under his control, Sterling Administration,

Sterling Investment Services, Milennium Aviation): $12.3 milion
b. K. Hoegel: $965,000
c. Jackie Hoegel (K. Hoegel's mother): $854,000

d. Brijesh Chopra: $90,000
e. Philippe Angeloni: $20,000
f. Lynn Wise (Wise's wife): $1.6 milion
g. Daryl Hoegel (Jackie Hoegel's husband): $130,000

h. Ryan Hoegel (K. Hoegel's brother): $34,000

1. Laurie Walton: $323,000
J. United T of S, LLC: $225,000
k. Sterling I.S., LLC: $504,000

L. Matrix Administration, LLC: $476,000

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m. Jasmine Administration, LLC: $18,000

n. Milennium Fin~cial Group: $20,000
o. United Trust of Switzerland, S.A.: $2.6 milion

p. UT ofS, LLC (operating expenses): $1.1 milion

In addition, other disbursements relating to credit cards ($2.8 milion), automobiles

($820,000), aviation ($870,000), ~d wine ($90,000) were also identified. There may be other
entities or individuals who received investor fuds as welL.
9. It appears that Wise directed transfers to his various business entities, namely

Sterling Investment Services, Sterling Administration, and Milennium Aviation. Approximately
$2.6 milion was tr~sferred to United Trust of Switzerland and approximately $6.6 milion was

transferred to or for the benefit of Sterling Investment Services/Sterling Administration. Of this

$6.6 milion, approximately $4.7 millon was wire transferred to ~ entity named Caribbean
Money Market Brokers, Ltd., located on the Caribbean isl~d of Port of Spain, Trinidad. I have
the fuds tr~sferred to United Trust of

not been able to determine the disposition of

Switzerl~d, Sterling Investment Services and Sterling Administration.

10. There does not appear to be any withdrawals from the account to properly invest

all of the identified investor fuds. Exhibit 1 to this declaration is a summary overview of the
UT of S account that I prepared, which identifies disbursements to Wise, K. Hoegel, and other
persons affliated with Milennium, namely, the Defendants ~d Relief

Defendants.

1 1. Exhibit 1 also identifies approximately $3 milion in payments back to investors

from October 2008 through February 2009, representing an investment "return" on the CD or a
purorted maturity redemption of

the CD. However, given that little or no investment activity

-,

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was ever conducted out of this account, it appears such payments represent Ponzi payments from
other investors, ~ example of

which is discussed below.

POSSIBLE PONZI PAYMENTS TO INVESTORS
12. On December 23,2008, the checks ofthree investors from Maryl~d ($50,000),
Oregon ($15,000), ~d San Fr~cisco ($20,000) were deposited into the UT ofS account. The
these deposits,

bal~ce in this account prior to these deposits was $1,937.08. After the receipt of

the following withdrawals were made from the account.
. $26,254.99 to other investors

. $12,000.00 to Lynn Wise
· $ 6,675.00 to Laurie Walton (affiiated with Wiliam Wise)

. $20,000.00 to Sterling I.S., LLC

. $10,140.89 to Old World Provisioning, LLC

· $ 5,313.39 to various credit card companies

. $ 13 1.91 to FedEx

· $ 75.00 to Reginald Sharpe
· $ 2,401. 1 6 to Ilegible / Global Group

13. After these withdrawals, the account reflected a bal~ce of $3,944.74. Thus, as

outlined above, it does not appear that the funds from these investors in Maryland, Oregon, and
San Fr~cisco were ever invested. The disposition or purpose of

the $20,000 to Sterling I.S.,

LLC, Wise's comp~y, is unown.

14. In summary, UT ofS's ban records establish the following: (1) there is no
evidence that all investor fuds were used for legitimate baning or investment activities; (2)
investor funds were commingled in the account; (3) money movement in the W AMU account

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included transfers to/from each of the Defendants, linking all of them to the scheme; (4) milions
of dollars of new investor monies were used to make apparent Ponzi payments to earlier
investors; (5) each of

the individual Defend~ts diverted investor funds for their personal use

(totaling approximately $14.2 milion); (6) each of

thous~ds to milions of

dollars of

the ReliefDefend~ts received from tens of
investor fuds (totaling approximately $3.3 milion) for no

apparent consideration; and (7) investor fuds were also used to pay at least $2.8 milion in
credit card expenses, $820,000 in auto expenses, $870,000 in aviation expenses, and $90,000 in

wine expenses (totaling approximately $4.6 milion).

Executed this 23rd day of March, 2009.

~;7~

Keith 1. Hunter, C.P.A.

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Exhibit

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Bank Account Summary Overview
Case Name:

Milennium Bank (FW - 03366)

Bank Name:
Account Name:
Account #:
Period:

JPMorgan Chase / Washington Mutual
UT of S, LLC
983949648

October 2005 - February 2009

Investor Deposits:
$68,624,772

Investor Deposits
Withdrawals by Defendants and Relief Defandants:

Defendants:
William J. Wise

Sterling iS d/b/a Sterling Investment Services
Sterling Administration
Caribbean Money Market Brokers - Sterling Administration
Millennium Aviation (Base Ops)

($5,676,373)
($1,079,000)
($813,000)
($4,752,000)
($70,000)

($12,390,373)

Kristi M. Hoegel
Jacqueline S. Hoegel

($965,626)
($854,254)
($90,000)
($20,145)
($20,000)
($2,690,578)

Brijesh Chopra
Millennium Financial Group
Philippe Angeloni

United Trust of Switzerland SA
Total Withdrawals by Defendants:

($17,030,975)

Relief Defendants:
United T of S, LLC
Sterling I.S., LLC
Matrix Administration, LLC
Jasmine Administration, LLC
Lynn P. Wise
Daryl C. Hoegel
Ryan D. Hoegel
Laurie Walton

($225,600)
($504,300)
($476,405)
($18,000)
($1,683,500)
($130,825)
($34,950)
($323,120)

Total Withdrawals by Relief Defendants:

($3,396,700)

Other Notable Withdrawals:
Potential

Investor Returns (Oct. 2008 - Feb. 2009)

($3,029,729)
($1,237,206)
($823,582)

Millennium Trust

Autos
Aviation

($877,891 )
($33,681 )

Cash
Credit Card

($2,885,420)
($92,433)
($24,206)

Wine
Shipping

Total Other Notable Withdrawals:

($9,004,148)

Net Difference (withdrawals not yet identified by the staff

$39,192,948

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EXHIBIT

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Attestation

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UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION

ATTESTATION
I HEREBY ATIST
that:

A dilgent search has this day been made of the records and files of this Commission and the

records andfiles do not disclose, that any registration statement has been received in this
Commission under the names Milennium Bank, United Trust of Switzerland s.A. or UT of S.
LLC, pursuant to the provisions of any of the Acts administered by the Commission.

on fie in this Commission

March 20, 2009
(Date)

~s fv
Records Offcer

It is hereby certified that the Secretary of the U.S. Securities and Exchange

Commission, Washington, D.C., which Commission was created by the

Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is official
custodian of the records and files of said Commission, and all records and

files created or established by the Federal Trade Commission pursuant to

the provisions of the Securities .Act of 1933 and transferred to this
Commission in accordance with Section 210 of the Securities Exchange
Act of 1934, and was such official custodian at the time of executing the
above attestation, and that helshe, and persons holding the positions of
Deputy Secretary, Assistant Director, Records Officer, Branch Chief of
Records Management, and the Program Analyst for the Records Officer,

or anyone of them, are authorized to execute the above attestation.
For the Commission

~ 7J. Y1~
Secretary

App. 99