FTC Lawsuit:
My name is Michael Santos, and I have a well-documented story of succeeding after many struggles. I made terrible decisions as a young man that led to my serving 26-years in federal prison. A Google search of my name will show the work that I’ve done to reconcile with society and to live as a law-abiding, tax-paying citizen.
Within five years of concluding my prison term, I accumulated approximately $5 million in assets, including $3 million in equity from real estate investments and businesses I helped to create. One of my vocations is publishing or ghostwriting books. I’ve authored more than 15 books, and I often pair writing with consulting. Through businesses I’ve worked to create, I’ve had a role in opening job opportunities for more than one-hundred people and generating millions of dollars in taxes.
In 2018, my wife and I made a bad real estate investment. That investment resulted in the Federal Trade Commission adding me to a civil lawsuit it filed against Sanctuary Belize and others.
- I was not a principal of the company,
- I did not have any authority or decision-making power over anyone that worked for the company, and
- I made a good-faith investment of $1.4 million of my own money to become a limited partner in a new development.
When I sued to recover my $1.4 million investment, the FTC retaliated by amending its complaint to add me as a defendant in the lawsuit against Sanctuary Belize. That lawsuit exposed me to $140 million in civil liability–threatening to cripple my career. The FTC exploited my history of imprisonment and mischaracterized my role.
To avoid a potential judgment of $140 million, I agreed to settle the FTC’s civil charges, “without admitting or denying liability.” I made a calculated decision. My history of imprisonment would make it difficult for me to prevail. I could recover by building new entities. But if I had a $140 million judgment against me, the challenge would be more daunting.
To prevail, the FTC would have a minimum legal threshold. The agency would exploit my past by saying I either “knew or should have known” about violations of FTC rules. A judge could hold me liable and decimate my future career in business.
We have to live in the world as it exists, rather than as we would like it to be. I made disastrous decisions when I was 20. I went to prison. As a result, my past will always make me vulnerable to litigation. These are the collateral consequences of mass incarceration.
This document provides the chronology of events that led to my problems with the FTC. I’ll amend this document from time to time while I complete a digital book that I’ll make available for anyone that has an interest.
It’s part of my ongoing effort to rebound from recent struggles, with my dignity intact.
Struggles or difficulties can strike anyone at any time. Through my work, I strive to show others how to be resilient. I never ask anyone to do anything that I’m not doing, and I’ll continue to document this story, providing links to supporting documentation. With digital publishing, we can use self-advocacy to recover from unanticipated challenges.
Settlement with the Federal Trade Commission
On January 14, 2020, a federal judge signed a “Stipulated Order” that finalized a settlement agreement in a civil matter brought against me by the Federal Trade Commission. I’m distributing this Order voluntarily to anyone that has an interest in my work and as an obligation to people with whom I do business. The Order includes provisions that may have a bearing on our working relationship.
I will also publish this information, and supporting documentation, on my websites at:
In the interest of full disclosure and compliance with the Order, I declare under penalty of perjury, under the laws of the United States of America, the information I provide is true and correct.
To validate everything, I provide links to supporting documentation.
Chronology:
On July 31, 2018, my wife and I provided a cashier’s check to Newport Land Group for $1.4 million. As stated on the cashier’s check, which you can view on the image below, we earmarked our investment to become limited investors in a real estate project that Newport Land Group intended to develop on the Pacific Ocean, in Costa Rica.
In addition to our personal investment, I invited several family members and friends to join us. In total, our group contributed $3.35 million to become limited investors in the Costa Rica real estate project through Newport Land Group.
David Heiman
$750,000 Investment / Testimonial Letter
Darren Christian
$600,000 Investment / Testimonial Letter
The Teng Family
$400,000 Investment / Testimonial Letter
The Santos Family
$100,000 Investment / Testimonial Letter
The Martin Family
$100,000 Investment / Testimonial Letter
The Bedoya Family
$100,000 Investment / Testimonial Letter
The links above represent testimonial letters that others provided to document our history of working together, and our expectations, with the investments we made. The first six testimonial letters are from investors that joined me in the Costa Rica project, the subsequent three letters represent testimonials from purchasers that attempted to buy lots in the Laguna Palms section of what was then known as The Reserve or Sanctuary Belize.
