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Beery found liable in alleged 'Ponzi Scheme'

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Money > Investigators say he bilked elderly out of nearly $170,000

By Ben Carlson

SANTA FE — A Los Alamos man was found liable Wednesday for “peddling promissory notes as investments in a very risky and illegal scheme” that cost at least 10 mostly elderly Los Alamos residents nearly $170,000, state officials said.
Jerome “Jerry” Beery, 81, of 566 Navajo, was ordered to pay a $5,000 fine and $1,000 in expenses following a ruling by Alan Wilson, securities division director of the New Mexico Regulation and Licensing Department, during an administrative hearing in Santa Fe.
Beery’s victims, however, will have act civilly to recoup their losses, Wilson said after the hearing, because his agency doesn’t have the authority to order restitution.
The adult children of two of the victims didn’t seem particularly thrilled with the punishment handed out to the man investigators say bilked their elderly parents out of $30,000.
“It was an administrative slap on the hand,” said Fred Edeskuty who was joined by his sister, Celeste Raffin, in testifying against Beery.
Investigators laid out a stiff case against Beery, who claimed that the numerous promissory notes he sold were loans, not investments, and that he didn’t need state licensing and certification to issue those notes.
State officials disagreed and offered reams of Beery’s bank records and victim testimony that shows Beery operated what one investigator compared a Ponzi scheme by taking money from investors and giving portions of it back to them in the form of interest payments. The rest of their money, investigators said, was used by Beery to pay bills and for his personal use, including purchasing plane tickets, while he was going through bankruptcy.
Perhaps the most damning evidence against Beery came by his own hand. When the Eduskutys became suspicious, they contacted Beery and said they wanted their money returned in full.
Beery responded by letter, telling them that the “commodity trading firm” he uses went into bankruptcy and that he wasn’t very hopeful that they’d get their money back.
Beery claimed in the letter that he used investment firm MF Global. When contacted by investigators, however, the firm’s bankruptcy trustee said there was no record of Beery investing in MF Global.
Beery defended himself during the hearing, offering a somewhat disjointed defense that included no evidence or witnesses to corroborate his claims. Instead, Beery spent most of his time trying to nitpick specifics in a cease and desist order issued against him earlier this year.
He also claimed repeatedly that the state’s securities division had no jurisdiction in the matter.
Acting as his own attorney, Beery was allowed to cross-examine the state’s witnesses, and had several testy exchanges with Fred Edeskuty and twice reminded Edeskuty’s sister, Celeste Raffin, that she was under oath.
Edeskuty told the state’s attorney that his father, a retiree from the Los Alamos National Laboratory, passed away a year ago and that his elderly mother is wheelchair bound and living in an assisted care facility.
During cross examination, Beery asked Edeskuty why his mother wasn’t there to testify and questioned her ability to attend due to physical limitations.
“Doesn’t she still take her power wheelchair a half a mile to Smith’s?” Beery asked.
Edeskuty said that’s true before adding, “Frankly, she doesn’t want to see your face.”
Edeskuty testified that his mother was uneasy about a $30,000 promissory note she and her husband purchased from Beery. That money, he said, came from the proceeds of selling his parents’ home.
Beery pressed the issue, first implying that Edeskuty and his sister were perhaps unhappy that money they thought might come to them from the sale instead went to him.
 “What did your mother want to do with that money?” Beery asked.
“Anything but give it to you,” Edeskuty responded.
During her testimony, Raffin said she saw Beery hand her parents interest checks on at least seven occasions, and twice hand them what she called “dividend” checks, proof that the promissory notes were indeed investments.
Beery seemed incredulous at those remarks and twice reminded Raffin that she was under oath. He did not, however, produce evidence to counter Raffin’s statements.
Beery also groused about the publicity the cease and desist order caused him in early February, demanding to know who tipped off a TV station that showed up as state officials attempted to serve the order at his home in Los Alamos.
Beery said it was “disgusting” that a citizen was treated that way, and said the episode was “embarrassing” to his wife. He went on to claim that the U.S. Supreme Court and various circuit courts have held that promissory notes are not securities, but could not site specific case law to back it up.
While rendering his decision, Wilson knocked back that argument.
“In New Mexico, it’s clear that (promissory) notes are securities,” Wilson said, adding that the state’s securities act “starts off by saying notes are securities.”
Wilson pointed out that Beery operated no business underlying the notes as investments and that Beery was offering the notes while he was going through bankruptcy.
“Whether you understand this to be a Ponzi scheme or not, it is and it’s illegal,” Wilson told Beery. “There was no evidence that this was for business use … you used it to pay pre-existing debt or personal use.”
Wilson then banned Beery from selling promissory notes for life, but said he might reconsider that ruling were Beery to become licensed and certified.
“We will be watching,” Wilson said.
Beery, who threatened to seek a judicial review of the ruling, responded by saying that at his age he wouldn’t be offering any more promissory notes, but referenced a friend who had discovered oil and that if he needed money, that would be an option.
“Then there won’t be a paper trail,” he said as he walked out of the hearing.
 

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