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Federal Court in North Carolina Upholds $1.2 million Ponzi Scheme Award

May 10, 2007, North Carolina: A federal court in North Carolina upheld a $1.2 million award on behalf of a group of investors who fell victim to the ETS Payphones Ponzi scheme.  The investors accused a Kannapolis financial services adviser of violating securities rules and allowing one of its brokers to sell the unregistered ETS investments to the investing public.

The group of investors, represented by the law firm of John S. Chapman & Associates, LLC,  was made up mainly of retirees who invested their life savings in the ETS scam. The 18 investors argued that Walnut Street Securities, a MetLife Company, failed to supervise its stock broker, Marie Foil.  Marie Foil established Foil & Associates Financial Services of Kannapolis, and between 1999 and 2000 peddled investments in ETS and other scams to its North Carolina residents.

The victims said Marie Foil’s sales staff pushed the ETS payphones as “recession-proof” investments, and told investors they would receive a 14 percent annual return.  In their complaint, investors claimed that Foil not only knew ETS was a scam, but also hosted an investment seminar for the public, where she introduced Edwards as a keynote speaker.

ETS Payphones is now bankrupt.  The fraudulent scheme collapsed after defrauding thousands of investors of more than $400 million.  The founder of the scheme, Charles Edwards, was convicted of money laundering, wire fraud and conspiracy and sentenced to 13 years in prison.

Investors alleged that ETS "used the investment capital contributed by new investors to make distributions to old investors” and that “ETS Payphones never generated enough revenue for it to make the fixed monthly payment to investors.”

“Walnut Street Securities had the duty and authority to control Foil’s activities, because Foil was licensed with Walnut Street and because Foil engaged in such activities from a Walnut Street business location,” said investors' lawyer, John Chapman.

“This is a great day for North Carolina investors,” said John Chapman. “This award serves notice on brokerage firms like Walnut Street that they had better keep a sharp lookout for agent misconduct, or pay the consequences.”

© John S. Chapman & Associates, LLC 2010