Is Spokane home to the next Bernie Madoff?
Rob Kauder | Internet Content Manager, KXLY.com
Posted: 11:35 am PDT April 6,2010 Updated: 6:03 pm PDT April 6,2010
-- A woman suspected of running a Ponzi scheme out of her Spokane-based payday loan business which may have bilked more than $100 Million from investors had her company raided by FBI and IRS agents
Federal agents executed a search warrant and seized assets at the offices of Team Spirit America located at 1800 W. Broadway in Spokane Tuesday morning. Authorities with the FBI and IRS by the Washington State Patrol executed the warrant against businesses owned by Doris Nelson, which runs Team Spirit America out of the West Broadway location.
Nelson is the owner of more than a dozen different limited liability companies (LLC) including LLS America, LLC, a payday loan company that filed for bankruptcy in Nevada last year claiming that it owes more than $100 Million to over 1,300 creditors from as far away as Florida, Ontario and Switzerland.
As the search warrant and seizures were executed approximately a dozen employees of the company were questioned by federal agents and then released. Near the building a black Mercedes was seized by federal agents.
In an order to cease and desist filed by the Washington State Securities Division in late January the state has Nelson started a short-term payday loan business in British Columbia in 1997. Four years later in 2001 she expanded south of the border with a new company in Spokane called Little Loan Shoppe, LLC.
Starting in 2005 Nelson began establishing two foreign corporations, registered in Utah, that would contract their work to a third company, Spokane-based Team Spirit America, which is located in the office building federal agents raided Tuesday.
While Nelson was in the payday loan business through storefronts and a website, authorities say that as far back as 2000 she began issuing initial investors up to two-year term promissory notes and guaranteed interest rates varying between 33 and 60-percent on their investments.
Investors later on were offered similar rates of return but on longer notes that generally lasted anywhere from five to ten years. Officials allege that, “Nelson told those investors that their funds would be used to fund her payday loan business.”
Between 2001 and 2008 Nelson created more than a dozen limited liability companies that she offered promissory notes to investors. At first early investors received interest payments each month but as time went on the payments shifted from monthly to quarterly, semi-annually, annually to finally every 20 months.
As Nelson continued to do business she had 300 investors sign 650 promissory notes worth $29 Million US and $26 Million Canadian dollars, the money wired to both US and Canadian bank accounts. In Washington State alone there were at least 35 residents who sank more than $6 Million into promissory notes with Nelson.
Many of the investors who bought promissory notes from Nelson were turned on to the investment opportunities through word-of-mouth advertising. Word spread from friends and family members; the state also claims a number of the investors were Jehovah’s Witnesses that heard about the investment from fellow Jehovah’s Witnesses.
The state goes on to assert that Nelson was continuing to bringing in more investors on claims that her business “defied financial gravity” even as the national economy was edging closer to a recession and she continued to solicit new investors as well as going back to current investors to see if they wanted to invest more.
Then in October of 2008 the money paid out to investors started drying up. Nelson initially offered a reduced interest rate payment of 10-percent on promissory notes but within five months she stopped paying altogether. In March 2009 the payments ceased.
By last July a group of investors had had enough and filed an involuntary petition for bankruptcy against Nelson’s businesses, which was followed in short order by Nelson’s own bankruptcy filing in late July in Nevada.
While the offices of Team Spirit America were raided Tuesday morning it’s not known yet if Nelson’s Colbert home was targeted by a similar raid.