EDMS investment plan a fraud, suit alleges

Woodstock, Ill.-As the Illinois Securities Department moves forward in its investigation of the investment schemes of an equine software developer, the state Attorney General's office has filed a civil suit for fraud against the business.

Randy Travnick, proprietary owner of Equine Data Management Software (EDMS) who committed suicide May 30, reportedly swindled more than $1.5 million from at least 120 veterinarians, horse breeders and trainers in at least nine states.

Dr. Kenneth Marcella, who practices in Canton, Ga., and made financial gains - at least on paper - of more than $40,000 on his initial $10,000 investment, says he had always trusted Travnick's software and investment program.

"As an investor, I can put my money into long-term investments or technical stocks, or municipal bonds, but I don't know anything about that. I do know computer software - (something) that I use every day," Marcella says.

In the suit filed in McHenry County circuit court July 21, the state is seeking restitution from Travnick's widow, Janice, and the estate of her husband. The Attorney General's office is prosecuting the case.

State action

The state Attorney General was granted an injunction prohibiting any further investor actions and has frozen the estate's assets, including potential assets from a $1 million life insurance policy taken out in Travnick's name, as well as all bank accounts. Computers also were confiscated from the Travnick estate, according to authorities.

On Aug. 4, the widow issued a motion to dissolve a temporary restraining order, but was denied her request. The matter was set for further hearing on Aug. 15.

In the suit, state officials assert Janice managed the affairs of EDMS and co-owned the company with Travnick. Janice Travnick pleads no involvement.

The attorney representing the widow, Jonathan Cyrluk, maintains the charges against his client are "absolutely baseless" and that she played "no role" in marketing Travnick's products or securities, reports The Woodstock Independent, a local paper.

Travnick developed and marketed software systems designed for the horse breeding and boarding industries. Veterinarians attest to the validity and practicality of the program. (Apparently a number of veterinarians have expressed interest in buying the business to maintain and run the software, according to officials who note the software business can't be purchased until the estate is settled.)

Background

However, the investment side of Travnick's business, which dates back to 1988 or earlier, continues to stymie trusting practitioners. Investors were from Illinois, Florida, Georgia, Indiana, Kentucky, Louisiana, New Jersey, Tennessee and Texas.

The premise for Travnick's investment plan was that funds were needed to establish a means to lease the hardware necessary to run the software for users who could not otherwise afford to buy the hardware.

Those investigating say Travnick's investment component mirrors the illegal "Ponzi scheme," named after Charles Ponzi, notorious fraudster of the 1920s. Such a scheme, an offshoot of the traditional pyramid scheme, involves recruiting people to invest in something for a guaranteed rate of return and using the money of later investors to pay off earlier ones.

Age-old con

Travnick's business offered certain investors returns on their investments as high as 30 percent. According to court documents, Travnick would use new investors' money to pay current investors their interest. His recruitment of investors was executed by mail and online, as well as directly from software customers.

The suit filed by the state alleges the program was "bogus" because it did not detail where the monies would be used.

Shortly before Travnick's death, Marcella of Georgia, received a letter from EDMSabout an investment program special offer. The letter stated that if investors provided additional funding no later than April 10, based on the amount invested, they could receive as much as 33 percent on a two-year term.

Fishy note

Says Marcella, "That's outrageous. That's why it's surprising to me in retrospect that he killed himself, because it was looking like he was setting up to take the money and split."

Investors began voicing complaints when EDMS interest checks bounced. Backing their complaints, the civil suit alleges EDMS was overdrawn at the bank and has more than $450,000 in credit card debt.

Troubled waters

To investigate the extent of Travnick's investment ventures, the Illinois Securities Department is faxing three-page letters to anyone as users of the software or investors. It asks when the customer heard of EDMS, who contacted them, if they ever talked to anyone other than Randy Travnick, how much was invested and when it was invested?

Because the investment program was ruled illegal, anyone who withdrew more than they invested will be responsible for paying the difference, according to Marcella, an investor. Those investors will reportedly be held liable for such profits to the Illinois Securities Department.

Marcella says, "This is an example where somebody could invest in something they had familiarity with and everything on paper would show it was a good stable company. I could see how people could get suckered into it."

Adds Daniel Sullivan, an attorney close to the case, "I hope that veterinarians are a little more careful in the future how they invest their money."