Goldline International - White Collar Fraud

info@frauddiscovery.netPhone & Fax:1-888-300-8307Goldline International:An In-Depth Look atCongressman Weiner’s Allegations,And How He Got It Wrong

Page 2 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Table of ContentsI. FDI summary background information 4II. A fundamental change in the FDI business model 4III. The reason for FDI weighing in on the Goldline International issue 6IV. What the report is and what it is not 7V. Specific allegations addressed, refuted 7VI. What one should find if Goldline International were not above reproach 25VII. Glenn Beck’s alleged self-fulfilling prophecy 26VIII. Who is the real villain in the ‘gold coin’ selling industry 36IX. Conclusion 41X. Index and addenda 432

Page 4 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Weiner are attempting, without any basis in fact, to co-op the power of U.S. government’sregulatory agencies to keep those who disagree with them intimidated and silent.FDI summary background informationThe Fraud Discovery Institute, Inc. (FDI) is a fully licensed private investigative agency underthe Bureau of Security in the State of California PI license number 24817. First established in2001 1 on the heals of the Enron debacle, FDI began with the goal of training law enforcementofficials and independent auditors on how to uncover fraud in the financial statements of bothpublic and private companies. 2Beginning in 2003, FDI began the proactive uncovering of various investment schemes that wereunknown to law enforcement. Typically, and with the permission of law enforcement, FDI wouldinfiltrate these schemes and secure usable evidence to expose the fraud and subsequently issuewritten reports, which contained all of the obtained evidence. The reports were forwarded torelevant 3 law enforcement agencies, which shut down the frauds. This accomplished the twofoldgoal of protecting the investing public from placing additional funds into an ongoing scheme andincreasing the perception of prosecution for others contemplating committing such acts.As a result of our efforts, the FBI, in 2005, issued an official commendation letter to the FraudDiscovery Institute, Inc., acknowledging that more than ten investment fraud cases totaling“millions of dollars” had been uncovered and shut down based on our submitted written reports. 4And since 2003, FDI has been credited by law enforcement with helping to shut down more than20 fraudulent companies, and we have not taken any compensation for those efforts. Uncoveringfraud was done as a public service. 5A fundamental change in the FDI business modelIn March of 2007 FDI began investigating public companies and developed a model for profitborrowed from Citron Research 6 whereby reports were issued by FDI on public companies that1 Barry Minkow was convicted of securities fraud in the 1980’s for crimes relating to his tenure as President and CEO of ZZZZBest Company, Inc.2 FDI was originally established as an LLC in 2001 and Barry Minkow was the Co-Founder. In late 2004, Barry Minkow boughtout the other co-founder and FDI became a California Corporation in 2005. Currently, Juan Antonio Lopez is President of FDIand has been since 2005. Barry Minkow is Co-Founder and Executive VP.3 Relevant in the context meant which law enforcement agency had legal standing to act on a particular investment scheme.4 It should be stated that despite the praise given to FDI by law enforcement, it is always the case that law enforcement deservesfar more credit than FDI as they have the much more difficult task of convincing judges and superiors as well as the media that acrime has taken place based on the high burden of proof necessary for a criminal conviction.5 In the interest of full disclosure, FDI did benefit from these fraud investigations based on the wide publicity the companyreceived for its efforts that increased speaking engagement income and book income. For example, in May of 2005 and August of2006, FDI and Barry Minkow were profiled on “60 Minutes,” which resulted in additional leads on alleged financial crimes inprogress for the company to investigate and submit to law enforcement.6 Citron Research was formerly known as “StockLemon.com” and has reports currently posted on its website on companies it hadreported alleged past bad acts and in which it apparently shorted the stock of dating all the way back to 2003—long before FDIbegan implementing this model in 2007. In the legal disclaimer section of its website Citron Research states: “The principals ofCitron Research most always hold a position in any of the securities profiled on the site. Citron Research will not report when a4

Page 5 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307FDI believed, based on the evidence, were undetected financial crimes in progress. FDI alsocreated a software system that fettered out inaccuracies in proxy statements of companies whosesenior management and/or board members intentionally embellished their resume. FDI, aftermaking full disclosure, shorted the stocks of companies it believed had problematic businessmodels or dishonest management.Because of unwanted scrutiny, three public companies filed civil lawsuits against the FDI and itsco-founder, Barry Minkow, claiming libel or stock manipulation, among other things. In one ofthese cases, a federal judge in Utah granted our “anti-SLAPP” motion 7 to throw the case out. Theother two are currently pending. However, FDI believes that with truth being the ultimatedefense against such allegations, the two current cases will end just as the first. 8In addition, several New York Stock Exchange public companies currently and previouslytargeted by FDI have made formal complaints and appeals to the enforcement division of theSecurities and Exchange Commission, arguing that Barry Minkow is a convicted felon (true)who in the 1980s was permanently (and voluntarily) banned by the Commission from everserving as an officer or director of a public company and, as a result, must be thoroughlyinvestigated by the SEC for potential securities violations. In other words, once a crook, always acrook—and despite the evidence that may appear to prove otherwise (the dozens of successfulfraud investigations and praise for law enforcement) Barry Minkow must be up to no good andtherefore investigated.However, with corporate fraud on the rise and arguably the reason for this country’s (and somesay the world’s), current financial woes 9 and with the SEC hopelessly overwhelmed and, with acombined $1.3 billion annual budget, outgunned, the Commission’s resources are precious andcannot be frivolously allocated to focus on the fraud investigators as opposed to fraudperpetrators.position is initiated or covered. Each investor must make that decision based on his/her judgment of the market.” Detractors arequick to point out the “ethics” or lack there of in stock “shorting” but not only is the model vindicated long before FDI employedit but also, and in the view of FDI, it is always much more serious when the senior management of a public company, beingcompensated, in part, by “stock options” abuses their position of trust and in order to enrich themselves, artificially inflates thefinancial condition of the company.7 Please see addendum 1 article showing FDI’s court victory against Usana Health Sciences, Inc.8 It is not the intent of FDI to litigate in this report its two remaining legal issues with Lennar Corporation and Medifast, Inc. Theonly reason these cases were mentioned were for full disclosure and to establish points of similarity in just how far a person orentity will go to silence their most vocal critics. That is, just as the two companies who sued us sought to silence their most vocalcritic, FDI, so too, in our view, has Congressman Weiner solicited the SEC and the FTC to muzzle one of his political party’smost vocal critic, Fox commentator Glenn Beck.9 The sub-prime mortgage crisis has decimated economies worldwide and fraud has been uncovered at every level, from therating agencies that provided triple A ratings for the most risky securities to the appraisers who overvalued properties to thehomebuilders who possessed conflicts of interest as builder and lender to the borrowers who knowingly lied or distorted theirability to repay. For an excellent discussion on this topic, please see Michael David White’s article, “Bring Criminal ChargesAgainst Chief Executives of Leading Originators And Securitizers of Stated-Income Mortgages.”5

Page 6 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Yet the SEC is regularly lobbied 10 to investigate issues that are clearly motivated by the desire todivert the attention of law enforcement officials off of the real culprits and on to those who darereveal these complex schemes. FDI calls such practices the “Octopus Defense.” That is, just aswhen in danger or backed into a corner, an octopus will emit blinding black ink to create adiversion that allows them to escape, so in like manner do these public companies spray theaccusatory black ink at their critics, telling regulators such as the SEC that “He’s an ex con,”“He’s a short seller,” or “He’s trying to manipulate the market.”In the case of FDI, the company is an easy target based on the past criminal acts committed byCo-Founder Barry Minkow in the 1980s. And with the alleged SEC blunder of the BernieMadoff scam fresh on the minds of everyone in the SEC enforcement division, 11 the Commissionnow finds themselves in the unenviable position of chasing down every lead in order to avoid thenext “I told you so” fiasco.Those who desire to silence their most vocal critics do not overlook this reality and have made arecent habit of getting law enforcement agencies such as the SEC to unintentionally help themimplement the octopus-diversion technique. This, despite, in the case of FDI, a 6-year trackrecord of proactively uncovering more than $1 billion in fraud impacting more than 50,000people. 12 However, if for any reason Barry Minkow turned out to be the world’s biggest criminaland the SEC did not heed the cry from those who benefit from silencing FDI, 13 then the potentialfor SEC criticism becomes a real motive for the misallocation of its already strained resources.The reason for FDI weighing in on the Goldline International issueIt is for this reason that FDI made the decision to weigh in on the Goldline International matterby issuing a point-by-point refutation of the Weiner Report. It is our opinion that just as somepublic companies seek to silence the most vocal critics of their alleged fraudulent activity byappealing for an investigation by the SEC, Congressman Weiner has done something similar. Inwhat appears to be a politically motivated smear, he has used his political office to appeal to theSEC and FTC for an investigation targeting the primary sponsor of one of his (and his10 For example, please see addendum 2 titled “Medifast Solicitation of SEC Investigation of FDI,” where Medifast, Inc. alongtime target of FDI criticism for their endless chain, pyramid structure of their most profitable division, Take Shape for Life,literally issues a press release announcing that they asked multiple agencies to investigate FDI. However, based on agreementsmade with the FBI before being allowed to work undercover with law enforcement, the Fraud Discovery Institute, Inc. alwaysassumes that no less than one law enforcement agency is always investigating the company either formally or informally.11 What is often lost in this discourse is the defense of the SEC made publicly by Barry Minkow on, for example, Neil Cavuto’sshow “Our World” on the Fox News Channel, where Minkow defended the SEC by revealing the 20 Ponzi schemes shut downbetween 2003 and 2008 by the SEC based on the reports submitted to them by FDI. The defense was simply that the Madoffdebacle was an isolated incident and not reflective of the SEC success in multiple cases by other SEC staff.12 More information here.13 FDI has filed Freedom of Information Act requests with the Securities and Exchange Commission. According to directcommunication with the FOIA division at the SEC (please see addendum 3) our results will be forwarded to us shortly but fornow an internal investigation has revealed that the following New York Stock Exchange public companies have officiallycomplained about FDI to the SEC’s enforcement division: Lennar Corporation; InterOil Corp; Medifast Inc. and Herbalife.6

Page 7 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Democratic party’s) most vocal and influential critic, Glenn Beck, along with other conservativepolitical commentators. 14Conveniently, FDI has industry specific experience with the issues brought up in the 8-pageWeiner Report. 15 For example, beginning in May of 2005, the Fraud Discovery Institute, alongwith the FBI and IRS, went undercover (which included the wearing of a wire) to infiltrate andexpose a gold mining scheme, Merendon Mining. 16 Additionally, in 2006 a consumer contactedFDI about Goldline International, Inc. and although we do not provide investment advice, 17 wewere able to establish, from the public record and through inquiries made to the company, that inan industry that has, like many industries, certain villains, Goldline International was not one ofthem.With the points of similarity established between Congressman Weiner’s attempt to appeal to theSEC (and FTC) to investigate the most prominent advertiser of one of his party’s most visiblecritics (Glenn Beck) and those public companies that have appealed to the SEC to investigatetheir most vocal and visible critic (FDI), the remainder of these findings will be dedicated to apoint-by-point refutation of Congressman Weiner’s report.However, the abovementioned dangerous trend, which seems to be gaining in popularity, mustbe exposed for what it is and stopped.What this report is and what it is notThe Fraud Discovery Institute, Inc. is not attempting to provide everything there is to knowabout Goldline International, but rather everything that one would need to know to see theinconsistencies and material inaccuracies contained in the Weiner Report. FDI will limit itsreferences to other gold coin selling companies to establishing what are standard practices for theindustry. That is, FDI will, when appropriate, discuss the policies and procedures of othercomparable companies within the industry for the purpose of testing whether an allegation madeby Congressman Weiner about Goldline can be dismissed based on the fact that other companieshave similar accepted practices.Specific allegations addressed, refutedCongressman Weiner makes the following allegation against Goldline International on page 5 ofhis report:14 In Congressman Weiner’s report, he does not limit his attacks to Glenn Beck but also includes former Presidential candidatesFred Thompson and Mike Huckabee, and conservative radio hosts Dennis Miller, and Laura Ingraham.15 Please see report here.16 Although the scheme dealt more with the exploration of gold, it was also recommended through a sophisticated army of peopletrained by Brost himself and graduates of his in-house, investment educational arm known as the “Institute for FinancialLearning.” Please see addendum 4 for news story crediting FDI with the assisting in the fraud uncovering.17 Based on the wide publicity received by FDI for various frauds uncovered, FDI periodically receives calls from consumersinquiring about various investment instruments. They are not calling for advice as to the financial worthiness of one investmentinstrument over another-but rather to know if any “red flags” for fraud exist in the investment they are considering.7

Page 8 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307“According to customer complaints, that can be found onconsumer complaint boards such as “Rip-off Reports,” 18 salespeople represent themselves as “Investment Advisors” or“Financial Advisers” implying that they have some sort offiduciary responsibility to get you the most return on yourinvestment. But since they are not licensed “Investment Advisors”(the industry term), they have no such responsibility (emphasisadded).”A reasonable reader would infer that “Rip-off-Reports” has a negative bias against GoldlineInternational and has concluded that the company’s sales representatives violate securities lawsby holding themselves out, as investment advisers when they are not licensed broker dealers.However, even a cursory examination into what “Rip-off Reports” currently and moreimportantly at the very time this report by Congressman Weiner was written, reveals an entirelydifferent story of customer satisfaction and company integrity. For example compare this currentquote from “Rip-off-Reports” March 2010 report issued on Goldline International (Report:#579000) 19 with the one cited in the Weiner Report:“Rip-off Report knows there is no company or individual that isperfect—Goldline International knows this also and demonstratestheir need for continuing improvement—that is why Rip-off Reportcomfortably states that you can be completely confident, safe andsecure when doing business with them as a member of Rip-offReports’ Corporate Advocacy, Business Remediation &Customer Satisfaction Program” (emphasis added). 20Phrases like “completely confident” and “comfortably states” do not appear to imply thecompany’s sales representatives are currently violating any securities laws by holdingthemselves out to be broker dealers when they are do not hold such licenses.The report goes on to add:18 It should be stated that Rip-off-Reports has been criticized for being less than independent. The Fraud Discovery Institute, Inc.is not taking a position in this report on the validity or trustworthiness of Rip-off-Reports and includes the above link for the sakeof thoroughness purposes only. Congressman Weiner has positioned Rip-off-Reports as a credible, independent consumerprotection group. Therefore, FDI will approach the debunking of Congressman Weiner’s use of Rip-off-Reports not by weighingin on the independence of the entity but rather in the further investigation performed by the group which ultimately vindicatedGoldline International. That is, whenever FDI conducts an investigation and can use the critiquing entity posited against thecompany in question (in this case Rip-off-Reports against Goldline International) to actually vindicate the company, that isalways the most convincing and preferred evidence to present. In this case the fact that Rip-off-Reports conducted aninvestigation of Goldline International in March of 2010 that addressed each of the concerns presented by Congressman Weiner,and that this newer information contained in the updated Rip-off-Reports appears to clear Goldline International, FDI has chosento accept Rip-off-Reports at face value.19 Please read more here.20 Please see full text here.8

Page 9 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307“Rip-off Report’s investigation of Goldline International uncoversan ongoing commitment to client satisfaction. This means clientscan expect that Goldline will always work towards finding amutually satisfactory resolution to complaints or concerns.Goldline listens carefully to client concerns and sees them as anopportunity to learn and become more efficient as a company inthe products it offers.” 21It would be difficult for Goldline International to both be accused by Rip-off-Reports ofcommitting crimes against Goldline customers by violating securities laws and, according to thesame Rip-off-Reports organization to possess an “ongoing commitment to client satisfaction” atthe same time!This kind of intentional and myopic cherry picking of information disclosure is both misleadingand intellectually dishonest by unfairly presenting a distorted view of Goldline International.Even if Congressman Weiner were to argue that at one point in time such an allegation were true,he fails to provide the “redeeming” conclusion.Moreover, and thankfully Rip-off-Reports correctly observes in the context of their March 2010investigation of Goldline International that: “All companies get complaints, but how the companyhandles those complaints, separates good business from bad business.” 22 Thus Weiner’sallegation is hopelessly misleading and inaccurate.Additionally, this quote by Rip-off-Reports applies to another condemnation against GoldlineInternational contained in the Weiner Report—specifically the 2006 encounter the company hadwith the State of Missouri. 23 In that case the character of a company was revealed not in that ithad complaints in that state but rather in how those complaints were handled and ultimatelysettled by Goldline International.Moreover, any company with more than $500 million in annual sales, as Goldline does, willexperience situations where employees did not follow company policy or even made a mistake inhow a certain product was sold. But as any experienced company that attempts to protect theconsumer from being victimized by fraud knows, it is what the company does when made awareof these errors that defines what their values, vision, mission and message truly are far more thanwords. That character and integrity was specifically revealed how Goldline made good in theState of Missouri case and in the day-to-day policies and procedures of the company.As the Rip-off-Reports states:21 Please see full text here.22Ibid.23 Please see Weiner report page 3. Also, please see this.9

Page 10 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307“Rip-off Report knows there is no company or individual that isperfect—Goldline International knows this also and demonstratestheir need for continuing improvement—that is why Rip-off Reportcomfortably states that you can be completely confident, safe andsecure when doing business with them as a member of Rip-offReports’ Corporate Advocacy, Business Remediation & CustomerSatisfaction Program.” 24Finally, what Congressman Weiner also conveniently omits in his report is GoldlineInternational’s A-plus rating with the Better Business Bureau. 25 By itself, such an achievementmay be discounted but when two companies whose existence is defined by protecting theconsumer from fraud (in this case the Better Business Bureau and Rip-off-Reports) praise theefforts and integrity of one company, such praise cannot and should not be overlooked.Another allegation made in the Weiner Report against Goldline deals with pricing. In fact, under“Key Findings” on page 3 of the report, the first item states:“Goldline Grossly Overcharges For Their Coins The averageGoldline mark-up was 90% above the melt value of the coin. Thelargest markup seen on a coin was 208% above the melt value. Theaverage Goldline markup in comparison to the best price we couldlocate on competitors websites was 47%, going as high as 102%on one of the coins they offered.”This claim comes from a comparison of 18 coins listed on page 8 of the report:1. High Grade Gold American Eagle MS-692. 1/10-oz. Bullion Gold American Eagles3. 1/4-oz. Bullion Gold American Eagles4. 1/2-oz. Bullion Gold American Eagles5. 1 - oz. Bullion Gold American Eagles6. 1/10-oz. Proof Gold American Eagles7. 1/4-oz. Proof Gold American Eagles8. 1/2-oz. Proof Gold American Eagles9. 1-oz. Proof Gold American Eagles10. 4-Piece Proof Gold Eagle Sets11. 1/10-oz. Gold Canadian Maple Leafs12. 1/4-oz. Gold Canadian Maple Leafs13. 1-oz. Gold Canadian Maple Leafs14. 1-oz. Gold South African Krugerrands15. BU Swiss 20 Franc 'Vreneli'24 Please see full text here.25 Please see more here.10

Page 11 of 43info@frauddiscovery.netPhone & Fax:1-888-300-830716. MS-62 $5 Liberty Gold Coins17. 2006 MS-69 First Strike Gold Eagles18. B.U. French 20 Franc 'Rooster' GoldThe Fraud Discovery Institute, Inc. utilized a sampling methodology to test the conclusionsderived from the coins in the abovementioned illustration. That is, FDI attempted to choosefrom the listed 18 coins a representative sample 26 to see if the conclusions contained within theWeiner Report fairly represent the alleged vast price differentiation between GoldlineInternational’s prices versus comparable products sold by its competitors.Our sampling methodology was non-statistical, and was aimed at isolating the products thatcould be found most often on competitors’ websites, to give a higher number of prices perproduct. We ultimately sampled six coins from the 18 listed above (the sample included somenumismatic coins that were heavily emphasized in the Weiner Report) and compared them withsix well-known competitors of Goldline International. Here are those results: 27As can be seen, there is a huge difference in conclusion between the sampling price comparisonperformed by FDI—which showed that Goldline International’s prices were, on average, withina modest two percentage points (on average), with those of its competitors and not anywherenear the 208% claimed by Congressman Weiner. 2826 “Representative” in this context is to be understood in this context as representative in variance, weight and size primarily aswell as country of origin. FDI is not representing to have a particular expertise in the selling of gold coins but does believe theapproach utilized in our sampling to test the conclusions stated in the report is fair and accurately summarizes the findings.27 It should be stated that Congressman Weiner’s report did not contain the detail that led to his conclusions in that none of the“competitors” were listed by name. In fact, the report simply states: “The coins retail price was then compared with competitor’swebsites that offered the same product” (page 8).28 Please see Weiner report pages 3 and 4 where it states: “The largest markup seen on a coin was 208% above the melt value.”11

