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Ponzi scheme hits Kauai, feds report


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POSTED: Tuesday, February 17, 2009

One prominent Hawaii psychologist invested $152,000. A Kauai physician and his wife invested $145,000. Another Kauai man invested $130,000, and members of a Kauai family invested $81,500.

The U.S. attorney says all of these people invested their money in a Ponzi scheme operated by David E. Ruskjer, according to a forfeiture lawsuit filed in U.S. District Court.

               

     

 

INVESTORS SHAFTED, SUIT ALLEGES

        According to a forfeiture lawsuit filed by the federal government, David E. Ruskjer of Kauai:
       

» Told potential investors he generates 5 percent to 5.5 percent profit monthly by buying and selling stock options.

       

» Promised monthly 3, 4 or 5 percent returns on investment.

       

» Directed investors to deposit their money into his bank account.

       

» Gave them a promissory note indicating the monthly guaranteed percentage of return.

       

 

       

Federal authorities say Ruskjer collected more than $13 million from so-called investors over three years by guaranteeing them 3, 4 and 5 percent returns on their money per month.

But instead of investing their money, Ruskjer used deposits from new investors to pay off earlier investors, a federal prosecutor said.

The government also says Ruskjer converted some of the money to his own use, including $528,457 to purchase a condominium in Koloa last October. It says the money he used to buy the condominium was proceeds obtained through wire fraud and money laundering.

However, there is no record that federal authorities arrested or filed criminal charges against him.

Ruskjer did not respond to e-mail or telephone messages.

The U.S. attorney has filed papers with the state Bureau of Conveyances to prevent the sale or transfer of the condominium and has initiated civil proceedings in federal court to have Ruskjer forfeit the property.

According to the forfeiture lawsuit, the government says Ruskjer also took $646,395 of investor money in cash withdrawals and spent an additional $578,208 on airline tickets, restaurants and goods and services in Hawaii, the mainland and Asia. He spent $29,000 more of investor money for a car, $10,343 for two motorcycles and $176,000 with an online funds transfer system, according to court records.

On a Web site, in a craigslist.org posting and during live sales presentations, Ruskjer told potential investors that he generates 5 to 5.5 percent monthly profit buying and selling stock options. But because he is not a licensed stockbroker, he told them he cannot take their money to invest it for them.

Ruskjer told potential investors they had to deposit their money into his bank account and he would give them a promissory note indicating what percentage of their investment they would receive per month, according to court papers.

By last August, early investors told potential new investors that new accounts would have to go through them because Ruskjer was no longer soliciting new investors. The money would still go into Ruskjer's account, but the early investors received a percentage as a finder's fee, according to the suit.

The Internal Revenue Service began investigating Ruskjer last September after a Big Island woman contacted the state Securities Enforcement Branch and reported that she thought Ruskjer was acting as an unlicensed securities broker.