Sanctions in commodities Ponzi case top $10 million -
Published Wednesday, February 12, 2014 at 1:00 am / Updated at 11:12 am
Sanctions in commodities Ponzi case top $10 million

Additional civil sanctions have been ordered in the Omaha case involving fraudulent commodities trades that cost investors about $4.7 million.

U.S. District Court Judge Laurie Smith Camp ordered about $10 million in civil sanctions against Elite Management Holdings and MJM Enterprises, and two of their principals, Michael Kratville and Jonathan Arrington.

Last week, Omaha lawyer Kratville was ordered to pay about $1.7 million in fines and penalties. This week, additional amounts were levied against the companies Kratville and Arrington controlled, amounts for which the principals are responsible.

In all, Kratville, Arrington and the shuttered investment companies Elite and MJM were ordered to pay $4.4 million in restitution and $5.7 million in civil penalties.

The companies, which promised investors steady returns from sure-fire commodities trading, closed in 2007 after a string of losses.

Attempts to reach Kratville were unsuccessful. Voice-mail messages left with Clarence Mock, the Omaha attorney representing Kratville in a related criminal trial, were not returned. James Davis, Arrington's lawyer in the criminal case, said he would comment after contacting his client.

Last year, a third partner in the trading firms, Michael Welke, agreed to pay $257,000 in restitution and $130,000 in penalties to settle his part of the same civil case.

Kratville, Welke and Arrington were indicted last year by a federal grand jury in Omaha on 14 criminal counts each, including charges of conspiracy and mail and wire fraud. Conviction carries 20 years in prison for each charge.

The Commodities Futures Trading Commission civil case was filed in 2011, after the collapse a few years earlier of the Elite and MJM trading companies. The commission said the operators contacted prospective investors via email, promising access to a trading strategy that regularly yielded returns of 6 percent per month.

In reality, the commission said in its court documents, the operators were simply sending the money off to an investment firm in Spain that also lacked a documented trading history, paying off old investors with money swept up from new ones in a Ponzi scheme.

It worked for a time, but by March 2007, the gains from Spain had become losses, and the Nebraska Department of Banking and Finance had already ordered the operation shut down. In all, 130 people lost about $4.7 million, the commission said.

Along the way, the operators paid themselves about $700,000 used for personal expenses, travel and golf-club memberships, the commission said.

Dan Uhing, who owns an Omaha landscaping company, said he lost about $250,000 to the Ponzi scheme.

“They said they had 48 months out of 51 months of positive earnings,” Uhing said. “It was all cooked up, premeditated. I can understand someone getting into trouble and cutting some corners to try to make it up, but this was premeditated in the first degree.”

Uhing said anyone confronted with an investment opportunity unfamiliar to them should do what he didn't do — call the Nebraska Department of Banking and Finance to see if the promoters are registered, as required by law, which these ones weren't.

Uhing said he will be following the government's attempts to locate and seize assets to pay the restitution and penalties and that he hopes to one day testify at the sentencing stage of the criminal trial.

Correction: The headline on a previous version of this story misstated the total amount of civil sanctions.

Contact the writer: Russell Hubbard    |   402-444-3133

Russell Hubbard covers banking, financial services, corporate finance, TD Ameritrade, business lawsuits, bankruptcies and other economic and financial topics.

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