Los Angeles, California - Two San Fernando Valley men were charged today in a federal fraud case that alleges they ran a 15-year-long Ponzi scheme that collected hundreds of millions from investors who were told their money would be used to purchase profitable automated teller machines.
Joel Barry Gillis, 74, of Woodland Hills, and Edward Wishner, 76, also of Woodland Hills, were charged today with mail fraud and wire fraud in a case that caused well over $100 million in losses to nearly 2,000 investors.
According to the criminal information filed today in United States District Court, Gillis and Wishner operated the Calabasas-based Nationwide Automated Systems, Inc. (NASI), which purported to place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores. NASI claimed that it operated over 30,000 ATMs and was involved in more than $1 billion in ATM transactions every month.
The information further alleges that Gillis and Wishner told victim-investors that NASI would lease back the ATMs and pay investors 50 cents for each transaction performed at their particular ATM, guaranteeing annual returns of 20 percent on each ATM. In addition to these high-yields, 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 the information.
NASI did make monthly payments to investors, but that money came from other investors. While NASI did operate 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. Gillis and Wishner prevented investors from discovering the fraudulent nature of the business by providing bogus monthly reports to the investors that falsely detailed the performance of the investors’ ATMs. In reality, the purpose of these reports was to conceal that the true source of the payments sent to investors were monies received from other investors. Gillis and Wishner also included a “non-interference” provision in the lease agreements that prohibited victim-investors from visiting the locations where their ATMs were supposedly located.
The scheme unraveled this past summer. In August, “NASI bounced approximately $3 million in checks that had been sent by NASI as monthly returns to victim-investors,” according to the criminal information. “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 victim-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.” Even as the Ponzi was collapsing, Gillis and Wishner allegedly continued to raise another $4 million from victim-investors.
The information filed today charged Gillis and Wishner with conspiracy, two counts of mail fraud and one count of wire fraud. If they are convicted, Gillis and Wishner each would face a statutory maximum sentence of 20 years in federal prison for each of the four charges.
Gillis and Wishner are expected to make their initial court appearances tomorrow afternoon in United States District Court.
This case was investigated by the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission provided substantial assistance in the matter.
The SEC filed a civil lawsuit in relation to the NASI scheme in September, which resulted in a court order freezing the company’s assets and having a receiver appointed to oversee the assets.