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Monday, July 21, 2008

Investors: We Were Scammed

By Scott Sandlin
Copyright © 2008 Albuquerque Journal Journal Staff Writer
       Pssst. Wanna buy a Diego Velázquez painting? Only $209,000 for a share in a work by the 17th century Spanish court painter.
    No?
    How about a little slice of the action in boxes of Federal Reserve notes the United States sent to Chiang Kai-shek during the Chinese civil war in the 1930s and 1940s?
    Documents filed in federal court say an Albuquerque man with a 1991 felony conviction for operating or promoting a pyramid scheme is under investigation for peddling high-risk investments such as lost art and well-aged currency. The investigation is looking at possible wire fraud, mail fraud, bank fraud, money laundering and hiding large cash transactions by James Lujan and others, which may have been going on since "at least 1998," the affidavit says.
    The common thread among potential victims appears to be his church.
    The U.S. Attorney's Office served a seizure warrant in April on a Bank of America checking account in the name of James E. and Terri Lujan. Federal authorities took $78,825 with that warrant.
    They also served a search warrant in September 2007 on the Lujans' Tanoan home, taking boxes of documents and financial records, computer units and the contents of at least four books with false compartments.
    Lujan has not been charged with a crime.
    His attorney, Peter Schoenburg, says that as outlandish as some of the investments may appear, they are real and some do pay off handsomely.
    The investigation is the result of "sour grapes" by some investors who knew what they were getting into, Schoenburg said.
    "This is just the very early stages of an investigation that may come to nothing," he said. "Some very rich business and professional people are willing to gamble some of their money on these opportunities and go into these high-risk ventures with their eyes wide open.
    "Now, as some of these ventures look like they're failing to pay off, these complaints result. They're just sour grapes. They're really just after-the-fact allegations of fraud to cover their own sense of embarrassment. ... Some people go to the casino; others go after high-risk investments."
    High-risk investments
    The Albuquerque division of the FBI got involved in looking into Lujan's activities after two city residents, Terry Brown and Ray Ziler, told them Lujan had convinced them to invest in "high-yield" or "prime bank" schemes. The U.S. Treasury Department describes "prime bank" trading programs as those offering "secret, private investment markets which purport to offer above-average market returns with below market risk."
    The frauds often encourage the victim to send money to a foreign bank, from which it is eventually transferred to an account controlled by the con artist.
    Lujan's aliases listed in the FBI's September 2007 search warrant affidavit include Santiago Lujan, Santiago Uzi, Santiago Uzy, Jose Echerivel Fernandez, Jose Esquivel Fernandez and James Edwards. Under one or another of those names, he is believed to have bank accounts in the Isle of Man, the Jersey-Channel Islands, the Bank of Bermuda and the Bank of Nevis.
    Schoenburg said it is not uncommon for people involved in high-risk investments to use more than one name. Lujan has resurrected a family name, Uzy, he said.
    According to the search and seizure warrants:
    Lujan told Terry Brown in February 2001 he could double his money in 10 months through a risk-free trading program that would enable Brown to invest in Christian missions. Lujan said he was set for life and wouldn't take a commission.
    He asked Brown to invest $10 million; when Brown said he didn't have that much, Lujan offered a "small investor program" and told him to wire transfer $45,000 to two offshore accounts. Brown, who trusted Lujan because they attended the same church, also gave Lujan $10,000 cash.
    Lujan continued to offer investment opportunities by e-mails to Brown, including offers to put money into boxes of Federal Reserve notes lost during World War II and recovered in the Philippines, precious metals, art and Federal Reserve bonds.
    Between 2001 and 2004, Brown sent $120,000 to individuals identified in Lujan's e-mails. One "investment" was in Federal Reserve notes on a U.S. troop ship sunk of the Philippine coast during World War II purported to contain $123 billion; Lujan said he had access to boxes worth $1 billion.
    Ray Ziler, the chief financial officer of several startup technology companies, transferred funds, including $320,000 on Sept. 9, 2001, to a Swiss bank account of a Spanish notary. When Lujan repeatedly failed to deliver on his promises, Ziler drafted an agreement in 2002 asking Lujan to acknowledge that he would pay him $1.6 million on his cash investments, though Lujan later asked to be released from his obligations.
    In 2004, Lujan told Ziler he could expect a return of $5 million from his prior investment. Lujan has made payments but has not returned the entire principal.
    The president of an Albuquerque church mission was convinced by Lujan to invest in a share of a painting by Velázquez, according to the seizure warrant. But like other alleged victims, he did not receive any gains on his investment. Most of the alleged victims suffered complete loss of their principal.
    Silver Eagle past
    Lujan pleaded guilty in December 1991 to running a pyramid scheme in connection with the sales of contracts for American Silver Eagle coins and motor vehicles and agreed to pay $40,000 — $30,000 as restitution to 17 victims, a $5,000 fine and $5,000 to the Attorney General's Office for investigation costs.
    District Judge Albert "Pat" Murdoch sentenced him to 18 months. But his attorney at the time, Randi McGinn, won reconsideration for the "disproportionately harsh sentence" and, after a diagnostic evaluation, Lujan was ordered into counseling during 18 months of probation.
    By August 1993, prosecutors were back in court seeking to revoke his probation, saying he'd paid a grand total of $1,000 restitution in the intervening year while maintaining his Tanoan home and driving a BMW.
    "It is felt that Mr. Lujan is making empty promises and trying to stall for time until his probation expires and the court no longer has any jurisdiction over him," his parole officer wrote.
    Court documents say Murdoch ordered him to perform 150 hours of community service in 2000, and by July 2001, he had met his court-ordered obligations and was discharged from probation.
    About the same time, a man giving the same home address as Lujan, and carrying an ID in one of his aliases, was charged with concealing his identity.