A civil lawsuit was filed in Lucas County Common Pleas Court Friday by two Texas investors against four men and their companies accused of a criminal scam involving the sale of Iraqi currency.
In the civil case, John R. Merritt and Arley G. Lee say they each purchased several thousand dollars of Iraqi dinar based on the representations of the defendants and that the defendants’ actions were in violation of the U.S. securities laws. Toledo attorney Thomas Pigott, who filed the complaint, said that he plans to ask that the lawsuit be made into a class action to cover all the investors who bought into the alleged scheme.
“Our case is different than the federal criminal allegations in that we are alleging violations of the federal securities act,” Mr. Pigott said.
In addition to the four defendants, the lawsuit specifically names Energy Savers Advisors LLC, which does business as the BH Group; Bayshore Capital Investments LLC of Jacksonville; Treasury Vault LLC of Draper, Utah; and Dinar Trade Inc., of Las Vegas.
Meanwhile, the Ottawa Hills owner of one of the businesses — based in downtown Toledo — was ordered on Friday released from jail, but with tighter restrictions than two employees also charged in the case.
Bradford L. Huebner, 65, of 2936 Pembroke Rd., Ottawa Hills, is charged with conspiracy to commit wire fraud, wire fraud, and multiple counts of money laundering.
An 83-count indictment filed in U.S. District Court in Toledo naming Mr. Huebner, who is chairman of BH Group, 17 N. St. Clair St., which specialized in the sale of Iraqi currency; Charles Emmenecker, 65, and Michael Teadt, 66, was unsealed Thursday after the three men were arrested. Later that day, all three men pleaded not guilty during their arraignments in U.S. District Court in Toledo.
Also indicted was Rudolph Coenen, 47, of Jacksonville, the owner of Bayshore Capital Investments LLC. He is charged with conspiracy to commit wire fraud, wire fraud, and money laundering.
According to the indictment, the men fraudulently marketed and sold dinars, the currency of Iraq, causing investors of the BH Group to lose nearly $23.8 million. They also are accused of selling more than $700,000 in nonexistent hedge-fund assets.
The sale of Iraqi dinar is not illegal. But the indictment said that beginning in August, 2010, the defendants falsely told investors and promoted through the Internet, email, and weekly telephone conferences that buying the dinar involved minimal risks because the currency was protected and regulated by the "Overseas Investment Protection Act and a presidential executive order, guaranteeing 90 percent reimbursement," among other misrepresentations.
During Mr. Huebner's Friday detention hearing in federal court, special agent Erik Kost of the Internal Revenue Service's criminal investigations division testified that the BH Group was still selling dinars and holding its weekly conference calls as of Tuesday.
The lawsuit asks the court to order the defendants to immediately desist from further sales and seeks damages in excess of $23 million and that a receiver be appointed over the businesses.
Mr. Kost testified Friday that the IRS began investigating the defendants in the fall of 2010 because of unusual financial transactions. They began taping the BH Group's telephone conferences in February, 2011, and an undercover agent bought into a non-existent hedge fund run by Mr. Coenen.
Agents raided the St. Clair Street office and Mr. Huebner's home July 27, 2011, and seized documents and a significant amount of money, including more than $1.7 million in Iraqi dinar.
Beyond the false dinar claims, Mr. Kost testified about what agents believed were transactions structured to evade reporting requirement, Mr. Coenen's false claims about his financial and military history, and the sale of seats on the hedge funds. Mr. Coenen's fake persona lent credibility to the company's dinar sales and was used to counter claims on Internet sites that the company was a sham. Mr. Kost said that Mr. Huebner should have easily known Mr. Coenen was never a vice president for JPMorgan Chase as he claimed to investors, because he is dyslexic, among other reasons.
Attorney Richard Kerger, who represents Mr. Huebner, has said that the operation and representation of the dinar and hedge funds offered by BH Group was “entirely lawful." Mr. Huebner's attorneys argue he was unaware of Mr. Coenen's claims. And Mr. Kerger said his client actually voluntarily came forward to the FBI over concerns about Mr. Coenen the day of the raid before IRS agents acted, unaware he was under investigation.
Mr. Emmenecker and Mr. Teadt were both released from jail Thursday after posting $250,000 unsecured bonds. But federal prosecutors asked in a detention hearing today that Mr. Huebner be held without bail, arguing that he couldn't be trusted to return to court and was a flight risk because he may own properties in other countries, frequently traveled abroad in recent years, and may have held residency in at least two other states.
Judge Jack Zouhary allowed Mr. Huebner to be released, but ordered his bond be $500,000 unsecured. He noted that Mr. Huebner has known he was under investigation since at least last year, yet he has not fled prosecution.
Mr. Huebner will also be placed on electronic home monitoring, and will only be allowed to go between his home and his office on North St. Clair Street.
Contact Erica Blake at:email@example.com 419-213-2134.