Hard Money Lender Sentenced in Investment Fraud Scheme

admin —  June 21, 2012 — 1 Comment

Dan Oaheyoh Two Feathers, 56, Hamilton, Montana, has been sentenced in connection with his guilty plea to conspiracy to commit investment fraud, investment fraud, receipt of stolen property in interstate commerce, and money laundering.

As previously reported on Mortgage Fraud Blog, during late 2007 or early 2008, Two Feathers became acquainted with Shawn Swor, a mortgage broker in Missoula, Montana whose business consisted largely of making hard money loans to clients who could not get loans through conventional banking means. At the time, in late 2007 and early 2008, Swor was looking into funding sources from a number of people, mostly over the Internet, who would contact him promoting investment ideas involving securities. One of the funding sources Swor met over the internet in late 2007 was Terrence Paulin, who also presented himself as a hard money lender and broker. Swor started working with Paulin identifying the validity of different funding sources offered over the internet.

When Two Feathers met Swor in late 2007, Two Feathers claimed he knew several different ways to generate cash flow through the purchase and sale of securities in Europe; providing large rates of return for investors as well as the brokers and traders which could be used to funds the hard money loans for Swor and Paulin. In February of 2008, Two Feathers, Swor and Paulin decided to start a business to offer investments in high yield investment opportunities using several different leveraged investment and securities programs. On February 26, 2008, Two Feathers, Swor and Paulin established and registered DTF Consulting Groupas a Missoula, Montana, company.

Two Feathers proposed using a large security, such as a Letter of Credit or a Note, which could be leased from a hedge fund, pension fund or bank. Once the security was in hand, the concept was to borrow against the large security and those funds would be used to invest in a risk free investment such as government securities. Two Feathers explained that he had connections in the world of international finance and international banking experience and could purchase securities at a discount and sell them in Europe at a premium. This would allow for additional profit margin on each transaction completed.

The DTF principals would solicit investors whose money would be used to secure the large security through a lease. Prospective investors would, in a short period of time, receive a substantial profit from buying the government securities at a discount and selling them at a premium.

In March 2008, Two Feathers, claiming to be an international financial trader with Wachovia Bank, met with potential investors in Denver, Colorado, and promoted a leveraging investment opportunity which he represented would produce remarkable profits within 30 days. At that meeting, he assured potential investors that his investment program was sound and had produced results in the past.

On April 11, 2008, Two Feathers and Swor met with potential investors in Nashville, Tennessee, and promoted their leveraging investment opportunity and promised extremely high returns of invested funds within a short period of time. Swor told potential investors that he had personally invested money in the leveraged investment program that he and Two Feathers were promoting. One witness to this meeting indicated that Swor represented that he had made millions from the investment scheme that he and Two Feathers were promoting.

Paulin manufactured a fraudulent Letter of Credit from Wachovia Bank in the amount of $1.5 billion to show potential investors that DTF had the necessary negotiable instrument available to make the investment trading program work. Paulin claimed when interviewed by law enforcement that the fraudulent document was created at Two Feathers’ direction and request. Two Feathers advised investigators that it was Paulin’s idea and that he did not request or direct its creation, although he admitted knowing about the Letter of Credit. It was Paulin’s understanding was that the Letter of Credit was to be used to entice potential investors into DTF’s trading program. However, Two Feathers started using the letter in other ways, including representation of the document as genuine to a real estate agent for the attempted purchase of property.

Swor and Paulin had a falling out with Two Feathers after the real estate agent discovered that the Wachovia Bank Letter of Credit was bogus and turned it over to local law enforcement and both stopped promoting the DTF scheme in June of 2008.

The DTF promotion attracted eight victims. A secondary scheme was tailored more as an advanced fee scheme where the investor would pay money up front for a hard money loan. Three more victims paid the advanced fee on the promise that DTF could and would secure loan funds. The total loss for all 11 victims between February and June of 2008 was approximately $800,000. The money, in whole or in part, was wired to the DTF account at Farmers State Bank in Victor, Montana, which was controlled by Two Feathers.

While the DTF enterprise was in operation, Two Feathers, on his own, was also promoting the DTF leveraging plan, or one similar, using the zero coupon Stripped Treasuries model, directly to investors or intermediaries working for them. Two Feathers again represented that he had a great deal of experience making these types of investments and a working relationship with D.A. Davidson, a regional investment firm in Montana, which allowed him to purchase the Treasuries at a discount and resell them on the open market. Each transaction would generate several points of return on investment. These transactions would be consummated several times a day. By the end of a designated period of time, Two Feathers guaranteed, the investment would provide a substantial rate of return for the investor.

Using a front company called TLT Holdings, Two Feathers told investors that his program was producing very large rates of return buying and selling U.S. Treasury Bonds. TLT Holdings had accounts at the Bank of Bermuda, the Bank of New York (through an intermediate institution called EKN Financial), and at D.A. Davidson in Montana. Approximately $850,000 of the monies provided to Two Feathers from this stage of the scheme was frozen by D.A. Davidson when Two Feathers attempted to get the money out of the country and into Switzerland into accounts under his control.

That portion of the scheme – where Two Feathers did not use associates to promote the leveraging platform – attracted four investors and grossed another $1,100,000 [$850,000 of which was intercepted] between August and September of 2008.

The evidence would have shown that Two Feathers has a history of investment fraud. In 1999, Two Feathers, then known as Dan Latham but using an alias of Dan Two Feathers, was convicted in both the Eastern and Southern Districts of New York, and sentenced to 41 months of incarceration and ordered to pay $5,162,558 in restitution. He later legally changed his name to Dan Oaheyoh Two Feathers. In that case, Latham and his associates used two sham Manhattan, New York companies, John J Barney and Associates, and Barney International Holdings, to convince victims that an overseas lender, Panacea Bank and Trust, would finance their loans.

The investigation was a cooperative effort between the Federal Bureau of Investigation and the Criminal Investigation Division of the Internal Revenue Service.

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One response to Hard Money Lender Sentenced in Investment Fraud Scheme

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