BY LINDA BENTLEY | DECEMBER 11, 2013
A predator in advocate’s clothing
Ponzi schemes just as popular as ever
CAVE CREEK – Ingratiating herself with politicians, sidling up to council members, attending political events, while she manipulated her way into various groups, committees and organizations, Cave Creek resident Sara Vannucci can’t seem to tear down that high visibility she’s been building up over the years fast enough.
Vannucci professed to be a community advocate, senior advocate, environmental advocate, child advocate, animal welfare advocate or whatever type of advocate she deemed essential, to infiltrate and prey upon the community. Vannucci has latched on to politicians such as Phoenix Councilwoman Peggy Neely, who faced recall last year, the dodgy Rep. Clancy Jayne, R- Dist. 6, with federal income tax liens for eight years and whose wife pled guilty to felony theft charges.
Lately, Vannucci is seen just about everywhere with Cave Creek Councilwoman Shea Stanfield, who seems drawn to those with questionable aspirations.
But, after she wrote the bizarre and false account of Anita Carr’s horse being “maliciously killed” to solicit donations for Desert Advocate Publisher Karen Seemeyer’s bogus “reward account,” it comes as no surprise to learn Vannucci is facing securities fraud charges in U.S. District Court, District of Arizona (CV03-2390-PHX-JAT).
Plaintiff Lawrence J. Warfield, the court-appointed receiver for the Mid-America Foundation, has named approximately 100 agent-defendants in the suit, citing breach of fiduciary duty, fraud in a confidential relationship, constructive trust/secret profit, negligence/gross negligence, fraud, securities fraud, fraudulent transfer, conversion, equitable disgorgement and other charges.
The receivership stems from the Feb. 7, 2003 federal grand jury indictment against Robert Roy Dillie, a 47-year-old Fountain Hills resident, for 193 counts of wire fraud, money laundering and transacting in proceeds from a criminal activity, in connection with a Ponzi scheme that bilked mostly elderly investors out of millions of dollars.
Named after the Italian immigrant Charles Ponzi, Ponzi schemes are essentially accomplished by robbing Peter to pay Paul. In the early 1920s, Ponzi promised investors a 40 percent return on their money in 90 days in a postal inspection scheme. He paid early investors using money from new investors. By the time his scheme collapsed, Ponzi had taken investors for $10 million.
The SEC continues to warn if the return on an investment sounds too good to be true, it usually is.
According to the SEC, Dillie’s Scottsdale-based Mid-America Foundation, Inc. fraudulently raised $53 million through the sale of Charitable Gift Annuities (GGA) between January 1997 and October 2001.
Dillie represented to investors their funds would go into stocks, bonds and money market accounts. Instead, Dillie is accused of diverting $19.2 million of that money to a hidden account so he could live the high life. He gambled away at least $10.2 million in Las Vegas, bought a $1.6 million Las Vegas home, purchased a $52,000 Mercedes Benz and wrote himself checks amounting to more than $600,000.
In order to keep the Ponzi scheme alive, Dillie used approximately $7.9 million of investors’ money to make payments to earlier investors, and spent another $3 million in commissions to sales agents.
When the Ponzi scheme collapsed, Dillie told investors Mid-America had “disbanded due to inadequate assets.” There was a $44 million loss of investors’ funds.
Dillie claimed he was broke during his arraignment in February 2003, and requested a court-appointed lawyer.
So far, the SEC has taken action against Dillie in 20 states, including Hawaii.
Attorneys for the receiver filed an amended complaint earlier this month, adding additional charges and defendant’s, including Vannucci’s husband, John Vannucci.
The amended complaint states, “Defendant Sara Vannucci … received $5,429.30 of victim money as payment for facilitating the sale of Mid-America CGAs. At all material times, John Vannucci is and was the spouse of Defendant Sara Vannucci and at all material times Defendant Sara Vannucci acted on behalf of and for the benefit of her marital community.”
