Two San Fernando Valley men were charged Tuesday with running a 15-year-long Ponzi scheme in which they allegedly collected hundreds of millions of dollars from investors who were falsely told their money would be used to purchase profitable automated teller machines.
Joel Barry Gillis, 74, and Edward Wishner, 76, face federal conspiracy and mail and wire fraud charges in connection with the loss of more than $100 million by nearly 2,000 investors, according to the U.S. Attorney’s Office.
According to the criminal information filing in Los Angeles federal court, Gillis and Wishner operated Calabasas-based Nationwide Automated Systems Inc., which purported to place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores.
NASI claimed that it operated more than 30,000 ATMs and was involved in more than $1 billion in ATM transactions every month.
Gillis and Wishner allegedly told victims that NASI would lease back the ATMs and pay the investors 50 cents for each transaction performed at their particular machine, guaranteeing annual returns of 20 percent on each ATM.
NASI and its salespeople urged some investors to use their retirement savings “by claiming that investments in NASI’s sale/leaseback program would outperform most traditional retirement investment accounts,” according to court papers.
NASI did make monthly payments to investors, but that money came from other investors, prosecutors allege.
While NASI operated a small number of ATMs — no more than 250, which were owned by the company and not investors — the overall operation was a sham hidden under the veil of a Ponzi scheme, federal prosecutors allege.
The scheme unraveled this past summer when NASI “bounced approximately $3 million in checks that had been sent by NASI as monthly returns to victim- investors,” according to court papers. “By the end of the month, NASI had drained its bank account, drawing it down to a balance of less than $200,000.”
In response to hundreds of calls from investors, Gillis and Wishner “falsely sought to reassure the victim-investors that NASI was only suffering from accounting problems and technical delays relating to system upgrades, and that timely payment of investor returns would likely resume by the beginning of October 2014,” prosecutors allege.
Even as the Ponzi scheme was collapsing, Gillis and Wishner allegedly continued to raise another $4 million from victim-investors.
If convicted, Gillis and Wishner both face up to 20 years in federal prison for each of the four charges.
— City News Service