Herald JournalHoward Lake-Waverly Herald, Sept. 9, 2002

Howard Lake man is charged with fraud

By Lynda Jensen

Howard Lake resident Virgil E. Smith has been charged with misappropriating about $110,000 in investor funds, according to the Commodity Futures Trading Commission (CFTC).

Smith is accused of fraudulently soliciting individuals to trade foreign currency futures contracts on their behalf, according to the complaint. The charge is related to his business, Maximus Capital Consultants, Inc.

Neither Smith nor Maximus are registered with the commission in any capacity, according to the complaint.

Smith is one of several plaintiffs, including Sovereign Resource Management, Inc, a Grenadian corporation, Ken Mitra, a Canadian citizen and president of Sovereign, and Anthony J. Heppner of Theilman, Minn.

The defendants allegedly accepted a total of $1.7 million from a pool of at least 97 customers, of which $630,000 was misappropriated for their own use, according to the complaint.

The defendants invested only $206,405 in futures, repaid $281,500, and misappropriated at least $629,215 of the remaining $1,229,872 in participant funds for their own use.

Smith himself is accused of accepting $170,000 from two investor pool participants, of which the money was deposited at TCF National Bank Minnesota, Minneapolis.

Smith forwarded $59,700 to Sovereign of this amount, keeping the remainder for his own use, according to the complaint.

The activity took place from November 1997 to January 2001, according to the commission. The complaint was filed July 18.

The complaint also alleges that the defendants falsely represented the profitability of the pool.

In Smith's case, he is accused of doing this by saying the Sovereign trader was achieving a 50:1 profit ratio for the fund, and that one group of participants already received $1 million as a result of their Sovereign investment.

The CFTC complaint also charged defendants with registration violations and Sovereign with failing to provide required pool disclosure documents to prospective pool participants.

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