Fraud : Federal Criminal Defense Blog

Posted on April 17, 2012 by Anthony Lake

KY Attorney Bryan Coffman Ordered to Forfeit Millions from Oil-Drilling Scam

Lexington, Kentucky, attorney Bryan Coffman was convicted last year in the U.S. District Court for the Western District of Kentucky on eight counts of mail fraud, nine counts of wire fraud, two counts of securities fraud, 10 counts of money laundering and one count of money laundering conspiracy. His wife, Megan Coffman, was acquitted of the money laundering charges against her. Coffman was charged with using his alleged oil-drilling business, American Oil & Gas Resources, to defraud investors out of more than $34 million. Another co-defendant, Gary Milby, was also convicted. Coffman has not yet been sentenced.

Coffman and his co-conspirators pocketed the investors' monies and spent lavishly on property, yachts, cars, jewelry. Milby furthermore threw a lavish birthday party for his daughter which was nationally broadcast on MTV's "My Super Sweet 16," in which Milby gave his daughter a new BMW, a helicopter ride and a shopping spree.

Image source: www.mtv.com/news/articles/1584566/my-super-sweet-16-dad-accused-fraud.jhtml

Today, according to the Lexington Herald, the Court ordered Coffman to forfeit $3.1 million in cash; a condominium in Charleston, South Carolina; and a yacht christened "For Your Eyes Only." The Coffmans were permitted to keep their house in Lexington, since the government was unable to trace any proceeds from illegal activity to the residence or any improvements.

Tags: 16, Bryan, Coffman, Court, District, Forfeiture, Fraud, Gary, Kentucky, MTV, Megan, Milby, Money, Super, Sweet, Western, conspiracy, daughter, forfeit, laundering, mail, wire

Posted on March 19, 2012 by Tom Withers

Horse Soring - A Federal Crime

Largely playing out under the radar, except in local media, is a fascinating case out of the Eastern District of Tennessee. Last week 4 defendants, Jackie L. McConnell, 60, Jeff Dockery, 54, John Mays, 50, all from Collierville, Tennessee and Joseph R. Abernathy, 30, of Olive Branch, Miss., were arrested on a 52 count indictment charging them with conspiracy to violate the Horse Protection Act by transporting and showing horses they knew to be "sored" and also falsifying entry forms and paperwork. The Horse Protection Act charges are misdemeanors, while the fraud and conspiracy charges are felonies.

Articles in the Chattanooga Times Free Press and The Shelbyville Times Gazette spotlight the horse soring practices that are said to be prevalent in the Tennessee Walking Horse industry. The Times Free Press describes the practice of soring in which some “trainers use chains, bolts, acid, kerosene and other techniques to make a walking horse’s feet . . . and legs so tender, they’re forced to change their gait. The pain causes them to lift their front feet higher and land with less force, exaggerating the high step that’s prized in walking horse competitions.” Other disturbing allegations include the practice of “stewarding” the sored horse where the trainer basically hits the horse in the head and nose when it displays reaction to the pain of soring.

This is the second case prosecuted in the Eastern District of Tennessee federal courts related to the practice of soring. The first case ended in guilty pleas for all defendants who were sentenced last month. Only one defendant was sentenced to imprisonment - one year. The other three defendants received probated sentences. Those cases marked the first convictions in 2 decades under the Horse Protection Act.

Tags: Fraud, Horse Protection Act, conspiracy, horse soring

Posted on March 2, 2012 by Anthony Lake

Execs of Medical Laser Manufacturer Acquitted on Most Counts

As reported by the Colorado Springs Gazette, former Chief Executive Officer John Schulte of Spectranetics Corp., a manufacturer of medical lasers, was convicted in the U.S. District Court for the District of Colorado yesterday on one count of lying to federal investigators but was acquitted on 11 counts of conspiring to defraud the Federal government. Trung Pham, a former business development manager for Spectranetics was acquitted on five charges, including conspiring to defraud the Federal government and smuggling unapproved medical devices into the country. The charges centered on Spectranetics' alleged illegal importation and marketing of unapproved medical devices. Their trial lasted nearly five weeks.

Tags: Acquittal, Colorado, Court, District, Federal, Fraud, John, Pham, Schulte, Spectranetics, Trung, conspiracy, defraud

Posted on February 27, 2012 by Anthony Lake

7th Circuit Reverses Mail and Wire Fraud Conviction of Contractor for Alleged Bid Rigging

Steven Fenzl was the principal of Urban Services of America, Inc. ("Urban"). Fenzl was charged with alleged mail fraud and wire fraud in the U.S. District Court for the Northern District of Illinois. The charges related to alleged bid-rigging under the Sherman Act on a 2005 contract to refurbish the City of Chicago's garbage carts.

Urban had won bids from the City in the past--however it had been subject to investigation on the allegation that Fenzl's partner and co-defendant, Douglas Ritter, had cashed checks from the City written to other contractors. As a result of the investigation, Fenzl and Ritter were afraid that Urban would not be awarded the contract even if it submitted the lowest bid. So Fenzl and Ritter persuaded three other companies to bid on the contract who would not otherwise have done so, with the understanding that if one of the companies were awarded the bid by the City, it would subcontract the fulfillment to Urban. Urban also submitted a bid, which was the lowest. The City awarded Urban the contract. However, the City was unaware of Urban's communications with the other bidders. All bidders, including Urban, had to certify to the City that they had not entered into any agreements with other bidders relating to the price of the bids. Fenzl was indicted in 2009, and was convicted at trial last year.

Image source: www.non-competes.com/2012/01/weekly-posner-no-1.html

Last week, the 7th U.S. Court of Appeals reversed Fenzl's convictions, in an opinion authored by Judge Posner, U.S. v. Fenzl, No. 11-2459 (7th Cir. 2012), available here. The Court held that it was difficult to see what was wrongful about Urban's alleged "scheme," since it increased, rather than reduced, competition among the bidders. It noted that the theory behind the government's fraud charges against Fenzl was infirm, since "[n]o evidence was presented that the more bidders there
were, the more likely Urban’s bid was to be accepted and that this would result in a higher price to the City for getting its garbage carts spruced up." Even if there were fewer bidders, Urban still would have likely been awarded the contract as the low bidder.

The Court rejected Fenzl's companion argument, that he could not have committed mail or wire fraud since the City did not lose any money as a result of his conduct. It observed that "there is no requirement that the victim have incurred, or the defendant have intended him to incur, a pecuniary loss. [Cit.] If you steal money from a person, it is theft even if you intended to, and did, replace the money before he noticed it was missing." (Citing U.S. v. Joshua, 648 F.3d 547, 553 (7th Cir. 2011)).

Fenzl was also charged with fraud relating to failure to subcontract to a woman or minority-owned business enterprise. However, the trial court ordered him acquitted of this charge. The Court of Appeals ordered Fenzl to be retried on the charge.

Tags: Act, America, Appeals, Chicago, Circuit, Court, District, Douglas, Fenzl, Fraud, Illinois, Mail/WIre/Honest Services Fraud, Northern, Ritter, Seventh, Sherman, Steven, Urban, acquitted, bid, business, contract, enterprise, garbage, mail, minority, noncriminal, owned, reversed, rig, rigging, services, subcontractors, wire, woman

Posted on February 22, 2012 by Tom Withers

You Can't Make This Stuff Up

The press release from the Northern District of Georgia announcing the guilty plea by novelist Mitchell Gross to wire fraud and money laundering charges has a great line:

“Much like the novels this defendant wrote, the stories he told to his victims to entice them to entrust him with their money or their legal business were also fiction, but of a far more sinister nature. Setting up phony investment companies and fake lawsuits may have provided this defendant with a comfortable lifestyle for a while, but now the storyline has changed and he faces the stark reality of federal prison.”

Mitchell Gross is a defrocked lawyer, having been disbarred in 1991, according to the press release and this is not his first rodeo in the criminal arena as he convicted of arson and insurance fraud in 2000.

Apparently blessed with a vivid imagination, Gross has authored a number of books under pen names, including the aptly titled “Circle of Lies.”

Gross bilked two victims in separate schemes out of over $ 4 million dollars. Interestingly, the case has been investigated by IRS Agents. Sentencing is scheduled for May 14, which is going to be an unpleasant day for the good Mr. Gross.

Tags: Fraud, Mitchell Gross, Money Laundering, novelist, wire fraud

Posted on February 21, 2012 by Anthony Lake

Former Cartersville, GA, Mayor Sentenced for Mortgage Fraud

H. Gregory Cordell, the former Mayor of Cartersville, Georgia, was sentenced to over two years imprisonment last Friday in the U.S. District Court for the Northern District of Georgia for mortgage fraud, as reported by the Chattanoogan. According to statements by the U.S. Attorney's Office for the Northern District of Georgia, Cordell inflated the purchase price of the property, lied on his mortgage application, and received a $1 million loan, from which Cordell was paid a kickback.

Tags: Cartersville, Cordell, Court, District, Federal, Fraud, Georgia, Gregory, Mortgage, Mortgage and Foreclosure Fraud, Northern, bank, kickback

Posted on February 17, 2012 by Tom Withers

What is the Deal With this Administration's Handling of the Mortgage Crisis?

I began working as an Assistant U.S. Attorney in 1990, just this side of the Savings and Loan crisis caused by the implosion of the real estate market and the criminal dealings in that industry. To understand how quickly history repeats itself, check out this interesting analysis by the FDIC and its ironic title – “History of the 80s – Lessons for the Future” criticizing, in part, the “go-go” mentality that existed in the Savings and Loan industry at the time.

In the late 80s, early 90s financial institution fraud was the enforcement priority of the Department of Justice and hundreds of bankers were convicted as a result of that initiative.

Syracuse University has a fascinating database called the Transactional Records Access Clearinghouse, which has compiled government records since 1989. TRAC records indicate that in 1995, banking regulators referred more than 1,500 cases to DOJ (more on this later).

The current financial crisis that now burdens the world financial system reached the point of critical mass in the Fall of 2008. As we now know, that crisis was and is fueled in substantial measure by mortgage fraud, but TRAC records tell us that from 2006-2010, the average number of referrals was just over 70 - SEVENTY! At the height of the financial crunch – 70 odd regulatory referrals a year! In the words of Vizzini from “The Princess Bride” – “inconceivable!”

So, what is the deal? In November 2009 DOJ announced the formation of the Financial Fraud Enforcement Task Force, which has produced shockingly few prosecutions. I guess in an effort to shore up that unit, last month the President announced the formation of a new task force, the Residential Mortgage-Backed Securities Working Group. In fact, it turns out that Task Force is just going to be a unit of the previously formed Task Force.

So, how do we find ourselves, more than 3 years out from financial crisis and by all accounts, a law enforcement effort that has been minimal? We’ll look at this more in coming days.

Tags: Bank Fraud, Financial Fraud Enforcement Task Force, Financial Institution Fraud, Fraud, Residential Mortgage-Backed Securities Working Group, Savings and Loan Crisis, Transactional Records Access Clearinghouse

Posted on February 8, 2012 by Tom Withers

President's Financial Fraud Task Force Gets Rare Win in Atlanta and Other News

After another late night of listening to tapes of witness interviews and undercover phone calls, I’ve just put on a little Richie Havens to look over the federal criminal news for you readers.

Much has been written over the past couple of years about the lack of financial institution fraud cases brought by the Department of Justice. However, the U.S. Attorney in Atlanta, Sally Quillian Yates, announced yesterday a sentencing in a case investigated by President Obama’s Financial Fraud Task Force. Mrs. Yates announced that Atlanta businessman, Charles Michael Vaughn, who operated CM Vaughn Emerging Ventures Fund, was sentenced to 8 years in federal prison and ordered to pay $9 million in restitution.

The announcement lauded the efforts of the multi-agency approach of federal law enforcement, regulatory agencies and others working to investigate and prosecute financial crimes in the markets. Quite frankly, that seems like a little bit of a stretch here to fit this case in that dynamic. This case seems more like the usual sort of fraud case traditionally handled by the FBI, or Postal Service.

Of absolutely no relation, but of note because it is such a rare event, federal district court Judge Richard J. Holwell, 65, is leaving the bench to form a boutique firm with two of his former partners at White & Case. Judge Holwell recently presided over the insider trading trial of Raj Rajaratnam. Of particular interest, Judge Holwell, noted in his interview with the New York Times that being a federal judge is “an extremely rewarding job, but [that it] can also be an extremely isolating job.” Also, he said that his move back into private practice had nothing to do with the compensation difference between private practice and the judiciary. You gotta like the guy to. Instead of maintaining the “Judge” before his name in private practice, he says, “I’m going back to Rick.”

Tags: Federal Courts, Federal Courts, Force, Fraud, Holwell, Judge, Raj, Rajaratnam, Task, enforcement, financial, insider, institution, trading

Posted on November 28, 2011 by Anthony Lake

Northwest Georgia Banks and Credit Unions Hit By Debit Card Fraud

Federal investigators are investigating an outbreak of debit card fraud in Northwest Georgia, according to a story by WCRtv in Chattanooga. Customers of the Bank of LaFayette, Cohutta Banking Company, and Tennessee Valley Federal Credit Union in Chickamauga, LaFayette, Rossville and Trion in Northwest Georgia have reported having their accounts drained.

Authorities believe that the thefts may be connected and may be the result of the theft of information from the company which handles the debit card transactions. The affected banks and credit unions have issued statements regarding the thefts.

Tags: Card, Chattanooga, Chickamauga, Cohutta, Credit, Federal, Fraud, Identity Theft, LaFayette, Rossville, Tennessee, Trion, Union, bank, debit

Posted on October 12, 2011 by Anthony Lake

Florida Attorney and Police Officers Acquitted of Federal Mortgage Fraud Charges

Prosecutors with the U.S. Attorney's Office for the Southern District of Florida have dropped charges of mortgage fraud against Plantation, Florida, attorney Steven Stoll and police officer Dennis Guarancino, according to the Miami Herald. Stoll and Guarancino were charged in relation to a $16.5 million dollar loan fraud scheme by Guarancino's brother, Joseph Guarancino, also a police officer, which involved purchasing and flipping properties. However, their trial last month ended in a mistrial when the jury could not reach a verdict. The Government has stated that it will re-try Joseph Guarancino. Three other Plantation police offers and an FBI agent were acquitted by a jury in April.

Contact the attorneys of Gillen Withers & Lake LLC for your criminal and civil matters, in Savannah or Atlanta.

Tags: Acquittal, Dennis, District, Federal, Florida, Fraud, Guarancino, Joseph, Mortgage, Plantation, Southern, Steven, acquitted, attorney

Posted on September 26, 2011 by Anthony Lake

California Businessman Acquitted on Tax Charges; Did Not Review or Authorize Tax Filings Due to Kidnapping of Son

Earlier this month, as reported in the Wall Street Journal's MarketWatch, a Federal jury in the U.S. District Court for the Central District of California acquitted Howard H. Berger, a business consultant, on four criminal tax charges. The charges stemmed from Mr. Berger's alleged filing of 2006 personal and partnership tax returns allegedly claiming a false charitable donation of $1 million.

The defense at trial presented compelling evidence that Mr. Berger never personally reviewed or authorized his 2006 return. The compelling evidence was that, four days before the return was due in October of 2007, Mr. Berger's ex-wife kidnapped their 4 year-old son from his preschool and fled with the child to her native country of South Africa. Furthermore, this was not the first time the former Mrs. Berger had abducted the child--she had refused to return to the U.S. after taking the child to visit her family in 2005. It took Mr. Berger 8 months working with the U.S. State Department to obtain a court order for the return of his son. The defense furthermore undermined the testimony of IRS agents regarding alleged false statements by Mr. Berger regarding his access to the charity's bank accounts or statements.

Image source: discoverlosangeles.com/photos.html

Tags: Acquittal, Africa, California, Central, District, Fraud, South, Tax, abduction, acquitted, charitable, charity, deduction, kidnapping, return, returns

Posted on September 20, 2011 by Anthony Lake

Atlanta Man Indicted in New York for Securities Fraud, Insider Trading

Image source: www.google.com/imgres

Scott Allen, of Atlanta, was charged last week with securities fraud and insider trading in the U.S. District Court Southern District of New York, according to the Wall Street Journal. The government alleges that Mr. Allen and John Bennett of Norwalk, Connecticut, conspired to make more than $2.6 million in profits on insider trades of pharmaceutical stocks. Mr. Allen was a former employee of Mercer, a gloabl human resources consulting firm, and Mr. Bennett was an independent film producer and stock trader. The criminal complaint against the defendants charges that Mr. Allen allegedly obtained information regarding acquisitions by pharmaceutical companies in 2008 and 2009, and gave the information to Mr. Bennett. Mr. Bennett is charged with using the information to make $2.6 million in trades, while paying Mr. Allen $100,000 in kickbacks.

For exceptional criminal representation, drawing on decades of Federal prosecutorial and defense experience, contact Gillen Withers & Lake LLC.

Tags: Allen, Atlanta, Bennett, Connecticut, Defense, District, Fraud, Georgia, Indictment, John, New, Norwalk, Scott, Securities, Securities Fraud, Southern, York, companies, criminal, insider, kickbacks, pharmaceutical, trading

Posted on September 20, 2011 by Anthony Lake

Fayetteville Man Indicted on Federal Charges for Defrauding Colleges and Universities

The season for college sports is upon us once again and what better way to honor the occasion than with a bit of news from 7th Space Interactive that Dale Brannan, of Fayetteville, Georgia, has been indicted in the U.S. District Court for the Northern District of Georgia for defrauding various universities and colleges, including Kansas State University, the University of New Mexico, Oakland University, Stonehill College and Minnesota State University - Mankato. Mr. Brannan was arraigned last week on charges of bank fraud, mail fraud, bankruptcy fraud, and one count of making a false declaration in a bankruptcy filing.

Mr. Brannan is alleged to have operated a company called Transport Athletics in Fayetteville and Savannah, Georgia, which purportedly arranged for overseas travel for collegiate sports teams to countries including China, Italy, Brazil and Finland. However, the government has charged that he used the funds paid by universities and colleges to pay the costs of earlier trips of other schools and to pay his personal expenses.

Mr. Brannan is alleged to have caused Transports Athletics to file for bankruptcy and notified the schools that the trips had been cancelled. He then allegedly started another company, Sports Tours and Tournament Specialists, Inc., or STATS, and re-commenced the scheme. The alleged loss from the activities is over $400,000.

Image source: heartlandcatbackers.com/News/News_Cheerleaders0803.asp

Gillen Withers & Lake LLC are expert criminal law attorneys with a stunning record of success on behalf of our clients in criminal investigations and prosecutions.

Tags: Arraignment, Athletics, Brannan, Brazil, China, Dale, Fayetville, Finland, Fraud, Indictment, Italy, Kansas, Mankato, Mexico, Minnesota, New, Oakland, Savannah, Specialists, Sports, Stonehill, Tournament, Tours, Transport, University, bank, bankruptcy, college, colleges, criminal, mail, universities

Posted on August 25, 2011 by Anthony Lake

Real Estate Market May Be Down, But Mortgage Fraud Rising

Al Lewis of the Wall Street Journal's MarketWatch reports that mortgage fraud is surprisingly on the rise despite the current weakness in the housing market. Mr. Lewis cites the FBI's report on mortgage fraud for 2010, which reports that mortgage brokers, appraisers, underwriters, accountants, real-estate agents, settlement attorneys, land developers, investors, builders, lenders, and bank and trust account representatives continue to utilize fraudulent schemes to defraud lenders, from inflating appraisals and fabricating income statements to recruiting straw buyers. As a result of the depressed housing market, inventive would-be felons have also apparently developed scams involving short sales, loan modifications, and firms offering relief from foreclosures.

The report states that mortgage fraud cases increased 12% in 2010 and that the majority of cases arose in California, Florida, New York, Illinois, Nevada, Arizona, Michigan, Texas, Maryland, New Jersey and, of course, Georgia. The Bureau claims that at least $10 billion in loans were advanced on fraudulent mortgage applications in 2010.

Image source: travelpod.com

For exceptional representation in Federal or State, criminal or civil matters, call Gillen Withers & Lake LLC (912) 447-8400 Savannah, or (404) 842-9700 Atlanta. Please visit our new website gwllaw.com.

Tags: Attorneys, FBI, Foreclosure, Fraud, Journal, Mortgage, Mortgage and Foreclosure Fraud, Street, Wall, accountants, appraisers, brokers, buyers, estate, loan, modifications, real, report, sales, short, straw, underwriters

Posted on August 10, 2011 by Anthony Lake

Marietta Executive Pleads Guilty in Rhode Island In Navy Kickback Scheme

The Washington Post reports today that Patrick Nagle, of Marietta, Georgia, pled guilty last week in the U.S. District Court for the District of Rhode Island to conspiracy to commit bribery. Nagle was formerly the Chief Executive Officer of Advanced Solutions for Tomorrow (AST), which was awarded contracts by the U.S. Navy. The prosecution alleged that Nagle paid inflated invoices by two subcontractors who were given work on Navy contracts by AST. The charges against Nagle allege that the kickback scheme cost the Navy between $7 and $20 million.

Image source: coloradoright.wordpress.com

Tags: Advanced, Fraud, Georgia, Island, Marietta, Nagle, Navy, Patrick, Rhode, Solutions, States, Tomorrow, U.S., United, conspiracy, contract, contracts, guilty, kickback, kickbacks, plea, plead, pled, subcontractor

Posted on August 9, 2011 by Anthony Lake

Former CEO of Kansas Utility Westar Energy Receives $36 Million Settlement, Plus $3.1 Million in Legal Fees for Dismissed Criminal Prosecution

Westar Energy, the largest electrical utility in the State of Kansas, announced last week that it will pay former Chief Executive Officer, President and Chairman of the Board, David Wittig $36 million as an arbitration settlement relating to Wittig's compensation contract, as well as $3.1 million in attorney's fees and $2.7 million in stock compensation, according to the Topeka Capital-Journal. Westar's settlement with Wittig follows its settlement in the Spring with its former Vice President of Corporate Strategy, Douglas Lake for $21 million in unpaid compensation and $5.3 million in legal fees. Wittig and Lake claimed Westar violated their employment contracts by terminating them prematurely.

Image source: aggregateresearch.com

The compensation for legal fees was for Wittig's and Lake's defense of a criminal prosecution. In 2003, the men were charged in the U.S. District Court for the District of Kansas with conspiracy, circumventing internal accounting controls and falsifying books and records, honest services fraud, wire fraud, submitting false statements and engaging in monetary transactions derived from an unlawful activity. Their first trial ended in a mistrial in 2004 after the jury could not reach a verdict. They were convicted at their second trial in 2005, but the Eighth Circuit Court of Appeals reversed their convictions last year following the U.S. Supreme Court's decision regarding honest services fraud in U.S. v. Skilling.

Tags: Appeals, Chairman, Chief, Circuit, Court, David, Department, District, Douglas, Eighth, Energy, Executive, Fraud, Justice, Kansas, Lake, Mistrial, Officer, President, Skilling, States, Topeka, U.S., United, Vice, Westar, Wittig, appeal, attorney, board, dismiss, dismissal, dismissed, electrical, honest, services, utility

Posted on August 5, 2011 by Anthony Lake

Former PA Attorney Nicholas Panarella Has Honest Services Fraud Conviction Reversed After 10 Years

In 2001, Pennsylvania tax attorney Nicholas Panarella, Jr., pled guilty to charges of honest services fraud. Mr. Panarella was alleged to have paid former Pennsylvania State Senator F. Joseph Loeper more than $330,000 as "consulting fees" to take actions which benefitted Mr. Panarella's tax-collection firm.

However, as a result of the Supreme Court's decision in U.S. v. Skilling relating to honest services fraud, the U.S. District Court for the Eastern District of Pennsylvania this week ruled that Mr. Panarella's actions were no longer criminal and that he was entitled to have his conviction reversed by means of a writ of coram nobis (Latin for "the error before us"), according to Philly.com.

Mr. Panarella was disbarred following his 2001 plea. Prior to his conviction, he assisted former Mayor of Philadelphia in recovering $51.9 million in back taxes. Joseph Loeper served 20 months in prison for obstructing a tax investigation.

Tags: District, Eastern, Fraud, Joseph, Loeper, Nicholas, Panarella, Pennsylvania, Philadelphia, Skilling, States, United, honest, reversal, reversed, services

Posted on July 21, 2011 by Anthony Lake

Harris County, Texas, Commissioner Faces Second Trial on Bribery and Other Charges Following Mistrial

Jerry Eversole, a Harris County (Houston), Texas, Commissioner, was charged in the U.S. District Court for the Southern District of Texas with conspiracy, accepting bribes and filing false income tax returns in 2003 and 2004. Eversole was alleged to have accepted $100,000 in gifts from a developer, Michael Surface, in exchange for being awarded County contracts.

Eversole was tried on the charges back in March. The defense put up no evidence of its own at trial. Nevertheless, the jury, during deliberations, raised questions about Eversole's friendship with Surface and the line between friendship and criminal conspiracy. On March 30, 2011, the Court declared a mistrial after jurors deadlocked on the charges. Eversole has spent $1.1 million on his defense. His second trial is scheduled to commence on October 24. He has just $51,000 remaining in legal defense funds.

Image source: examiner.com

Tags: 2003, 2004, Commissioner, County, Court, District, Eversole, Fraud, Harris, Houston, Jerry, March, Michael, Mistrial, Southern, States, Surface, Tax, Texas, United, bribe, bribery, conspiracy, deadlock, false, income, jury, returns, statements

Posted on June 1, 2011 by Anthony Lake

Supreme Court Declines to Hear Conrad Black's Appeal of His Two Remaining Convictions

The U.S. Supreme Court yesterday denied the petition for certiorari by former international media mogul, Canadian citizen and British Lord, Conrad Moffat Black, as reported in the Washington Post.

Mr. Black was the CEO of Hollinger International, Inc., which owned newspapers worldwide. He was indicted (in an indictment made available by FindLaw which may be viewed here) with other officers and employees of Hollinger in the Northern District of Illinois in November of 2005 on 11 counts, in an original indictment which charged mail fraud conspiracy, wire fraud conspiracy and substantive counts of mail and wire fraud. The counts all referenced the "honest services" fraud statute, 18 United States Code section 1346. Testifying to the vigorousness of his defense, on July of 2007, a jury acquitted Mr. Black on 9 counts but convicted him on three others.

Mr. Black then challenged his convictions on appeal. In June of last year, the Supreme Court handed down its three "honest services" decisions, Skilling v. U.S., Black v. U.S., and Weyrauch v. U.S. In Skilling, the main decision involving former Enron President Jeffrey Skilling, the Court rejected the old "intangible right" to an employee's honest services theory and held that, in order to avoid being unconstitutionally vague, section 1346 applies to bribery or kickback schemes, and not to mere self-dealing by an employee. In Mr. Black's case, the Court unanimously held that the jury had not been properly instructed on honest services fraud at trial, and vacated his convictions and remanded. Then in October of last year, the Seventh Circuit Court of Appeals, in an opinion authored by distinguished Judge Richard Posner, struck two of the three remaining counts against Mr. Black, leaving him convicted on a single fraud count and a count for obstruction of justice. Mr. Black again appealed these two remaining convictions to the Seventh Circuit, which upheld them last December, and then to the Supreme Court, which has now declined to review them. Mr. Black is scheduled to be resentenced on June 24.

Source: McLean's.ca

Tags: 1346, Canada, Canadian, Conrad, Court, Fraud, Hollinger, Illinois, Kingdom, Lord, Moffat, Posner, Richard, Skilling, States, Supreme, U.S., United, Weyhrauch, black, bribe, bribery, counts, decision, honest, international, kickbacks, mail, media, newspaper, newspapers, opinion, services, wire

Posted on May 30, 2011 by Anthony Lake

Conversion Solutions Holdings CEO of Adairsville, GA, Arrested in Provo, UT, After Fleeing Trial

After a five-day nation-wide manhunt, Rufus Paul Harris, former CEO of Conversion Solutions Holdings Corporation (CSHC), originally of Adairsville, Georgia, was arrested on Sunday by the U.S. Marshal's Service in Provo, Utah. According to the Rome News-Tribune, Harris fled Atlanta on May 23 following the eighth day of his jury trial for conspiracy, fraud and falsifying financial statements in the U.S. District Court for the Northern District of Georgia in which Harris was representing himself. The charges against Harris were based on an alleged "pump-and-dump" scheme in which Harris and others allegedly inflated CSHC's stock prices by false claims and financial statements and defrauded investors out of millions.

Harris was convicted in absentia and will be sentenced on August 18, and will face a potential 25 years' imprisonment.

