Omega Trust & Trading Ltd. was an American company that engaged in
prime bank fraud from 1994 to 2000.
The organization was created by retired electrician Clyde Hood, who presented it as an offshore investment program offering complex financial instruments with a payout of 50-to-1 or more.
In 2001 Hood pleaded guilty to charges stemming from the scheme, and admitted that Omega investors could never have received the profits that they had been promised.
Although there were many prime bank scams in 1990s, Omega is set apart by the enduring faith of victims that they would receive a return on their investment, even after Hood's arrest.
When federal authorities offered
restitution
The law of restitution is the law of gains-based recovery, in which a court orders the defendant to ''give up'' their gains to the claimant. It should be contrasted with the law of compensation, the law of loss-based recovery, in which a court o ...
to an estimated 10,000 victims, many declined for fear of disqualifying themselves from receiving Omega's long-awaited payout.
Background
Clyde Hood was a lifelong resident of
Mattoon, Illinois
Mattoon ( ) is a city in Coles County, Illinois, United States. The population was 16,870 as of the 2020 census. The city is home to Lake Land College and has close ties with its neighbor, Charleston. Both are principal cities of the Charlestonâ ...
, where he worked as an electrician. In December 1990 he was indicted in
Pike County, Indiana
Pike County is a county in the southwest portion of the U.S. state of Indiana. As of the 2010 United States Census, the population was 12,845. The county seat is Petersburg. It contains the geographic point representing median center of US popu ...
in connection with a fraudulent scheme to sell overseas oil
futures
Futures may mean:
Finance
*Futures contract, a tradable financial derivatives contract
*Futures exchange, a financial market where futures contracts are traded
* ''Futures'' (magazine), an American finance magazine
Music
* ''Futures'' (album), a ...
. The case was dismissed when Hood refused to appear before the court.
According to court testimony, Hood and his "mentor" traveled to Oregon in the early 1990s, where he met some of the con artists running the first prime bank scams.
The term "prime bank" has no real meaning, except to create the appearance that the scam involves special financial institutions and programs that would normally only be available to the wealthy.
A typical prime bank pitch involves discounted
debentures
In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowle ...
, "prime bank notes," or other financial instruments that are purportedly too complex for investors to understand.
The scam
In Hood's version of the prime bank scam, Omega offered a "private party loan agreement" wherein the victim would "lend" $100 to a prime bank, and receive a lump-sum payout of $5,000 (in addition to the original $100) in September 1994.
A "roll program" would be offered so that participants could reinvest their profits up to three times, resulting in a total return of $765,000.
Hood claimed to be one of "only seven people, possibly eight, in the world" qualified to manage these instruments.
Using
affinity fraud
Affinity fraud is a form of investment fraud in which the fraudster preys upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups. The fraudsters who promote affinity ...
tactics, Hood initially targeted church groups, claiming that the
Holy Spirit
In Judaism, the Holy Spirit is the divine force, quality, and influence of God over the Universe or over his creatures. In Nicene Christianity, the Holy Spirit or Holy Ghost is the third person of the Trinity. In Islam, the Holy Spirit acts as ...
led him to "fill the Lord's warehouse" by sharing his good fortune with Christians.
Omega also claimed that only a limited number of $100 "units" would be made available, and sales would shut down in August 1994. This helped to persuade victims that the program was not simply an open-ended scam to make as much money as possible.
To expand the reach of the scheme, Hood hired
network marketers to both sell his product and recruit additional sellers.
Consequently, the details of the scheme expanded beyond Hood's original plan. One Omega solicitor, Michael Kodosky, continued to sell units after the August 1994 deadline, claiming that "refund units" had become available, and inflating the 50-to-1 payout to whatever amount potential customers wanted to hear.
Whereas Hood avoided selling units to his local community in Mattoon, marketer Arlene Diamond had no such compunction.
Diamond also recommended that clients send payments in cash wrapped in aluminum foil, to avoid scrutiny from postal inspectors.
On September 1, 1994, Hood met with Omega lenders in
Portland, Oregon
Portland (, ) is a port city in the Pacific Northwest and the largest city in the U.S. state of Oregon. Situated at the confluence of the Willamette and Columbia rivers, Portland is the county seat of Multnomah County, the most populous co ...
, to answer questions and provide information on when payouts would be received.
Hood claimed to be leaving for
Zürich
Zürich () is the list of cities in Switzerland, largest city in Switzerland and the capital of the canton of Zürich. It is located in north-central Switzerland, at the northwestern tip of Lake Zürich. As of January 2020, the municipality has 43 ...
the following day to complete the transactions, and that the three rollovers would be completed by the end of the year.
By 1995, however, Omega was fielding enough questions about the payout that Hood set up a telephone line that played pre-recorded updates. At least 72 different messages were recorded for the service, often assuring clients that the payouts were imminent. Excuses for the delay ranged from "some unforeseen international financial conflict" to "the greed, the jealousy, the desire for power" of Omega's own clients.
With the money Hood and his associates bought land and businesses in Mattoon, gave no-interest loans and made trips to Europe. Some of the money also went to finance businesses of other Hood associates like construction contractor Chris Engel.
Arrests and aftermath
Clyde Hood and 18 of his associates were indicted in August 2000. Some of them pleaded guilty or were convicted of multiple counts of
fraud
In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compens ...
,
mail fraud
Mail fraud and wire fraud are terms used in the United States to describe the use of a physical or electronic mail system to defraud another, and are federal crimes there. Jurisdiction is claimed by the federal government if the illegal activit ...
