The man federal authorities allege was behind a $10 million Bothell-based con game was in US District Court March 1 facing four counts of wire fraud and five counts of money laundering.
According to indictment papers filed against Kevin Halverson, his Bothell company, Total Ticket Services (TTS), was actually a front for “a classic ‘Ponzi’ scheme.”
Again according to indictment papers provided by the Seattle field office of the IRS Criminal Investigation unit, the purported business of TTS was the purchase and sale of tickets to major public events such as the Super Bowl and the Indianapolis 500 along with various concerts and shows in Las Vegas.
The indictment states that beginning in about January 2003 and continuing until about September 2006, Halverson allegedly sought investments in his ticket company, supposedly promising to buy tickets to events and sell them at a profit, splitting the proceeds with his investors.
In its indictment, the US Attorney’s office argues that instead, Halverson used investors’ money to pay “‘interest’ on earlier investments; to repay principal on earlier investments; and, for his own personal benefit, including his gambling.”
IRS Criminal Investigation Special Agent and Public Information Officer Daniel Wardlaw said his agency and the FBI conducted the investigation into Halverson.
According to Wardlaw, a “Ponzi” scheme is essentially an investment fraud in which the operator offers a high financial return not available through traditional investments. However, instead of investing victims’ funds, the “Ponzi” operator pays “dividends” to initial investors using the amounts paid by subsequent investors. Such schemes generally fall apart when a sufficient number of new investors cannot be found to allow the continued payment of “dividends.”
Such a scheme is named after Charles Ponzi of Boston, who ran a company offering a great rate of return for an investment in postal coupons. The scheme fell apart when he was unable to pay investors.
Judging from the indictment against Halverson, some of his alleged activities came to light after three different creditors filed involuntary Chapter 7 bankruptcy petitions against Halverson and his wife in 2006.
In responding to those filings, Halverson claimed to have roughly $450,000 in cash from the proceeds of ticket sales, but also claimed about $10 million in debt, mostly in the form of unpaid loans.
The indictment continues that Halverson promised investors as much as a 50-percent return on short-term investments, but asked that all investments be made in the form of cash or cashier’s check.
“It was further part of the scheme and artifice to defraud that… Halverson used a small percentage of the invested funds to actually purchase event tickets so as to perpetuate the image that he was operating a successful, ongoing ticket sales business,” the indictment reads in part.
When money came due to investors, the US attorney states Halverson routinely would ask those to whom he owed money to rollover their original investment or even to invest more. About half way through the indictment, authorities allege the total dollar amount turned over to Halverson was in excess of $10 million.
In a separate document, the US attorney’s office moved that Halverson be detained awaiting trial, citing him as a flight risk. According to Wardlaw, Halverson remained in jail as of March 3 awaiting a detention hearing set for sometime this week. Wardlaw said each count of wire fraud carries a maximum sentence of 20 years in jail and a $250,000 fine. Ten years in jail and a $250,000 fine is the maximum for each count of money laundering.
