Tradewind settlements executive served eight years in prison for viatical scheme
By donna horowitz updated 07:34 pm, dec-01-2015 et
The executive running tradewind settlements llc served eight years in prison in connection with a viatical company he previously ran in which thousands of investors, many of them elderly, were defrauded of millions of dollars in what prosecutors described as a classic ponzi scheme.
Thomas j. Smith, who headed now-defunct trade partners inc., was sentenced to prison after pleading guilty in 2005 to mail fraud, interstate transportation in aid of racketeering enterprises and securities fraud.
Following his release from prison in june 2012, he began running tradewind settlements, a franchise-like operation in jacksonville, fla., that makes money by selling territories for $24,950 to insurance agents to generate life settlements.
Neither smith nor tradewind has disclosed the fraud conviction, prison sentence or restitution order requiring him to repay about $100 million to defrauded investors on the company's website or in marketing materials. Smith's name and photo also do not appear on the company's website.
Smith did not respond to requests seeking comment.
Information about his conviction in a viatical fraud shocked those who used to work with him.
"holy moses! holy moses!" said lee mowery, who ran weekend training workshops for tradewind as a consultant. He left the company after a dispute over the use of his name and photo under the management heading on the tradewind website. Both sides ended up suing each other, but ultimately settled without any money changing hands, mowery said.
Harry holan, managing partner of trinity financial services llc of orlando, fla., said he's glad his company disassociated itself from tradewind about a month and a half ago after learning tuesday of smith's background from the deal.
He said his life settlement brokerage never did any business with tradewind because the policies that were submitted were either too small or the insureds on them were too young. He said he began working with tradewind after brian casey, an attorney at locke lord llp, ran into him at a conference and suggested that the company might be a source of paper for him.
As to whether smith should have disclosed his background, holan responded that he should have done so, but he understands why he didn't.
Holan said he wouldn't have worked with tradewind if he had known of smith's criminal conviction.
"are you kidding me? This is a very litigious industry. The last thing you want to do is have your name mixed up in something like this," holan said.
One of smith's conditions of probation, which ended this past june, said he had to work in a lawful occupation that did not require him to have fiduciary responsibility, involve investments or the handling of funds for others.
Smith's conviction resulted from two frauds he committed while running trade partners, according to a 39-page sentencing memorandum filed march 2005 by the u.S. Attorney's office in dallas in u.S. District court in grand rapids, mich.
The first was related to a well-known clean-sheeting scandal in the life settlement market in which he bought policies at substantial discounts from kelco inc. That had been issued by insurance companies on aids patients whose illness was hidden from them. Kelco provided fake medical records to carriers, substituting the patients' blood tests with those of healthy individuals.
Steve keller, who operated kelco out of lexington, ky., and his officers were convicted in march 2003 of fraud and money laundering in kentucky.
Smith and trade partners bought the kelco policies as early as 1995, the same year trade partners was incorporated. The company developed various investment schemes, but mainly focused on financial products based on viaticals.
For the next phase of smith's fraud, he created two main trusts to hold most of the policies. Investors obtained an interest in a policy held in one of the trusts. Trade partners promised to keep part of the money raised in a separate premium account at grand bank in grand rapids, now known as macatawa bank. Trade partners also promised to pay premiums beyond the maturity date, if necessary.
For the investment to succeed, policies needed to mature in a two-year time period or trade partners would have to sell them to new investors.
When neither happened regularly, smith's and trade partners' solution was to sell to even more investors, placing them "at the mercy of a ponzi scheme" to try to dig the company out of its problems, the sentencing memo said.
"as the operation continued, by the spring of 2000, however, all pretense of escrowing premiums was dropped as trade partners did everything it could to sell investments of any kind to new investors and to stall increasingly hostile investors who wanted their money back," the sentencing report further said.
In addition to viaticals, smith's company also promoted two funding instruments to investors that were supposed to be secured by underlying businesses. One, sojkara, purportedly was a telecommunications company, while the other, iwm, supposedly was a waste management company that purportedly had technology to turn pig dung into a useful product.
At the height of the company's operation, smith, who was president, had about 30 employees and more than 100 outside brokers in addition to the company's sales team. Trade partners sold its investments between late 1995 through march 2003, raising more than $200 million from thousands of investors before the company collapsed, the court document added.
