The United States Attorney's Office for the Northern District of California announced today that Vincent J. Ferro, 46, of San Juan Capistrano was arraigned today in San Jose federal court following the indictments of five people involved in a scheme to allegedly defraud more than $10 million from more than 50 victims. 

Mr. Ferro appeared this morning before Magistrate Judge Richard Seeborg in San Jose.  He was released on a $50,000 secured bond and is scheduled to appear for a preliminary hearing on August, 23, 2004, at 1:30 p.m. before Judge James Ware.  Defendants Kummel J. Heir, 43, of San Jose, and Mark C. Selby, 45, formerly of Campbell, now residing in Las Vegas, made their first appearances on July 29, 2004.  Eduardo J. Prado, 36, of San Juan Capistrano and Walter Zlotnicki, 60, of Thousand Oaks, CA are scheduled to be arraigned before Judge Seeborg on August 26, 2004.  The matter has been assigned to U.S. District Court Judge James Ware.

An indictment filed in San Jose on July 14, 2004, charges Kummel J. Heir, Eduardo J. Prado, Mark C. Selby, and Vincent J. Ferro with conspiracy to commit mail fraud in violation of 18 U.S.C. § 371; conspiracy to commit money laundering in violation of 18 U.S.C. § 1956(h); and committing mail fraud in violation of 18 U.S.C. § 1341.  Walter Zlotnicki is charged with conspiracy to commit mail fraud and multiple counts of mail fraud. 

According to the indictment, the five defendants used various business entities to defraud more than 50 victims.  The victims were located predominantly in the San Jose and Thousand Oaks areas of California.  Sometime prior to August 1997, Mr. Prado, Mr. Selby and others designed a Certificate of Deposit ("CD") program that involved the sale of "interest at maturity" CDs to public customers.  Under their plan, Mr. Prado, a broker licensed with the National Association of Securities Dealers, would identify 20 to 30 year term jumbo CDs available for purchase at favorable interest rates.  Mr. Selby, working under Mr. Prado's direction, would then engage sales representatives including Mr. Ferro and Mr. Heir, to solicit clients for the program.  Mr. Zlotnicki reported to Mr. Ferro, who reported to Mr. Selby in representing or "sub-brokering" sales of CDs in this program designed by Mr. Prado, Mr. Selby and others.

The defendants represented that the 20 to 30 year term CDs could be redeemed after one year without penalty.  Also, the defendants are alleged to have failed to tell their potential victims that client funds were pooled into CDs that could not be redeemed without the consent of all parties involved.  The indictment further alleges that the defendants failed to state the fact that the fees and commissions, some of which exceeded 25 percent, were taken from client deposits within days of remittance. 

As the indictment alleges, the defendants specifically and intentionally marketed their product to vulnerable elderly people through targeted advertising and false claims that their program was suitable for retired persons who "require the conservative safety of bank CDs," but who want a higher yield.

Defendants Prado, Selby, Ferro and Heir were charged with the money laundering conspiracy based on this scheme and their involvement in financial transactions representing the proceeds therefrom.  A criminal forfeiture allegation is included in the indictment that requests forfeiture to the United States of any proceeds traceable to this scheme.

U.S. Attorney Kevin V. Ryan stated, "As this indictment demonstrates, the U.S. Attorney's Office of the Northern District of California will work aggressively with federal law enforcement agencies to deter the intentional defrauding of citizens, particularly vulnerable citizens, such as the elderly."

According to Internal Revenue Service-Criminal Investigation Assistant Special Agent in Charge Cleve Daniels "The allegations in this indictment involve acts of incredible greed and financial harm to so many victims it is heartbreaking."

According to U.S. Secret Service Resident Agent in Charge Christopher Von Holtz "The Secret Service is proud to participate in any investigation that helps secure our country's financial system, especially for our elderly citizens."

The charges contained in this indictment are only allegations, and as with all defendants, Mr. Prado, Mr. Selby, Mr. Ferro, Mr. Zlotnicki and Ms. Heir should be considered innocent until and unless convicted of a crime. 

Assistant United States Attorney Elizabeth de la Vega is prosecuting the case with the assistance of Legal Technician Gina Brewer.

All press inquiries to the U.S. Attorney's Office should be directed to Administrative Assistant U.S. Attorney Cynthia Caporizzo at (415) 436-6470.