Five Florida promoters who in 1974 convinced recently repatriated U.S. prisoners of the Vietnamese war to invest their back pay and disability compensation in various financial schemes, were indicted for criminal fraud by a federal grand jury in Miami yesterday.
The indictment, which was unsealed in Miami, stated that the POWs and other investors lost about $4 million in schemes that ranged from hydroponic farming to modernizing old DC-3 airplanes.
During a 1974 court hearing of a civil suit brought by the Securities and Exchange Commission, a federal judge branded the schemes "horrible, vicious, brutal, and diabolical."
At those hearings it was revealed that one Thomas Preston sent "welcome home" letters to about 80 ex-POWs claiming he had been a POW during the Korean conflict and had lost his back pay in bad investments after the war. Preston offered expert investment advice.
Preston, who is serving 10 years in Texas on a state court conviction for defrauding POWs there, was not named in the federal indictment.
Robert J. Allen, who is serving five years in Texas for the fraudulent sales to POWs, was named were Howard W. Alexander, Charles J. Diaz, James W. Brewer and I. Vasilios.
According to the indictment, the defendants established Alexander & Allen, Inc., and R.J. Allen & Assoc., Inc., which sold industrial revenue bonds purportedly to finance several projects. But the indictment charges that the principals pocketed most of the money.
Among the projects were a hydroponic farm in Tuskegee, Ala., which was owned by the defendants.
The victims were told their investments were insured by companies in Grand Cayman and Jamaica. But according to the indictment, the insurance companies "were shell corporations with virtually no assets."
Several of the returning POWs lost more than $50,000 to the schemes, the indictment said. Many of the investors, some of them ex-POWs, lost between $5,000 and $50,000.
The defendants set up headquarters at One Financial Plaza, Ft. Lauderdale, in August 1974.They charged brokerage fees on the bonds that ranged from 15 to 20 per cent, according to the indictment.
In addition to soliciting business from POWs by mail, the defendants allegedly advertised their municipal bonds in newspapers. A sales force was recruited to solicit prospects by telephone and circulars.
The indictment said that the defendants used a bank as trustee for the industrial revenue bonds. The bonds supposedly were released when investors' funds were turned over to the bank.
But the indictment said "the defendants mailed confirmation forms to some customers . . . indicating that the bonds had been purchased for the customers, when in truth . . . the bonds had not been purchased for the customers and the customers' funds converted by the defendants to their own use."