Not only was the scheme complicated, so was the enforcement effort, which involved two jurisdictions. The securities fraud prosecution was handled by the federal court in dallas and grew out of a previous criminal investigation focused on larry tyler, owner of advanced financial services inc. Of fort worth, texas. He had sold investments in fractional interests for trade partners. A federal grand jury indicted him in july 2004 on securities fraud and wire fraud while the securities and exchange commission had filed a civil suit against him two years earlier. Ultimately, in may 2005 he pleaded guilty and was sentenced to eight years in prison and ordered to pay $23.6 million in restitution.
After smith entered a guilty plea, he requested that the case be transferred to the federal court in grand rapids, where he was sentenced.
Smith was quoted as saying he was "very ashamed" in a story on the sentencing in the grand rapids press.
Macatawa bank corp. Agreed in 2008 to settle a suit against it in connection with the case by paying $5.75 million in cash and stock to 1,300 investors, according to the grand rapids newspaper. In 2001, macatawa had purchased grand bank, which held the escrow accounts for the trade partners' policies.
The receivership ultimately sold the portfolio for $43 million in cash to universal international settlements international inc. Of burlington, ontario, canada.
As of june, smith only had paid $2,369 toward $98.4 million in restitution to court-appointed receiver bruce kramer, according to an order by judge robert holmes bell of u.S. District court in grand rapids. He assigned the remaining balance to the crime victims fund, stating that granting that request didn't change the requirement for smith to continue making payments.
Kramer, an attorney with apperson crump plc in memphis, recalled that he liquidated assets, including selling real estate and the trade partners' life settlement portfolio. In all, he said there were 13,000 individual claims.
He and others, including a now-retired dallas prosecutor, an attorney for a court examiner and a whistleblower involved in the case say they all were surprised that smith is back working in life settlements.
Sherry tedaldi, who was the top saleswoman for trade partners, said she worked to bring the company down several months before she left once she learned to her shock that it was not escrowing premiums as it promised to investors.
Tedaldi initially was frustrated after reaching out to authorities, including the postal inspector and fbi in michigan, after they told her they needed more information to prove a crime had been committed.
Finally, she said she reached out to michael quilling, a dallas receiver for tyler's advanced financial services, an outside broker for trade partners.
"i said 'we have a problem. You need to look at this. The customers your policies are on do not have premiums escrowed.' then, a policy for $1 million lapsed. I said 'you have to listen to me.'''
After that, she said she got quilling's attention.
Quilling's office sent someone to collect evidence, she said. She gave the man the password to gain access to the computer system and let him into the office four nights in a row so he could pore through the files.
Tedaldi, who was earning $300,000 a year at trade partners, said she lost everything after the company collapsed. She had taken money out of her house to invest $600,000 in the company's viaticals. She says she's now back to making payments on her house, which had been paid off.
She said smith portrayed himself as being a religious, christian man.
"i have no clue how tom smith can get through a day, let alone sleep at night," tedaldi said.
"he's got no conscience. I would say he was a very smooth con-man," she added.
Dennis roossien jr., an attorney with the munsch hardt kopt & harr pc law firm in dallas who represented court examiner steve harr, said he was shocked to hear that smith was back in life settlements.
"i'm disappointed," he said. "tom had an opportunity to roll up his sleeves and work for a living. The judge was hoping when he came out [of prison] he would stay away from this whole business," he said.
"my read on tom smith is that he didn't appreciate the depth to which trade partners was a con. He could talk himself into anything," he added.
During sentencing, he said the judge told smith that he didn't want to see him back in his court.
"then, he set these three very odd conditions. He was sending a message that tom didn't take."
Floyd clardy, a special assistant u.S. Attorney in dallas who prosecuted the case and now is retired, also said he was disappointed that smith got back in the life settlement business.
He said that originally the case was going to be prosecuted in michigan, but he didn't support the prosecutor's office there because it wanted to let him off with a slap on the wrist.
"i thought it was wrong. I had quite a time being able to wrangle control away from them. They didn't take it kindly," he said.
He recalled seeing the victims at the sentencing who grasped at him.
"they were really old, they were all broke. He [tom] had taken all of their money. ... They all wanted to touch me and thank me. I remember sort of being cornered. They were desperate."
