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Friday, December 22, 2000

JTI under fire
in federal ’Net
fraud probe

The company allegedly used
a pyramid scheme to defraud
investors of more than
$1 million this year

By Tim Ruel

A Honolulu-based company that sells hosting services for Web sites is being investigated by the FBI for running an alleged Ponzi scheme that took in more than $1 million this year from local and mainland investors.

JTI International became the subject of testimony by the FBI yesterday in the federal prosecution of another alleged Hawaii Ponzi scheme that drew headlines earlier this year for soliciting more than $40 million from people in several countries.

"I will confirm that we do have an investigation," John Gillies, FBI special advisory agent, said yesterday.

During a hearing in federal court, the FBI said it had received a complaint that between February and August, JTI recruited some 200 people to invest an average of $10,000 with the promise that they would make money from e-commerce flowing into JTI's Web sites.

JTI told investors it would feed Web traffic to the sites through its own Web site, which features a shopping mall, auction house and classified advertising section, special agent William Denson said in yesterday's hearing before Magistrate Judge Kevin Chang.

JTI said it would track transactions made on the sites and pay investors a commission based on sales.

However, a visit to the site,, shows that JTI has few products for sale, and it isn't generating much revenue, Denson said.

Moreover, the company's principal leader, Jason T. Ibara, admitted in an FBI interview that JTI had no way of tracking transactions, Denson said.

Several investors in JTI became employees of the company and found the only way they would make money was to recruit more investors, which Denson said is a classic pyramid, or Ponzi, scheme.

Robin Taibbi, a Salt Lake resident and former employee of JTI, told the Star-Bulletin that some investors only got payments from JTI when Taibbi threatened to go to the authorities. Taibbi said he later went to the FBI anyway.

Taibbi called JTI a "cult" in which people didn't ask questions about the company because they were so taken by its leader, Ibara, who purported to be a millionaire.

When contacted by the Star-Bulletin, JTI principal Stacy K. Naito said the company was not a Ponzi scheme. When asked how investors are paid, she refused further comment and hung up.

According to the FBI, a statement in November from Ibara said, "I know this was wrong and I'm no longer defrauding anybody."

However, one of JTI's former employees, Rande Scott Worcester, had his bail revoked yesterday for participating in the company.

Worcester was one of five people indicted in March in the "Cayman Islands Investment Program," a plan that allegedly promised returns on money to be invested with the Cayman Islands government and banks.

More than 4,000 people -- mainly from Hawaii but also from Japan, Singapore, American Samoa and the U.S. mainland -- invested $1,000 or more in the Cayman Islands scheme, one of the largest Ponzi cases to be prosecuted in Hawaii's history, according to U.S. attorneys.

Worcester, who awaits trial in March, violated the terms of his bail by working as an account executive for JTI between July and August, assistant U.S. attorney Larry Butrick said in federal court yesterday.

Butrick said JTI was engaging in fraud at the time and that Worcester knew it.

Worcester's attorney, Michael Waite, said there was no evidence -- only hearsay from other JTI employees -- that Worcester thought it was fraud.

Magistrate Judge Chang sided with the U.S. government, however, and revoked Worcester's bail, remanding him to the custody of U.S. marshals.

Chang said the government had shown probable cause that Worcester had participated in fraud by working for JTI.

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