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NM couple indicted in $50 million investment scheme

Copyright © 2016 Albuquerque Journal

Michael Jacobs and his wife, Ruby Handler-Jacobs, often took long trips to foreign countries. Sometimes they came home with brand-new cars.

And they repeatedly told Melissa Carroll, who lived in their two-story stucco house in Northeast Albuquerque and managed the couple’s security business, that they were making money from investors and would soon buy her and her fiance a new home to live in.

But all that came to a halt Sunday night when a phalanx of law enforcement officers arrived at the home near Edith and Osuna armed with an arrest warrant.

Jacobs and his wife, both 64, had swindled at least a dozen investors across the globe out of more than $50 million with the help of four other people – a broker from Washington state, a broker from Illinois, the ringleader from Sri Lanka and a broker from Singapore – according to an indictment filed Monday in federal court. All are facing numerous federal charges in New York.

Some of them posed as federal bank employees and promised investors huge returns. Once they received an investment, they would disappear, according to the indictment.

A whiteboard in Michael Jacobs’ office, where he spent 8 to 10 hours every day working on investments. Federal authorities claim he was defrauding investors of millions. (Jim Thompson/Journal)

A whiteboard in Michael Jacobs’ office, where he spent 8 to 10 hours every day working on investments. Federal authorities claim he was defrauding investors of millions. (Jim Thompson/Journal)

Carroll, who has lived in the couple’s home with her family and fiance the past three years, said the couple appeared to be legitimate, successful businesspeople who frequently traveled and worked out of their home when in Albuquerque.

Handler-Jacobs’ federal public defender, Kari Converse, said she couldn’t respond to the details alleged in the indictment because she was only representing Handler-Jacobs for the legal proceeding to determine whether she would be taken to New York by federal authorities or released to get there on her own. She said Handler-Jacobs will likely be appointed a new attorney in New York.

According to the indictment, Jacobs and Handler-Jacobs’ racket started no later than June 2013 and continued at least until August 2016.

Prosecutors allege the couple worked with Rienzi Edwards, of Sri Lanka, to promote an investment scheme they called the “Cities Upliftment Program.” To give it legitimacy, the defendants claimed it was backed by the Federal Reserve Bank of New York, and promoted it as an exclusive invitation-only offer.

They promised huge returns – $2 million per day in some cases – and said investing was risk-free because they were backed by the government. A portion of the proceeds was supposed to go to American cities struggling after the 2008 financial crisis.

Jacobs and Edwards once pretended to be federal bank employees in a meeting at a Hong Kong hotel, according to the indictment.

The defendants told investors their family members had successfully invested and that the money wouldn’t be subject to income tax. They promised green cards to investors from other countries and forged documents to make themselves look legitimate, according to the indictment.

An indictment accusing a New Mexico couple of defrauding investors was filed Monday in federal court. (Pacer.gov)

An indictment accusing a New Mexico couple of defrauding investors was filed Monday in federal court. (Pacer.gov)

At least 12 investors took the bait, according to a spokeswoman for the Southern District of New York U.S. Attorney’s Office. They wired a total of more than $50 million to accounts in the United States, as well as to accounts in Hong Kong and Sri Lanka.

“Instead of keeping the CUP investors funds … and using the funds to generate the promised high returns, the defendants simply stole the victims’ money,” an investigator wrote in court documents.

When investors didn’t receive their money back, the defendants made excuses and claimed the program had been delayed. Then they stopped communicating with the victims altogether.

“The defendants typically promised investors that they would be invited to the New York Fed’s headquarters in Manhattan to finalize their investment contracts after they invested, which meetings never occurred,” an investigator wrote in the indictment.

Dawn Dearden, a spokeswoman for the U.S. Attorney’s Office in the Southern District of New York, said she couldn’t say how the feds got tipped off or when they started investigating.

But the operation, led by Homeland Security Investigations and the FBI, culminated earlier this week with the arrests of four of the suspects. Jacobs and Handler-Jacobs were both arrested Sunday – Handler-Jacobs in Albuquerque, and Jacobs at the Los Angeles airport. He was on his way to Spain, according to Carroll. She said Jacobs was a photographer and Handler-Jacobs used to be an actress and model.

Lawrence Lester, 71, of Mount Vernon, Wash., is accused of being a broker in the scheme and was arrested Monday. And Rachel Gendreau, 46, of Savanna, Ill., was also arrested Monday, accused of being a broker in the scheme.

Edwards and F.K. Ho, 80, a broker from Singapore, had not yet been arrested earlier this week, according to a news release from prosecutors.

Monday’s indictment is not the first incident that’s landed Jacobs in the news.

In 2012, he was indicted on 57 counts of fraud, conspiracy and securities violations for allegedly defrauding investors out of more than $500,000 with his plans to build a multimillion-dollar digital film studio in Rio Rancho, according to Journal archives.

According to online court records, the case against Jacobs was dismissed in October 2015. A news article at the time said his wife was also charged, but there is no record of a case against her in online records.

For Carroll – who, with her fiance, helped the couple run a security business named No Stone Unturned in exchange for housing – the arrests were a huge shock. And now she’s worried that federal authorities will seize the house and cars, and her family will lose everything.

“I just don’t want to start over again,” she said in an interview Thursday at the home she shared with Jacobs and Handler-Jacobs. “I’m scared to death they’re going to come at any moment and say ‘pack your stuff and get out.’ ”

Three years ago, the couple opened their home to a man who would become Carroll’s fiance, who was working at the security firm. Soon after, he met Carroll and she and at least one of her children moved in as well. She and her fiance took over the daily operations of the security business but weren’t paid for their work. Instead, they were given free housing and access to Jacobs and Handler-Jacobs’ vehicles.

Carroll said she’d recently been trying to move out, but with no money, it was impossible.

“It’s just hard because I trusted them,” she said. “We thought that everything was OK. And now to have to sit here … worrying about being homeless.”

Prosecutors say Handler-Jacobs and Jacobs will be arraigned in New York next week.

Edwards, Handler-Jacobs and Jacobs are facing charges of wire fraud, money laundering and impersonating employees of the United States, among other things. Ho, Lester and Gendreau are charged with wire fraud and identity theft, among other charges.

Handler-Jacobs’ public defender, Converse, said she argued for Handler-Jacobs’ release because she has leukemia and needs to be on a special diet. A federal judge denied that request Thursday.

Journal staff writer Elise Kaplan contributed to this report.

Melissa Carroll was fully dependent on a couple who were arrested Sunday on federal charges for allegedly defrauding investors of more than $50 million. Now Carroll is worried the house will be seized and she won’t have a place to live. (Jim Thompson/Journal)

Melissa Carroll was fully dependent on a couple who were arrested Sunday on federal charges for allegedly defrauding investors of more than $50 million. Now Carroll is worried the house will be seized and she won’t have a place to live. (Jim Thompson/Journal)

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