The SEC claims each of the defendant-agents breached their fiduciary duty, including the duties of loyalty, good faith, integrity and honesty and as a direct result, the victims have suffered damage by the loss of all, or a portion of their investment(s), including the facilitation fees paid to the defendant-agents.
Relief being sought includes the amount of their ill-gotten gains plus prejudgment interest from the date they received payment of each facilitation fee.
The damages are believed to be collectively over $2.6 million, plus pre-judgment interest.
The plaintiff asserts the victims had a right to rely on the advice of the defendant-agents who were acting in a fiduciary capacity as the victims’ attorneys, financial advisors, agents and/or brokers, when they purchased Mid-America Foundation CGAs. And, victims purchased worthless CGAs based on the advice of the defendant-agents.
The complaint also cites the American Council on gift Annuities and the National Committee on Planned Giving both assert payment of commissions for selling CGAs is “inconsistent with their charitable purpose.”
The facilitation fees paid to the defendant-agents for soliciting victims ranged from 8 – 10 percent of what the victims paid for the CGAs.
The complaint maintains the defendant-agents did not perform any reasonable or proper due diligence with regard to Mid-America Foundation, Mid-America Financial or Dillie. Had they done so, they would have known Mid-America Foundation’s sales brochure statement that Merrill Lynch, Pierce, Fenner & Smith managed the investment was completely false.
As to Dillie, they could have easily learned of his arrest for felony check fraud in Nevada, or perhaps the stipulated surrender of his insurance license in the state of Wisconsin in 1990, the denial of a license in Wisconsin in 1996, for failure disclose the 1990 action. He failed to disclose that same information to the state of Arizona, resulting in his Arizona license being “deemed expired.” Defendant-agents could have easily learned about the MGM Grand Hotel’s $473,000 judgment against Dillie in Maricopa County Superior Court.
Scottsdale resident Leonard Bestgen is also named as a defendant. Bestgen is believed to have received $104,248.32 of victim money in facilitation payments.
Interestingly, Bestgen also served as the original treasurer and chairman of the board for the Foothills Children’s Foundation (FCF), one of several foundations and LLCs formed by Vannucci. Vannucci was director and secretary, while Cave Creek resident Harold Sparks was president and assistant chairman/director and Carol Mellander, from Hoffman Estates, Ill. was listed as a director.
Vannucci formed the organization in 1998, claiming the nature of its business income activity as “non-profit fundraising.” The IRS Form 990 attached to their Arizona Corporation Commission (ACC) annual report indicated the foundation had $50,000 in cash.
The following year’s ACC annual report indicated Mellander was gone. Vannucci reported assets of $37,125 in a brokerage fund, $35 in cash. Expenses included $125 for brokerage and $3,300 for “gift annuity payments.”
The corporation commission lists their organization as “educational” although Vannucci continues to report it to be a “charitable” organization.
The FCF’s website lists current projects (as funds permit), including the “support, outreach and enrollment efforts of AvatarRx and state agencies in their efforts to bring health services to children, unemployed, veterans and seniors.”
By the end of 2000, Bestgen was gone and the financial disclosure statement indicated there was $32,000 cash invested in Prudential Fund Accounts and liabilities totaled $4,800 for “annuity payments.”
The account balance continued to dwindle. It began to look as though Vannucci was been operating a Ponzi scheme of her own.
Vannucci submitted two financial disclosure statements for with FCF’s following ACC report. Both reports were dated May 31, 2002. One said it was for FCF, showing $22,600 cash invested in Prudential Fund Accounts, with a liability of $5,000 for annuity payments and $600 in expenses for filing fees and computer work. The second report stated it was for the Pathway Foundation for Children, another one of Vannucci’s nonprofit organizations that appears to do nothing, indicated a $10 cash balance in Prudential Fund Accounts with no liabilities or expenses.
AvatarRx is another one of the Vannuccis’ nonprofit organizations. Formed in 2001, Vannucci is secretary, her husband John, the president.