Lawsuit
In November of 2018, the Federal Trade Commission (FTC) sued Andris Pukke, Rod Kazazi, Frank Costanzo, Brandi Greenfield, and others. Besides being the general partners of Newport Land Group, the defendants were authority figures in the Sanctuary development in Belize.
From the time I met Andris in federal prison, I considered him a friend. I only knew him as someone who wanted to help me upon my release from prison, in 2013.
The lawsuit against Andris and the other leaders of his company stemmed from earlier litigation against Ameridebt. Ameridebt was a company that Andris started back in the late 1990s.
The FTC sued Andris Pukke and AmeriDebt around 2005. In 2005, I was in my 18th year of confinement, with eight more years to serve. I did not know Andris Pukke, or anything about his development in Belize until I met him in prison when I was serving my 25th year, in 2012.
- United States District Court of Maryland, Southern Division
- In re Sanctuary Belize Litigation
- No: 18-CV-3309-PJM
When the FTC sued the general partners in the above-referenced case, it became clear that the real estate project in Costa Rica was not going forward.
The $3.35 million invested by other limited partners and me remained in a Bank of America account belonging to Newport Land Group.
Suing Newport Land Group:
Upon learning that the FTC had sued Andris and the other leaders of his company, I spoke with each of the people that invested with me. We agreed that I would look for a law firm to represent us. We settled on hiring Cris Armenta and her team at the Armenta Law Firm.
Cris Armenta advised that in order to retrieve funds we had intended to invest in the Costa Rica real estate project, our group of limited investors would have to sue Newport Land Group for breach of contract.
I told the lawyer about my history of imprisonment and suggested that she should reach out to the FTC. Since the FTC had not named me as a defendant, and since we made an investment in a company that was developing land in Costa Rica, she said the best approach would be to sue. The other investors and I agreed to move forward with that plan.
The FTC responded aggressively to our lawsuit against Newport Land Group. The agency believed that the $3.35 million our group intended to invest in the Costa Rica real estate project should become a part of the lawsuit against Andris Pukke and others involved with Sanctuary Belize.
In the FTC’s view, since the authority figures at Newport Land Group were also authority figures with the development project in Belize, any funds those people controlled should become a part of the receivership estate. Authorities cited the mixing of funds. Authorities disregarded the fact that limited investors would not have had any of knowing about any mixture of funds, as we did not control bank accounts.
Amended Complaint
On December 28, 2018, the FTC amended its lawsuit. The amended complaint named Newport Land Group and me as additional defendants in the case. The lawsuit wrongfully accused me of being an authority figure with Sanctuary Belize and its related entities. That lawsuit exposed me to civil liability of $140,000,000.
The FTC offered to limit my liability to $86,092,438.67 if I would settle the lawsuit. The agency would not reveal how it came up with that number.
My prison term did not conclude until 2013, and the Sanctuary Belize development began operating in 2005 or before. I never had an ownership interest in Andris’s company, and I did not have any decision-making power over any aspect of his company. I never received a commission and I never had any leadership role. I never oversaw employees or directed how they did their work. As far as I knew, his company developed land it had a great relationship with its customers.
Nevertheless, the FTC accused me. It said that I either knew, or that I should have known, that Andris’s company violated the Federal Trade Commission Rule and the Telemarketing Sales Rule.
To settle, the agency insisted on taking all of my “positive-value assets.” At the time, The value of my assets was in the $5 million range.
Asset Freeze:
When the FTC added me to the lawsuit, the Court froze all additional assets my wife and I owned. In addition to the $1.4 million liquid investment we made to join the Costa Rica real estate project, the Court froze our other bank accounts. The order froze our additional assets, including our residence and the investment real estate we began acquiring after my release from prison. At the time of the lawsuit, the fair market value of the real estate assets that my wife owned in California approximated $3.5 million. That was in addition to the $1.4 million we invested in the Costa Rica project.
One of the assets we owned included a licensed and operating 12-bed senior-living facility, with many residents that were on hospice. The senior-living facility employed more than a dozen people. We began acquiring our portfolio of investment real estate in 2012, as I was concluding my journey of 26 years in prison.
Other than $1.4 million we invested as limited partners in the Costa Rica real estate project. None of our assets had anything to do with any of the entities or individuals accused in the original lawsuit against Sanctuary Belize.
