By David G. Hanger
August 21, 2005
At approximately 2 p.m. Malaysian time on Tuesday, August 16, 2005, the main offices of PIPS were raided by "15 to 20" Malaysian Central Bank agents under the command of Inspector Mazlan. The bank agents were escorted by several uniformed police officers. All computers, servers, telephones, other electronic devices, and records were confiscated by bank authorities, and PIPS was shut down.
According to reports from reliable sources on the scene, the Marsdens "are offering all the assets of PIPS to the Malaysian authorities, no doubt in an attempt to bargain their way out of trouble. What this will mean for the members I am unable to predict." "A great deal of the funds appear to have been squandered on" unprofitable projects.
"The Malaysian authorities are hoping to be in a position to bring them to trial some time in October but admit that they are hampered by the lack of adequate records." Malaysian authorities are confident they will get what they need by analyzing the computer records, but acknowledge "some pretty laborious work" will be involved. Likely sentence for this type of crime in Malaysia is seven years. Reports indicate Malaysian prisons are among the most miserable in the world.
Despite the continued wishful thinking of tens of thousands of victims worldwide, PIPS is dead. There yet remain the hundreds, if not thousands, of 'PIPS franchisees', who scammed the scam and their numerous neighbors by sending Bryan Marsden's own funny money, PicPay, back to him and pocketing your cash. Many of these 'PIPS franchisees' have clipped their neighbors for tens and even hundreds of thousands of dollars. This fraudulent activity is felonious in most jurisdictions. The researchers and private investigators have substantiated how this scam operates and who has benefited, and it is now up to law enforcement authorities on all levels to carry the baton forward. Substantial funds are recoverable at the local level.
On or about May 19 of this year Mr. Quinten Warren of the Alaska Banking & Securities Division advised me that Bryan Marsden would be behind bars within two months. In this assessment Mr. Warren was incorrect; it took three months. That law enforcement had next to nothing to do with this result is the interesting aspect of this part of the PIPS story. The investigation that was done which culminated in the arrests of the Marsdens and the shutting down of PIPS was conducted by a small handful of professionals in the private sector. In the end, however, what actually activated law enforcement in Malaysia is what the folks in law enforcement have been asking for all along; a complaint.
Before their story is forgotten in the midst of court cases and the many other actions likely to emanate from this point forward their efforts deserve to be noted. PIPS, a phenomenon of the internet, was brought down in part by the internet, for the parties to this demise reside in all instances literally continents away from each other, and few of these individuals have had the opportunity to physically meet with each other. A writer, an accountant, a private investigator, and a legal team representing a small handful of disgruntled investors were the folks who brought PIPS down.
By the end of June the case against PIPS was moribund. Cease & Desist Orders remained faddish, and after Texas and Alaska started it the states of Nebraska, Pennsylvania, Missouri, and others followed. The FBI has been aware of the situation for quite awhile. For the most part, nonetheless, the efforts of law enforcement were advisory and symbolic. PIPS had not been paying out anything to speak of to its membership since the fall of 2004, had been vilified by the press and by numerous government enforcement agencies, and yet PIPS and PIPSters persisted in believing they were the possessors of special knowledge that would make them all rich, and all the rest of us were just a bunch of fools for not joining in.
For a while some students of this phenomenon were satisfied with the explanation that this seemingly cult-like behavior explained this disconnection; a bunch of 'kool-aid' drinking fools had just gone off the deep end. When Mr. Owen Platt, a successful writer about financial scams, contacted me on June 21, among the subjects discussed was this oddity that PIPSters still adamantly believed in PIPS despite the fact that PIPS by that time had in fact been a dead duck for quite awhile. The 'cult' explanation was just not adequate to justify this level of continued support by PIPSters. Something else was going on.
While there are PIPS clubs all over the world and all over the United States, by virtue of this and that in the way of circumstance the two hot spots of PIPS activity at the local level most frequently discussed were Kells, Ireland, and Ketchikan, Alaska. Kells is a community with an area population of 6000 or so; Ketchikan argues with itself whether its population is 11,000 or 15,000 people, and season by season the population is probably even more variable than that. Both appear generally to be blue-collar communities, albeit the Ketchikan tourist industry might pedantically argue to the contrary on that subject. Both have recently experienced population declines and weak local economies.