Tradewind settlements executive served eight years in prison for viatical scheme
By donna horowitz updated 07:34 pm, dec-01-2015 et
The executive running tradewind settlements llc served eight years in prison in connection with a viatical company he previously ran in which thousands of investors, many of them elderly, were defrauded of millions of dollars in what prosecutors described as a classic ponzi scheme.
Thomas j. Smith, who headed now-defunct trade partners inc., was sentenced to prison after pleading guilty in 2005 to mail fraud, interstate transportation in aid of racketeering enterprises and securities fraud.
Following his release from prison in june 2012, he began running tradewind settlements, a franchise-like operation in jacksonville, fla., that makes money by selling territories for $24,950 to insurance agents to generate life settlements.
Neither smith nor tradewind has disclosed the fraud conviction, prison sentence or restitution order requiring him to repay about $100 million to defrauded investors on the company's website or in marketing materials. Smith's name and photo also do not appear on the company's website.
Smith did not respond to requests seeking comment.
Information about his conviction in a viatical fraud shocked those who used to work with him.
"holy moses! holy moses!" said lee mowery, who ran weekend training workshops for tradewind as a consultant. He left the company after a dispute over the use of his name and photo under the management heading on the tradewind website. Both sides ended up suing each other, but ultimately settled without any money changing hands, mowery said.
Harry holan, managing partner of trinity financial services llc of orlando, fla., said he's glad his company disassociated itself from tradewind about a month and a half ago after learning tuesday of smith's background from the deal.
He said his life settlement brokerage never did any business with tradewind because the policies that were submitted were either too small or the insureds on them were too young. He said he began working with tradewind after brian casey, an attorney at locke lord llp, ran into him at a conference and suggested that the company might be a source of paper for him.
As to whether smith should have disclosed his background, holan responded that he should have done so, but he understands why he didn't.
Holan said he wouldn't have worked with tradewind if he had known of smith's criminal conviction.
"are you kidding me? This is a very litigious industry. The last thing you want to do is have your name mixed up in something like this," holan said.
One of smith's conditions of probation, which ended this past june, said he had to work in a lawful occupation that did not require him to have fiduciary responsibility, involve investments or the handling of funds for others.
Smith's conviction resulted from two frauds he committed while running trade partners, according to a 39-page sentencing memorandum filed march 2005 by the u.S. Attorney's office in dallas in u.S. District court in grand rapids, mich.
The first was related to a well-known clean-sheeting scandal in the life settlement market in which he bought policies at substantial discounts from kelco inc. That had been issued by insurance companies on aids patients whose illness was hidden from them. Kelco provided fake medical records to carriers, substituting the patients' blood tests with those of healthy individuals.
Steve keller, who operated kelco out of lexington, ky., and his officers were convicted in march 2003 of fraud and money laundering in kentucky.
Smith and trade partners bought the kelco policies as early as 1995, the same year trade partners was incorporated. The company developed various investment schemes, but mainly focused on financial products based on viaticals.
For the next phase of smith's fraud, he created two main trusts to hold most of the policies. Investors obtained an interest in a policy held in one of the trusts. Trade partners promised to keep part of the money raised in a separate premium account at grand bank in grand rapids, now known as macatawa bank. Trade partners also promised to pay premiums beyond the maturity date, if necessary.
For the investment to succeed, policies needed to mature in a two-year time period or trade partners would have to sell them to new investors.
When neither happened regularly, smith's and trade partners' solution was to sell to even more investors, placing them "at the mercy of a ponzi scheme" to try to dig the company out of its problems, the sentencing memo said.
"as the operation continued, by the spring of 2000, however, all pretense of escrowing premiums was dropped as trade partners did everything it could to sell investments of any kind to new investors and to stall increasingly hostile investors who wanted their money back," the sentencing report further said.
In addition to viaticals, smith's company also promoted two funding instruments to investors that were supposed to be secured by underlying businesses. One, sojkara, purportedly was a telecommunications company, while the other, iwm, supposedly was a waste management company that purportedly had technology to turn pig dung into a useful product.
At the height of the company's operation, smith, who was president, had about 30 employees and more than 100 outside brokers in addition to the company's sales team. Trade partners sold its investments between late 1995 through march 2003, raising more than $200 million from thousands of investors before the company collapsed, the court document added.