Page 12 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307What, then, accounts for this huge discrepancy between the comparison done by CongressmanWeiner and the FDI comparison? The answer lies in what consumer advocate group PyramidScheme Alert, on numerous occasions, has pointed out to the SEC and to the FTC how multilevelmarketing companies seduce new recruits into the business opportunity by citing a “meanincome average” instead of a “true income average.” 29For example, suppose one wanted to determine the average annual income of three neighbors ona certain residential street. Two of the people each made $50,000 per year, and the third neighborwas Bill Gates with an annual income of $1 billion. Averaging these three incomes wouldprovide a skewed result. While the calculated average annual income of over $333 million wouldstill be mathematically correct, it would be misleading to someone who only saw the average andnot the inputs. Little does the person seeing the average know that two of the three residentsonly made $50,000 each.Nationally recognized consumer advocate Robert L. Fitzpatrick, the founder of Pyramid SchemeAlert, notes the following deception inherent in this approach to presenting an “average” incometo potential recruits in a multi level marketing scheme. He writes:“Many MLM companies offer ‘average incomes’ that are actuallymean averages that meld the huge incomes of those at the top withthousands of others that make nothing at all. This leaves theimpression that the ‘average’ MLM participant actually earns a‘profit,’ when almost no one does.” 30Using our example, by adding the salary of Bill Gates at $1 billion per year, the average incomeof the residents in our illustration is hopelessly distorted and artificially inflates an unrealisticannual salary for those considered.In like manner, Congressman Weiner’s report uses less than a handful of products sold byGoldline International that are significantly higher than those of their competitors to present adeceptive (and distorted) conclusion. Specifically, it would appear that Goldline’s price of theSwiss 20 Franc retails at about $399 31 per coin while the same product sold, for example, by theAmerican Gold Exchange is about $256. 32 Obviously, by adding this product into the pricecomparison performed by Congressman Weiner, the end result skews the facts and allows29 Please see addendum 5 detailed email from Robert Fitzpatrick.30 Please see more here.31 On May 25, 2010, Barry Minkow contacted Goldline International (877-376-2646) and spoke with Morey Wasserman at ext.6460. This was a blind inquiry and Wasserman was asked numerous questions and asked to mail information to Barry Minkow’shome address. Minkow provided his first and middle name only “Barry Jay” and gave both an accurate home address and homephone number for follow up. Wasserman stated that on May 25, 2010 the price of a Swiss 20 Franc was $399. Because the Swiss20 Franc contains approximately 90% gold, its price is subject to the price of gold at any given time and thus fluctuates.Wasserman was also careful to make it clear that no more than between 5 and 20 percent of an investment portfolio shouldcontain any kind of gold investment.32 Please see more here. Barry Minkow purchased, for the purposes of this report, $2,539.00 worth of Swiss 20 Franc’s fromAmergold. See addendum 6 for actual purchase order.12

Page 13 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Congressman Weiner to make the following, faulty inference, which immediately follows. Hestates: “Goldline Falsely Claims To Offer “Good” Investments By selling gold at twice the meltvalue, the price of gold would need to double for consumers to break even on their“investment.” 33Then again, on page 4 of the report the same argument is repositioned and re-emphasized but isderived from the same, faulty percentages reflected in the implementation of the ‘mean,’ and notthe ‘real,’ price averages: “By selling gold at twice the melt value, the price of gold would needto double for consumers to break even on their ‘investment.’ ”It should also be stated that it is not a crime to charge higher prices for products. GoldlineInternational does business in California (they are headquartered in Santa Monica), a state whereit is more expensive to operate a business than most. Goldline International also has chosen radioand television as the primary marketing strategy implemented to attract new customers and to doso the company has utilized the paid celebrity endorsement of Joe Battaglia. 34 These factors mustbe considered by any company seeking to make a profit and must be factored into pricing.However, such practices are also viewed as benign and not necessarily a red flag by those in theindustry. 35In a free market system, those who seek higher profit margins for some of their products run therisk of a consumer who will, with the convenience of the Internet at their fingertips, comparetheir higher priced product with that of a cheaper product sold by one of their competitors.Moreover, in the interview with Morey Wasserman at Goldline International, he never claimedthat Goldline’s price for the Swiss 20 Franc was the most inexpensive on the market nor is thereany evidence on the Goldline International website of the company claiming that their Swiss 20Franc is the lowest price available to the consumer. 36This is critical because in a free market system it is not a crime to set a high price for a productand such a practice is only a material misrepresentation if Goldline contended, as a value-addedbenefit to doing business with them, that they had “the lowest prices in town’ or “the lowestprices in the industry” but such statements were not made. Accordingly, such issues do not rise33 Please see “Weiner Report” page 3.34 According to Mr. Wasserman, Mr. Battaglia is 70 years old and has only recently ceased his role as official spokesperson forGoldline International. This decision was made, according to Mr. Wasserman, not because of the recent report issued byCongressman Weiner. According to Mr. Wasserman, Mr. Battaglia simply decided that he wanted to retire.35 For example, on May 24, 2010 Barry Minkow interviewed John McDonald at the American Gold Exchange (800-613-9323).Mr. McDonald stated that while he could think of a couple of companies (he was reluctant to specifically name these companiesas he did not think it was appropriate to talk negatively about those in his industry) in the industry that are less than abovereproach, Goldline International was not one of them.36 FDI is aware that the claim of Congressman Weiner is that while Goldline International may not claim to have the lowestprices, they intentionally “push” customers to purchase its “higher margin” products, like the Swiss 20 Franc over the productsidentified in, for example, our sampling. FDI will deal with this issue in more detail later on in this report, but for now it can bestated that such an argument does not negate the fact of the “skewed” conclusion made on page 3 of the Weiner Report byutilizing the mean average in its price comparison or that neither Goldline’s website nor the representative that we spoke withmade claims that the Goldline International Swiss 20 Franc was the “most inexpensive” of its kind.13

Page 14 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307to the level of involving the attention of law enforcement—most certainly not the attention of analready overburdened SEC.In conclusion, by using a mean average for products sold by Goldline International and notpresenting the underlying data, Congressman Weiner does not give the reader of the report theopportunity to examine the differences for each product.He also appears to reveal that the approach taken in his report was deductive (GoldlineInternational must be demonized because they are the primary supporter for Glenn Beck’s show)versus an inductive approach that follows the evidence wherever it leads without the influence ofa presuppositional bias. This bias was also seen in the selective presentation of evidence byRipoff Report by the intentional omission of its current official position on GoldlineInternational, as well as the apparent intentional omission in the Weiner report of the company’sA plus Better Business Bureau rating.Moreover, since 2003 the price of gold has actually tripled and in the past three years it hasincreased approximately 70%, 37 which means that for the customers who purchased many of thealready established and competitively priced “pure gold” products offered by GoldlineInternational, a vast number of its customers, depending on when they purchased, have madeinvestments that have been extremely profitable. 38Another allegation of Congressman Weiner is Goldline International’s apparent failure to place“in writing” its buy-back guarantee. The report states on page 5:“Goldline sales representatives tell their customers that they willbuy back your gold when you’re ready to sell, but nowhere in theirterms of service is that guaranteed.”On the Goldline International website, the following is stated regarding the company’s officialposition on the repurchasing of product sold to customers:“The law does not allow us to guarantee a buy-back but,historically, we have repurchased the coins we sold and intend todo so in the future.” 39In a telephone conversation with Goldline representative Morey Wasserman at ext. 6460, he wasasked specifically about this issue as to why Goldline International does not, as CongressmanWeiner indicates, provide a written guarantee for the repurchase or redemption of products soldby the company.37 Please read more here.38 In rebutting this point, Congressman Weiner would argue that the Goldline International sales force intentionally pushes thehigher profit Swiss 20 Franc type products over the less profitable (for Goldine) almost pure gold products like the goldAmerican Buffalo and Canadian Maple Leaf.39 Please read more here.14

Page 15 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Mr. Wasserman indicated that guaranteeing a certain price for those customers who wanted tosell back or return their purchases would be a violation of the securities laws based on the factthat such a guaranteed return or refund places the purchase of gold from Goldline in the categoryof a security based on the Howey test 40 which would then prohibit unlicensed broker dealersfrom selling Goldline products.Simply stated, if Goldline International were to comply with Congressman Weiner’s request andactually make a policy of placing guaranteed prices on all returned products, then the companywould literally be violating another set of securities laws. In other words, Congressman Weineris placing Goldline International in a proverbial Catch-22 by demanding that the company put inwriting that it will repurchase yet such a guarantee in writing appears to be prohibited by law.FDI then sought independent confirmation of this apparent industry-wide problem of not beingable to guarantee prices on returned products and contacted competitor Amergold, also known asthe American Gold Exchange. 41 American Gold Exchange is owned, founded and operated byDana Samuelson. Mr. Samuelson is one of the most credentialed and well-educated men in theentire “gold coin” selling industry. 42In an email exchange, FDI inquired of Mr. Samuelson that although it appears that GoldlineInternational states to customers that they will repurchase the coins they sell, they do not reducethis guarantee “in writing” accompanied by a specific price and if that was a red flag or if it wasan understood, acceptable practice in the industry. Mr. Samuelson made the followingobservation:“We guarantee to buy back from our customers whatever we sellthem at whatever a competitive rate is at the time they wish to seefor the items they bought. Different items have different buy/seespreads. And things change, so a printed policy with specificspreads can become moot fast in times like we saw on the heels ofthe 2008 banking crisis. It we [Amergold] had held to our normalbids during that time, we would have short changed many of ourcustomers, because bids relative to melt surged and for someitems, substantially. We raised our bids to numbers I have neverseen in the 30 years of doing this. When the crisis passed the40 More about the “Howey” test for what constitutes a security is discussed later in the report but for now, a “guaranteed return”does appear to meet the test of a security. Mr. Wasserman did not use language in the interview like “the Howey test” but mostcertainly alluded to it based on the fact that he said it would make gold fall into a category that would preclude unlicensed brokerdealers from selling.41 Please read more here. Co-Founder Barry Minkow had multiple phone conversations and email exchanges with DanaSamuelson, president and CEO of Amergold a sample of which can be found in addendum 7.42 Mr. Samuelson is a member of the above reproach and prestigious PNG (Professional Numismatists Guild) and he, along withhis Vice President John McDonald, were both extremely helpful in providing objective information for this report. In fact and inorder to obtain a first-hand account of how the industry functions from the first phone call contact to the purchase of various goldcoins, Co-Founder Barry Minkow purchased certain Swiss 20 Franc gold coins from Amergold.15

Page 16 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307market settled back down and so did our buy and sell prices. Themarkets dictate what many dealers do and fair competition helps tokeep us all honest” (emphasis added). 43In other words, volatility in the market is another rational, plausible reason why repurchasingpromises are not reduced to “in-writing guarantees” as in the case of the 2008 banking crisis—had such guarantees been provided, the customers would have been materially “short changed”based on volatility.Finally, that this is a commonly understood practice in the gold coin selling industry can be seenin the disclosure section of another competitor, “Finest Known” 44 (also a member of the abovereproach American Numismatic Association), where the company states:“The law prohibits us from guaranteeing to repurchase the coinswe sell, although we have always made buy-sell markets in bullionand rare coins we offer. Therefore, our buy-back policy is not aguarantee and is subject to change without notice.” 45The operative phrase here is “the law prohibits.” Capital Gold Group, another competitor ofGoldline International, when disclosing its buyback guarantee policy also points to “the law” as areason they cannot do what Congressman Weiner insists that Goldline International do. CapitalGold Group states:“Although we are prohibited by law from guaranteeing torepurchase the coins we sell you, we have always made buy/sellmarkets in the coins we offer at the highest posted bid price on theelectronic exchange.” 46So either out of ignorance or malice, Congressman Weiner has raised an issue that in order tocomply with would require Goldline International to violate the securities laws.Congressman Weiner’s complaint was not that he had scores of people from whom GoldlineInternational had refused to repurchase product from but rather that Goldline International didnot reduce its promise to repurchase in writing. Moreover, and based on Mr. Wasserman’s pointabout the company’s financial stability, Goldline International is celebrating their 50thanniversary and receives annual audited financial statements from the big four accounting firm,Deloitte & Touche.43 Please see addendum 7 email exchanges between Co-Founder Barry Minkow and Dana Samuelson, CEO of Amergold. In theinterest of full disclosure, it is fair to state that both Dane Samuelson and Vice President John McDonald provided balanced,honest responses to questions pertaining to competitor, Goldline International. The questions presented were not necessarily theiropinion of Goldline but rather are certain practices standard or understood to be acceptable as an industry standard.44 Please read more here.45 Please read more here.46 Please read more here.16

Page 17 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307As an example of why this point about financial stability is the most important point whendiscussing buy-back promises, try returning today, for a full refund, that Ginsu knife you boughtoff of an infomercial from the 1970s that came with a “lifetime” guarantee. One would havegreat difficulty trying to get his or her money back from that kind of purchase. But if someonehad purchased a product from Goldline International during the same period, he or she wouldhave no problem receiving his or her money back—tied to today’s gold prices.However, this issue of the potential violation of the securities laws is further complicated byanother allegation leveled against Goldline International found on pages 3 and 5 of the WeinerReport. Like the proceeding issue, this, too, deals with alleged securities violations but from adifferent angle.According to the Weiner Report:“Goldline Salespeople Misrepresent Their Ability To Give‘Investment Advice’ Sales people imply that they are ‘InvestmentAdvisors’ or ‘Financial Advisers’ by offering investment advice,which insinuates that they have some sort of fiduciaryresponsibility to get you the most return on your investment.However, since they are not licensed ‘Investment Advisors’ (theindustry term), they have no such responsibility.” 47The Fraud Discovery Institute, Inc. has submitted more than 20 reports alleging financial fraud tothe Securities and Exchange Commission and various state securities agencies like the CaliforniaDepartment of Corporations as well as the Arizona Corporation Commission 48 and in each casethe Howey test was an issue.Consumers often mistakenly assume that a security must be limited to a stock or a bond andtherefore do not think to apply the standard legal test for what constitutes a security. By omittingthis key component of due diligence, consumers leave themselves vulnerable to investmentfraud.Essentially, the Howey test for whether a particular investment is a security is commonlyunderstood to meet a three-prong test or standard: (1) a sum of money, (2) for profit, or (3)where the primary reliance for success is dependent on the efforts of the promoter—meaning theinvestor is passive not active and totally reliant on the promoter to generate the promised return.47 Please see Weiner report pages 3 and 5.48 FDI was involved in the uncovering of the case of Ed Purvis who perpetrated a Ponzi scheme against various Arizona-basedchurches. For a lengthy discussion on this case involving the Arizona Corporation Commission please see “Down but not Out”by Barry Minkow (Thomas Nelson 2006).17

Page 18 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Now, this is critical because once an investment, any investment, is deemed a security, it canonly be sold or offered by licensed broker dealers.The allegation leveled against Goldline International by Congressman Weiner is that salesrepresentatives, by positioning themselves as “investment advisors” or “financial advisors,” takeon the role of broker dealers without a license. However, even a cursory examination of thecompany’s policies and procedures as well as its disclosure section states that salesrepresentatives are not licensed broker dealers: The disclaimer reads as follows and isconspicuously absent from the Weiner Report:“Goldline employees may from time to time discuss the generaldirection of various financial markets. Neither Goldline nor itsrepresentatives can guarantee any market movement. Further,Goldline employees are not licensed as investment advisors andthey are not making any specific recommendations concerningstocks or any other form of investment. Goldline and its AccountExecutives are not agents for Client, have different financialinterests and incentives from Client and owe no fiduciary duty toClient. Account Executives are generally commissionedsalespeople whose commissions are greatest on numismatic andsemi-numismatic items and least on bullion related products. Theymay receive cash and other undisclosed compensation fromGoldline for recommending specific coin or currency products.Client will check with a licensed professional with expertise in aparticular market before making a decision to buy or sell”(emphasis added). 49There is really no ambiguity at all in this disclosure and that it can be actually proven to be truein not just theory but practice can be seen in two ways. The first is an absence in the publicrecord of any current, open lawsuits against Goldline International or their senior management. 50That is, one would expect to find lawsuits from disgruntled customers of Goldline Internationallittering the courts of America yet FDI could not find even one, open complaint from a consumerarguing that the had been duped into relying upon a Goldline sales representative whodeceptively held themselves out to be investment advisors when they were not.49 Please read more here.50 Please see section titled “What you would expect to find if Goldline International was above reproach” later in the report wherethe results of a deep background check on both the company and several of its senior management was performed. Additionally,in the case cited in the Weiner report regarding the 2006 complaint filed by the state of Missouri, Goldline International settledthat claim without admitting or denying wrongdoing in October of 2006. Read more here. However, and as was stated earlier inthe report the words of Rip-off Reports are worth recalling when they correctly observed that the mark of a great company is notwhen they have customer complaints but rather in how a company—specifically Goldline International—has handled suchcomplaints.18

Page 19 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307The second reason or way to independently confirm that normally and regularly GoldlineInternational sales representatives do not mislead customers by claiming to be investmentadvisors is the company’s policy of taping all calls. 51 The exact language found on the GoldlineInternational website states:“Client understands and agrees that Goldline may, in Goldline'sdiscretion, but is not obligated to do so, monitor or record Client'stelephone conversations with Goldline for quality control andGoldline's protection. Unless otherwise agreed by Goldline inwriting, Goldline does not consent to the recording of telephoneconversations by Client or any third party. Client understands thatnot all telephone lines or calls are recorded and Goldline does notguarantee that any recordings of any particular telephone callswill be retained or be capable of being retrieved.” 52This fully disclosed policy of taping customer calls provides law enforcement, if they deemnecessary, the ability to independently corroborate that Goldline International salesrepresentatives do not mislead customers by stating that they are licensed broker dealers.In conclusion, the assurance that Goldline International sales representatives position themselvesto customers as broker dealers is actually testable independently and in addition to what thecompany warrants and represents.Another allegation made in Congressman Weiner’s report is found on page 5:“Hidden fees include 1.) Storage fees if you want Goldline to holdthe gold you’ve purchased 2.) Conversion fees if you have storedyour gold with them and now want it mailed to you 3.) Liquidationfee of 1% when selling your gold back to them 4.) Delivery fee of$25.” 53To address this issue, it is important to remember an old saying that is practically a motto for theSecurities and Exchange Commission when instructing public companies on a mindset theyshould possess whenever communicating to the investing public: “When in doubt, disclose.”And when it comes to the issue of the alleged hidden fees that’s exactly what GoldlineInternational puts into practice.Even a cursory examination of the Goldline International website reveals that of all the wordsCongressman Weiner could have used to describe Goldline International’s storage, conversion,liquidation and delivery fees—“hidden” is not one of them. It is critical to remember that the51 Please read more here.52 Ibid.53 Please see page 5 of the Weiner report.19

Page 20 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307argument posited by Congressman Weiner is not that these alleged “hidden fees” for storage,conversion, liquidation and delivery are not an industry standard or are charges that are unique toGoldline International and not to any of the company’s competitors but rather that these fees arenot disclosed or hidden.Consider the following statements directly from the company’s official website that address eachof the four objections made in the Weiner report.For example, while the Weiner Report states fees relating to storage are “hidden” the companywebsite clearly states:“Storage fees are calculated by multiplying .00375 by the "ask"price of Client's holdings as of the date of the storage statement(the buy-back price for holdings is less than the ask price). Storagefees are charged in advance of each six (6) month storage periodand are payable upon receipt of the statement. The minimumstorage fee is $15.00. Goldline may increase or decrease storagefees upon thirty (30) days written notice to Client. Storage fees arenon-refundable.” 54Again, the report categorizes storage fees as “hidden” and that is simply not the case as can beclearly seen. The same argument applies to the contention that “conversion fees” are hidden.Conversion fees are charges made by the company for cases where clients had at one time storedtheir gold with the company and now want to take possession of their purchase. The companywebsite states:“At Client's written request, Goldline will ship stored metalswithin seven (7) business days of Client's request for delivery andpayment of shipping charges and applicable conversion fees.Stored silver and gold bullion are subject to conversion fees toconvert the unallocated bullion into deliverable bars, rounds orcoins (coin and bar types are subject to existing inventory).Goldline will provide a schedule of these conversion fees onrequest. This delivery period may be extended based upon marketconditions. Requested bar types and sizes are subject toavailability.” 55Clearly the company fully discloses its policy on product conversion and the same can be saidfor the company’s policy on liquidation. The website in section “D” titled “Payments, SecurityAgreement and Liquidations” states:54 Please read more here.55 Please read more here.20

Page 21 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307“When Client resells precious metals, coins ornumismatic/collectible items to Goldline, Goldline will purchasethe items at its current buy-back (or bid) price. Items not storedthrough Goldline must be shipped to Goldline at Client's expenseand verified by Goldline as to quantity and condition prior toliquidation. Goldline will charge a 1% liquidation fee. Goldlinewill deduct all amounts owed to Goldline with the balance paid bycorporate check payable to Client's account title of record.Payment will be sent within three (3) business days of liquidationto Client's account address. The law prohibits Goldline fromguaranteeing to repurchase the items it sells, although Goldlinehas always made buy-sell markets in bullion and rare coins itoffers. Therefore, Goldline's buy-back policy is not a guaranteeand is subject to change without notice.” 56Once again, the contention is not that the company ought not to charge for these kinds ofadditional services but rather that they are “hidden” and not disclosed—which is clearly, basedon the above evidence, not the case. Finally and considering the issue of “delivery” the website,in a section titled “Delivery Methods” states:“Goldline delivers precious metals via Federal Express, registeredinsured USPS mail and United Parcel Service. All deliveries areinsured (certain orders may be self-insured by Goldline).In fact, in order to avoid any ambiguity, the company states in a section titled “Delivery &Handling Charges” that:“$25 flat fee for all gold, silver, platinum and palladium products.†The above charges are for deliveries to the United States andCanada. Canadian clients are responsible for any applicablecustoms fees. Delivery fees are subject to change at any time.” 57Based on the four examples provided above, it appears that the only thing “hidden” isCongressman Weiner’s political agenda and his failure to cite the readily accessible informationcontained on the Goldline International website relating to the charges a customer will becharged for services like storage, conversion, liquidation and delivery.Another allegation in the Weiner Report is found on page 5:56 Please see http://www.goldline.com/buygold-preciousmetalstorage/#E.57 Please see http://www.goldline.com/buygold-howto.21