The financials submitted with the annual ACC report is simply a check register report, which reflects a bank balance of $55. Deposits indicate they’re payments for either card fees or enrollment fees.
The expenses for the year include a $197.65 in August for an APS bill.
Vannucci has formed myriad LLCs as well. Last September, she formed One Source Business Advisors, LLC with Cynthia Foster, who also sells insurance and investment products as Foster Financial Services.
One week later, Vannucci formed Southwest Small Business Services, LLC with Attorney Daniel McCauley, III.
McCauley, who is defending Vannucci in this SEC case, was sanctioned by the bar last year as the result of a complaint.
While Vannucci was busy forming organizations, Bestgen was involved with his own. One of them, the He & Company Foundation, Inc., is listed as a nonprofit charitable organization and Bestgen as a director/officer since 1991. Although required by the ACC, most of the annual reports submitted by Bestgen did not include any financial statements. The 1995 financials reflected a $7,036 cash balance.
In 1998, all the other officers and directors resigned and the financial statement submitted showed a zero balance.
By 2003 records indicate Bestgen is the lone director/officer.
Bestgen was also listed as a director of a for-profit corporation called E Squared, Inc. The annual ACC report claims the company is involved in “science/research.” The financials included with their ACC annual report reveal assets totaling $53,819.
Jim Stapley, whom former Mesa City Councilwoman Joan Payne dubbed a “pervert in polyester” back in 1997, was E Squared’s president.
The Vannuccis have recently formed yet another corporation: AZRx, Inc.
While John Vannucci claims to be the administrator for AvatarRx, as treasurer of his wife’s Maricopa County Political Committee $500 Threshold Exemption Statement, he claimed to be retired.
Yes, Sara Vannucci is running for office. She’s running for Maricopa County Special Health Care District 2 as non-partisan. She’s the chair of her election committee and claims to be self-employed as an attorney. The only problem with that is she’s not licensed to practice law in Arizona.
Sara is also treasurer of her husband’s candidate campaign committee.
Yep, John Vannucci is running for office as well. The unemployed airplane mechanic set his sights a bit higher though, and has decided to run as a Democrat for State Senator, District 7.
He claims to have seven years of experience in working for children’s and senior causes, “through our nonprofit organizations, The Foothills Children’s Foundation, AZRx and AvatarRx.
He also claims to have “decades of experience as both a Small Businessman and union member.”
Speaking of unions … Sara Vannucci was offering health insurance benefits through a company called Spirit of America, claiming all one needed to do to qualify for enrollment was join the Production Workers Union, Local 707. According to Vannucci, it wasn’t necessary to be employed or represented by that union in any other way.
A “Recognition Agreement” form for the Production Workers Union, Local 707, displayed a signature line stating: “National Workers Master Contract Group, on behalf of Employer, by Sara Vannucci, President.”
Another signature line read, “Production Workers Union, Local 707, by Anthony J. Monaco, Pres.”
Some time ago, the National Labor Relations Board (NLRB) issued a decision and order regarding a bizarre takeover of Local 703 IBT’s (International Brotherhood of Teamsters) employees and assets by Local 707, both affiliates of the National Production Workers Union in Chicago, Ill.
The story that unfolds over the 36 pages reads like a gangster novel, complete with a reference to a U.S. Department of Justice Racketeer Influenced and Corrupt Organization Act (RICO) suit filed a few years earlier. Remedies being sought then included direct election of officers and the removal from office of various individuals throughout the organization whom, it alleged, “were closely tied to elements of organized crime, particularly La Cosa Nostra.”
Political opposition to those controlling the unions was due to rival factions in the Chicago underworld, not other Teamsters locals.
When a candidate was hospitalized after his car blew up on a public street in Chicago, several witnesses referred to the bombing as an “unfortunate accident.”
The members of the executive board of the local, who were members of the faction that assisted in carrying out the plan, which became the substance of that litigation, included no other than Anthony J. Monaco.