No question who put Ketchikan on the map. I put out a 'fraud alert' on Dick Kauffman's SITNEWS intended for local consumption, and because I put it on letterhead it became the first commentary denouncing PIPS that was signed by an accredited professional in the financial field. A far superior article had in fact been written by Mr. Tony Levene in the UK publication THE GUARDIAN in late 2004, but unfortunately not enough people read it. SITNEWS has managed this story very well, and has enhanced its reputation nationally and internationally accordingly, and the commentaries written by such local professionals as Bill Tatsuda, Charlotte Glover, and Mary Lynn Dahl have created what has been described by others "as the most reliable source of information on the subject of PIPS available anywhere." That is probably a considerable overstatement, but it has been a job well handled. The PIPS trolls have found no footing in Ketchikan.
The situation in Kells, Ireland, was brought to the attention of the world by an anonymous young man who hides behind the internet moniker "Paddybawn." He has been howling anonymously for months in internet forums about what is going on with PIPS in Kells. All evidence indicates he is afraid to do anything else. Described by one source as "a young man with a chip on his shoulder" he constantly laments the dilemma of his community, thinks it would be embarrassing for the world to know what's going on there, and then broadcasts to the world what is going on there. Apparently a rather conflicted young man in his mid-twenties, he clangs loudly from the shadows.
His clanging brought attention to a situation where purportedly as many as one out of three residents of Kells bought into PIPS. One out of three is probably another considerable overstatement, but there is no question today that a lot of people in the Kells area got conned.
A graduate of the London School of Economics, Mr. Owen Platt has recently written about bank fraud in Grenada and is highly respected in his field. His recent book is used by many in law enforcement as a guide for dealing with these types of scams. He resides in the Loire River Valley in France. He was asked not long ago by his publisher to write a book about PIPS. Early on in our conversations I pointed out to Owen that the way things were going this was going to be a long, drawn out story, that law enforcement if it was moving at all was moving very slowly, that PIPSters had yet to give an inch; and if he wanted to write the story any time soon, he would probably have to help make some of the story happen. A private investigator was sent into Kells to study the PIPS phenomenon there.
In the meantime Mr. Platt assisted in coordinating activities for a group of disgruntled investors and their legal team. This ultimately brought Marsden down. The details of this story belong to others, but formulating and directing the complaint was not a straightforward endeavor.
By July 21 the preliminary investigative report from Kells was completed, and this was revelatory. Quite a number of individuals and institutions have known for quite some time that with PIPS there has been a lot of scammers scamming other scammers going on. Bryan Marsden invented his own funny money, PicPay, probably not considering initially how imaginatively others would use this worthless, not even existent on paper currency to scam their neighbors and to scam even Bryan Marsden himself. For months people have been trying to dump this phony junk on unsuspecting fools via such things as eBay auctions.
What the Kells investigation brought into focus was why so many people still believed in PIPS in the last week of July 2005. By this point in time Bryan Marsden's PIPS had already fallen apart. His key people had all walked out on him, and his house of cards was crumbling around him; and still PIPSters believed in PIPS.
There is certainly a 'nut' factor involved, but the more startling reality remains how many individuals all over the United States, all over Europe, and all over Australia, just to name a few places, decided to become in effect "franchised" scammers and began stealing from their friends and neighbors and pocketed all of the proceeds themselves. It is very possible that these individuals stole a lot more money than did the Marsdens.
The method in fact is quite simple. I labeled it "couponing"; others call it the "cloning of PIPS accounts." The label does not matter. Some jolly PIPSter convinces a new victim that PIPS is a great deal, and the new victim pitches anywhere from $500 to $5000 in real cash money into the deal. Our jolly PIPSter uses his 'PicPay' to sign you up with PIPS and sticks your $500 to $5000 in his pocket. He rips you off, and he rips Marsden off at the same time. And cheeky, cheeky, he blames Marsden for his crime. The justification for this conduct is self-centered and bizarre. Our jolly PIPSter sent Bryan Marsden some money, then watched numbers progress on a computer screen: 1, 2, 4, 8, 16, 32, 64, 128. It is literally that lame. So some months later our jolly PIPSter actually wants to believe that his $500 has grown to $150,000 or more because of a bunch of fictional numbers on a screen. When, therefore, he can no longer withdraw his "money" from PIPS in Malaysia, he goes into business for himself: Cash in, nothing but 'PicPay' out. He is not stealing, our jolly PIPSter will insist, for he has provided you with exactly what you paid for, a PIPS membership starting out at such and such a number, whatever you put in. There are, of course, the even more unconscionable individuals who do not need any self-justification whatsoever for their stealing; they just enjoy doing it.
