sacbee.com
Alleged online scam is busted: The 'club'
extracted $50 million from investors, officials say.
By Steve Wiegand
Bee Staff Writer
(Published Sept. 7, 2001)
An Internet "investment club" that milked more than $50 million from investors
around the world over the past two years -- including nearly 100 people in the
Sacramento area -- has been shut down, federal law enforcement officials said
Thursday.
The demise of the Tri-West Investment Club came with the arrests of a Canadian
con artist and a California Web site architect in Costa Rica. Taken into custody on
charges of mail and securities fraud and awaiting extradition to the United States
were Alyn Richard Waage, 55, of Canada and James Michael Webb, 39, of
California.
Waage's sister, Lynne Waage Johnston, who was described as the operation's
bookkeeper, was being sought on similar charges in connection with the alleged
scam.
Costa Rican police also seized bank accounts containing more than $2 million, real
estate valued at $5 million, a helicopter, a yacht and 10 late-model cars and other
vehicles.
Authorities said the scheme stretched from a post office box in Belize to a bank in Latvia, and involved $54
million taken from 13,000 victims in 57 countries.
"Complex fraud schemes frequently transcend national boundaries," said Richard Baker, FBI special agent
in charge of the Sacramento office. "Today's arrests underscore our commitment to pursue accused
wrongdoers wherever they may try to hide."
The case is being prosecuted through the U.S. attorney's office in Sacramento, according to a criminal
complaint filed by FBI special agent John Boles, because the first victims to holler foul were from Northern
California.
The 95 Northern California victims suffered losses of about $800,000, and included people in Sacramento,
Weed, Rio Linda, Placerville and Turlock.
Officials said the scam they fell for was a cyberspace version of the classic Ponzi scheme, in which a few
investors are paid off with money from other investors, and not through returns on actual investments.
Visitors to the Tri-West Web site, "a worldwide private membership club formed to assist members in
investing offshore," were dazzled with promises of 120 percent annual returns if they put their money into a
"bank debenture trading program."
The program, according to the Web site, was run by a 30-year-old Panamanian company, which invested in
no-risk bank notes issued by "key international prime banks."
It also included glowing testimonials from "investors" around the world, claiming that dividend checks arrived
promptly each month and that investments of as little as $10,000 had turned into millions.
The trouble, according to authorities, was that the "30-year-old company" was actually started in 1999 and
was a shell corporation.
Moreover, federal bank officials say in the complaint, "investment opportunities described (at the Tri-West
Web site) are bogus," and there is no such thing as a "prime bank" or a "prime bank note."
About $30 million of the $54 million invested was returned to investors through dividend checks, the
complaint says, in order to give the scheme an air of legitimacy.
Waage, Webb and Johnston used much of the rest of the money to buy condos in Mexico, where the site
operated until switching to Costa Rica, property in Costa Rica, a $150,000 helicopter and an $818,000
luxury yacht, officials said.
They also created a half-dozen shell companies, the complaint states. And they did it all using a labyrinthine
trail of stops that began at a post office box in Belize, moved to a bank in Riga, Latvia, and then to a bank in
New York City.
"Waage also sent e-mails to Webb instructing him to 'hold the members at bay with positive inputs' to
'dream up details of a substantive change in the Web site,' and that as to Tri-West's imminent demise, 'the
more deteriorated the body, the easier it is to bury,' " FBI agent Boles said in the complaint.
According to the complaint, Waage, who used several aliases and described himself as a retired "senior
government official" and investment expert, was actually a con man with four prior convictions in Canada for
mail fraud and wire fraud. He is wanted by Canadian police on 44 counts of real estate fraud.
Waage was arrested in Mexico last April when he tried to enter the country with $4.5 million in checks and
money orders payable to the bogus Panamanian company. He was released last month after posting $2
million in bail, and left that country for Costa Rica.
If convicted of the criminal charges, the trio face up to 10 years in prison and fines in the millions.
In addition, the federal Securities and Exchange Commission announced Thursday that it was filing a civil
suit against Tri-West. At least 10 states have also filed cease-and-desist orders against the firm.
Club members, meanwhile, could take small financial solace in the news.
Visitors to the Tri-West Web site Thursday were greeted with the news, posted July 9, that "the temporary
closure of our main bank is causing unexpected delays in the full operation of Tri-West Investment Club. We
have been advised that this problem is temporary."
The Bee's Steve Wiegand can be reached at (916) 321-1076 or swiegand@sacbee.com. |
