By Brian Mahany
Pastor Tyrone L. Gilliam claims to be a man of God, a hip-hop promoter and a TV personality. He also claims that he operates a successful investment firm. Now he can add being under indictment to his resume. Gilliam is accused of defrauding investors out of millions of dollars.
Investment fraud comes in many flavors. Prosecutors say that Gilliam was hawking STRIPS or “Separate Trading of Registered Interest and Principal of Securities. Essentially, a stockbroker “strips” away each of the future interest payments from a Treasury Bond and sells them on the secondary market. Instead of selling STRIPS, however, the government says he “stripped” investors of their hard earned money.
Gilliam claimed his system would yield returns of 5% per week. From a T note! That’s a definite red flag and one that wasn’t heeded by investors. One columnist calculated that with compound interest, Gilliam’s STRIPS claimed to yield more than 8953 times the underlying Treasury instrument yield.
We often see that victims of investment fraud don’t fully understand what they are investing in. Today’s complex derivative securities are often not even understood by brokers and the other financial professionals that sell them. Simple logic, however, should cause one to question how anyone could generate 5% weekly returns.
An old copy of Gillman’s website reveals that he “began a highly profitable business in artist and concert promotions.” So far, so good. We know that Gilliam’s claims to be a multitalented guy. The next sentence, however, causes concern: “Due to the extreme success of Tyrone’s concert promotions… he was able to purchase new cars, fine clothing, jewelry and cellular phones.”
Successful investment firms don’t brag about the ability of their principals to buy cars and fancy clothes!
The website showed a map with dozens of red dots called “locations” scattered across the globe but no addresses. An investigative reporter for Reuters tracked down the global “headquarters” for Gilliam’s operation in Philadelphia. It’s a virtual office or what I would call a mail drop.
Perhaps the biggest red flag is that Gilliam was not registered with any of the regulatory agencies. If you sell commodities, stocks or securities you must be registered. The SEC, Financial Industry Regulatory Authority (FINRA) and CFTC all offer free online services to check the status and regulatory history of both individual stockbrokers / investment advisers and the firms that employ them.
One investor reportedly gave Gilliam $4 million. How does this happen? Hindsight is a wonderful thing and today that decision sounds ridiculous. Unfortunately, many Ponzi schemes are successful because the promoter pays off the first few investors. There is nothing more powerful than learning from friends that they DID earn 5% weekly returns.
The endorsement or success story that comes from a friend is often enough to override any logic we may possess.
Was Gilliam’s STRIPS scheme a scam? That’s up to God and a jury of Gilliam’s peers to determine.
If you are the victim of fraud call us. Investment fraud, securities fraud and phony welfare benefit schemes, we have seen it all. The fraud and asset recovery lawyers at Mahany & Ertl help victims of fraud get back their hard earned money. Cases can often be handled on a contingent fee basis.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services available in most locations.