ARTICLE TOOLS

E-mail story

Comments

Printer friendly version

iPod friendly version

Share This

Text Size: A A A A

Chattanooga: Questions about Rivas began swirling last summer

By: Monica Mercer
(Contact)

Included in this article

Bob Cheli

As Chattanooga investors reel from their losses of thousands of dollars to a man accused of fraud, there are indications local law enforcement and business officials had been advised as early as last summer about questionable activity by Luis Rivas.

But when Bob Cheli, who lost $106,000 in what federal authorities call a “classic Ponzi scheme,” contacted the Chattanooga Police Department’s fraud department in February, he said officials “blew him off.”

“It was a three-minute phone call,” Mr. Cheli said. “I told a detective I knew people who had taken out mortgages on their houses because of (Mr. Rivas). This wasn’t just about $20.”

Detective Larry Lockmiller, who works in the fraud department, said he was unaware of such a call.

Cases of alleged fraud are not investigated unless such proof of intent exists, he said. The fraud division typically takes on cases of forgeries, counterfeit checks and ID theft, among others, he said.

According to Chattanooga police, only one official report has been filed against Mr. Rivas in the past year. That came on June 5 from two men who claim they lost a collective $425,000.

Chattanooga police say the complaint is under investigation, months after Mr. Cheli’s complaint and an FBI investigation begun in February that would lead to Mr. Rivas’ federal fraud charges in late June.

Now in federal custody and charged with mail, wire and securities fraud, Mr. Rivas allegedly bilked about 523 people in 23 states out of at least $31 million over the past year, all while supposedly trading clients’ money in the foreign currencies market from offices in Chattanooga and five other southeastern cities.

Mr. Rivas first came to the attention of the local Better Business Bureau in July 2007, according to President Jim Winsett.

Mr. Winsett said he received a call about how Mr. Rivas had urged builders to get loans on unsold properties and then give him the money on the promise he would earn them a 60 percent return in one year by investing in the foreign currencies market.

“At that time I did speak to the city police authorities,” Mr. Winsett said. “They recommended I contact the FBI in Chattanooga. We just felt this was a red flag that needed to be investigated.”

The BBB, however, did not issue a consumer alert on Mr. Rivas and his company, The Forex Project, because there was not enough outcry to warrant one, Mr. Winsett said.

“For a business to be considered high risk, there has to be a pattern of complaints,” he said, noting that at least 25 complaints usually would prompt the bureau to take action.

No such pattern existed with Mr. Rivas, Mr. Winsett said, aside from about “five phone inquiries” to the BBB about the kind of business Mr. Rivas ran.

“In each instance I explained the risk of investing, and some of them still invested,” he said.

And although the Better Business Bureau decided to issue a consumer alert in May in the wake of Mr. Rivas’ involuntary bankruptcy proceeding, Mr. Winsett said he regrets the action was not taken sooner.

Meanwhile, during the fall and early spring, Mr. Rivas continued soliciting clients from around the country, including Mr. Cheli, a LaFayette, Ga., man who handed over $106,000 in December 2007.

Like others, Mr. Cheli received a promissory note from Mr. Rivas stating he would get a 5 percent monthly return on his money and receive the full investment amount back after three years.

But at the beginning of the year, Mr. Cheli said he started to suspect Mr. Rivas because the monetary returns did not materialize as promised. He said when he confronted Mr. Rivas, the businessman “flew off the handle.”

“I got the impression I was the first one to really start questioning him,” Mr. Cheli said. “Which is why I think he got so upset.”

Those overseeing the involuntary bankruptcy claim filed in May later would state that Mr. Rivas appeared to stop investing people’s money altogether in October, perpetuating a Ponzi scheme in which he paid out fraudulent investment returns with money he solicited from others.

Mr. Cheli said an investigator with the fraud division of the Chattanooga Police Department, whose name he does not remember, told him in February that there had to be “proof of intent to defraud” before officers could launch an official investigation.

“He told me it was a civil matter,” Mr. Cheli said.

Still, people such as Ron Wyatt from Chickamauga, Ga., were giving their money to Mr. Rivas as late as March. Mr. Wyatt, who lost $100,000, said he had “no idea” that others had questioned Mr. Rivas’ business practices.

With many investors complaining about being tangled up in the mess, Mr. Cheli said he never was naive enough to think there weren’t risks involved.

After a creditors meeting held last week in U.S. Bankruptcy Court in Chattanooga, investors learned getting any of their money back likely will take years.

“I took a risk and lost,” Mr. Cheli said.

Comments