Photo: amberlrhea

Tags: Adairsville, Atlanta, Conversion, Corporation, District, Fraud, Georgia, Harris, Holdings, Marshals, Northern, Rufus, Securities, Securities Fraud, Sentencing, Service, Solutions, U.S., charge, charges, conspiracy, criminal

Posted on May 9, 2011 by Anthony Lake

Economic Concerns Driving DOJ's Prosecutorial Discretion in Large Corporate Prosecutions; Government Files Civil Suit Against Deutsche Bank Over Alleged Massive Mortgage Fraud

Federal officials last week announced that Deutsche Bank and its mortgage division, MortgageIT, allegedly engaged in fraud on a massive scale as a civil complaint was filed against Deutsche Bank. The complaint alleges that the massive German bank allegedly defrauded the government of up to $1.2 billion through alleged reckless lending practices. The Federal Housing Administration has allegedly paid out approximately $386 million in wrongful insurance claims. The government is seeking three times this amount in fines and penalties. Among the government's allegations is a charge that documents which would have informed bank officials about high rates of default were hidden in a closet at MortgageIT. The civil complaint fails to disclose any incriminating documents which could be used to establish an intent to defraud the government.

However, according to an article by Fox Business News, the government is holding back in the Deutsche Bank case from bringing criminal charges in response to the alleged massive fraud. The author points to the case as illustrative of a trend by Federal officials to prosecute alleged wrongdoing by corporations through civil, rather than criminal, means.

The article speculates that Federal officials might have elected civil, rather than criminal, proceedings due to the lower burden of proof , as well as the more time and resource-consuming nature of criminal proceedings. It also acknowledges concerns by prosecutors over potential harm to corporations, investors and the economy and markets in general, illustrated by the demise of accounting giant Arthur Andersen in 2002 as a result of the federal prosecution in the wake of the Enron scandal. The article cites the fact that criminal, as opposed to civil, actions, are often accompanied or followed by de-licensing actions by regulatory bodies.

The article also cites the relatively few criminal prosecutions following the financial collapse of 2007. What criminal proceedings there have been have focused on individuals with various Wall Street firms--rather than the firms themselves. Furthermore, several of these prosecutions have ended in failure, as exemplified by the acquittal of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin in 2009.

Tags: Civil, Corporation, Department, Deutsche, Economic, Federal, Fraud, Justice, Miscellaneous, Mortgage, MortgageIT, Street, Wall, bank, collapse, discretion, estate, financial, fines, investor, investors, of, penalties, prosection, prosecutorial, real

Posted on April 18, 2011 by Anthony Lake

"Hero" or "Terrorist" Cuban Exile Luis Posada Carriles Feted in Miami Following Acquittal on 11 Counts; Deportation Sought by U.S. Government

Luis Posada Carriles was 30 years old at the time of the 1959 Cuban Revolution. He was sent to prison by the regime of Fidel Castro and subsequently sought asylum in Mexico. Posada then emigrated to the United States where he helped to organize President John F. Kennedy's and the CIA's failed 1961 Bay of Pigs invasion. He then returned to the U.S. where he became a 2nd Lieutenant in the U.S. Army and was active in the CIA's Operation 40--a guerilla force which operated covertly to overthrow the Castro regime. Posada also developed close ties to anti-Castro groups in the U.S., including the Cuban American National Foundation.

Eventually suspected by the CIA of alleged involvement in several bombing plots, Posada relocated to Venezuela in 1968. Carriles became a chief of operations for Venezuela's intelligence agencies. The CIA severed all ties with Posada in 1976, on suspicion that he was allegedly involved in cocaine trafficking. That same year, he was arrested in Venezuela for alleged involvement in the bombing of Cubana airlines flight 455, which killed all 73 people on board. He was acquitted in a trial in military court, however the verdict was overturned and Posada was retried in a civil court. He escaped from prison in Venezuela and sought asylum in Chile.

Posada was imprisoned in Chile until 1985, when he escaped from prison again, dressing as a priest. He fled to El Salvador, where he again became involved in U.S. activities in the region, helping to provide supplies to the Contra forces opposed to the Sandinista regime of Nicaragua for the administration of President Ronald Reagan. Following the Reagan administration, Posada became a security advisor to the Guatemalan government. He was shot in Guatemala City in 1990, upon information and belief by Cuban agents.

Posada was implicated in a series of bombings in Cuba in 1997 which killed a Canadian citizen and wounded 11 other people. He was arrested in Panama City in 2000 with 200 pounds of explosives which were allegedly to be used to assassinate Castro, who was to visit Panama for the first time since 1959. In 2004, Panamanian President Mireya Moscoso pardoned Posada and his alleged co-conspirators. Posada requested asylum in the United States in 2005, and he was detained by the Department of Homeland Security, which sought to deport him. He was released on bond in 2007, and was indicted on seven counts of alleged immigration fraud. In 2009, a grand jury in El Paso, Texas, issued a superseding indictment against Posada, charging him with 11 counts, including immigration fraud, obstruction of a terrorism investigation and terrorism charges relating to the 1997 Cuban bombings. As reported by the Miami Herald, Posada was tried in a 13 week trial in the Western District of Texas in 2010. The jury took 3 hours to find him not guilty on all charges.

Last week, the 83 year-old Posada received a gala dinner in Miami by Cuban exile organizations including Alpha 66, intended to help defray his legal expenses. Posada's counsel stated that they believed that the jury was favorably disposed to Posada as a result of his military history. However, as a result of his 2004 Panamanian conviction, Posada is barred from seeking residency in the U.S. No other countries will accept Posada, however, besides Cuba and Venezuela, and the U.S. has refused to deport him to Cuba or Venezuela, citing concerns that he might be tortured. Venezuela has announced that it will re-file its petition to extradite Posada. Venezuelan President Hugo Chavez has called Posada the "biggest terrorist" on the continent, and Castro has denounced Posada as a "coward."

Tags: 1997, Agency, Army, Bay, CIA, Carriles, Castro, Central, Chavez, City, Contra, Cuba, Cuban, FBI, Fidel, Fraud, Guatemala, Hugo, Immigration, Intelligence, John, Kennedy, Luis, Mireya, Morosco, Nicaragua, Panama, Pigs, Posada, Reagan, Ronald, Sandinista, Terrorism, Venezuela, anti-Castro, bombings, invasion, revolution, terrorist

Posted on March 31, 2011 by Anthony Lake

Prominent Cuban-American Acquitted of Healthcare Fraud in the 1990s, Indicted a Second Time for Submitting False Claims to Medicare

Ernesto Angel Montaner, aged 70, a member of a prominent Miami Cuban family, is facing healthcare fraud charges for the second time, according to the South Florida Sun Sentinel. Montaner was the sole defendant acquitted in a vast healthcare fraud prosecution in the 1990s for an alleged $15 million in false claims to Medicare.

The government alleges that, from 2006 to 2008, Montaner submitted approximately $6.2 million in false claims to Medicare at rehabilitation clinics which he operated, including Infinity Therapy and Miami Dade Medical Group. Montaner and others are alleged to have bribed or paid kickbacks to assisted-living facilities, home health care agencies, patient recruiters and patients in exchange for referrals. Many of the patients referred to Montaner did not require physical therapy/occupational therapy services.

Montaner fled to Costa Rica in early 2009 after government agents raided his offices, where he lived on a farm worth $1 million. However, the government successfully extradited Montaner back to the U.S. in February. The current set of charges against Montaner arose out a sting operation by the FBI using a registered nurse and convicted felon posing as a patient recruiter, as well as a physician convicted of Medicare fraud and other ex-felons and recruits posing as patients with ailments. Montaner allegedly paid the informants cash to refer Medicare patients to him. The informants also signed off on claims for 17 rehabilitation sessions which were never given.

The government has also charged Montaner's business partner and his son, Ernesto Montaner Jr., 45, who entered a guilty plea to manipulating Medicare billing codes to maximize patient visits, was sentenced to four years in prison and is cooperating with authorities. Montaner's partner, Jose A. Varona, 39, a patient recruiter, has been sentenced to three years imprisonment and has also given information to the FBI.

Tags: Costa, Ernesto, Florida, Fraud, Health Care Fraud, Healthcare, Jose, Medicare, Miami, Montaner, Rica, Varona, bribery, bribes, care, claims, clinic, clinics, false, health, kickback, kickbacks, patient, patients, referral, referrals, rehabilitation

Posted on March 25, 2011 by Anthony Lake

New York Senator May Be Retried in Wake of Supreme Court's "Honest Services" Fraud Decision

New York Senator Joseph L. Bruno was indicted in January of 2009 on eight counts of fraud. A jury in the U.S. District Court for the Northern District of New York acquitted Bruno, who is now 81 years old and the former Republican Majority Leader of the New York State Senate, on five of the remaining charges and deadlocked on the sixth in December of 2009. The charges were based on allegations that Bruno allegedly took approximately $3 million in kickbacks from businesses seeking to do business in New York, as well as labor unions. In particular, Bruno s alleged to have accepted $280,000 in "consulting fees" from companies associated with Loudonville, New York, businessman Jared Abbruzzese. Bruno was sentenced to two years' imprisonment last May, but has remained free pending his appeal in the U.S. Court of Appeals for the Second Circuit.

Now the U.S. Attorney's Office has filed a brief with the Court of Appeals requesting that the dismiss the charges against Bruno and remand his case for a new trial, as reported in the Saratogan. The prosecution argued that Bruno's convictions under 18 United States Code Section 346--the honest services fraud statute--cannot stand following the U.S. Supreme Court's decision in U.S. v. Skilling, the case against former Enron executive Jeffrey Skilling, as the Blog has noted here. However, it maintains that it can obtain another indictment of Bruno under the statute, as amended by Skilling. The government contends that it will be able to prove a quid pro quo if Bruno is ordered retried. Bruno and his counsel have filed a brief with the Court of Appeals arguing that any retrial of Bruno would violate double jeopardy.

Tags: Abbruzzese, Acquittal, Bruno, District, Enron, Fraud, Jared, Jeffrey, Joseph, Leader, Loudonville, Majority, New, Northern, Noteworthy Cases, Republican, Senator, Skilling, State, York, acquitted, bribery, honest, kickbacks, services

Posted on March 23, 2011 by Anthony Lake

Tax Fraud on the Rise in Georgia--52,000 False Returns in 2010

According to the Atlanta Journal-Constitution, the IRS found more than 52,000 fraudulent tax returns filed in Georgia in 2010, worth $41 million in refunds, an increase over the 29,000 fraudulent returns discovered in 2009 and the almost 16,000 returns in 2008. Last year, the Service and the Georgia Department of Revenue launched more than 20,000 investigations of tax fraud in Georgia, and initiated 200 criminal cases.

Many of the fraudulent returns involve identity theft, including stolen Social Security numbers and bank information. The article also cites the cases of tax preparers who have become involved in fraudulent tax schemes. It furthermore describes a scheme by Decatur, Georgia, residents Michael Romeo St. Romain and Brian Dupree several years ago which obtained more than $475,000 in fraudulent refunds and would have netted another $1 million in refunds before St. Romain and Dupree were caught. The men are currently serving approximately five year sentences in federal prison. Another Georgia man, Michael Stringer, obtained $560,000 from false state tax returns in 2008, attempting to defraud the State of $1.4 million.

Representatives of the Gwinnett County Police Department stated that their White Collar Crime Unit receives approximately 10 cases of tax fraud each week, increasing to 15 to 20 per week in March and April.

Tags: Atlanta, Brian, Decatur, Department, Dupree, Fraud, Georgia, Identity, Internal, Michael, Revenue, Romain, Romeo, Service, St., Stringer, Tax, Tax Fraud, Theft, false, fraudulent, return, returns

Posted on March 18, 2011 by Anthony Lake

Georgia, Atlanta, Identity Theft Hot Spots

The Federal Trade Commission has ranked Georgia 4th among the States and Atlanta 19th among cities for identity theft crimes, as reported in the Atlanta Business Chronicle. The rankings are based on complaints received by the FTC in 2010.

Significant among Georgia's numbers are 2,882 complaints of government benefits or documents fraud; 911 complaints of bank fraud and 328 complaints of loan fraud.

Atlanta moved up substantially from its 2010 of 123 among major metro areas.

Tags: Atlanta, Commission, FTC, Federal, Fraud, Georgia, Identity, Identity Theft, Theft, benefits, documents, government, loan, trade

Posted on February 16, 2011 by Anthony Lake

Georgia Prisons Big Source of Tax Fraud According to USA Today

An article in USA Today claims that prison inmates in Georgia, Florida, California and elsewhere caused the Internal Revenue Service to issue $39 million in undeserved federal tax refunds in 2009. Georgia came in second with $3,560,562 in fraudulent refunds issued to prisoners, but was far outstripped by Florida's $12,576,944 in refunds. The IRS identified 44,944 false or fraudulent tax returns filed by prisoners in 2009, however an audit identified 54,410 tax returns which the IRS had failed to identify as having been filed by prisoners.The number of undeserved refunds paid out was up from $13.4 million in 2004.

While some inmates came legally receive income from investments, inheritances and other sources, the false tax returns are typically based on fictitious jobs and taxes that were never withheld. Although inmates do work in prison, prison jobs do not pay enough to trigger withholding. The scams often involve the theft of Social Security Numbers and other information from others. In some cases, the inmates will find the names of businesses which have declared bankruptcy, in order to make it more difficult for the IRS to verify the claims.

A Florida inmate, Danilo Suarez, obtained $58,022 in tax refunds by filing 14 or more false tax returns. Jeanni Renee Hillin, a Tennessee inmate, received $58,651 in refunds in 2006.

Tags: California, Florida, Fraud, Georgia, Prisoner, Tax, Tax Fraud, false, fraudulent, inmate, prison, refund, refunds

Posted on February 15, 2011 by Anthony Lake

Roswell Man and Military Contracting Firm Indicted in Rhode Island for Fraud Against Navy

The Washington Examiner reports that Anjan Dutta-Gupta of Roswell, Georgia, and Ralph M. Mariano of Arlington, Virginia, have been charged in the U.S. District Court for the District of Rhode Island on bribery and kickback charges. Mariano was a senior engineer at the Washington Navy Yard. Gupta was the founder of Advanced Solutions for Tomorrow (AST), a Georgia technology company. The charges assert that Mariano and Gupta allegedly engaged in a scheme to defraud the U.S. Navy dating back to 1998 and resulting in approximately $10 million in losses in inflated costs to the Navy. During this time, AST gained 10 contracts with the Navy totalling $120 million. Gupta and AST allegedly paid kickbacks to Mariano, who allegedly distributed the gains to his father, brother, girlfriend and associates. Prosecutors claim to have recorded conversations in which Mariano describes the alleged scheme.

Gupta also allegedly contributed to U.S. Democratic Senator Jack Reed, a member of the Senate Appropriations Committee. Senator Reed allegedly helped earmark military funding for ASFT. Senator Reed has pledged to donate the contributions from Gupta to charity.

Tags: Advanced, Anjan, Appropriations, Arlington, Dutta, Fraud, Gupta, Island, Jack, Mariano, Navy, Ralph, Reed, Rhode, Senate, Solutions, Tomorrow, Virginia, bribery, committee, contracts, kickbacks

Posted on February 1, 2011 by Anthony Lake

Georgia Minister Receives 5 Years for Burning and Defrauding Church

Donny Ray Horton of Hoschton, Georgia, a minister at Gardendale First Baptist Church in Birmingham, Alabama, was sentenced to five years imprisonment yesterday in the U.S. District Court for the Northern District of Alabama on charges of arson and mail fraud, according to KARE11.com. Horton allegedly set two fires at the church last year. He was also charged with defrauding the church of $78,769 for church pews, which he received in his role as a sales representative for Sauder Manufacturing, which makes seats and pews for churches.

Tags: Alabama, Birmingham, Court, District, Donny, Fraud, Gardendale, Georgia, Horton, Hoschton, Northern, Ray, arson, mail, minister, pastor

Posted on January 24, 2011 by Anthony Lake

Former Community Bank & Trust Executive Pleads Guilty to Fraud Charges

Randy Jones, a former executive vice president with Community Bank & Trust who worked for the bank for 30 years, pled guilty last week in the U.S. District Court for the Northern District of Georgia for an alleged multi-million dollar fraud scheme, according to an article in the Atlanta Journal-Constitution. Specifically, Jones was alleged to have made loans to a customer, Joseph Penick, Jr., to purchase tracts of land in North Georgia. Penick is alleged to have paid Jones $770,000. Penick has pled guilty to his involvement in the scheme.

Jones was also alleged to have used family members and friends to obtain more than $800,000 in loans from Community Bank & Trust to purchase an interest in six Zaxby's restaurants.

Community Bank & Trust was shut down by regulators in January of 2010. The bank opened in 1900 and had been insured by the Federal Deposit Insurance Corporation since 1934. Before it failed, it had 36 branches across the region and $1.1 billion in assets. An FDIC report in September of 2010 found that Community Bank & Trust failed to follow its own loan policy and had made more than $10 million in bad loans. Georgia has had more failed banks than any other state--52 since 2008.

Investigators say he used the names of family members without their consent to obtain more than $800,000 in loans from the bank, which he used to buy a stake in six Zaxby's restaurants. And they claim he approved more than $2.8 million in loans to fraudulent borrowers so that a customer who was a real estate developer could pay down interest on loans.

The bank failures have also led to a number of prosecutions and suits against former bank executives, employees and others. Five people with ties to Omni National Bank of Atlanta were convicted on bank fraud and other charges after the bank collapsed during a federal mortgage fraud probe. A lawsuit by the FDIC also alleges that former officers of Alpharetta-based Integrity Bank engaged in gross negligence and breach of fiduciary duty relating to making bad loans. One of the defendants is State Senator Jack Murphy, a former bank official and the new Chairman of the Senate Banking Committee. Sen. Murphy has denied any wrongdoing.

Tags: Alpharetta, Atlanta, Bank Fraud, Corporation, Deposit, FDIC, Federal, Fraud, Gainesville, Georgia, Insurance, Jones, Joseph, Mortgage, Penick, Randy, Trust, bank, community, conspiracy, mail

Posted on January 21, 2011 by Anthony Lake

Charges Dismissed Against Executives in Titanic West Titanium Case for Alleged Government Contract Fraud; Prosecution Provides Alleged Favorable Evidence 6 Weeks Into Trial

Two years ago, Western Titanium was indicted in the U.S. District Court for the Southern District of California on 19 counts, including mail fraud and conspiracy, for allegedly selling substandard titanium to the government to use in aerospace equipment and engine mounts for military jets and allegedly falsely certifying that the metal met technical specifications, according to an article on San Diego Signon. Also indicted were Western Titanium's CEO, Daniel Schroder, and three other current and former executives. The "titanic" prosecution involved some 900 docket entries, extensive pretrial hearings and finally an 11 week trial.

However, the trial terminated last week with Western Titanium pleading guilty to a single count of mail fraud for causing an alleged loss of $51,350 and the charges against the executives being dismissed under deferred prosecution agreements. The reason for the abrupt end was the defense's accusations that the prosecution had withheld thousands of pages of documents favorable to the defense showing that the titanium was not substandard. Counsel for the defendants claimed that the government did not disclose the materials until approximately six weeks into the trial in an act of intentional prosecutorial misconduct.

The U.S. Attorney's Office has denied that the prosecution acted in bad faith.

Posted on January 12, 2011 by Anthony Lake

Head of Georgia Medical Equipment Provider Indicted for Medicare Fraud; Atlanta Inmate Indicted for Selling "Cooperation" Information to Defendants

Samuel Curtis, III, a Texas resident, has been charged with four counts of health care fraud and aggravated identity theft in the U.S. District Court for the Southern District of Georgia for allegedly attempting to steal more than $500,000 from Medicare, according to an article in the Florida Times-Union. Curtis is alleged to have operated Perferred Prosthetics and Orthotics, a medical equipment supply company doing business in Georgia and Texas, and to have allegedly stolen information from Medicare physicians and recipients and used the information to submit false claims to Medicare. The indictment alleges that Curtis and others routinely billed Medicare for ankle, knee and back braces and other medical devices that either were never provided to patients, were not medically necessary or had not been prescribed by a doctor. Curtis' associate, Cecil Risher, of Brunswick, Georgia, was arrested earlier in the investigation.

In other Georgia news, according to 7th Space, Sandeo Dyson, a former inmate of the Atlanta City Detention Center, has found himself indicted once again in the U.S. District Court for the Northern District of Georgia for allegedly obtaining information about crimes being committed in Georgia and North Carolina from other inmates and then selling the information to criminal defendants in cases in the Northern District for five to ten thousand dollars apiece, earning an approximately $50,000 from the scheme. The defendants would offer the information provided by Dyson to have their sentences reduced for cooperation. Dyson allegedly instructed the defendants to lie to authorities by concealing the fact that they had no real personal knowledge of the proffered information, and had purchased the information from Dyson. Dyson is charged with one count of conspiracy to obstruct justice and to make false statements, three counts of obstruction of justice, and two counts of false statements.

Tags: Atlanta, Brunswick, Cecil, Curtis, District, Dyson, Fraud, Georgia, Healthcare, Identity, Medical, Miscellaneous, Northern, Preferred, Risher, Samuel, Sandeo, Texas, Theft, aggravated, care, conspiracy, cooperation, equipment, false, health, obstruction, orthotics, prosthetics, reduction, sentence, statements

Posted on December 28, 2010 by Anthony Lake

Utah Man and Canadian Citizen Indicted In Georgia for Conspiracy, Mail and Wire Fraud, May Have Been Conned by Their European Contacts

As reported in the Salt Lake Tribune, Thomas Repke of Holladay, Nevada, has been indicted in the U.S. District Court for the Northern District of Georgia on 22 counts of conspiracy, mail fraud and wire fraud. The charges are based on allegations that Mr. Repke, through the companies Coadum Capital and Mansell Acquisition Co., allegedly defrauded more than 100 investors of more than $30 million. Mr. Repke and James Jeffrey, a Canadian citizen, are alleged to have promised investors monthly returns of 5 percent on their investments. The indictment charges that Mr. Repke and Mr. Jeffrey promised investors that their money would be kept safe in escrow accounts, but allegedly transferred $20 million in investor funds to accounts in Switzerland and Malta, as well as allegedly diverting substantial funds to themselves, companies which they controlled and investments of family members. The defendants are alleged to have made false statements to investors about their monthly gains and account balances and to have used funds from investors to pay off other investors in what a Ponzi scheme.

Mr. Repke's and Mr. Jeffrey's uses of investor funds do not appear to have been totally selfish, however. Coadum is alleged to have used $425,000 of the funds to commission a 40-foot bronze statue of New York City firefighters for the National Fallen Firefighters Foundation for a memorial to September 11, 2001. Furthermore, in a novel twist, comments by Pat Huddleston, a receiver appointed to oversee companies operated by Mr. Repke and Mr. Jeffries, indicates that the two men might have been victims themselves, deceived by individuals in Europe who they dealt with. "My investigation shows they were conned out of that money," Huddleston stated. "They might have believed they were making legitimate investments over there, but the person was essentially conning them."

Mr. Repke pleaded not guilty to the charges yesterday and was released on a $250,000 bond. The U.S.Securities and Exchange Commission has also sued Mr. Repke and Mr. Jeffrey.

Tags: Acquisition, Canada, Canadian, City, Coadum, Commission, Court, District, Fraud, Georgia, Holladay, Indictment, James, Jeffrey, Lake, Mansell, Northern, Ponzi, Receiver, Repke, SEC, Salt, Securities, Thomas, Utah, capital, conspiracy, exchange, mail, wire

Posted on December 15, 2010 by Anthony Lake

Operation Broken Trust Targets Financial Crime in Georgia

According to a news release by the U.S. Attorney's Office for the Southern District of Georgia, Attorney General Eric Holder announced last week the results of Operation Broken Trust, an unprecedented nationwide law enforcement operation targeting a variety of investment schemes. President Obama established an inter-agency Financial Fraud Enforcement Task Force, consisting of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement, which was launched on August 16, 2010. The purpose of the Task Force is to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. To date, Operation Broken Trust has taken action against 343 criminal defendants and 189 civil defendants for schemes involving more than 120,000 victims and an estimated more than $10 billion in losses.

The news release states that, in the Southern District of Georgia, the operation has resulted in the sentencing of Alvin Charles Ramsey, a former financial advisor, for defrauding his clients out of over $500,000 and Augusta, Georgia, investment advisor Walter Marian Williams for defrauding his clients of over $1.7 million.

Tags: Broken, Crimes, Fraud, Miscellaneous, Operation, Trust, financial

Posted on December 13, 2010 by Anthony Lake

Executives of Canada's Royal Group Technologies (now part of Georgia Gulf Corp.) Acquitted of Fraud Charges

A Judge in Oshawa, Ontario, a suburb of Toronto, acquitted six former executive of Royal Group Technologies on Friday, according to the Toronto Star. Royal Group is a manufacturer of plastic materials for the housing construction industry. The company is a subsidiary of Georgia Gulf Corporation, an Atlanta-based, manufacturer and marketer of chlorovinyls and aromatics, which purchased Royal Group in 2006 for $1.7 billion.

The executives, including Royal Group's founder, Vic De Zen, president Doug Dunsmuir, former chief financial officers Ron Goegan and Gary Brown, ex vice-president Luciano (Lu) Galasso and accounting director Gordon Brocklehurst, were charged with fraud in 2006 relating to a purchase of a property in Vaughan, Ontario, in 1998 for $20.5 million by a company tied to the defendants, which was then re-sold on the same day to Royal Group for $27.4 million. The defendants were also charged over their receipt of more than $2 million in bonuses for the sale of a subsidiary of Royal Group in 2002. The defendants were charged following an investigation by the Royal Canadian Mounted Police's Market Enforcement Team, designed to combat white collar crime.

The defendants' counsel argued that the defendants satisfied all disclosure requirements, and that the bonuses appeared in Royal Group's annual circular. Mr. Justice Richard Blouin acquitted the defendants immediately after hearing final oral arguments. The trial ran a total of 49 days, beginning last April. Canada's Federal Public Prosecution Service will determine whether or not to appeal the Judge's decision.

Tags: Acquittal, Atlanta, Canada, Canadian, Corporation, De, Fraud, Georgia, Group, Gulf, Mounted, Ontario, Oshawa, Police, Royal, Technologies, Toronto, Vaughan, Vic, Zen, acquitted, bonuses, enforcement, market, prosecution, public

Posted on November 17, 2010 by Anthony Lake

FBI Investigating "Pay for Play Plan" Allegations Surrounding Auburn Quarterback Cam Newton and Father

It is college football season, and appropriately the most notable news in an otherwise slow Federal criminal news day appears to be that the Federal Bureau of Investigation has interviewed John Bond, a former quarterback for the Mississippi State Bulldogs, regarding Auburn quarterback Cam Newton, according to the Atlanta Journal and Constitution.

Bond told Mississippi State officials in January that a former teammate had asked him for $180,000 in order to secure Newton's commitment to the Bulldogs. The teammate was subsequently revealed to be Kenny Rogers, another former player for the Bulldogs and owner of a company called Elite Football Preparation, which holds camps in Alabama, Chicago and Mississippi, and matches football prospects with colleges. Rogers, in turn, has publicly stated that he met with Newton's father, Cecil Newton, as well as assistant coaches for MSU, on November 27, 2009, in Starkville, Mississippi, and that Newton demanded between $100,000 and $180,000 in order to ensure that his son signed with the Bulldogs.

Newton originally signed a letter of intent with the University of Florida, where he spent the 2007-2008 season as a back-up quarterback to Heisman Trophy winner Tim Tebow. He subsequently transferred to Blinn College in Texas, where he led the Blinn Buccaneers to the NJCAA National Championship before signing with Auburn. According to ESPN, Cecil Newton told Rogers at the meeting that his son's transfer to Auburn was not going to be "free." Rogers was referred to Mississippi State booster and former Bulldogs offensive lineman Bill Bell. Bell confirmed to ESPN that Rogers did contact him to ask for money in exchange for Newton signing with Mississippi State. Rogers has stated that he doesn't know if Cam Newton knew about his father's demand for money. However, ESPN reported that recruiting sources for Mississippi State had disclosed that they had had telephone conversations with Cam Newton, as well as his father, that Newton's college choice would be based on a pay-for-play plan.

The allegations are further not limited to Newton's dealings with Mississippi State. One recruiter has reported that Cam Newton telephoned him after committing to Auburn and informed him that he had chosen Auburn over Mississippi State because "the money was too much."

