Thursday, January 7, 2010

White Collar: Federal Authorities Foil Boston Area Affinity Scheme

Agents of the Federal Bureau of Investigation arrested Richard Elkinson at a casino in Mississippi yesterday. He is charged with operating a Ponzi scheme that defrauded more than 130 investors out of more than $29 million. Federal prosecutors in Boston filed the charges, which include mail fraud.

The government alleges that Elkinson gave investors promissory notes paying up to 13% return on the investments. The funds were supposedly to be used to supply uniforms to governments and large private organizations. Apparently, no such business existed, and Elkinson kept the scheme going by making interest payments to early investors by using the monies of later investors. This Ponzi scheme was the type known as an "affinity scheme" because it targeted victims who were close to Elkinson. Many of those victimized belonged to the Belmont Country Club in Belmont, Massachusetts.

The scheme came to light when Elkinson failed to make regularly scheduled interest payments last year. Investors made complaints to the Massachusetts Secretary of State who referred the matter to federal law enforcement authorities for investigation. The secretary of state has proceeded with civil enforcement in the matter by filing civil charges against a Boston area financial advisory firm for referring clients to Elkinson. To prevail in the civil suit the secretary will have to prove knowledge on the part of the advisers.

Federal authorities said that they had tracked Elkinson to Las Vegas before capturing him in Mississippi. They allege that Elkinson had conducted $3.7 million in reportable currency transactions of more than $10,000 since 1998. These transactions included placing and collecting wagers.

For more information, please see The Boston Globe, January 7, 2010,

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