Northwest Territorial Mints Fraud Ponzi Scheme

Bernard Ross Hansen, who also goes by Ross B. Hansen is the founder and former president of the Northwest Territorial Mint. A Federal Grand Jury indicted him on April 12. His charges include ten felony counts of mail and wire fraud.  Stemming from multiple bullion fraud schemes, Hansen, and the firm’s former vault manager, Diane Renee Erdmann, allegedly conned 3,000 patrons out of almost $36 million. Erdmann is Hansen's long-time girlfriend. If convicted on all counts, the pair faces prison terms of a combined 400 years. And up to 20 years on each count.

The indictment handed down on April 12 in the United States District Court for the Western District. The document was finally unsealed on April 16 when Hansen, 57, and Erdmann, 45, made their first court appearance. They both used appearance bonds to release themselves. (a type of bail in which the accused make a written promise to appear in court and to pay a specified sum of money if they fail to appear as required). If they violate the appearance bond, it could cost each of them up to 20 years in prison and $250,000 in fines.

Northwest Territorial Ponzi Scheme

Allegedly, in the eight years between 2009 and 2017, Hansen and Erdmann bilked customers by lying about shipping times for bullion orders. They were illegally using customer funds to expand the business. Additionally, they were using customer money to pay for their personal expenses.  By 2012, the company didn’t have enough assets to satisfy orders. Instead, they took money from new customers to pay off older customers. This Ponzi-like scheme would come to cost customers over $25 million, according to the U.S. Attorney’s Office in Seattle. The U.S. Securities and Exchange Commission (SEC) defines a Ponzi scheme clearly. It is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors."  Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities. These opportunities claim to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make payments to earlier-stage investors. This creates the false appearance that investors are profiting from a legitimate business.  Because Northwest Territorial Mint operated on paying old customer orders with new customer funds, only the courts could determine whether that fit the criteria and definition of a Ponzi scheme.

Indictment

The indictment also alleges that in April 2016, over 50 people discover that all or some of their bullion was gone. These were buyers who had their precious metals in Northwest Territorial Mint vaults. The bullion values at $4.9 million. Northwest supposedly scammed a Canadian silver bullion producer of more than $1 million in silver bullion. Additionally, roughly 20 customers involved in a bullion leasing program lost more than $5 million. Between 2012 and 2016, Ross B. Hansen and Diane Renee Erdmann allegedly took over $1 million out of the company’s accounts for their use. Moreover, the pair was supposedly transferring roughly $120,000 in cash from the company to Erdmann’s checking account. They were using $400,000 in company funds to pay their credit card bills. According to the indictment, between March 2016 and June 2017, Erdmann sold more than $700,000 worth of precious metals. These were including gold and silver bullion. They then took the money for personal gain. The indictment also alleges that in 2009, Hansen used $2 million in customer accounts to expand Northwest Territorial Mint. He purchased Medallic Art Company. Furthermore, they were using more than $3 million in 2011 to purchased Graco Awards, a manufacturer of custom medals in Texas.

The Company

Northwest Territorial Mint was a manufacturer of medallions, rounds, and other awards. They were also a bullion business that sold, bought, exchanged, stored and leased gold, silver, platinum, and other precious metals. In 2016, the company, which was at Federal Way, Washington, was forced to file for bankruptcy. This was after the company had a 37 million dollar defamation suit.

From the Highest Highs to the Lowest Lows

Northwest Territorial Mint was not always in controversy. Medallic Art Company, which was one of Northwest’s affiliates, was a one-time supplier of blanks to the U.S. Mint for their production of American Eagle silver coins. At one time, Hansen’s company even manufactured the United States Medal of Honor, which is the nation’s highest award for valor. Hansen himself, at one point, was a respectable member of the precious metals industry. In 2011, he testified before the House Committee on Financial Services’ Domestic Monetary Policy and Technology Subcommittee. He suggested changes to the U.S. Mint’s bullion program. His past, however, was anything but respectable.

Kent's Past

According to a 1995 Seattle Times article, Kent police arrested Hansen in 1989 after a large drug bust led them to Hansen. In the seizure of more than 1 ton of marijuana, police also stumbled across $600,000 worth of precious metals. Hansen sold these precious metals to the drug dealer. Charges against Hansen did not file in that case due to a loophole. The loophole prevented prosecutors from proving that Hansen broke the law. He was, however, charged with “avoiding federal tax-reporting requirements” and gun possession. After pleading guilty, he served three years in prison.

Trust is the Golden Rule

The actions of Hansen and Erdmann were abhorrent and certainly do not inspire confidence in the precious metals industry. However, it’s important to remember that this is an extremely isolated incident. Bullion companies as a whole are very trustworthy and provide a tremendously safe setting in which to invest and shop. At Bullion Exchanges, we are leaders in our field. We adhere to the highest ethical standards in the industry. We have an A+ rating from the Better Business Bureau.  Bullion Exchanges is a team of highly-skilled, superbly trained, and fiercely motivated experts. We enjoy sincere and mutual respect with our clientele. We will do anything in our power to safeguard your hard-earned investment.