Department of Justice News Release – January 21, 2015

Two Woodland Hills Men Who Operated $100+ Million Ponzi Scheme involving ATMs Plead Guilty to Federal Fraud Charges

LOS ANGELES – The president of a Calabasas firm that was used to run a Ponzi scheme that caused investors to loss more than $100 million pleaded guilty this morning to federal fraud charges.

Joel Barry Gillis, 74, of Woodland Hills, pleaded guilty in relation to a 13-year-long scheme that collected hundreds of millions from investors who were told their money would be used to purchase profitable automated teller machines.

The second man charged in the scheme related to Nationwide Automated Systems, Inc. (NASI) – Edward Wishner, 76, also of Woodland Hills, who held various titles at NASI, including vice president – pleaded guilty on January 13 in the case that bilked approximately 2,000 investors.

Gillis and Wishner each pleaded guilty to conspiracy, two counts of mail fraud and one count of wire fraud. As a result of their guilty pleas, each defendant faces a statutory maximum sentence of 80 years in federal prison.

Both men are scheduled to be sentenced on March 30 by United States District Judge S. James Otero.

According to documents filed in United States District Court, Gillis and Wishner operated NASI, which purported to place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores. NASI claimed that it operated approximately 31,000 ATMs and was involved in more than $1 billion in ATM transactions every month.

Victim-investors paid a flat amount – typically $12,000, but in some cases as much as $19,800– to buy a specific ATM, each of which was to be installed at a specific location. Gillis and Wishner told victim-investors that NASI 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.

NASI did make monthly payments to investors, but that money came from other investors. While NASI 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. Gillis and Wishner prevented investors from discovering the fraudulent nature of the business by providing bogus monthly reports to the investors that falsely detailed the supposed performance of the investors’ ATMs. 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 charging document in the case. “By the end of the month, NASI had drained its bank account, drawing it down to a balance of less than $200,000.”

But, even as the Ponzi was collapsing, Gillis and Wishner continued to raise another $4 million from victim-investors.

This case was investigated by the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission provided substantial assistance in the matter.

The SEC filed a civil lawsuit in relation to the NASI scheme in September, which resulted in a court order freezing the company’s assets and having a receiver appointed to oversee the assets (see:

http://www.sec.gov/litigation/litreleases/2014/lr23106.htm).

CONTACT: Assistant United States Attorney Ranee A. Katzenstein
Major Frauds Section
(213) 894-2432

Assistant United States Attorney Paul G. Stern
Major Frauds Section
(213) 894-0715

Release No. 15-006

SEC News Release – December 16, 2014

Two Woodland Hills Men Charged with Running Ponzi Scheme involving ATMs that Caused Investors to Lose Well Over $100 Million

FOR IMMEDIATE RELEASE

December 16, 2014
LOS ANGELES – Two San Fernando Valley men were charged today in a federal fraud case that alleges they ran a 15-year-long Ponzi scheme that collected hundreds of millions from investors who were told their money would be used to purchase profitable automated teller machines.

Joel Barry Gillis, 74, of Woodland Hills, and Edward Wishner, 76, also of Woodland Hills, were charged today with mail fraud and wire fraud in a case that caused well over $100 million in losses to nearly 2,000 investors.

According to the criminal information filed today in United States District Court, Gillis and Wishner operated the Calabasas-based Nationwide Automated Systems, Inc. (NASI), which purported to place, operate and maintain ATMs in high-traffic locations, such as hotels, casinos and convenience stores. NASI claimed that it operated over 30,000 ATMs and was involved in more than $1 billion in ATM transactions every month.

The information further alleges that Gillis and Wishner told victim-investors that NASI 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, NASI and its salespeople urged some investors to use their retirement savings “by claiming that investments in NASI’s sale/leaseback program would outperform most traditional retirement investment accounts,” according to the information.

NASI did make monthly payments to investors, but that money came from other investors. While NASI 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 prevented investors from discovering the fraudulent nature of the business by providing 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.

The information filed today charged Gillis and Wishner with conspiracy, two counts of mail fraud and one count of wire fraud. If they are convicted, Gillis and Wishner each would face a statutory maximum sentence of 20 years in federal prison for each of the four charges.

Gillis and Wishner are expected to make their initial court appearances tomorrow afternoon in United States District Court.

