USDOJ Press Release: Six Remaining Defendants Plead Guilty in $18 Million Fraudulent Investment Scheme

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For Immediate Release
December 8, 2009 United States Attorney's Office
Southern District of Florida
Contact: (305) 961-9000

Six Remaining Defendants Plead Guilty in $18 Million Fraudulent Investment Scheme

Jeffrey H. Sloman, Acting United States Attorney for the Southern District of Florida, and John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (“FBI”), Miami Field Office, announced that defendants Jimmy L. Barker, Jr., Theodore Ginocchio, Ronald Bowsky, Jack Maddock, Robert Pozsony, and Rodger Brownson each pled guilty on Friday, December 4, 2009, to one count of conspiracy to commit mail and wire fraud in connection with a scheme that defrauded more than 600 investors throughout the United States. Codefendants Robert Ladrach and Marc Rifkin previously pled guilty to one count of conspiracy to commit mail and wire fraud and are awaiting sentencing in this matter.

According to documents filed in the case, from about 1999 through mid-2008, 3001 AD, LLC (“3001 AD”) and its affiliates operated as a virtual reality video gaming company that developed, marketed, and sold high-tech video game products. Initially, 3001 AD and its affiliates operated “Beta Zones,” which were virtual reality video game centers installed in popular theme parks. In 2004, 3001 AD and its affiliates began touting the Trimersion First Person Shooter Video Game Accessory as an in-home accessory that allowed players to immerse themselves in video games played on common, commercially available video game consoles.

The defendants raised approximately $18 million from investors by selling equity interests in 3001 AD, Trimersion, and numerous affiliated entities with similar names. Investors were attracted to based on materially false and misleading representations and omission of material facts. The misrepresentations and omissions gave investors an unrealistic expectation of profits. In fact, many investors were promised $29,000 profit annually on each $5,000 invested. To bolster these claims, investors were falsely led to believe that prominent entrepreneurs and well-known companies were considering significant investments in 3001 AD, and its affiliates. In truth, however, the Beta Zones that were operated never generated sufficient profits to distribute returns to investors, only approximately 2,000 Trimersion headsets were ever delivered to 3001 AD and its affiliates, and very few Trimersion headsets were ever sold.

According to court records and the pleas in this case, instead of using the investor money to develop and produce virtual reality gaming equipment, the defendants misappropriated investor funds to pay large undisclosed sales commissions and to pay for unauthorized personal expenses.

A sentencing hearing has been set for February 12, 2010. At sentencing, each defendant faces a statutory maximum term of imprisonment of up to twenty years. In addition to imprisonment, the Court may order each defendant to pay fines and restitution.

In a related case, defendant Michael Weidgans pled guilty to one conspiracy to commit securities fraud, which provides for a statutory maximum term of imprisonment of up to five years. A sentencing hearing for this related matter has also been set for February 12, 2010.

Acting U.S. Attorney Jeffrey H. Sloman stated, “Investment fraud schemes erode the public’s confidence in our economic system and lead to increased economic instability. The U.S. Attorney’s Office, along with the FBI’s Corporate and Securities Fraud Squad, remain committed to the investigation and prosecution of these investment frauds.”

FBI Special Agent in Charge John V. Gillies states, “This is a stark reminder that promises of large returns with little risk should immediately send up red flags and make investors run the other way.A strongregulatory and enforcement system is the keyto a robust securities market andthe FBI and its partners are committed to investigate those who illegally enrich themselves by swindling investors.”

Mr. Sloman commended the investigative efforts of the FBI and the and cooperative efforts of the Miami Regional Office of the Securities and Exchange Commission. This matter is being prosecuted by Assistant U.S. Attorneys Ryan Dwight O’Quinn and Oliver Benton Curtis III.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the United States District Court for the Southern District of Florida at www.flsd.uscourts.gov or http://pacer.flsd.uscourts.gov.