- Click here to see the operating agreement for the Costa Rica real estate project.
- Click here to see the subscription agreement for the Costa Rica real estate project.
[3] Click here to see the correspondence between my attorney and the FTC regarding the lawsuit that the other investors and I filed in Orange County Superior Court.
[4] See Receiver’s Report to take $3.35 million in liquid assets belonging to investors in Costa Rica project from Newport Land Group.
[5] See the Amended Complaint.
[6] Download financial statement submitted to FTC under penalty of perjury.
Litigation and Depositions
After burning through more than $250,000 in legal fees, I dismissed the attorneys I had hired to represent me. I chose to proceed without counsel. I attended every deposition and participated actively in the discovery process.
While attending the depositions, I took extensive notes and deposed the witnesses myself. During those deposition proceedings, I had many opportunities to speak with the attorneys representing the FTC.
I pointed out how the depositions showed that the FTC attorneys were misrepresenting me as being an authority figure of the Sanctuary Belize development team. Every person that the FTC deposed testified under oath that I did not have any authority role in the company.
The agency’s decision to add me as a defendant in the case, I suggested, was a collateral consequence of mass incarceration.
I had an “off-the-record discussion with the lead FTC attorney. Two other FTC employees were present. During that conversation, I suggested that the FTC made me a defendant as a result of my prior imprisonment. The FTC attorney said I was wrong. I summarize what he told me:
The FTC did not make you a defendant in the original lawsuit. We knew who you were and we did not include you in the suit. You never have been a defendant if you had not sued Newport Land Group.
FTC Attorney
Since our conversation was “off-the-record,” the FTC attorney made it clear that I could not cite his words in Court. In the interest of truth, I trust that he does not object to me writing the essence of that conversation to clarify the record.
When I told the FTC attorney that I filed that lawsuit against Newport Land Group on the advice of counsel, he advised that I should sue the attorney for malpractice. Yet several attorneys agreed that the only approach to recovering my investment was to sue Newport Land Group.
At every stage in the proceeding, I acted in good faith. I made an overture to walk away from the $1.4 million I invested if the agency would return funds to the other Class A investors. The FTC rejected the offer, saying that the Court had already ordered that funds we invested in the Costa Rica project had become a part of the receivership.
Later, I offered $600,000 in additional liquidity if the FTC would allow me to retain the investment real estate my wife and I had acquired in California. The FTC rejected the offer, demanding that I contribute an additional $1,047,000 to the receivership if I wanted to retain our properties.
Motion for Summary Judgment
An abundance of evidence showed that:
- I did not have any decision-making authority with the developer,
- I did not set policies for the developer,
- I did not share in profits or receive commissions, and that
- I did not have any reason to believe the company was not 100 percent legitimate,
I prepared an extensive motion for summary judgment. I hoped that the judge would dismiss me from the case because I was a limited investor and also a W-2 employee for the developer, but not a person with any decision-making authority for the development team.
I believed that I could prevail in a trial. Yet several attorneys that knew the case well helped me understand the risk of litigation. Since the matter was civil in nature, the FTC had a very low threshold to hold me liable.
Click here to see the extensive summary judgment motion
Click here to see the extensive exhibit list and depositions summaries
Risks of Trial:
- If I went to trial, attorneys for the FTC would exploit my history of imprisonment.
- The FTC would exploit the fact that I met Andris Pukke while we were both in prison.
- The FTC would exploit the fact that Andris’s company employed me after my release from prison. They would argue that I “should have known” about violations of FTC rules, and that could be sufficient to hold me liable for $140 million.
I considered Andris Pukke a friend. He offered to assist me as I adjusted in society after 26 years in prison. He offered me employment and tasked me with assignments to help the company.
Since I believed the company was 100 percent legitimate, I willingly accepted his offer of employment and support.
During my first few months of employment with the company, I authored a booklet called “The Buyer’s Guide.” Although the Buyer’s Guide did not make a single misrepresentation, the FTC accused me of writing the Buyer’s Guide to help sales, which it would cite as a reason for my liability in a $140 million judgment.
My history of being in prison, and my friendship with Andris, exposed me to enormous financial risk. Further, I filmed a series of videos to document my investment decisions. All of these efforts were part of a plan to build a new venture around my journey.
The FTC mischaracterized the videos I created. Each video was part of my efforts to build Alternative Investment Properties and document my investment journey.