Not only was the scheme complicated, so was the enforcement effort, which involved two jurisdictions. The securities fraud prosecution was handled by the federal court in dallas and grew out of a previous criminal investigation focused on larry tyler, owner of advanced financial services inc. Of fort worth, texas. He had sold investments in fractional interests for trade partners. A federal grand jury indicted him in july 2004 on securities fraud and wire fraud while the securities and exchange commission had filed a civil suit against him two years earlier. Ultimately, in may 2005 he pleaded guilty and was sentenced to eight years in prison and ordered to pay $23.6 million in restitution.
After smith entered a guilty plea, he requested that the case be transferred to the federal court in grand rapids, where he was sentenced.
Smith was quoted as saying he was "very ashamed" in a story on the sentencing in the grand rapids press.
Macatawa bank corp. Agreed in 2008 to settle a suit against it in connection with the case by paying $5.75 million in cash and stock to 1,300 investors, according to the grand rapids newspaper. In 2001, macatawa had purchased grand bank, which held the escrow accounts for the trade partners' policies.
The receivership ultimately sold the portfolio for $43 million in cash to universal international settlements international inc. Of burlington, ontario, canada.
As of june, smith only had paid $2,369 toward $98.4 million in restitution to court-appointed receiver bruce kramer, according to an order by judge robert holmes bell of u.S. District court in grand rapids. He assigned the remaining balance to the crime victims fund, stating that granting that request didn't change the requirement for smith to continue making payments.
Kramer, an attorney with apperson crump plc in memphis, recalled that he liquidated assets, including selling real estate and the trade partners' life settlement portfolio. In all, he said there were 13,000 individual claims.
He and others, including a now-retired dallas prosecutor, an attorney for a court examiner and a whistleblower involved in the case say they all were surprised that smith is back working in life settlements.
Sherry tedaldi, who was the top saleswoman for trade partners, said she worked to bring the company down several months before she left once she learned to her shock that it was not escrowing premiums as it promised to investors.
Tedaldi initially was frustrated after reaching out to authorities, including the postal inspector and fbi in michigan, after they told her they needed more information to prove a crime had been committed.
Finally, she said she reached out to michael quilling, a dallas receiver for tyler's advanced financial services, an outside broker for trade partners.
"i said 'we have a problem. You need to look at this. The customers your policies are on do not have premiums escrowed.' then, a policy for $1 million lapsed. I said 'you have to listen to me.'''
After that, she said she got quilling's attention.
Quilling's office sent someone to collect evidence, she said. She gave the man the password to gain access to the computer system and let him into the office four nights in a row so he could pore through the files.
Tedaldi, who was earning $300,000 a year at trade partners, said she lost everything after the company collapsed. She had taken money out of her house to invest $600,000 in the company's viaticals. She says she's now back to making payments on her house, which had been paid off.
She said smith portrayed himself as being a religious, christian man.
"i have no clue how tom smith can get through a day, let alone sleep at night," tedaldi said.
"he's got no conscience. I would say he was a very smooth con-man," she added.
Dennis roossien jr., an attorney with the munsch hardt kopt & harr pc law firm in dallas who represented court examiner steve harr, said he was shocked to hear that smith was back in life settlements.
"i'm disappointed," he said. "tom had an opportunity to roll up his sleeves and work for a living. The judge was hoping when he came out [of prison] he would stay away from this whole business," he said.
"my read on tom smith is that he didn't appreciate the depth to which trade partners was a con. He could talk himself into anything," he added.
During sentencing, he said the judge told smith that he didn't want to see him back in his court.
"then, he set these three very odd conditions. He was sending a message that tom didn't take."
Floyd clardy, a special assistant u.S. Attorney in dallas who prosecuted the case and now is retired, also said he was disappointed that smith got back in the life settlement business.
He said that originally the case was going to be prosecuted in michigan, but he didn't support the prosecutor's office there because it wanted to let him off with a slap on the wrist.
"i thought it was wrong. I had quite a time being able to wrangle control away from them. They didn't take it kindly," he said.
He recalled seeing the victims at the sentencing who grasped at him.
"they were really old, they were all broke. He [tom] had taken all of their money. ... They all wanted to touch me and thank me. I remember sort of being cornered. They were desperate."
Tradewind Settlements Reviews
Tradewind settlements executive served eight years in prison for viatical scheme
By donna horowitz updated 07:34 pm, dec-01-2015 et
The executive running tradewind settlements llc served eight years in prison in connection with a viatical company he previously ran in which thousands of investors, many of them elderly, were defrauded of millions of dollars in what prosecutors described as a classic ponzi scheme.