Mississippi State compliance officials reported the allegations to Southeastern Conference compliance officials in January. The NCAA and the FBI are both conducting investigations into these allegations. The news has cast a shadow over Auburn's so-far undefeated season, and Newton himself, the current leading contender for the Heisman Trophy. Newton's reputation was already previously marred by charges of burglary, larceny and obstruction relating to an alleged stolen laptop while he was at the University of Florida.

The Federal investigation could result in criminal proceedings for conspiracy, fraud, bribery and other offenses. In a case which college football fans will have some familiarity with, U.S. v. Young, NO. 03-20400 BV, (W.D.Tenn. 2004), Tennessee businessman and University of Alabama booster Logan Young was indicted for structuring, in violation of 31 U.S.C. § 5324; Travel Act violations under 18 U.S.C. § 1952; and conspiracy, in violation of 18 U.S.C. § 371, for paying $150,000 to Lynn Lang, coach of Trezvant High School in Memphis, to ensure that high school defensive player Albert Means signed a letter of intent with Alabama. Young, Lang and Trezvant Assistant Coach Milton Kirk were subsequently convicted. Alabama was placed on probation for five years by the NCAA as a result of the conduct, and given a two year bowl ban. The University of Kentucky was given a one year bowl ban for a $6,000 payment by a booster to Lang in order to have Means visit the school. Similar misconduct was alleged against the University of Georgia, the University of Arkansas and the University of Memphis, however those schools were not sanctioned. An old Sports Illustrated article has more on the Means scandal.

Tags: Albert, Arkansas, Auburn, Bond, Bulldogs, Bureau, Cam, Cecil, Conference, ESPN, FBI, Federal, Football, Fraud, Georgia, Heisman, High Profile Cases, Illustrated, Investigation, John, Kenny, Kentucky, Kirk, Lang, Logan, Lynn, Means, Memphis, Milton, Mississippi, NCAA, Newton, Rogers, SEC, Southeastern, Sports, State, Tebow, Tim, University, Young, bribe, bribery, college, commit, commitment, gratuities, gratuity, lineman, pay, play, quarterback, sign, signing, trophy

Posted on November 11, 2010 by Anthony Lake

Alabama Contractor Roger Taylor Acquitted of Conspiracy, Bribery and Obstruction Charges Following Federal Trial; Avoyelles Parish Sheriff Bill Belt and Family Acquitted

On Tuesday, a jury in the U.S. District Court for the Northern District of Alabama in Tuscaloosa found construction contractor Roger Taylor not guilty on one count of conspiracy, five counts of bribery and two counts of obstructing justice, according to Tuscaloosa News. Mr. Taylor was one of numerous individuals investigated in relation to Alabama's Community College System. Mr. Taylor, co-owner of Hall-Taylor Construction, and was alleged to have bribed former two-year college Chancellor Roy Johnson by paying for more than $92,000 in construction costs and appliances at Johnson’s home in Opelika, Alabama, in exchange for awards of construction management work within the system. The government alleged that Mr. Taylor was awarded $4 million in no-bid state contracts from 2002 to 2006 in exchange for the alleged bribes.

Mr. Taylor's trial began on October 25. He was originally charged with 17 counts, but the majority of these were dropped after a successful appeal by a co-defendant. At trial, however, the prosecution failed to present any testimony showing that Johnson alleged directed or threatened college presidents to hire Hall Taylor on contracts for a massive makeover of the college system. On the contrary, witnesses testified that another construction management firm received a fair share of the contracts. The witnesses at the trial also praised Hall-Taylor's work. Mr. Taylor's counsel made the trial into a referendum on Johnson's credibility. Johnson pled guilty to 14 charges of conspiracy, bribery, witness tampering and money laundering in January of 2008. He is scheduled to be sentenced on November 18.

17 individuals, including former state legislators, college presidents and the system chancellor, have either pled guilty or been found guilty by a jury as a result of the investigation. A spokesperson for the U.S. Attorney’s Office for the Northern District of Alabama issued a statement that the prosecution believed it had presented sufficient evidence to find Mr. Taylor guilty of the bribery and obstruction charges, but that it respected the jury's verdict. The government has a companion civil forfeiture case against Hall-Taylor's assets. Mr. Taylor's counsel stated that the prosecution intimidated and threatened witnesses at the grand jury investigating Johnson, and have indicated that Mr. Taylor may seek recourse for the prosecution's actions.

In other positive Federal criminal news, Bill Belt, the former Sheriff of Avoyelles Parish, Louisiana, his wife, Tracy Belt, and his sister, Julie Bernard, were found not guilty of conspiracy, mail fraud and obstruction of justice last week by a jury in the U.S. District Court for the Western District of Louisiana after a trial which also began on October 25, according to Towntalk.com.

In 1988, Sheriff Belt allegedly contracted with Michael and Rae Johnson to install pay telephones for prisoners in Avoyelles Parish in a venture called Cajun Callers. Under the agreement, Cajun Callers would pay a monthly commission to the Sheriff's Office. The Johnsons made large amounts of money from the venture, which they failed to pay taxes on. Johnson subsequently became a Louisiana State Judge, but was removed from the bench due to ethical violations relating to Cajun Callers. The government alleged that Sheriff Belt was paid kickbacks.

In 1990, Sheriff Belt's future wife began keeping the books for two companies She owned: Southern Louisiana Communications, which operated public pay phones; and Central Louisiana Communications, which operated phones in Louisiana parish jails.

Rae Johnson testified at trial that Tracy Belt would allegedly take money collected from the pay phones and deposit it and then write three checks in identical amounts--one of which was to her husband's tax account from which taxes were never paid. Johnson stated that she would allegedly cash one of the other checks and deliver the money to Mrs. Belt. Sheriff Belt's counsel undermined Johnson's account of the triple-check scheme on cross-examination, however. Counsel argued in closing that Johnson was a liar who escaped prosecution herself by making up stories about the Belts. The government also presented the testimony of a convicted male pedophile who installed the Cajun Callers phones in the jails, and another convicted felon who served time for crimes including insurance fraud.

Tags: Alabama, Avoyelles, Belt, Bernard, Bill, District, Federal, Fraud, Justice, Louisiana, Northern, Noteworthy Cases, Opelika, Parish, System, Taylor-Hall, Tracy, Tuscaloosa, acquittal, acquitted, bribe, bribery, bribes, college, conspiracy, construction, criminal, mail, obstruction

Posted on November 10, 2010 by Anthony Lake

Rome Man Enters Last Minute Plea In Phantom Timber Prosecution

Aaron Wilbert Freeman of Rome, Georgia, pled guilty last week in the U.S. District Court for the Northern District of Georgia to one count of conspiracy and one count of wire fraud after a jury had been selected in his trial, according to a press release by the U.S. Attorneys Office for the Northern District of Georgia, Freeman operated a "scale house" for the Temple-Inland Company where trucks carrying timber were weighed and drivers were issued a "scale ticket" as proof of delivery of the timber. Freeman was alleged to have manipulated the scale house's computer system to note multiple deliveries of timber where in fact there was only a single delivery. Freeman allegedly recruited delivery drivers, co-defendants Kevin Fields, Jason Joseph, Roger Carthern, Andrew Carthern, David Carthern, Robert Frank Ferguson and Bonner Tate to redeem false scale tickets with timber suppliers. The alleged co-conspirators are alleged to have laundered the monies gained through various accounts, and to have split the profits with Freeman. The scheme allegedly netted approximately $4 million. All of the defendants were indicted in November of 2009.

Tags: Aaaron, Andrew, Bonner, Carthern, District, Fields, Frank, Fraud, Freeman, Georgia, House, Inland, Jason, Joseph, Kevin, Northern, Robert, Rome, Tate, Temple, Temple-Inland, Wilbert, conspiracy, scale, ticket, timber, truck, wire

Posted on October 20, 2010 by Anthony Lake

Six Indicted for Alleged Medicare Fraud in South Georgia; Augusta Man Indicted for Alleged Fraud from Federally-Funded Meals for Children Program

Federal criminal activity has been brisk in the Southern District of Georgia. First, six defendants were charged with conspiracy to defraud Medicare and money laundering, according to a press release from the U.S. Attorney's Office. The charges were the result of a nationwide investigation which included the Federal Bureau of Investigation (FBI), the Department of Health and Human Services, Office of the Inspector General (HHS-OIG), and Immigration and Customs Enforcement (ICE) which has resulted in the arrests of more than 35 defendants across the country.

The government has alleged that, beginning in 2006, the defendants allegedly opened five sham medical clinics in Savannah, Macon and Brunswick, and allegedly stole the identities of physicians and Medicare beneficiaries. The defendants are alleged to have submitted over $4 million in false claims to Medicare for services which were allegedly never provided. Nationwide, the scheme is alleged to have cost Medicare $163 million. The Georgia defendants are also charged with allegedly laundering the proceeds through various shell corporations.

Later in the week, an Augusta man was indicted for allegedly defrauding a program which provided meals to low income children in the Savannah River area under the Federal Head Start program of tens of thousands of dollars.

Tags: Augusta, Brunswick, Customs, DHS, District, FBI, Federal, Fraud, Georgia, Head, Immigration, Indictment, Macon, Medical, Medicare, Money, OIG, Savannah, Southern, Start, States, United, attorney, clinic, criminal, laundering

Posted on October 11, 2010 by Anthony Lake

Federal Prosecutors Observe "No Touch" Ruling on Possible Retrial of San Diego Councilman for Alleged Honest Services Fraud; Former Alaska Chief of Staff to Have Honest Services Conviction Dismissed

Last week was a good one for public officials charged with Federal crimes. First, the U.S. Attorney's Office for the Southern District of California announced that it would not seek a second trial of former San Diego Councilman Michael Zucchet on alleged honest services fraud charges pursuant to 18 U.S.C. 1346, relating to political contributions from the owner of a strip club, as reported by the Los Angeles Times. Mr. Zucchet was indicted with two other City Council members and an aide in 2003. The government alleged that the Council members had a meeting with a lobbyist for the strip club owner for the alleged purpose of changing the City's "no touch" ordinances relating to strip clubs. The Council members, however, argued that they reported the contributions on their financial disclosure forms. The government's decision was prompted by the U.S. Supreme Court's recent decision in U.S. v. Skilling, No. 08-2349, in which, as we have noted, the Court held that the "honest services" mail fraud statute, 18 U.S.C. §1346, applies to bribery and kickback schemes, and not to mere "undisclosed self-dealing by a public official or private employee," alone.

Councilman Charles Lewis died before trial. Mr. Zucchet and Councilman Ralph Inzunza were convicted by a jury following trial in July of 2005. However, U.S. District Judge Jeffrey Miller dismissed the jury's guilty verdict on seven counts against Mr. Zucchet. The Judge permitted the government to retry Mr. Zucchet on the two remaining counts. The Ninth Circuit Court of Appeals upheld the district court's ruling on appeal. Mr. Inzunza has also appealed his convictions. Mr. Zucchet resigned from the Council soon after his conviction, and is currently General Manager of the San Diego Municipal Employees Association.

Then, according to the Achorage Daily News, the U.S. Attorney's Office for the District of Alaska announced that it would agree to the dismissal of the honest services fraud conviction of Jim Clark. Mr. Clark was the former Chief of Staff to Alaska Governor Frank Murkowski, a lobbyist and attorney, and was once viewed as the most powerful unelected official in Alaska. The U.S. Attorney's Office announced that Mr. Clark's 2008 guilty plea was to a felony that no longer exists, pursuant to the Supreme Court's Skilling decision. Mr. Clark pled guilty to alleged conspiring with former officials of the defunct oil-field services company Veco Corp. to channel $68,550 in illegal contributions to Governor Murkowski's political campaign -- without the Governor's knowledge. He is expected to be a witness for the government in a possible upcoming trial of State Representative Bruce Weyhrauch on bribery, extortion and conspiracy charges. Mr. Clark's law license, which was suspended following his guilty plea, is expected to be reinstated by the Alaska Supreme Court.

Tags: 1346, Alaska, California, City, Clark, Court, Diego, District, Frank, Fraud, Jim, Michael, Murkowski, San, Southern, States, United, Zucchet, bribery, conspiracy, corruption, council, councilman, extortion, honest, official, officials, public, services

Posted on October 8, 2010 by Anthony Lake

Georgia Piano Importer Charged Over Alleged 100 Year Old Elephant Ivory; Loganville Man Allegedly Bilked New York Investor Into Paying $5 Million in Foreign Currency Scheme

In Georgia Federal Criminal news, the Associated Press reports that Federal prosecutors charged A-440 Pianos, Inc., a piano importer in the Atlanta area, and its owner, Pascal Vieillard, last week with alleged illegal smuggling of 855 elephant ivory key tops into the U.S. Mr. Vieillard and the company pled not guilty, and Mr. Vieillard's counsel has stated that the ivory at issue is more than 100 years old.

In other news, Tony Leon Smith, a resident of Loganville, Georgia, has been charged with wire fraud in the U.S. District Court for the Northern District of New York, according to the Rochester Democrat and Chronicle. Smith is alleged to have falsely represented himself to an entrepreneur in the Rochester area as a successful investor in foreign currencies and to have promised a 100 percent return within 90 days for investments in alleged foreign exchange instruments. Smith allegedly convinced the man to set up a corporation in the Caribbean island nation of Saint Kitts and to wire $5 million to the corporation. Smith allegedly then withdrew $537,467 from the company's account and converted it to his own use.

Tags: A-440, A440, Atlanta, Defense, District, Foreign, Fraud, Georgia, Indictment, Loganville, Miscellaneous, New, Pascal, Vieillard, York, attorney, criminal, currency, elephant, import, importation, instrument, ivory, piano, pianos, wire

Posted on September 9, 2010 by Anthony Lake

Rascos Give Up the Fight; U.S. Senate Assumes Role of a Court for Impeachment Trial of Louisiana District Judge G. Thomas Porteous, Jr.

We have commented on the case of Alfredo and Niurka Rasco of South Georgia, who were charged in a $6.5 million Medicare fraud scheme. Well, despite a heated and well-founded defense against the charges based upon illegal use of immunized evidence by the government, Mr. Rasco and his wife pled guilty to the charges against them last week during their trial, according to a press release by the U.S. Attorney's Office for the Southern District of Georgia. Mr. and Mrs. Rasco face maximum terms of imprisonment of 12 years and 6 months respectively.

In other news, the U.S. Senate will convene next week to hold an impeachment trial of U.S. District Judge G. Thomas Porteous, Jr., of the Eastern District of Louisiana according to the National Law Journal. Judge Porteous is charged with corruption. Specifically, Judge Porteous is charged with accepting meals, trips and other gifts from bail bondsman Louis Marcotte III and his sister Lori Marcotte in return for giving the Marcottes and their clients special treatment while he was a state court judge. Judge Porteous is also alleged to have made false statements to the Senate and to the FBI in 1994 regarding his past.

Judge Porteous' attorneys are vigorously defending him, however, pointing out that much of the conduct charged against Judge Porteous occurred prior to his appointment to the bench. Furthermore, a federal grand jury had investigated Judge Porteous as part of wide-ranging probe into Louisiana corruption, however no charges resulted. The U.S. Department of Justice also decided to drop the case against Judge Porteous. Judge Porteous' attorneys have denied any wrongdoing by Porteous, and state that he has done nothing to justify his removal from office. The defense also contends that the FBI and the Senate were aware of the allegations against Judge Porteous prior to voting to confirm his appointment.

A fascinating fact is that Congress is also the nation's least used court. The trial of Judge Porteous will be the Senate's first since the impeachment trial of President William Jefferson Clinton (who appointed Judge Porteous to the bench) in 1999, and the first of a federal judge since 1989. The U.S. House of Representatives has considered bringing impeachment proceedings against federal judges in the interim, but the judges had resigned before the proceedings could be brought. Judge Porteous was referred to the Senate for impeachment by the Judicial Conference of the United States, led by Supreme Court Chief Justice John Roberts Jr., in June of 2008. A committee of 12 senators will serve as both judges and jurors at his trial. Members of the House will serve as prosecutors, or "managers." The Senators will vote on whether to convict Judge Porteous, with a two-thirds majority required to convict. Any of the Senators may question witnesses following examination and cross-examination by counsel. The Senate Committee will first gather evidence for consideration by the full Senate. Each side will have 20 hours to put on evidence. The Senate can only vote to impeach Judge Porteous, and cannot impose any sentence of imprisonment or fine. The trial will take place in the same chamber the Senate uses for confirmation hearings.

Tags: Alfredo, Congress, District, Eastern, Federal, Fraud, Georgia, House, Immunity, Judge, Louisiana, Medicare, Miscellaneous, Niurka, Porteous, Rasco, Representatives, Senate, Southern, States, Thomas, United, bench, confirmation, corruption, impeachment, judiciary, kickbacks, plea

Posted on August 25, 2010 by Anthony Lake

Beazer Homes Executive and Alpharetta Resident Michael Rand Indicted in NC for Fraud

As reported in the Charlotte Observer, Michael Rand, former Chief Accounting Officer for Beazer Homes USA and a resident of Alpharetta, Georgia, has been indicted in the U.S. District Court for the Western District of North Carolina on 11 counts, including securities fraud, witness tampering and making false statements. Rand is alleged to have directed a conspiracy to manipulate Beazer's books, achieve earnings targets, and deceive the company's auditors.

Specifically, the indictment alleges that, from 2005 to 2007, Rand entered into an agreement with another company to allow Beazer to get revenue from purported sales of model homes, and that he and others created a false set of books to understate income when business was doing well, and "smoothing" income when business became tighter. Beazer terminated Rand in June of 2007 for allegedly destroying documents during an internal investigation.

Federal authorities began investigating Beazer in 2007 after the Charlotte Observer ran a series that claimed that Beazer arranged larger loans than some customers could afford and violated federal lending rules, leading to high foreclosure rates in certain communities. Prosecutors filed mortgage fraud and accounting fraud charges against Beazer in July of 2009, and the company entered into a deferred prosecution agreement in which it agreed to pay up to $50 million. Beazer was also the defendant in a class action lawsuit over lending practices, which it settled in 2009 for $30.5 million. The company stopped mortgage lending in 2008. Beazer has reported 1,643 home closing in the third quarter of this year, as well as losses of $27.6 million.

A detention hearing for Rand is scheduled for Friday. Rand is also the subject of a lawsuit filed in July of 2009 by the Securities and Exchange Commission in the Northern District of Georgia.

Posted on August 11, 2010 by Anthony Lake

Conrad Black on the Problems of the U.S. Justice and Prison System: Prisoners are "An Ostracized, Voiceless Legion of the Walking Dead"

Canadian citizen Conrad Black, former head of Hollinger International, Inc., and once the third biggest newspaper magnate in the world, was charged in the Northern District of Illinois with diverting corporate funds for his own use and was convicted in July of 2007for "honest services" mail fraud, in violation of 18 U.S.C. s 1846, and obstruction of justice, following a jury trial. On June 24, 2010, the Supreme Court issued an opinion in Black v. U.S., case # 08-876, vacating Black's honest services convictions and remanding his case on the ground that the district court's instruction to the jury on honest services was incorrect. Black was incarcerated at the Federal Correctional Center in Coleman, Florida, and was released on bail two weeks ago after spending two years and four months in prison. He remains in the U.S. pending an appeal to return to Canada.

Lord Black's (he was made a member of the House of Lords of the United Kingdom by Queen Elizabeth II and Prime Minister Tony Blair) legal odyssey aside, he has become an observer and critic of the U.S. criminal justice system. Black has kept a diary, which may be viewed here, regarding his experience in prison. Most recently, on July 31, Black published a letter in Canada's National Post entitled "Conrad Black: My Prison Education." Black does pause to criticize his conviction in passing, citing the "fallibility of American justice." However, Black's letter provides a glimpse into life at the end of the tunnel of the federal criminal justice system. Black discusses his daily calls to his wife and his difficulties in getting updates on his application for bail in prison. He recounts the interest of his fellow inmates in the developments and media attention in his case, and rather poignantly describes the lengthy goodbyes from his friends:

"The Mafiosi, the Colombian drug dealers, (including a senator with whom I had a special greeting as a fellow member of a parliamentary upper house), the American drug dealers, high and low, black, white, and Hispanic; the alleged swindlers, hackers, pornographers, credit card fraudsters, bank robbers, and even an accomplished airplane thief; the rehabilitated and unregenerate, the innocent and the guilty, and in almost all cases the grossly over-sentenced, streamed in steadily for hours, to make their farewells."

"Most goodbyes were brief and jovial, some were emotional, and a few were quite heart-rending. Many of the 150 students that my very able fellow tutors and I had helped to graduate from high school, came by, some of them now enrolled in university by cyber-correspondence."

Black goes on to criticize harsh federal sentencing policies, especially for drug offenders, citing in particular the disparities in the crack cocaine sentencing Guidelines and their disproportionate impact on African-Americans. He also takes the public defender system to task for being subservient to the will of prosecutors, and laments the United Sates' massive prison population and prison industry in comparison with other Western democracies. Black concludes that "America’s 2.4 million prisoners, and millions more awaiting trial or on supervised release, are an ostracized, voiceless legion of the walking dead; they are no one’s constituency."

CTV.ca

Tags: Canada, Canadian, Cocaine, Coleman, Conrad, Court, Crack, Federal, Florida, Fraud, Hollinger, Justice, Post, Sentencing, Supreme, black, criminal, disparities, honest, incarceration, international, mail, national, obstruction, prison, services

Posted on July 7, 2010 by Anthony Lake

Supreme Court's Skilling Decision Affects Retrial of Abramoff Associate; Georgia Attorney Gets 5 Years for $4.3 Million Fraud Against Clients; Dutch Company Enters $240 Million Settlement of Foreign Bribery Allegations in Texas

On June 24, the United States Supreme Court rendered its decision in the case of former Enron executive Jeffrey Skilling. The majority in U.S. v. Skilling, No. 08-2349, in an opinion authored by Justice Ruth Bader Ginsberg (which may be read in its 114 page entirety here), held that the "honest services" mail fraud statute, 18 U.S.C. §1346, applies to bribery and kickback schemes, and not to mere "undisclosed self-dealing by a public official or private employee," alone. The majority held that Skilling did not violate §1346 since, although the Government charged Skilling with conspiring to de-fraud Enron’s shareholders by misrepresenting the company’s financial health and therefore profiting, the government never alleged that Skilling solicited or accepted any payments from third parties in exchange for making the misrepresentations.

The recent Skilling decision is already having an impact on federal prosecutions. As reported by Law.com, this week, Judge Ellen Segal Huvelle of the U.S. District Court for the District of Columbia told the parties in the prosecution of Kevin Ring, a former associate of convicted lobbyist Jack Abramoff, that the Court would grant Ring more time to file a motion for judgment of acquittal in light of Skilling. Ring was charged with bribery and tried last year, however the trial ended in a hung jury. The Court intentionally delayed Ring's retrial to await the Supreme Court's decision in Skilling and the cases of Black v. U.S. and Weyhrauch v. U.S. The prosecution has announced its intent to push forward with a second trial of Ring.

In Georgia news, attorney M. Dewey Bain, of Sugar Hill, Georgia, was sentenced to 5 years and 3 months imprisonment today in the U.S. District Court for the Northern District of Georgia for defrauding clients--including a 97 year-old woman--out of $4.3 million, as reported by the Atlanta Journal-Constitution. Bain entered into trust agreements with clients in which Bain falsely promised he would invest their monies in safe accounts, but instead fraudulently diverted the monies to his own personal use.

In Southeastern news, Snamprogetti Netherlands B.V.--yes, that Snamprogetti Netherlands B.V.--has agreed to pay $240 million in penalties to the government for alleged violations of the Foreign Corrupt Practices Act (FCPA) for allegedly bribing officials in Nigeria to obtain engineering, procurement and construction (EPC) contracts to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, according to an FBI press release. Snamprogetti is a Dutch corporation and a wholly owned subsidiary of Snamprogetti S.p.A., an Italian corporation. Snamprogetti was alleged, along with Kellogg Brown & Root Inc. (KBR), Technip S.A. (Technip), and a Japanese engineering and construction company to have engaged in a joint venture that was awarded four EPC contracts by Nigeria LNG Ltd. (NLNG), between 1995 and 2004 to build LNG facilities on Bonny Island. Snamprogetti allegedly caused the venture to hire two agents, Jeffrey Tesler and a Japanese trading company, to pay approximately $172 million in bribes to Nigerian officials. The deferred prosecution agreement was filed today in the U.S. District Court for the Southern District of Texas. Snamprogetti also reached a settlement of a related civil action by the SEC.

Tags: 1846, Abramoff, Act, Bain, Brown, Dewey, Dutch, Enron, FCPA, Foreign, Fraud, Georgia, Hill, Italy, Jack, Japan, Jeffrey, Kellogg, Kevin, Netherlands, Nigeria, Nigerian, Practices, Ring, Root, Skilling, Snamprogetti, Sugar, Texas, U.S.C., bribery, corrupt, criminal, honest, kickbacks, mail, services

Posted on July 6, 2010 by Anthony Lake

Acquittals in Ponzi Prosecution Across the Pond: Jury Acquits Imperial Consolidated Execs Fraser and Brook

UK citizens Lincoln Julian Fraser and Jared Bentley Brook, former executives with the Imperial Consolidated Group (ICG) were acquitted today at the Old Bailey at the conclusion of a nearly nine month trial, according to the Guardian and the Telegraph. The jury acquitted Mr. Fraser and Mr. Brook of one count of conspiracy to defraud, and deadlocked over another conspiracy charge and a fraudulent trading charge.

The fraud charged against Mr. Fraser, Mr. Brook, ICG (headquartered on a Royal Air Force base in Lincolnshire, England, with offices in Europe, Australia and the Caribbean) and others, involved offshore investments in South American mining operations and havens such as the British Virgin Islands and Greneda, in what has been alleged to be Britain's largest Ponzi scheme. From 1998 through 2002, approximately 3,000 investors around the world invested nearly £253 with ICG on the promise of high-yield returns of up to 36 percent and "total asset protection." The loss to investors is alleged to be £150 million. One investor alone, Yuichi Yoshida of Japan, invested £16.7 million. The defendants were also alleged to have provided false information to investors, including falsely inflating the alleged value of mining interests in South America, and publishing false or misleading performance figures in the Financial Times. The defendants allegedly used investment monies to cover overhead and expenses, and for investments in failed mining interests in Argentina.

ICG's business declined precipitously when a Spanish newspaper article allegedly linked ICG to Osama bin Laden in 2001. The company failed in 2002.

The British Department of Trade and Industry disqualified Mr. Fraser and Mr. Brook from acting as directors of ICG for alleged unfit conduct relating to a failed hotel business in Morecambe, Lancashire, England.

The Crown has attempted to prosecute Mr. Fraser and Mr. Brook three times over eight years. The first trial of Mr. Fraser and Mr. Brook two years ago ended in stalemate, forcing the judge to discharge the jury. The second trial was abandoned by the Serious Fraud Office (SFO) as a result of legal errors. The SFO has seven days in which to choose to seek a retrial, but has announced that it will cease its efforts to prosecute Mr. Fraser and Mr. Brook, the investigation and prosecution of whom has cost British taxpayers approximately £10 to £20 million.

A co-defendant, Bill Godley, pled guilty to a charge of conspiracy to defraud in 2007. Godley claimed to have posed as a dynamic entrepreneur and to have transformed ICG into an international business empire. Godley is expected to receive approximately three years in gaol.

Mr. Fraser's and Mr. Brook's former solicitor, Michael John Harvey, was struck off by the British Law Society in a disciplinary proceeding for alleged involvement in Mr. Fraser's and Mr. Brook's dealings.

Tags: Australia, Bailey, Bentley, Bill, Britain, British, Brook, England, Europe, Fraser, Fraud, Godley, Great, Greneda, Islands, Japan, Jared, Julian, Kingdom, Lincoln, London, Office, Old, Ponzi, Ponzi Schemes, Serious, Solicitor, United, Virgin, conspiracy, fraudulent, trading

Posted on June 17, 2010 by Anthony Lake

Chairman of Nation's Largest Mortgage Company Indicted for Bank Fraud and TARP Fraud in Relation to Scheme Against Colonial Bank, SEC Charges Filed

The U.S. Department of Justice and the U.S. Securities and Exchange Commission have brought criminal charges and civil claims against Lee B. Farkas, former Chairman of Taylor, Bean and Whitaker Mortgage Corp. (“Taylor Bean”) for allegedly selling at least $1.5 billion in fictitious and impaired residential mortgage loans to Colonial Bank and its parent company, The Colonial BancGroup, Inc. (“CBG”), according to press releases by the Department of Justice and the SEC, and the SEC’s complaint. Mr. Farkas, a resident of Ocala, Florida, is also charged with attempting to defraud the U.S. Department of Treasury through its Troubled Asset Relief Program (“TARP”) by allegedly representing to CBG and the public that Taylor Bean had secured a $300 million equity investment in CBG which would allow CBG and Colonial Bank to qualify for $550 million in TARP funds. The government contends that the investment and prospective TARP grant was a sham.