The FTC mischaracterized those videos, saying that I filmed the videos to assist with the developer’s sales.
To hold me liable for $140 million, the FTC would only have to show that I either “knew or should have known” that authority figures in the development company had violated FTC rules. The FTC wanted vengeance because I sued to recover the $1.4 million that I invested into the Costa Rica project:
- I never earned a single commission,
- I never received a profit distribution,
- I never oversaw a profit and loss statement,
- Not a single employee reported to me,
- I was not a signer on a single corporate bank account for the developer.
- I invested $1.4 million to become a limited investor,
- I invited family and friends to join me as a limited investor.
If the FTC prevailed, I would have a judgment of $140,000,000 against me. A nine-figure judgment would be an insurmountable barrier to my career. Since I intended to work toward making other investors whole, I could not take that risk.
[7] Click here to review notes from all deponents.
[8] Click to review Summary Judgment Motion that I filed in federal court.
[9] See Exhibit List for Summary Judgment, with info on Alternative Investment Properties.
Settlement
As a result of the enormous risk I faced, attorneys that I respected urged me to settle. I stipulated to a settlement agreement with the FTC. That settlement agreement did not require me “to admit or deny any of the allegations in the Complaint.”
Nevertheless, the settlement required that I accept burdensome terms, including:
- Monetary judgment of $86,092,438.67.
- Forego all my frozen funds or assets, including:
- $1.4 million I invested toward the Costa Rica real estate project,
- $24,528.93 in frozen cash accounts,
- $900,000 Coastal Way Property,
- $1,300,000 Birch Hill Property,
- $650,000 Lindberg Property,
- $250,000 Falling Leaf Property,
- $350,000 Chase Avenue Property, and
- $50,000 Miscellaneous Business Investment
- Total Assets: $4,874,528.93
In exchange for walking away from $4,874,528.93 in assets, with approximately $3,000,000 in equity, the FTC agreed to suspend the remainder of the $86 million judgment against me.
California is a community-property state. Despite not being a party to the lawsuit, my wife suffered from the financial terms of the settlement.
At the time we controlled our properties, my wife and I maintained excellent credit. We had mortgage debt of approximately $1.7 million and we paid those mortgages on time.
With the settlement, however, we no longer control the properties we once owned together. We did not expect the Receiver representing the FTC to pay the mortgages on time. Accordingly, both of us anticipate damaged credit as a result of this settlement.
The settlement would mean that I could move forward to go on with my business career—provided that I abide by specific permanent injunctions
Settlement and Injunction
In addition to surrendering approximately $5 million in assets that I accumulated since my release from prison, with $3 million in equity, I also had to abide by specific injunctions, including:
- I could not own any real estate that included more than two separate units.
- I could not participate in (or assist others that participate in) any business that would help consumers with any debt relief product or service.
- I could make any misrepresentations in business.
- I also had to keep the FTC apprised of any business that I launched or oversaw.
- Click this Link to See Copy of Settlement Order Here
I do not fully understand the FTC’s hold on me. I will comply with the settlement to the best of my knowledge and ability, building a career around all that I learned.
In the interest of transparency and disclosure, I am publishing a copy of the Stipulated Order for Permanent Injunction and Monetary Judgment that Judge Peter J. Messitte signed on January 14, 2020.
As mentioned earlier, I will publish a copy of this order and the supporting documentation on my websites for all to see. I will also release a digital book describing:
- How I became involved in this investment opportunity,
- How the 26 years I served in prison influenced perceptions and exposed me to liability,
- What I learned from this process,
- How I intend to rebuild my life after this new challenge.
To comply with section XIV “Order Acknowledgement,” sections B and C, I’m providing a copy of this abbreviated letter to everyone with whom I have a business relationship.
I made every decision in good faith, with hopes of building a family business. My 26-year history of imprisonment, however, continues to complicate my life. Now I must overcome this new hurdle. I intend to do so with my dignity intact, consistent with my message that I never ask anyone to do anything that I’m not doing.
Government Investigations:
One new area of business that I am developing is helping others understand the dangers of government investigations. Consider the experience:
- While serving 26 years in prisons of every security level, I met and interacted with more than 10,000 people that lost their liberty as a result of decisions they made–and the government investigations that followed.