Thomas j. Smith, who headed now-defunct trade partners inc., was sentenced to prison after pleading guilty in 2005 to mail fraud, interstate transportation in aid of racketeering enterprises and securities fraud.
Following his release from prison in june 2012, he began running tradewind settlements, a franchise-like operation in jacksonville, fla., that makes money by selling territories for $24,950 to insurance agents to generate life settlements.
Neither smith nor tradewind has disclosed the fraud conviction, prison sentence or restitution order requiring him to repay about $100 million to defrauded investors on the company's website or in marketing materials. Smith's name and photo also do not appear on the company's website.
Smith did not respond to requests seeking comment.
Information about his conviction in a viatical fraud shocked those who used to work with him.
"holy moses! holy moses!" said lee mowery, who ran weekend training workshops for tradewind as a consultant. He left the company after a dispute over the use of his name and photo under the management heading on the tradewind website. Both sides ended up suing each other, but ultimately settled without any money changing hands, mowery said.
Harry holan, managing partner of trinity financial services llc of orlando, fla., said he's glad his company disassociated itself from tradewind about a month and a half ago after learning tuesday of smith's background from the deal.
He said his life settlement brokerage never did any business with tradewind because the policies that were submitted were either too small or the insureds on them were too young. He said he began working with tradewind after brian casey, an attorney at locke lord llp, ran into him at a conference and suggested that the company might be a source of paper for him.
As to whether smith should have disclosed his background, holan responded that he should have done so, but he understands why he didn't.
Holan said he wouldn't have worked with tradewind if he had known of smith's criminal conviction.
"are you kidding me? This is a very litigious industry. The last thing you want to do is have your name mixed up in something like this," holan said.
One of smith's conditions of probation, which ended this past june, said he had to work in a lawful occupation that did not require him to have fiduciary responsibility, involve investments or the handling of funds for others.
Smith's conviction resulted from two frauds he committed while running trade partners, according to a 39-page sentencing memorandum filed march 2005 by the u.S. Attorney's office in dallas in u.S. District court in grand rapids, mich.
The first was related to a well-known clean-sheeting scandal in the life settlement market in which he bought policies at substantial discounts from kelco inc. That had been issued by insurance companies on aids patients whose illness was hidden from them. Kelco provided fake medical records to carriers, substituting the patients' blood tests with those of healthy individuals.
Steve keller, who operated kelco out of lexington, ky., and his officers were convicted in march 2003 of fraud and money laundering in kentucky.
Smith and trade partners bought the kelco policies as early as 1995, the same year trade partners was incorporated. The company developed various investment schemes, but mainly focused on financial products based on viaticals.
For the next phase of smith's fraud, he created two main trusts to hold most of the policies. Investors obtained an interest in a policy held in one of the trusts. Trade partners promised to keep part of the money raised in a separate premium account at grand bank in grand rapids, now known as macatawa bank. Trade partners also promised to pay premiums beyond the maturity date, if necessary.
For the investment to succeed, policies needed to mature in a two-year time period or trade partners would have to sell them to new investors.
When neither happened regularly, smith's and trade partners' solution was to sell to even more investors, placing them "at the mercy of a ponzi scheme" to try to dig the company out of its problems, the sentencing memo said.
"as the operation continued, by the spring of 2000, however, all pretense of escrowing premiums was dropped as trade partners did everything it could to sell investments of any kind to new investors and to stall increasingly hostile investors who wanted their money back," the sentencing report further said.
In addition to viaticals, smith's company also promoted two funding instruments to investors that were supposed to be secured by underlying businesses. One, sojkara, purportedly was a telecommunications company, while the other, iwm, supposedly was a waste management company that purportedly had technology to turn pig dung into a useful product.
At the height of the company's operation, smith, who was president, had about 30 employees and more than 100 outside brokers in addition to the company's sales team. Trade partners sold its investments between late 1995 through march 2003, raising more than $200 million from thousands of investors before the company collapsed, the court document added.