This case was investigated by the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission provided substantial assistance in the matter.
The SEC filed a civil lawsuit in relation to the NASI scheme in September, which resulted in a court order freezing the company’s assets and having a receiver appointed to oversee the assets (see: http://www.sec.gov/litigation/litreleases/2014/lr23106.htm).
Release No. 14-163

Open Letter to NASI Investors

As you may already know, the Securities and Exchange Commission (“SEC”) recently filed a complaint against the following companies and persons:

NATIONWIDE AUTOMATED SYSTEMS, INC.
JOEL GILLIS
EDWARD WISHNER
Defendants,
and
OASIS STUDIO RENTALS, LLC
OASIS STUDIO RENTALS #2, LLC
OASIS STUDIO RENTALS #3, LLC
Relief Defendants
The SEC alleges the Defendants operated a large Ponzi scheme by selling investments in automated teller machines (ATM’s) through purported “sale and leaseback” transactions. The complaint further alleges that Nationwide Automated Systems, Inc. (“NASI”) told investors they were buying ATM’s and leasing them back to NASI, who would in turn guarantee an investment return of at least 20% per year. The complaint states that none of this was true and that roughly 98% of funds distributed to investors actually came from money invested by subsequent investors. It is further claimed that only a small fraction of the ATM’s claimed to be purchased and installed in various locations ever existed.

As a result of the above complaint and other supporting papers filed by the SEC, on September 30, 2014, the U.S. District Court entered a temporary restraining order, which, among other things, appoints a Receiver (William J. Hoffman) to take possession and control of NASI, its subsidiaries and affiliates (“TRO”). Pursuant to the TRO, the Receiver has taken control of NASI, its business records, operations, funds and accounts in order to preserve and protect the company’s assets and value. Our investigation is still at an early stage and we expect to discover more information as we move forward.

A Receiver acts as an agent of the court and cannot provide legal representation or advice to you. We ask your cooperation and understanding as we move ahead. A website has been established to provide information about the case – www.NASI‐receivership.com. The complaint and related papers filed by the SEC, as well as the TRO entered by the Court, are available on the website. We encourage you to visit the website and review these documents. The website also has a “Questionnaire for Investors” which we ask you to complete at your earliest convenience. This will assist us in identifying investors; funds contributed and distributed, actual ATM’s and their locations, and other information which will greatly help in recovering as much value as we can as quickly as we can.

We have also established a dedicated phone number and email address for investors. The phone number is (858) 242‐1161 and the email address is receiver@NASI‐receivership.com.
Although we will be listening to all of your phone messages and reading your emails, personally responding to all messages would take a great deal of time. We may not be able to respond to all of you (at least not right away). Please be patient and rest assured that when there is news to report, the receivership website will be promptly updated.
We appreciate your concerns and anxiety and are working quickly and thoroughly to secure assets and recover as much value as possible. We will continue to post information on the website and keep you updated on our progress. In particular, the Receiver will be filing periodic reports with the court summarizing his activities and those reports will be available on the website.

Thank you for your cooperation and understanding. Our company has been assisting in the recovery of assets for the benefit of investors and creditors for over 35 years; rest assured you have our full attention.
Sincerely yours,
William J. Hoffman, JD
Chairman and CEO
Trigild, Inc.
San Diego, CA

What is a Receiver?

A court-appointed receiver is an unbiased third party appointed by a court to carry its orders into effect. The court appoints the receiver to take possession, custody, and control of the subject matter of the court action, which can include a specified real estate asset, personal property, business operations and all records and accounts. Government regulatory agencies can request the court to appoint a receiver in order to seize a business accused of fraudulent or other illegal activities.

When are receiverships needed?
Receivers are utilized in civil cases when an independent party is needed to control and protect an entity’s operations and/or assets. The most common instance in which receivers are appointed over the operation of a business include: (1) when there is a fear of significant mismanagement or misappropriation of funds; (2) when there is an accusation of fraudulent or other illegal activities; (3) if there is a concern that debts are not being paid; and (4) if the business operation has been abandoned. Typically, the plaintiff is the party who files the motion seeking the appointment of the receiver.

Obligations of the Receivership
The receiver is mandated by law to use his/her best efforts to preserve the viability of the business while enforcing the court’s orders. It is important to remember that the receiver is officer of the court, independent of any interested parties. Where it is not clear how the receiver must perform his or her duty, he or she may refer to the court for instructions.

What is the “Order Appointing Receiver”?
The Order Appointing Receiver defines the scope of responsibility and authority for the receiver.

How long does a receivership last?
The term of the receivership is dependent on the length of the underlying case, and can therefore range from a few months to a few years.

Isn’t receivership just like bankruptcy?
No. While there are many similarities in what is ultimately accomplished, they are fundamentally very different. Bankruptcy laws are written to protect debtors from legal action by creditors and involve volumes of rules, regulations and specific procedures. Receivership is an “ancillary remedy” – which means there must already be some legal proceeding taking place (e.g. fraud, foreclosure action, partnership dispute). A receivership is designed to protect creditors, typically has broad rules and the court is allowed to use its “equitable” powers of fairness rather than adhere to rigid limitations.