There are hundreds, if not thousands, of these individuals out there; PIPS franchisees. They've put together their little PIPS hamburger stand on the corner and are doing their best to steal the neighbors blind. PIPSters still believed in PIPS the last week of July 2005 because many were still contentedly stealing from their neighbors; other PIPSters just did not want it to be understood how much they had been stealing. In Kells, Ireland, that became clear when it was established that about a half-dozen individuals in Kells were the primary beneficiaries of a scam done in PIPS name where very little of the money left town.
By the last week in July all the pieces were falling into place. There was a lot of hard thinking involved before anything was done; and then methodically PIPS was taken down in less than three weeks. The commentary in SITNEWS on August 2, 2005, had one simple purpose: To set Kells, Ireland off at that moment in time. It blew sky high. There is everything but blood in the streets right now in Kells, Ireland. The locals know they've been conned, and that a lot of the con is local. They also know who conned them. The Irish branch of the PIPS family has some interesting days ahead of them.
This was not done callously, but rather as part of a concerted campaign to insure this thing is eradicated at all levels. To take out Marsden and to leave these local scammers untouched is not even a half-assed job. In many instances it looks like locals took considerably more than Marsden, which makes them naughty enough to be sure, but it also provides the opportunity for the recovery of a lot more of the stolen money. We have verified beyond question in the field that the PIPS fiasco morphed some time ago into a massive endeavor involving an incredible number of people engaged in criminal activity. Local law enforcement now has a serious job of work on its hands in numerous localities, whether it wants it or not. PIPS International is already dead and gone; the PIPS locals are about to follow.
Again, by virtue of nothing more than circumstance the road to Ketchikan, Alaska, led through Kells, Ireland. There appear to be significant differences in the PIPS phenomenon in each of these two localities. In Kells it seems to have started in the pubs, "lottery tickets and PIPS memberships," as one of my friends described it; and in terms of local population it does appear to be widespread in the community. Now that the folks in Kells are aware they have been ripped off, they are really pissed. Some of the 'baddies' have already sought the advice of solicitors, and it looks to be pretty much unraveling at this time.
In Ketchikan it seems to have run through a couple of the local churches, the winter basketball leagues, and reportedly some retirement plans by individuals.* (*This sentence has been edited to ensure that legitimate business retirement plans -- for example, such as Madison Hardware has -- aren't confused with individual investments in PIPS that might be made by employees.) At most a few hundred locals have gotten involved, and the total local financial loss could be as low as several hundred thousand dollars and not likely more than $2 million on the outside. Even the low end is a serious chunk of change. How much of the local loss has been the result of some 'pied piper' leading the gullible over the cliff by sending the money to Marsden, and how much of the local loss has ended up in the hands of local scammers, I do not know with certainty. Lew Williams, Jr. has reported that there is at least one local PIPS club with more than 50 local members, and as recently as last weekend there are at least 100 hardcore PIPS supporters having a grand old time here in Ketchikan. All of that suggests the likelihood of a considerable amount of local stealing going on here. Game called, folks. PIPS has been toast for a while now, so if you still believe in it, you're dumber than a rock, or you're stealing from somebody.
In Ketchikan stealing or conning locals out of their money is not viewed fondly. Not long ago a prominent local did Federal time for conning a bunch of Russians, which demonstrates we don't like locals conning folks from somewhere else either. Kathy Blauser and Ron Wendte both did time for their embezzlements. Until now, unfortunately, we have had a major disconnect with our local police force. One lieutenant even observed to me that one of his friends had made thousands of dollars from PIPS. What was wrong with it?
To which I submit you haven't put your friend in jail yet. He has probably confessed to a felony.
