Man connected to alleged Bothell con earns four years in prison
August 3, 2010 · Updated 2:48 PM
The man authorities say was behind a Bothell-based con game that may have bilked its victims of up to $7 million was sentenced Aug. 2 to 51 months in a federal prison after pleading guilty in a U.S. District Court to wire fraud.
According to court papers filed against Kevin Halverson in February, his Bothell company, Total Ticket Services (TTS), was actually a front for a "classic 'Ponzi' scheme."
Halverson initially was facing four counts of wire fraud and five counts of money laundering following an investigation by the FBI and the Seattle field office of the IRS Criminal Investigation unit.
"When criminals take advantage of the trust placed in them by ordinary citizens, those citizens expect their government to hold those criminals accountable. The judge in this case did just that," said IRS Special Agent in Charge Marcus Williams.
According to indictment papers provided by the IRS unit, the purported business of TTS was the purchase and sale of tickets to major public events such as the Super Bowl and the Indianapolis 500 along with various concerts and shows in Las Vegas.
The indictment states that beginning in about January 2003 and continuing until about September 2006, Halverson allegedly sought investments in his ticket company, supposedly promising to buy tickets to events and sell them at a profit, splitting the proceeds with his investors.
In its indictment, the U.S. Attorney's office argues that instead of running a ticket firm, Halverson used investors' money to pay "'interest' on earlier investments; to repay principal on earlier investments; and, for his own personal benefit, including his gambling."
In February, in commenting on the Halverson case, IRS Criminal Investigation Special Agent and Public Information Officer Daniel Wardlaw said that a "Ponzi" scheme is essentially an investment fraud in which the operator offers a high financial return not available through traditional investments.
However, instead of investing victims' funds, the Ponzi operator pays "dividends" to initial investors using the amounts paid by subsequent investors. Such schemes generally fall apart when a sufficient number of new investors cannot be found to allow the continued payment of "dividends."
Ponzi schemes get their name from Charles Ponzi of Boston, who ran a company offering a great rate of return for an investment in postal coupons. The scheme fell apart when he was unable to pay investors.
Judging from the indictment against Halverson, some of his alleged activities came to light after three different creditors filed involuntary Chapter 7 bankruptcy petitions against Halverson and his wife in 2006. According to a sentencing memorandum filed in the case, one key question that remains is what happened to the money allegedly collected by Halverson.
Filed by the U.S. district attorneys prosecuting the case, the sentencing memo states the total loss to investors may be between $2 million and $7 million "with strong indications that it approached the upper end of this range."
The memo also states some of the money that went to TTS was used to make "limited" payments to early investors, while other funds went to pay for gambling debts Halverson incurred in Las Vegas.
"The balance was lost in a sea of bank accounts and cash transactions which could not be traced," the memo reads in part.
In sentencing papers, Halverson is ordered to make restitution in the amount of $7.6 million. But how much of that ever will be repaid might be debatable. The sentencing memo states Halverson claims to have no notable assets.
"The investigation proved unable to trace much of the ill-gotten gain after it was received by the defendant," the memo reads.
Officials also were unable to determine exactly how many people became victims of the alleged scheme. The sentencing memo puts the number at approximately 50, but admits there is some uncertainty as to the accuracy of that figure.
While prosecutors took Halverson to task for taking advantage of his investors, they also say he had never been in trouble previously.
"The reports from this family generally emphasize that he is a generous man, who cannot say, 'No,'" prosecutors wrote. "In short, there is a significant disconnect with the defendant’s life prior to the start of this scheme and the time after the scheme began."