Page 22 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307“Goldline tells customers that they will give them only a little bitless than the “bid” price when they decide to resell their gold toGoldline. This is confusing because the price a customer originallypays is called the “buy” price by Goldline and the “bid” price isthe non- marked up cost of the coin.”First, it is clear that Goldline International fully discloses what it means when the term “bidprice” is used on the company’s website under a section titled “Liquidation/Buy-Back Policy.” 58In that section, the company states:“When you decide to sell your coins or currency, we appreciatethe opportunity to purchase them at our current bid/buy price.Although you are free to sell to other coin dealers by private treatyor at auction through one of the many rare coin auction houses, webelieve that you will receive a higher net amount by selling to usbecause we are familiar with the quality and marketability of theitems we sell, and do not charge any additional fees orcommissions other than the 1% liquidation fee when making suchpurchases. Depending upon market conditions and your originalpurchase price, you may receive less than what you paid for thecoins and currency. The law prohibits us from guaranteeing torepurchase the coins we sell, although we have always made buysellmarkets in bullion and rare coins we offer. Therefore, our buybackpolicy is not a guarantee and is subject to change withoutnotice. We post our price indications on bullion and bullion coinson weekdays and will quote them upon request. You can checkcurrent price indications here at www.goldline.com. On bullion,semi-numismatic and rare coins and rare currency, it is our policyto offer to repurchase coins sold by us at the then current bid/buyprice. A lower bid price is generally offered for products notoriginally sold by Goldline. While our company is not obligated todo so, we continue to make a market for the coins we sell, havehistorically done so, and intend to continue to do so in the future.Please see the section entitled "Liquidity" for more informationregarding the sale of precious metals, rare coins and rarecurrency.” 59That section titled “Our Prices” further informs customers that:“Of the products that we buy and sell, bullion and bullion coinsare generally more liquid than semi-numismatic coins, and semi-58 Please read more here.59 Please read more here.22

Page 23 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307numismatic coins are more liquid than numismatic/rare coins.Goldline may not provide a "bid" or "buy-back" price on somecollectible coins. Sometimes, because of its market influence, whenGoldline stops recommending an individual semi-numismatic ornumismatic coin, its price may drop.”Finally, and for the sake of thoroughness, in the section titled “Our Prices,” GoldlineInternational makes clear that: 60“Our prices are set internally based upon our analysis of a varietyof factors and are not necessarily tied to the prices quoted by anyother organization. The prices charged by Goldline for coins aresubject to change based on market conditions. Our total profitbefore operating expenses may be more or less than our spreadbased on various factors including, but not limited to: quantitypurchasing, favorable or unfavorable purchases and positive andnegative market conditions. Goldline acts as a principal, not as abroker, and generally owns the coins and precious metals it buysand sells. There is a price differential or "spread" between ourselling price (the "ask" price) and our buy-back price (the "bid"price). This is often referred to as a "transaction cost." A typicalspread on our most common bullion coins (e.g. Canadian MapleLeaf or South African Krugerrand gold coins) may range fromapproximately 5% to 20% depending on the coin though spreadsmay increase based upon market conditions, availability anddemand. Our spread on semi-numismatic coins, rare ornumismatic coins and rare currency currently ranges from 30% to35%. Examples of coins which have a 30% to 35% spread includeEuropean gold coins such as the Swiss 20 Franc, the PCGScertified "First Strike®" coins, coins which have beenencapsulated by a grading service such as PCGS or NGC, theMorgan and Peace silver dollars in all grades, and the WalkingLiberty, Franklin and Kennedy silver half-dollars in all grades.Spreads may change based upon market conditions, availabilityand demand. With the exception of the most common 1 oz. bullioncoins, Goldline charges clients its numismatic spread, whichcurrently ranges from 30% to 35%, on coins and currency. Toearn a profit upon resale to us, your coins, currency or bullionmust appreciate sufficiently to overcome this price differential. Toillustrate how this spread works, consider the following example. Ifthe spread on a coin is 35% and Goldline's ask/sell price is $500for the coin, then Goldline's bid/buy price is $325. Your coin must60 Please read more here.23

Page 24 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307appreciate more than $175 to earn a profit. If you choose to sellyour coin back to Goldline, you must also pay a 1% liquidation fee(the minimum liquidation fee is $15). Purchases of less than$1,500 are subject to a small lot fee of $15.”Although Congressman Weiner’s claim that Goldline International’s policies relating to the “bidprice” are confusing, the fact that examples are provided so that the customer can thoroughlyunderstand exactly what terms like “bid,” “market conditions” and “liquidation” mean appear tobe provided a hedge against any customer confusion or ambiguity.Unlike the allegations made by Congressman Weiner regarding the alleged “hidden fees” forthings like storage and liquidation, this allegation asserts that the Goldline International policyrelating to the bid price is somehow unfair. However, the points of similarity between GoldlineInternational’s policy relating to the “bid price” repurchases appears to be perfectly consistentand acceptable within the industry as evidenced by a similar “less than bid price repurchasepotential” in the policy of competitor ITM Trading, Inc where they disclose to customers thefollowing:“Coin repurchase policy: ITM currently has a policy that we willrepurchase coins from customers who bought their coins from us.We plan to maintain that policy in the future, but we are notobligated to do so and we may modify, suspend or terminate ourrepurchase policy at any time, in our sole discretion and withoutnotice to you. In addition, ITM is prohibited by law fromguaranteeing that we will repurchase any of the precious coins ormetals that we sell, and we do not guarantee that we will make abid on every coin that you may wish to sell. Factors may includethe market for the coin and whether we need the coin for ourinventory. If you wish to sell your coins to ITM, we will quote youthe current bid price for those coins. If you decide to sell yourcoins to ITM, we generally will purchase your coins at our currentbid price on the day in which we receive your coins at ourcorporate office. Because coin prices are a reflection of supply anddemand, much like stocks and bonds, bid prices can change everyday or in some instances from minute to minute. As a result, theactual price at which we purchase your coins may be higher orlower than the bid price that we quoted before you shipped yourcoins to us (emphasis added).” 61Thus, and in the case of ITM Trading, the potential for a repurchase to be “slightly less than thebid price” appears to be an industry understood and acceptable policy. That is, if it is thecontention of FDI that Goldline International has been unfairly or selectively prosecuted by61 Please read more here.24

Page 25 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Congressman Weiner, then one would expect to find evidence of this by demonstrating thatmany of the charges leveled against the company are actually acceptable practices in the industrypracticed by Goldline International competitors. In several instances thus far this is exactly whathas been demonstrated.What one should find if Goldline International were not above reproachInvestigations are revealing both for what they report and what they do not report. For example,Goldline International has been in business since 1960 and sells products that can feasibly cost acustomer more than $10,000 or even up to $100,000. That is, they are not “small dollar”purchases and, as a result, if a consumer was victimized or defrauded in the manner in whichCongressman Weiner appears to say that they have, then why does he not provide the details ofthe many fraud-inspired lawsuits filed against this company by these defrauded consumers? Thisis an especially troubling omission when one considers that Goldline International activelysolicits customers to invest their IRA funds into gold, which increases the potential high dollaramount of a particular purchase. 62It is for this reason that FDI retained the services of outside investigator Terry Gilbeau ofCheckMate Investigative Services, Inc. 63 Mr. Gilbeau is also a certified fraud examiner, and hewas tasked with performing a deep background check on not only Goldline International, butalso its senior management. After a careful investigation, Mr. Gilbeau concluded:“With regard to Goldline, I really can't find anything wrong—andnot from lack of looking! They not only appear to be solvent, thelawsuits that I did find over the past 10 years have all beendismissed. In fact, even the one wrongful termination suit appearsto also be recently settled. The company is solvent and appearsalmost lily-white.” 64As for the company’s senior management, Mr. Gilbeau was tasked with performing a deepbackground check of the following five individuals: Mark Albarian, CEO; Robert J. Fazio, EVP;Keyth Pengal, VP of Operations; Stuart Hong, VP Controller; and Joseph P. Ozaki, CFO andCOO. After a careful investigation of these five individuals, Mr Gilbeau concluded:“None of the 5 had any criminal history, no negative public recordon any of the 5 individuals. In the case of Mr. Hong, there was nocriminal history but he was a defendant in a case where ajudgment was granted to plaintiff. It appears to be related to hisinvolvement in a business, LA Health Management. The judgment62 Please read more here.63 Please see addendum 8 for Gilbeau report and supporting documentation.64 Ibid.25

Page 26 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307was for $25,000, and it appears to have been paid.” 65These findings are as troubling as they are vindicating. Troubling because it would appear thatthe lack of an appeal by Congressman Weiner to the public record history of GoldlineInternational, a company selling high dollar items reaching to the thousands and even the tens ofthousands would not include the fact that there appear to be no outstanding lawsuits. AndGoldline would have many lawsuits filed against it if fraud took place on the high-ticket items.It’s also vindicating because the absence of company lawsuits and, for that matter, personallawsuits go a long way in answering the “who are people are who run Goldline Internationalwhen no one is looking” argument. The public record is even more remarkable consideringanyone in a high-profile business faces the attracting lawsuits—even if they are not guilty ofanything. 66 However, the integrity of both Goldline International and its senior management--asseen in the absence of negative public record information make the claims of CongressmanWeiner border on libelous.Glenn Beck’s alleged self-fulfilling prophecyOne of the allegations leveled by Congressman Weiner against Glenn Beck is that Beck hascreated a kind-of self-fulfilling prophecy. That is, by frequently mentioning on his radio andtelevision show information relating to the national debt, which is now hovering around some$13 trillion, and by offering gold as a viable investment, he is creating a false demand for goldthat enriches his primary advertiser, Goldline. The Weiner Report states:“On numerous occasions, Glenn Beck has dedicated entiresegments of his program to explaining why the U.S. money supplyis destined for hyperinflation with Barack Obama as president. Hewill often promote the purchase of gold as the only safe investmentalternative for consumers who want to safeguard their livelihoods.When the show then cuts to commercial break, viewers are treatedto an advertisement from Goldline.”By way of background, Mr. Beck has a certain style that is best summed up by the followingstatement: “The meaning of anything is tied to its origin.” That is, Mr. Beck is a student ofhistory and encourages his audience to also be students of history in order to understand thecontext in which critical events have taken place.65 Ibid.66 The Fraud Discovery Institute, Inc. has two lawsuits pending. One was filed by Medifast, Inc a New York Stock Exchangepublic company and one in Florida State court filed by Lennar Corporation, also a New York Stock Exchange public company.Both suits stem from critical reports issued by FDI on these companies. FDI stands by its reports 100%.26

Page 27 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307For example, on a recent show, Mr. Beck had as a guest Andrew Allison, the co-author of “TheReal George Washington,” to debunk various revisionist historical accounts of this country’sfirst president and to show how he was a reluctant hero.In like manner, when discussing the current debt crisis and potential action the government maytake based on the past, Mr. Beck has explained that under Executive Order 6012, Franklin D.Roosevelt, to avoid a run on the banks by those who had lost faith in the economy, ordered allcitizens to deliver all gold coin, gold bullion and gold certificates owned by them to the FederalReserve by May 1 1933, for the set price of $20.67 per ounce. 67By May 10, 1933 the government had taken in $300 million of gold coin and $470 million ofgold certificates. Two months later, a joint resolution of Congress abrogated the gold clauses inmany public and private obligations that required the debtor to repay the creditor in gold dollarsof the same weight and fineness as those borrowed. In 1934, the government price of gold wasincreased to $35 per ounce, effectively increasing the gold on the Federal Reserve's balancesheets by 69 percent. This increase in assets allowed the Federal Reserve to further inflate themoney supply. 68The government held the $35 per ounce price until August 15, 1971, when President RichardNixon announced that the United States would no longer convert dollars to gold at a fixed value,thus abandoning the gold standard. In 1974, President Gerald Ford signed legislation thatpermitted Americans again to own gold bullion. 69Based on the abovementioned historical background, Glen Beck has mentioned that thegovernment could, in the future, order that all Americans turn in their gold for a set price and theonly way to protect oneself from this kind of confiscation is to own overseas gold coins or coinsthat are categorized as “collectables.” However, based on the fact that Goldline International’shighest margin coins are their overseas gold coins and their collector coins, Congressman Weinermakes the following observation on page 5 of his report.“The reason given to customers by sales associates for why theyshould purchase these more expensive coins is often that if thegovernment ever comes to confiscate your gold, they can’t takeyour vintage and collector coins. This is in reference to anoverturned executive order issued by FDR in 1933 requiringAmericans to sell their gold to the government, with an exception67 The purpose here is not to provide an exact quote of how Mr. Beck explained the historical background of the FDR goldconfiscation order but merely to explain what occurred and, subsequently the potential future actions the government might takebased on the past. Additionally, all information describing the background of the FDR gold confiscation order comes from bothMr. Beck and here.68 Please read more here.69 John McDonald at Amergold in his telephone interview with Co-Founder Barry Minkow specifically mentioned how, in 1971,Nixon announced that the U.S. would no longer convert dollars to gold at a fixed value and therefore completely abandoning thegold standard for monetary policy in the U.S.27

Page 28 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307for "gold coins having a recognized special value to collectors ofrare and unusual coins," the executive order however did notdefine special value or collector value, and certainly notcollectibles. Nevertheless, telemarketers promoting old U.S. goldcoins perpetuate this myth because it makes the selling of highpricednumismatic coins easier.”Of all the arguments made in the Weiner Report, this is the most disturbing because even acursory examination of competitor sites reveals that the language used by Goldline Internationalabout this issue is an industry standard, demonstrating further that the attack on GoldlineInternational is selective and arbitrary. If there is any doubt that this is in fact the case, pleasecompare the below statement taken from the Goldline International website and those taken fromthree competitor websites: 70Goldline International’s statement: 71 Times were very good formany Americans in the mid- to late-1920s: the stock market hadgrown exponentially—driven, in part, by a frenzy of investingwhich sent stock prices well beyond their true value. In 1929, thefrenzy ended. Black Tuesday started a stock market crash whichultimately led to the Great Depression. By 1933, the demoralizednation looked to Washington, D.C. and President Franklin D.Roosevelt for salvation. Seeking to inflate the dollar in an effort tocombat the depression, the United States government issued anorder confiscating gold bullion from American citizens underthreat of fines or imprisonment. There were certain limitedexceptions. One of the most notable exceptions was that Americanscould continue to own: “gold coins having a recognized specialvalue to collectors of rare and unusual coins.”You can view the Executive Order and read the terms ofconfiscation by clicking on the highlighted graphic. Followingconfiscation, in 1934 the government devalued the dollar andraised gold's value by nearly 75%. Many of the gold coins whichwere confiscated were later melted. Rare coin collectors, exemptby the gold confiscation profited from the confiscation, melting,and price revaluation in two important ways. Their coins gainedvalue because:• The price of gold increased from $20 per ounce to $35 per ounce.70 It should be stated that these examples of gold coin selling companies establishing the 1933 confiscation as a reason topurchase numismatic coins could be readily multiplied.71 Please read more here.28

Page 29 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307• Official melting of the confiscated gold coins lead to greaterscarcity for those coins exempt from confiscation.The events of the 1930s and the decades that followed help toprove the importance of owning collectible gold coins.The ‘GoldWhy’ website: In 1933 the United States Governmentconfiscated everyone's gold coins. Can you believe it! If you weresmart enough to hold gold coins to hedge your bets against anunstable government, too bad. Your coins were confiscated for afraction of their actual value and your hard work and prudencewere all for nothing. Want to learn a bit more about the 1933 goldcoin confiscation? There are already a ton of great articlesincluding this one by Blanchard and Company. I personallybelieve there will not be another gold confiscation. Perhaps I'mjust an optimist. Or, it's my belief that the media is so widespreadthat it would be impossible for the government to get away withsomething like this. However, that doesn't mean that I'm notplanning for the worst. Hey, I'm a gold coin investor. Is there agold coin investor out there that is not planning for the worst? Thetopic of today's article is all about how you can protect yourselffrom the next gold confiscation.Multiple Safe Deposit Boxes Protect You From Gold Confiscation,SomewhatAs you know, I'm a big advocate of storing your gold in your safedeposit box. However, I have read a variety of opinions on theInternet that certain banks have orders from the government tofreeze safe deposit boxes in the event of an economic collapse. I'mnot sure if I believe this or not. Regardless whether it's true or not,why not split your gold holdings amongst several safe depositboxes at different banks? For example, why not have one safedeposit box at Wells Fargo and another at Bank of America? Thisonly makes sense if you have sufficiently large gold holdingsbecause these boxes will run you $75 or more per year, but Itotally recommend this if your gold holdings are large enough. Ifone bank confiscates or freezes your gold, at least you have thehope that the other won't. Moreover, I have heard reports of bankemployees breaking into safe deposit boxes and taking gold coins.Again, I'm not sure if this is true. Regardless, it makes sense todiversify your gold coin portfolio amongst several safe depositboxes. In the worst case, you will lose half your gold coins if onebank steals your gold. All of this sounds "worst case" and it truly29

Page 30 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307is. However, why not sleep better at night by hedging your bets incase another gold confiscation really happens. Another tip: checkyour safe deposit boxes regularly. I check mine at least once peryear to make sure everything's in order. Another tip: If you go themultiple safe deposit route, why not diversify geographically?Make sure they're at least 20 or so miles apart in different cities. 72The US Gold Coin website: Then, in 1933, President Rooseveltimposed a ban on U.S. citizens buying, selling, or owning gold.While the U.S. Government continued to sell gold to foreigncentral banks and government institutions, the ban preventedhoarders from profiting after Congress devalued the dollar, interms of gold, in January 1934. This action raised the official priceof gold by more than 65 percent, from $20.67 to $35 per troyounce. Gold coins and certificates that were considered collectorsitems, were exempt from the prohibition, and artistic and industrialusers of gold were permitted to deal in the metal under a specialTreasury license. Legal gold transactions had to be made at theofficial U.S. Government price until 1968, when gold regulationsagain were changed to prevent runs on U.S. Government goldreserves. Under the new system, the worlds’ currencies would stillbe valued in terms of the dollar, but the dollar would no longer berelated to gold reserves. Since 1968, licensed dealers have beenable to buy and sell gold at market-determined prices. The UnitedStates stopped selling gold to foreign official holders of dollars atthe rate of $35 an ounce in 1971, which brought the gold exchangestandard to an end. In August 1974, President Ford repealed theprohibition on the public’s owning gold or engaging in goldtransactions. Today, no country bans private ownership of gold. 73The Legacy Precious Metals website: 74 A Little History LessonHistorical BackgroundThe year was 1933 and the country was reeling. It seemed asthough the good times of the Roaring Twenties had long sincegiven way to 1929’s Black Tuesday stock market crash and theunemployment and hardships of the Great Depression. Across thecountry banks were going under at a record pace, taking the lifesavings of ordinary citizens with them. Naturally, bank depositorswere clamoring to withdraw their money, preferably in gold coinand bullion. After all, back in 1933 the dollar was still on a gold72 Please see http://www.goldwhy.com/gold-confiscation.html.73 Please see http://www.usgoldcoins.com/information/gold/the_history_of_gold.html.74 Please see http://www.legacypreciousmetals.com/gold-confiscation.30

Page 31 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307standard; gold coin was used as everyday currency, paper dollarscould be exchanged for gold coin or gold bullion at the officialgovernment rate of $20.67 per troy ounce. As a result of the "runon the banks" the nation’s gold reserves were severely depletedRoosevelt’s Banking System Power GrabOn March 4, 1933 Franklin D. Roosevelt was inaugurated as the32nd President of the United States of America. Two days later, forthe first time in American history, President Roosevelt closed thenation’s banks. Basically Roosevelt claimed that the recent goldand currency withdrawals had created a national emergency anddeclared a "bank holiday." On March 9, FDR’s fifth day in office,President Roosevelt railroaded the Emergency Banking Act (billH.R. 1491) through Congress. Congressmen were not given achance to read the bill (records show that only one printed copywas handed over when the bill was brought to the House), thebill’s author remained anonymous, and the President himselfrequested that debate on this bill be limited to just 40 minutes – 20minutes for each party. The bill passed at noon without a roll callvote, on the premise that the Congress should support the newPresident. By 7:30 pm that evening the bill made it through theSenate, and President Roosevelt signed it into law.What, you might wonder, was the Emergency Banking Act, allabout? The bill’s preamble stated that it was an "act to providerelief in the existing national emergency in banking, and for otherpurposes." H.R. 1491 accomplished three main things:1. It retroactively gave Roosevelt permission for the bankingholiday he had illegally declared a few days previously.2. It amended existing law to give the President shocking newauthority during time of war or during any other period of nationalemergency declared by the President to regulate all banks andfinancial transactions in general, and everything concerning goldin particular.3. It gave the government (specifically, the Secretary of theTreasury) the authority to force holders of gold coin, gold bullionand gold certificates to surrender them to the Treasurer of theUnited States in exchange for paper money.The 1933 Gold Confiscation Executive Order31

