Table of Contents
- Resource Development International Ponzi Fraud case in King County Superior Court
- God bless you – these guys won’t ; A pair of South Sound con men who often invoked religion have gone to prison. They leave their investors to pick up their damaged lives. Some of them still believe.
Mansfield v Bastrom
Resource Development International Ponzi Fraud case in King County Superior Court
From Tacoma News Tibune:
God bless you – these guys won’t ; A pair of South Sound con men who often invoked religion have gone to prison. They leave their investors to pick up their damaged lives. Some of them still believe.
Before losing his future to an investment scam, Dick Mansfield had a fairly good life.
In his mid-50s, with a wife, two daughters and enough money to sustain pleasant dreams, Mansfield could look back over three decades of teaching and look ahead to a well-deserved retirement.
Then, in the name of God and with a talent for swindles, into Mansfield’s life came a Tacoma father and son who ran a time-tested scam featuring unnamed European banks and the promise of a financial return of up to 4 percent every month.
In came family friend Steven Bastrom, a former insurance salesman who offered his clients friendship, attention and, it turns out, the chance to lose their life savings.
But he sent his customers birthday cards, shared meals, attended their family gatherings, and now he says he’s sorry. He represented James Edwards and his son, David Edwards, the Tacoma pair who operated a company called Resource Development International.
With down-home piety, all the right answers and heads for big numbers, the Edwardses would go on to bilk perhaps 1,300 people nationwide of investments totaling, according to some estimates, $97.3 million.
The two were tried by a jury, unanimously convicted and recently sentenced in Santa Clara County, Calif., on charges of fraud, burglary and conspiracy.
They are both now in San Quentin State Prison beginning sentences of more than 27 years each.
Bastrom has not been charged with a crime. He does face a civil suit filed by 26 alleged RDI victims, and he has declared bankruptcy. A substitute teacher in the Highline and Federal Way school districts, he is also named in an investigation under way at the state Department of Financial Institutions.
Meanwhile, Dick Mansfield is at home in South Tacoma. He worries a lot. He calls his life “tortuous.”
He has assembled an archive that chronicles his relationship with Bastrom and RDI, and he wonders, in the quiet moments, how everything went so very wrong.
A Tacoma victim
“This has been more tortuous than I can explain,” Mansfield said. “I’m a wreck. To be robbed of your life savings, your future . . .”
He’s 59, a retired Tacoma teacher with 31 years in the classroom.
He figures he lost $175,000 to RDI, invested through Bastrom.
“He caught all of us at our most vulnerable time. We were there to be milked. It was unimaginable that he could be putting any of us at risk.”
Mansfield had previously invested in annuities through Bastrom and made a profit.
Then came RDI.
“In January 1999, he came in the door and told us about this marvelous investment opportunity. It was a European program. That was as much as he could tell us.
“It must be good. This was Steve Bastrom.”
Mansfield recalls Bastrom discussing James and David Edwards.
“They were the best people on Earth. David was a genius. (Bastrom) just laid it on.”
Mansfield did receive a few interest payments. The investment began to sour when the checks stopped coming a few months later.
“It just built up a huge amount of anxiety,” Mansfield said. “The payments stopped, and we were getting these pious letters that were very sketchy.”
The delay was the fault of bank regulators, the letters said. There was a long European holiday when the banks were closed. One letter said that some brokers were killed in the attacks of Sept. 11, 2001.
The greatest shock for Mansfield came when The News Tribune reported that the Edwardses had been arrested in 2002.
“It was a Mack truck hitting me. I called Bastrom,” Mansfield said. “He said he was in shock. From that dark day, it has taken away my joy of living.”
Twice during a recent interview, Mansfield wept.
“My daughter wonders what happened to her dad. They’ve stolen my life.”
Mansfield and two dozen other victims have filed suit against Bastrom, who has declared bankruptcy.
“This is a very sensitive area because we’re running into lawsuits,” Bastrom said.
He confirmed that he has known Mansfield since 1984, and he said that Mansfield now “has run around and told people about me. Part of it is flat-out lies.”
Because of his relationship with RDI, Bastrom agreed last August to pay a $5,000 fine to the state insurance commissioner in lieu of suspension of his license to sell insurance.
According to court documents, he has paid $220,000 to the receiver – the person charged with collecting and distributing whatever assets remain – in the RDI case.
He has claimed that he was misled by James and David Edwards, and he has acknowledged that he negligently referred clients to the company. He denies doing anything illegal.
In a review of an interview with Bastrom’s attorney, state insurance commissioner investigator Tom Talarico said Bastrom had “about 30 insurance clients invest in the RDI investment” and that Bastrom “was paid about $155,000” in commissions.