Not only was the scheme complicated, so was the enforcement effort, which involved two jurisdictions. The securities fraud prosecution was handled by the federal court in dallas and grew out of a previous criminal investigation focused on larry tyler, owner of advanced financial services inc. Of fort worth, texas. He had sold investments in fractional interests for trade partners. A federal grand jury indicted him in july 2004 on securities fraud and wire fraud while the securities and exchange commission had filed a civil suit against him two years earlier. Ultimately, in may 2005 he pleaded guilty and was sentenced to eight years in prison and ordered to pay $23.6 million in restitution.
After smith entered a guilty plea, he requested that the case be transferred to the federal court in grand rapids, where he was sentenced.
Smith was quoted as saying he was "very ashamed" in a story on the sentencing in the grand rapids press.
Macatawa bank corp. Agreed in 2008 to settle a suit against it in connection with the case by paying $5.75 million in cash and stock to 1,300 investors, according to the grand rapids newspaper. In 2001, macatawa had purchased grand bank, which held the escrow accounts for the trade partners' policies.
The receivership ultimately sold the portfolio for $43 million in cash to universal international settlements international inc. Of burlington, ontario, canada.
As of june, smith only had paid $2,369 toward $98.4 million in restitution to court-appointed receiver bruce kramer, according to an order by judge robert holmes bell of u.S. District court in grand rapids. He assigned the remaining balance to the crime victims fund, stating that granting that request didn't change the requirement for smith to continue making payments.
Kramer, an attorney with apperson crump plc in memphis, recalled that he liquidated assets, including selling real estate and the trade partners' life settlement portfolio. In all, he said there were 13,000 individual claims.
He and others, including a now-retired dallas prosecutor, an attorney for a court examiner and a whistleblower involved in the case say they all were surprised that smith is back working in life settlements.
Sherry tedaldi, who was the top saleswoman for trade partners, said she worked to bring the company down several months before she left once she learned to her shock that it was not escrowing premiums as it promised to investors.
Tedaldi initially was frustrated after reaching out to authorities, including the postal inspector and fbi in michigan, after they told her they needed more information to prove a crime had been committed.
Finally, she said she reached out to michael quilling, a dallas receiver for tyler's advanced financial services, an outside broker for trade partners.
"i said 'we have a problem. You need to look at this. The customers your policies are on do not have premiums escrowed.' then, a policy for $1 million lapsed. I said 'you have to listen to me.'''
After that, she said she got quilling's attention.
Quilling's office sent someone to collect evidence, she said. She gave the man the password to gain access to the computer system and let him into the office four nights in a row so he could pore through the files.
Tedaldi, who was earning $300,000 a year at trade partners, said she lost everything after the company collapsed. She had taken money out of her house to invest $600,000 in the company's viaticals. She says she's now back to making payments on her house, which had been paid off.
She said smith portrayed himself as being a religious, christian man.
"i have no clue how tom smith can get through a day, let alone sleep at night," tedaldi said.
"he's got no conscience. I would say he was a very smooth con-man," she added.
Dennis roossien jr., an attorney with the munsch hardt kopt & harr pc law firm in dallas who represented court examiner steve harr, said he was shocked to hear that smith was back in life settlements.
"i'm disappointed," he said. "tom had an opportunity to roll up his sleeves and work for a living. The judge was hoping when he came out [of prison] he would stay away from this whole business," he said.
"my read on tom smith is that he didn't appreciate the depth to which trade partners was a con. He could talk himself into anything," he added.
During sentencing, he said the judge told smith that he didn't want to see him back in his court.
"then, he set these three very odd conditions. He was sending a message that tom didn't take."
Floyd clardy, a special assistant u.S. Attorney in dallas who prosecuted the case and now is retired, also said he was disappointed that smith got back in the life settlement business.
He said that originally the case was going to be prosecuted in michigan, but he didn't support the prosecutor's office there because it wanted to let him off with a slap on the wrist.
"i thought it was wrong. I had quite a time being able to wrangle control away from them. They didn't take it kindly," he said.
He recalled seeing the victims at the sentencing who grasped at him.
"they were really old, they were all broke. He [tom] had taken all of their money. ... They all wanted to touch me and thank me. I remember sort of being cornered. They were desperate."
Read more: http://pipeline.Thedeal.com/tdd/viewarticle.Dl?Id=13383533#ixzz3t7ss8ipw
Donna horowitz | senior editor, the life settlements report
The deal | 1435 n. Mcdowell blvd., suite 120 | petaluma, ca 94954
Contact info for Tom Smith ?