Taylor Bean was the largest non-depository mortgage lender in the United States by 2008, originating more than $30 billion in mortgage loans. Taylor Bean engaged in the the origination, acquisition, sale and servicing of residential mortgages through a network of local banks and mortgage brokers. The company filed for Chapter 11 bankruptcy in August of 2009.

Colonial Bank, one of the fifty largest banks in the U.S., has had its own problems. In August of last year, the Alabama State Banking Department seized the bank and appointed the Federal Deposit Insurance Corp. as receiver. CBG subsequently filed for Chapter 11 bankruptcy and a financial holding company purchased Colonial Bank’s assets and assumed its deposits.

Taylor Bean had a financing arrangement with Colonial Bank to fund the mortgage loans which it originated. Under the agreement, Taylor Bean would represent that the loans were of a certain quality and that there was a commitment from a third-party investor to ultimately purchase the loan. When the investor purchased the loan, Colonial Bank would receive the proceeds to reimburse it for advancing the loan funds.

Colonial Bank and Taylor Bean also had another financing agreement, called an assignment of trade agreement, under which Colonial Bank would purchase a 99 percent interest in a bundled group of mortgage loans, or mortgage-backed securities, which Taylor Bean would issue, market and sell to third parties. Under the agreement, Taylor Bean was required to provide evidence of a binding commitment from a third party investor to purchase the securities.

The government alleges that Taylor Bean began experiencing liquidity problems in 2002. It alleges that Farkas and an unnamed officer of Colonial devised a pattern of “kiting” in which certain debits to Taylor Bean’s warehouse line of credit were not entered until after credits for the following day were entered. As a result of this kiting, Taylor Bean was supposedly overdrawing its accounts with Colonial Bank by approximately $150 million a day.

Farkas and the bank officer, in order to conceal the kiting activity, allegedly devised a scheme in which Taylor Bean would create and submit fictitious loan information to Colonial Bank. In December of 2003, Farkas allegedly directed Taylor Bean to submit approximately $150 million in non-existent loans, which Farkas allegedly referred to as “Plan B,” and impaired loans, which Farkas is alleged to have referred to as the “Crap,” to Colonial Bank for funding.

In 2004, as the loans began to age, in order to conceal them, Farkas and the officer allegedly bundled the loans in fictitious trades to Colonial Bank. Following the trades, Colonial Bank was unable to identify individual loans, or the age of the loans, within the trade. Farkas and the officer then caused information to be submitted to Colonial Bank which would reset the commitment dates on the loans and make the loans appear as if they had only recently been purchased. Farkas also caused Ocala Funding, L.L.C., a wholly-owned subsidiary of Taylor Bean, to divert funds which it received from Freddie Mac and other third parties for purchases of mortgages to Taylor Bean in order to pay down Taylor Bean’s debt to Colonial Bank.

By the close of 2007, Colonial Bank allegedly held $1 billion in impaired loans and $500 million in wholly fictitious, unsecured loans, as a result of Farkas’ and the officer’s conduct. The impaired and fictitious loans caused Colonial Bank to misstate its assets to the SEC and investors.

Finally, in November of 2008, Colonial Bank applied for TARP funds from the U.S. Treasury. The Department of Treasury approved Colonial Bank to receive $550 million in TARP funds on the condition that Colonial Bank increase its equity by $300 million. In 2009, Farkas allegedly approached Colonial Bank to raise the $300 million captial infusion through an investment group. Farkas falsely represented to Colonial Bank that it had found investors to participate in the capital infusion, and created a false stock purchase agreement. Farkas diverted $50 million in funds from an Ocala Investors Account to an escrow account in a move which he allegedly referred to as “Project Squirrel” in order to convince Colonial Bank that Taylor Bean had obtained investors. Colonial Bank entered the stock purchase agreement with Taylor Bean, however both companies subsequently terminated the agreement.

The indictment against Farkas in the U.S. District Court for the Eastern District of Virginia charges him with one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; six counts of wire fraud; and three counts of securities fraud. The SEC complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

Tags: Asset, BancGroup, Bank Fraud, Bean, Colonial, Court, Defense, District, Farkas, Florida, Fraud, Indictment, Lee, Mortgage, Program, Relief, Securities, TARP, Taylor, Troubled, Virginia, Whitaker, bank, criminal, loans

Posted on June 16, 2010 by Anthony Lake

Former Broncos and UGA Football Player Arthur Marshall Sentenced to 69 Months for Mortgage Fraud

Arthur Marshall, a former wide receiver for the Denver Broncos, was sentenced to 69 months imprisonment yesterday for bank fraud in the U.S. District Court for the Southern District of Georgia, Augusta Division, as reported by the Augusta Chronicle. Marshall was indicted in June of last year and pled guilty to two counts of bank fraud last October for defrauding banks in the Augusta area of over $3 million in mortgage loans. Marshall admitted to falsifying information to obtain the loans.

Marshall's victims included veterans whom Marshall met through his father's American Legion post, who never received title to the properties they purchased. The post is in bankruptcy and has filed a $91,000 claim against Marshall. Marshall's company, Custom Contractors, declared bankruptcy in August of 2008, listing $11 million in debts.

Marshall was born in Fort Gordon, Georgia. He played football at Hephizbah High School before going on to play for the University of Georgia Bulldogs. Marshall was a wide receiver for the Broncos from 1992 through 1996, receiving for 1,267 yards during his five year NFL career and scoring four touchdowns.

www.youtube.com/watch

Tags: Arthur, Broncos, Denver, District, Football, Fraud, Georgia, Marshall, Mortgage, Mortgage and Foreclosure Fraud, Receiver, Sentencing, Southern, University, bank, veterans, wide

Posted on June 10, 2010 by Anthony Lake

Florida Ponzi Con Man Scott Rothstein Gets 50 Years

Florida attorney and mastermind of a $1.2 billion Ponzi scheme, Scott Rothstein, was sentenced to 50 years yesterday in the U.S. District Court for the Southern District of Florida. The scam involved investments in non-existent settlements, and resulted in the loss of about $400 million to 400 victims. Rothstein wrote a letter to the court stating that he had entered into the scheme in order to help his law firm, Rothstein, Rosenfeldt & Adler, meet its costs of expansion. Rothstein used the income and his client's funds to live a lavish lifestyle, and to associate with the powerful and famous, including Florida Governor Charlie Crist and California Governor Arnold Schwartzenegger. When the scheme unraveled last October, Rothstein fled to Morocco, but returned after "praying" for several days.

The government had sought a sentence of 40 years, and Rothstein's counsel had argued for a reduced sentence based upon Rothstein's cooperation with authorities following his arrest, however the court imposed a longer sentence, citing Rothstein's "greed and arrogance." Rothstein reportedly has assisted authorities in helping to set up a reputed organized crime figure.

Only one of the many victims, a client whom Rothstein had represented in a municipal proceeding, spoke at the sentencing. Another victim, auto magnate Ed Morse, has claimed $57 million alone in losses from Rothstein's conduct.

The chief operating officer of Rothstein's firm, Debra Villegas, is expected to plead guilty on Friday to charges of conspiring with Rothstein in the scheme. Villegas is the only other individual from Rothstein Rosenfeldt & Adler to face criminal charges. A bankruptcy proceeding continues to attempt to recover assets, and investors have sued numerous defendants, including Toronto Dominion (TD) Bank, which Rothstein moved his monies through.

Tags: District, Florida, Fraud, Investment, Ponzi, Ponzi Schemes, Rothstein, Scott, Sentencing, Southern, agreement, criminal, scam, scheme, settlement

Posted on May 28, 2010 by Anthony Lake

DOJ Returns $40 Million to Japanese Investors from $1 Billion Filipino Shrimp Farming Ponzi Scheme

In a press release by the Department of Justice today, the Department announced that, in cooperation with the Ministry of Justice of Japan, it has recovered more than $40.2 million in proceeds from an alleged $1 billion Ponzi scheme by a Japanese citizen, Isamu Kuroiwa, involving investments in Filipino shrimp farms.

Kuroiwa operated "World Ocean Farm" from February 2005 to May 2007. Authorities allege that World Ocean Farm was a Ponzi style investment scheme which claimed to operate shrimp farms in the Philippines, and promised investors a 100 percent annual return on their money. According to the government, World Ocean Farm did own a couple of ponds in the Philippines, which contained no shrimp and were used to dupe traveling Japanese investors.

Instead, investors were treated to shrimp from local markets. Kuroiwa and his accomplices also allegedly told investors that World Ocean Farms was invested in high-yield investments in the U.S.

The scheme affected over 30,000 Japanese investors and defrauded them of approximately $1 billion (or ¥91 billion). Kuroiwa and his co-conspirators allegedly laundered investment monies through Japanese and American financial institutions. They used the proceeds to pay earlier investors and for their own personal uses, including a lavish gambling trip to Las Vegas. Kuroiwa was arrested, along with his accomplices.

The $40 million was returned to Japanese investors pursuant to an order of forfeiture by the U.S. District Court for the District of Columbia.

Tags: Farm, Filipino, Foreign Crimes, Fraud, High, Investment, Isamu, Japan, Japanese, Kuroiwa, Philippines, Ponzi, criminal, farming, scheme, shrimp, yield

Posted on May 13, 2010 by Anthony Lake

Developer, Bank Executives Indicted Over $80 Million in Loans/Failure of Integrity Bank

Last week, an indictment was unsealed in the U.S. District Court for the Northern District of Georgia, charging Guy Mitchell of Coral Gables, Florida, and Douglas Ballard and Joseph Todd Foster, of Atlanta, with bribery, insider trading and securities fraud, as reported in the Atlanta Journal Constitution.

Mitchell was a hotel developer and Ballard was a vice president with Integrity Bank in Alpharetta, Georgia. Beginning in 2004, Mitchell allegedly took out tens of millions in loans from Integrity for alleged real estate ventures, including $29 million to purchase Casa Madrona, a 63 room resort hotel overlooking San Francisco Bay, and for the purchase of an island in the Bahamas. Ballard allegedly authorized the loans and draw downs, in exchange for accepting more than $230,000 in kickbacks from Mitchell.

The indictment alleges that Mitchell misled Integrity's Board of Directors regarding the amount of work which had been done on the hotel. Integrity's Board claims that it never approved many of the loans.

Foster, vice president of risk management for Integrity, allegedly sold 30,000 shares for $350,000 after discovering that Integrity did not have enough liquid security to cover a $20 million loan to Mitchell.

Integrity, a faith-based bank, sustained an alleged $80 million in losses and constitutes the fourth largest of Georgia's many bank failures. The bank was shut down by the Federal Deposit Insurance Corporation in August of 2008.

The defendants have pled not guilty. Mitchell was released on a $2.5 million bond and Ballard was released on a $200,000 bond.

Tags: Ballard, Douglas, Foster, Fraud, Guy, Integrity, Joseph, Mitchell, Noteworthy Cases, Securities, Todd, bank, board, bribery, construction, directors, failure, hotel, loan, loans

Posted on May 4, 2010 by Anthony Lake

Ponzi and Check Kiting Schemes by Georgia Mortgage Broker Cost Victims $23 Million

According to a press release by the U.S. Attorney's Office for the Northern District of Georgia, Edward William Farley, of Hoschton, Georgia, was sentenced to 25 years imprisonment today in the U.S. District Court for the Northern District of Georgia for causing more than $23 million in losses to mortgage lenders in a real estate investment Ponzi scheme. Walter Julius Herman, of Dunwoody Georgia, was sentenced to over 2 years imprisonment. Farley was also ordered to pay restitution of $24,131,857. He had pled guilty to the charges last November.

Farley, a mortgage broker, operated through the entities Creative Home Search, Southern Land Partners, Georgia Land Group, and Global Mortgage. Farley engaged in same-day flips of properties in Buford, College Park, Conyers, Cumming, Dacula, Grayson, Lawrenceville, Lithonia, Norcross, Marietta, Roswell, Snellville and Suwanee. He paid Hermann, an appraiser, to fraudulently inflate the value of each property by $50,000 to $100,000. He also recruited purchasers to purchase the properties from one of his entities. In the process of flipping the properties, Farley would submit loan applications with false statements.

Farley was also charged with operating a real estate investment/Ponzi scheme through an entity called Alliance Resource Management. Farley falsely represented to investors that Alliance Resource Management was in the business of purchasing residential properties, renovating the properties and selling them at a profit, when in truth Alliance Resource Management had insufficient equity or income to purchase or renovate property. Farley also falsely promised investors that their investments were guaranteed by a first security position in property, a personal guarantee or title insurance, and provided investors with false promissory notes promising interest rates between 14 and 60 percent. In typical Ponzi scheme fashion, Farley paid early investors with investment proceeds from later investors.

Finally, Farley was charged with fraudulently obtaining $1.2 million from Washington Mutual Bank
in a check kiting scheme by transferring funds he did not have among several Alliance Resource Management bank accounts, and withdrawing scheme proceeds before the “insufficient funds” checks were returned.

Tags: Edward, Farley, Fraud, Hermann, Julius, Mortgage, Ponzi, Ponzi Schemes, Sentencing, Walter, William, check, criminal, estate, kiting, real, restitution, scheme

Posted on May 4, 2010 by Anthony Lake

Senate Hears Testimony on Criminal Penalties for Breaches of Fiduciary Duty by Financial Employees;

The Senate Subcommittee on Crime and Drugs is holding a hearing today on whether to overhaul laws governing financial crime, as reported by the National Law Journal, which has a link to video of the hearing. One point of contention has been whether to impose a requirement for financial services employees to meet a fiduciary duty to their clients, or else face criminal penalties.

Tags: Drugs, Fraud, Senate, Subcommittee, crime, criminal, duties, duty, fiduciary, financial, penalties

Posted on April 29, 2010 by Anthony Lake

Senate Permanent Subcomittee on Investigations Grills Goldman Sachs Execs

Goldman Sachs alleged securities fraud and role in the financial collapse has dominated the news this week, as reported by ABC News, NBC news and Bloomberg. It is difficult to evaluate the evidence against or supporting Goldman at this stage, but Goldman's fortunes were not helped by an inquisitorial and highly publicized hearing by the Senate Permanent Subcommittee on Investigations. The Subcommittee scheduled the hearing less than two weeks after the U.S. Securities and Exchange Commission filed a complaint against Goldman alleging that the firm committed securities fraud.

Goldman officers and employees testified that Goldman was managing its risk on individual transactions, and not betting against the future of the housing market. Six Goldman officers and employees, including its Chief Executive, Lloyd Blankfein, were summoned to testify. Senators asked the witnesses to look through binders of evidence containing internal e-mails and communications.

Goldman defended that the Subcommittee had reached its conclusions before the hearing. The firm also released documents showing that any gains it made from short sales of mortgage backed securities in 2007 were entirely erased by its losses when higher quality mortgages failed in 2008. Goldman's representatives pointed out that the firm had no special advance knowledge that the market would collapse.

The Senators asked Mr. Blankfein if it was morally correct to sell securities to clients while betting against the securities at the same time. Mr. Blankfein promised Goldman would "tighten up" the practices subject to criticism. Michigan Democratic Senator Carl Levin scolded Mr. Blankfein for Goldman selling securities, allegedly described by Goldman's own employees as "crap," and betting against them. Mr. Blankfein told the Committee that it was not Goldman's responsibility to tell its clients how to trade or invest. Blankfein had testified in January before the Financial Crisis Inquiry Commission led by former California Treasurer Phil Angelides.

In an e-mail from November 18, 2007, Blankfein allegedly stated to a colleague that Goldman was making more money from short bets on mortgages than it had lost on its investments in home loans. However, Blankfein also states in the same e-mail that Goldman did not dodge the mortgage crisis, and noted that the crisis was not over. Another document discussed during the hearing was an e-mail between Goldman's Chief Financial Officer, David Viniar, and its President and Chief Operating Officer, Gary Cohn, regarding a profit and loss statement from July 2007 and short sales of stock by Goldman.

Goldman's mortgage chief Dan Sparks admitted in his testimony that Goldman made poor decisions in hindsight.

The Senators frequently interrupted witnesses. Their questioning was also not confined to the allegations of the SEC's complaint. Senator Levin seized on an e-mail between the head of Goldman's mortgage desk, Thomas Montag, and Sparks, in which Montag called a set of mortgage linked investments "one shitty deal." Republican Senator Tom Coburn criticized Goldman for making Goldman bond trader Fabrice Tourre a "whipping boy" and releasing his personal e-mails. In response to Goldman's contention that the Committee had cherry picked its evidence, Senator Levin retorted that the evidence was the "whole bowl of cherries," and reflected the history of what happened.

Tourre also tesfied and asserted his innocence, claiming that he did not mislead any parties in dealings relating to a collateralized debt obligation which he helped to develop. He told the panel that he would defend himself in court against the "false" allegations.

Protestors attending the hearing wore striped prison uniforms and held signs stating "shame" and "Goldman banksters," recalling a term coined by Ferdinand Pecora, an Assistant District Attorney appointed by the Senate to head the Pecora Commission which investigated the causes of the 1929 stock market crash.

Goldman received $10 billion in stimulus money from the federal government following the financial collapse. It repaid the monies with interest eight months later.

It will be interesting to see if the SEC or the Subcommittee--coincidentally the same panel led by Wisconsin Republican Senator Joseph McCarthy in the 1950s--has any more damning evidence up its sleeve. In the meantime, in happier news for Goldman, shares in the company have risen from a low of $152 per share on April 26, to $160 in current trading.

Tags: Blankfein, CDO, Carl, Coburn, Commission, Corporate Crimes, Fabrice, Fraud, Goldman, Levin, Lloyd, Mortgage, SEC, Sachs, Securities, Tom, Tourre, backed, collateralized, debt, exchange, obligations

Posted on April 22, 2010 by Anthony Lake

Miami Man Receives 41 Months for $8 Million Fraud Against Medicare in South Georgia

On Monday, Jose Garcia-Iglesias was sentenced to 41 months imprisonment in the U.S. District Court for the Southern District of Georgia as a result of a scheme to bill Medicare for $8 million in phantom infusion therapy services and cancer and AIDS medications, according to a press release. Garcia-Iglesias, who is from Miami, billed the false claims from two clinics which he established in South Georgia. He also stole information on Medicare beneficiaries and from a physician in order to submit the false claims. Garcia-Iglesias was ordered to pay restitution in the amount of $423,951.

Tags: Fraud, Health Care Fraud, Medicare

Posted on April 20, 2010 by Anthony Lake

The SEC's Case Against Sir Robert Allen Stanford -- A Case Study in Investigative and Enforcement Failure

Since last year, we've followed the government's investigation and prosecution of Texan and Antiguan financier Sir Robert Allen Stanford for allegedly defrauding investors of billions in a Ponzi scheme. Well, as set forth in a 150 page Report of Investigation by the U.S. Securities and Exchange Commission Office of the Inspector General (OIG), the SEC has been following Stanford and his companies for much, much longer. OIG made the Report public yesterday. The Report reveals a stunning pattern of lack of diligence in SEC enforcement.

Stanford's investment advisor registered with the SEC in 1995. By 1997, the SEC's Fort Worth Office Examination Group had conducted an examination and concluded that the CDs Stanford and his companies were marketing were most likely a Ponzi scheme and that Stanford was allegedly engaging in fraud. However, despite the fact that the 1997 examination concluded that Stanford was likely engaging in a Ponzi scheme and referred the matter to the Fort Worth Office Enforcement Office, Enforcement staff did not open an investigation, or "matter under inquiry" (MUI), until May 1998. Enforcement sent Stanford Group Company (SGC) a voluntary request for documents. SGC refused to provide many of the requested documents, and the MUI was closed in August 1998.

The Examination Group conducted another examination of Stanford in 1998, and again concluded that the investments being offered by Stanford were highly suspicious. However, Enforcement staff did not listen to the Examination Group or review its report in deciding to close the investigation of Stanford and his companies.

A third examination of SGC was conducted in 2002 and once again concluded that the consistent above-market returns claimed by SGC were highly unlikely to be legitimate investments. The SEC again did not follow up on the examination, despite receiving conflicting representations from SGC regarding its due diligence and a growing number of complaints from outside entities confirming their suspicions.

In October of 2003, the SEC received a letter from the National Association of Securities Dealers (NASD) stating that Stanford's companies were engaged in an alleged massive Ponzi scheme. The Examination Group was asked to conduct a fourth investigation, which it did in October 2004. The investigation concluded that the CDs were part of "a very large Ponzi scheme." However, in March of 2005, senior Enforcement officials in Fort Worth learned of the Examination Group's fourth examination of Stanford and told them that "[Stanford] was not something they were interested in.”

Shortly thereafter, the head of Enforcement for the Fort Worth Office stepped down. The former head later sought to represent Stanford himself in proceedings by the SEC, despite the fact that he was involved in quashing the investigation of Stanford and his companies.

Enforcement sent Stanford International Bank (SIB) a second voluntary request for documents in August 2005. SIB refused to produce the requested documents. In November of 2005, Enforcement again closed its investigation of Stanford and his companies.

After the exposure of the Ponzi scheme of Bernard Madoff in December 2008, the SEC began to receive complaints regarding the fact that it had allowed Stanford and his companies to continue to engage in a Ponzi scheme. The SEC finally shut down Stanford's companies and froze their assets in February 2009. In October of 2009, Senator David Vitter and Senator Richard Shelby wrote a letter to the SEC asking it to conduct a comprehensive inquiry into its investigation and handling of the Stanford matter.

The OIG Report found that Enforcement staff were reluctant to pursue cases which were novel or complex, preferring to focus on cases which were "quick hits" or "slam dunks." The Report notes that, in the 12 years between the time that the SEC first gained knowledge that Stanford and his companies might be engaging in a Ponzi scheme and the time that the SEC took action to freeze their assets, investments in Stanford's CDs grew from $250 million to $1.5 billion. A survey was taken of investors in Stanford's scheme with 95% responding that knowledge of an inquiry by the SEC would have affected their decision to invest.

Posted on April 19, 2010 by Anthony Lake

SEC Goes After Goldman Sachs in Financial Crisis Fallout

The story of the week is the U.S. Securities and Exchange Commission filing a complaint against international investment firm Goldman Sachs ("Goldman") on April 15 in the U.S. District Court for the Southern District of New York, alleging that Goldman and a Goldman employee, Fabrice Tourre, a former Vice President of Goldman in New York and current Executive Director of Goldman Sachs International in London, allegedly made materially false statements to investors regarding a synthetic collateralized debt obligation, or CDO, which Goldman marketed to investors. A CDO is an asset-backed security which derives its value from underlying assets. The CDO in question was called Abacus 2007-CD1 ("Abacus 2007" or "CDO"), was backed by subprime residential home mortgages. Goldman issued a press release following the filing of the complaint stating that "The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation."

The SEC complaint alleges that Goldman used marketing materials for Abacus 2007 which falsely represented that the portfolio of mortgage-backed securities which formed the CDO were selected by ACA Management LLC ("ACA"), a firm with experience in analyzing mortgage-backed securities. However, the complaint contends that Paulson & Co., Inc. ("Paulson"), allegedly participated in the selection of the portfolio in the Spring of 2007 without any mention in Goldman's marketing materials and without the knowledge of Goldman's investors. Paulson also allegedly entered into "credit default swap" ("CDS") agreements with Goldman. Under a CDS agreement, in its basic form, an entity or person purchases "protection" against a potential default or "credit event" involving a credit instrument such as a bond or loan. The purchaser of the protection makes quarterly or premium payments to the seller of the protection. In the event that the instrument goes into default, the seller pays the purchaser the par value of the bond or other fixed amount. CDS agreements may be used for speculative purposes, such as betting on a default in credit or loan obligations. The SEC alleges that Paulson, in selecting the securities which made up Abacus 2007, had a financial incentive to select securities which would experience credit events.

Paulson allegedly was under the belief since 2006 that certain "Triple B" rated subprime mortgage loans would experience "credit events," a/k/a significant losses. Paulson then allegedly approached Goldman and asked it to create a CDO composed of the mortgage-backed securities it believed would experience credit events. Paulson and Goldman would then allegedly "short" the CDO by entering into a CDS agreement.

The complaint alleges that Tourre designed the Abacus 2007 transaction, prepared the marketing materials and communicated with investors. At the time they were structuring the transaction, Goldman, Paulson and Tourre knew that the market for mortgage-backed CDOs was declining. Tourre allegedly sent an e-mail to a friend in January of 2007 in which he stated ""More and more leverage in the system, The whole building is about to collapse anytime now...Only potential survivor, the fabulous Fab[rice Tourre] ... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!" The following month, Tourre allegedly received an e-mail from the head of Goldman's structured product correlation trading desk stating that "the cdo biz is dead we don't have a lot of time left."

The complaint also alleges that Goldman, Paulson and Tourre chose ACA Management as the portfolio selection agent because they knew they could not attract investors if the investors knew that Paulson had selected the CDO in order to short it. Paulson then allegedly identified over 100 Triple B bonds which it expected to experience credit events, including mortgage-backed securities with a high concentration of subprime adjustable rate mortgages and buyers with low FICO scores.

Tourre and representatives of Goldman, Paulson and ACA met in January and February of 2007 to select the portfolio for Abacus 2007. ACA allegedly had no knowledge that Paulson intended to short the CDO and the complaint alleges that Goldman allegedly mislead ACA into believing that Paulson was investing in the equity of the CDO and had a "long position" in the CDO's success, as opposed to taking a short position adverse to the interests of Goldman investors. ACA allegedly only permitted Paulson to participate in the portfolio selection process because it was led to believe that Paulson was a large equity investor. Tourre allegedly sent an email to a co-worker during these meetings stating "I am at this aca paulson meeting. this is surreal."

By the end of January, 2009, 99% the Abacus 2007 portfolio had been downgraded and investors in the CDO had lost $1 billion. Conversely, Paulson allegedly received $1 billion in profit. Investors in Abacus 2007 included IKB, a commercial bank in Germany, which lost almost all of the $150 million which it invested; and ACA's parent company, ACA Capital Holdings, the largest investor which invested some $951 million.

The SEC alleges that Goldman and Tourre violated Section 17(a) of the Securities and Exchange Act of 1933, 15 U.S.C. s 77q(a) and Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. s 78j(b). It seeks civil penalties and fines against the defendants.

Goldman, by all appearances, intends to fight back against the allegations. In a second press release, it contends that the accusations are unfounded in law and fact. Goldman maintains that it would not structure a portfolio that was designed to lose money, that it retained substantial risk in the transaction, and points out that it lost more than $90 million itself. It contends that its large investors were provided with extensive information relating to the underlying mortgage securities and the risks, and provided input on the underlying mortgage securities. Furthermore, Goldman points out that ACA was the largest investor and had every incentive to select securities which would not experience credit events. Goldman also claims that it never represented to ACA that Paulson would be a long investor, and that the industry practice is not to disclose the identities of buyers to sellers.

The complaint against Goldman is the largest action thus far to emerge out of the financial collapse which began in 2007, and which has angered the public and has lawmakers, law enforcement and the SEC itself feeling the heat. Former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin were acquitted on fraud charges last November relating to a failed hedge fund.

Tags: 2007, ACA, CDOs, Credit, Fabrice, Fraud, Goldman, IKB, Paulson, Sachs, Securities, Securities and Exchange Commission Proceedings, Tourre, agreement, collateralized, crisis, debt, default, financial, monstrosities, mortgages, obligations, subprime, swap

Posted on April 15, 2010 by Anthony Lake

South Carolina Man Sentenced for $2.5 Million Ponzi Scheme

The Ponzi scheme of the day involves Gene Sullivan, of Rock Hill, South Carolina. According to the Rock Hill Heraldonline, Sullivan defrauded mostly elderly investors of more than $2.5 million over nearly two decades. Sullivan was sentenced in the U.S. District Court for the District of South Carolina to 30 months imprisonment.

63 year-old Sullivan, a former insurance agent for New York Life, had expressed his admiration for convicted arch Ponzi scam artist Bernard Madoff. He convinced widows, people in nursing homes and other people he knew through insurance and family connections to invest with him. Sullivan used his gains to make payments to other investors, also spending large amounts on his home and tuition, weddings and vehicles for his children. Sullivan's recommended sentence was 51 to 63 months, however the Court arrived at its sentence after considering Sullivan's more than 30 years of community service, including coaching, refereeing, church and community work. Sullivan addressed the Court, stating that once he had gotten into the scheme, he could not get out of it. New York Life has paid off the investors and has obtained a $2.4 million judgment in a civil lawsuit against Sullivan.