Page 32 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Slightly less than one month later, on April 5, 1933, PresidentRoosevelt issued executive order No. 6102, which became knownas the 1933 Gold Confiscation. This executive order…• Declared a national emergency (remember, the EmergencyBanking Act gave the President unprecedented power if he should,in his sole discretion, declare a national emergency for any reasonwhatsoever);• Prohibited the "hoarding" (defined as holding more than $100worth per person) of gold coin, gold bullion and gold certificateswithin the U.S. by individuals, partnerships, corporations andassociations;• Compelled everyone in the country to deliver their gold to thebank in exchange for $20.67 per troy ounce;• Created criminal penalties for individuals who violated thisexecutive order (including private citizens, and officers, agents ordirectors of corporations that willfully violated any provision ofthe executive order): $10,000 fines, 10 years in prison, or both.However, certain gold coins were exempt. Although nearlyeveryone was forced to turn in their gold in to the government inexchange for fiat currency, U.S. citizens were allowed to keep theirholdings of "gold coins having a recognized special value tocollectors of rare and unusual coins."What Happened Next?After the government had confiscated the American peoples goldand made it illegal to own, the government then raised the officialprice of gold for international transactions from the currentmarket price of $20.67 per troy ounce to $35 per troy ounce. Thisin effect, devalued the U.S. dollar. Instantly, the "new blackmarket" and international price of gold increased by a whopping+69% percent, while the value of the U.S. Dollar compared togold (the world’s reserve currency at that time) decreased by astaggering -69% percent, a further blow in the midst of adepression.Notably, the rare coin collectors who were exempt from the goldconfiscation order because there coins had an establishedcollectible value profited handsomely from this increase in thegold bullion value of their coins. The official $35 per troy ounceprice for gold remained until August 15, 1971, when underPresident Richard Nixon the nation officially abandoned the goldstandard for foreign exchange. Limitations on gold ownership inthe U.S. remained until December 31, 1974, when President32

Page 33 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Gerald Ford signed a bill legalizing private ownership of goldcoins, bars and certificates.Could History Repeat Itself?Yes. Although private ownership of gold in the U.S. was legalizedin 1974, the Emergency Banking Relief Act of 1933 was apparentlynever repealed. The President still retains the right to confiscateyour gold. And even if the Act is repealed, it can just as easily bereinstated. Do you think a 21st century American President wouldnever confiscate your gold? Think again. Take a look at what’shappening with government policy today. In the past year or so wehave seen unprecedented government intervention in the financialmarkets, privately held property, and nearly every other sector ofthe economy. Bank bailouts, auto industry bailouts, insurance andsecurity bailouts have all been part of a historical power grab thatkeeps getting worse. Strict government regulations placed on thecompanies they are bailing out mirror the actions taken by theadministration of 1933. Governments through time have illustratedits ability to usurp personal liberties in the name of nationalsecurity.Beyond the question of government policy, let’s not forget the issueof the economy itself. Many economists (and ordinary citizens)believe that today’s bailouts will lead to tomorrow’s inflationarypressures and monetary crisis. This, in turn, could create aneconomic climate in which the government may attempt to returnto some form of gold standard. Unfortunately, U.S. gold reservesand central banks no longer have enough gold to make thishappen. The return to a gold standard hybrid would require a reconfiscationof gold to the government’s coffers. And where do youthink this gold would come from?What Can You Do to Protect Yourself?If history does repeat itself, and the U.S. government does onceagain make it illegal for private citizens to own most forms of gold,we believe that collectible and/or rare gold coins (pre 1933 U.S.gold coins) would once again be exempt from the order. Why? Tworeasons:1. Non-traceability. In the U.S., ownership of gold bullion and goldbullion coins is subject to stringent government reportingrequirements. Ownership of "rare coins" is not. In the event thatthe government should issue an order confiscating privately held33

Page 34 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307gold, it will be difficult for the government to trace down owners ofcollectibles in order to enforce compliance.2. Legal precedence. The legality of FDR’s 1933 actions held up incourt. A similar executive order would undoubtedly face legalchallenges. While there is legal precedence for confiscating goldbullion coins, no historical legal precedence exists for theconfiscation of coins that have numismatic value.Which Coins Should Be Exempt from Future GovernmentConfiscation?The U.S. government – and the IRS tax code – currently classifypre-1933 American gold coins as “collectible.” This is the caseeven though most of these coins are currently selling at a relativelylow premium over their gold value.For those who are concerned that the government may declareanother gold confiscation, we recommend purchasing thefollowing collectible gold coins:• $20 Liberty Head Double Eagle PCGS MS-61 through MS-65Gold Pieces – Minted by the U.S. government from 1849 to 1907,the Liberty Head Double Eagle is coveted by collectors andinvestors alike because of its scarcity, historical significance, andappealing aesthetics. Even though these coins are all over 100years old, the MS-61 to MS-63 coins are still in "uncirculated mintstate" condition making the a very desirable vessel to store goldcontent.• $20 Saint Gaudens Double Eagle PCGS MS-63, MS-63, MS-64and MS-65 – Recognized as one of the most beautiful gold coins inthe world, the Saint Gaudens Double Eagle offers broad appeal,rising demand, limited supply, well-established and transparentmarkets, and a high gold content. Minted by the U.S. governmentfrom 1907 to 1933 Saint Gaudens continue to be the most populargold coin of all time.** It is important to note that these coins are only available todaybecause they were not confiscated and melted down back in 1933.Remember, every gold coin and gold bar that did not have anestablished "collectible" value – i.e. the bullion coins that wereconsidered "modern" at the time – were subject to confiscation bythe government and made illegal to own. These coins hadcollectible value in 1933 and in addition to their gold content they34

Page 35 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307have collectible value today. They were not confiscated in 1933,when nearly everything else was. The probabilities are very highthat if the government confiscates gold again in the future, thesesame coins that were exempt in 1933 will again be exempt.How Have These Coins Performed?Since 1911, rare coins in general have outperformed every otherasset in their class. While past performance doesn’t guaranteefuture returns, you can rest assured that rare coins will only getrarer with the passing of time. The $20 Saint Gaudens and the $20Liberty Head Double Eagles are two of the most popular andworld-renowned numismatic coins available to the averageinvestor today. Both have strong performance histories and greatpotential. The $20 Liberty Head PCGS MS-63, for example,increased 483% from November 2002 to November 2009 –outperforming gold bullion by almost 60%. The Saint GaudensPCGS MS-64 increased 375% during this same time period. Thevalue of these coins have a “triple action” appreciation attributewhich is linked to their gold content, their esthetic value ofbeautiful artwork and their limited supply. The numismatic valueof these Double Eagle gold coins have historically producedexceptional growth and appreciation far beyond what standardgold coins and gold bullion could attain to. Take your future inyour own hands. Protect yourself and your liberty to own realmoney. The $20 Liberty Head and $20 Saint Gaudens DoubleEagle gold coins are the ultimate investment grade gold. We highlyrecommend the ownership of these coins because of their security,preservation of capital and strong appreciation attributes.These examples could be readily multiplied but to single out Goldline International for acommon practice that is industry wide is selective and unfair. 75 Despite the clear evidence of aindustry-wide practice, Congressman Weiner states on page 3 of his report: “On numerousoccasions, Glenn Beck has dedicated entire segments of his program to explaining why the U.S.money supply is destined for hyperinflation with Barack Obama as president. He will oftenpromote the purchase of gold as the only safe investment alternative for consumers who want tosafeguard their livelihoods. When the show then cuts to commercial break, viewers are treated to75 In the interest of full disclosure, there are a few companies that, in attempt to one up their competition, repudiate the citing ofFDR, 1933 confiscation event. For example, CMI Gold and silver (please see http://www.cmi-gold-silver.com/gold-confiscation-1933.html) calls company’s that site this historical event as creating a myth. However, in a free market system, the consumer isentitled to all the evidence that is available and can therefore make up their own mind after a thorough examination of thatevidence. The fact that Goldline International and many of their competitors have a different opinion and interpretation of thepast and its potential impact on future events does not necessarily mean that these company’s are in anyway deceiving theircurrent or potential customers—especially in the case of Goldline International, based on their 50 years in business, can actuallysite customers who have profited over the years from the purchase of numismatic coins.35

Page 36 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307an advertisement from Goldline.”In other words, Congressman Weiner would like the SEC and the FTC to believe that there is aconspiracy between Glenn Beck, Fox News Channel and Goldline International to manipulatethe advertising clock so that right when Glen Beck discusses the potential for history to repeatitself and the government to again confiscate all the gold owned by US citizens, that at that veryinstance and with planning and forethought a specific Goldline International ad is to air. Itborders on absurd.This is especially hard to fathom when, through a commonly understood policy, there is adistinct separation between a news organization’s advertising department and its correspondentsand commentators. Therefore it is difficult to comprehend that there is an intentional connectionbetween Mr. Beck’s knowledge of precisely knowing the exact timing of a certain commercial toair by a specific advertiser and for him to create a show that finds its origin not from the truthbased on historical events but rather to do nothing more than to help an advertiser is anintellectual stretch to say the least.Finally, it is now obvious that Mr. Beck has not created a story out of thin air and leveraged intoa reason to purchase his sponsors products. If this section has proved one thing, it has shown thatlong before Goldline International became the primary sponsor for Glen Beck whether it be forhis radio or television show, the industry as a whole has used the unprecedented executive orderof FDR to impute value to those numismatic gold coins that would be exempt from potentialconfiscation.In summary, based on the three examples given above and what would have to be true in orderfor Congressman Weiner’s assertion to be correct, it once again appears that GoldlineInternational is being selectively and unfairly persecuted.Who is the real villain in the ‘gold coin’ selling industryIf Congressman Weiner wants to find a villain in the gold coin selling industry, why not theNumis Network? 76 Here, Congressman Weiner can look to a company that does not possess a50-year track record, does not have annual sales of over 500 million dollars, and a companywithout an above reproach senior management team, and who does not obtain annual auditedfinancial statements from a big four accounting firm (not a requirement for a private company)but rather a multi-level marketing scheme that suggests to potential recruits that they can earn anincredible income with very little training.We had nationally recognized multi-level marketing expert and forensic CPA Tracy Coenenevaluate the Numis Network multi-level marketing compensation plan. Her results clearly show76 Please read more here.36

Page 37 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307the difference between a well-run company and a potential consumer fraud that law enforcementshould examine carefully. She notes:“As with most multi-level marketing companies, Numis Networkpurports to offer a business opportunity that can generate highearnings for an individual. The “product” being sold by Numis iscollectible coins. As an investment, gold and silver coins havevalues that are fairly easy to determine with a few minutes and aninternet connection. The value of a “collection,” however, is not soeasy to assess. The value of a “collection” varies from owner toowner, so it is hard to put a price tag on it.Numis Network is careful not to call its coins investments, as thatcreates regulatory problems in addition to the ease of objectivelyvaluing the investment (and coming to the conclusion that Numis isnot the place for a serious coin buyer).Indeed, the coins being sold by Numis appear to have values lowerthan the price for which they're being sold. A quick examination ofwebsites like eBay, Gainsville Coins, American Historic Societyand American Precious Metals Exchange all sell the MS70 SilverEagle coin, the most common Numis product retailing at $120 andwholesaling at $100, at or below the wholesale price at whichNumis representatives pay.There is little focus on the actual selling of coins. In fact, it'sdifficult to find a Numis Network representative site from which toactually buy coins unless you already know the web address for thesite. Searching Google for a site from which to buy the coins isalmost futile. Almost all the search results point to sites which areselling the “business opportunity” instead.The Numis compensation plan is incredibly complicated, boastingpayments for binary downline cycle bonuses, enroller organizationmatching bonuses, coded organization matching bonuses, and FastTrack Collector Bonuses. There is a dizzying list of qualifyingactivities and bonus percentages, all tied to configurations ofdownlines.37

Page 38 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307A basic membership package for a Numis representative costs $75plus $10 per month. This entitles the representative to wholesalepricing on coins, potentially offering an opportunity to earn moneyby buying coins at wholesale and selling them at retail. However,based on the fact that the retail price of the MS70 Silver Eagle is atleast 20% higher than the most expensive alternatives we foundand more than 100% higher than the least expensive alternativeswe found, it seems unlikely that anyone will be able to generate asignificant or sustainable income from selling coins.The company promotes bypassing the Basic membership, andinstead purchasing the “Training Qualified” package, which costs$495 up front, plus a $99 per month “autoship” of one MS70Silver Eagle Coin. This package will cost the representative almost$1,700 in his first year.Representatives can initially qualify for “bonuses” (payments fromthe company for things other than selling coins) by recruiting or bypurchasing the “Executive Success System.” To actually receivethe bonuses, a representative must personally purchase 1 to 3Silver Eagle Coins (or the equivalent value of other coins) at thepreferred price of $99 each, and these purchases must be madeeach month.A hallmark of an endless chain recruitment scheme is the ability tobuy one's way to higher levels of commissions. However, Numis isquick to point out that no purchase is necessary to qualify forcompensation. A representative with qualifying volume achievedthrough customer sales can receive some bonuses. However, toreceive all potential bonuses, personal purchases are required.One might suggest that those personal purchases could easily bere-sold to customers for a profit, but as discussed above, thelikelihood of making consistent sales is low.How much activity will it take to recover (through bonuses) the$1,700 a “training qualified” representative will spend in the first38

Page 39 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307year? The cost averages to $142 a month, not including any othercosts a representative will incur in running his “business.”The company bases bonus payouts on a BV (bonus value) for eachcoin sold. The MS70 Silver Eagle coin has a BV of 60, and thecompany says that an estimated 10% of that could be paid asbonus, for $6 bonus paid on each of these coins sold. However, thebonus money is only paid on part of the representative's total BV.The representative has two legs to his downline, and the bonus willonly be paid on the BV total of the leg with the lower number ofpoints each month.At least 24 coins per month must be sold in the representative'sweakest leg to generate enough to cover the minimum costs of$142. This means in total, the representative's downline must sell(or purchase themselves) at least 48 coins total (24 in each leg) togive the representative a chance of even breaking even. Additionalbonus money could be earned in a variety of ways that only analgorithm can compute, but these require substantial recruiting ofrepresentatives who make monthly coin purchases.The compensation plan is not nearly as simple as this, however,and many variables can prevent the representative from recoveringhis monthly costs. Numis Network brags that representatives canearn money from an unlimited number of levels below them,however, the company has a broad policy that limits bonus payoutsto no more than 50% of the total company BV.Since the coins sold by Numis Network appear to have little retailappeal to true customers, the only way a representative can hopeto make money is by constant recruiting. The representativescannot rely on retail sales of coins, so they must rely on thecomplicated methods of calculating various bonuses for therecruits in their downlines. The only hope for a representative liesin recruiting an endless chain of representatives.” 7777 Please see addendum 9 email report and analysis of the Numis Network by Tracy Coenen.39

Page 40 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Additionally the failure and attrition rates for multi-level marketing are well established andmathematically proven. However, the Internet provides several examples of Numis Networkdistributors promising a “six figure” income potential from home. 78 Consider the followingpromise made in one Numis Network distributor website that seeks to recruit new people into thescheme:“What will you do when your income surpasses your lifestyle?Right now, You are 6 months away from earning a 6-figure incomefrom home with Numis Network. Numis network is not like anyordinary company marketing the latest and greatest ninja juice,powder, or supplement that everyone else is marketing. No, NumisNetwork is the first business opportunity to pioneer the sale ofgraded, mint state silver and gold numismatic coins.” 79Or there is this income promise made on yet another Numis pitch website: 80“How Does the Idea of Earning $1,000-$3,000+ / Week Sound?We Would Like To Show You The Best Work at Home BasedBusiness Website To Make Money!” 81Yet the verdict is already in for companies like the Numis Network that make promises ofunlimited income potential 82 through a binary compensation plan. In a study of 10 major multilevelmarketing companies with similar compensation plans to those of the Numis Network, theresults were stunning and settle the issue of the income myth once and for all. The results were:“A statistical analysis of income disclosures made by 10 majormulti-level marketing (MLM) companies and the largest of allMLMs, Amway/Quixtar, reveals that, on average, 99% of allparticipants received less than $10 a week in commissions, beforeall expenses. Additionally, the report shows that on average no net78 Example here.79 Ibid.80 Please read more here and here.81 Ibid.82 The company will be quick to point out that they discourage distributors to make income promises publicly to potential, newrecruits, however, and as evidenced by these easily accessed internet websites, the Numis Network does little to police the actionsand promises made of huge income potential by their current members and distributors.40

Page 41 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307income is earned by MLM distributors from door to door “retail”sales. Total losses of the participants exceed $5 billion each year,if only the entry fees, basic business expenses, marketing “tool”purchases and the pyramid commission portion of their productpurchases (about 40% of their purchase price) are totaled.” 83If Congressman Weiner wants to “clean up” the gold coin selling industry, perhaps he shouldfocus on a company that, with the economy near an all-time low and people susceptible todreamy income opportunities, suggests “six figures in six months” income such as the NumisNetwork.It is untenable that an honest pursuit of villains in the gold coin selling industry could focus onGoldline International, a company that really does pay 250 to 300 employees a real salary andnot a company that promises to pay its sales associates yet rarely never does based on thestatistical averages.ConclusionThe problem with this kind of investigation is answering the motive question. That is, it is rarefor a United States Congressman to come out with such a strong condemnation against a singlecompany in private industry, a business that happens to support one of the Representative’sbiggest political enemies. In the opinion of FDI, politics has hit an all-time low. It is clear fromthe evidence that Goldline International is a respectable company in the gold-coin sellingbusiness, have treated their customers well, and corrected any problems along the way.The report issued by Congressman Weiner lists a total of nine people 84 who endorse Goldline.However, Glenn Beck is mentioned no less than eight times, while the others are mentioned on aper person basis, twice. However, each person mentioned share in common the fact that they areall public people, who, for the most part, host successful and nationally syndicated radio shows(including Dennis Miller and Laura Ingraham) or who are conservative political personalitiessuch as former presidential candidate and actor Fred Thompson. 85Each also shares in common political views, which are for the most part opposed those ofCongressman Weiner. Most listed in Congressman Weiner’s report also make frequentappearances on the Fox News Channel and, as already noted have been or are currently paidspokespersons for Goldline International.83 Please read more here.84 Those people: Fred Thompson, Dennis Miller, Mark Levin, Laura Ingraham, Lars Larson, Michael Smerconish, MonicaCrowley and Mike Huckabee. All, according to Congressman Weiner are paid spokespeople for Goldline International.85 In the upcoming movie titled “Minkow,” the role of Lisa Minkow is played by Elizabeth Rhom, a former colleague of FredThompson during the time she played Assistant District Attorney, Serena Southerlyn (please see http://www.elisabethrohm.com/homeand http://www.imdb.com/title/tt1441922).41

Page 42 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307There is little doubt that the primary target of the report is Glenn Beck, which goes back tomotive. However, when it comes to that issue, the Fraud Discovery Institute, Inc. moves out ofits field of expertise. Theories are nothing more than conjecture. What can be known for certainare two things: first, the Fraud Discovery Institute, Inc. does know how to identify, infiltrate andproactively uncover fraud schemes and secondly, based on that knowledge and experience andevidence we’ve gathered, we can state that Goldline International is no fraud.Respectfully SubmittedBarry MinkowCo-Founder, Fraud Discovery InstituteSan Diego, Californiawww.frauddiscovery.netReviewed byShannon BoelterCA PI License# 2564342

Page 43 of 43info@frauddiscovery.netPhone & Fax:1-888-300-8307Index and AddendaLetter of Commendation, FBILetter of Commendation, NFLArticle, Christianity TodayArticles showing FDI involvement in uncovering various fraudsAddenda 1-943

The FraudbusterThe faithful are being defrauded of billions. But this Ponzi-bustingex-con knows how to stop it.Rob Moll | posted 12/17/2004 01:08PMIn the offices of Community Bible Church, pastor Barry Minkow leans over thephone talking to an executive who is trying to raise money for a Christiancompany. Minkow, after admitting he spent seven years in prison, uses hisstandard line when he has a hunch that a company's investment deal is a fraud."We've got $2 million in our church building fund we're looking to invest." (Hischurch actually does, though Minkow can't sign checks.) "You're a Christiancompany. We're a church. I see a fit.""Now is really the time to buy," the man on the phone says, encouraged byMinkow's $2 million. Minkow frowns. A minute earlier the executive said hewasn't allowed to solicit funds. Hanging up the phone, Minkow shakes his head."I don't like that at all."Minkow smells a fraud. Sixteen years ago, as the famed Wall Street Whiz Kid,Minkow and his company, ZZZZ Best Carpet and Furniture Cleaning Company,swindled the investment community out of $26 million, going from boom to bustby the time he was 20. Minkow's firm was in fact a Ponzi scheme in which moneyfrom investors was used fraudulently to pay off a handful of early investors,creating the false impression of high returns. Such investment pyramidseventually collapse, causing most people to lose money. At age 21, Minkow wassentenced to 25 years in prison and ordered to pay back $26 million (which wasdismissed by his judge in 2002).Between 1998 and 2001, at least 80,000 peoplelost $2 billion in religious scams.In prison, Minkow earned undergrad and graduate degrees from LibertyUniversity. He now pastors a growing church of 1,200 in San Diego. To atone forhis past, Minkow gives seminars to fraud investigators for the FBI. Insurancecompanies invite Minkow to speak to executives to demonstrate theconsequences of white-collar crime. Minkow pulls out his bright orange prisonjumpsuit to illustrate.With his nose for fraud, Minkow helped found the Fraud Discovery Institute,which trains accountants and investigators on fraud-perpetration techniques andways to expose them.Minkow is now an investigator himself, uncovering more than $1 billion in fraudin recent months. In his book Cleaning Up, to be released this month by Thomas

Nelson, Minkow documents his investigations of eight frauds, all of which wereshut down by the government in a 10-month stretch from September 2003 toJuly 2004. The frauds were perpetrated against Christians, and, he believes, it'sonly of fraction of what's out there.Minkow is convinced that frauds are occurringright now in churches nationwide.Christians are easy targets, Minkow says, and they are increasingly a favorite ofperpetrators who are bilking billions from believers and churches. "Can youimagine what this does to churches?" he asks. Minkow has watched asChristians—as investors or scammers—lie and steal tens of thousands of dollarsfrom other believers and, in the process, destroy congregations. Burdened to stopthe plague, Minkow is a busy man—investigating fraud when he's not preparingsermons, counseling, or making hospital calls.Fraud's Perfect StormScamming unwary, trusting believers is an age-old tactic, but Minkow believesthat now more than ever investors are ripe for the picking. Minkow sees theconditions for what he calls a "fraud perfect storm"—the convergence of factorsthat make today's investors especially vulnerable.Lower interest rates and a volatile stock market cannot provide the kind ofreturns many baby boomers need for retirement. But skyrocketing housing pricesin many areas of the country give homeowners hundreds of thousands of dollarsin home equity. "The average person doesn't have six figures to invest," Minkowsays. "However, when the housing market goes up, they can tap equity, and nowthe average person becomes a mark."In many of the cases Minkow uncovered, perpetrators encouraged victims to takea second mortgage on their homes to invest money in the scam. Victims werepromised that in no time they would receive a 100 percent return on theirinvestment and soon be set for retirement. For many soon-to-retire boomers,investments guaranteeing 40 percent to 80 percent returns seem to be thefinancial solution for their golden years. "The environment in California, in NewYork, in Chicago is ripe for that kind of deal," Minkow says.Three kinds of investors are particularly susceptible to frauds, says Joe Borg,director of the Alabama Securities Commission. Investors who lost moneybecause the '90s tech bubble burst are looking for other investments. Retirees arelooking for safe investments, but cds, bonds, and mutual funds offer too little tolive on. And those baby boomers approaching retirement who haven't savedenough are looking for high-yield investments to make up for lost time. Becauseof Wall Street's recent bust, they are hesitant to invest in traditional markets.

