FREEZE FRAME 


Editor's note: This is a corrected version of the story. This corrected version was updated 11/6/2008 at 4:09 p.m.

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Last summer brought both steamy weather and a newfound prosperity for Quincy-based online advertising company AdSurf Daily. The company made money by selling Internet advertising to its members, who could recoup the cost of their advertising, and theoretically even make money, by viewing the advertising of other members. Basically, ASD paid its members to drive traffic to their websites. The company has about 100,000 members, including nearly 20,000 in Central Florida, who say they were profiting handsomely from the site.

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According to ASD officials, the company brought in some $90 million in June. There was a members' rally in Tampa that month and another in Miami in July that brought in millions in advertising fees – nearly $40 million at the three-day Miami rally alone.

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ASD exploded. In April, the company had 23,000 members and 25 employees. By late July it employed 80 and had 100,000 ; members.

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But in August, federal agents raided the company's offices, a forfeiture complaint in hand, seizing more than $90 million. Secret Service investigators based in Orlando alleged ASD was a Ponzi scheme, a scam that pays investors with funds brought in from ; other investors rather than selling an underlying investment.

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Headed by a secretive grandfather and run out of a former flower shop, ASD has almost all the trappings of a money-laundering case: victims, a raid by the feds and a very public takedown of a suspect business. What makes this case different is the fact that there are few who consider themselves victims of ASD. More than 4,000 members wrote to Collyer over a two-month period; most stood by the company. And the call volume of members expressing support has been so heavy that the Florida attorney general set up a dedicated hotline.

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"The unfortunate reality is that in these kinds of cases when the government jumps the gun and grabs property, the government is acting as judge, jury and executioner. There's been no finding of engaging in illegal activity," says ASD attorney Jonathan Goodman, of powerhouse Miami-based firm Ackerman Senterfitt.

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"[Members] still support the company. They don't blame the company; they blame the government. They don't consider themselves victims. That is not common in a fraudulent scheme case."

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A brilliant genius

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ASD was founded in October 2006 by Thomas "Andy" Bowdoin Jr., a 74-year-old grandfather, religious country boy and successful entrepreneur with a hands-on approach to business. Bowdoin often returned phone calls personally and liked to mingle with new members at rallies.

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At the same time, he's publicity-shy. Bowdoin initially expressed interest in speaking to Orlando Weekly for this story, but ultimately declined because he was worried about tapped phone lines and government officials hacking his e-mail. Miles Christian-Hart, Bowdoin's spokesman, offered the possibility of a conference call, but that never happened. An in-person interview was ruled out on the advice of his attorney.

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"The attorney general is gathering information to use against us," Christian-Hart warns, noting that the company has asked Microsoft "do a security sweep to see if the Secret Service put in bugs" on computers returned two months after the raid.

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During the last 25 years, Bowdoin founded or worked for a dozen failed fledgling companies, including South Polk Investors, Creative Retailing Services, Crosby Enterprises of Lakeland and World Payment Systems, a payment-processing business. All were ultimately dissolved, at least five of them involuntarily. Most of the companies appeared to be technology or multilevel marketing. According to the recent federal filing, Bowdoin "earned no significant income from legal employment in the 20 years prior to his commencement of [ASD's] operation."

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Bill Robinson, a Sarasota member and a friend of Bowdoin's, says Bowdoin suspected his company would draw the attention of the feds, but thought such an investigation could validate ASD.

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"That's one thing that didn't make sense to me – that a man who is 74 and in the last section of his life, with grandchildren working for the company, would be so stupid and so visible and not do it right. I said to Andy all along that we were going to get looked at and he welcomed them to look, because everything was done right," Robinson says.

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Bowdoin does have a history of not doing things right. On Oct. 6, 1997, he agreed to felony pre-trial diversion that included three years of probation and payment of $15,000 in restitution. The charges were for the offer and sale of securities by an unregistered agent and failure to reveal information that could have impacted investment decisions while promoting an Alabama cellular phone company, Mobile International, that later collapsed. The state charges were dismissed upon completion of the pre-trial program.

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On Jan. 11, 1999, also in Alabama, he pleaded guilty to one count of sales of unregistered securities and was sentenced to a year in prison, again for his involvement with Mobile International. That term was suspended in favor of three years probation and $75,000 ; in restitution.

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Courted

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For two years ASD operated without questions from state or federal officials. Suddenly both took an interest.

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Orlando Secret Service agents began investigating the company on July 3 after receiving a tip it was possibly a Ponzi scam. (The Secret Service is in charge of investigating suspected money laundering.)

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A St. Cloud IRS–Secret Service task force member says most ads "did not come from legitimate advertisers," according to the court filing. The first three ads viewed by the agent promoted ASD. The next two sites were ads for other multilevel marketing programs: Bio Petro Improver and Acai Berry Juice.

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"These alleged advertisers had no independent product or service to sell, no web-based business, and thus no legitimate reason to have paid ASD to advertise for them except to secure ASD's ‘rebates,'" read the court filing.

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A week later the agent upgraded his membership and followed it up with a deposit at the downtown Orlando Bank of America. He used his MySpace page as his business website. "ASD did nothing to ensure that real businesses were joining its program as advertisers," court documents note.

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ASD's site even acknowledged that owning a business wasn't a requirement; the company suggested a handful of online affiliate programs for members without businesses.

