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A Florida bankruptcy judge last week allowed for the sale of the Sweetwater Development property to investor D.R. Horton. Purchase price of the Spring Lake Village subdivision was not disclosed, but sources close to the transaction say it was in the neighborhood of $1 million.
That's bad news for Niagara Falls area investors who poured as much as $14 million into the project over the last several years by way of unsecured notes sold by local investment advisor Richard Muto. Sources say Sweetwater already has an on-the-books debt of $1 million in judgments, subcontractor fees, mechanics' liens and unpaid employee wages.
That would leave nothing for the 60 area residents who last week filed a $7.2 million lawsuit against Muto and dozens of others who invested in the Sweetwater scheme but chose not to take part in the suit.
In the meantime, Muto -- who was never licensed to sell securities in New York State -- seems to have taken up residence in Las Vegas, where he is registered as the president, treasurer and secretary of a corporation called Your Wish Inc.
The company was registered in Muto's name by David Tedder, a shadowy financial manipulator specializing in seminars on hiding assets and establishing offshore bank accounts. Those familiar with the Sweetwater case say Muto transferred investors' money to banks in the Cayman Islands and from there to financial institutions in Belize.
Belize is known for its notoriously lax banking laws, and is very popular with money launderers, drug dealers and other criminals.
Tedder is an attorney who resigned from the California bar pending charges and was more recently charged in Florida for practicing law without a license. The California charges involved an offshore financial scheme called Global Investments Inc., which was remarkably similar to the Sweetwater case.
A testimonial Muto gave was published in some of the literature Tedder passed out to lure in other suckers.
"Before I met David Tedder, my home was raided by the IRS due to previous negligence by my financial planner," Muto wrote. "David Tedder reviewed my situation, saved me from alleged criminal charges, defended my position with the IRS and allowed me to get my foot on the ground again with financial opportunities I did not know existed. David Tedder is a lifesaver!"
Both the Sweetwater and Global Investments scams involved promising investors fantastic rates of return. Original investors at least got some of their money back as newer investors were brought in. Meanwhile, Tedder, Muto and others involved in the schemes funneled money out of the country in anticipation of their inevitable collapse, authorities said.
"This was a classic Ponzi scheme, where you rob Peter to pay Paul," said a law enforcement source. "Eventually, you run out of Peters and Pauls."
Investors were lulled into a false sense of security when Muto and Tedder told them their money was bonded by a pair of insurance companies, Tangent Insurance and New England International Surety. What the investors didn't know was that both companies were nothing more than offshore shell corporations, unlicensed to do business in the United States.
Another of Tedder's ploys is to register corporations in Delaware. For just $320, anyone can set up a corporation and name him or herself as the sole officer, director and shareholder.
Numerous dubious business enterprises -- including Cintra America, which sought a 99-year lease on the Niagara Falls International Airport and Community Newspaper Holdings, which owns the Niagara Gazette -- are registered Delaware corporations.
Muto has been charged with multiple civil counts, including fraud, in connection with Sweetwater. Sources say he closed his office after receiving death threats from disgruntled Sweetwater investors, and has since fled to Las Vegas.
Neighbors said a moving truck was recently spotted at Muto's Lewiston home, and it appears that his wife Deborah is preparing to join him. Deborah Muto has also been named as a defendant in the civil lawsuit.
While the judge in the suit last week froze Muto's assets, the United States has no jurisdiction in Belize, where most of the money is believed to be.
"He'll declare bankruptcy, do his time on the criminal charges or get off altogether, and retire with $14 million," one source said.
| Niagara Falls Reporter | www.niagarafallsreporter.com | June 25 2002 |