Because of the threat of terrorism, say both Borg and Minkow, the FBI appears toput less emphasis on white-collar crime. As a result, perpetrators are workingharder than ever. Add the trusting atmosphere created by religion to the mix, andthe combination is particularly dangerous.An Epidemic within the ChurchReligious-affinity fraud is among the most common scams, according to both theSecurities and Exchange Commission and the North American SecuritiesAdministrators Association (NASAA). Minkow agrees, saying that the regulatorshe works with see fraud in Christian circles as a particular problem. Borg says,"I've got cases going out my ears."Affinity frauds target any close-knit group—united by race, religion, or a commoninterest. By posing as part of the group, perpetrators bet on the trust membershave for each other. They learn the language and concerns of the group, build asense of commonality, and then offer the "investment opportunity." By this point,many Christians instinctively trust this "brother in the Lord" and don't think itnecessary to investigate.Between 1984 and 1989, 15,000 people were swindled out of $450 million due toreligious-affinity fraud, according to NASAA, which represents state securitiesagencies. After a spate of massive fraud was uncovered in 2001, NASAA lookedagain. They discovered that between 1998 and 2001, at least 80,000 people lost$2 billion in religious scams. Regulators told Christianity Today such fraud isstill on the rise. Minkow is convinced that frauds are occurring right now inchurches nationwide. "Too many cases have occurred," Minkow says. "It's time tosay something."The nature of affinity fraud makes investigation difficult. In some Christiancircles, mistrust of the government is greater than mistrust of fraud perpetrators,even when victims learn they've been ripped off. Borg has helped shut downmany religious-affinity frauds and knows first-hand the difficulty of investigatingscams within churches. He helped shut down Greater Ministries International,which stole more than $500 million from churches and Christian investors."Con artists try to make faith in God synonymous with faith in their investmentscam," said one regulator. In one secretly taped conversation at GreaterMinistries, which promised to double investors' money in 17 months, Borg said,one victim asked for financial statements showing those enormous returns.In response, a church leader scolded him, "Obviously you just don't have faith. Iquestion whether you ought to be a member of our church with such a lack offaith." After that, no one questioned the investment.Some schemes don't target Christians but spread quickly once introduced in achurch. Others go unreported, or regulators can't shut them down becausevictims refuse to testify. In one case, Borg said church members "were told that if

they spoke to us, they would be excommunicated and their souls damned to hell.We had a lot of folks who said, 'Look, I may have lost everything I own, but I'mnot going to take a chance.' " Borg said he has even had to let one scam continuebecause he could find no one willing to testify.Investors are often following the advice of trusted leaders. Victims aren't simplymishandling their money or investing in scams reasonable people would steeraway from. Scammers are smart, Borg says, and they play on victims' greed whileeasing their conscience by saying that the investment comes from God or that themoney is being invested in ministry."This is a big spiritual problem. It's not how many dumb people are out there,"Minkow says. "Greed blinds." Several church members offered Daystar Assemblyof God in Prattville, Alabama, the opportunity to participate in their "investmentprograms." The church was promised huge returns that would help it grow. Thechurch ended up investing and losing about $4 million. Borg says, "They gottaken so bad that the church got foreclosed on because they couldn't pay theirbills."These schemes tempt Christians from all walks of life. Warren L. Ware raisedmore than $16.5 million from Christians who believed his promise that averageinvestors could make money like the mega-rich.Financial adviser James Lewis convinced top administrators at the FoursquareGospel church to invest $15 million in Financial Advisory Consultants—thelongest-running and largest Ponzi scheme ever, swindling a total of $885 millionfrom investors.MX Factors stole $1.4 million from three prominent pastors and a churchemployee as part of a $55.6 million Ponzi scheme.Pastors, church elders, and plenty of well-heeled parishioners all believed thepromises of con artists. But when Minkow first learned about those deals, hecould smell the fraud, and he went to work uncovering it. "He's a cocaine-sniffingdog," says one victim of a fraud Minkow uncovered.Minkow is unusually well-qualified to sniff out affinity fraud. Having perpetrateda $300 million Ponzi scheme himself, Minkow either knows the tricks of thetrade, or he knows whom to ask—fellow former inmates are on Minkow'sRolodex. Minkow sees his criminal past as preparation for his new role warningthe church and helping stop the hemorrhage.As a teen, Minkow conned Wall Street's best accounting and law firms. As apastor, Minkow says his new passion is to protect the church. "I can see where hisGod-given gifts got him in trouble prior to becoming a Christian because he's sodynamic and so intense," says Minkow's life coach, Gene French.

French founded the church Minkow now pastors in an area that was known as a"church graveyard." Minkow's drive, personality, and heart for the down and outhelped him build the church from 130 to 1,200 members. "He takes the believerinto the Word," French says. Minkow applies the same intensity and depth to hisfraud work."God's been preparing me," Minkow told Christianity Today. "I was in prisonand learned why perpetrators did what they did. I believe God has raised [thechurch] up, not just me, for this unique time in our church's history."Horsing AroundTriple Crown Enterprises, though on a smaller scale ($15 million) than some ofthe frauds Minkow has uncovered, illustrates the destructive ripple effects onChristians and their congregations.TC Enterprises offered investors an opportunity to participate in the sport ofkings—horseracing—without needing to know anything about horses or racing.According to the report prepared by the Fraud Discovery Institute for state andfederal regulators, TC Enterprises claimed that it was able to generate 30 percentto 80 percent annual returns by focusing its investments on horse-breedinginstead of racing. One salesman told Minkow that he had never had an investorearn less than 50 percent annually. TC Enterprises offered customized packagesfor any level of investor and claimed that in four years the company had grownrapidly with offices from Tennessee to Thailand.Salesmen, two of whom belonged to a church near San Diego, would inviteprospective investors for a sales pitch on a rented yacht. One claimed to own theboat and said one of the company's executives, Tim Disney, was related to WaltDisney. They claimed that local celebrities and, later, church leaders wereinvested. TC Enterprises accepted IRA money, and many potential investors weretold the company was legit because it was permitted to accept retirement funds.But the come-on was littered with lies. Accepting IRA money does not amount toan sec endorsement. According to regulators, many con artists use that linebecause investors don't typically withdraw from IRAs for years. A phone call fromMinkow to Roy Disney's office confirmed that Tim and Walt Disney were notrelated.TC Enterprises also claimed they could guarantee the principal on theinvestment, because each horse was insured. If the horse died prematurely theinsurer would pay investors the price of the horse. But the horses were worth farless than what investors paid for them—sometimes $100,000 less—and theinsurance policy would only pay the estimated worth of the horse at the time ofits death.Whenever an investor places money in someone else's hands to invest, the

investor is buying a security. Mutual funds, cds, and bonds are securities, andanyone selling a security must be registered in every state that the security issold. A quick call to a state regulator revealed that TC Enterprises was notregistered. And the address TC Enterprises listed as their headquarters was reallya Mailboxes Etc. address.Most of these claims could have been investigated with a phone call. Minkowcomplains that many victims do more to check out bananas when buyinggroceries than securities when investing thousands of dollars.After Minkow filed his report with the California Department of Corporations,federal and state regulators shut down TC Enterprises, saying they hadmisrepresented the investment and sold it illegally. TC Enterprises immediatelychallenged the ruling in court.Word spread quickly at the church. Some members, even leaders, claimed theyhad received all their money as promised. Others complained they hadn'treceived their return and that the deal was a fraud. According to one victim, afault line grew within the church as members took sides.At the time, Minkow received a call from Matt (not his real name), whose brotherlost money in TC Enterprises. Minkow agreed to help Matt's brother recover hismoney. Matt also said he himself had lost $25,000 in the fraud but was hesitantto do anything about it.Matt said he was friends with the man who sold him the investment. They wentto church together. "We got into it and didn't even check up on it," he said. But hetold Minkow he didn't want to cooperate with investigators because that couldsend a fellow Christian to jail.He also revealed that the fraud perpetrators were telling investors that Minkowwas overzealous and that the deal was legitimate. Minkow was accused of tryingto ruin the church to increase membership at his own church.Another victim said, "They got a couple of well-liked, high-integrity individuals toget in the program early and paid them." He says the investment as a whole didnot specifically target Christians, but a couple of salesmen did, and once itentered the church, it spread rapidly.Church leaders did not know how to respond to the fraud or the salesmen, thisvictim says. He complains that it was too easy for salesmen to make their salespitches after Sunday school.He has tried to expose the scam for what it is. "I can be quiet and go back andpretend this [salesman is] a nuisance. [But] he's a cancer who's going to infectother people, and if I'm a doctor, I will not stand to let cancer grow, not when Ihave the tools to contain it."

With Minkow's help, this victim was able to recover much of his $67,000investment. But according to the Associated Press, after TC Enterprises droppedits challenge in California, it reopened in other states as ThoroughbredChampionship Enterprises.Minkow knows the consequences of fraud for both the perpetrator and the victim.He has seen it damage churches, individuals, and denominations.Minkow still pays restitution to Union Bank for his own fraud, including morethan $100,000 in 2004 through speaker fees and refinancing his house. He stillowes Union Bank at least $7 million.Minkow understands the pain he caused. He understands the guilt carried by theperpetrator, the lies told to others and to oneself. He knows the desire for wealth,fame, or power that leads to crime and masks a need for God.So while frauds continue to be perpetrated in churches across the country,Minkow is fighting to stop them.Rob Moll is online assistant editor for CT.!

Saturday, February 14, 2009Al Lewis: Of All the Indignities, Don't GetMinkowedBy Al Lewis -- A Dow Jones Newswires ColumnFOXBusinessOne of the most embarrassing ways for a key executive to be removed fromoffice is to be Minkowed.Getting Minkowed begins when you learn that a guy named Barry Minkow hasjust shorted your stock, betting that information he has just uncovered can makeit go down.Then you learn that Minkow has discovered those lies that you put on yourresume.Sure, you did it many years ago, just to get hired. But you've had to maintainthese mischaracterizations ever since, just to remain employed.Now, your board has to face investors who are asking "Gee, if there's lie on theresume, are there lies on the books, too?"Your immediate removal is the only good answer to this question.You've just been Minkowed.And here's the most embarrassing part of the whole deal: Minkow is a convictedfelon who told more lies as a teenager than you could ever dream up in yourwhole miserable adult life.Patrick Avery was president and chief operating officer of Intrepid Potash Inc.(IPI: 24.73, -0.26, -1.04%) in Denver until he was Minkowed on Wednesday.His name is now enshrined on a list of nearly a dozen executives who've beenMinkowed, too.Vahid Manian, former senior vice president of global manufacturing operationsfor Irvine, Calif.-based Broadcom Corp. (BRCM: 34.52, 0.18, 0.52%), gotMinkowed in December.

Former MGM Mirage (MGM: 12.46, -0.34, -2.66%) CEO J. Terrence Lanni, apowerful figure in the gambling industry, was Minkowed in November.Gregory Probert, who was president and chief operating officer of Herbalife Ltd.(HLF: 45.19, -0.32, -0.7%), got Minkowed in April.The biggest problem with hyping your resume comes when your company filesdocuments with the Securities and Exchange Commission that include yourbloated bio.When Intrepid Potash, maker of fertilizers, became a public company in April, itclaimed that Avery received bachelor of arts degrees in biology and chemistryfrom the University of Colorado.Turns out, Avery hung out at the school from 1970 through 1975 but neverearned these degrees.Intrepid Potash also claimed he earned a master's in engineering from "Loyola."Sure, he hung out at Loyola Marymount University in Los Angeles from 1982 to1985, but there's no record of a degree.Neither the company nor Avery are doing interviews."The company accepted Mr. Avery's resignation because his misrepresentationof his academic credentials was a violation under the company's code ofbusiness conduct," said Chairman and CEO Robert P. Jornayvaz III in astatement on Wednesday."Pat Avery came to Intrepid with more than twenty years of service with J.R.Simplot and ARCO and his experience was very helpful to our operations sincejoining our company in 2007," Jornayvaz said.(Note to Jornayvaz: Thanks for mentioning the other companies that may havefallen for Avery's fake degrees, too. But remember, Avery got Minkowed on yourwatch.)Intrepid stock closed at $23.38 on Thursday, down about 28% from it's IPO priceof $32. The stock has taken a bounce for the better since Intrepid announcedAvery's resignation.Minkow would not tell me whether he bagged any profits from shorting Intrepid'sstock. He said he still holds a position because he is not done.

"We're still in because we think there are more irregularities," he said, promisingto enumerate more red flags any day now.Minkow runs a for-profit enterprise called the Fraud Discovery Institute in SanDiego. Some may quibble with the ethics of shorting a stock and then ratting outthe company's executives for a profit. But what else is Minkow supposed to do fora living? He's a felon.And a famous one at that.When Minkow was a teenager, he'd started a carpet cleaning outfit called ZZZZBest Co. and took it public with a dizzying array of lies. He even booked mobmoney as revenue. And when this amazing Ponzi scheme finally blew, he wentto prison for nearly eight years, at age 23.After prison, he earned several degrees from Jerry Falwell's Liberty University,including a master's degree in divinity. And today, in addition to investigatingfraudulent statements from companies, he is pastor of Community Bible Churchin San Diego.So I wondered: Wouldn't it be fun to Minkow Minkow? I called Liberty's registrar'soffice. And guess what? He really did earn all these degrees. I guess the art ofMinkowing isn't all that easy.Minkow says he has built a database from which he can quickly check thedegrees that corporate executives claim."We look for skin of the truth stuffed with a lie," he said.So executives with fake degrees, beware.You may soon be Minkowed.!

Associated Press 14 July 2007 00:00California man charged in alleged$45m fraudThe SEC charged a Southern California man with fraud forallegedly running a $45 million Ponzi schemeLOS ANGELES (AP) The Securities and Exchange Commission charged aSouthern California man with fraud for allegedly running a $45 million Ponzischeme through investment firms that claimed to make loans to Asiancompanies.A complaint was filed Thursday against Terchi ''Nelson'' Liao, 49, the SEC said.A judge also temporarily halted the activities of two firms he controls, AOBCommerce and AOB Asia Fund, and froze their assets, the agency said.According to regulators, Liao took in at least $45 million since 2004 fromhundreds of investors nationwide, promising them monthly returns as high as 5.5percent.While Liao and his firms claimed they made loans to companies in China andother Asian countries, most of the money they received went instead to payinginterest due to other investors, officials said.In a Ponzi scheme, early investors are generously rewarded when they recruitinvestors. It is illegal to use money from those recruits, rather than realinvestments, to pay promised returns.A lawyer representing Liao, Russ Frandsen, said AOB Commerce wascooperating with authorities.''AOB Commerce had consulted several attorneys during the course of itsbusiness in an effort to comply with the law and AOB commerce believed it wasin full compliance with the law,'' he added.A hearing in the case was set for Aug. 6.Allegations were brought to the attention of authorities by Barry Minkow, a formerfederal convict turned anti-fraud investigator. Minkow is co-founder of the forprofitFraud Discovery Institute in San Diego.!

Calif. Firm Accused of Pyramid Scheme;Marines, Churches InvestedTuesday , May 11, 2004By Mike StrakaNEW YORK, N.Y. —A federal judge has frozen the assets of a California-based real estate companyafter authorities accused it of running a securities scam that counts at least 30active-duty Marines and several churches as investors.U.S. District Judge Charles R. Breyer in San Francisco took the actionagainst Chicago D&P (search) after the Securities and ExchangeCommission (search) filed a lawsuit May 3 against the company and its owners,Pat Morgen (search), and her son Shalom Gibson."They are running a classic Ponzi [pyramid] scheme," Marc Fagel, assistantdistrict administrator at the SEC's San Francisco office, told Fox News.According to the SEC lawsuit, Chicago D&P "lured investors into a fraudulentPonzi scheme by guaranteeing profits of 36 percent per year, and at timespromising to double investors' money within a year."Pat Morgen, president of Chicago D&P, disagrees with the SEC and promised toanswer all of the accusations to the court's satisfaction. The company is based inEmoryville, Calif."If we were so bad, wouldn't there be complaints against us?" she asked in aninterview with Fox News.The SEC filing also alleges Chicago D&P raised millions of dollars from hundredsof investors since 2001, including more than $6 million in the last six months.Fox News has learned that some of those investors include church organizationsand up to 30 active U.S. Marines, who were apparently referred to the fund by asuperior officer. According to Morgen, Chicago D&P offered "bonuses," orreferral fees of up to 10 percent of a new investment to members of the fund."The concept of a Ponzi scheme is lost to the public," Fagel explained. "There's acommon misperception that if I'm getting checks every month, then it's OK. Whatpeople don't understand is that as long as the scam is getting new money, theycan pay out to investors. But once that last round of investors is done and nonew money is coming in, that money is gone," he said."We try to get the word out there how these things really work."

The SEC, as well as the FBI, was alerted to the alleged scam by Barry Minkow, areformed white-collar criminal who co-founded the Fraud Discovery Institute,(search) a for-profit organization that provides fraud detection services toindividuals and corporations. Minkow is also a frequent contributor to "Your WorldWith Neil Cavuto" on FOX News Channel as an expert in fraud detection."The SEC is always happy to receive leads from third parties on potential criminalactivity," Fagel said.According to the Better Business Bureau (search), zero complaints have beenfiled against the company, which has been a BBB member in good standing forthree years running."There has been a lot of negative information that has come in on Chicago D&P,but so far there is not one consumer complaint," said Pat Wallace, president ofthe Greater Bay Area of the BBB in San Francisco."What's troubling is that they are dealing with real estate and they do not have areal estate broker's license or a securities broker's license in the state ofCalifornia. Also, all of their mailing addresses that we have checked on are dropboxes," Wallace said.Indeed, a few of the addresses Fox News checked on were traced to Mail BoxesEtc., but Morgen said that's just part of doing business."There are several legitimate companies that use mail drops for business," shesaid. As for the license issue, Morgen said she uses a California state-licensedbroker to handle their real estate properties. Fox News did verify that the brokerMorgen identified is registered with the California Department of Real Estate.But Fox News also discovered that Morgen was sued under the name of PatriciaGibson in 2000 and the plaintiff, Bridge LN Funding Corporation, was awarded ajudgment of more than $400,000 in a property dispute in Chicago. There are alsorecords that she filed for Chapter 13 bankruptcy protection under the namePatricia Daniel in 1996, also in Chicago.Morgen said she has several names because she was married more than once,and explained she ran into some financial difficulty after a divorce. However, shesaid doesn't see how her personal history has anything to do with the status ofher current company."I don’t, because some of the information is incorrect and has to do with anotherperson who was using my identity, and I don’t see how it pertains to theselenders because they receive their money," she said."If you try to discredit the person — let me ask you — would that person havepaid out properly for the last four years? If lenders ask for their money back we

give them their money back," she said. "In most cases, the same day." (FoxNews was unable to independently verify Morgen's claims of identity theft).But Fagel said that after Chicago D&P was served with the subpoena, the SECwas notified that the company tried to withdraw $300,000 from a financialinstitution.According to Morgen, Chicago D&P is doing nothing wrong and believes that inthe end, the company will resolve the matter.Minkow said the confusion is with securities laws. "Whether it's property or bondsor stocks, it's all a security, and they are not licensed to deal in securitiesanywhere," he said.But Morgen said she doesn't run an investment fund. "We have loans withindividuals who basically we pay back at a very high rate," she said. "We havebeen ethical and honest to our lenders. We just took them on a trip to Kaui andwe're about to take the company to a whole new level," she said.Morgen also said the Fraud Discovery Institute was most likely furnished withinformation by a disgruntled employee, since there was personal informationabout Chicago D&P's lenders in its report, which was provided to Fox News.But Minkow quickly rebuffed that statement."I received a prospectus that is signed by Ms. Morgen and it has investors' homeand cell phone numbers in it, so that I could call for references," he said. Minkowalso provided the prospectus to Fox News, as well as the SEC and the FBI.Securities regulators will seek a permanent injunction against Chicago D&P in afederal court hearing scheduled for 2 p.m. PDT on Monday.FOX News' Kirsten Noyes contributed to this report.!

