Leader of nationwide investment fraud scheme caught in Philippines

Authorities hope to have the leader of a multi-million dollar securities fraud scheme behind bars in Coffee County within a month.

Coffee County District Attorney Gary McAlliley said authorities recently caught a Tennessee man wanted for the past four years for his involvement in an elaborate investment fraud scheme. McAlliley said Scott Frye was arrested earlier this month in the Philippines. Frye, 41, of Knoxville, Tenn., was indicted by a Coffee County grand jury in 2005 on five felony charges of transacting business in unregistered securities.

"The U.S. Securities and Exchange Commission described Frye as the pioneer of Internet fraud," McAlliley said.

McAlliley said Coffee County Investigator Dwight Holley will pick Frye up in Manila, Philippines, and escort him to San Francisco by airplane. McAlliley said Frye can contest his return to Alabama through extradition hearings in the Philippines and California. McAlliley called the arrest Coffee County's first international extradition.

Frye was charged with five counts of not registering the Bridge Loan Program security with the Alabama Securities Commission. McAlliley said investigators also contend the unregistered security program's assets were fabricated. If convicted, Frye faces two to 20 years in prison for each of the class B felony crimes.

McAlliley said Frye has been charged with illegally obtaining $139,500 from six Coffee County residents. He also said Frye faces charges of inducing proposed investors from Alabama, Florida, Mississippi, Tennessee and Indiana to make investments in excess of $3.7 million.

"These six people did not know their money was being invested in unregistered securities," McAlliley said. "They lulled their investors by giving minimal payments on investments that did not exist."

Three other people have been charged with felony crimes as part of the investigation. McAlliley said Michael Allen Vonkanel, 59, pleaded guilty in 2007 to 16 counts of transacting business in unregistered securities. He was sentenced to 10 years in prison for each of the charges to run concurrently. But McAlliley said Vonkanel was ordered to serve three years in prison for the crimes in exchange for his testimony against Frye.

Douglas Handley, 72, of Bessemer, was charged with the same crimes as Frye, but he later was allowed to enter into a pre-trial diversion program in exchange for paying restitution and testifying against Frye. McAlliley said Teresa Handley VonKanel, 47, of Bessemer, who is Vonkanel's wife and Handley's daughter, was also charged with the same crimes as Frye. He said those charges will be dismissed in exchange for her testimony against Frye.

McAlliley said Michael Vonkanel worked for a John Hancock investment company out of Birmingham, and as part of his job traveled offering business owners retirement investment options.

"He would dangle these fraudulent investments, promising a better return," McAlliley said of Vonkanel.

According to the Enterprise Ledger, Vonkanel had been a John Hancock life insurance agent who administered employee retirement plans for Century 21, a real estate brokerage firm with offices throughout the southeastern United States, until his indictment on the security fraud charges in November 2005. Five real estate agents at the Enterprise Century 21 office had participated in the retirement plan Vonkanel presented, McAliley said. According to the subsequent investigation, Vonkanel had forged the local real estate firm owner's signature on John Hancock loan disbursement forms totaling $139,500. The John Hancock Insurance Company repaid the six Enterprise people for their losses, McAlliley said.