Two California men ran a company called Nationwide Automated Systems, Inc., which told potential investors that it could place, operate and maintain automated teller machines in high-traffic locations such as hotels, casinos and convenience stores.
The company claimed that it operated about 31,000 ATMs and was involved in more than $1 billion in ATM transactions every month.
Investors, also known as victims, paid a flat amount of money — typically $12,000, but in some cases as much as $19,800 — to buy an ATM and have it installed at a specific location. The company owners told victim-investors that NASI would lease back the machines and pay investors 50 cents for each transaction performed at their particular ATM, guaranteeing annual returns of 20 percent on each ATM.
Made monthly payments
NASI did make monthly payments to investors, but only with money that came in from other investors. NASI did operate a few ATMs — no more than 250 and they were owned by the company, not investors. The overall operation was a sham.
The owners prevented investors from finding out the fraudulent nature of the business by providing bogus monthly reports to the investors that falsely detailed the supposed performance of the investors’ ATMs. The company also had a “non-interference” provision in the lease agreements that prohibited victim-investors from visiting the locations where their ATMs were supposedly installed.
The scheme unraveled in the summer of 2014. In August, NASI bounced approximately $3 million in checks that had been sent by the company as monthly returns to victim-investors. By the end of the month, NASI had drained its bank account, drawing it down to less than $200,000.
Continued raising money
But even as the Ponzi game was collapsing, the owners continued to raise money and took in an additional $4 million from victim-investors.
In all, the plan operated for 13 years and cost some 2,000 investors more than $100 million.
The president of the Calabasas, California, company, Joel Barry Gillis, 74, of Woodlands Hills, has pleaded guilty to federal fraud charges. The second man charged, Edward Wishner, 76, also of Woodland Hills, who held various titles at NASI including vice president, also pleaded guilty.
Each defendant faces a maximum sentence of 80 years in prison. Sentencing is scheduled for March 2015.