Opinion ID: 217641
Heading Depth: 2
Heading Rank: 1

Heading: Caribou Program

Text: Beginning in the late 1990s, Mr. Fishman, along with co-conspirators Robert Searles, Joseph Lynn Thornburgh, Wayne Davidson, and others, participated in a fraudulent investment scheme based on the sale of interests in worthless (except as collectibles) bonds issued in 1913 by the Chinese government (Chinese bonds), [1] and in the 1850s by the long-since bankrupt Galveston, Houston and Henderson Railroad (GH & H or Galveston bonds). These and similar antique bonds were referred to as historic bonds. The sales pitch for the obsolete Galveston bonds, which were the primary product, portrayed them as immensely valuable for use as secondary collateral to obtain huge lines of credit from unspecified European banks. The supposed credit lines would then support unspecified high yield trading programs which would allegedly produce a return on bond investment of around ten-fold per week for forty weeks. Thus, for example, it was represented, that an investment of $100,000 to participate in the profits from one 1855 $100 face value ten percent GH & H historic bond would yield profits of $1,100,000 per week for forty weeks, for a total return in a year or less of $44,000,000. R. Vol. 1 at 60. And, to make the investment opportunity more enticing, prospective investors were promised, in writing, a full refund of their money in sixty days if profits were not paid as specified. To support such a rosy scenario for investors, the conspirators clothed the bonds in value by paying an individual to act as an authenticator not only as to the authenticity of a bond (actual original) but also as to its worth according to the authenticator's own terminology, theory and method. The authenticator then determined worth not in terms of sale, investment or redemption value but in terms of a hypothecation valuation, i.e., potential use as a pledge against credit, by calculating compound interest for 144-plus years and the weight of gold to be used for payment, valued at the current market, and then using a formula to arrive at a result. The results were astronomical. Thus, for instance, as of January 1, 2000, the authenticator, John Clancy, placed a hypothecation valuation of $1,840,763,697 on each $100 GH & H ten percent bond. R. Vol. 6 at 2337-39. By 2003 Clancy was assigning a value of almost fifteen billion dollars to each $500 Galveston bond. Id. at 2153-54. The conspirators further bolstered their story by representing that the Florida Supreme Court had secretly issued an opinion, being kept under seal in chambers, which established the validity of the bonds. They also assured prospects that the United States government had assumed the railroad's obligation for the bonds following the civil war, and that the obligation represented by the bonds was still a live debt backed by the Federal government. R. Vol. 4 at 1218. In general (the details of each sale varied from investor to investor), the mechanics of the operation called for investors to enter into a Non-Circumvention/Non-Disclosure and Joint Venture Agreement (Agreement) with Caribou Capital Corporation (Caribou), a North Carolina corporation set up by Robert Searles and operated by him on behalf of the conspirators out of its home office in Madisonville, Tennessee. Caribou was designated on the documents as the Program Coordinator, and described in the Agreement as having valuable knowledge of private placement programs dealing in Historical Gold Backed Railroad Bonds. R. Vol. 1 at 60. Investor funds were largely deposited in the Caribou bank account at the SunTrust Bank in Loudon, Tennessee, and disbursements to the conspirators were mostly made from that account, with Searles acting as paymaster. The GH & H bonds, in the name of either Searles or Thornburgh, were placed in a Safekeeping Depository which issued Safekeeping Receipts or Certificates representing the bonds. The original certificates were then sent to Patrick Henriette, the group's designated Program Manager in Europe, ostensibly for presentation to European banks. A certified copy of each certificate was sent to the purchasing investor. Id. After obtaining money from an investor, the conspirators employed stalling tactics to explain away the lack of any promised return. For literally years, one or another of the conspirators advanced excuse after excuse and glowing progress reports designed to string the increasingly distressed investors along and lull them into not taking any action. Some investors were also offered a new opportunity to invest in the Chinese bonds for a can't miss quick deal where the alleged imminent redemption of those bonds by the current government of China would make the investor whole. When those tactics finally wore out, investors were offered yet another document (Termination and Hold Harmless Agreement) to sign, promising a full refund of their initial investment on an agreement not to sue. Predictably, no refund occurred. The end game had the conspirators blaming each other, nefarious government agents, and government seizures of bonds and files, for thwarting the investment program. Throughout, the co-conspirators generally cooperated with one another, interdependently, to further the goals of the conspiracy to sell interests in the worthless bonds. Mr. Searles, as president and organizer of Caribou, operated at the business and banking center of the enterprise both as a salesman and a manager. Mr. Thornburgh was in sales. Mr. Davidson was in sales in New Zealand and Australia. Mr. Henriette provided the European window dressing, and Mr. Fishman provided the neural glue, as described by the government. In aid of the efforts by Messrs. Thornburgh, Davidson and Searles, Mr. Fishman drafted and furnished documents, consulted with investors both before and after investment, traveled to Europe with Mr. Thornburgh to meet with Henriette and supposed bank contacts, hosted at least one meeting of investors at his home, drafted and furnished lulling progress reports, provided bonds, picked up bonds from escrow, supplied the names of authenticators, and sold or attempted to sell both railroad and Chinese bonds. He and Mr. Thornburgh shared $108,000 or more, paid directly to them by one investor supposedly to defray ongoing personal expenses allegedly relating to the bond program. R. Vol. 3 (7 of 8) at 837. That investor, Dr. Wayne Maltz, described his investment experience as follows: There was a lot of correspondence, faxes and e-mails, mostly . . . written by Mr. Fishman about the program. Mr. Fishman came into the picture to tell us how these bonds were going to be placed. Id. at 808. Another witness, an investor's CPA, described the sales process this way: A. Well, Mr. ThornburghI would characterize him as the salesperson. . . . [H]e's the one that brought the parties to the table. And then later, we were introduced to Mr. Fishman, who then would reiterate the mechanics of the deal. And that's how we got knowledge of the next level of the investment. . . . A. We would be on the phone with Mr. Thornburgh, and we would ask pointed questions. And he would always then refer us to Mr. Fishman, who did have the answers to the more technical questions. Id. at 921-22. . . . A. [L]ater [after no payments were received] we started calling Bob Searles. And Bob Searles actually was the only one that seemed to try to help, quite frankly. Id. at 933. In 2002, Messrs. Thornburgh and Searles parted ways. However, Mr. Fishman maintained relationships with both, and both remained involved in the bond program. The conspiracy ran to mid-2005. During its life no bonds were placed with a financial institution, no lines of credit were granted, no trading programs, high-yield or otherwise, were established, no profits or other returns were realized, and no payments to investors were made under the terms of their agreements with Caribou. [2] The total number of victims exceeded 250, and the total known loss was $4,057,846.26. [3] Mr. Fishman received a total of $343,629.50 personally from the Caribou program.