Still, investigations have been launched by both the SEC (which has subpoenaed documents from the case) and the FBI. An SEC spokeswoman in Utah said she could not confirm or deny that an investigation was under way. A spokesman with the FBI in San Francisco, where yet another civil lawsuit has been filed, confirmed the agency was looking into the allegations. A civil lawsuit against Catledge and the Elliotts was also filed in Utah.
Judge Gold also said he would forward the allegations to Canadian authorities. But neither the Ontario Securities Commission nor the RCMP would comment on whether they were investigating. But Patrick Dadlani, a Toronto investor who says he lost $115,760 (Canadian), has filed a lawsuit against the Elliotts, with a statement of claim mostly parroting the allegations from the Florida case.
Despite the Elliotts’ claims that they, too, are victims in all this, Canadian shareholders have questioned business practices that have nothing to do with James Catledge. In 2007, the Elliotts even sued two long-time Ontario investors for libel after they raised alarm bells in e-mails to fellow investors. (The case is winding through the courts.)
Calgary insurance salesman Roméo Lefaivre, a 63-year-old shareholder in the Elliotts’ EMI Sun Village Inc., is among those who say that the pair have long promised too-good-to-be-true returns. One brochure, provided by Lefaivre and dating from 2000, includes pictures of horseback riders on the beach, and tells investors to expect “projected returns” of 440%, with 18% in the first year: “Your investment...is as secure as the land it’s built on, and you will receive your income on the calendar quarter, every 90 days.” (Fine print warned the document was not a prospectus and that “there is no assurance that such projections will be realized.”)
Lefaivre sank $15,000 (U.S.) into Elliott investments and claims he only received $600 in returns. He was persuaded, he says, by Fred’s down-home manner. “This is going to sound stupid, but the thing I liked about Fred is that he wore cowboy boots. I mean, I’m from Calgary, right? We wear cowboy boots around here. Anybody who wears cowboy boots has got to be a pretty cool dude. He’s got to be a straight shooter.”
But the very venue for Lefaivre’s meeting with Fred would have been a red flag for many people: a 2000 conference in Cancun, Mexico, organized by an outfit called the Institute of Global Prosperity—which even Derek acknowledges was a questionable place to do business. Lefaivre and other attendees from the U.S., Canada and elsewhere paid thousands of dollars to learn “insiders’ most jealously guarded secrets of creating and amassing wealth.” Those secrets involved offshore investments and radical anti-tax rhetoric. In addition to Sun Village, the Elliotts were hawking their own offshore bank card and a hedge fund promising returns of up to 22%.
In 2008, the three founders of Global Prosperity were all sentenced to prison for conspiracy to defraud the United States and for tax evasion. Other presenters listed alongside the Elliotts on a “confidential” agenda for a conference held in 2002 have since had run-ins with authorities.
These conferences, Derek says, could bring in over $1 million in a weekend. But, he adds, “When we were at that conference, we were also saying, ‘I can’t believe people are buying this product, because they look like a bunch of scammers. We are the only product that was real down there.”
Flanked by a couple of rusty pickups, the Mohawk Country Inn sits just north of Highway 401 in Campbellville, Ontario, next to the neon lights of the Mohawk Racetrack. It’s an evening in May, and a line of mostly grey-haired couples—some from as far away as Chicago—are filing inside a saloon-like bar with a pile of children’s high chairs at the back.
Leftover purple streamers hang from a wooden beam, but this is no party. It’s a meeting of shareholders in the Elliotts’ web of companies, many of whom know each other from “owners’ weeks” and discounted holidays at Sun Village. Fred and Derek, both wearing suits, sit at the front of the room. An agent of Florida special master Thomas Scott is monitoring the proceedings via speakerphone.
The Elliotts are on a first-name basis with many of the 150 people who cram into the room. They are insurance salesmen, factory workers, farmers, even a former bank vice-president. Most of them started investing with the Elliotts years ago—some as far back as the mid-1990s—and many put tens of thousands of dollars, even hundreds of thousands, into Sun Village. Some also bought time-shares from Catledge. All of them have now lost money.