United States v. Alyn Richard Waage - No. 03-CR-005 (E.D. Cal.)

This is an update on the status of restitution in the case of United States v. Alyn Richard Waage, No. 03-CR-005 (E.D. Cal.) and related cases. Tri-West Investment Club was a massive internet Ponzi scheme devised by Alyn Richard Waage and others. Potential investors were told that they could earn high dividend returns through a "bank debenture" trading program. Waage instead used incoming funds to make purported dividend payments to other investors and to purchase millions of dollars worth of real properties in Mexico and Costa Rica, a yacht, a helicopter, numerous late-model automobiles, and other luxury and personal items. Eventually, the scheme collapsed and thousands of victims lost part or all of their investments.

In 2002 through 2004, Waage and his co-conspirators pleaded guilty in federal court to mail fraud and related offenses. Federal investigators and prosecutors recovered property and funds valued at approximately $8.4 million. After Waage pleaded guilty, the United States Attorney for the Eastern District of California notified approximately 6,000 investors whose names were recovered from Tri-West’s records of their right to submit claims for restitution. About 4,800 claims were submitted.

Officials of the United States Internal Revenue Service-Criminal Investigation (IRS-CI) reviewed each of the claims. Follow-up communications were made to hundreds of claimants whose information was either incomplete or was inconsistent with other information obtained by investigators. IRS-CI completed its initial investigation in 2008. Subsequently, claims were received from other investors who were not previously notified of the restitution process. IRS-CI has completed its investigation of those additional claims and all the claims have been forwarded to the Asset Forfeiture and Money Laundering Section of the United States Department of Justice (AFMLS) in Washington, D.C., for final review pursuant to federal regulations. (See Code of Federal Regulations, Title 28, Part 9 (2009).)

Because of the large number of claims, the Department of Justice has contracted with an information processing firm to assist in the final review. After the review is completed, AFMLS will send decision letters to all claimants informing them whether their claims have been approved. Persons whose claims are not approved may submit a request for reconsideration within 10 days after receipt of the decision. Instructions for filing a request for reconsideration will be included in the letters. A short period of additional time will be required for AFMLS to review any requests for reconsideration that are submitted.

After any requests for reconsideration are decided, payment checks will be disbursed. In this case, the government has recovered significantly less than the total amount of money that was lost by the victims. Therefore, each victim will receive a pro-rata share of the net forfeiture proceeds, based on the amount of the victim’s actual pecuniary loss. For example, if the government recovers 20 percent of the victims’ total losses, each victim would receive a check for 20 percent of his or her net pecuniary loss, as determined by AFMLS. The exact amount of the payments will not be known until all requests for reconsideration are resolved.

FREQUENTLY ASKED QUESTIONS ABOUT REMISSION IN THE TRI-WEST CASE

What is Forfeiture?

When a federal crime is committed, proceeds of the offense can be seized and forfeited to the United States. Forfeiture may be ordered by a federal court or by the administrative agency that seized the asset. Following forfeiture, the asset becomes the property of the United States government.

What is Remission?

Remission occurs when forfeited assets are returned to the victims of the crime underlying the forfeiture. When forfeiture is ordered by a federal court, authority to grant remission rests with the United States Attorney General, as delegated to the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS), which is located in the Criminal Division of the United States Department of Justice. If forfeiture is ordered by an administrative agency, remission authority generally rests with the administrative agency.

What is Restitution?

Restitution occurs when a criminal court orders the offender to compensate the victim of the crime. In the Tri-West cases, the criminal court did not order restitution due to the complexity of the case and the large number of victims. Consequently, assets forfeited from the Tri-West offenders will be used to compensate victims of the scheme through the remission process.

How much money did the government forfeit from the Tri-West offenders?

The Internal Revenue Service, the Federal Bureau of Investigation, and the Office of the United States Attorney recovered assets from the defendants valued at about $8.6 million after deduction of government expenses of $533,750. The government expenses were necessary to secure, maintain, and liquidate real properties and other assets located in Costa Rica.

Will I receive my full loss amount?

No. The value of the forfeited assets is only a small percentage of the overall victim losses. Each victim will receive a proportionate pro-rata share based upon his or her loss amount. The exact amount of each victim’s payment will not be known until the claims review process is completed.

Why has the claims process taken so long?

Federal regulations require that each claim be reviewed by the federal investigative agency that seized the money. This review was prolonged due to the complexity of the case and the large number of victims. In addition, more than 100 additional victims filed claims in 2009 which had to be reviewed.

If my claim is approved, when will I receive payment?

Payments should be made within 60 days after each victim receives notice of approval of his or her claim. The approval notices are expected to be mailed prior to December 31, 2009.

What if I have a question about my claim?

A toll-free number has been established if you have any questions about your claim. The number is 1-888-888-4157. The hours of operation are from 7 a.m. to 4 p.m. Pacific Standard Time.