Tags: Carolina, Fraud, Gene, Hill, Ponzi, Rock, South, Sullivan, scheme

Posted on April 13, 2010 by Anthony Lake

Georgia Trio Claim $1 Million in False Tax Refunds; Locust Grove Couple Sentenced for Illegal Disposal of Napalm Bursts

In Georgia federal criminal news, Jamil Flowers pled guilty on Tuesday in the U.S. District Court for the Northern District of Georgia to conspiracy to defraud the government and making false claims and statements to the IRS for defrauding the federal government of more than $1 million in tax refunds, according to the AJC. Flowers, Rico Lampkin and Jason Soudemire, who have also pled guilty, admitted to filing more than 100 tax returns containing false statements of income and withholding. Most of the false returns contained false 1099-R forms showing that the taxpayers had allegedly received money from a pension with the U.S. Railroad Retirement Board. The conspirators used other persons to open bank accounts to receive the tax refunds.

According to a press release by the U.S. Attorney's Office for the Northern District of Georiga, John Duffey and Jennifer Duffey of Locust Grove, Georgia, were both sentenced to a year and a day in the Northern District for illegally disposing of hazardous wastes. The Duffeys operated a company Joint Military Development Services (JMDS), which conducted training exercises for the military. JMDS purchased approximately 560 "napalm bursts," containing napthalene, a federally-listed hazardous waste. The Duffeys were charged with burying the napalm bursts on an adjacent landowner's property in Locust Grove, Georgia, rather than paying to have the bursts lawfully disposed of. JMDS did not have a permit from the Environmental Protection Agency to dispose of the waste.

Tags: Environmental, Fraud, Noteworthy Cases, Tax, disposal, hazardous, waste

Posted on April 9, 2010 by Anthony Lake

Tom Petters, The "Minnesota Madoff," Gets 50 Years Out of Potential 335 Years for $3.7 Billion Ponzi Scheme

Former Minnesota billionaire and former owner of Polaroid and Sun Country Airlines Tom Petters was sentenced to 50 years imprisonment yesterday by the U.S. District Court for the District of Minnesota, according to the Associated Press. Petters, 52, was charged with a $3.7 billion Ponzi scheme--the largest in Minnesota history-- which had over 500 victims and defrauded hedge funds, pastors, missionaries and retirees, among others. His company, PCI, was alleged to have used false purchase orders and bank records to convince investors to finance alleged purchases of electronics which PCI would allegedly resell to retailers such as Sam's Club and Costco. The government contended that the alleged merchandise never existed. Petters was alleged to have taken $400 million of the investments to support his companies and a lavish personal lifestyle.

Petters was convicted on 20 counts of conspiracy, mail fraud, wire fraud and money laundering in December. Petters told the Court that he was "filled with pain" for the lives which had been destroyed as a result of the conduct, but did not admit guilt. Petters had claimed at trial that he was unaware of the fraud in his organization, Petters Group Worldwide, and that his business associates were responsible. The prosecution had urged that Petters receive the statutory maximum sentence of 335 years; the defense had argued that 4 years would constitute sufficient punishment. He has cooperated with a court-appointed attorney in attempting to recover monies lost by the scheme.

Tags: Airlines, County, Fraud, Investment, Money, Petters, Polaroid, Ponzi, Ponzi Schemes, Sentencing, Sun, Tom, conspiracy, electronics, fund, hedge, laundering, mail, scheme, wire

Posted on April 8, 2010 by Anthony Lake

Eleventh Circuit Hears Arguments From NFL and Retired Players in Appeal Over Suit Arising From $11 Million Ponzi Scheme

Today's Fulton County Daily Report contains a story concerning Tuesday's oral arguments before the Eleventh Circuit Court of Appeals in an appeal by retired professional football players against the National Football League and the NFL Players Association. The former players are seeking to reverse a ruling last year dismissing the players' suit against the NFL and the Player's Association regarding a Ponzi scheme by an alleged broker and financial advisor, Kirk S. Wright, with whom the players had invested millions of dollars.

The plaintiffs allege the Player's Association allowed Wright to be placed on a list of approved financial advisors. The plaintiffs allege that a background check would have revealed multiple liens against Wright and his business partner, Nelson "Keith" Bond, and that neither Wright or Bond were licensed financial advisors in any state. Wright was convicted for fraud and money laundering in 2006. He is alleged to have defrauded investors, including professional athletes, entrepreneurs and his very own mother, of approximately $150 million.

The plaintiffs invested a total of $11 million with Wright and Bond and their partnership, IMA. Wright committed suicide in a jail in Union City, Georgia, three days after he was convicted. IMA is in bankruptcy. A staggering 170 lawsuits have been filed seeking restitution as a result of Wright's activities, including by investment firms Lehman Brothers Inc., Oppenheimer & Co. Inc., J.B. Oxford & Co., Banc of America Securities LLD and TD Ameritrade Inc., and law firm Gambrell & Russell.

The plaintiffs include retired players Steve Atwater, Blaine Bishop, Carlos Emmons, Clyde Simmons and Al Smith. Atwater was a free safety for the Denver Broncos and New York Jets from 1989 to 1999; Bishop was a safety for the Houston Oilers, Tennessee Titans and Philadelphia Eagles from 1993 to 2002; Emmons was a linebacker for the Pittsburgh Steelers, the Eagles and the New York Giants from 1996 to 2006;Simmons was a defensive end for the Eagles, the Arizona Cardinals, the Jacksonville Jaguars, the Cincinnati Bengals and the Chicago Bears from 1986 to 2000; and Smith was a linebacker for the Oilers from 1987 to 1996. "Assassin" Atwater in particular is a two time Superbowl winner with the Broncos, an eight-time Pro Bowl selectee, a two-time First Team All-Pro Selectee who has been considered for the Pro Football Hall of Fame. The players' filed suit against the NFL and the Players' Association in the U.S. District Court for the Northern District of Georgia. However, in March of 2009, District Judge Julie E. Carnes dismissed the plaintiffs' suit.

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The plaintiffs' attorneys argued to the panel, which included Judge Gerald B. Tjoflat and Judge David M. Ebel, a visiting Senior Judge from the Tenth Circuit Court of Appeals, that the District Court's order deprived the players of any remedy and effectively gave the NFL and the Player's Association immunity. The panel pointed out that the players' collective bargaining agreement appeared to pre-empt the players from filing suit. Counsel for the players' union countered that the plaintiff's failed to inquire with the Players' Association regarding Wright prior to investing millions of dollars with him. The case turns on whether the retired players are still governed by the collective bargaining agreement, which would bar their suit against the NFL and the Players' Association since it provides that players are solely responsible for their own finances.

Tags: Al, Appeals, Association, Atwater, Bishop, Blaine, Carlos, Circuit, Clyde, Court, Eleventh, Emmons, Football, Fraud, Georgia, Gerald, League, Money, NFL, Noteworthy Cases, Players, Ponzi, Simmons, Smith, Steve, Tjoflat, Union, bargaining, collective, laundering, national, scheme

Posted on March 15, 2010 by Anthony Lake

The Iceman Goeth: Computer Hacker Gets 13 Years for $86.4 Million Credit Card Scheme

On Friday, Max Ray Butler, also known as the "Iceman" on the internet and by various other aliases, was sentenced to 13 years' imprisonment in the U.S. District Court for the Western District of Pennsylvania, according to a Department of Justice press release. The Court also ordered Butler to pay $27.5 million in restitution.

Butler was charged with engaging in computer hacking and identity theft on a massive scale, including hacking into financial institutions and credit card processing centers to steal customers' information. Butler would provide the victims' financial information to an accomplice, Christopher Aragon, who would use the information to purchase merchandise, or would sell information on the internet. Butler nd Aragon also created a website called "Cardersmarket," to acquire, use and sell credit card information Butler and Aragon recruited approximately 4,500 people through the site.

The Secret Service arrested in San Francisco Butler back on September 5, 2007 in San Francisco. A search of his computer revealed more than 1.8 million stolen credit card account numbers. Visa, MasterCard, American Express and Discover have reported that the amount of fraudulent charges on the cards totaled approximately $86.4 million.

Tags: Butler, Card, Computers, Credit, Cybercrime, Fraud, Identity, Max, Ray, Theft, cards, computer

Posted on March 12, 2010 by Anthony Lake

New York Defendant Indicted for $50 Million in Fraud from ATM, Armored Car and Other Businesses

As reflected in an FBI press release, an indictment was unsealed in the U.S. District Court for the Southern District of New York against Robert Egan, President of Mount Vernon Money Center (MVMC) on Wednesday charging Egan with one count of conspiracy to commit bank fraud and wire fraud and six counts of bank fraud for allegedly defrauding banks and other financial institutions of approximately $50 million.

MVMC operated various cash management businesses, including replenishing cash for over 5,300 automated teller machines (ATMs), payroll services for businesses, and an armored car service, Armored Money Services (AMS). MVMC's clients included banks and financial institutions, businesses and universities. MVMC also had several cash vaults to store and process cash from its businesses.

The government alleges that, from 2005 through 2010, Egan and MVMC's Chief Operating Officer, Barnard McGarry, allegedly collected hundreds of millions of dollars from MVMC clients based on false representations that they would not commingle clients' funds or use the funds for purposes other than those specified in MVMC's agreements with the clients. However, Egan and McGarry are alleged to have engaged in a practice known as "playing the float," in which they misappropriated funds from the substantial cash flow into MVMC to their own uses, to pay prior client obligations or to cover operating expenses of MVMC's businesses. Egan and McGarry are also alleged to have commingled its clients' monies in its accounts and cash vaults, and instructed employees to use whatever monies were available to replenish ATM machines. McGarry is alleged to have transferred clients' monies among MVMC's accounts. In addition, both defendants are alleged to have made false representations in reports to ATM clients regarding the amount of funds MVMC allegedly held in its vaults for the clients. MVMC was entrusted with approximately $70 to $75 million by its clients, but allegedly only kept approximately $20 to $25 million in its accounts and vaults.

Egan was arrested last month. A receiver has been appointed to administer MVMC. The press release stated that the case was brought in coordination with the White House's Financial Fraud Enforcement Task Force. Among the officials who addressed the media in conjunction with the press release was the Special Inspector General of the Troubled Asset Relief Program (SIGTARP) Neil Barofsky.

Tags: Asset, Bank Fraud, Barofsky, Bernard, Center, Crimes, District, Egan, Force, Fraud, McGarry, Money, Mount, Neil, New, Program, Relief, Robert, SIGTARP, Southern, TARP, Task, Troubled, Vernon, York, bank, enforcement, financial, mail, reciever, wire

Posted on March 8, 2010 by Anthony Lake

SEC Charges Prominent South Florida Cuban-American Couple with $135 Million Ponzi Scheme

The Securities and Exchange Commission has charged prominent Miami businessman Gaston E. Cantens and his wife, Teresita Cantens, with allegedly running a $135 million Ponzi scheme targeting elderly Cuban-Americans, according to the Miami New Times.

Specifically, the Cantens allegedly used their development company, Royal West Properties, to sell promissory notes to finance the purchase of properties, representing that the investments were safe and would yield annual returns of 9 to 16 percent. When property owners began to default on their mortgages, however, the Cantens purportedly used monies from new investors to pay returns to previous investors. The Cantens are alleged to have persuaded investors by using their prominent standing in the community and claiming that Jesuit priests and other religious leaders had entrusted their money to them, targeting investors at social and religious gatherings and through national television ads on Spanish language channels. The Cantens were allegedly never authorized to sell the securities by the SEC. They furthermore are alleged to have diverted $20 million of the funds to themselves, their children and their grandchildren, and to finance their other businesses.

Gaston Cantens was an advisory board member for Belen Jesuit Preparatory School. The Cantens are the parents of former Florida State Representative Gaston I. Cantens, who served from 1998 to 2006 as a Republican representing District 114, and is currently is a Vice President at Florida Crystals Corporation.

Tags: Cantens, Commission, Fraud, Gaston, Noteworthy Cases, Ponzi, Securities, Teresita, exchange, scheme

Posted on March 1, 2010 by Anthony Lake

Oral Arguments in Skilling Case Focus on Jury Selection Issues, Less Emphasis on Honest Services Fraud

According to Lyle Denniston at SCOTUSblog, Ashby Jones at the Wall Street Journal Law Blog, and Professor Ellen S. Podgor of Stetson University College of Law and the White Collar Crime Prof Blog, the U.S. Supreme Court seemed more interested in the jury selection/fair trial issues in yesterday's oral arguments in the case of former Enron CEO Jeffrey Skilling, Skilling v. U.S., Case No. 08-1394 then it did in the constitutionality of 18 U.S.C. 1346, the federal honest services fraud statute. The transcript of the oral argument may be read here. After lengthy questioning regarding the jury selection at Skilling's trial by Justice Stephen G. Breyer and others, Chief Justice John G. Roberts, Jr., raised the question of honest services. Skilling's counsel, Sri Srinivasan, appeared to have adopted the strategy of arguing for a new trial based upon juror bias relating to the Enron scandal rather than a reversal of Skilling's convictions for honest services fraud. Srinivasan argued that the Department of Justice was interpreting the law broadly enough to reach virtually any falsehood told by an employee.

Deputy Solicitor General Michael R. Dreeben argued for the government. Dreeben argued ways in which the Court could interpret the honest services fraud statute in order to avoid holding it unconstitutionally vague. Justice Anthony Kennedy stated to Dreeben that it was Congress' job to rewrite the statute and Justice Antonin Scalia remarked on the excessive scope of the statute.

The Court's decision in the case is expected this spring or summer. The parties' arguments regarding honest services fraud largely mirrored the arguments in the two other challenges to 1346 which the Court had heard this term. Commentators have opined that 1346 may not survive without being sent to Congress for reshaping.

Tags: 1346, Corporation, Court, Enron, Fraud, Jeffrey, Selection, Skilling, Supreme, arguments, honest, jury, oral, services

Posted on February 27, 2010 by Anthony Lake

Appeal of Former Enron CEO Jeff Skilling to Test Constitutionality of Federal Honest Services Fraud Statute

As noted by Ashby Jones at the Wall Street Journal Law Blog, the U.S. Supreme Court will hear oral arguments in the case of U.S. v. Skilling on Monday at 1 p.m., Eastern Time. The central issue to be argued to the Court is whether the federal honest services fraud statute, 18 United States Code 1346, is "unconstitutionally vague." Mr. Jones rounds up commentary from around the blogosphere on the case.

As noted by Mr. Jones, the honest services fraud statute, Section 846, criminalizes the deprivation of another of the "intangible right to honest services." Congress enacted Section 846 22 years ago following the Supreme Court's decision in McNally v. U.S, which had ended prosecution for honest services as a part of mail or wire fraud. The problem is that Section 846 does not define "honest services." The honest services provision is a favorite of prosecutors, especially in cases where deprivation of money or property, as required in traditional mail or wire fraud cases, may be difficult to establish.

Jeff Skilling is the former Chief Executive Officer of Enron Corporation, which crashed into sudden bankruptcy in 2001. Skilling, former CEO Kenneth Lay and others were charged with conspiracy, wire fraud, making false statements to auditors and insider trading. In May of 2006, Skilling was tried in the U.S. District Court for the Southern District of Texas and the jury found him guilty on 19 counts. The District Court sentenced him to 292 months imprisonment and ordered him to pay $45 million in restitution.

Skilling appealed to the U.S. Court of Appeals for the Fifth Circuit, arguing that the government used an invalid theory of "honest services" fraud to convict him. The indictment alleged that Skilling conspired with others to, among other things, deprive Enron and its shareholders of the right to the honest services owed by its employees. The Fifth Circuit affirmed Skilling's honest services fraud conviction, noting that it had created an exception to the honest services fraud statute in the related Enron case of U.S. v. Brown, 459 F.3d 509 (5th Cir.2006) where an employer creates a goal, aligns employees' interests to achieve the goal and higher-level management sanction improper conduct to reach the goal. However, the Fifth Circuit held that Skilling's conduct had not been sanctioned by the corporation.

Skilling has appealed to the Supreme Court, arguing that lower rulings on the honest services fraud statute have been “a hodgepodge of oft-conflicting holdings, statements, and dicta” that “only the most discriminating lawyer or judge” could understand. Attorney Sri Srinivasan of O’Melveny & Myers will argue on Skilling's behalf before the Court.

Another case calling into question the constitutionality of Section 1346 is the case of newspaper magnate Conrad Black. The Court heard oral arguments in Black's case last December.

Tags: Conrad, Enron, Fraud, Jeffrey, Skilling, black, constitutional, constitutionality, honest, mail, services, vague, vagueness, wire

Posted on February 25, 2010 by Anthony Lake

Adult Urinary Incontinence Supplies Fraud? DME Owner Pleads Guilty to Healthcare Fraud and Identity Theft

In another sign that nothing is sacred and no area safe from crime, even the adult undergarment industry has now been marred by fraud. Benjamin Essien, 34, owner and operator of Logic World Medical, a Houston-based durable medical equipment (DME) company, pled guilty to conspiracy to commit healthcare fraud, five counts of healthcare fraud and two counts of aggravated identity theft in the U.S. District Court for the Southern District of Texas, according to a press release by the FBI. Essein was charged with a scheme which began in 2004 of using names, addresses and account numbers of Medicaid beneficiaries to file false claims for adult urinary incontinence supplies many of which were never delivered to the beneficiaries, some of which were never purchased from suppliers, and which were not needed or were never prescribed by a physician. Essein continued to bill Medicaid for the supplies--which included adult diapers, underpads, wipes, and pull-up briefs--even after his delivery contractors were informed by the beneficiaries that they did not need or want the supplies. Essien billed Medicaid for the maximum amount allowable for supplies each month per beneficiary including extra large size diaper briefs, which apparently have the highest Medicaid reimbursement rate, regardless of the actual size needed by the beneficiary. it is alleged that Essein received payments from Medicaid for claims totaling approximately $1,101,865.37. he will be sentenced in May.

Tags: Benjamin, Essein, Fraud, Health Care Fraud, Healthcare, Identity, Logic, Medical, Theft, World

Posted on February 24, 2010 by Anthony Lake

Forensic Accountant Lewis Freeman Indicted for Alleged Misappropriation of $6 Million in Funds from Fiduciary Accounts

As reported in the South Florida Business Journal, Lewis B. Freeman, one of the best-known forensic accountants in South Florida was indicted yesterday in the U.S. District Court for the Southern District of Florida on charges of conspiracy to commit mail fraud. Freeman is alleged to have misappropriated funds from fiduciary accounts from 2000 through 2009 by writing checks to himself and his firm, Lewis B. Freeman & Partners, and depositing the funds into the firm's operating account. Freeman is alleged to have misappropriated some $6 million in funds by writing approximately 162 unauthorized checks and using the proceeds to support a lavish lifestyle.

Freeman put his firm into receivership last fall during the federal criminal investigation. The firm previously did millions of dollars in business. The government alleges that out of the $6 million misappropriated, some $2.6 million of clients' monies were lost. Freeman, oddly, worked routinely as an expert for the court in liquidating the assets of companies. According to Freeman's counsel, he turned himself in and is cooperating with authorities. His counsel have stated that he made "serious mistakes," and will "accept the consequences for his actions.”

Tags: Accounts, District, Florida, Fraud, Freeman, Lewis, Noteworthy Cases, Southern, Trust, account, accountant, conspiracy, fiduciary, forensic, mail

Posted on February 22, 2010 by Anthony Lake

Former Head of SK Foods Indicted for Food Fraud and Mislabeling

Frederick Scott Salyer, 54, former owner of California-based SK Foods, which grows, processes and distributes tomatoes, was indicted on Friday on charges of racketeering, wire fraud, mail fraud, money laundering and obstruction of justice. Tomatoes from SK Foods are widely used in tomato-based products including sauces, ketchups and juices.

Salyer is alleged to have manipulated the industry through price fixing, bribery and mislabeling. Specifically, he is alleged to have bribed purchasing managers at food companies to guarantee that the companies purchased SK Foods' products over its competitors and for its competitors' pricing information. Salyer is also alleged to have ordered the mislabeling of products As a result, consumers received dated and moldy products, and products mislabeled as organic at higher prices. In some cases, products as much as three years old with a shelf life of one year, or containing mold levels beyond limits set by the Food and Drug Administration, were alleged to have been placed on the market.

Salyer was arrested earlier this month at John F. Kennedy Airport in New York upon arriving on a flight from Switzerland. He had allegedly fled the U.S. last fall to relocate to a country where he could not be extradited after some of his subordinates pled guilty to charges in relation to the investigation, a joint effort by the FBI, IRS, FDA and Department of Justice Anti-trust Divison, nicknamed Operation Rotten Tomatoes. Salyer is alleged to have arranged for the transfer of millions of dollars to overseas accounts, and to have placed a $7 million home in Pebble Beach on the market. Salyer was denied bail.

SK Foods declared bankruptcy last May and has been acquired by another company.

Tags: Foods, Fraud, Frederick, Money, Noteworthy Cases, SK, Sayler, Scott, laundering, mail, mislabeling, racketeering, tomatoes, wire

Posted on February 18, 2010 by Anthony Lake

FBI Raids Home of Southern Christian Leadership Counsel Chairman; Meets with SCLC Officials Over Diversion of Funds

As reported here and here in the Atlanta Journal-Constitution, the Southern Christian Leadership Conference has had its own leadership under scrutiny by investigators. This week, three SCLC officials met in Atlanta with Federal and local authorities investigating allegations that its National Chairman and its former Treasurer allegedly mishandled hundreds of thousands of dollars. Last week, FBI agents in Dayton, Ohio, raided the home of its Chairman, Reverend Raleigh Trammell, the home of Trammell's daughter, Angela Goodwine, as well as the SCLC's Dayton office. Rev. Trammell and former national Treasurer Spiver Gordon are alleged to have diverted at least $569,000 in SCLC funds to bank accounts which they controlled and made out checks to themselves and their relatives. The SCLC's Atlanta General Counsel, Dexter Wimbush, has voluntarily and temporarily stepped down.

Law enforcement agencies in Georgia, Ohio and Alabama were provided information on possible mismanagement of SCLC funds.

Tags: Christian, Counsel, FBI, Fraud, Gordon, Leadership, Raleigh, Southern, Spiver, Trammell

Posted on February 11, 2010 by Anthony Lake

Edward Stein, Architect of $46 Million Hedge Fund Ponzi Scheme, Sentenced to 9 Years

Edward T. Stein, a former hedge fund manager, was sentenced to nine years in prison in the U.S. District Court for the Eastern District of New York for a Ponzi scheme which defrauded investors of $46 million, according to BusinessWeek. Stein was arrested last April and pled guilty last June to counts of securities fraud and wire fraud.

Stein was alleged to have operated a Ponzi scheme from 1988 to 2009, targeting friends, acquaintances and vulnerable investors. The government alleged that Stein promised to invest clients' money in annuities but instead converted the monies to his own use. Stein managed Gemini Fund I hedge fund, Prima Capital Management Corp., and DISP LLC, a firm which invested in life insurance policies. Stein, through Gemini, invested in fashion magazine publisher Detour Media Group, Inc., and used money from new investors with Gemini to repay selected clients. In all, some 83 investors were affected by the scheme. Stein used his gains to, among other things, purchase a $1 million apartment in Manhattan.

Stein, who is 60, faced up to 19 years in prison, however U.S. District Judge Jack B. Weinstein found that the circumstances of the scheme placed it outside the "heartland" of fraud cases. Judge Weinstein stated that Stein's age made it unlikely that he would commit any further crimes. Stein's counsel had argued for a reduced sentence based on Stein's assistance to authorities in locating assets.

Several of Stein's victims testified at the hearing. One called Stein “a money-hungry, evil, sly fox who preyed on seniors.” Stein offered an apology for his actions in his address to the court.

Tags: Attorneys, Defense, Edward, Fraud, Noteworthy Cases, Ponzi, Securities, Stein, criminal, fund, hedge, wire

Posted on January 27, 2010 by Anthony Lake

Rothstein Enters Guilty Plea

Of course we knew it was coming, but disbarred Fort Lauderdale attorney Scott Rothstein, architect of a $1.2 billion Ponzi scheme selling phony interests in settlements in employment and civil cases, pled guilty today in the U.S. District Court for the Southern District of Florida to charges of racketeering, fraud and money laundering,

as reported by the Miami Herald

and various other sources. Rothstein was also charged with taking monies from client trust accounts and making unlawful campaign contributions to politicians. Former attorneys and employees of Rothstein's former law firm, Rothstein Rosenfeldt Adler, are currently being investigated for illegal campaign contributions.

Following his surrender to authorities last fall, Rothstein assisted authorities in locating assets. His sentencing hearing has been set for May 6.

Tags: Court, District, Florida, Fort, Fraud, High Profile Cases, Lauderdale, Money, Ponzi, Rothstein, Scott, Sentencing, Southern, campaign, contribution, contributions, laundering, racketeer, racketeering, scheme, settlement, settlements

Posted on January 26, 2010 by Anthony Lake

Investment Advisor Jailed for Refusing to Locate Assets from $130 Million Alleged Investment Scheme

Trevor Cook was 37 year-old Minneapolis, Minnesota-based investment advisor. He is alleged to have defrauded investors of at least $130 million. U.S. District Judge Michael Davis found Cook in contempt of an order by the Court requiring Cook and his associates to turn in investor assets to a receiver, according to an article in the Minneapolis Star-Tribune. Cook invoked his Fifth Amendment privilege against self-incrimination in response to questions regarding money, assets and offshore accounts. U.S. Marshals took Cook into custody yesterday. The Court ordered Cook to remain incarcerated until he cooperates with the receiver and surrenders monies and assets, including a houseboat and a submarine. Cook is also ordered to assist in the recovery of a computer and other records.

Cook pitched currency investments to investors. The alleged scheme was promoted by Cook and Pat Kiley in a widely broadcast radio program called "Follow the Money." Cook used a vast array of business entities and bank accounts to funnel monies from investors, including eight accounts in the U.S. and 19 foreign accounts in a dozen countries. The structuring of the transactions and the fact that some of the foreign accounts are in countries noted for being bank secrecy havens has made the monies difficult to locate. Cook has not yet been indicted.

Tags: Accounts, Cook, Fraud, Minneapolis, Minnesota, Noteworthy Cases, Trevor, account, assets, bank, currency, investments, investors

Posted on January 13, 2010 by Anthony Lake

SEC Complaint Against Florida Hedge Fund Managers for Violations of Anti-Fraud Provisions

On Monday, the SEC filed a Complaint for Injunctive and Other Relief, in Federal court in Tampa, Florida, which may be viewed here, against Neil V. Moody and Christopher D. Moody, managers of the hedge funds Valhalla Investment Partners, L.P., Viking IRA Fund, LLC, and Viking Fund, LLC. Neil Moody, 71, and his son Christopher D. Moody, 35, are co-owners of the funds, based in Sarasota, Florida.

The Complaint charges that the Moodys allegedly recklessly violated anti-fraud provisions of Federal securities laws. Specifically, the SEC alleges that, from 2003 to 2009, the Moodys allegedly overstated investment returns and the value of the funds' assets by as much as $160 million in account statements provided to investors and offering materials provided to prospective investors. The Complaint also charges that the Moodys allegedly recklessly misrepresented to investors that they actively managed the funds, when in fact the investment and trading activities of the funds were managed by a third-party, namely Arthur Nadel of Scoop Management. Nadel, however, was the operator of a large Ponzi scheme involving hundreds of investors, including investors in the Moodys' hedge funds. Nadel allegedly fabricated false performance and account information which overstated the value of the Moodys' funds, and shared management and performance fees with the Moodys. The SEC filed an emergency action against Nadel in the Middle District of Florida last January, and was indicted in the Southern District of New York in April on six counts of securities fraud, eight counts of wire fraud, and one count of mail fraud.

Counsel for Christopher Moody has responded to the Complaint. “The SEC's complaint does not allege that Chris Moody knowingly intended to harm investors. The complaint alleges recklessness which Mr. Moody neither admits nor denies. Mr. Moody has cooperated from the outset with the receiver in the recovery of assets and will continue to do so,” said Mr. Moody’s attorney, Jeffrey L. Cox, of Sallah & Cox, LLP.

The Complaint alleges violations of Sections 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b); Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a); Section 206(4) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-6(4); Exchange Act Rule 10b-5, 17 C.F.R. § 240.10b-5; and Advisers Act Rule 206(4)-8, 17 C.F.R. § 275.206(4)-8. It seeks declaratory relief, a permanent injunction against the Moodys, disgorgement of all profits and civil penalties. A Receiver has been appointed for the funds.

