Two accused of $11 million scam
The case apparently involves nonexistent products and a bogus Internet business, named in documents filed in U.S. District Court in Portland as part of an attempt by federal prosecutors to seize property in Washington state and Florida that was bought with proceeds from the scheme.
The waterfront property in Gig Harbor, Pierce County, was purchased by Scott Louis Guenther, and property in Shalimar, Fla., is linked to Frank Richard Hendricks, according to an affidavit written by FBI Special Agent Joseph Boyer.
The two are accused in the document of trying to defraud investors through their company, Pacific Achievements International, or PAI.
No charges have been filed against either Guenther or Hendricks.
But the FBI and the Internal Revenue Service are investigating them and their company.
Guenther's lawyer, Alan Baum of Los Angeles, said it would be "premature and inappropriate" for him to comment on the case. Neither Hendricks nor his lawyer could be reached for comment Friday.
Investigators say the men targeted investors through the Internet and quickly raised millions. The business was incorporated in Nevada in August 2002, but some of the money was funneled through banks in Corvallis, Ore., where Guenther lived at one point, court records say.
Oregon Department of Justice officials said they received 13 complaints from investors about PAI. After investigating, state officials ultimately forwarded the case to federal authorities, department spokeswoman Jan Margosian said.
According to Boyer's affidavit, the men pitched "e-book marketing" and offered expertise and consulting to "emerging business opportunities." But details about their products are slim, and in fact, federal investigators concluded that PAI "never engaged in income-producing business."
For an initial contribution of $5,859, investors were told they could earn monthly profits ranging from $2,017 to $1 million.
The FBI first learned about PAI in September 2003 after receiving reports from several banks, including one in Corvallis, about suspicious activity in PAI accounts.
One account with Bank of America was opened in August 2002 with a deposit of $50 but by October 2003 had deposits of more than $6 million. All of the money was coming from wire transfers from people around the country.
Instead of selling business-related products, investigators said, Guenther and Hendricks used the money to return money to some investors, buy costly real estate and participate in other suspicious ventures.
Court records say that $2.2 million was returned to investors who thought they were being paid dividends from their original investments.
Bank records show that the pair made large withdrawals, including wire transfers to a Nassau bank, a mortgage company and a gold-trading company. In August 2002, Guenther used some of the money to make a down payment on a $688,000 house in Gig Harbor.
Hendricks, too, withdrew large amounts of cash from the PAI account, court records say. He used money to help buy a house in Florida that was estimated to cost as much as $650,000. He also started a business called Destinations and Beyond, which paid young women to pose for a calendar and magazine.
Beginning in September 2003, a consumer-fraud investigator with the state Department of Justice began monitoring conference calls with investors. According to court records, Hendricks appeared to string along investors, asking them to be patient and promising bigger financial rewards.