The Maryland attorney general's office moved Thursday to halt an alleged pyramid scheme by a Gambrills company and its owner, who are accused of bilking about 500 people out of hundreds of thousands of dollars by promising commissions, free rent and cars in exchange for recruiting more investors.
The plan started to fall apart when rent checks bounced and the investors were evicted. More than 115 people paid several thousand dollars into the 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, could not 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 in the 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 could impose fines of up to $20,000 per victim for violations of securities law, said Raquel Guillory, a spokeswoman for the attorney general's office. It is unclear whether victims would 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, though not all continued to pay the monthly fee.
Many paid money in advance for an apartment for a year in such areas as 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 recruit more, according to the order.
Despite some discussion of cellular phone sales, DMC did not tell investors that all income stemmed from recruiting and that the company lacked the money to pay everyone's rent, authorities said.
The securities division alleges that DMC violated state securities laws by failing to provide investors with relevant information about company officials, such as Williams' prior conviction.
As the scheme progressed, a larger number of referrals for potential investors was required, authorities say. 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 choosing for hundreds of dollars up front.
Last fall, Martin invested $2,000 after one daughter put in $5,000 and another paid $4,300. Martin said she had doubts about the program early on. But her daughter Sade Brown secured an apartment, leading Martin to believe that Williams' program was legitimate.
About a week after Brown moved into the apartment, she was evicted.
"She said, 'Ma, look at this. He didn't pay nothing,'" Martin said.
The family tried to contact Williams by phone and 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.
Brown, 24, is returning home to live with her mother. Martin, who had hoped to move from her East Baltimore rowhouse 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 had doubts but felt reassured that her sister's friend and another acquaintance had each gotten apartments through DMC. That's when the University of Baltimore student handed over the savings she had been tucking away since she was 14, as well as part of a scholarship, she said.
The business "was all supposedly about helping everybody afford the things that most people couldn't, and it was just a scam," Brown said.
Brown and Martin had been involved for about a month when the pyramid 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."