Tags: 10b-5, 17(a), 1933, 1934, 1940, 206(4), 77q(a), 78j(b), 80b-6(4), Act, Advisers, Arthur, C.F.R., Christopher, Commission, Florida, Fraud, Investment, Moody, Nadel, Neil, Rule, SEC, Sarasota, Securities, Securities and Exchange Commission Proceedings, Tampa, U.S.C., anti-fraud, exchange, reckless, recklessly

Posted on January 11, 2010 by Anthony Lake

Defendant in Stock Option Backdating Case Requests Hearing Based on Prosecutorial Misconduct/Interference with Witnesses

As reported by Law.com, Bruce Karatz, Chief Executive Officers of KB Home, a home construction corporation based in Los Angeles, California, was indicted in the action of U.S. v. Nicholas, 2:09-cr-00203-ODW (C.D.Ca. 2009), on 20 counts of fraud for defrauding the company and its shareholders of millions of dollars in undisclosed backdated stock option over a period of seven years, and concealing the fraud from KB Home's directors, compensation committee and shareholders. Karatz's trial in the U.S. District Court for the Central District of California is scheduled to begin on February 23.

Karatz's attorneys have requested a hearing regarding whether prosecutorial misconduct has tainted the government's case against Karatz. Karatz contends that two witnesses for the government--James Johnson, former Chairman of the Board of Directors' Compensation Committee for KB Home, and Gary Ray, former Vice President of Human Resources--initially believed that the stock options grant practice was lawful, but changed their position following contacts with the prosecution. Karatz's lawyers want to examine Johnson regarding why he denied allegedly defending KB Home's option granting process during an internal investigation by the company's outside counsel in his statements to prosecutors.

The defense also wants to question Ray, who has pled guilty to obstruction of justice and is cooperating with the government, regarding why he had allegedly previously maintained that the process was "lawful and proper." Following is a link to

Karatz's Motion for Evidentiary Hearing Regarding Testimony of Crucial Witnesses

.

Karatz's motion is based on an order in December by U.S. District Judge Cormac Carney in the action of U.S. v. Nicholas, SACR 08-00139 CJC (C.D.Ca. 2008), another backdating case, in which the Court dismissed the government's indictment against co-founder of Broadcom Corp., Henry Nicholas, and former Broadcom Chief Financial Officer William Ruehle, blasting the prosecution for "distorting the truth-finding process" by intimidating and improperly influencing key witnesses. Karatz also relies on the Ninth Circuit Court of Appeals' overturning last August of the conviction of former Chief Executive Officer for Brocade Communication Systems, Inc., Gregory Reyes, for backdating based on false statements by the prosecution in closing arguments that Brocade's finance department didn't know about backdating. A hearing on Karatz's motion has been scheduled for February 8.

Tags: Attorneys, Broadcom, Brocade, Bruce, California, Central, Chief, Communications, Court, District, Executive, Fraud, Governmental, Governmental Misconduct, Henry, Home, Indictment, Internal, Investigation, KB, Karatz, Lawyers, Nicholas, Officer, President, Ruehle, Systems, Vice, William, access, attorney, backdate, backdating, criminal, financial, interference, investigative, lawyer, misconduct, options, prosecutorial, stock, witnesses

Posted on January 6, 2010 by Anthony Lake

Comverse Technologies Enters Into $255 Million Settlement Over Backdating of Stock Option Awards; Convicted Former General Counsel Fights On

As reported by Law.com, New York-based Comverse Technology, Inc., the worlds largest manufacturer of voice mail software, has entered into a $225 million settlement in a class action brought against it stemming from a backdating scandal. William Sorin, Comverse's former general counsel, and Comverse's former CEO, Jacob "Kobi" Alexander, were charged by the SEC and Federal prosecutors in 2006 with fraudulenty changing the grant dates of stock option awards from 1998 to 2000. In all, Sorin realized $14 million in profits from stock options, approximately $1 million of which was due to backdating. Sorin pled guilty in the U.S. District Court for the Eastern District of New York to conspiracy to commit securities fraud, mail fraud and wire fraud in 2006, and has already served his sentence of a year and a day in prison. Alexander an Israeli citizen, fled to Namibia to avoid prosecution.

Plaintiffs brought a derivative actions against Comverse in New York Federal and State courts based on the backdating. Alexander has agreed to pay $60 million and Sorin has agreed to pay $1 million to fund the settlement. In exchange, Comverse will drop its lawsuit against the former executives, who will also drop their counterclaims against the company. The company earlier settled claims relating to the improper backdating and other accounting problems with federal regulators.

Sorin had previously entered into a settlement with the SEC, agreeing to pay $3 million in fines. However, his attorneys have asked the Court to vacate the SEC settlement and judgment, claiming that Federal prosecutors violated promises they made as part of his plea deal. Sorin claims that prosectors agreed not to object to his request to avoid jail time when he agreed to plead guilty to criminal charges and pay the SEC $3 million to settle civil charges, however he alleges that the government reneged on its promise and opposed his request at sentencing.

Tags: Alexander, Commission, Comverse, Counsel, Fraud, General, Jacob, Jacobi, SEC, Securities, Securities Fraud, Sorin, Technologies, William, attorney, criminal, derivative, exchange, lawyer, mail, settlement, wire

Posted on January 4, 2010 by Anthony Lake

"J4guar17" a/k/a "Soupnazi" a/k/a Super Hacker Albert Gonzalez Pleads Guilty to One of the Largest Data Thefts in U.S. History

Once again demonstrating the massive potential for crime created by our digital age, 28 year-old Albert Gonzalez pled guilty to two counts of conspiracy to gain unauthorized access to payment card networks last week in the U.S. District Court for the District of New Jersey according to a DOJ press release. Gonzalez was charged with hacking into the computer networks of major financial and retail organizations and stealing data on tens of millions of credit cards and debit cards, in one of the largest data breaches in U.S. history. He gained unauthorized access to the payment card networks of New Jersey-based, Heartland Payment Systems; Texas-based convenience store chain 7-Eleven; and Hannaford Brothers Co. Inc., a Maine-based supermarket chain. He was indicted in New Jersey in August 2009. In September 2009, Gonzalez also pled guilty in the U.S. Distric Court for the District of Massachusetts to 19 counts of conspiracy, computer fraud, wire fraud, access device fraud and aggravated identity theft for hacking into retailers including TJX Companies, BJ’s Wholesale Club, OfficeMax, Boston Market, Barnes & Noble and Sports Authority. In the same month, he pled guilty to a count of conspiracy to commit wire fraud for hacking into the system of Dave and Buster's, a restaurant chain, in the U.S. District Court for the Eastern District of New York.

Gonzalez had several servers, or "hacking platforms," and would give access to the servers to other hackers. Gonzalez and others would use the platforms to store malicious software, or "malware," in launching attacks on their victims. Gonzalez's plea agreement states that it was forseeable that Gonzalez and his co-conspirators would have used the malware to steal tens of millions of credit and debit card numbers, affecting more than 250 financial institutions.

Gonzalez tested malware by running multiple anti-virus programs in an attempt to ascertain if the programs detected the malware. According to information in the plea agreement, it was foreseeable to Gonzalez that his co-conspirators would use malware to Gonzalez was indicted in New Jersey in August 2009 for this criminal conduct. His plea agreement provides for a sentence of imprisonment between 17 and 25 years. He is scheduled to be sentenced in the Massachusetts, New York and New Jersey cases in March.

The charges against Gonzalez are staggering in their scope. They also demonstrate that would-be cybercriminals should consider their online aliases carefully, as they may resurface in a Federal indictment, as in the case of Albert Gonzalez a/k/a "j4guar17" a/k/a "soupnazi," etc.

Tags: Albert, Computers, Crimes, Cybercrime, Fraud, Gonzalez, Jersey, Massachusetts, New, York, access device, access devices, computer, conspiracy, crime, criminal, cyber-crime, e-crime, hacker, hacking, law, mail, malware, wire

Posted on January 1, 2010 by Anthony Lake

Chief Justice John Roberts Issues Year-End Report on the Federal Judiciary; Judiciary "Operating Soundly"; New Criminal Cases at Highest Levels Since 1932

As the final hours of 2009 were running out on New Years' Eve, U.S. Supreme Court Chief Justice John Roberts issued the Chief Justice's Year-End Report on the Federal Judiciary, available here, a tradition begun by Chief Justice Warren Burger in 1970 to address the most critical needs of the federal judiciary. The Chief Justice has used the Year-End Report in the past to call for salary increases for federal judges. However, this year, the Report merely states that the federal courts are operating soundly, citing the hardships experienced by the nation in 2009.

The Appendix to the Report surveys the workload of the federal courts in 2009. It notes that the total number of cases filed in the Supreme Court decreased by about 6.1% from 2007 to 2008, however the Court hear more cases argued and issued more signed opinions in 2008 than 2007. Filings in the Federal Circuit Courts of Appeals also declined 6% to 57,740, mostly due to a drop in appeals from the Board of Immigration Appeals.

The Year-End Report notes, however, that criminal case filings in federal district courts rose 8% to 76,655, and the number of defendants climbed 6% to 97,982, surpassing the previous record for the number of defendants, 92,714, set in 2003, and reached its highest level since 1932. Filings relating to immigration, fraud, marijuana trafficking, and sex offenses increased. The number of mmigration cases and defendants reached record levels, as a result of illegal re-entries and visa or entry permit fraud. Most of the increase was in five federal districts near the southwestern border. The Report also observes that, as of September 30, 2009, the number of persons under post-conviction supervision was 124,183, an increase of 3% from the previous year. Supervised release cases and pretrial services cases also rose by several percent.

Tags: 2007, 2008, 2009, Appeals, Cases, Chief, Circuit, Court, District, Drug, Drugs, End, Federal, Fraud, Immigration, John, Justice, Miscellaneous, Roberts, Supreme, Year, courts, criminal, defendants, opinions, report

Posted on December 29, 2009 by Anthony Lake

Assistant United States Attorney Sally Quillian Yates Nominated by President Obama to Be United States Attorney for the Northern District of Georgia

Leading the Georgia news today is the nomination of Assistant United States Attorney Sally Quillian Yates by President Barack Obama to be the United States Attorney for the Northern District of Georgia. The President announced Mrs. Yates' nomination in a Christmas Eve press release.

Mrs. Yates has served as the interim head of the U.S. Attorney's Office for the Northern District of Georgia since August, when the former U.S. Attorney, David E. Nahmias, stepped down to become Chief Justice of the Georgia Supreme Court. She has had a distinguished career as a federal prosecutor since joining the U.S. Attorney's Office in 1989. Mrs. Yates became the Chief of the U.S. Attorney's Office's fraud and public corruption unit in 1994, and became a top aide to the U.S. Attorney in 2002. Prior to joining the U.S. Attorney's Office, Mrs. Yates, a double graduate of the University of Georgia, was in private practice with King & Spalding. Notably, Mrs. Yates successfully prosecuted former Atlanta Mayor Bill Campbell and former Georgia State Schools Superintendant Linda Schrenko for corruption, and was an integral part of the investigation into the 1996 Olympic Park bombing in Atlanta. Mrs. Yates is married to J. Comer Yates, an attorney and Executive Director for the Atlanta Speech School, which has served children with speech, hearing, language or learning disabilities since 1938.

Mrs. Yates' nomination has been widely praised, including by the criminal defense bar. The nomination must be approved by the United States Senate. If confirmed, Mrs. Yates will be the first female U.S. Attorney for the Northern District of Georgia. Georgia was one of the 13 original federal districts created by the Judiciary Act of 1789, and was subdivided into the Northern and Southern Districts in 1848, and further subdivided again to include the Middle District in 1926. The Act provided that "there shall be appointed in each district a meet person learned in the law to act as attorney for the United States in such district, who shall be sworn or affirmed to the faithful execution of his office, whose duty it shall be to prosecute in such district all delinquents for crimes and offences, cognizable under the authority of the United States, and all civil actions in which the United States shall be concerned, except before the supreme court in the district in which that court shall be holden." Judiciary Act of 1789, Sec. 35. There are currently 93 U.S. Attorneys in a corresponding number of districts across the nation. The Federal Criminal Defense Blog congratulates Mrs. Yates on her nomination and expected confirmation.

Tags: 1996, Assistant, Barack, Bill, Campbell, David, Fraud, Georgia, Linda, Miscellaneous, Nahmias, Obama, Olympic, Park, Quillian, Sally, Schrenko, Senate, States, United, University, Yates, attorney, bombing, confirmation, confirmed, corruption, criminal, nominated, nomination

Posted on December 28, 2009 by Anthony Lake

Georgia's Bank Failures Lead to Prosecutions; Atlanta Man Indicted in Relation to Omni National Bank

Georgia leads the nation in bank failures this decade, with 32 failed banks since 2002, 25 of those in 2009 alone, according to the Federal Deposit Insurance Corporation (FDIC). Fraud has undoubtedly played a substantial role in the failure of many of these banks, and the FDIC and other agencies are especially vigilant in detecting and prosecuting fraud in the wake of bank failures.

Brent Merriel of Atlanta, Georgia, was indicted last week in the U.S. District Court for the Northern District of Georgia on four counts of aggravated identity theft and two counts of making false statements to the FDIC as announced by the U.S. Attorney's Office for the Northern District of Georgia. Merriel is alleged to have obtained several million worth of loans on properties in his name and the names of family and friends from Omni National Bank (Omni). Omni failed on March 27, 2009, and was taken over by the FDIC. Merriel then asked the FDIC to forgive $2.2 million in loans and to allow him to make a "short sale" of two properties to purchasers. A short sale is a sale of a property for less than the full amount due or owed, which serves to reduce a lender's losses or assist the property owner. However, in Merriel's case, the alleged purchasers were allegedly persons whose identities had been stolen. Merriel is also alleged to have forged sales contracts and loan commitment letters which he submitted to the FDIC.

The release notes that other individuals have been prosecuted relating to Omni, including Mark Anthony McBride, who fraudulently obtained millions in mortgage loans from Omni and other lenders and who pled guilty last April, and Delroy Oliver Davy, who similarly obtained millions in fraudulent loans from Omni and others. It quotes FDIC Office of Inspector General, Southeast Region Special Agent In Charge C. Ed Slagle as stating that FDIC will aggressively investigate and prosecute fraudulent acts uncovered in the FDIC's process of liquidating assets of failed banks in order maximize recoveries. The release also quotes Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofski, Department of Housing and Urban Development Inspector General Kenneth M. Donohue and U.S. Postal Inspector in Charge, Atlanta Division Martin D. Phanco on fraud and enforcement.

Tags: Atlanta, Attorneys, Brent, Corporation, Defense, Deposit, FDIC, Federal, Fraud, Georgia, Indictment, Insurance, Lawyers, Merriel, attorney, bank, banks, crime, criminal, failed, failures, false, lawyer, mail, statements

Posted on December 23, 2009 by Anthony Lake

Rothstein Investigation Widens to Include Attorneys, Police Chief; Pols Return Donations

The fallout from Fort Lauderdale attorney Scott Rothstein's alleged fraudulent scheme to bilk investors out of hundreds of millions continues to fall.

Florida Governor Charlie Crist has told the media that he will return campaign contributions received from Rothstein and employees of his law firm, a total of $76,250. The announcement by Crist follows a pledge by Florida Republican Senate President Jeff Atwater to return donations by Rothstein. On the same day, Florida Chief Financial Officer Alex Sink, a Democrat, announced that she would return at least $7,025 in contributions from Rothstein and members of his firm. Crist is running for U.S. Senate, Sink is running for Governor and Atwater is running for Chief Financial Officer. Rothstein is alleged to have made contributions to numerous politicians using ill-gotten gains, and to have illegally reimbursed members of his firm for making contributions. Rothstein and his wife, Kimberly, also held fundraisers for Senator McCain and Governor Crist in one of their waterfront homes.

The campaign contributions have also created potential criminal exposure for lawyers at Rothstein's firm Rothstein Rosenfeldt Adler. Approximately 30 lawyers in the firm, along with 15 employees, spouses and relatives, made approximately $2.2 million in Federal and State campaign contributions, with the largest recipient being the 2008 Presidential campaign of Arizona Senator John McCain. One attorney, Steven Lippman, and his wife contributed approximately $247,000 to Governor Crist, Senator McCain and other politicians over a span of four years. Federal investigators are looking into the contributions. Several partners in the firm have retained counsel in response to the investigation. Experts have stated that the attorneys should have been aware that they were violating campaign finance laws when Rothstein required the attorneys to make campaign donations as a condition to receiving bonuses.

The fallout has extended further to Fort Lauderdale Police Chief Frank Adderly. Two Fort Lauderdale City Commissioners have asked the Florida Department of Law Enforcement to investigate Adderly regarding his relationship with Rothstein. Rothstein is alleged to have flown Adderly to New York in December 2008 for a football game, and Adderly personally intervened in an automobile collision involving a friend of Rothstein.

Fisher Auction will auction property of Rothstein's law firm on January 23, at the direction of the firm's trustee, including fountain pens used by Rothstein and the massage chair in the firm's lounge. Rothstein's attorney has opposed the auctioning of photographs of Rothstein withvarious politicians.

Tags: Adderly, Alex, Attorneys, Atwater, Charlie, Crist, Defense, Florida, Frank, Fraud, High Profile Cases, Jeff, John, Lawyers, Lippman, McCain, Ponzi, Rothstein, Scott, Sink, Steven, White Collar, attorney, campaign, contributions, criminal, donations, illegal, lawyer, mail, political, unlawful, wire

Posted on December 18, 2009 by Anthony Lake

Hedge Fund Managers, Attorneys, Others Fall in Rajaratnam/Galleon Insider Trading Investigation

Raj Rajaratnam and Danielle Chiesi were indicted in indictment alleging 17 counts of securities and wire fraud on Tuesday in the U.S. District Court for the Southern District of New York, U.S. v. Raj Rajaratnam et al, Case No. 09-2306, as reported by the New York Daily News here, here and here, and the New York Times here, here and here. Rajaratnam is a former Bear Stearns hedge fund manager and is the founder of Galleon Management LP, which managed some $3.7 billion in funds. Rajaratnam, a U.S. citizen born in Sri Lanka, was arrested on October 16 at his Manhattan home. U.S. Magistrate Judge Douglas Eaton set Rajaratnam's bail at $100 million which Rajaratnam posted. The indictment alleges a multi-million dollar insider trading scheme that spanned from coast to coast, in which Rajaratnam and Chiesi shared tips on companies like Google, Advanced Micro Devices, Hilton Hotels and others, and reaped more than $20 million in illicit profits by trading on the confidential information. Rajaratnam and Chiesi have both pled not guilty and are fighting the charges. The government claims to have numerous recorded telephone conversations from cooperating witnesses in support of the charges.

Rajaratnam's attorneys also requested a second time that his bail amount be reduced to $20 million. His lawyers disputed the government's reliance on Roomy Khan, an Intel Corp employee and former trader who was convicted of wire fraud in California in 2002 for passing confidential information to Galleon and Rajaratnam when she was an employee of Intel, and who is cooperating with the government. Half a dozen persons, including Ms. Khan, are cooperating in the case.

The U.S. Securities and Exchange Commission has also filed civil charges against Rajaratnam. Following Rajaratnam's arrest, investors withdrew more than $4 billion from various Galleon hedge funds, and the firm ceased operations.

The investigation has implicated 21 individuals, including 14 hedge fund managers, lawyers and other investors who were arrested in November. Robert Moffat, a senior official at I.B.M., Rajiv Goel, an executive of Intel; and Anil Kumar, an executive at the consulting firm McKinsey & Company, were arrested at the same time as Rajaratnam, but have not yet been indicted. The Court has granted the prosecution an extension of 30 more days to indict these individuals. The prosecution has described the case as the largest insider trading case in history.

Attorney Brien Santarlas, of the New York law firm of Ropes & Gray, pled guilty to conspiracy to commit securities fraud and wire fraud this week. Santarlas admitted that, from June 2007 to May 2008, he and another attorney, Arthur Cutillo, also with Ropes & Gray, used confidential information regarding acquisitions by 3Com, Inc., and Axcan Pharma, Inc. Bain Capital Partners LLC, a Ropes & Gray client, had announced it planned to acquire 3Com on September 27, 2007, in a deal which would have also involved China's Huawei Technologies Co Ltd. A U.S. government security panel rejected the deal, however. 3Com is now in the process of being purchased by Hewlett-Packard Co. Another Ropes & Gray client, TPG Capital LP, announced on November 29, 2007 that it was acquiring Axcan Pharma.Prosecutors charged Santarlas, Cutillo, Jason Goldfarb and Zvi Goffer with causing trades of 3Com and Axcan stock before the public announcements, making approximately $20 million in profits.Santarlas also faces civil charges by the SEC. His sentencing is tentatively scheduled for June 1. Cutillo was indicted in November.

Rajaratnam has also been linked to Steven Cohen, manager of SAC Capital Advisors, a hedge fund, major art collector, and with a $6 billion net worth, the 36th richest person in America. Cohen's ex-wife, Patricia Cohen, filed a lawsuit in Federal court on Wednesday alleging that Cohen had hid money during their divorce 20 years ago and asserting civil RICO claims. The former Mrs. Cohen alleges that Cohen had made millions from insider trading in the 1980s and had hid the money with the help of one of his real estate partners. Specifically, she claims that Cohen received an insider tip prior to General Electric's purchase of RCA in 1985. She is seeking $300 million from Cohen. SAC issued a statement criticizing the former Mrs. Cohen and her attorney, calling the allegations in the lawsuit "ludicrous" and "without merit."

Federal prosecutors on Wednesday asked for 30 more days to indict four defendants tied to the Galleon Group insider trading scheme, one day after two of the main players were formally indicted on conspiracy and fraud charges.

Tags: Advisors, Arthur, Bond, Brien, Chiesi, Cohen, Collar, Corporate, Cutillo, Danielle, Federal, Fraud, Funds, Galleon, High Profile Cases, Indictment, Management, Raj, Rajaratnam, SAC, Santarlas, Securities, Steven, White, bail, capital, crime, criminal, divorce, fund, hedge, insider, stock, trading, wire

Posted on December 16, 2009 by Anthony Lake

Federal Prosecutions of Corporate, Financial and White-Collar Crimes Fall to Six-Year Low; Congress Increases Funding & DOJ Increases Criminal Probes

Brad Heath points out a disturbing trend in today's USA Today--federal prosecutions of serious corporate, financial and other white-collar crimes have fallen to new lows. In this age of Enron, Madoff and massive failures of financial institutions, this is a serious breach of the public trust. The article contains a chart which shows that, in fiscal year 2009, the Department of Justice opened only 63 new corporate fraud prosecutions. That is barely one case per year per district and represents a 55% decrease since 2003. Securities fraud charges have decreased 17% and bankruptcy fraud cases have decreased 44% over the same period. The article cites Professor Ellen Podgor of Stetson University College of Law and creator of White Collar Crime Prof Blog who attributes the decline was the result of the Bush administration's push of federal prosecutors and the FBI to focus on terrorism and national security.

However, relief appears to be on the way. The article states that lawmakers have put new pressure on DOJ officials, who have launched thousands of new criminal probes into financial crimes. Congress has approved extra money to target financial crime, and Attorney General Eric Holder announced a new task force to target financial fraud last month. As if to herald a change of direction, prosecutors in New York also announced indictments yesterday against Raj Rajaratnam, founder of Galleon, claiming that the case is the largest hedge fund insider trading case ever. The article also states that the FBI currently has more than 2,800 open mortgage fraud cases..

Tags: Collar, Congress, Corporate, Corporate Crimes, Department, Federal, Fraud, General, Justice, Mortgage, Securities, White, White Collar, attorney, crime, criminal, financial

Posted on December 4, 2009 by Anthony Lake

Florida Executive Sentenced in $10.5 Million Embezzlement Scheme

Although it may be considered small change when compared with the fraud of fellow Floridian Scott Rothstein, according to an FBI press release, Gary Ernest Williams, former Chief Financial Officer for Marian Gardens Tree Farm (MGTF) in Groveland, Florida, was sentenced to eight years imprisonment on Monday in the U.S. District Corut for the Middle District of Florida. Williams was charged with embezzling approximately 10.5 million from MGTF since 2000 through falsified checks, use of a credit card in the company's name and making large cash withdrawals which he told bank officials were to be used to pay “employee bonuses.” Willams spent the money on lavish homes, luxury cars, jewelry, drugs, and vacations by private jet. He also failed to failed to pay federal income taxes in the amount of $3,675,000 on the illegally obtained funds.

Williams entered a guilty plea in July. The District Court ordered Williams to pay more than 14 million in restitution to MGFT and to forfeit homes in North Carolina, Pennsylvania and the Bahamas.

Posted on December 3, 2009 by Anthony Lake

Fort Lauderdale Attorney Scott Rothstein Pleads Not Guilty to Information Alleging $1.2 Billion Dollar Ponzi Scheme

In response to allegations uncomfortably similar to those against former New York celebrity lawyer and arch Ponzi-schemer Marc Dreier, Fort Lauderdale attorney Scott Rothstein, head of Rothstein, Rosenfeldt and Adler, P.A., appeared in response to a criminal information in the U.S. District Court for the Southern District of Florida on Tuesday. The information charges Rothstein with one count of Racketeering Conspiracy, in violation of 18 U.S.C. § 1962(d); one count of Money Laundering Conspiracy, in violation of 18 U.S.C. § 1956(h); one count of Mail and Wire Fraud Conspiracy, in violation of 18 U.S.C. § 1349; and two counts of Wire Fraud, in violation of 18 U.S.C. § 1343, as well as criminal forfeiture, U.S. v. Rothstein, 0:09-cr-60331-JIC.

According to the criminal information, available here, from about 2005 through November 2009, Rothstein, and other “known and unknown” unnamed co-conspirators, allegedly unlawfully obtained approximately $1.2 billion from investors through a Ponzi scheme (outdoing even Dreier’s scheme). The Government alleges that Rothstein used false statements, documents and computer records to induce investors to loan money to alleged borrowers based upon fraudulent and fictitious promissory notes and bridge loans. Rothstein allegedly falsely informed investors that his law firm, Rothstein, Rosenfeldt and Adler, P.A.’s, clients requested short-term financing for undisclosed business deals and that the clients were willing to pay high rates of return for loans negotiated by Rothstein.

Rothstein also allegedly told investors that they could purchase at a discount confidential settlement agreements in sexual harassment and whistleblower cases in amounts ranging from hundreds of thousands of dollars to millions of dollars. Rothstein allegedly falsely represented that the settlement agreements would be repaid to the investors at face value over time. Rothstein allegedly represented to investors that the settlements were highly confidential in order to protect the reputations of the companies and executives involved; that the plaintiffs preferred to settle the claims rather than purse them in a public forum; that Rothstein, Rosenfeldt and Adler, P.A., would disburse the investors’ funds to the plaintiffs; that the firm would make payments to the investors pursuant to the payment schedules in the alleged settlement agreements; that the funds were maintained in designated trust accounts for the investors in accordance with the rules and regulations of the Florida Bar and were verified by independent sources, as well as numerous other alleged false statements regarding the settlement agreements, investment funds and the firm.

To effect the fraud, Rothstein allegedly established numerous trust accounts in Rothstein, Rosenfeldt and Adler, P.A.’s name; falsified statements from financial institutions and manufactured online banking information allegedly showing investors’ monies; created false and fictitious settlement agreements and other documents. Among the alleged false and fictitious documents was a court order in a case, purportedly signed by a Federal District Judge, which falsely alleged that Rothstein, Rosenfeldt and Adler, P.A.’s clients had prevailed in a lawsuit and were owed $23 million, when in fact the firm had settled the case without the clients’ knowledge and had obligated them to pay $500,000 to the defendant.

The information also alleges that Rothstein allegedly falsely told clients that, in order to recover funds, they had to post bonds to be held in Rothstein, Rosenfeldt and Adler, P.A.’s trust account. Over several years, clients wired approximately $57 million to a trust account controlled by Rothstein. Rothstein allegedly created another false Federal court order to conceal the scheme, providing that the funds were to be returned to the clients by a later date.

Rothstein used the funds acquired through the alleged scheme to fund the operations of Rothstein, Rosenfeldt and Adler, P.A., and to expand the firm. The firm grew to employ approximately 70 attorneys. Rothstein is alleged to have laundered the funds from the scheme through corporations, contributions and large bonuses and gifts to employees. The information alleges that Rothstein used the funds to make contributions to Federal, State and local political candidates in a manner designed to conceal the source of the funds and to circumvent Federal and State limits on campaign contributions; for charitable donations; to purchase controlling interests in restaurants in South Florida; and to hire members of local law enforcement to provide security for Rothstein, Rosenfeldt and Adler, P.A., and for Rothstein personally.

