Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

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.

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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.

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The culture of corruption of some foreign nations may heavily influence to U.S. companies doing business abroad to play along in order to be competitive. Regardless of the competitive disadvantages, the Foreign Corrupt Practices Act (FCPA) stands as a serious deterrent to engaging in bribery or kickbacks in business transactions abroad. The force of the FCPA was demonstrated once again on Thursday, when two former executives of Willbros International, a subsidiary of Willbros Group, an engineering-construction firm headquartered in Houston, were sentenced in the U.S. District Court for the Southern District of Texas for participating in a $6 million bribe of Nigerian officials to secure a contract for a major natural gas pipeline. As reported by the Houston Chronicle, Jason Edward Steph and Jim Bob Brown had pled guilty to violating the FCPA. U.S. District Judge Sim Lake sentenced Steph to 15 months imprisonment and Brown to a year and a day. Willbros Group has also agreed to pay $32.3 million under a deferred adjudication settlement.

The bribe was made in relation to a $387 million natural gas pipeline project in the Niger Delta known as the Eastern Gas Gathering System. Steph and Brown gave bribes to Nigerian officials to ensure that Willbros was awarded the contract, at one point keeping $1 million in a suitcase.

The prosecution requested consideration for Steph and Brown based on their cooperation with and assistance to the government. Steph told the court that he was doing what his superiors had told him to do.

Brown's attorney pointed out at the sentencing hearing that Brown had been threatened, kidnapped, beaten and shot at while in Nigeria. The court noted the corrupt conditions in Nigeria, observing that one of the Nigerian officials bribed is currently running for office. However, the court stated that it wanted to send a message to the business community in sentencing Steph and Brown.

Another former executive, Kenneth Tillery, remains a fugitive in the case.

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