Judge Freezes Assets of Alleged Ponzi SchemeThe suspected operator raised $8 million by courting L.A.church members, the SEC says.November 05, 2004|E. Scott Reckard, Times Staff WriterBefore hearing the sales pitch, the 500 potential investors invited to the Ritz-Carlton Hotel in Marina del Rey last month feasted on lobster and prime rib andenjoyed drinks from an open bar.They had been told that sports greats Mike Tyson and Earvin "Magic" Johnsonwould be attending the free dinner and presentation. Tyson was indeed there, aglass of Courvoisier in hand, federal authorities said Thursday, as an investmentadvisor they described as a scam artist gave his pitch.Christiano K. Hashimoto, the authorities said, described an opportunity thatwould earn people in the audience 20% returns the first month -- and 10% amonth after that.The authorities said Hashimoto targeted members of prominent AfricanAmerican churches in Los Angeles. They would make the money by issuing shorttermloans to government contractors, Hashimoto told the would-be investors,according to a lawsuit filed by the Securities and Exchange Commission. Inreality, Hashimoto was running an old-fashioned Ponzi scheme, the lawsuitalleges -- paying some people "profits" with money brought in by new investors.On Wednesday, U.S. District Judge Robert J. Timlin in Riverside froze the assetsof Hashimoto and his companies and appointed Robb Evans & Associates, afinancial-trustee firm in Sun Valley, as a temporary receiver for the corporateassets.There was no evidence that former heavyweight boxing champ Tyson was awareof any fraud, said Lisa Gok, the SEC's assistant regional director for enforcementin Los AngelesTyson "probably just got an appearance fee," she said, noting that former Lakerbasketball star Johnson wasn't there.Neither Hashimoto nor the attorney for his companies, David Michael, could bereached for comment.Employees of the court-appointed receiver sent workers packing Thursday fromthe offices of Hashimoto's company, Financial Solutions, located in an office parknear Ontario International Airport. Someone apparently tipped off theircounterparts at a second office on Wilshire Boulevard in the Miracle Mile district,

where the lights and computers were on but not a soul was seen, Gok said."The Cokes were still cold on the desks and the coats were on the rack," she said.Hashimoto, 44, of Riverside, president of Financial Solutions and a relatedcompany, Ohana International Inc., raised at least $8 million, Gok said. Salespitchdocuments said his goal was to raise $150 million, she added.!"#$%&'(')#&*$)'+,$)"'*#$-)$)"#$.-&/0-$,#+$1#2$#3#0)$)"-)$4'"0*'05*$6/0-07/-+$-,3/*'&8$9-&&#0$:&-0)8$;-*$-0$/03#*)'&$/0$)"#$,#-+8$:'#/)"#&$:&-0)$0'&$4'"0*'08$0';$-$%&'(/0#0)$#0)&#%&#0#?&8$7'?+,$@#$&#-7"#,$6'&$7'((#0)=$$A)#3#$A?B#&(-08$-$*%'

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SEPTEMBER 11, 2007Former Head of MX Factors IsCharged With FraudBy KEITH J. WINSTEINFederal authorities arrested Richard M. Harkless, former head of MX FactorsLLC, and charged him with operating a Ponzi scheme that bilked investors out ofmore than $39 million.Authorities said that from 2000 to 2003, MX Factors, of Riverside, Calif.,pretended to make short-term secured loans to government contractors andothers. According to an indictment handed up by a federal grand jury in LosAngles, the company sought out investors by promising astronomical returns --in some cases, 12% in 60 days, equivalent to a 99% annual return.Initially, authorities said, the company made good on its promises, and investorssent in more than $55 million. In reality, MX made few loans, and instead paidearly investors out of the principal contributed by later ones, prosecutors said.They said more than $5 million was used to fish for crabs in Mexico, and thatmuch of the rest was taken by MX and associates -- Mr. Harkless, Daniel Berardi,Thomas Hawkesworth, and Randall W. Harding.MX collapsed in 2003, after the California Department of Corporations ordered itshut down as an illegal Ponzi scheme. The Securities and Exchange Commissionsued Harkless and MX in 2004, putting the business into a receivership.Investors have received about eight cents on the dollar so far.Messrs. Berardi, Hawkesworth, and Harding pleaded guilty to fraud and othercharges and are currently in prison. Mr. Harkless fled to Mexico in 2004 andbecame a fugitive, authorities say. In his absence, a court ordered him to pay backmore than $42 million.Monday, Mr. Harkless was arrested by agents of the Internal Revenue Service inPhoenix, while visiting his wife and mother-in-law, authorities say. In theindictment, unsealed Monday in U.S. District Court in Los Angeles, he wascharged with 16 counts of fraud and money laundering. He was to appearMonday in U.S. District Court in Phoenix, a spokesman for the Los Angeles U.S.attorney said.Authorities credited a San Diego private investigator, Barry Minkow, withidentifying MX Factors as a Ponzi scheme and helping to pursue Mr. Harkless.Mr. Minkow originally brought MX to the government's attention in 2003, saidTimothy France, a U.S. postal inspector. Mr. Minkow arranged for surveillance of

Mr. Harkless in Mexico, Mr. France said, "since we as law enforcement cannotreally go down into Mexico." A tip from Mr. Minkow led indirectly to Mr.Harkless's discovery in Arizona, Mr. France said.Mr. Minkow himself served seven years in jail in the 1990s for stock fraud afterbilking creditors and investors in a fraudulent carpet-cleaning company, ZZZZBest, out of more than $20 million. He later founded a company that hunts forother frauds and has won praise from the Federal Bureau of Investigation.Write to Keith J. Winstein at keith.winstein@wsj.comPrinted in The Wall Street Journal, page C2!

Investors roll dice on Vegas loan companyBY DON THOMPSONAssociated Press WriterSACRAMENTO — Federal and California authorities are probing a Las Vegas company thatpromises 24 percent annual returns by investing in payday loan and check-cashing companies that inturn charge customers hefty interest.Par Three Financial Inc. and its operators apparently aren’t licensed to lend money or sell securities orother investments — but say they don’t have to be under federal law.The company uses current investors to recruit new investors with a $200 referral fee and a monthlypercentage of whatever new investment money they bring in. It also has advertised for investors innews- papers including the San Francisco Chronicle and Seattle Times, and at online classified adsites.Company officials told private fraud investigator Barry Minkow they have raised millions of dollarsfrom more than 100 investors in states including California, Florida, Kansas, Nevada, Oklahoma,Texas, Utah and Washington, with a minimum investment of $10,000.Minkow is a convicted felon himself who has since co-founded the for-profit Fraud DiscoveryInstitute in San Diego. He and other experts said Par Three’s promised return rates seem unreasonablyhigh, a frequent sign of an unsustainable Ponzi scheme in which money from new investors is used topay previous investors.In a year-end newsletter, company Vice President J.W. Long tells investors that revenue gains neared35 percent in 2004 and are projected to top 40 percent this year.He included a letter from “the chair- man of our trade association — Financial Service Centers ofAmerica or FiSCA. You will probably see articles in the newspapers referencing this organization andour industry in general. I hope that this message from (FiSCA chairman) Gary Dachis will shed morelight on our ever-expanding industry.”Yet FiSCA, the largest national organization representing the check cashing industry, has no listing ofPar Three as a member, nor Long, nor any of five others known to be affiliated with the firm.“I don’t know them from a hole in the wall. Obviously, what he’s trying to do is drum up investors,”said Bob DeChillo, who handles FiSCA’s membership roll as director of business development. “Hecould have gotten that (letter) out of magazines. ... He could have taken a piece off our Web site.”Community Financial Services Association of America spokesman Steven Schlein also said he hadnever heard of Par Three. His organization rep- resents payday advance companies.The firm’s Las Vegas headquarters is actually that of KeyState Corporate Management, which listsPar Three as one of 35 businesses with headquarters in the same office suite in a nondescript buildinga short distance from the Las Vegas Strip.Financial experts, including Bert Goldberg, founder and executive director of The InternationalFactoring Association, and president of Distinctive Solutions, which provides computer soft- ware tofactors, said he had never heard of any company lending money to check- cashing and payday loancompanies, let alone Par Three. Factors generally lend money at high interest to businesses, securedby the firms’ accounts receivable.Par Three does not disclose on its Web site or to its investors which payday loan or check-cashing

companies are its customers.Ron Hammers, the company’s vice president and general counsel, declined to provide financialdetails, references from customers, nor say how many clients Par Three has, though he said it aidsmore than 75 cash-advance stores, most of them long-term customers.Par Three’s password-protected Web site says the company makes loans, but as “notes” that arecollected within nine months. That, the Web site asserts, means the company isn’t selling regulatedsecurities.Florida regulators have warned that such nine-month notes have been used by operators of Ponzischemes to avoid full disclosures that are required of securities dealers. Moreover, they said most suchtransactions still require licensing.The federal Securities and Exchange Commission, Federal Bureau of Investigation and CaliforniaDepartment of Corporations wouldn’t comment, but Corporations spokeswoman Susie Wong said “ifthere are any California investors, they should contact our department.”Par Three acknowledges on its Web site that lending money at the rate it charges would be illegal, butsays it is engaging in “accounts receivable pur- chase agreements,” not loans.“What we do is above board — it’s legal,” Hammers said in an interview with The Associated PressFriday.Hammers said the company was formed in 1997 and incorporated in 1998, but is lit- tle knownbecause “we don’t advertise (for clients) — a lot of it is basically word of mouth.” He said thecompany has few investors, using mostly its own money.“We loan our money out at a high rate to check cashing and payday stores across the country,”Hammers said. “They pay us a nice rate of return and we’re able to pass that along to our factors.”Payday or cash-advance companies have often been accused of predatory lending, offering smalladvances on pay- checks with interest rates often as high as 400 percent.“I don’t think you’ll find anyone who’s unhappy with our services,” Hammers said. “We do exactlywhat we say we’ll do, we pay exactly what we say we’ll pay.”Investors reported they have been receiving their monthly interest checks and referral fees withoutproblems. But one elderly West Coast man with more than $200,000 invested approached Minkow inJanuary after seeing him interviewed on television. The investor since has had difficulty getting hismoney back from Par Three.“The business model is untenable,” Minkow said. “That nine-month note technique was used inFlorida to the point that the entire Florida banking commission is warning against it.” Moreover,Minkow was concerned Par Three placed classified advertisements in newspapers to find investors:“Why is that significant? Because I did that at ZZZZ Best when I was desperate to raise money.”Minkow spent seven years in federal prison for defrauding investors through his ZZZZ Best carpetcleaning company by raising new money to pay off the accumulating debt of the business he started inhigh school.Federal investigators credit him with helping break up several alleged scams in the last year, includingwhat they call one of one of the largest Ponzi schemes in U.S. history: Orange County-based FinancialAdvisory Consultants allegedly swindled investors out of more than $814 million.!

Ga. company faces probe over adspromising big returnsThursday, September 21, 2006By Zachary M. Seward and John Hechinger, The Wall Street JournalCalifornia securities regulators are investigating an Atlanta company that hasraised millions of dollars through a national advertising campaign promising fatreturns investing in foreclosed properties, according to a person familiar with thematter.The state is examining Pinnacle Development Partners LLC, whose ads tellinvestors they will receive a 25 percent return on their investments in 60 days.Capitalizing on investors' thirst to strike it rich in a waning real-estate market,Pinnacle says it refurbishes foreclosed properties and then sells them at a heftyprofit. However, real-estate records show the only buyers of the properties arelocated at Pinnacle's address. A person familiar with Pinnacle said those buyersare related to the company.California officials are trying to determine whether Pinnacle is generating profitsfrom buying and selling real estate, or whether it is paying returns using otherinvestors' money, which would make it a Ponzi scheme, according to one personfamiliar with California's investigation. In a Ponzi scheme, earlier investors arepaid with money from newer investors, until the supply of new investors runs out.Robert Hendree, a Pinnacle official, denied impropriety. "We're doing perfectlyfine, legitimate business here," he said. Through an assistant, Pinnacle's founderand an owner, Gene A. O'Neal, declined an interview.California regulators became involved because some investors are from thatstate. The state's securities regulator, the California Department of Corporations,believes Pinnacle has attracted tens of millions of dollars. Pinnacle's ads andmarketing materials say the company has done more than $56 million inbusiness, and aims for $80 million this year.In interviews, customers said they consistently received promised payments fromPinnacle and, when they asked, were also able to withdraw their initialinvestments. Still, some investors say they don't understand how Pinnacle is ableto pay such high returns. "We don't see the back end. Is he selling theproperties?" asked Gerry Reif, an investor in Denver. Mr. Reif says heparticipated because the offer was too good to pass up.The company has discouraged investors from checking out its businesspractices. In a recent letter, a lawyer for Pinnacle, Christopher M. Kunkel, toldinvestors that if they check with anyone other than an approved list of partners,they risk "dismissal from the investment group and a return of only your initialcapital contribution." Mr. Kunkel declined to discuss the letter and said that, on

Tuesday, he stopped representing Pinnacle.Since incorporating in 2003, Pinnacle bought 15 properties for $9 million inGeorgia, according to AFX Corp., which collects and analyzes real-estaterecords. In that period, AFX found no sales to third parties except to entitieslisting Pinnacle's address.Barry Minkow, a private investigator who runs Fraud Discovery Institute, a forprofitcorporation in San Diego, says the apparent lack of sales raises "red flags"about financial wrongdoing. Mr. Minkow started investigating Pinnacle after aninvestor contacted his office. He says that the Federal Bureau of Investigation, athis urging, is looking into the matter.The FBI declined comment. Mr. Minkow also sent a report to the Securities andExchange Commission, which declined comment.Mr. Minkow served time in the 1980s for financial fraud, and subsequentlyfounded an investigative service focused on financial services. The FBIcommended him in October 2005 for helping to "disrupt and dismantle" financialschemes worth millions of dollars.Pinnacle's growing business comes as the real-estate boom appears to befaltering. Many investors have been trying to snap up bargains by buyingforeclosed real estate from buyers who took out risky loans but now can't makepayments, or from banks left holding the properties.Pinnacle's ads, promising 25 percent returns, have run in major publications,including this newspaper and Barron's, both published by Dow Jones & Co. InApril, Newsweek began running a full-page ad for Pinnacle. "Stocks still low?"begins the ad in Newsweek's current issue. "Invest now in Atlanta's booming realestate market." A Pinnacle newsletter distributed to current and potentialinvestors says the company is "anticipating the addition of many new investors"as a result of the Newsweek ad.A spokeswoman for Washington Post Co.'s Newsweek said the magazine hadreceived an official inquiry about Pinnacle earlier this week, "and made thedecision not to run any more of the ads until the investigation is complete."Other than confirming that Pinnacle was an advertiser, Robert Christie, a DowJones spokesman, declined to comment.In Pinnacle offering materials, the company says it performs "minor work" onforeclosed properties purchased from banks and turns them around for a profit."After closing," the documents say, "the investor will receive their 25 percentreturn." To attract money, Pinnacle offers a "$500 referral bonus" to currentinvestors who successfully refer new ones to the company.

In documents sent to earlier investors, Pinnacle promised payment in 30 days.That "closing period" has grown to 45 days and then 60. Keith Ellis, a postalworker in Washington who invested $5,000, and other investors said thecompany told them that future closing periods will be as long as six months.Charife Jefferson, a Pinnacle spokeswoman, said the closing periods have grownlonger because of the firm's rapid growth. "We get an influx of phone callseveryday from potential partners who want to partner with us," she said. "It getsreally, really busy."Generally speaking, companies that broadly solicit money from investors mustregister with the Securities and Exchange Commission and state regulators tooffer securities. Pinnacle isn't registered to offer securities nationally or inGeorgia, according to an SEC database and a Georgia regulatory official.A person familiar with Pinnacle said the company has structured the real-estatedeals as general partnerships that buy the properties. Securities lawyers say thatgeneral partnerships like these, in certain cases, wouldn't have to register withregulatory officials. Ms. Jefferson said the company has 1,900 partners. In itsmaterials, the company says the minimum investment is $5,000.In documents provided to potential investors, Pinnacle offered one property -- 8Clifton St., an apartment complex in eastern Atlanta -- as an example of asuccessful investment. According to public records, Pinnacle's owner, Mr.O'Neal, purchased the property in December 2005 for $300,000. Three monthslater, he transferred ownership of the property to Pinnacle with no money listedas changing hands. That same day, Pinnacle sold the property for $389,000,turning an apparent profit of 30 percent.The buyer, 8 Clifton Street Development Partners, lists the same address asPinnacle in records on file in DeKalb County, Ga. A personal familiar withPinnacle said the new buyer was a Pinnacle partnership, as was a subsequentbuyer, Edgewood Development Partners, which also lists the company'saddress.In another instance, Pinnacle bought a Atlanta property at Adeline Avenue, N.W.,in March for $950,000, according to real-estate records. Two and half weekslater, Pinnacle transferred the property to a number of entities that sharePinnacle's address. In a Fulton County, Ga., tax document, the company lists theproperty's market value at $4.75 million.First published on September 21, 2006 at 12:00 amRead more: http://www.post-gazette.com/pg/06264/723826-28.stm#ixzz0pUF9FgLs!