,
money laundering
Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...
and filing a false tax return (see ).
Engel later cooperated with the police and let them tape a phone conversation with Hood.
Hood lawyer Steve Ryan was also later removed from the case when he was
subpoena
A subpoena (; also subpœna, supenna or subpena) or witness summons is a writ issued by a government agency, most often a court, to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of ...
ed as a
witness
In law, a witness is someone who has knowledge about a matter, whether they have sensed it or are testifying on another witnesses' behalf. In law a witness is someone who, either voluntarily or under compulsion, provides testimonial evidence, e ...
and for possible collusion.
On April 10, 2001, Hood pleaded guilty to mail or wire fraud conspiracy, money laundering conspiracy, and filing a false tax return.
On January 18, 2002, he was sentenced to 14 years in prison, to be followed with three years of
supervised release
Parole (also known as provisional release or supervised release) is a form of early release of a prison inmate where the prisoner agrees to abide by certain behavioral conditions, including checking-in with their designated parole officers, or ...
, and a fine of $5000.
Hood died on July 24, 2012.
Five of his associates were convicted of active participation of the scheme and were ordered to make restitution. Thirteen associates were convicted of money laundering. Three hundred fifty-five victims received restitution from forfeited Omega Trust funds to the total of $1,697,310.00.
Related activities
Omega Trust inspired similar schemes, either to offer similar phony debentures or to propose a new path to securing the payout promised in the original scam.
Clyde Hood testified that he was aware of imitators who copied his methods without sending him any money.
Programs known as "Alpha" and "Destiny" were circulating as early as 1998.
The anti-fraud website
Quatloos.com
Quatloos.com is an anti-fraud website maintained by a non-profit corporation, Financial and Tax Fraud Education Associates, Inc. It evolved out of a basic educational website on the topic created in 1997 by Jay Adkisson, an attorney and stockbr ...
speculated that Alpha and Destiny were "probably run by the same people" as Omega.
Following the arrests of Hood and his associates, an email from "Alpha/Destiny Commission" disavowed any connection to Omega and assured lenders that funding would begin soon.
Many students in
Ramtha's School of Enlightenment
Ramtha's School of Enlightenment (RSE) is an American New Age spiritual sect near the rural town of Yelm, Washington, U.S. The school was established in 1988 by J. Z. Knight, who claims to channel a 35,000-year-old being called Ramtha the Enlig ...
in
Yelm, Washington
Yelm () is a city in Thurston County, Washington, United States. Its population was 10,617 at the 2020 census. At the beginning of the 21st century, Yelm was the 10th fastest growing city in the state in regard to population.
History
The wor ...
, sent money to Omega, although leader
J. Z. Knight
Judy Zebra "J. Z." Knight (born Judith Darlene Hampton; March 16, 1946) is an American spiritual teacher and author known for her purported channelling of a spiritual entity named Ramtha. Critics consider her to be a cult leader.
Knight has ap ...
did not endorse or promote the program. In 1998, Yelm resident and former Ramtha student Shaini Goodwin learned of Omega from a friend, and purchased two units. By November 1999 she was posting reports on the Internet under the pseudonym "Dove of Oneness," identifying as an Omega investor who awaited her "propserity deliveries" from the program. As Omega lenders became more conspiratorial and paranoid about the delay of their payouts, Goodwin's "information" about Omega grew popular. By 2000, she attributed the Omega delays to a conflict between "White Knights" and "the dark agenda." After the August 2000 indictments, Goodwin assured her followers that the case would be unable to prevent funding. She warned that lenders who read about, or cooperated with, the investigation could lose their payout.
Goodwin asserted that Omega was one of 50 "prosperity programs" that would be free to deliver payouts after the conflict was resolved.
To explain this eventual triumph, she co-opted
NESARA
''Nesara'' is a genus of moths in the family Lasiocampidae
The Lasiocampidae are a family of moths also known as eggars, tent caterpillars, snout moths (although this also refers to the Pyralidae), or lappet moths. Over 2,000 species occur wo ...
, a proposed US law published in 1996 by Harvey Barnard.
Although Barnard's bill had never been sponsored by a member of Congress, Goodwin claimed that it had been secretly passed in March 2000, but a
gag order
A gag order (also known as a gagging order or suppression order) is an order, typically a legal order by a court or government, restricting information or comment from being made public or passed onto any unauthorized third party. The phrase may ...
prevented anyone from enforcing it or acknowledging its existence.
Goodwin said that NESARA would forgive all loans and eliminate taxes; when Barnard took exception to her misrepresentation of his proposals, she suggested that he could not affirm her claims, since doing so would be an act of
treason
Treason is the crime of attacking a state authority to which one owes allegiance. This typically includes acts such as participating in a war against one's native country, attempting to overthrow its government, spying on its military, its diplo ...
.
Hours after the
September 11 attacks
The September 11 attacks, commonly known as 9/11, were four coordinated suicide terrorist attacks carried out by al-Qaeda against the United States on Tuesday, September 11, 2001. That morning, nineteen terrorists hijacked four commercia ...
, Goodwin claimed that the World Trade Center had been
targeted by "U.S. citizens who are trying to stop our deliveries/funding and NESARA." The conspiracy theory drew a new audience to Goodwin and her claims.
Enduring interest in Goodwin's version of NESARA has sustained Clyde Hood's original claims about Omega well into the 2020s.
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References
{{Reflist
Fraud in the United States
Crimes in Illinois