The enormous wealth amassed by Rothstein through the alleged scheme is apparent in the Governement’s forfeiture allegations, which seek forfeiture not only of a sum of $1.2 billion, but also of 24 properties in Fort Lauderdale, Lauderdale by the Sea, Boca Raton, Hollywood and Plantation, Florida; New York City and Narragansett, Rhode Island, including Rothstein’s 10% ownership in the Miami Beach mansion of late fashion mogul Gianni Versace, “Casa Casuarina.” Forfeiture is also sought of numerous business interests, bank accounts and jewelry, as well as 24 vessels and vehicles purchased by Rothstein, including a 55 foot yacht.

The Government also lists millions in political and charitable contributions by Rothstein which it seeks forfeiture of, including contributions to the Republican Party of Florida; Florida Governor Charlie Crist; Democratic Chief Financial Officer Alex Sink, who is running for governor; and two hospitals.

As reported in the Miami Herald here, and here, Rothstein started Rothstein, Rosenfeldt and Adler, P.A., in 2002 as an obscure attorney practicing employment law. Over the next six years, his net worth grew from about $160,000 to tens of millions. Rothstein used flashy wealth and connections in the Broward County social and business communities to lure wealthy persons to invest in his schemes. He befriended the rich and famous, including NFL Hall of Famer Dan Marino

George G. Levin, a wealthy Fort Lauderdale resident and hedge fund manager, gave $656 million to Rothstein to invest in settlements purportedly worth $1.1 billion. Levin helped Rothstein market investments in employment and sexual harassment lawsuits to investors, although he is not alleged to have been complicit in Rothstein’s crimes. Another of Rothstein’s clients, car-dealership mogul Ed Morse, claims that Rothstein defrauded him of $57 million, arising from the settlement of a contract dispute with an interior decorator.

Rothstein would allegedly give large bonuses to employees of Rothstein, Rosenfeldt and Adler, P.A. on the condition that they make campaign contributions to political candidates who Rothstein would specify. The Government has stated that the recipients of the political contributions have returned the contributions. The Florida Democratic Party has returned $200,000 and the Florida Republican Party has given back $150,000. After Crist won the Governor’s race in 2006, he appointed Rothstein to a panel which nominates Broward County judicial candidates. The Florida Democratic Party has called for an investigation of Crist. Rothstein also allegedly paid gratuities to local law enforcement officers to avoid scrutiny.

Rothstein’s scheme began to unravel over Halloween weekend, when investors began calling the firm for overdue payments and discovered the fraud. Rothstein fled to Morocco in October, taking $400,000 to $500,000 in cash with him and wiring $16 million to Casablanca. Rothstein reportedly sent e-mails to members of his firm that he was contemplating suicide, but he returned to the U.S. on a private jet in early November. He met with Federal authorities and provided details regarding his Ponzi scheme. FBI and IRS agents raided Rothstein, Rosenfeldt and Adler, P.A.’s law offices, and seized Rothstein’s real and personal property. Rothstein agreed to waive indictment, an indication that he is cooperating with the Government, although Rothstein’s counsel has denied that he has any deal with the Government.

The Government’s information does not name Rothstein’s alleged co-conspirators, however news reports suggest members of Rothstein's inner circle at the law firm, and officers at Toronto Dominion Bank, where the investor trust accounts were held.

Rothstein’s alleged Ponzi scheme has been called the largest in the history of South Florida by Federal officials. The Florida Bar has disbarred Rothstein for stealing from the firm’s trust account. Rothstein, Levin and TD Bank are also being sued by a group of investors for more than $100 million.

Rothstein appeared in court on Tuesday in casual attire with a confident demeanor and pled not guilty to the information. U.S. Magistrate Judge Robin Rosenbaum ordered Rothstein jailed pending trial based on Rothstein’s flight to Morocco. Rothstein is represented by attorney Marc Nurik, oddly of Rothstein, Rosenfeldt and Adler, P.A. He faces up to 100 imprisonment if convicted.

Posted on September 28, 2009 by Anthony Lake

Civil Suit Alleges Fraud by Bear Stearns Execs

Bear Stearns' woes from the financial crisis continue to grow. We have noted the prosecution of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin for alleged fraud. Now, as reported by Law.com, Bruce Sherman, CEO and Chief Investment Officer for Private Capital Management, L.P., which held approximately 5.9% of Bear Stearns' shares, has filed suit in the U.S. District Court for the Southern District of New York against Bear Stearns, former CEO James Cayne, co-president Warren Spector and accounting firm Deloitte & Touche LLP, the complaint for which can be viewed here.

The complaint alleges that Mr. Cayne and Mr. Spector allegedly repeatedly and directly assured Mr. Sherman that Bear Stearns' valuations and "book value "of its assets were accurate when they allegedly knew that the valuations and book value were materially inflated. Plaintiff alleges that, in July 2007, Mr. Cayne and Mr. Spector allegedly assured Mr. Sherman that the substantial overvaluation of mortgages and mortgage-backed securities owned by two failed hedge funds managed by Bear Stearns (the ones managed by Mr. Cioffi and Mr. Tannin ) did not reflect overvaluation of other Bear Stearns assets, which the Defendants allegedly knew to be false. The complaint alleges that Mr. Cayne and Mr. Spector repeatedly assured Mr. Sherman that Bear Stearns' risk-management policies protected his investments, which they allegedly knew to be false. The suit also alleges that Bear Stearns allegedly materially and falsely misrepresented the value of its assets in its financial statements, and that Deloitte & Touche allegedly certified the false financial statements.

The complaint alleges claims for violations of Sections 10(b), 18 and 20 of the Securities and Exchange Act of 1394, as well as common law fraud. Mr. Sherman is represented by Boies Schiller & Flexner.

Tags: Bear, Cayne, Civil, Deloitte, Fraud, High Profile Cases, Securities, Spector, Stearns, Touche

Posted on September 15, 2009 by Anthony Lake

Indictment in the Bear Stearns Prosecution Traces Origins of the Financial Crisis

The indictment against Bearn Stearns executives Ralph Cioffi and Matthew Tannin is available here. Cioffi and Tannin are charged in the only major prosecution to date arising out of the collapse of numerous Wall Street firms beginning in 2007.

As related in the indictment, the Bear Stearns High Grade Structured Credit Strategies Fund Ltd. ("High Grade Fund") and the Bear Stearns High Grade Credit Strategies Enhanced Master Fund Ltd. ("Enhanced Fund") were hedge funds registered as a Cayman Island corporation. The High Grade Fund and the Enhanced Fund were brokered by Bear Stearns Securities Corporation (BSSC). Cioffi was the founder and Senior Portfolio Manager of the funds. Tannin was a Portfolio Manager who reported to Cioffi.

The indictment alleges that the High Grade Fund opened in 2003 and was invested in low-risk, high grade debt securities and collateralized debt obligations (CDOs). The fund purchased income earning assets through repurchase agreements. The indictment alleges that Cioffi and Tannin allegedly told investors that they could expect annual returns of 10 to 12 percent and that the fund was only slightly riskier than a money market fund.

By 2006, the performance of the High Grade Fund began to decline due to investors' threats to withdraw their investments. In response to this decline, Cioffi and Tannin allegedly created the Enhanced Fund, which was also invested in CDOs, but had greater leverage than the High Grade Fund and could allegedly provide greater returns than the High Grade Fund with only slightly more risk. Cioffi and Tannin had their own monies invested in the funds. In July, 2006, Cioffi and Tannin allegedly told investors that they were moving their funds from the High Grade Fund to the Enhanced Fund. Many investors allegedly moved their investments to the Enhanced Fund.

The Government acknowledges that the funds had positive monthly returns until January 2007. It alleges that in about March 2007, The indictment also alleges that Cioffi and Tannin owed duties to BSAM, the funds and the funds' investors. Cioffi and Tannin, despite allegedly knowing that the funds had serious problems, allegedly began to make misrepresentations to investors in hopes that the funds' incomes would recover. Cioffi and Tannin allegedly misrepresented material facts in communicationswith investors and lenders including the funds' financial prospects, liquidity and exposure to the subprime mortgage market, as well as Cioffi's and Tannin's personal investments in the funds. Cioffi allegedly had a meeting with the funds' portfolio management team in March of 2007 after which he instructed those attending the meeting not to discusse the funds' difficulties with others. The indictment cites communications between Cioffi, Tannin and others on the portfolio management team, in which they allegedly expressed concern over the condition of the funds.

Despite the condition of the funds, Cioffi and Tannin allegedly continued to make misrepresentations regarding the condition of the funds in hopes of enticing more investors and improving the financial condition of the funds. Furthermore, the indictment alleges that, beginning in March 2007, Cioffi allegedly began to transfer the more than $6 milion which he had invested in the funds to other Bear Stearns hedge funds without disclosing this fact to the funds investors.

On April 17, 2007, the management team produced a CDO report which stated that the CDOs held by the funds were worth significantly less than had previously been determined. The indictment alleges that Cioffi and Tannin communicated regarding hiding the funds' troubles from other fund employees and allegedly made false statements regarding the financial condition of the funds during a conference call with investors on April 25, 2007. In the meantime, major investors in the funds were redeeming tens of millions from the funds. In June, 2007, investors in the funds were told that the funds had lost 100% of their value, or approximately $1.4 billion.

Cioffi and Tannin are charged in the Eastern District of New York with one count of conspiracy to commit securities fraud and wire fraud, three counts of securities fraud, and four counts of wire fraud, as well as a criminal forfeiture count against their real and personal property. Cioffi's and Tannin's trial is scheduled to begin on September 28.

Tags: Bear, Fraud, Funds, High Profile Cases, Mortgage, Securities, Stearns, crisis, financial, fund, hedge, subprime, wire

Posted on September 8, 2009 by Anthony Lake

Bear Stearns Execs Head for Trial on Wire and Securities Fraud Charges

As is well known, Bear Stearns, one of the largest investment banks in the world, was sold to JP Morgan Chase and effectively ceased to exist in March of 2008, after two Bear Stearns hedge funds invested in collateralized debt obligations—mainly subprime home loans—and once worth approximately $1.6 billion, lost nearly all of their value. The collapse of Bear Stearns was the harbinger for a succession of massive failures of financial institutions, including Lehman Brothers, Merrill Lynch and AIG, triggering the current global recession.

As reported by New York Magazine, Reuters and the Daily Telegraph, two managers of the hedge funds, Ralph Cioffi and Matthew Tannin were charged in June in the Eastern District of New York with several counts of wire and securities fraud for allegedly misleading investors regarding the status of the funds in the Spring of 2007. Cioffi, a hedge fund manager, and Tannin, the Chief Operating Officer of Bear Stearns Asset Management (BSAM), have pled not guilty. The collapse in value of the funds cost investors approximately $1.4 billion. When traders wanted to sell some of the funds’ subprime mortgages, no one wanted to buy them.

The trial of Cioffi and Tannin is set to begin in October. The evidence against Cioffi and Tannin consists largely of e-mails between them and investors describing the funds as “an awesome opportunity,” despite allegedly knowing that the funds had problems. Bear Stearns investors are expected to testify at the trial. Both men have consistently maintained their innocence. They face a potential 20 years in prison if convicted.

Cioffi is also charged with alleged insider trading for withdrawing $2 million of his own money from the funds. The government alleges that he engaged in hundreds of transactions involving the funds without the necessary approval by the fund’s directors and despite being warned about conflicts of interest. All trades between Bear Stearns, a securities firm, and BSAM, an asset management firm, were supposed to be vetted by an independent committee. In the Fall of 2006, Bear Stearns ordered a moratorium on such internal trades by Cioffi. Prosecutors sought to introduce evidence of Cioffi’s alleged insider trading in order to demonstrate how Cioffi allegedly operated.

British bank Barclays, a shareholder of one of the funds, also filed suit against Cioffi and Tannin for alleged fraud, however, the suit has been withdrawn.

The prosecution of Cioffi and Tannin makes conspicuously noticeable the fact that no senior executives from Bear, Lehman Brothers, AIG, etc., have been charged with any wrongdoing in the fallout from the financial crisis.

Posted on September 3, 2009 by Anthony Lake

Pfizer Enters Largest Healthcare Fraud Settlement in U.S. History

Pharmaceutical giant Pfizer, inc., will pay $2.3 billion to the Federal government and 49 States to settle allegations that it violated federal regulations in promoting several drugs, as reported by the Atlanta Journal-Constitution. The settlement is the largest in U.S. history to date in a healthcare fraud case.

Georgia will receive $21.7 million as part of the settlement. A spokesperson for the Georgia Attorney General's office told the media that Georgia's portion of the settlement funds would be earmarked for Georgia's Medicaid program.

The U.S. Department of Justice had accused the New York-based pharmaceutical company and its subsidiaries of conducting marketing campaigns to promote drugs including Geodon, Lyrica, Zyvox, and no longer marketed Bextra, for uses not approved by the U.S. Food and Drug Administration. The government also alleged that Pfizer gave kickbacks such as cash, travel and entertainment to members of the healthcare industry in order to persuade them to prescribe these drugs and others, including Lipitor, Zyrtec and Viagra. The only State which did not join in the suit was South Carolina.

Pharmacia & Upjohn Co., a subsidiary of Pfizer, has pled guilty to a felony charge of violating the Food, Drug and Cosmetic Act, and will pay a fine of $1.3 billion.

Posted on August 31, 2009 by Anthony Lake

IRS Prosecutions of UBS Customers Widen; IRS Offers Voluntary Disclosure

The Federal government is building criminal cases against more than 150 U.S. citizens holding overseas bank accounts with Union Bank of Switzerland (UBS), as reported by Reuters and the Banking Times. The criminal investigations are part of a Federal crackdown on tax evasion by means of overseas accounts and were facilitated by a settlement between U.S. and Swiss authorities earlier this month in which Switzerland agreed to disclose the identities of some 5,000 U.S. citizen account holders, contrary to Switzerland's longstanding tradition of banking secrecy. UBS has already settled charges that it assisted U.S. customers in evading taxes for $780 million.

As the IRS states on its website, under the agreement, the IRS will receive information on accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts. UBS will give account holders notice if information relating to the acocunt holders is included in the IRS treaty request. "Information provided to the IRS through this process will be thoroughly examined for all potential civil and criminal tax violations." "The IRS will also recommend criminal prosecution in those cases where the facts warrant such an action."

Four U.S. clients of UBS, three in Florida and one in California, are already being prosecuted based on the information provided by UBS. And the number of investigations and prosecutions are expected to grow. In a press release,Tax Commissioner Doug Shulman claimed that the U.S./Swiss agreement "puts in place an apparatus for the IRS to obtain information on thousands of offshore accounts. Further the Swiss government is prepared to work with us regarding similar U.S. requests, if any, involving other financial institutions." U.S. and Swiss authorities are reportedly negotiating for the disclosure of thousands of additional names of U.S. account holders. Commissioner Shulman stated that international tax evasion is a "top priority."

Commissioner Shulman stated that the IRS has set a "voluntary disclosure" deadline of September 23, 2009, for UBS customers with unreported, offshore income, and advised persons to contact a tax professional. Customers receiving notification from the bank may come forward under the voluntary disclosure program--however "once the Swiss government sends [the IRS] the name, all bets are off." UBS customers with any reason for concern should strongly consider promptly contacting tax and legal professionals.

Tags: Accounts, Evasion, Fraud, IRS, Internal, Offshore, Overseas, Revenue, Service, Switzerland, Tax, Tax Fraud, Voluntary, account, bank, disclosure, prosecution, swiss

Posted on July 31, 2009 by Anthony Lake

Jury Begins Deliberating Rep. William Jefferson's Fate Following Over 2 & 1/2 Hours of Jury Instructions

As reported by the New Orleans Times-Picayune, Judge T.S. Ellis, III, of the U.S. District Court for the Eastern District of Virginia read instructions to the jury yesterday which lasted over 2 & 1/2 hours, and the jury retired for its deliberations in the case against former U.S. Representative William Jefferson. The jury deliberated for about four hours and will re-convene to continue deliberations this morning.

The jury weighing the evidence in the six week long trial of Jefferson on 16 criminal counts, including racketeering, honest services fraud and violations of the Foreign Corrupt Practices Act, consists of two white males, six white females, two black males and two black females. Jefferson's case is the first time the Foreign Corrupt Practices Act has been applied to a public official. The Court sent three alternate jurors home yesterday, instructing them to remain "pristine" with regard to their exposure to information regarding the case.Jefferson's lead attorney, Robert Trout, told reporters that Jefferson intends to be present at Court each morning when the jury arrives.

Closing arguments were heard earlier in the week, with numerous media outlets and journalists from Louisiana in attendance.

Posted on July 30, 2009 by Anthony Lake

Trial Ends in Case of Former Representative William Jefferson; Jury Deliberations to Begin Today

The trial of former Representative William Jefferson, which has gone on for six weeks in the U.S. District Court for the Eastern District of Virginia, will come to an end today. As reported by Ashby Jones at the Wall Street Journal Law Blog and UPI, both sides gave their closing arguments yesterday. Judge T.S. Ellis will give jury instructions and likely send the case to the jury this morning.

The case is best known for the infamous discovery of $90,000 in cash stuffed in boxes for burgers and pie crusts in the freezer at Jefferson's home by federal agents. Jefferson was indicted in 2007 on 16 counts of bribery, racketeering, and violations of the Foreign Corrupt Practices Act. The government charged Jefferson with using his position to promote business ventures in West Africa in exchange for cash payments for his family.

Assistant U.S. Attorney Rebecca Bellows argued during the govenrment's closing that Jefferson allegedly schemed to give at least $100,000 in cash (the "freezer money") to the Vice President of Nigeria, Atiku Abubakar, as a bribe in exchange for granting rights to a telecommunications company with ties to Jefferson's family. The government also played video and audio tapes of meetings between Jefferson and Virginia businesswoman Lori Mody, who was working for the government as an informant. In one video, Jefferson supposedly informed Mody that the cash would be "doled out" to "make sure the hook is in there," and on another tape Jefferson allegedly referred to the bribe as "a goodwill present."

The defense maintained during trial that Jefferson's conduct was stupid or unethical, but not criminal. Defense attorney Robert Trout told the jury during his closing arguments that the government wanted to make Jefferson's actions a crime when it was really a "gray area." He told the jury that Jefferson only agreed to give the money to Abubaker in order to please Ms. Mody.

Prior to closing arguments, Judge Ellis refused to dismiss an obstruction of justice count against Jefferson. Jefferson faces a lengthy prison sentence if convicted.

Posted on July 29, 2009 by Anthony Lake

DeKalb County Man Arrested in Multimillion Dollar Ponzi Scheme; Victims Included Parents

As reported by the Atlanta Journal-Constitution and WSB Radio, Anthony Ray, a DeKalb County resident, solicited money from investors by promising them large returns from real estate investments by his company, Key Funding Group. He would frequent local churches to locate victims, making presentations to the congregations. Ray lulled his victims by giving them back portions of their investment and falsely referring to them as returns. Ray hosted his victims at several locations around the Atlanta area, including his condominium in Buckhead as well as a $680,000 home in Decatur, Georgia, which belonged to one of his victims and in which he ran his office. In all, Ray stole at least $5 million from over 30 investors.

Ray stole $160,000 from his own parents. He started Key Funding Group with his father, Calvin Ray, 70, and took out large loans using his father’s identity and his parents’ home as collateral. His parents subsequently turned him in. Ray’s twin brother, Antonio, told reporters that Ray took everything his parents had, and that their father, decided that they had to prosecute.

Ray previously served five years in prison for stealing his brother's identity.

Posted on July 28, 2009 by Anthony Lake

Sir Robert Allen Stanford's Continuing Pretrial Detention Blues

Sir Robert Stanford has filed a Motion for Relief from Oppressive Jail Conditions. Stanford is currently being held at the Joe Corley Detention Facility in Conroe, Texas. The Motion alleges that temperatures have reached 100 degrees and that the cell in which Stanford is being housed in a cell with 8 to 10 other men and with no windows or air conditioning. Stanford requests transfer to the Federal Detention Center in downtown Houston. The Motion also asserts, as a ground for transfer, the fact that the government has provided discovery in electronic form and the Joe Corley Facility does not permit the use of electronic devices. Stanford's counsel, Dick DeGuerin, claims that he has tried to work these issues out with the U.S. Marshals Service and the staff of the Joe Corley Detention Facility, but to no avail.

A status conference has been set in Stanford's case for September 10, which the defendants moved to continue from August 17. Meanwhile, Stanford's appeal of the District Court's denial of pretrial release is listed in the U.S. Court of Appeals for the Fifth Circuit, U.S. v. Stanford, Case No. 09-20444.

While in no way meaning to detract from the charges against Stanford and his codenfendants, which are extremely serious in magnitude, this Blog notes that arch-Ponzi schemer Bernard Madoff and celebrity attorney-turned-crook Marc Dreier were both granted pretrial release and were confined to their residences with electronic monitoring devices. Given that the government has frozen all of Stanford's assets effectively starving his defense of funding, and that the defense has alleged deliberate misrepresentations by the prosecution in arguing for pretrial detention, pretrial release appears to be appropriate in Stanford's case. We will await the hopefully speedy resolution of the bail issue by the Fifth Circuit.

Posted on July 27, 2009 by Anthony Lake

FBI Operation "Bid Rig" Nabs 44 Suspects in New Jersey Public Corruption, Illegal Organ Transplant and Designer Merchandise Schemes

The 44 public officials and other persons arrested in the massive sweep on Thursday by the FBI, the result of efforts by the convicted son of a rabbi, include:

Daniel Van Pelt, State Assemblyman;

Peter Cammarano III, Mayor of Hoboken, New Jersey;

Dennis Elwell, Mayor of Secaucus, New Jersey;

Anthony Suarez, Mayor of Ridgefield, New Jersey;

Leona Beldini, Deputy Mayor of Jersey City;

Mariano Vega, President of the Jersey City Council, Commissioner with the Jersey City Housing Authority and Director of Parks, Engineering and Planning for Hudson County, New Jersey;

L. Harvey Smith, President of the Jersey City Council and former State Assemblyman;

Lou Manzo former State Assemblyman;

Edward Cheatam, Jersey City Housing Authority Commissioner and Hudson County Affirmative Action officer;

Michael Schaffer an employee of the North Hudson Sewerage Authority and former Hoboken Councilman;

John Guarini, city taxi inspector and former 13th District Congressional candidate

Denis Jaslow, former 32nd District State Senate candidate;

Guy Catrillo, Michael J. Manzo and LaVern Webb Washington, former Jersey City City Council candidates;

Richard Greene, former aide to L. Harvey Smith;

Joseph Cardwell, Jack Shaw, political operatives;

Also Moshe Altman, Charles Amon, Joseph Castagna, Schmulik Cohen, Levi Deutsch, Yeshayahu Ehrental, Mordchai Fish, Yolie Gertner, David S. Goldhirsh, Shimon Haber, Eliahu Ben Haim, Itzak Friedlander, Saul Kassin, Maher A. Khalil, Ron Manzo, Edmond Nahum, Abraham Pollack, Levi Izhak Rosenbaum, Lori Serrano, Jack Shaw, Vincent Tabbachino, Jeffrey Williamson, Lavel Schwartz, Binyomin Spira, Naftoly Weber and Arye Weiss.

As reported by various sources here, here and here, the arrests were part of a 10-year, two-track investigation by the FBI, code named “Bid Rig” which uncovered three criminal schemes: bribery of public officials; an international money laundering ring operating between Deal, New Jersey, and Israel; and trafficking in illegal kidneys and Gucci bags. The schemes were uncovered by a confidential informant had been charged with bank fraud in 2006 and agreed to work with the FBI. Five rabbis from New Jersey and New York were among those arrested. Hundreds of federal agents raided the suspects’ homes in New Jersey and New York. There were so many arrestees that they had to be brought to FBI headquarters in Newark, New Jersey, by bus. One religious leader arrived in a Mercedes-Benz. Bail was set as high as $3 million for some of the suspects.

FBI Special Agent Ed Kahrer stated to reporters that New Jersey has one of the worst, if not the worst, public corruption problems in the nation, and that corruption has become “engrained” in New Jersey’s “political cult.” Acting U.S. Attorney Ralph J. Marra, Jr., announced that the conspiracy, which was headed by rabbis cloaked their criminal activity in a “facade of rectitute.”

Investigators stated that they have hundreds of hundreds of hours of video and audio recordings containing evidence of money laundering and bribery.

The Public Corruption and Bribery Cases

A criminal complaint filed against Hoboken Mayor Peter Cammarano, 32, alleges that Cammarano accepted a bribe in exchange for giving priority to an FBI informant posing as a real estate developer wanting to develop property in Hoboken. Hoboken’s waterfront contains prime real estate across from Manhattan. The informant is believed to have been Solomon Dwek, who was arrested in 2007 and charged with bank fraud for bouncing a $25 million check. Dwek is the son of Rabbi Isaac Dwek of the Deal Synagogue in Deal, New Jersey, which was raided by the FBI on Thursday. Dwek told the conspirators that he was in bankruptcy and was interested in hiding his assets.

The informant met Cammarano while he was running for Mayor and told Cammarano that he would give him $10,000. The complaint alleges that Cammarano promised the informant that he would sponsor the plans and treat the informant like a “friend.” Michael Schaffer, a North Hudson Utilities Authority commissioner and former Hoboken Councilman, allegedly acted as a middle man for the bribe.

Cammarano has only been in office for three weeks. He allegedly told the informant that those who oppose him get “ground into powder.” When the discussion turned to a possible runoff election with Cammarano’s challenger Dawn Zimmer, who lost the election by only 161 votes, Cammarano allegedly told the informant “I could be indicted and still get 85 to 95 percent of the vote.” Cammarano’s attorney, Joseph Hayden, has made a statement that Cammarano intends to fight the charges.

Cammarano is charged with allegedly accepting a total of $25,000 in cash bribes. Dennis Elwell, 64, Mayor of Secaucus is charged with allegedly accepting a $10,000 cash bribe and Anthony Suarez, 42, Mayor of Ridgefield, is also charged with allegedly accepting a $10,000 cash payment—for his legal defense fund.

L. Harvey Smith, Jersey City Council President, and several other current and former Jersey City public officials also are accused of allegedly accepting money to help the fake developer gain permits and approvals. Deputy Mayor of Jersey City Leona Beldini is charged with conspiracy to commit extortion for allegedly accepting $20,000 in illegal campaign contributions.

FBI agents raided the home and office of New Jersey Department of Community Affairs Commissioner and former State Senator Joe Doria as part of the investigation. Doria resigned on Thursday afternoon. Officials have not stated whether he will face charges.

The Money Laundering and Black Market Organ and Designer Goods Cases

Five rabbis from Deal and Brooklyn were charged with alleged money laundering and sale of fake designer bags. The rabbis were approached by Dwek and dealt with him, despite the fact that it was well known that he had been charged by the government. Dwek’s dealings with the rabbis eventually uncovered the public corruption case when a Jersey City building inspector accepted a $20,000 bribe. Rabbi Saul Kassin of Deal is charged with allegedly laundering more than $200,000. Mordchai Fish, a rabbi at Congregation Sheves Achim, and his brother, Lavel Schwartz, laundered nearly $600,000 for Dwek, giving him cash and taking a 15% cut.

Agents raided “cash houses” run by associates of the rabbis, including a charity called Bnoth Jerusalem and a beeper store.

Levy Rosenbaum, a Brooklyn resident, was charged in a criminal complaint with allegedly conspiring to broker a sale of a human kidney for transplant for $160,000. The complaint further alleged that Rosenbaum had been selling kidneys from vulnerable persons in Israel for 10 years, which he would purchase for $10,000 and sell in the U.S. for $160,000.

The public corruption scandals will undoubtedly figure into the current U.S. Senate contest between Senator Jon Corzine and former U.S. Attorney Chris Christie, who claims to have obtained 130 convictions of elected and appointed officials on corruption charges.

