Ponzi Scheme Uses Names of Legitimate NGOs for Million-dollar Con


April 26, 2017; Dallas Morning News

Nemelee Liwanag Jiao, a Dallas-area nurse, was indicted by a federal grand jury on two counts of wire fraud related to a fraudulent Ponzi-style investment scheme she allegedly operated, resulting in the defrauding at least 35 “investors” of more than $1 million over seven years.

The ten-page indictment outlines how Jiao approached investors to purchase promissory notes issued by two legitimate nonprofit schools in the Philippines, Shepherd’s Light Learning Center and Lord of Peace Learning Center. Jiao was not connected to the two nonprofit schools in any way, and the schools had no knowledge she was using their names in her alleged scheme. According to prosecutors, proceeds from the promissory note sales were used by Jiao for personal expenses, including a country club membership.

If convicted, Jiao would be subject to a maximum penalty of 20 years in prison and a $250,000 fine. In addition, she would be required to forfeit all proceeds from the criminal activity.

The investors lured to part with their money were apparently greedy in their own way, as well as unaware of the finer points of investing. Jiao accepted checks and promised full return of principal as well as interest ranging from 10 percent to 100 percent within 30 days to a year after the funds were given to Jiao. She went so far as to notarize the promissory notes in an effort to make them appear legitimate.

As is common practice with a Ponzi scheme, later investors’ money was used to pay earlier investors what appeared to be investment returns. Jiao not only did this, but she encouraged her husband to make such payments to some investors using cashier’s checks, and even had later investors write their investment checks directly to previous investors. Jiao’s husband is not included in the indictment.

The story is a cautionary tale for nonprofits in at least two ways. First, it’s important to be vigilant in protecting its name, logo, branding, images, etc., from misappropriation, regardless of purpose. Copyrights and trademarks that are not routinely protected may make it easier for others to adopt a nonprofit’s intellectual property without acknowledgement or compensation. In this case, there is no reason to believe the nonprofit schools could have or should have known of the misuse of their schools’ names. Assuming the schools chose to do so, they could sue Jiao for the misappropriation of their corporate identities.

The second issue for nonprofits to consider is the continued willingness of some nonprofit supporters to seek an angle when considering charitable giving, and the extent to which legal nonprofit fundraising practices may contribute to the consideration of “leveraging” charitable giving for personal gain. The publicity surrounding legitimate investment-based charitable vehicles makes it more believable to the gullible that Ponzi schemes in the name of charity are also somehow on the up-and-up.—Michael Wyland