Charity's investment plan probedFBI, state investigating church group's dealingsRobert AnglenThe Arizona RepublicSept. 10, 2006 12:00 AMChurchgoers in as many as 10 states are investing in a company that some were told is worth$170 billion with assets around the world. Yet its business address is a Scottsdale post office boxand state and federal officials are investigating its owners.No one has been charged in the case, and no investors have sued.At least one pastor, church elders and congregation members in Avondale and Chandler areamong those who have put money into Nakami Chi Group Ministries International. The non-profitcompany promises to fund Christian charities while paying investors 24 percent annual returns.Nakami's owners have told potential investors they control gold mines, Australian developments,telecommunication firms, banks and a Phoenix technology company.Financial records raise questions about the size of Nakami's assets. One of its owners, EdPurvis, is a licensed practical nurse who lives in a Chandler home valued at $270,000.Records also show Purvis and Nakami principal Gregg Wolfe do not have brokers', lenders' orbanking licenses and have not filed paperwork in Arizona related to mines in the state.The FBI confirmed last week that church members and others in 10 states have put severalmillion dollars into Nakami."They encouraged us to take out equity loans on our homes," says Gary Bruyns, an airline pilotwho attended an investment meeting with Purvis at Vineyard Church in Avondale. "(Purvis)personally guarantees 24 percent per year as a freshman investor."Investigators with the Arizona Corporation Commission are looking into possible state securitiesviolations. The FBI is examining whether Nakami functions as a pyramid scheme, in which fundsfrom new investors are used to pay returns to existing ones without a real revenue source."The investigation is moving forward with criminal action against various people," says FBIsupervisor Pete Norell in California. He added that investments in Nakami are "pretty widespread"and he expects Nakami to be shut down. "Hopefully, an end is coming soon."Purvis and Wolfe declined to talk about Nakami. In a letter sent to The Arizona Republic, Purvissays he has no investors and "is philanthropic and pays out money to deserving charities." Hesays Nakami's financial dealings have harmed no one and the investigations constitute a "witchhunt."Church members and pastors are vehement in their defense of Purvis and Wolfe, saying they areconvinced everything is legal."Has anyone complained? No. Has any victim come forward? No," says Leon Goshow, director ofan investment club made up of Vineyard Church members.Many church investment efforts are certainly legitimate. But fraud cases involving churches also

have increased across the country in recent years, costing investors billions of dollars, financialexperts say.In most religious investments, the faithful put their trust in the company based on its promise todo God's work and generate returns.Pastors defend companyPastor John Farmer can barely contain his enthusiasm as he wraps up a service in theelementary school auditorium that doubles on Sundays as Vineyard Church.Sitting in folding metal chairs, the congregation is anticipating the good news. Farmer, smiling,doesn't disappoint.After nine years of worshiping in school buildings, he says they will be getting their first realchurch. And Farmer says he believes Purvis and Wolfe will help make it happen.For months the congregation has been digging deep into its pockets to raise $1.4 million to buyland and fund construction. Purvis has agreed to match the building fund.If the match money doesn't come in, Farmer says the church would likely have to sell a primeportion of its newly acquired site to pay for construction. But he believes the money will be therein time."Just because it hasn't happened yet, doesn't mean it isn't going to happen," he says.Farmer, who was subpoenaed in August by the Arizona Corporation Commission to testify aboutNakami, says his faith in Purvis goes back four years. That's when Farmer first put his personalmoney into Nakami."We don't consider them investments," Farmer says. "We consider themdonations."Still, Farmer acknowledges he and others who gave money to Nakami have received regularreturns of 2 percent per month."I don't want to deceive you. I have been getting money back," he says. "But that's not what this isabout."Farmer says he originally put money into Nakami as a way to fund Christian ministries andcharities. He says a good portion of his returns also go to charities."I know for a fact that some (charities) have been helped," Farmer says, adding he is distrustful ofthe state's investigation. "A lot of people get accused of a lot of things. The way I feel is that Idon't know of any evidence of guilt."It's common for individuals to make donations to a non-profit charity and deduct the amounts ontax returns. But the law does not permit a charity to pay donors returns in exchange for donations.Pastors at the 2,000-member Chandler Christian Church also defend Purvis.Associate Pastor Don Anderson said church officials "confronted" Purvis about some of thequestions being raised and determined he is "handling himself in a proper manner.""We can play 'what if' games forever," Anderson said in brief phone interview. "As far as thechurch goes, it's people's own business what they do."Investors warn church

Financial adviser Mitch Behm says he repeatedly warned pastors at Chandler Christian that somemembers were investing thousands with Purvis and Wolfe. Among them were Behm's father-inlawand brother-in law, who is a missionary for the church in Peru."They gave $150,000 to Purvis," says Behm, who works for Edward Jones Investments inDenver. "I called the church to tell them what was going on. . . . They told me I wasn't givingPurvis a fair shake."Behm says his research left him with concerns about Nakami's purported assets and lack oflicenses. When he threatened to file complaints with regulators, Purvis and Wolfe both agreed togive back all of the money that his relatives invested, Behm says."They told me that if I agreed not to go to authorities, then they would give back the $150,000,"Behm says. "I'll tell you, the minute the checks cleared, I called every regulatory agency I couldthink of."Those included the Securities and Exchange Commission and the Arizona CorporationCommission.Behm's father-in law, Tony Senarighi of Prescott, says he testified this month before the ArizonaCorporation Commission."I gave (Purvis) $50,000," the 63-year-old retired management consultant says. "It was ourretirement money. It is a lot of money to us."He first met Purvis at a Chandler Christian Church picnic in 2004. He says Purvis' approach waslow-key and attractive. Senarighi says he didn't jump in right away. But over the next 12 months,Purvis and Wolfe made him feel comfortable about investing.Senarighi says he took $50,000 from an IRA and his son-in-law invested more than $100,000from the sale of his home.Senarighi says he regretted the decision to invest almost immediately.He says he was thankful when Behm was able to get the money returned.Probe beginsMore than a year after Behm's calls, the state has not taken any enforcement action againstNakami.And federal investigators didn't start questioning Nakami's activities until four months ago, whenBarry Minkow contacted them. Minkow is a former con man turned pastor who runs a privateinvestigative agency in San Diego called the Fraud Discovery Institute. Federal authorities credithim with stopping more than $1 billion in fraud in the past two years.Minkow says he received calls about Nakami from church members in Arizona. He says hecontacted pastors in Avondale and Chandler who rebuffed his concerns."This is a company that appears to be offering returns with no paperwork, no prospectus, nolicenses," Minkow says.Minkow says his investigation of Nakami found ties to investments at churches in Texas inaddition to Arizona and Missouri. He says he also found a California investor who says he gavePurvis almost $100,000 for an overseas gold mine operation.

Purvis' lawyer, John O'Neal of Phoenix, says he cannot discuss the case.Officials with the Arizona Corporation Commission confirmed they are investigating Nakami butwould not talk specifically about the case.Spokeswoman Heather Murphy said the commission is seeing more securities-related casesinvolving churches. "In Arizona, we have had several large cases dealing with investments thathave spread like wildfire through churches," she said.Nationally, authorities say they also are investigating more cases of "affinity frauds," which targetmembers of a particular religious or ethnic group.Church scams cost individuals about $450 million between 1994 and 1998, says the NorthAmerican Securities Administrators Association, which seeks to educate and protect investors.Between 1998 and 2001, the amount skyrocketed to more than $2 billion and since has risen.Holdings not evidentIn May, Purvis and Wolfe met with about 15 Vineyard church members at an investment-clubmeeting and described their holdings and strategy."You don't want to miss out," says airline pilot Bruyns, a 35-year-old father of three."If this guy is abenevolent billionaire, you don't want to miss out on an opportunity."Bruyns, who did not invest, says Purvis and Wolfe equated investing in Nakami with faith in God."They said let your yes be your yes and your no be your no," he says.Purvis and Wolfe asked people to donate to the company as a way to fund Christian charities. Inreturn for their donations, Purvis and Wolfe guaranteed financial returns paid through theirpersonal fortunes, Bruyns says.A review of public records did not reveal Nakami's overseas companies, mines and other assetsdescribed in the investment club meeting. Financial records, property searches, corporationsearches and tax filings show only that Nakami was incorporated in Nevada in 2003 and itsdirector's address is a UPS postal box near Fashion Square Mall in Scottsdale. It also has a$500,000 investment in a Phoenix technology company, ACI Holdings.The public record also shows few holdings for Purvis and Wolfe.Property records show Purvis, 37, has lived on and off in the Valley since 1989, rentingapartments in Scottsdale, Mesa and Chandler. He and his wife, Maureen, own the $270,000house in Chandler, which they borrowed $60,000 against last year.Records for Wolfe show he also has lived in apartments and townhouses around Scottsdale.According to church members, investors who wanted proof of Purvis' holdings were given tours ofACI's facility near Interstate 17. There, investors were shown a device that they were told couldreduce home energy bills and save homeowners thousands of dollars.ACI President James Keaton says he had no idea his company was being held up as evidence ofPurvis' claims to church investors. He acknowledged that Nakami is a shareholder and thatPurvis was a former company director.But he says his company can't offer any returns and investors should know that.

"This is an equity investment that doesn't have any immediate returns," Keaton says, adding thathe isn't involved in Nakami or any other Purvis or Wolfe business.Financial adviser Behm tells a different story. He says Keaton arranged the return of the moneyto his in-laws. Behm says after demanding that Purvis and Wolfe return the money, he received acall from Keaton who offered to make it happen if Behm agreed not to go to authorities.Keaton says he never told Behm not to go to authorities. He says he returned Senarighi's$50,000, which was made as a direct investment to ACI.Keaton says he had nothing to do with returning the $100,000 to Behm's brother-in-law, who wasnot a listed as investor in ACI. He may have offered to speak with Purvis and Wolfe about it, butthat's as far as it went, he says.Keaton says after his talk with Behm, he began asking Purvis and Wolfe questions that theyrefused to answer. Keaton says when Purvis refused to fill out a financial disclosure form relatedto his position as company director, he asked Purvis to step down and evicted both Purvis andWolfe from ACI offices.Even after the eviction, however, Purvis continued to bring investors to the company and Nakamiis still a shareholder in ACI, Keaton says.Keaton says he is worried that his company might have been used to mislead investors and hewants to cooperate with authorities.Purvis threatens lawsuitArizona Corporation Commission lawyers have been trying to examine Purvis' bank records sincelast year as part of their investigation of Nakami. A Maricopa County Superior Court judgethreatened in August to hold Purvis in contempt if he fails to produce the documents by October.Purvis last month made an unusual demand against Judge Paul McMurdie, several ArizonaCorporation Commission officials, Minkow, Behm, Bruyns and The Republic.In a mailed letter, Purvis threatened to charge each party upwards of $20 million if they did notagree to remain silent about the questions surrounding Nakami. Purvis calls the questionslibelous. He also attached a bill.In his letter, Purvis says he "only engages in private contracts with other private parties." He saysthe state does not have any jurisdiction to question his dealings.Standing at the entry of his house, Purvis says he wants nothing more than to clear his name. Buthe declined to answer questions."I can't talk. I'm sorry," he says. "I also wouldn't answer any of the state's questions."!

A Shot at RedemptionWhite-Collar Crook Now Helps Authorities Uncover ScamsBy Jeff D. Opdyke Staff Reporter Of The Wall Street JournalAs a 10th-grader, Barry Minkow launched a neighborhood carpet-cleaning business inReseda, Calif., that soon grew into a $300 million public company called ZZZZ Best. Thetrouble was, the company was a fraud.Mr. Minkow, it turned out, had conned his way through lenders, lawyers, auditors andinvestment bankers for five years, falsifying some 22,000 documents along the way.After the company disintegrated in 1987, he was sentenced to a 25-year prison term, ofwhich he served more than seven years, one of the longest terms served by a whitecollarcriminal.Today, the 37-year-old Mr. Minkow is again deep into the world of fraud. A number ofgovernment agencies-including the Federal Bureau of Investigation, the San Diego U.S.attorney's office, the Los Angeles Better Business Bureau and even the Securities andExchange Commission, which originally prosecuted his crimes-couldn't be happier.Instead of swindling investors, Mr. Minkow is helping regulators, investigators andprosecutors unravel and understand the sorts of fraud he once orchestrated.'Tricks of the Trade'To some, Mr. Minkow is far from a white knight. Some investors are still out millions ofdollars from the ZZZZ Best fraud. And some critics say that the cases in which he hasassisted regulators are small and that he couldn't be very helpful in working throughmore sophisticated financial schemes.Still, his newfound role as a corporate crime fighter illustrates Mr. Minkow's efforts toresurrect his name and shows that even notorious white-collar criminals can findredemption.On a more practical level, investigators and prosecutors say Mr. Minkow offers welcomeassistance at a time when agencies are stretched thin in efforts to police fraud. While theSan Diego-based Fraud Discovery Institute, which Mr. Minkow helped found, might nothave uncovered Enron or other high-profile scandals, his experience with ZZZZ Best"gives him unique insight about the tricks of the trade," says James Asperger, the formerfederal prosecutor in Los Angeles who brought charges against Mr. Minkow and oncecompared him to Billy the Kid. "Barry appears to be one of those people who truly turnedtheir life around."Other former skeptics also are starting to appreciate Mr. Minkow's help. DickranTevrizian-the federal judge who originally sentenced Mr. Minkow to 25 years and once

told the smooth-talking young criminal that "you don't have a conscience"-cut short theformer felon's probation last fall. In doing so, the judge noted Mr. Minkow's continuingwork helping investigators detect fraud: "We have [a] problem facing our country nowwith corporate dishonesty," the judge told Mr. Minkow. "Go in and investigate some ofthese frauds ... and bring others to justice."'Barry Has Baggage'That is exactly what Mr. Minkow is trying to do-though it isn't easy. Tim France, a U.S.postal inspector in San Diego, says that while Mr. Minkow has provided "great stuff onwhat looks and smells like it's a pyramid scheme, my problem is that Barry has baggage,and you have to disclose who he is" to superiors before pursuing any investigation.Other ghosts haunt him as well. Mr. Minkow still owes Union Bank of California, thebiggest victim of ZZZZ Best, $19 million, which includes interest. As a pastor for achurch in suburban San Diego, Mr. Minkow knows he will never fully repay that debt. Buthe says he remits as much as 30% of what he makes every month to the bank-hisannual salary is $68,500-and turns over the lion's share of each check received forspeaking engagements.Mr. Minkow's efforts at rooting out potential fraud are highlighted in court papers theSEC filed earlier this year in a continuing case with Edward R. Showalter, a Californiabusinessman. The SEC in 1998 accused Mr. Showalter in a civil case of devising twofraudulent schemes to raise money for a now-defunct Florida restaurant company. TheSEC in 2001 won a roughly $900,000 default judgment in this case against Mr.Showalter.In court filings, the SEC specifically notes that Mr. Minkow provided new evidenceincludingvoice mails from Mr. Showalter and a packet of information for a new businesshe is pitching to investors to import cement from the Ukraine. That, the SEC told thecourt, "causes us a lot of concern, and we don't want to be in a position where this is afraudulent enterprise being used to pay our judgment."In an interview, Mr. Showalter says Mr. Minkow's information "is extremely incorrect." Hedeclined further comment, saying he had to talk to his lawyer first. Neither Mr. Showalternor his lawyer returned subsequent calls.When he gathered the information, Mr. Minkow called the SEC's enforcement division inWashington, D.C., which had prosecuted him 15 years ago, and said, "This is BarryMinkow." The agency, he says, "was a bit taken aback in hearing from me."Nevertheless, the SEC asked him to send the evidence he had gathered. Within weeks,the SEC cited those documents in federal court.!

info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum OneUsana Gets SLAPPed Down tweetUsana Health Sciences (USNA) is a -- forgive the redundancy -- sleazy Utah companyin the nutritional supplement business. As sleazy Utah companies are wont to do, itreacted to criticism by suing the criticizer, Barry Minkow of the Fraud Discovery Institute.Minkow had prepared an extensive report describing the company's frailities. Well, thatcertainly would not do. Usana sued, and that great defender of corporate sleaze, JuddBagley of corporate sleaze palace Overstock.com, chimed in with a typically nauseatingmud-sling attack.So I am delighted to report that today Usana was ordered to pay attorney fees toMinkow under the SLAPP statutes, which punish suers who use the legal system tosilence critics.I can't find a working link to the article -- it has vanished for some reason from the SaltLake Tribune website -- so here's the Associated Press account of the good news:The Associated PressArticle Last Updated: 05/07/2008 12:43:10 PM MDTPosted: 12:44 PM- Vitamin maker USANA Health Sciences Inc. must pay a critic of themultilevel marketing industry who was forced to defend himself against a companylawsuit.Federal Magistrate Samuel Alba decided Wednesday that USANA owes $142,510 inattorney fees to a San Diego investigator, Barry Minkow, and his Fraud DiscoveryInstitute.Alba's order came after U.S. District Judge Tena Campbell ruled on March 3 thatUSANA violated California's anti-SLAPP (Strategic Lawsuit Against Public Participation)law for suing Minkow for fair criticism.Minkow has assailed USANA for its network marketing business model, once-soaringshare price, and series of flaps involving the credentials of top executives and sales

Page 2 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307associates.Minkow served eight years in prison for stock fraud before starting the Fraud DiscoveryInstitute. He came out with his first critical report on USANA in February 2007 when hebought "put" options on USANA's stock in a bet the price would fall.USANA sued him for defamation and stock manipulation, but dropped the defamationclaim last summer. It still has one claim pending, for securities manipulation.USANA and its Chicago-based public relations firm did not immediately return calls forcomment.Congratulations, Barry, and keep up the good work.About the author: Gary Weiss

Page 3 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum TwoMedifast, Inc. Complaints Against FDI PendingWith the United States Department of Justice,the United States Securities and ExchangeCommission, the Maryland SecuritiesCommissionerPosted on: Thursday, 14 January 2010, 17:16 CSOWINGS MILLS, Md., Jan. 14 /PRNewswire-FirstCall/ -- Medifast, Inc. (NYSE: MED)has been the subject of a series of fraudulent attacks on its stock in a case of outright,deliberate, and possibly illegal market manipulation. Beginning February 17, 2009, Mr.Barry Minkow, a convicted felon, and his Fraud Discovery Institute (FDI) posted on theFDI website a "report" authored by his close associate, Mr. Robert Fitzpatrick, whichaccused Medifast through its direct selling subsidiary, Take Shape for Life, Inc., ofbeing: 1) an illegal "endless chain" pyramid, and 2) a Ponzi scheme comparable to thatperpetrated by Bernard Madoff. The attacks continued with subsequent "reports" andupdates posted by Mr. Minkow, Mr. Fitzgerald and their co-conspirators in May andJune 2009; and most recently January 8, 2010. The allegations are patently untrue.They were made with the intent to manipulate the share price of Medifast downward(which occurred) in order for Mr. Minkow and others to profit from his subsequentlydisclosed short position in Medifast stock, which he acquired prior to publishing his firstfraudulent attack. Following the first attack, Medifast, Inc. constituted a committee ofprestigious, experienced independent directors to review the public allegations made byMr. Minkow and his associates on the FDI website pertaining to alleged illegal activitiesof Take Shape for Life, the direct selling subsidiary of Medifast, Inc. These publicallegations were made in mid-February 2009 and were immediately followed bysignificant short selling and short selling option puts that shaved more than $30 millionfrom the market capitalization of Medifast. The company has demanded that this thirdparty take down its website information containing false information or be subject toappropriate legal action. Medifast, in a press release on February 17, 2009, respondedto the false claims in United States Securities and Exchange Commission File #: 001-31573; Film #: 09617581. The Medifast Independent Committee appointed as chairmanMr. Barry B. Bondroff, CPA, an officer and director of the law firm Gorfine, Schiller &Gardyn, PA. Members of the Committee include: Mr. George J. Lavin, Esq, foundingpartner of the law firm, Lavin, O'Neil, Ricci, Ceprone & Dispicio, who is an expert inProduct Liability Law; Lt. Gen. Dennis M. McCarthy USMC (Ret.), Executive Director ofthe Reserve Officers Association of the United States and a licensed attorney; Capt.Joseph D. Calderone USNR (Ret.), chaplain and counselor of the Villanova University

Page 4 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Law School; and Mr. Charles P. Connolly, former president and chief executive officerof First Union Corporation of Pennsylvania and Delaware. After an investigation of thefacts and information developed to date the committee unanimously agreed that theallegations were false, misleading and/or without merit. Counsel forwarded three ceaseand desist demands by letter to Mr. Minkow, a convicted felon, and FDI, of whichMinkow/FDI confirmed receiving two. After the initial attack in February, 2009, Medifast,Inc. soon filed complaints with the United States Department of Justice, the UnitedStates Securities and Exchange Commission, and the Maryland SecuritiesCommissioner. Those complaints are deemed confidential matters, and Medifast, Inc,as any responsible corporate citizen should, has honored that confidentiality. The mostrecent January 8, 2010 attack regurgitated the same published allegations whichMedifast, Inc. consider to be false, misleading and without merit. Other public directselling companies have been attacked by this individual and his network of associatesusing the same blueprint of allegations before retracting or disavowing theirunsubstantiated allegations as part of an announced settlement. Medifast believes thatany investigation, regulatory or otherwise, should be focused on the false allegationsand stock dealings of Mr. Minkow, Mr. Fitzgerald and their co-conspirators to harmMedifast, Inc., our over 360 Maryland-based employees, 122 Medifast clinic associates,our 5,800 dedicated nationwide health coaches and our loyal shareholders. Medifastrespectfully suggests its team members and shareholders keep in mind that thewidespread acceptance of the Medifast products by our customers who want to improvetheir health through a proven, clinically tested, weight-loss program is the importantfocus of the Medifast core mission. The periodic audited Medifast financial reportsreflect in large measure the success its growing customer base has seen in achievingtheir weight-loss goals and enjoying a healthier lifestyle as they take shape for life.Michael S. McDevitt, chief executive officer of Medifast, Inc., said, "Our diversifiedproduct distribution model continues to operate very efficiently and we believe that willcontinue to be the case for the foreseeable future. We will be reporting year-endfinancial results in early to mid-March 2010 and we believe those results will reflect ourconfidence."About Medifast:Medifast (NYSE: MED) is the leading easy-to-use, clinically proven, portion-controlledweight-loss program. Medifast has been recommended by over 20,000 doctors andused by over one million customers since 1980. It is committed to enriching lives byproviding innovative choices for lasting health. Medifast programs have been proveneffective through studies by major university teaching hospitals. The company sells itsproducts and programs via four unique distribution channels: 1) the web and nationalcall centers, 2) the Take Shape For Life direct-selling division 3) medically supervisedMedifast Weight Control Centers, and 4) a national network of physicians. Medifast wasfounded in 1980 and is located in Owings Mills, Maryland. For more information, logonto http://www.choosemedifast.com. MED-G

Page 5 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Safe Harbor StatementPlease Note: This release contains "forward-looking statements" within the meaning ofSection 27A of the Securities Act of 1933, as amended, Section 21E of the SecuritiesExchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of1995. These forward-looking statements generally can be identified by use of phrasesor terminology such as "intend" or other similar words or the negative of suchterminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals ortargets contained herein are also considered forward-looking statements. Medifastbelieves this release should be read in conjunction with all of its filings with the UnitedStates Securities and Exchange Commission and cautions its readers that theseforward-looking statements are subject to certain events, risks, uncertainties, and otherfactors. Some of these factors include, among others, Medifast's inability to attract andretain independent Associates and Members, stability in the pricing of print, TV andDirect Mail marketing initiatives affecting the cost to acquire customers, increases incompetition, litigation, regulatory changes, and its planned growth into new domesticand international markets and new channels of distribution. Although Medifast believesthat the expectations, statements, and assumptions reflected in these forward-lookingstatements are reasonable, it cautions readers to always consider all of the risk factorsand any other cautionary statements carefully in evaluating each forward-lookingstatement in this release, as well as those set forth in its latest Annual Report on Form10-K and Quarterly Report on Form 10-Q, and other filings filed with the United StatesSecurities and Exchange Commission, including its current reports on Form 8-K. All ofthe forward-looking statements contained herein speak only as of the date of thisrelease.Brendan Connors, VP-Finance of Medifast, Inc., +1-410-504-8178SOURCE Medifast, Inc.Source: PR Newswire

Page 6 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum ThreeBarry Minkow13983 Hickory StPoway, CA 92064(858) 486-4814February 20th, 2010U.S. Securities and Exchange Commission100 F Street, NEMail Code 5100Washington, DC 20549Dear Sir;Under the Freedom of Information Act (FOIA), please send me the records of any and allcomplaints made against Barry Jay Minkow, Barry Minkow, The Fraud Discovery Institute, Inc.,or FDI that the SEC has received since March 1, 2007. I will pay up to $2,500.00 for search andreview or additional payment if necessary. My daytime phone number is 619-992-7729.SincerelyBarry Minkow9770 Carroll Center Road Suite FSan Diego, California 92126

Page 7 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum FourFormer con man helping unravel hugeCalgary Ponzi schemeBarry Minkow served seven years in jail for bilkingmillions of dollars from investors. Afterwards, hehelped unravel a Calgary-based Ponzi scheme —one police say cost North American investors morethan $100 millionBY RICHARD CUTHBERTSON, CALGARY HERALDSEPTEMBER 25, 2009Milowe Brost, who has been charged with operating a Ponzi scheme, enters his homein Chestermere, Alberta on Sept. 17.Photograph by: Leah Hennel, Calgary HeraldCALGARY — Barry Minkow served seven years in prison for bilking millions of dollarsfrom investors with a fraud scheme involving a carpet-cleaning company he launchedas a teenager. Behind bars, the California man found religion and emerged as a churchpastor and unlikely anti-fraud crusader, starting an organization that investigatescorporate swindling.Minkow is among those who have worked to unravel a Calgary-based Ponzi scheme —one police say cost North American investors more than $100 million.Reached at his church in San Diego this week, Minkow said he went undercover for theFBI about four years ago as it investigated two purported gold mining companies in theUnited States linked to the alleged fraud."This was the most outrageous case I had ever seen," he said.Minkow's own investigation into the case began in 2005 at the behest of an accountantfor a former NFL player. The accountant was worried his client was being lured into aninvestment "disaster" involving a mining company allegedly controlled by Milowe Brost,a Calgary financier.Minkow soon hired a former geologist with the United States Securities and ExchangeCommission who, in an affidavit, concluded that claims made by one of the companies,Merendon Mining (Colorado), were false.