“The RDI investment has been a nightmare for Mr. Bastrom,” Talarico wrote. “Mr. Gingold (Bastrom’s attorney) writes that Mr. Bastrom is very sorry for what has happened with the RDI investments, and he has done everything to make things right.”
Bastrom’s 2003 Christmas letter speaks proudly of his work with “the Christian Ski School at Stevens Pass” and a trip the previous summer to the Young Life Camp Malibu in B.C.
Late Friday, the Department of Financial Institutions issued a “statement of charges” against Bastrom and 10 others pertaining to RDI. The order imposes fines of $200,000 on the Edwardses, $30,000 on Bastrom and between $20,000 and $30,000 for others.
“I will make sure that this statement of charges comes to the attention of the appropriate criminal authorities,” said Mike Stevenson, director of the securities division of the department.
The hook was the interest – 4 percent per month – and the bait was a mixture of friendship, religion, fanciful tales of unnamed foreign banks and the kind of whispered secrets that bound investors together into something resembling a private club.
Prosecutors, the Securities and Exchange Commission and the SEC- appointed receiver say the scheme had its origin with smaller, similar scams. But this was the big one – the largest scam of its kind ever based in Washington.
It was a type of Ponzi scheme, a “prime bank note” operation. Certain European banks, so the legend went, share large concessions and profits. Only the big boys play.
But the Edwardses knew somebody, they said. They had a way inside. They were offering the little guy a chance to eat at the grown-ups’ table. This was real money.
Using a series of “facilitators” who sold the investments to individuals, RDI would go on to raise upwards of $100 million from as many as 1,300 investors, according to the SEC.
No one seems sure of the final scope of the scam.
Last February in Santa Clara County, James and David Edwards were convicted of securing $73.6 million from more than 1,000 people nationwide.
They each received a sentence of 27 years, eight months in prison. They also have been ordered to pay $37 million each, plus $11 million interest, plus a civil penalty of $120,000 to the federal government, and at least $2 million for restitution in the criminal case.
The original complaint charged that the Edwardses operated RDI from January 1999 through March 2002. They were arrested in July, 2002 and sent to Texas. They were later extradited to California.
The trial took two months. The jury deliberated for a few hours.
In December, one of the jurors in the case wrote to the officer who would prepare the pre-sentence report for the pair.
“I would urge you to recommend the maximum possible sentence for both Jim and Dave Edwards,” the juror said.
“It really broke my heart to see the type of victims that (the Edwardses) targeted. The . . . fraudulent scam basically took advantage of some of the weakest people in our society.
“(They) implied that the members of the jury should vote for acquittal since they were men of such strong Christian faith. I was among several members on the jury who were both shocked and sickened that they would use their faith and ask us to use ours in such a manner.”
As to the use of the attacks of Sept. 11 to find sympathy, the juror said, “The use of this national tragedy is simply outrageous and deserves to be punished harshly.”
According to Santa Clara prosecutor Paul Colin, the judge, in offering the sentences, called James and David Edwards “evil incarnate” and “morally and ethically bankrupt.”
In San Quentin State Prison, they were unavailable for comment.
A South Sound family member familiar with the case has not responded to a request for an interview.
More bad news
Investors who made a profit from their investments with RDI are being told that they must return that money to Larry Warfield, the government-appointed receiver.
“The money has been stolen, and I’m just trying to get back what I can,” Warfield said.
Victims have filed claims of $51 million lost in the RDI scheme.
“We have $1 million to distribute,” Warfield said. “I would hope we’ll get maybe another million. If we’re lucky, we’ll have $2 million to distribute.”
That leaves less than a nickel on the dollar.
Some of the nearly $100 million, he said, was simply spent by the Edwardses. The majority was distributed to the facilitators. Some was given back to what Warfield said are 1,500 investors.
“Some profited, and some didn’t lose as much as others.”
Those who profited are finding a second chance to rue the day they heard of RDI.
“I have sent letters to all people who have received a profit,” Warfield said. “I have filed lawsuits against some of the largest profiteers. I’m going to expand that lawsuit to include additional profiteers.”
He has so far sent 395 letters, with 167 going to Washington investors. Sixteen letters went to Tacoma, nine to Puyallup, eight to Gig Harbor, three to University Place, one to Anderson Island.
“There’s a lot of gullible people out there,” he said.
Everybody loses – even the winners.
“The message has to get out: Be careful.”
James and David Edwards represented themselves in Santa Clara County.
Colin of the Santa Clara County prosecutor’s office represented the people.
Colin said he could trace more than $73 million of the money. Thirty million went back to the investors, $30 million to the facilitators, $2 million to the Edwardses, and just over $11 million was still missing.
“It was definitely $73.6 million that came into RDI from a thousand to 1,300 investors,” he said.
The money was sifted through a bank in Nevis, West Indies. None of it went to European banks as an investment, Colin said.
