LOS ANGELES – Two San Fernando Valley men allegedly involved in a lease-back ATM business that turned out to be a Ponzi scheme were charged Tuesday with fraud, officials said.
Joel Barry Gillis, 74, of Woodland Hills, and Edward Wishner, 76, also of Woodland Hills, ran a scam for 15 years that collected more than $100 million from nearly 2,000 investors who were told that their money would be used to purchase profitable ATMs, the U.S. Justice Department said.
Gillis and Wishner were charged with conspiracy, two counts of mail fraud and one count of wire fraud.
Both are facing up to 20 years in federal prison for each of the four charges.
According to the criminal information filed today in federal court, Gillis and Wishner operated the Calabasas-based Nationwide Automated Systems, Inc. It claimed to install and operate ATMs in high-traffic locations, such as hotels, casinos and convenience stores. Automated Systems claimed that it operated over 30,000 ATMs and was involved in more than $1 billion in ATM transactions every month..
Gillis and Wishner allegedly told victim-investors that Automated Systems would lease back the ATMs and pay investors 50 cents for each transaction performed at their particular ATM, guaranteeing annual returns of 20 percent on each ATM.
In addition to these high-yields, Automated Systems and its salespeople urged some investors to use their retirement savings “by claiming that investments in automated systems sale/leaseback program would outperform most traditional retirement investment accounts,” according to the information.
Automated Systems did make monthly payments to investors, but that money came from other investors, according to authorities.
While Automated Systems did operate a small number of ATMs – no more than 250, which were owned by the company and not investors – the overall operation was a sham hidden under the veil of a Ponzi scheme.
Gillis and Wishner provided bogus monthly reports to the investors that falsely detailed the performance of the investors’ ATMs.
In reality, the purpose of these reports was to conceal that the true source of the payments sent to investors were monies received from other investors. Gillis and Wishner also included a “non-interference” provision in the lease agreements that prohibited victim-investors from visiting the locations where their ATMs were supposedly located.
The scheme unraveled this past summer.
In August, “NASI bounced approximately $3 million in checks that had been sent by NASI as monthly returns to victim-investors,” according to the criminal information. “By the end of the month, NASI had drained its bank account, drawing it down to a balance of less than $200,000.”
In response to hundreds of calls from victim-investors, Gillis and Wishner “falsely sought to reassure the victim-investors that NASI was only suffering from accounting problems and technical delays relating to system upgrades, and that timely payment of investor returns would likely resume by the beginning of October 2014.”
Even as the Ponzi was collapsing, Gillis and Wishner allegedly continued to raise another $4 million from victim-investors, according to court documents.