Page 8 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307According to court filings by the U.S. Internal Revenue Service, investors were enticedto hand over their money by promoters of Merendon Mining (Colorado), which claimedthat new technology could extract gold and other minerals from two disused mines."In fact, Merendon's properties contained no commercially marketable quantities of ore,"the IRS said in a February 2008 filing in a Texas court.Not only was there no mining, in some cases the company didn't even have permits fordevelopment on the properties, the U.S. authorities said. One investor who visited amine said it was dilapidated and "covered in rat droppings."While some investors were invited to put money into the mines, another facet of theventure allegedly targeted former NFL players, among others, with a tax scheme.The scheme offered what U.S. tax authorities say were fraudulent returns — returnsthat were then to be invested into Merendon Mining (Colorado), a subsidiary ofMerendon Mining (Nevada)."The purported investment scheme was a sham," the IRS stated.Both firms were controlled by Brost, the IRS said, a 55-year-old Albertan who wascharged last week by RCMP with theft and fraud with regards to an alleged Ponzischeme.His co-accused in the case is another Calgary-area man, Gary Sorenson, 66, whoRCMP believe to be living in Honduras. Police in Honduras say they believe he hasvacated his palatial mansion there. Sorenson is the CEO of a company calledMerendon Mining Corp. Ltd. A statement posted on that firm's website says thatcorporation is not affiliated with U.S. companies with a similar name.Alerted by the suspicious accountant, Minkow — who runs the Fraud Discovery Institutein San Diego — hired David Abbott, a former Securities and Exchange Commissiongeologist to investigate some of the claims made by Merendon Mining (Colorado).Abbott said there was little evidence of profitable gold reserves at the mine in theJamestown mining district of Boulder, Colo.He said the company claimed it had environmentally friendly "proprietary technology"that could extract gold. Abbott said that, in his experience, such claims are clear signsof fraud."These are things that are very attractive sales techniques, that are used over and overagain," he said.

Page 9 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307"People regularly invest in these sorts of ventures making these kinds of claims. It'ssomething that I saw repeatedly in various mining frauds that I investigated when I waswith the Securities and Exchange Commission."For Minkow, the probe didn't end there.At one point, he said, he went undercover for the FBI, posing as an investor whilemeeting with a recruiter for the Merendon companies. The FBI declined to comment onthe case.The recruiter was a former football player."The guy was just suspicious," Minkow said. "The goal was to meet and get pitched andrecord the pitch, 'cause they were not giving out paperwork."It's unclear just how much money the U.S. mining companies collected, although aseparate lawsuit filed by six former investors says Merendon Mining (Nevada) claimed it"raised in excess of $112 million from over 2,000 investors."The six investors tried to force the two mining companies into involuntary bankruptcy.But Denver lawyer Andrew Petrie said he wasn't successful tracking any of thecompanies' assets.The NFL itself became interested in the case, according to Lawrence Sweeney, thefootball league's former director of investigative services.The league has a policy whereby players or their agents can ask the NFL to do a duediligence assessment of possible investments, which happened in the Merendon matter,he said."It was absolutely atrocious what was happening," Sweeney said from his home inSmithtown, N.Y.Sweeney declined to divulge much about the case, because he believes it is still underinvestigation. But, in general, professional sports athletes are attractive recruits forPonzi scheme promoters because they can be used to draw in other investors, he said.Sweeney credits Minkow and his anti-fraud organization for helping out the NFL invarious cases where players have been targeted.As for Minkow, who's been the subject of a 60 Minutes TV news feature and an indiefilm being shot in Los Angeles, the case continues.

Page 10 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307The preacher said he's been tracking the Merendon companies for four years, andremains dedicated to helping law enforcement uncover other alleged frauds."I realized that law enforcement can be helped by thinking like a crook — and that's onething they can't do."

Page 11 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum FiveFrom: Robert FitzPatrick Date: May 27, 2010 3:07:47 PM PDTTo: Barry Minkow Subject: Re: can I say that the average lost is between 1 and 3 thousand for theMLM industry? I am saying it in the context of why more law suits are not filedagainst by consumers when they lose-other than a family member got them inand plain old embarrassmentReply-To: "rfitzpatrick@falseprofits.com" Barry,Some scams hit a few people for a lot of money -- Madoff, for example and otherconfidence schemes.MLMs, on the other hand, use the strategy of taking a little money from a lot of people.Average investments are between $1,000 and $3,000 in actual dollars. But in there 5-7million losing money each year and this among the people in the bottom or middle of theincome range, this is $12 to $15 billion loss among those least able to bear it. Reallosses may be much more, when all costs are factored. There are many other "losses" -- time, opportunity, lost wages, alienation of friends, time from family, all in a futile quest.For the more zealous, the losses are greater, and for those who stay in longer, thelosses are greater still.From a legal and economic standpoint, it makes little sense for a consumer to complainor sue.1. No one person stands a legal chance against a huge company.2. The amount of money at stake is usually less than costs of suing.3. The charge of pyramid scheme is hard to win at. There is no federal law specificallyagainst pyramid schemes. There is no "rule" on pyramid's most common form -- multilevelmarketing -- as we do have in franchising. For this reason, among others,regulators often avoid litigation and allow complaints to gather dust.4. Lack of response from regulators is another reason people offer for not bothering toregister complaints.Regarding averages: MLMs use "mean" averages counting together the losers and thewinners.They only include the total reported at the end of a time frame, not the actual numberthat churned through during that time.And they always use data for short time frames.These three factors are calculated means of grossly distorting the picture, and hiding

Page 12 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307the losses.Using those factors, leaves the impression that most (the average) actually make somepositive money "each year". In fact nearly all lose money. The actual data calculatedfrom the bottom 90% of the schemes and gathered over a five year period, wouldreveal the truth. Virtually all are in loss positions and they are churned every year atrates of 40-80%. But, if you shorten the time frame to just six months or even a year andinclude losers at the bottom with the "winners" at the top or if you only include thosewho made some money, and count only the number currently enrolled at the end of theyear, rather than all who churned thought during the year, then the picture can be madeto appear that the "average" made a little, and some made a lot. A gross lie.Example:The mean average is not even close to realty:• 100 people are enrolled, 90 at the bottom lose money, each loses $10, a total of$900.• The 10 at the top get the money the 90 lost. Each of the 10 gets $90. Bottom 90people earn zero.• Total earnings are $900 for 100 people. The mean "average" is $9 per person, or$900 /100.• The reality is that 90% earned nothing and the average income of the top 10 is $90, avery different picture.Now add churning:• Each year 50% quit (50 people) and are replaced.• So, in year one 90 people lost plus the 50 more that joined during the year. That'sactually 140 lost and 10 made money. So in fact, only 10 out of 150 made moneyor 7%, not 10%.• 93% lost, not 90%, when churning is factored.• Also, if every new recruit lost $10, then the real losses were $140, not $90.And then add a longer time frame to the calculations,• The total number of people who lose grows further, while the same 10 at the top keepgetting their money.• The "mean" average "per year" only of the "active" people reported only "at the end ofthe year" (100) keeps showing a $9 average income!Here is an article I wrote a few years ago that explains some of the social and personalreasons -- legalities and regulators aside -- why people remain silent.Silence of the LambsSeven Reasons Why Few MLM Victims Report the Scams to the Authorities,Personally Protest, Sue for Damages or even Warn Othersby Robert L. FitzPatrick © 2005

Page 13 of 22info@frauddiscovery.netPhone & Fax:1-888-300-83071. Personal Shame -- Who wants to publicize their own folly? Whistle blowing is not justdirected at unscrupulous recruiters at the top but at the gullibility, guilefulness, greed,and lapse of judgment, common sense and values of ALL participants, including thewhistle blowers themselves.2. Social Embarrassment -- Most people enrolled friends, family and neighbors. Do theynow want to shine the light on how they harmed people who trusted them? To go publicmay require going back and making amends with aggrieved friends or relatives, whichmany people cannot bring themselves to do. Let sleeping dogs lie.3. Self-incrimination -- All pyramid schemes make each victim, to some extent, also aperpetrator. Blowing the whistle might be legally self-incriminating.4. Intimidation -- MLMs have been known to vilify, bully and intimidate whistle blowers oreven to legally sue them.5. Loyalty -- Most people who join the schemes were recruited by friends or relatives,some of whom may still be in the scheme. Or, people they recruited during their shorttenure may still be faithful perpetrators. The whistle blower therefore must incriminateclose associates, maybe even their own mother!6. Cutting Losses –- The victims of MLM schemes (99% of all participants each year)have already lost significant time and money. Some may have quit their jobs, taken onmore debt, fallen behind on existing debts or neglected their work or families. Whenthey quit, few have the time, energy or resources to wage a battle for truth, justice orrestitution. Their immediate and urgent need is to cut their losses and rebuild theirpersonal and financial conditions.7. Gullibility -- These schemes are organized as 'stingsʼ, that is, scams in which thevictim is set up not to report the fraud to the police. This is done by convincing the newrecruit that the scheme is entirely workable, legal and viable. The only reasons a personmight fail, they are told emphatically and repeatedly, include laziness, lack of ambition,fear of success, poor character, lack of adequate effort, fear, or refusal to follow theprescribed marketing plan. In short, the people who fail are just "losers" or "quitters."They will have no one to blame but themselves if they don't make money. The leadersare portrayed as model human beings - fearless, enlightened, the real winners in life,people to emulate. Thus, most people, when they do quit -- and most quit in a year or so-- do so silently, shamefully and with great personal disappointment in themselves.Indeed, many victims insist the MLM company and its people were good, decent andhonest. The reason for their financial loss, they believe, was entirely their own making.

Page 14 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Robert L. FitzPatrick, Author.FALSE PROFITS1800 Camden Rd.Ste. 107 #101Charlotte, NC 28203Tel. 704-334-2047Fax 704-334-0220RFitzPatrick@FalseProfits.comhttp://www.FalseProfits.com

Page 15 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum SixFrom: John McDonald Date: May 26, 2010 10:16:20 AM PDTTo: Barry Minkow Cc: "John@amergold.com" Subject: AGE Order #108908 Payment ReceivedDear Barry MinkowGreetings from American Gold Exchange.This courtesy notice confirms receipt of payment in the amount of $2,539 for your order#108908 Your total payments for this order are listed below.05-26-2010 $2,539Invoice total: $2,539Balance: $0.00The estimated shipping date for this order is 05-27-2010, and you should receive itapproximately 5 to 7 business days after it ships. On the day your order ships we willsend an email confirming shipment.If you have any questions, please contact me at 1-800-613-9323, or via email atJohn@amergold.comThank you for allowing us to serve you. We appreciate your business!Best regards,John McDonaldAccount ManagerAmerican Gold ExchangeYour Reliable Hard Asset Advisorwww.amergold.com1-800-613-9323

Page 16 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum SevenFrom: Dana Samuelson Date: May 25, 2010 8:54:18 AM PDTTo: Barry Minkow Subject: Barry - I'm happy to help you any way I can.Hi Barry,Thanks for calling and speaking to my sales manager John McDonald yesterdayafternoon. I’m sorry I missed you.If there is anything else we can help you with, please do not hesitate to call oremail me. Please tell Laura, our receptionist, I’m expecting your call should youdecide you want to talk. You can email me here as well. I appreciate what youare doing and am happy to help you in any way I can.Sincerely,Dana SamuelsonPresidentAmerican Gold Exchange, Inc.Austin, TX1-800-613-93231-512-323-0194 Faxwww.amergold.comFrom: Dana Samuelson Date: May 25, 2010 2:33:05 PM PDTTo: Barry Minkow Subject: RE: Hey DanaHi Barry. My responses below in CAPS.Dana SamuelsonPresidentAmerican Gold Exchange, Inc.Austin, TX1-800-613-9323

Page 17 of 22info@frauddiscovery.netPhone & Fax:1-888-300-83071-512-323-0194 Faxwww.amergold.com-----Original Message-----From: Barry Minkow [mailto:barry@barryminkow.com]Sent: Tuesday, May 25, 2010 12:21 PMTo: Dana SamuelsonSubject: Hey DanaDear Dana;First, I promised John yesterday that I would forward a sample of ourmost recent issued report so please find the enclosed. Please also keepconfidential. OF COURSE a few questions relating to what theunderstood industry standard is for storing gold coins purchased bypeople who do not want, for whatever reason, to take delivery.Congressman Weiner states that the "hidden fee" of a 1% storage byGoldline International is less than above reproach. What is theunderstood industry standard charge, if any, for storage of coins? IDON'T BELIEVE THERE IS ANY INDUSTRY STANDARD STORAGE FEE. VERY FEWDEALERS ACTUALLY DO THIS, WE DON'T, WE DELIVER. Second, the issue ofGoldline International not putting in writing their "buy back"guarantee. With this issue my concern deals with the follow upcomplaint contained in the report (by the way, to see Congressman Weiner8 page report please seehttp://weiner.house.gov/reports/5%2017%2010%20Goldline%20Report.pdf).But back to the buy back issue--the Congressman complains that it isdone based on the "bid" price and therefore wrong. RELIABLE DEALERS ARECOMPETITIVE, AND DISCLOSE PROPERLY WHAT THEY REALLY ARE DOING. WEGUARANTEE TO BUY BACK FROM OUR CUSTOMERS WHAT EVER WE SELLTHEM ATWHATEVER A COMPETITIVE RATE IS AT THE TIME THEY WISH TO SELL FORTHEITEMS THEY BOUGHT. DIFFERENT ITEMS HAVE DIFFERENT BUY/SELLSPREADS. ANDTHINGS CHANGE, SO A PRINTED POLICY WITH SPECIFIC SPREADS CANBECOME MOOTFAST IN TIMES LIKE WE SAW ON THE HEELS OF THE 2008 BANKING CRISIS. IFWEHAD HELD TO OUR NORMAL BIDS DURING THAT TIME, WE WOULD HAVE SHORTCHANGED MANY OF OUR CUSTOMERS, BECAUSE BIDS RELATIVE TO MELTSURGED, AND

Page 18 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307FOR SOME ITEMS, SUBSTANTIALLY. WE RAISED OUR BIDS TO NUMBERS I HAVENEVER SEEN IN 30 YEARS OF DOING THIS. WHEN THE CRISIS PASSED THEMARKETSETTLED BACK DOWN AND SO DID OUR BUY AND SELL PRICES. THE MARKETSDICTATE WHAT MANY DEALERS DO AND FAIR COMPETITION HELPS TO KEEPUS ALLHONEST.

Page 19 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum Eight

Page 20 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307Addendum NineAs with most multi-level marketing companies, Numis Network purports to offer abusiness opportunity that can generate high earnings for an individual. The “product”being sold by Numis is collectible coins. As an investment, gold and silver coins havevalues that are fairly easy to determine with a few minutes and an Internet connection.The value of a “collection,” however, is not so easy to assess. The value of a “collection”varies from owner to owner, so it is hard to put a price tag on it.Numis Network is careful not to call its coins investments, as that creates regulatoryproblems in addition to the ease of objectively valuing the investment (and coming to theconclusion that Numis is not the place for a serious coin buyer).Indeed, the coins being sold by Numis appear to have values lower than the price forwhich they're being sold. A quick examination of websites like eBay, Gainsville Coins,American Historic Society and American Precious Metals Exchange all sell the MS70Silver Eagle coin, the most common Numis product retailing at $120 and wholesaling at$100, at or below the wholesale price at which Numis representatives pay.There is little focus on the actual selling of coins. In fact, it's difficult to find a NumisNetwork representative site from which to actually buy coins unless you already knowthe web address for the site. Searching Google for a site from which to buy the coins isalmost futile. Almost all the search results point to sites which are selling the “businessopportunity” instead.The Numis compensation plan is incredibly complicated, boasting payments for binarydownline cycle bonuses, enroller organization matching bonuses, coded organizationmatching bonuses, and Fast Track Collector Bonuses. There is a dizzying list ofqualifying activities and bonus percentages, all tied to configurations of downlines.A basic membership package for a Numis representative costs $75 plus $10 per month.This entitles the representative to wholesale pricing on coins, potentially offering anopportunity to earn money by buying coins at wholesale and selling them at retail.However, based on the fact that the retail price of the MS70 Silver Eagle is at least 20%higher than the most expensive alternatives we found and more than 100% higher thanthe least expensive alternatives we found, it seems unlikely that anyone will be able togenerate a significant or sustainable income from selling coins.The company promotes bypassing the Basic membership, and instead purchasing the“Training Qualified” package, which costs $495 up front, plus a $99 per month

Page 21 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307“autoship” of one MS70 Silver Eagle Coin. This package will cost the representativealmost $1,700 in his first year.Representatives can initially qualify for “bonuses” (payments from the company forthings other than selling coins) by recruiting or by purchasing the “Executive SuccessSystem.” To actually receive the bonuses, a representative must personally purchase 1to 3 Silver Eagle Coins (or the equivalent value of other coins) at the preferred price of$99 each, and these purchases must be made each month.A hallmark of an endless chain recruitment scheme is the ability to buy one's way tohigher levels of commissions. However, Numis is quick to point out that no purchase isnecessary to qualify for compensation. A representative with qualifying volume achievedthrough customer sales can receive some bonuses. However, to receive all potentialbonuses, personal purchases are required. One might suggest that those personalpurchases could easily be re-sold to customers for a profit, but as discussed above, thelikelihood of making consistent sales is low.How much activity will it take to recover (through bonuses) the $1,700 a “trainingqualified” representative will spend in the first year? The cost averages to $142 a month,not including any other costs a representative will incur in running his “business.”The company bases bonus payouts on a BV (bonus value) for each coin sold. TheMS70 Silver Eagle coin has a BV of 60, and the company says that an estimated 10%of that could be paid as bonus, for $6 bonus paid on each of these coins sold. However,the bonus money is only paid on part of the representative's total BV. Therepresentative has two legs to his downline, and the bonus will only be paid on the BVtotal of the leg with the lower number of points each month.At least 24 coins per month must be sold in the representative's weakest leg to generateenough to cover the minimum costs of $142. This means in total, the representative'sdownline must sell (or purchase themselves) at least 48 coins total (24 in each leg) togive the representative a chance of even breaking even. Additional bonus money couldbe earned in a variety of ways that only an algorithm can compute, but these requiresubstantial recruiting of representatives who make monthly coin purchases.The compensation plan is not nearly as simple as this, however, and many variablescan prevent the representative from recovering his monthly costs. Numis Network bragsthat representatives can earn money from an unlimited number of levels below them,however, the company has a broad policy that limits bonus payouts to no more than50% of the total company BV.Since the coins sold by Numis Network appear to have little retail appeal to true

Page 22 of 22info@frauddiscovery.netPhone & Fax:1-888-300-8307customers, the only way a representative can hope to make money is by constantrecruiting. The representatives cannot rely on retail sales of coins, so they must rely onthe complicated methods of calculating various bonuses for the recruits in theirdownlines. The only hope for a representative lies in recruiting an endless chain ofrepresentatives.-Tracy Coenen