Does anyone know how to get Tom Smith's current contact info ? I'm doing an expose on him that will be televised.
Tradewind settlements executive served eight years in prison for viatical scheme
By donna horowitz updated 07:34 pm, dec-01-2015 et
The executive running tradewind settlements llc served eight years in prison in connection with a viatical company he previously ran in which thousands of investors, many of them elderly, were defrauded of millions of dollars in what prosecutors described as a classic ponzi scheme.
Thomas j. Smith, who headed now-defunct trade partners inc., was sentenced to prison after pleading guilty in 2005 to mail fraud, interstate transportation in aid of racketeering enterprises and securities fraud.
Following his release from prison in june 2012, he began running tradewind settlements, a franchise-like operation in jacksonville, fla., that makes money by selling territories for $24,950 to insurance agents to generate life settlements.
Neither smith nor tradewind has disclosed the fraud conviction, prison sentence or restitution order requiring him to repay about $100 million to defrauded investors on the company's website or in marketing materials. Smith's name and photo also do not appear on the company's website.
Smith did not respond to requests seeking comment.
Information about his conviction in a viatical fraud shocked those who used to work with him.
"holy moses! holy moses!" said lee mowery, who ran weekend training workshops for tradewind as a consultant. He left the company after a dispute over the use of his name and photo under the management heading on the tradewind website. Both sides ended up suing each other, but ultimately settled without any money changing hands, mowery said.
Harry holan, managing partner of trinity financial services llc of orlando, fla., said he's glad his company disassociated itself from tradewind about a month and a half ago after learning tuesday of smith's background from the deal.
He said his life settlement brokerage never did any business with tradewind because the policies that were submitted were either too small or the insureds on them were too young. He said he began working with tradewind after brian casey, an attorney at locke lord llp, ran into him at a conference and suggested that the company might be a source of paper for him.
As to whether smith should have disclosed his background, holan responded that he should have done so, but he understands why he didn't.
Holan said he wouldn't have worked with tradewind if he had known of smith's criminal conviction.
"are you kidding me? This is a very litigious industry. The last thing you want to do is have your name mixed up in something like this," holan said.
One of smith's conditions of probation, which ended this past june, said he had to work in a lawful occupation that did not require him to have fiduciary responsibility, involve investments or the handling of funds for others.
Smith's conviction resulted from two frauds he committed while running trade partners, according to a 39-page sentencing memorandum filed march 2005 by the u.S. Attorney's office in dallas in u.S. District court in grand rapids, mich.
The first was related to a well-known clean-sheeting scandal in the life settlement market in which he bought policies at substantial discounts from kelco inc. That had been issued by insurance companies on aids patients whose illness was hidden from them. Kelco provided fake medical records to carriers, substituting the patients' blood tests with those of healthy individuals.
Steve keller, who operated kelco out of lexington, ky., and his officers were convicted in march 2003 of fraud and money laundering in kentucky.
Smith and trade partners bought the kelco policies as early as 1995, the same year trade partners was incorporated. The company developed various investment schemes, but mainly focused on financial products based on viaticals.
For the next phase of smith's fraud, he created two main trusts to hold most of the policies. Investors obtained an interest in a policy held in one of the trusts. Trade partners promised to keep part of the money raised in a separate premium account at grand bank in grand rapids, now known as macatawa bank. Trade partners also promised to pay premiums beyond the maturity date, if necessary.
For the investment to succeed, policies needed to mature in a two-year time period or trade partners would have to sell them to new investors.
When neither happened regularly, smith's and trade partners' solution was to sell to even more investors, placing them "at the mercy of a ponzi scheme" to try to dig the company out of its problems, the sentencing memo said.
"as the operation continued, by the spring of 2000, however, all pretense of escrowing premiums was dropped as trade partners did everything it could to sell investments of any kind to new investors and to stall increasingly hostile investors who wanted their money back," the sentencing report further said.
In addition to viaticals, smith's company also promoted two funding instruments to investors that were supposed to be secured by underlying businesses. One, sojkara, purportedly was a telecommunications company, while the other, iwm, supposedly was a waste management company that purportedly had technology to turn pig dung into a useful product.
At the height of the company's operation, smith, who was president, had about 30 employees and more than 100 outside brokers in addition to the company's sales team. Trade partners sold its investments between late 1995 through march 2003, raising more than $200 million from thousands of investors before the company collapsed, the court document added.
