Palasini accused of orchestrating massive Ponzi scheme

A growing number of people now claim they lost money by unwittingly participating in what one federal investigator calls a massive Ponzi scheme orchestrated by Gina Palasini, a Mississippi fugitive arrested Aug. 29 on a warrant outside her Palm Springs, California, home.

Palasini will be extradited to Mississippi on Monday, said James Haywood, sheriff of Sunflower County, where she faces charges for felony bad checks.

After that, she'll go to Wayne County for sentencing on a felony false pretense charge to which she pleaded guilty in December 2013. She was out on a court order to reimburse her victims from that case, but she never did.

Wayne and Sunflower counties will split the cost of the extradition, Haywood said. To save money, they'll forgo flying and instead drive Palasini home over the course of three or four days, having her spend the night in different jails along the way.

The U.S. Postal Inspection Service also wants to talk to her as part of its ongoing federal wire fraud case, which continues to expand as more people say they realize they fell victim to a scam, especially in the weeks since The Clarion-Ledger detailed Palasini's activities.

"There are more victims than we can even get ahold of," said Memphis-based U.S. Postal Inspector Kyle Parker.

Parker would not say exactly how many people allegedly lost money to Palasini but confirmed it's "well over" the nearly one dozen interviewed by The Clarion-Ledger. Many of them now know they're victims, he said, but several others still have no clue.

"A lot of these people are at the age right now where if they knew their whole life savings was gone, they'd be ruined," Parker said. "It's a very delicate situation. We don't know how much longer these people have."

Tracking her for years

The U.S. Postal Inspection Service has tracked Palasini for years, watching money flow in and out of her bank accounts and building a case against her for fraud.

Palasini had operated a series of businesses claiming to help seniors obtain Medicaid or veterans benefits. Sometimes it was as simple as filling out a few forms, but other times it involved clients transferring their life savings to her.

Transferring funds served two purposes: With little or no assets, clients qualified for government benefits they otherwise would not have received. And they thought Palasini put their money into interest-earning accounts from which they could withdraw cash at any time. Upon a client's death, designated beneficiaries would get the assets.

Parker called it a Ponzi scheme in which Palasini allegedly used one client's money to pay for withdrawals made by other clients. But she appears to have spent most of the cash on herself and on high-priced gifts, including vehicles and vacations, which she gave to family and friends. When she couldn't afford to pay a client, she made up excuses or simply wrote bad checks that bounced.

Clients who threatened to sue sometimes got a bit of their money back in installments, Parker said, but those payments usually stopped after a few months.

A few victims eventually did sue and even won judgments, including one for $155,000 in DeSoto County Circuit Court last year, but Palasini has not faced trial on any of them.

Other victims say their financial losses pale in comparison to the trouble Palasini caused them with Medicaid or the Department of Veterans Affairs. Investigators say she jeopardized several of her clients' ability to obtain government benefits by withholding paperwork or using enrollment tactics that amount to fraud.

This prompted the VA Office of the Inspector General to join the U.S. Postal Inspection Service on the case, Parker said.

From disbelief to shock

Jimmy Toland's phone rang on July 3.

It was four days after his father had died and three days after he'd notified Palasini to transfer the patriarch's $340,000, plus interest, to his beneficiaries.

In 2011, Toland put his father's life savings into an income protection plan managed by Palasini's Indianola-based company, Veteran's Pension Planners of America. He also paid her $4,000 to establish a limited liability company in his and his siblings' names where the money would go after his father died.

Noteworthy is that the Mississippi secretary of state's office charges only a $50 filing fee to create an LLC, something that can be done without an attorney or even a notary public.

The man on the phone that day introduced himself as U.S. Postal Inspector Kyle Parker and told Toland, a Purvis resident, that his father had fallen victim to a scam.

"He said, 'You ain't going to get your money back,' " Toland recalled. "He said when I wired it from my bank to the Guaranty Bank in Indianola, she started spending it. She bought a race car for her son."

Parker even knew exactly how much money Toland had given Palasini. When Toland said he invested $340,000, Parker said, "I'm showing $344,000," Toland recalled.

It's a large sum of money, but Parker said other victims have lost even more.

Toland initially didn't believe Parker. After they hung up, Toland texted Palasini, who reassured him that everything was fine. She had received the copy of his father's death certificate and was preparing the paperwork for a money transfer to the LLC.

Days passed. Then weeks. The money never came.

Palasini stopped taking his calls and wouldn't return his texts.

Toland said he got angry then, not just with Palasini but with the authorities.

"They've been watching this for a long time, and that's what gets me mad," he said. "Why didn't you do anything about it back then?"

Seized assets?

Toland said authorities should seize assets Palasini purchased with his and other victims' money, including those she gave to other people as gifts. He specifically mentioned the race car. Palasini's son, Mike Palasini Jr. of Leland, races sprint cars and has a Facebook page called "Mike Palasini Racing."

Mike Palasini Jr. told The Clarion-Ledger his mother never gave him a race car nor contributed any funds to his racing.

Gina Palasini did form a for-profit company called MP Racing Inc. in 2008, according to secretary of state records. It was dissolved in 2009 for failure to file an annual report and reinstated by Gina Palasini in 2010. The state dissolved again it in 2011.

Parker would not comment on whether authorities believe Gina Palasini bought a race car with fraudulent funds, but he said authorities can seize that car if proof of such exists.

As to why the U.S. Postal Inspection Service didn't stop Palasini before she allegedly spent Toland's money, Parker said it was impossible to know at the time whether money entered her account from a potential victim or a knowing donor. Only after careful scrutiny can investigators reach such conclusions.

"These intricate fraud cases take years," Parker said.

Contact Emily Le Coz at elecoz@jackson.gannett.com or (601) 961-7249. Follow @emily_lecoz on Twitter.