Colin said he had never known jurors to ask to attend sentencing. In this case, five came to listen.
“That kind of juror interest is really based on juror outrage,” he said.
Attorney John Tollefsen of King County is representing 26 investors in a suit against Bastrom. He hopes to recover any judgment from Bastrom’s former employer, for whom Bastrom sold legitimate investment products.
Does Tollefsen believe that Bastrom deserves sympathy, that the Edwardses may have hornswoggled and hypnotized him as well as RDI investors?
“Yes, he decided to believe the Edwardses,” Tollefsen said. “But at some point, a professional has to be held to a higher standard. When you license a professional in securities, he’s responsible to know that you diversify, that you don’t take a high risk with people in retirement. All those things were ignored.
“When somebody comes to you and says, ‘Look inside my coat and see something only the wealthy see, here’s an inside deal,’ it’s never true. It’s never true. Run.”
Tollefsen speculated there are other potential plaintiffs who could join his suit, but won’t.
“I still have people who will not hire me because they’re sure the Edwardses will pay. These are educated people. There’s a human sociological pattern that happens when they become believers. It’s sort of a religion. You can’t shake them.”
Ralph Martin of Yelm met Bastrom while working for the Federal Way School District. Some early investments made money and seemed safe.
“About five years ago, when he first presented (the RDI scheme), I didn’t bite,” said Martin, 77.
But Bastrom returned an investment that Martin thought had failed. He hand-delivered a check for $15,000.
“That was the sucker punch,” Martin said.
He would go on to invest more than $50,000.
“He was friendly. He was religious. We exchanged Christmas cards. We had him over for lunch and dinner. He was what I considered a good friend. He sent us birthday cards,” Martin said.
Did Martin understand what a prime bank note was?
“Not really. The way he explained it to me was that the money was already available. He said it was a short note, and it’s all overseas.
“The blame is all on myself. I’m very conservative. As I think back on it, it’s absolutely crazy that I got myself into this.”
Also from Yelm, Elaine Daniels, 60, lost $15,000.
Did she understand the product?
“It didn’t make sense. I didn’t have a clue. I’d known (Bastrom) awhile, and someone else I knew knew him. I figured he was a legitimate guy.”
Then came the news that the money had evaporated.
“I should have had enough sense to look into it,” Daniels said. “He had us all suckered. You hear about this happening to other people. You never think you’re going to be that dumb.
“It was God bless this, and God bless you. He loved his mother.
“I’m a whole lot more leery now.”
C.R. Roberts, 253-597-8535
SIDEBAR: Why pigeons exist
How is it that sensible, educated and otherwise financially conservative people get involved with schemes such as Resource Development International?
And even after the scams begin to crumble, why do some investors remain true believers?
Tacoma attorney Richard Brady, formerly a registered representative for a stock brokerage, also has worked for the state Department of Financial Institutions. He has represented clients who have invested in various ill-fated swindles.
In the RDI case, he said, “The Edwardses engaged in what is called affinity fraud. They preyed upon a group of people who shared religious values. A lot of victims came from their church.
“When people are doing business with a friend, they let their guard down.”
Once investors decide to offer their trust in such matters, he said, “they’re psychologically unable to listen to reason. They just believe.”
The secrecy surrounding such deals helps develop a bond, he said, and when the immediate returns typical of a Ponzi scheme begin coming in, investors “really believe that they have a good deal going. That’s when they go in for more.”
They are not led by greed, but something more akin to faith.
As to James and David Edwards, each now facing nearly three decades in the California prison system, Brady said, “I can guarantee you that they never, ever dreamed that they would get that much time.”
C.R. Roberts, The News Tribune
An extensive account of messages from Resource Development International to investors can be found at www/thenewstribune.com/ business
SIDEBAR: Prime Bank Note Fraud
This is a form of the age-old Ponzi pyramid scheme.
How it works: Organizers solicit money, some of which is paid to investors who are at the top of the pyramid. As more investors put money in, the base grows larger, and all the more money is needed to repay those above. These schemes cannot succeed – and they’re illegal.
The fraud: Prime bank notes are explained as investments in overseas banking markets. The notes and the markets do not exist. Promoters often offer sophisticated-looking documents and complicated explanations that make the investment seem official. Organizers tell investors they have special access to programs available only to financiers on Wall Street or in European financial centers.
The lure: Promoters promise high, guaranteed returns of anywhere from 2 percent to 200 percent monthly. They typically demand confidentiality, saying the programs are a secret.
Actually, they’re a lie. There is no such thing. It’s a scam.
To learn more: Go to the U.S. Securities and Exchange Commission Web site, www.sec.gov, or the Washington Department of Financial Institutions, www.dfi.wa.gov.
C.R. Roberts, The News Tribune
Copyright: The News Tribune, all rights reserved