A similar problem emerges in Kells, Ireland. Apparently there, at least one cop has invested money in PIPS (is a victim, not a scammer), and the badge carriers are being slow reacting there, in part as consequence. Meanwhile, there have been numerous calls for vigilante justice.
Until recently it has been convenient for law enforcement to sit on its hindquarters and wait for someone to come and complain. Marsden's in Malaysia, the money's gone; nothing we can do. If there are complaints, we'll look into it. The recent $75,000 fines on the Cease & Desist orders is a positive and commendable development that has generated considerable news coverage in the state, but this action is largely a symbolic gesture. As the fines from other C&D's in other states pile up, the gesture will be more telling; but the plodding nature of law enforcement's effort makes a lot of that effort somewhat meaningless. The fox cleaned out the hen house and split a long time ago.
In a more tranquil time the nonchalant attitude of law enforcement toward this type of crime has a certain legitimacy. In a large city on any given weekend there is enough violent criminal activity to keep 1000 law enforcement types busy for a month, and there's three more weekends before the end of the month. It is not top priority stuff, and the law's limited resources usually get used for other things. Why should some fool's greed cost them money and time? By directing as much of this stuff as possible to the civil courts it becomes a profitable endeavor for the law, or at least for the legal profession, and, frankly, I see nothing illogical about creating a positive economy out of a negative one. Thus from the standpoint of traditional law enforcement efforts respective this type of crime the concerted efforts of state authorities against PIPS and the extensive statewide media coverage of those efforts is already in fact beyond the norm. Considerable credit is due, therefore, to Assistant Attorney General Ed Sniffen of the AG's office, to Mr. Quinten Warren of Alaska Banking & Securities, and to the District Attorney of the City of Anchorage whose name is not right handy (my apologies, sir). In the media the efforts of Paula Dobbyn of the Anchorage Daily News and the efforts of Lew Williams, Jr., retired former owner of the Ketchikan Daily News, have been notable. Public radio has consistently reported the news about PIPS, and there has been at least one television story on one of the Anchorage stations. (Sorry, folks, I don't live in Anchorage.)
In the case of PIPS to an extent such consideration is logical. There is no evidence to date that any of the scammers in PIPS, including the chief honchos in Malaysia (a Muslim country in substantial measure, I am told), are anything but the scamming selfish "cockroaches" that law enforcement assumes. PIPS, unfortunately, is just one of hundreds, perhaps thousands, of these so-called High Yield Investment Programs (HYIPs) offered on the internet. They are all scams. Called High Yield Investment Frauds (HYIFs) by the Feds, they are an unregulated financial disaster. PIPS is probably the "Big Daddy" of these things, and, as such, should be used as a harsh example. The PIPs Ponzi and its multiple franchise spinoffs has conceivably gone through several hundred million real dollars, and I would estimate the Marsdens saw only a small part of the total take.
All of this nonsense is, of course, tied into identity theft and other major problems our contemporary society is experiencing, and thus its seriousness is compounded. In the case of PIPS it's the madness of the thing, the widespread nature of it, and the amount of money involved that requires a more serious response from law enforcement. The FBI has formed an entity called ECON that is designed to be more 'pro-active' in dealing with these scams. To be 'pro-active' is to stop them as they start, or to stop them before they start; and I do not think law enforcement has a clue how to do that. They can clean up after the fact, but to be 'pro-active' is in fact an undeveloped concept.
These HYIPs or HYIFs as things currently stand can clean out the henhouse for seven-, eight-, or even nine-figure money. Many are run from Muslim countries, a very convenient way for stupid Westerners to support Islamic terrorists. If it is not happening already, it will. HYIPs should be outlawed, period.
The greatest debt of gratitude for the rapid conclusion of the PIPS fiasco is owed to Mr. Owen Platt. He has endured a lot of grief in the course of this endeavor. His experience made a considerable difference in bringing together in a coordinated effort the work of several individuals who would otherwise have operated totally independently, and that I assure you made a world of difference. His exuberance was infectious, his tolerance generous. He pressed the right buttons. Buy the book.
My work on this project is now concluded.
and do not necessarily reflect the opinions of Sitnews.