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Another Secret Service agent opened an account from Washington, D.C., on July 20 and viewed ads with similar results. And then came the raid on Aug. 5. A civil forfeiture complaint listed offenses including wire fraud, money laundering and conspiracy to violate anti-money laundering and wire fraud statutes. The forfeiture action included Bowdoin's waterfront Quincy home, his Myrtle Beach condo, the company's computers and $53 million in funds. Bowdoin hasn't disclosed his worth, but federal prosecutors say his business had a net worth of $10 million. They also say he spent $51,000 in company funds on jewelry in a single day, an act indicative of a lavish lifestyle.

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A day later, on Aug. 6, the state of Florida filed an action requesting civil damages, penalties and an injunction to dismantle ASD, and accused the company of deceptive and unfair trade practices by operating a Ponzi scheme. On Aug. 18, the federal government seized another $40.5 million, bringing the total to $93.5 million.

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Sham business

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John Mrha, the Orlando-based Secret Service special agent in charge of the ASD investigation, won't talk about many specifics of the ongoing investigation, but he says ASD's operations aren't legitimate and questions the types of businesses that advertised through the site.

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"We're trying to figure out how many legitimate businesses there were. If you're spending a lot of money on advertising, what are you advertising? That's a key for us," Mrha says. "I was surprised by how much money was being generated. If times are so tough, why are people sending money to someone they don't know to buy ad packages?"

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The government has argued that the company operates illegally by paying rebates for looking at ads that appear to be exclusively derived from fees paid by others participating in the same program.

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"ASD does not appear to sell any independent products or services sufficient to generate an income stream needed to support the rebates and commissions that it promises its members," prosecutors wrote in the ; court filing.

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"Further, most of the so-called advertisers are not paying ASD for advertising services at all; instead, they are paying ASD with the expectation that ASD will provide a full rebate and additional revenue."

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That, prosecutors and Secret Service agents say, made it a Ponzi scheme.

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On the other hand

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At the crux of the argument is whether ASD is a Ponzi scam. Defense expert Gerald Nehra, an attorney specializing in direct sales for 38 years, says it isn't. Nehra, who Bowdoin hired on as a consultant only days before the raid, still works for ASD.

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In fact, a lengthy membership agreement made clear money paid to the company was to buy advertising, not investments, and made no guarantees of profits.

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"It is not [a Ponzi]," Nehra wrote in an evaluation submitted to the court. "The complaint uses investment and return-on-investment language, but the company never used such language. The complaint repeatedly speaks of promises, but the Ponzi–like promises were never made by the company."

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That assertion is backed up by "the presence of a real, viable, marketable service, namely Internet advertising" and the fact that "participants are not needed to keep everything afloat," he says.

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ASD did have outside income, including rights to e-books, proceeds from domains it owned and marketing revenue from partnerships with GreenBackStreet, an online shopping portal, and Million Dollar Advertising. At the Miami rally, Bowdoin also announced that the company was considering the purchase of call centers in Latin America and an interest in an international bank.

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Christian-Hart, who points out that ASD created dozens of $12-an-hour customer service jobs in a community where many commute to Tallahassee, an hour away, says the company was only raided because it was making buckets of money.

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"They just decided to tap into the money. They didn't charge us with anything," he says. "They just accused us of being a Ponzi scheme so they could confiscate close to $90 million and freeze bank accounts."

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And there is a dedicated member base standing beside the company. Numerous members observed the two-day evidentiary hearing.

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Orlando ASD member Robert Drazen was initially skeptical about ASD, but listened to the low-pressure pitch at a crowded Tampa rally.

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"I was fascinated by it. At first I thought it was too good to be true; it sounds like a Ponzi where there would be someone at the top and the rest of us getting taken advantage of," Drazen says. "Then I saw the level of brilliance in the structure that Andy put together."

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Over his wife's protests, Drazen immediately bought $2,000 worth of advertising. He'd pulled out only $300 in rebates before the raid.

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"A lot of people were involved whose lives were really transformed, people who were broke, lost a job or were down on their luck. And with ASD they would be able to earn a living for their self and family," Drazen says. "People thought Napster was strange at first. It's an idea that's a little ahead of its time."

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Waiting game

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Collyer will soon make a ruling on the company's future.

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"[The government] can't prove it's a Ponzi scheme. If there's wrongdoing, they'll have evidence [if allowed to restart under the plan]," says Miami ASD member Todd Disner, a co-founder of sandwich franchise Quizno's. "I'm not only angry but depressed that the government can do this. It's like the Depression of 1928 with people jumping out windows. [Members] are putting cars up for sale. They can't pay mortgages."

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Disner says ASD worked. It increased web traffic and drove sales at legitimate businesses. Says Disner: "That's the Holy Grail in advertising – to get in front of people for 15 seconds."

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After a flurry of court filings, it's now become a waiting game, and members have become more supportive than ever. Steve Watt, a Port Charlotte member, flew to Washington, D.C., to attend hearings and report the results on his personal website.

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"All members that asked to get checks got paid," he says. "All the lights were green."

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Whether a judge will agree with that assertion in court remains to be seen, but continued negotiations to reopen ASD might ultimately make a mockery of the forfeiture case.

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"It's all about the money," says Debary member Bob Waldorf. "There's not a chance of getting it back if the government gets it."`

; dmorey@orlandoweekly.com

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