- While working with our team to develop products and services to help others that faced challenges with the law, we’ve worked with more than 500 business leaders who told us they would have made different decisions had they known more about government investigations and where they could lead.
- We have a deep bench of team members, including former physicians, former lawyers, former investment bankers, former government officials, former CEOs or entrepreneurs that can help us communicate this importance message of preparing in ways to avoid problems with the law.
Through Prison Professors, White Collar Advice, and Resilient Publishing, our team will create resources to help business leaders understand the costs of government investigations, and the penalties that others have paid when they became targets of government investigations.
I will document every step of the way, showing the strength that comes from living transparently. It is the way to move through challenges with dignity, and with a 100% commitment to transparency.
Sincerely,
Michael Santos
Complying with the Receiver
In addition to surrendering approximately $5 million in assets, the settlement also requires that I cooperate fully with the Receiver. In other words, I must help the Receiver take possession of properties that my wife and I worked hard to accumulate since my release from prison.
Upon receiving the request, I prepared a detailed list of my assets for the Receiver, and I await further proceedings.
Judge’s Findings and Order
On August 28, 2020, federal judge Peter J. Messitte, issued his order.
- Memorandum Opinion
- Proposed Order for Permanent Injunction Against Defendants Andris Pukke, Peter Baker, and Luke Chadwick
- Memorandum
The above links show the order of Judge Messitte. When I read the Memorandum Opinion, my initial thoughts were of sadness and disappointment. My name is not mentioned in the opinion at all, except my investment in Newport Land Group. Further, when reading the judge’s opinion, I surmised that he would not have found me liable. Not a single witness accused me of wrongdoing—only the FTC.
But I could not take the risk of going to trial. And I had moved on with my life, rebuilding my business. All of that would have been at risk if I would have proceeded through a trial.
Then, I spoke with Andris and learned more about the judgment of more than $100 million against him and the others. Besides having that massive judgment, the judge indicated that he intended Andris to:
- Surrender any asset valued at more than $2,500.00.
- If he ever earned more than $5,000.00 per month, he would have to surrender those resources to the FTC.
The above two orders would last for the rest of Andris’s life, or until the full judgment would settle. Further, Andris would have to file forms to show that he was in compliance with those two points.
A government investigation led to a financial death sentence for those that were found liable to the FTC.
Rod Kazazi:
An interesting development concerns Rod Kazazi. Rod Kazazi was the Chief Operating Officer of Andris’s Company, and he was also close friends with Andris.
The FTC allowed Rod to settle prior to going to trial. To get the settlement, Rod had to provide the FTC with statements that Rod knew to be false and in total contradiction to the evidence provided during deposition of other witnesses. The FTC wanted to strengthen its case, and Rod Kazazi willingly complied to give the FTC what the agency needed in order to spare himself, even though he had to give testimony that he knew to be false.
Despite the leadership role that Rod played in the company, the FTC agreed to allow Rod to keep his residence located at 3137 Corte Portofino, Newport Beach, CA 92660 if Rod Kazazi provided the FTC with more than $250,000.
Rod’s attorney, David Wiechert, a former Assistant US Attorney, assisted Rod in negotiating his settlement with the FTC.
Apparently, Rod failed to pay the payment to the FTC.
As a result of Rod Kazazi’s failure to pay more than $250,000, the FTC is seeking to hold him accountable by arguing that Rod should be liable for the entire $144 million judgment. Further, the FTC is asking the Court to hold Kazazi’s former attorney, David Wiechert, liable for the payment that Rod Kazazi was supposed to make.
The FTC offered to release Rod Kazazi from the $144 million judgment if he paid more than $268,000, and forfeited his personal residence. The following filings are from the PACER filing system:
- Kazazi’s Memorandum of Law filed on 9-29-2020
- Attorney David Wiechert’s motion to Intervene
- Declaration of Attorney David Wiechert
Newport Land Group Investors
All of the other investors that joined me in the initiative to invest in Costa Rica as limited investors have attempted to retrieve their capital. The FTC opposes the return of their capital. It filed the following motions, urging the Court to reject each investor’s request to have the capital returned. The FTC provided the following document to support its position. The 400+ page document shows the honest ways that I communicated with each investor. Note that among the various people that provided capital, my wife I provided the most capital, with our contribution of $1.4 million.
