James E. Brown News Release by dea

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									                                 UNITED STATES ATTORNEY’S OFFICE
                                 EASTERN DISTRICT OF VIRGINIA
                                  ALEXANDRIA         NEWPORT NEWS          NORFOLK         RICHMOND

                                 CHUCK ROSENBERG, UNITED STATES ATTORNEY

FOR IMMEDIATE RELEASE:                                      September 18, 2006

Jim Rybicki                                                 Further Information Contact:
Public Information Officer                                  Sue Vick (804) 819-5471
Phone: (703) 842-4050 Fax: (703) 549-5202
E-Mail: usavae.press@usdoj.gov
Website: www.usdoj.gov/usao/vae


                  Multi-Million Dollar Ponzi Investment Scheme Shutdown


        (Richmond, VA) – James E. Brown, Jr., was indicted today on charges of mail fraud in
connection with a multi-million dollar Ponzi investment scheme, and possession of a firearm by
a convicted felon. He faces a maximum of 20 years in prison on the fraud charge and 10 years
on the firearms charge. Chuck Rosenberg, United States Attorney for the Eastern District of
Virginia; Charles J. Cunningham, Special Agent-in-Charge, Federal Bureau of Investigation
(FBI); Charles Pine, Special Agent-in-Charge, Internal Revenue Service (IRS); Guy J. Cottrell,
Inspector-in-Charge, Postal Inspection Service (USPIS); Major William Warner, Chesterfield
Police Department; and, Richard Foelber, Deputy Chief, Commodity Futures Trading
Commission (CFTC), announced the indictment at a press conference today in Richmond.

       As described in papers filed in court, Brown was the president and sole owner of Brown
Investment Services (“BIS”), which is a Virginia based company located in Chesterfield County.
BIS employed approximately 10 individuals in various capacities.

        According to the indictment, beginning in or about April of 2006, Brown held seminars
in the Richmond area to attract investors to BIS. During the seminars, Brown and his employees
told potential investors that BIS could guarantee to double their investments every thirty business
days (six calendar weeks). Brown claimed that he was an expert in foreign currency trading on
the Foreign Currency Exchange Market (FOREX) and told potential investors that he would
personally invest their money in the FOREX. Potential customers were told after the initial
thirty business days of an investment; investors could roll their investments over and BIS would
once again guarantee to double their investments. BIS and Brown would be compensated for
Brown’s investment services with investment proceeds in excess of the investors’ guaranteed
returns.
       As a result of Brown’s seminars, it is alleged, over 350 investors, including individuals,
small businesses, and churches, invested money through BIS. Based on guarantees and
representations made by Brown and his employees, customers invested approximately $8 million
in BIS with the understanding that these funds would be invested in the FOREX market. These
funds were deposited into a BIS bank account, over which Brown exercised sole control and was
the only authorized signatory.

         The indictment alleges, however, that the vast majority of the approximately $8 million
in investor funds was never invested in the FOREX market. Instead, according to the indictment,
Brown transferred $445,000 of investor money from the BIS bank account into his personal bank
account, and then wired that money into a personal FOREX trading account. It is also alleged
that Brown used approximately $2.6 million obtained from investors who came into the scheme
later to pay off earlier investors, in an effort to conceal the fact that he was not investing the vast
majority of the money in FOREX. Brown falsely told those investors receiving payments, it is
alleged, that they were being paid with the proceeds of Brown’s “expertise” in trading in the
FOREX market.

       Using approximately $2.9 million obtained from investors, the indictment charges,
Brown purchased approximately 28 luxury vehicles for himself and his employees. It is also
alleged that Brown made approximately $469,000 in cash withdrawals and approximately
$159,000 in debit card transactions from investor funds. It is further alleged that Brown used
investors’ money to purchase more than $154,000 in jewelry, and to pay BIS employees’
approximately $640,000 in salary. Despite having no discernible prior experience in the
investment industry, the indictment charges, BIS employees had an average annualized salary of
approximately $115,000 each and included Brown’s personal fashion consultant whose primary
duties were to pick out Brown’s clothes and set them out each morning.

        United States Attorney Rosenberg stated, “Mr. Brown orchestrated a massive fraud, with
lofty promises and nothing to back it up.”

        The investigation was conducted by the FBI, the IRS, and the USPIS. In addition, the
CFTC provided assistance related to the FOREX trading account FOREX market issues. The
Chesterfield County Police Department also provided assistance to the investigation. Assistant
United States Attorney Michael Dry is prosecuting the case for the United States.

      Criminal indictments are only charges and not evidence of guilt. A defendant is
presumed to be innocent until and unless proven guilty.

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