A key figure in a $100 million fraud scheme is the chief financial officer for a militia group now based in North Idaho.
Michael Duane Smith is charged in U.S. District Court in New York with bilking 1,100 investors in a nationwide scam involving the discounted purchase of life insurance policies from terminally ill people.
Now, the FBI is investigating Smith’s ties to the United States Constitution Rangers - a right-wing political group whose members have badges and call themselves “constitutional policemen.”
Last month, two members of the militia group based in Hayden Lake hand-delivered letters to Congress, threatening to bring public officials to justice for “exceeding their lawful authority.”
Smith, formerly of Spokane, has been the “national finance director” for the Constitution Rangers, law enforcement sources confirm.
“Yes, he’s the treasurer and handles the finances for our group,” said Jack Dean Yoos, commander of the Constitution Rangers.
“These charges against him are trumpeted up, bogus, because he’s going after government officials and the IRS, exposing the truth,” said Yoos.
He said the Constitution Rangers police government officials to see that they do not obstruct or usurp the power granted under the Constitution.
Yoos is not accused of any involvement in the investment scheme, the scope of which amazes investigators and securities enforcement specialists.
In March alone, court documents allege, Smith pocketed at least $360,000 as his commission for convincing 77 people to invest $3.6 million in the scheme.
Smith was arrested by FBI agents April 4 in Denver as he got into a limousine with two women from an escort service. He was en route to the Denver airport, where a chartered jet was waiting to take him to Maryland, authorities said.
He had a $1.3 million negotiable check that was seized by the FBI.
Three other co-defendants were arrested the same day by the FBI in Palm Springs, Calif. There is no evidence at this point tying them to the Constitution Rangers.
Smith, who was raised in Spokane and still has family here, is free on bond and couldn’t be located for comment.
His attorney, Gordon Sanchez, of Denver, did not return telephone calls.
In only nine months, court documents say, the investment scheme raised $100 million - significantly overshadowing a check fraud promoted last year by the Montana Freemen.
Smith, 34, and the three co-defendants promised investors they could earn 25 percent returns in a year by investing with Personal Choice Opportunities, court documents allege.
The company advertised on the Internet and radio talk shows, promising to use the investors’ funds to purchase life insurance policies from people with less than six months to live.
The company said the policies would to be purchased at far less than their face value, and the company would be the beneficiary after the seller’s death.
“In fact, there is no evidence that any legitimate insurance policies were ever purchased,” said Keith P. Bishop, commissioner of the California Department of Corporations.
“We are alleging that this was a giant Ponzi scheme in which investors got a little of their own money back to lull them into believing that the investments were real,” Bishop said.
Instead, company leaders pulled in salaries in excess of $300,000 a month and led lavish life-styles, complete with limousines and chartered jets, authorities said.
At least 40 of the investors live in Idaho, and a smaller number are from Washington.
Other victims are from South Dakota, Minnesota, Nevada, Arizona, Oregon and California, investigators say.
A court-appointed receiver was named after state securities officials in California, Idaho and Colorado moved to seize assets.
G.W. McDonald, an enforcement commissioner with the California Department of Corporations, said approximately $60 million is in bank accounts seized by investigators.
“We’re hopeful that there can be a significant return to the investors who’ve lost money in this scheme,” McDonald said.
Yoos, who recently moved the Constitution Rangers’ headquarters from Arizona to Hayden Lake, said Smith is a “God-fearing, law-abiding American.”
“I know him personally,” Yoos said. “I’ve been to his home in Denver, and he’s been to my home, as recently as two weeks ago. There’s not a crooked bone in his body.
Yoos said if there were more people like Smith, “we wouldn’t be facing many of the problems we’re facing from our government.”
Yoos was questioned Thursday by FBI agents at his home in Dalton Gardens, north of Coeur d’Alene. He didn’t say if he was questioned about Smith’s involvement with the Constitution Rangers.
Yoos, 64, said he called the FBI and invited agents to pay him and his pet parrot a visit.
“We’re not the terrorists that people think we are,” Yoos said. “We want to work together with the FBI and the local sheriff. We’re not enemies.”
, DataTimes ILLUSTRATION: Photo
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.