The Maryland Attorney General's office moved Thursday to stop a pyramid scheme by a Gambrills company and its owner who allegedly bilked about 500 people out of hundreds of thousands of dollars by promising commissions as well as free rent and a car for a year in exchange for recruiting more investors.
The scheme started to fall apart when rent checks bounced and the duped investors were evicted. More than 115 people paid several thousand dollars into the sham company for an apartment, and most have been tossed out, according to authorities.
The securities division of the attorney general's office issued a cease-and-desist order against Diversified Marketing Consultants Inc., its owner Lamondes D. "Monte" Williams of Clinton, and related companies Digital-Zone Electronics Warehouse and Mainline Properties LLC. The division contends the operation raised more than $800,000.
Williams, who was convicted in 2005 of running a similar scheme, couldn't be reached for comment. His most recent troubles triggered a probation violation hearing scheduled for Friday in Prince George's County Circuit Court, according to court records. In the previous case, he was sentenced to five years in prison and three years of probation and ordered to pay $146,000 in restitution.
The latest scheme began last year in the midst of the worst recession in decades when Williams started holding meetings in hotels around the metro Baltimore region and offered the opportunity to become an "employee," according to the order from securities regulators. The meetings were open to the public, and word spread.
Among those allegedly duped by Williams were Helen Martin, a 59-year-old social worker, and her two daughters who together lost more than $11,000 — including scholarship money and savings. They said they were lured by the promise of better housing, and they felt assured by testimonials from a network of friends and family.
"This was too good to be true — and it was," Martin said.
Williams and the companies named in the order have 15 days to respond or request a hearing, or a final order may be issued that would impose fines of as much as $15,000 to $20,000 per victim for violations of securities law, said Raquel Guillory, a spokeswoman for the attorney general's office. It's not clear whether victims will get their money back.
"We've got to get in there and see if there's any money, if there's anything to return," Guillory said.
According to authorities, people were promised commissions for signing up new investors in exchange for application fees of $100 and subsequent monthly payments of $100. About 500 people signed up between June and September 2009, according to the order from regulators, although not all continued to pay the monthly fee.
Many paid money in advance for an apartment for a year in areas like Columbia, Laurel and Owings Mills. Most have been evicted in recent months, Guillory said.
Williams and his companies, also known as DMC or Diversified Marketing Concepts and with addresses in Laurel and Gambrills, held regular meetings in the Hyatt Owings Mills, the Radisson and other hotels around Baltimore to meet with investors and to recruit more, according to the order.
Despite some discussion of cell phone sales, DMC did not tell investors that all income stemmed from recruiting, and that it lacked the money to pay everyone's rent, authorities said.
The securities division alleges that DMC violated state securities laws by failing to inform investors of relevant information about company officials, such as Williams' prior conviction.
As the scheme progressed, a larger number of referrals for potential investors was required. To rent apartments, investors would make lump sum payments. Digital-Zone or Mainline signed rental applications for investors, who might have bad credit.
Though the companies were required to pay the rent, they did not, leaving tenants at risk of eviction before the end of the year they were promised. In some cases, investors also paid Williams to lease a car of their choice for hundreds of dollars up front.
Last fall, Martin was enticed to invest $2,000 after one daughter put in $5,000 and another daughter paid $4,300. Martin said she had her doubts about the program early on. But her daughter Sade Brown secured an apartment, leading Martin to believe that Williams' program was legitimate.
Then about a week after Brown moved into the apartment, she got evicted. "She said, 'Ma, look at this. He didn't pay nothing,'" Martin said.
The family tried to contact Williams by phone and even drove to the Baltimore and Pikesville hotels where he ran his workshops to find him — all to no avail.
"That's when we knew we were scammed," Martin said.
Now Brown, 24, has to return home to live with her mother. Martin, who had hoped to move from her East Baltimore rowhome into a one-bedroom apartment near Johns Hopkins Hospital to be secured by DMC, now says she's lucky she never moved.
"I'm glad I didn't move because we both would be homeless," Martin said.
Brown said she had doubts but felt reassured that her sister's friend and another acquaintance had both gotten apartments through DMC. That's when the University of Baltimore student said she handed over the savings she had been tucking away since she was 14, as well as part of a scholarship.
The business "was all supposedly about helping everybody afford the things that most people couldn't, and it was just a scam," she said.
Brown and Martin were only involved for about a month when the scheme started to crumble. "It went from five meetings a week to three, and then two and one," Brown said. "You would see less and less people. Everyone started to get eviction notices."