Not only was the scheme complicated, so was the enforcement effort, which involved two jurisdictions. The securities fraud prosecution was handled by the federal court in dallas and grew out of a previous criminal investigation focused on larry tyler, owner of advanced financial services inc. Of fort worth, texas. He had sold investments in fractional interests for trade partners. A federal grand jury indicted him in july 2004 on securities fraud and wire fraud while the securities and exchange commission had filed a civil suit against him two years earlier. Ultimately, in may 2005 he pleaded guilty and was sentenced to eight years in prison and ordered to pay $23.6 million in restitution.
After smith entered a guilty plea, he requested that the case be transferred to the federal court in grand rapids, where he was sentenced.
Smith was quoted as saying he was "very ashamed" in a story on the sentencing in the grand rapids press.
Macatawa bank corp. Agreed in 2008 to settle a suit against it in connection with the case by paying $5.75 million in cash and stock to 1,300 investors, according to the grand rapids newspaper. In 2001, macatawa had purchased grand bank, which held the escrow accounts for the trade partners' policies.
The receivership ultimately sold the portfolio for $43 million in cash to universal international settlements international inc. Of burlington, ontario, canada.
As of june, smith only had paid $2,369 toward $98.4 million in restitution to court-appointed receiver bruce kramer, according to an order by judge robert holmes bell of u.S. District court in grand rapids. He assigned the remaining balance to the crime victims fund, stating that granting that request didn't change the requirement for smith to continue making payments.
Kramer, an attorney with apperson crump plc in memphis, recalled that he liquidated assets, including selling real estate and the trade partners' life settlement portfolio. In all, he said there were 13,000 individual claims.
He and others, including a now-retired dallas prosecutor, an attorney for a court examiner and a whistleblower involved in the case say they all were surprised that smith is back working in life settlements.
Sherry tedaldi, who was the top saleswoman for trade partners, said she worked to bring the company down several months before she left once she learned to her shock that it was not escrowing premiums as it promised to investors.
Tedaldi initially was frustrated after reaching out to authorities, including the postal inspector and fbi in michigan, after they told her they needed more information to prove a crime had been committed.
Finally, she said she reached out to michael quilling, a dallas receiver for tyler's advanced financial services, an outside broker for trade partners.
"i said 'we have a problem. You need to look at this. The customers your policies are on do not have premiums escrowed.' then, a policy for $1 million lapsed. I said 'you have to listen to me.'''
After that, she said she got quilling's attention.
Quilling's office sent someone to collect evidence, she said. She gave the man the password to gain access to the computer system and let him into the office four nights in a row so he could pore through the files.
Tedaldi, who was earning $300,000 a year at trade partners, said she lost everything after the company collapsed. She had taken money out of her house to invest $600,000 in the company's viaticals. She says she's now back to making payments on her house, which had been paid off.
She said smith portrayed himself as being a religious, christian man.
"i have no clue how tom smith can get through a day, let alone sleep at night," tedaldi said.
"he's got no conscience. I would say he was a very smooth con-man," she added.
Dennis roossien jr., an attorney with the munsch hardt kopt & harr pc law firm in dallas who represented court examiner steve harr, said he was shocked to hear that smith was back in life settlements.
"i'm disappointed," he said. "tom had an opportunity to roll up his sleeves and work for a living. The judge was hoping when he came out [of prison] he would stay away from this whole business," he said.
"my read on tom smith is that he didn't appreciate the depth to which trade partners was a con. He could talk himself into anything," he added.
During sentencing, he said the judge told smith that he didn't want to see him back in his court.
"then, he set these three very odd conditions. He was sending a message that tom didn't take."
Floyd clardy, a special assistant u.S. Attorney in dallas who prosecuted the case and now is retired, also said he was disappointed that smith got back in the life settlement business.
He said that originally the case was going to be prosecuted in michigan, but he didn't support the prosecutor's office there because it wanted to let him off with a slap on the wrist.
"i thought it was wrong. I had quite a time being able to wrangle control away from them. They didn't take it kindly," he said.
He recalled seeing the victims at the sentencing who grasped at him.
"they were really old, they were all broke. He [tom] had taken all of their money. ... They all wanted to touch me and thank me. I remember sort of being cornered. They were desperate."
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Donna horowitz | senior editor, the life settlements report
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