The News & Observer: Shanahan comments on North Carolina man's arrested in ATM Ponzi scheme

Raleigh man arrested in $80 million Ponzi scam

September 22, 2009

RALEIGH -- A Raleigh businessman is one of two people charged in a 10-count federal indictment unsealed Monday that says the pair cheated investors out of at least $80 million through a Ponzi scheme that fell apart last year.

Vance Moore II of Raleigh was arrested Friday afternoon in Garner, the U.S. Attorney's Office in New York City said in a press release. Moore's family operates a business in Garner and in Leesburg, Fla., called Best Lab Deals Inc. A spokeswoman for the U.S. attorney said Moore was arrested at his office. He is scheduled to appear in federal court in Raleigh this morning.

Moore's attorney, Stuart Abrams of New York, did not return phone calls Monday.

His co-defendant in the case, Walter Netschi, 62, of McKinney, Texas, surrendered in New York on Monday.

Both are charged with nine counts of wire fraud and one count of conspiracy to commit wire fraud.

The indictment says the two worked together to persuade investors to buy automated teller machines to be placed in convenience stores, shopping centers, hotels and other locations around the country. Investors were to earn monthly income from fees charged to users of the machines.

The indictment says Moore, Netschi and others led investors to believe they had as many as 4,000 machines in place. In fact, investigators say, they had only about 400, and they relied on money from new investors to pay dividends to existing ones.

Phantom revenue

FBI Assistant Director-in-Charge Joseph M. Demarest Jr. described the arrangement as a classic Ponzi scheme, with phantom revenue coming from new investors rather than ATM fees.

"The scheme itself, until discovered, was one giant cash machine," Demarest said in the press release.

The indictment does not detail where the money went, but it says Moore and Netschi used some of it for "their own personal expenses, among other things."

Investigators say the scheme began in 2005 and worked like this: Through one of his companies, Netschi would sell individual ATMs or groups of machines to investors. The investors would then enter into agreements with Moore's company, ATM Financial Services, to process, operate and maintain the machines.

ATM Financial also prepared documents for investors indicating how much they could expect to earn from their machines based on where they were placed and their use history.

In addition, ATM Financial would make the required lease agreements with owners of the retail businesses in which the machines were to be placed.

A California company called ATM Equity became one of ATM Financial Services' largest investors, paying the company about $25 million to buy and maintain teller machines. The company received payments on its investment for a while, but then the payments stopped.

According to the indictment, ATM Financial Services quit making payments to investors in July 2007. When investors complained, the company said it was having trouble determining payment amounts because of issues with a new software program it had installed.

In February 2008, Raleigh lawyer Kieran Shanahan sued ATM Financial Services for months of back payments -- millions of dollars -- that ATM Equity had not received.

Comparing notes

Once the lawsuit was filed, Shanahan said Monday, he started hearing from other frustrated investors and comparing notes.

"We realized our inventory lists were the same," Shanahan said, suggesting that Moore was telling different investors they owned the same machines. "At one point we went out to try to do a physical inventory, and the shop owners would say, 'We've never had a machine,' or they would say, 'You don't own that machine. Some other, unrelated company owns it.'"

Also in February, a judge agreed to ATM Equity's request to stop ATM Financial Services from doing business. A federal investigation began a month later. What assets the company had were sold at auction.

Each count in the indictment carries a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss derived from the offense. The indictment also seeks $80 million in forfeiture from Moore and Netschi, money that Shanahan is not expecting to see.

"No matter how large the fraud, the money just gets gone," Shanahan said. "The great tragedy," he added, "is that this was such a good business model. Collections are not a problem -- the banks collected the fees --so once you've made the capital investment, you have a guaranteed return. The profitability is huge."