Friday, October 30, 2020

EarthWater former executives plead guilty to defrauding elderly victims

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Two former EarthWater executives have pleaded guilty to multiple fraud counts for scamming elderly investors out of millions of dollars.

The sales pitch was intriguing and promising: bottled water infused with special minerals mined from “deep within the Earth’s surface” in a secret deposit that’s 80 million years old. The water was promoted as a “magical tonic” and a miracle remedy for HIV and cancer.

Organic compounds that gave the beverage its “rich, black color” provided the enormous health benefits, the company’s website said. Huge returns were promised. But the only profits that came from Addison-based EarthWater Ltd. were made by the owners and their cohorts, who pocketed millions of dollars from elderly investors for their own benefit, according to federal court records.

Two former top executives of the company have pleaded guilty to fraud and money laundering charges for their role in the multimillion-dollar investment scheme that involves 11 defendants, the U.S. attorney’s office said.

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John Mervyn Price, the company’s former chief operating officer, pleaded guilty Thursday to one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud, 10 counts of wire fraud and one count of money laundering. Price, 64, of Dallas, is scheduled to be sentenced in October. His attorney could not be reached.

The company’s founder and CEO, Cengiz Jan Comu, pleaded guilty in March to one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud, 10 counts of wire fraud and two counts of money laundering.

Known as C.J. Comu, the 59-year-old ran for Addison City Council last year as a business and civic leader. He now faces life in prison.

EarthWater made a name for itself in the local startup scene as an up-and-coming health and wellness company as well as a good corporate citizen. Its products supposedly contained mysterious nutrients and minerals that boosted immunity. It sponsored a race car at the Texas Motor Speedway. And in 2015, the Addison company said it planned to donate 1,000 water bottles to the Dallas Police Department.

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But Comu and Price used other people’s investments in the curious black liquid, which the company called “the greatest water on earth,” as their own “personal piggy bank,” according to prosecutors.

The government won its attempt to keep Comu behind bars in March by arguing that if he were released, he would likely return to scamming the elderly and might even claim his mineral water could cure COVID-19.

“Were he to be released amidst the COVID-19 pandemic, he would pose an even greater danger to his elderly victims and other vulnerable individuals,” wrote Christopher Fenton, a Justice Department trial attorney, in a filing. “Comu could easily rebrand his EarthWater pitch to include COVID-19 among the list of serious diseases EarthWater purportedly cures.”

Comu promoted his beverage as “a unique source of water that comes from a secret deposit in the USA containing over 70 trace minerals that have resulted in magical and remarkable results from radical improvement in health of body functions, to reduction in illness, Alzheimer’s, psoriasis and HIV,” court records show.

He also claimed EarthWater was to thank for patients’ remission from Stage 4 leukemia, according to records in the case.

Comu remains in federal custody until his sentencing, which is set for September. His attorney could not be reached Friday for comment.

Back to jail

Even after being charged in the case, Comu continued his fraud — from behind bars and while he was out on bond, Fenton said.




Comu was arrested in May 2019 after being indicted for his role as the leader of the “absurd get-rich-quick scheme,” as described by Erin Nealy Cox, the U.S. attorney in Dallas.

Comu, a native of Canada, was released last year on conditions ordered by a judge and then wound up back behind bars six months later after the judge revoked his bond for violating those terms.

Just weeks after his release, Comu resorted to more scams by “launching a months-long campaign to raise millions of dollars by promoting and selling securities,” Fenton said in court documents. During his sales pitch, Comu “spun a story” about being the victim of a beverage industry conspiracy that resulted in the charges against him, Fenton said.

Comu targeted the “same elderly victims” of his original fraudulent scheme for which he was indicted, using the same lies and “modus operandi,” Fenton said. That included dozens of calls, emails, meetings and exchanges of draft documents, he said.

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While being held in federal custody, Comu used a telephone to continue trying to scam people even though he knew the line was being recorded, Fenton said.

When he was caught, Comu was trying to negotiate a deal to sell all of EarthWater’s stock to a new company and continue his operations under a different name, Fenton said.

Comu again tried to win his release from federal custody after pleading guilty in March.

But Fenton opposed it, saying in court documents that Comu is “an unrepentant and undeterred confidence man” who might even try to flee the country. Comu is a Canadian citizen with strong ties to that country, and he has the financial resources to disappear, the prosecutor said.

Fenton noted that Comu has said in court filings that he considers incarceration to be equivalent of a death sentence. Having pleaded guilty to all 23 counts against him, Comu had nothing to lose, Fenton said.

Hidden commissions

Two EarthWater stock promoters from Florida, Richard Laurence Kadish, 59, and Richard Lawrence Green, 69, also pleaded guilty in the scheme, along with a fifth defendant, authorities said.

Six others in the case are awaiting trial.

As part of the scheme, which began in 2013, Comu lied to investors about being a successful Wall Street veteran with decades of experience. He left out the fact that he was permanently barred from selling unregistered securities, authorities said.

Comu and Price partnered with the stock promoters, who were paid undisclosed commissions on the sale of EarthWater shares using the victims’ money, according to court records in the case.

Comu admitted in court papers that he lied to investors when he told them most of their money would be used to support EarthWater’s operations when, in fact much, of it went to pay “excessive commissions” to the sales team.

Kadish and Green recruited people from across the U.S. who were not licensed to sell securities to help sell EarthWater stock, court records show.




Elderly people were targeted in the scheme using telephone and email sales pitches from various locations, including Oklahoma, California and Florida, authorities said.

The victims, most of whom live outside of Texas, invested between $2,500 and $75,000 in the scam, the indictment says. Some plan to testify against the defendants at their sentencing hearings.

Meanwhile, as he awaits his fate, Comu was placed in isolation in the Dallas County jail infirmary after contracting COVID-19 while in custody, his attorney said in an April filing.

“Comu understands better than anyone the severity of the COVID-19 pandemic,” his attorney wrote.

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