FROM: Alvin G. Weger, Assistant District Attorney
Paul Colin, Deputy District Attorney
Real Estate Fraud Unit
(408) 792-2576 For Immediate Release on July 25, 2002 CHARGES FILED IN $98.7 MILLION SECURITIES FRAUD CASE
Four men are in custody facing criminal charges filed by the Santa Clara County District Attorney’s Office for a securities fraud scheme estimated by the U.S. Securities and Exchange Commission (SEC) to have bilked over 1,300 people nationwide out of $98.7 million. One of the four faces additional charges for selling two other fraudulent securities that were the subject of a $25 million judgment obtained by the California Department of Corporations. The charges were filed on June 20, 2002 after nearly a year-long investigation by the Santa Clara County District Attorney’s Office, and the men were separately arrested between June 25 and July 21. Bail was set at ten million dollars ($10,000,000) each.
The Santa Clara County case involves eight local victims who were persuaded to transfer money from retirement funds or home equity loans to Resource Development International (RDI), based in Tacoma, Washington, or its predecessor, Dennel Finance Limited, based in Phoenix, Arizona. The victims were sold “International Prime Bank Notes” — a fake investment scheme that has been the subject of federal fraud alerts since 1993. These eight victims invested a combined $365,000 into these fake “Prime Bank Notes”; other local victims have been identified as the investigation continues.David Edwards, 44 and his father, James Edwards, 70 are two chiefs of RDI; two local “sales” agents are Michael Keller, 59, formerly of Saratoga, California, and William Whelan, 54, of Visalia, California. The men were charged with numerous counts of:
- Selling a Security by False Statements or Material Omissions, in violation of Corporation Code section 25401;
- Selling an Unqualified Security, in violation of Corporation Code section 25110;
- Burglary in violation of California Penal Code section 459; and
- Elder Financial Abuse, in violation of California Penal Code section 368.
For the Edwards and Whelan the charges carry a potential sentence of over 15 years in prison. Keller faces additional charges that could raise his sentence to over 20 years because he sold some of the victims additional “investments” in Hotel Connect and World Cash Networks.On March 25, 2002, the U.S. Securities and Exchange Commission’s filed a federal emergency enforcement action in U.S. District Court, Dallas, Texas against both of the Edwards, plus Whelan and related persons and companies. Based on evidence that 98.7 million dollars was obtained from over 1,300 victims nationwide since January 1999, the SEC obtained emergency orders calling for the immediate end to Resource Development activities and for the appointment of a “Receiver” with broad powers to seize RDI assets and records. The next day, March 26, 2002, the Receiver, assisted by U.S. Marshalls and the Tacoma, Washington Police Department took possession of the Resource Development Headquarters. The SEC and the Santa Clara County D. A.’s Office are working together. In addition, the State of Washington’s Department of Financial Institutions is assisting the D. A.’s Office in the criminal case and conducting its own investigation into the Tacoma-based fraud. In Visalia and Fresno, California, the Tulare County D. A.’s Office assisted the Santa Clara County D. A. The additional scams sold by Keller to the 8 local victims (and many others) were Hotel Connect and World Cash Networks (or World Cash Providers), both marketed via agents of Fresno-based Hapjack Marketing. A $25 million judgment was obtained in December by the California Department of Corporations against these entities and their principles, including Claude Smith and Brian Griggs, formerly of Fresno, California.Whelan was arrested on June 25, 2002 by D.A. Investigator Dalton Rolen. Whelan has a bail hearing scheduled Thursday, August 1, 2002 at 8:30 AM. Keller was arrested on July 19, in El Cajon and is expected to be arraigned in Santa Clara County Superior Court later this week. David and James Edwards were arrested on federal warrants for contempt of court in the SEC federal case and will be extradited to face the local criminal charges. Anyone will information or questions is encouraged to call Santa Clara County D. A. Investigator Dalton Rolen at 408-792-2939 (San Jose, CA) or U. S. Securities and Exchange Trial Counsel Jeffrey Norris at 817-978-6452 (Dallas, TX), or Washington State Department of Financial Institutions Enforcement Attorney Martin Cordell at 360-902-8732 (Olympia, WA), or California Department of Corporations Senior Corporations Counsel Karen Patterson at 916-322-6737. ###