Two Lower 48 businessmen who committed to raise millions of dollars to develop an Alaska gold mine on an island just south of Kodiak were arrested Wednesday on counts of securities and wire fraud.
The men are accused of bilking millions of dollars from unwary investors in the Sitkinak Island gold mine and an unrelated real-estate scheme in the Lower 48.
One of the two is a former Alaskan, William Lange, 63. He had a checkered history in Alaska. In the past, Lange has been fined by the state for consumer law violations involving condo time-shares in Seward and for illegal moose hunting.
In December, a federal grand jury indicted Lange, now of Gig Harbor, Wash., and Joseph Pascua, of Lake Tapps, Wash., on three counts of fraud. The two were accused of defrauding 300 private investors of an estimated $9 million in connection with the gold mine and home-building projects in areas recovering from Hurricane Katrina.
Prosecutors said the indictment was unsealed Wednesday. After their arrests that morning, the two were arraigned in federal district court in Tacoma.
In an unusual twist, the case has been assigned to a judge in the U.S. District Court in Brooklyn, N.Y. One possible reason is that many of the developers who lost money in the Hurricane Katrina reconstruction projects are based on the East Coast.
REAL ESTATE SCAM?
Over the past few years, Lower 48 real estate developers' outrage over the two men's loan practices spilled into online message boards devoted to business fraud.
At least one real estate developer posted on a message board that Lange had bilked him for more than $1 million.
Some said they had asked multiple federal agencies to investigate.
The indictment said the duo ran an illegal advance-fee scheme from 2006 until now. The alleged scam involved a promise to provide financing for home builders in exchange for an advance fee of 10 percent of the loan amount.
Lange and Pascua didn't fund the loans and didn't return the developers' fees. Instead, they used the money to pay for their own and their employees' salaries, vacations and hunting trips, mortgage payments on Lange's house, and other unrelated projects, the indictment said.
ONE SURPRISED MINER
Alaska mining officials said they were aware of the federal probe and had been contacted by the FBI. They also had received calls from potential investors in the gold mine.
Anchorage miner Yoram Palkovitch, 59, said Lange and Pascua, through their business called Black Sand Mine Inc., had so far invested $50,000 in his Sitkinak mining project, which involves placer mining on beach sand.
Palkovitch said has been trying to develop the project -- located on state land -- for decades.
Palkovitch said he did not know about the indictment and the arrests until he was contacted by a reporter.
"I thought (the men) were legit. I still think they are unless I am told otherwise," Palkovitch said.
The grand jury indictment says Lange and Pascua told investors that their company owned a large stake in the Sitkinak Island project and that gold and other precious metals were already being mined there. The men falsely said the mine was projected to gross $52 million a month this year, according to the indictment.
It's unclear how many people wrote checks for the mine project. The indictment gives only one example, from last August, when a married couple furnished a $30,000 check to Black Sand Mine.
A state mining official, Kerwyn Krause, said he learned about the company after receiving several inquiring phone calls from people in Washington state.
"Upon checking, I learned that Black Sands Mining was not qualified to conduct business in Alaska," Krause said.
Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.
By ELIZABETH BLUEMINK