Tags: Atlanta, Attorneys, Corporate, Corporation, Defense, False Claims, Federal, Fraud, Georgia, High Profile Cases, Honest Services, Jersey, Lawyers, Money, Money Laundering, New, Qui Tam, Savannah, Whistleblower, White Collar, attorney, bank, black, bribe, bribery, bribes, class action, complex, conspiracy, contracts, corrupt, corruption, criminal, government, laundering, law, lawyer, litigation, mail, market, mayor, official, organ, public, racketeer, racketeering, transplant, wire

Posted on July 24, 2009 by Anthony Lake

Attorney General Holder's Remarks on the Organized Crime Drug Enforcement Task Forces (OCDETF) Program

On Wednesday, U.S. Attorney General Eric Holder addressed the Organized Crime Drug Enforcement Task Forces and Asset Forfeiture Program's National Leadership Conference. Mr. Holder spoke regarding the Organized Crime Drug Enforcement Task Forces (OCDETF) Program, an inter-agency program established in 1982 to conduct comprehensive, multi-level attacks on major drug trafficking and money laundering organizations. OCDETF combines the resources and expertise of the Drug Enforcement Administration, the Federal Bureau of Investigation, the Bureau of Immigration and Customs Enforcement, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Marshals Service, the Internal Revenue Service, and the U.S. Coast Guard in cooperation with the Department of Justice Criminal Division, Tax Division and its U.S. Attorney’s Offices, as well as state and local law enforcement. Its mission is to identify, disrupt, and dismantle drug trafficking and money laundering organizations.

Mr. Holder praised the track record of OCDETF and the Asset Forfeiture Program. He mentioned that, since the inception of the Attorney General's Consolidated Priority Organization Target (CPOT) List in 2002, OCDETF has dismantled or disrupted over 1,2000 CPOT and CPOT-linked organizations.

The Attorney General discussed the innovation of OCDETF in establishing the OCDETF Fusion Center to gather intelligence on drug trafficking and money laundering organizations from human and electronic sources in its "Compass" database. Mr. Holder also stated that the International Organized Crime Intelligence and Operations Center -- or "IOC-2"--has recently entered into a partnership with the OCDETF Fusion Center to add data to the Compass database in order to "broaden our capability to attack organized crime in all its forms."

Mr. Holder also remarked on the success of permanent OCDETF Strike Forces in Boston, New York, Atlanta, Tampa, San Juan, Houston, Phoenix, San Diego, with an additional Strike Force planned for El Paso. He mentioned that OCDETF has begun placing Document and Media Exploitation (DOMEX) Teams in the Atlanta and Houston Strike Forces, which permit agents to rapidly capture and exploit evidence and permit prosecutors to quickly develop trial exhibits.

The Attorney General cited the national security threat of the Mexican drug cartels. Mr. Holder furthermore discussed the success of the Asset Forfeiture Program and noted that, since 1984, more than $13 billion in net federal forfeiture proceeds have been deposited into the Justice Assets Forfeiture Fund and more than $4.5 billion has been equitably shared with more than 8,000 state and local law enforcement agencies nationwide, thereby supplementing their constrained resources without further taxing the public. The Attorney General stated that, in fiscal year 2008 alone, approximately $500 million was paid to more 39,000 victims.

Mr. Holder also praised Operation Honor Student, which involved a task force led by the Rhode Island U.S. Attorney’s Office, the Asset Forfeiture and Money Laundering Section of the Criminal Division, and the Food and Drug Administration’s Office of Criminal Investigations, and resulted in the forfeiture of $2.7 million from the accounts of GeneScience, one of the largest biopharmaceutical companies in China which had been involved in the illegal distribution of Human Growth Hormone into the United States. He noted that the task force employed a new statutory vehicle-- 18 U.S.C. § 981(k) --enacted as part of the Patriot Act and used for the first time, which permitted the Government to seize the funds, physically located in China, from the corresponding accounts of Chinese banks in New York. Task force agents estimate that at the time of the investigation, GeneScience manufactured approximately 90% of the hGH being illegally sold and distributed in the United States.

Posted on July 22, 2009 by Anthony Lake

Cap and Trade/H.R. 2454 New Criminal Provision: "Fraud and false statements in connection with regulated allowances" (Proposed Amendment to 18 U.S.C. § 1041)

New legislation typically means new criminal laws, and the White House's and Congress' recent ‘‘American Clean Energy and Security Act of 2009,’’ H.R. 2454, better known as the "Waxman-Markey Bill" or "Cap and Trade Bill," is certainly no exception. The bill is over 1,000 pages long and, for those with copious amounts of time, may be viewed in its entirety here. H.R. 2454 was introduced on May 15, 2009, and narrowly passed in the House of Representatives on June 26, 2009, by a vote of 219 to 212. The Senate is expected to vote on the bill sometime this Fall.

FCDB seeks to keep readers and practitioners alike abreast of changes in criminal law posed by such new legislation. Somewhat surprisingly, a search of H.R. 2454 reveals just one criminal provision, Section 1041, page 1045, in Part IV of the bill entitled "Carbon Market Assurance," which provides:

§ 1041. Fraud and false statements in connection with regulated allowances
        Whoever in connection with a transaction involving a regulated allowance (as defined in section 401(a) of the Federal Power Act, as added by section 341 of the American Clean Energy and Security Act of 2009), knowingly—
        (1) makes or uses a materially false or misleading statement, writing, representation, scheme,
or device; or
        (2) falsifies, conceals, or covers up by any trick, scheme, or device any material fact, shall be fined not more than $5,000,000 (or $25,000,000 in the case of an organization) or imprisoned not more than 20 years, or both.
        (2) The table of sections at the beginning of chapter 47 of title 18, United States Code, is amended by adding at the end the following new item:
‘‘1041. Fraud and false statements in connection with regulated allowances.’’

A "regulated allowance" is defined in Section 401 of H.R. 2454 as "any emission allowance, compensatory allowance, offset credit, or Federal renewable electricity credit established or issued under the American Clean Energy and Security Act of 2009." The proposed changes would be to 18 U.S.C. § 1041, which currently prohibits fraud in connection with a major disaster or emergency benefits.

The Waxman-Markey/Cap and Trade legislation amends the Federal Power Act to require corporations which emit pollutants such as carbon to hold the allowances, which represent the right to emit a certain amount of pollutant. It also would create “regulated allowance derivatives,” which are financial instruments derived from the allowances. The derivative instruments would be purchased and traded by corporations, financial institutions and funds. The proposed change to 18 U.S.C. § 1041 represents a typical fraud/false statement criminal provision for new legislation, albeit with stiff penalties.

Posted on July 17, 2009 by Anthony Lake

Sir Allen Stanford Remains in Custody Pending Appeal

As we have noted, the prosecution of wealthy, international financier Sir Robert Allen Stanford has been characterized from the outset by vigorous disputes over bond for Stanford. The prosecution has argued that Stanford poses a risk of flight given his international connections and the potential that he possesses resources hidden overseas. The defense, led by attorney Dick DeGuerin, has hit back, arguing that Stanford possesses considerable ties to the U.S. and voluntarily surrendered himself, and further charging that the prosecution has made numerous knowing misrepresentations in arguing against bond for Stanford.

The U.S. magistrate judge had ordered Stanford to be released on $500,000 bond, however the District Court Judge reversed the order and ordered Stanford to remain in custody. Last Friday, Stanford's attorneys appealed the Court's bond determination to the U.S. Court of Appeals for the Fifth Circuit.

The government is certainly pulling out all the stops in putting pressure on Stanford, who is charged in an alleged Ponzi scheme which allegedly lost investors $7 billion. Not only has it managed to deny him bond, but it has frozen his assets and those of his companies. Yesterday, the defense was granted permission by the Court to file a motion regarding attorney's fees ex parte and under seal.

Posted on July 17, 2009 by Anthony Lake

"Nuwaubian" Leader and Mass Child Molestor Dwight York Seeks to Vacate 135 Year Sentence Based on Alleged Prosecutorial Misconduct

As reported in the Macon Telegraph, Dwight "Malachi" York, former leader of the United Nuwaubian Nation of Moors who was indicted and convicted on over 100 counts of child molestation in April 2004 and setenced to 135 years, has filed a motion in the U.S. District Court for the Southern District of Georgia to vacate his sentence. York, who has been a minister and a musician, is best know as the founder of "Nuwaubianism," an unorthodox religious sect established in the 1970s. In 1993, York moved the Nuwaubians from upstate New York to a compound in Putnam County, Georgia, near Eatonton. York was arrested for sexually molesting dozens of children in 2002. The charges against York were truly astounding and hideous in their magnitude--author Bill Osinsky, in the fact sheet for his book Ungodly, reveals that state prosecutors literally had to cut back the number of counts listed in the indictment from well over 1,000 to slightly more than 200 because "they feared that a jury simply would not believe the magnitude of York's evil."

York has now filed a motion alleging that Federal Bureau of Investigation agents threatened witnesses to give perjured testimony against him, as well as alleging that the prosecution used unauthenticated tapes of York having sex with minors to taint the jury. The motion attached affidavits from witnesses in York's trial, including one by a witness who alleges that FBI agents took him from his family and transported him to a home in Milledgeville and pointed guns at him until he agreed to give information against York. York is currently incarcerated at the supermax prison in Florence, Colorado.

Posted on July 9, 2009 by Anthony Lake

Dreier Sentencing Next Monday: Defense Wants 10 to 13 Years/Government Wants 145 Years or Life

As reported by Law.com, the sentencing of celebrity attorney and Ponzi schemer Marc Dreier is scheduled for next Monday, July 13. Dreier was arrested last December for defrauding investors and clients of more than $740 million through a series of schemes. A full history of the Dreier saga is set forth here. He pled guilty on May 11 to one count of conspiracy to commit securities fraud and wire fraud, one count of money laundering, one count of securities fraud and five counts of wire fraud and has remained under house arrest in his luxury apartment in Manhattan.

Dreier's attorney, Gerald L. Shargel, filed a sentencing memorandum on Tuesday requesting a sentence for Dreier of between 10 years and 12 years and 7 months. Shargal asserted that Dreier has already started to be punished through his public disgrace, the loss of his law firm and possession, and "the shame and suffering that his actions have brought upon his family."

However, the prosecution, headed by Assistant U.S. Attorney Jonathan R. Streeter, has filed a sentencing memorandum aiming for a higher sentence for Dreier--145 years in prison, or, in the alternative, "a term of years that would both assure that Dreier will remain in prison for life and emphatically promote general deterrence."

The government's recommended sentence for Dreier is a mere 5 years less than the 150 year sentence imposed two weeks ago on the largest Ponzi scheme fraudster in history, Bernard Madoff (as massive as Dreier's crimes were, Madoff defrauded investors of exponentially more money). Dreier is currently 59. The proposed 145 years aside (and 145 years before his sentencing date--June 13, 1864--Ulysses S. Grant and Robert E. Lee had just concluded one of the bloodiest battles in American history at Cold Harbor, Virginia) any sentence imposed by the Court is all but guaranteed to ensure that Dreier spends the rest of his life behind bars. Although Drier's fraud, as massive as it is, is only a small fraction of the damage caused by Madoff, the record for a white collar criminal sentence is actually 845 years, imposed on Shalom Weiss in 2000 for a $450 million mortgage and insurance scheme against Florida pensioners (to be eligible for release today, even counting "good time," Weiss would have had to have started his sentence in 1290--the year Edward I of England passed the statute of Quia Emptores, which reformed the feudal land system). You can enjoy Money Central's list of the ten longest white-collar criminal sentences here.

Tags: Atlanta, Attorneys, Corporate, Corporations, Defense, Dreier, Fraud, Georgia, Gillen, High Profile Cases, Lake, Lawyers, Marc, Money, Ponzi, Savannah, Withers, attorney, claims, criminal, false, laundering, law, lawyer, mail, qui, scheme, tam, wire

Posted on June 25, 2009 by Anthony Lake

Indictment in the Sir Robert Allen Stanford Case/Stanford to Be Arraigned in Houston Today

Sir Robert Allen Stanford is scheduled to be arraigned today on conspiracy, mail and wire fraud, money laundering and obstruction charges in Houston in the U.S. District Court for the Southern District of Texas. Stanford is represented by attorneys Dick DeGuerin and Sean Ryan Buckley, of the Houston firm of DeGuerin and Dickson.

According to the docket for the case, the Government obtained its 21-count indictment, which can be viewed here, last Thursday and promptly moved to seal (i.e. prevent public access to) it, and then unsealed it on Friday shortly before Stanford’s arrest.

The Court will likely revisit the issue of whether Stanford is entitled to release before trial. On Friday, the Court ordered co-defendants Mark Kuhrt and Gilberto Lopez released on a $100,000 unsecured bond. However, given Stanford’s considerable wealth and ties abroad, any amount of bond imposed in his case will undoubtedly be far higher, if Stanford is granted pre-trial release at all, that is. The U.S. District Court for the Eastern District of Virginia determined that Stanford posed a high risk of flight, and denied bond.

The case will be tried before U.S. District Judge David Hitter, a brief description of whom can be found here.

Tags: Allen, Antigua, Atlanta, Attorneys, Collar, Corporate, Corporations, Counsel, Crimes, Defense, Drug, Environmental, Federal, Food, Fraud, Georgia, Healthcare, High Profile Cases, Indictment, Lawyers, Medicare, Money, RICO, Reasonable, Robert, Savannah, Securities, Seizures, Sir, Stanford, Suspicion, Tax, Whistleblower, White, action, and, business, claims, class, complex, conspiracy, criminal, false, grand, honest, investigations, jury, laundering, litigation, mail, national, nationwide, officials, pharmaceutical, pharmacies, probationer, public, qui, racketeering, search, searches, seizure, services, statements, tam, warrantless, wire

Posted on June 24, 2009 by Anthony Lake

Sir Robert Allen Stanford Indicted in Alleged Second Largest Ponzi Scheme in U.S. History

The writers of Federal Criminal Defense Blog have been busy writing on other matter and apologize for the brief hiatus. Much has happened in the sphere of white collar crime even during our short absence, most notably developments in the two largest Ponzi schemes in U.S. history, and we have some catching up to do.

We’ll start with the second largest—an indictment indictment against billionaire Texas financier Sir Robert Allen Stanford, 59, was unsealed in the U.S. District Court for the Eastern District of Virginia on Friday according to the Associated Press and the BBC. The 50-page indictment alleges that Stanford and six other defendants with allegedly perpetrated a $7 billion Ponzi-style fraud. It charges Stanford and the other defendants with 21 counts, including 7 counts of wire fraud, 10 counts of mail fraud, conspiracy to obstruct an investigation for the Securities and Exchange Commission, obstruction of an investigation by the SEC and conspiracy to commit money laundering. Defendants Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are executives of Stanford Financial Group. Defendant Leroy King, a former bank regulator for the Caribbean island nation of Antigua and Barbuda, allegedly accepted more than $100,000 in bribes from the other defendants in order to allow the alleged scheme to continue.

The indictment alleges that the defendants sold certificates of deposit issued by Stanford International Bank, based in Antigua, to investors, promising large returns. The defendants allegedly made false claims to investors regarding the growth of Stanford Financial Group’s assets.

The scheme had approximately 30,000 investors. Stanford is alleged to have diverted more than $1.6 billion in investment funds in personal loans to himself. More than $1 billion in investment money is allegedly unaccounted for. Stanford is also charged in the indictment with allegedly conspiring to obstruct an SEC proceeding. Stanford Financial Group’s finance chief, James M. Davis, is cooperating with investigators. Davis has been charged with fraud and obstruction in a separate indictment.

Stanford was the owner of a newspaper, two restaurants, and a development company in Antigua, and was a cricket enthusiast and owner of the Stanford cricket grounds in Antigua. In 2008, Stanford staged a $20 million, winner-takes-all, match between a West Indian XI and England at the grounds. In 2006, Stanford became the first American to be knighted by Antigua and Barbuda.

Stanford is represented by attorney Dick DeGuerin, who has issued a statement to the press that Stanford is innocent of the charges. Stanford has made repeated statements as to his innocence and has alleged that no money was lost.

Stanford surrendered to the FBI on Thursday and had his initial appearance on Friday. U.S. Magistrate Judge Hannah Lauck determined that Stanford posed a flight risk and ordered him to remain in custody pending a future detention hearing in Houston. Several governments have frozen his assets. Stanford faces as much as 250 years in prison if convicted.

Tags: Allen, Antigua, Atlanta, Attorneys, Collar, Corporate, Corporations, Counsel, Crimes, Defense, Drug, Environmental, Federal, Food, Fraud, Georgia, Healthcare, High Profile Cases, Indictment, Lawyers, Medicare, Money, RICO, Reasonable, Robert, Savannah, Securities, Seizures, Sir, Stanford, Suspicion, Tax, Whistleblower, White, action, and, business, claims, class, complex, conspiracy, criminal, false, grand, honest, investigations, jury, laundering, litigation, mail, national, nationwide, officials, pharmaceutical, pharmacies, probationer, public, qui, racketeering, search, searches, seizure, services, statements, tam, warrantless, wire

Posted on June 2, 2009 by Anthony Lake

Syed Haris Ahmed Trial: Allegations

By way of background, the Government originally charged Syed Haris Ahmed in a sealed indictment filed on March 23, 2006. The Government obtained a Superseding Indictment on July 19, 2006. It has charged Ahmed and his co-defendant, Ehsanul Islam Sadequee, with one count of conspiracy to provide material support to terrorists, in violation of Title 18 United States Code Sections 956 and 2332b; one count of providing and attempting to provide material support to terrorists, in violation of Title 18, Sections 956, 2332b and 2339A; one count of conspiracy to provide material support to a Designated Foreign Terrorist Organization, in violation of Title 18, Section 2339B; and one count of attempting to provide material support to a Designated Foreign Terrorist Organization, in violation of Title 18, Section 2339B.

The Government’s Superseding Indictment contains the following facts and allegations:

Ahmed was born in Pakistan in 1984 and became a naturalized U.S. citizen. Sadequee, who is allegedly nicknamed “Shifa,” was born in Virginia in 1986, and is of Bangladeshi descent.

In or around late 2004, Ahmed and Sadequee and another person engaged in alleged paramilitary training, including with paintball guns, in Northwest Georgia.

On or about February 26, 2005, Ahmed and Sadequee traveled to Toronto, Canada, by bus. While in Toronto, Ahmed and Sadequee allegedly met in person with “supporters of violent jihad” and “discussed strategic locations in the United States that were suitable for terrorist attack, including military bases and oil storage facilities and refineries.” Ahmed, Sadequee and the others allegedly also “explored how they might disrupt the world-wide Global Positioning System (GPS)” and “a plan for members of the group to travel to Pakistan to seek and receive paramilitary training that they would then use to engage in violent jihad.”

After returning to Atlanta, in or about March or April 2005, Ahmed and Sadequee further discussed these plans, and also the possibility of attacking Dobbins Air Reserve Base in Marietta, Georgia.

At or around this time, Sadequee was allegedly in communication with Younis Tsouli, an unindicted co-conspirator in the United Kingdom.

On or about April 10 and 11, 2005, Ahmed and Sadequee traveled to Washington, D.C., in Ahmed’s pickup truck. On April 11, Ahmed and Sadequee allegedly “made short digital video recordings… of symbolic and infrastructure targets of potential terrorist attacks in the Washington, D.C., area, including the United States Capitol; the headquarters building of the World Bank…; the Masonic Temple in Alexandria, Virginia; and a group of large fuel storage tanks near I-95 in northern Virginia.”

On returning to Atlanta, Ahmed allegedly gave the video clips to Sadequee so that he could send the clips to supporters of violent jihad abroad. Sadequee allegedly sent the video clips to Tsouli in the United Kingdom and Tsouli stored the clips on his computer along with other materials relating to violent jihad.

Between March and July 2005, Sadequee allegedly provided Ahmed with the contact information for Abu Umar, an unindicted co-conspirator, and told Ahmed that Abu Umar could assist Ahmed with obtaining paramilitary training in Pakistan. On or about July 17, 2005, Ahmed traveled from Atlanta to Pakistan for the alleged purpose of studying in a madrassa and then obtaining paramilitary training to engage in violent jihad in Kashmir or other locations, including the U.S. Ahmed is alleged to have intended to join Lashkar-e-Tayyiba (“Army of the Righteous”). Ahmed was allegedly unsuccessful in his attempts to enter a madrassa or to obtain paramilitary training, and returned to Atlanta.

On or about August 18, 2005, Sadequee traveled from Atlanta to Bangladesh to allegedly get married and to pursue violent jihad. Sadequee was stopped as he traveled through John F. Kennedy Airport in New York and was discovered to allegedly have two compact discs concealed in the lining of his suitcase which contained a Fairfax County, Virginia, Visitor’s Center map of the Washington area, including the sites of four potential terrorist targets which Sadequee and Ahmed had videotaped in April 2005. Sadequee was interviewed by federal agents and allegedly falsely stated that he had traveled to Toronto alone.

On or about August 19, 2005, Ahmed returned to Atlanta from Pakistan and was interviewed by federal agents at Hartsfield International Airport in Atlanta. Ahmed allegedly made false and misleading statements about his travel to Canada and Pakistan, allegedly stating that he had made the trips to visit friends and family and to attend a religious school.

In the Fall of 2005, Ahmed allegedly researched shaped explosive charges and methods to defeat surveillance by government authorities. He also allegedly cautioned an individual to avoid discussing certain topics over the telephone.

On or about November 27, 2005, Ahmed allegedly told a supporter of violent jihad of his intent to go abroad again to train for, and engage in, violent jihad, and told the individual to read the indictment against Jose Padilla. At or around this time, Ahmed allegedly reviewed a periodical for gun enthusiasts.

In early 2006, Ahmed allegedly engaged in efforts to detect and evade suspected government surveillance. In March of 2006, agents from the FBI Joint Terrorism Task Force engaged in a series of interviews with Ahmed, in which Ahmed allegedly attempted to conceal the true nature of his, Sadequee’s and their alleged co-conspirators’ discussions, activities and plans. After the interviews began, Ahmed communicated with Sadequee in Bangladesh and warned him about the FBI’s interest in their activities.

Tags: Ahmed, Atlanta, Attorneys, Collar, Corporate, Corporations, Counsel, Crimes, Defense, Drug, Environmental, Federal, Food, Fraud, Georgia, Harris, Healthcare, Indictment, Lawyers, Medicare, Money, Prejudice, Prejudicial, RICO, Savannah, Securities, Syed, Tax, Terrorism, Whistleblower, White, action, and, business, claims, class, complex, conspiracy, criminal, false, grand, honest, investigations, jury, laundering, litigation, mail, national, nationwide, officials, pharmaceutical, pharmacies, public, qui, racketeering, services, statements, tam, wire

Posted on June 2, 2009 by Anthony Lake

Syed Haris Ahmed Trial: Day 1

The trial of Syed Haris Ahmed is Georgia’s most significant terrorism case and we will collect for readers daily information on the trial and additional information. Today’s information on the Ahmed/Sadequee Trial comes from the Atlanta Journal-Constitution, WSBTV and CNN.

Ahmed is 24, an Atlanta area native and a former student at Georgia Tech. Ahmed waived his right to jury trial, and his case is being tried before District Court Judge William S. Duffey in the U.S. District Court for the Northern District of Georgia without a jury. Jack Martin, of Martin Brothers, P.C., is representing Ahmed. Assistant U.S. Attorney Robert McBurney is representing the United States. Ahmed’s co-defendant, Ehsanul Islam Sadequee, will be tried in August. Stephanie Kearns of the Federal Defender Program is representing Sadequee.

On Monday, Mr. Martin gave his opening statements to the Court, describing Ahmed as a confused, frustrated and immature young man who “fell prey” to websites espousing extremist views. Mr. Martin characterized the alleged plans for terrorist acts as “passing random thoughts, momentary ideas, childish fantasies, unformed, inchoate notions.” Mr. Martin argued that Ahmed had the ability to commit the alleged acts but said “No.” He stated that Ahmed’s idea of paramilitary training was shooting paintball guns with a friend in the North Georgia woods.

Mr. McBurney argued that Ahmed “one step removed from the bomb throwers” and intended to wage violent jihad. Mr. McBurney argued that Ahmed was a would-be terrorist who went to Pakistan to join the Taliban. He said that the videos made by Ahmed while allegedly “casing” locations in Washington, D.C., including the Capitol and the Pentagon, were intended to prove to terrorists overseas that Ahmed had access to Washington’s “backyard” and could get in close to targets. McBurney said the government’s case is about supporting terrorism and not actually “pulling the trigger or dropping the bomb.”

FBI Special Agent Mark Richards testified for the government. During Agent Richard’s testimony, the government showed some of the videos. In one video of the World Bank Building, Ahmed bobbed up and down so much that Mr. Martin asked Special Agent Richards “If a terrorist was attacking on a pogo stick, this might be useful, right?” However, another video shows Ahmed and Sadequee driving past the Pentagon with Sadequee stating “This is where our brothers attacked.”

Tags: Ahmed, Atlanta, Attorneys, Collar, Corporate, Corporations, Counsel, Crimes, Defense, Drug, Environmental, Federal, Food, Fraud, Georgia, Harris, Healthcare, Indictment, Lawyers, Medicare, Money, Prejudice, Prejudicial, RICO, Savannah, Securities, Syed, Tax, Terrorism, Whistleblower, White, action, and, business, claims, class, complex, conspiracy, criminal, false, grand, honest, investigations, jury, laundering, litigation, mail, national, nationwide, officials, pharmaceutical, pharmacies, public, qui, racketeering, services, statements, tam, trial, wire

Posted on May 28, 2009 by Anthony Lake

Supreme Court Overrules Michigan v. Jackson and Presumption that Waivers of Right to Counsel After the Right to Counsel Has Been Invoked Are Invalid

In an opinion issued on Tuesday, Montejo v. Louisiana, --- S.Ct. ----, 2009 WL 1443049 (2009), the Supreme Court removed a layer of protection of criminal defendants against coercive and badgering police interrogations by overruling, Michigan v. Jackson, 475 U.S. 625, 106 S.Ct. 1404 (1986), in which the Court had held that “if police initiate interrogation after a defendant's assertion, at an arraignment or similar proceeding, of his right to counsel, any waiver of the defendant's right to counsel for that police-initiated interrogation is invalid.”

The petitioner in Montejo was arrested in connection with a robbery and murder and waived his rights pursuant to Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602 (1966), while being interrogated by police detectives. A preliminary hearing was then held in which the court ordered an indigent defender to represent the petitioner. After the hearing, two detectives visited the petitioner and requested that the petitioner lead them to the murder weapon. The detectives read the petitioner his Miranda rights, and the petitioner proceeded to go along with the detectives, writing an inculpatory letter of apology to the widow of the victim in the process. Only following this excursion did the petitioner meet his court-appointed attorney and consult with him. The State admitted the petitioner's letter of apology against him at trial, and the petitioner was convicted of first degree murder and sentenced to death.

The petitioner appealed, arguing that the State's admission of the letter was error pursuant to Jackson. The Louisiana Supreme Court held that Jackson is not triggered unless and until a defendant has actually requested a lawyer or has otherwise asserted his Sixth Amendment right to counsel. It held that because the court had appointed the petitioner counsel while the petitioner stood mute, the petitioner had not sufficiently asserted his right to counsel. The Courtaffirmed his conviction and the Supreme Court granted certiorari.

Justice Scalia, writing for the majority, observed that some States require an indigent defendant to affirmatively request counsel before an appointment is made, while other States automatically appoint counsel upon a finding of indigency. Justice Scalia recognized the problem that "Defendants in States that automatically appoint counsel would have no opportunity to invoke their rights and trigger Jackson, while those in other States, effectively instructed by the court to request counsel, would be lucky winners." The majority rejected the petitioner's position that, once a defendant is represented by counsel, police may not initiate any further interrogation.

The majority proceeded to overrule Jackson and its holding that waivers of a defendant's right to counsel after the right to counsel is asserted are presumed invalid. The Court noted that it had created the presumption in Jackson by making an analogy to a similar prophylactic rule which the Court had established in Edwards v. Arizona, 451 U.S. 477, 101 S.Ct. 1880 (1981), for the Fifth Amendment right to have counsel present at any custodial interrogation under Miranda. The majority held that where a defendant does not invoke his right to counsel, such as where a court appoints counsel in the absence of any request by the defendant,there is no initial election "that must be preserved through a prophylactic rule against later waivers." It noted that the benefits of the prophylactic rule of Jackson were outweighed by its costs in "hindering “society's compelling interest in finding, convicting, and punishing those who violate the law." The majority observed that, even without the rule of Jackson, defendants are still entitled to the protections of Miranda, Edwards and Minnick v. Mississippi, 498 U.S. 146, 151, 111 S.Ct. 486 (1990). It held that "Jackson not only 'operates to invalidate a confession given by the free choice of suspects who have received proper advice of their Miranda rights but waived them nonetheless,' ... but also deters law enforcement officers from even trying to obtain voluntary confessions."

Justices Stevens, Souter, Ginsburg and Breyer all dissented.