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

The U.S. Securities and Exchange Commission charged four Canadian citizens and two Florida residents for an alleged Ponzi scheme which defrauded more than 3,000 investors across the U.S. and Canada of approximately $300 million, according to an SEC press release. The SEC has filed a complaint alleging that Milowe Allen Brost and Gary Allen Sorenson of Calgary, Alberta, devised the scheme in which the defendants claimed to be an independent financial education which had discovered investment opportunities in certain companies engaged in gold mining. The defendants held seminars in which they promised investors they could earn 18 to 36 percent annual returns. Brost, Sorenson and the other defendants are alleged to have concealed the fact that the companies, Syndicated Gold Depository (SGD) and Merendon Mining Corp., Ltd., were actually shell companies which the defendants owned or controlled. The defendants claimed that Merendon was a successful gold mining and refining company.

Brost and Sorenson allegedly used various aliases, shell corporations and trust agreements to conceal their ownership of SGD. They would transmit investor money to accounts in Europe, Asia and South America. The defendants allegedly used investor monies to make interest payments to other investors, and for lavish personal spending, including for a luxury fishing resort in South America. Sorenson also allegedly took investors on tours of an alleged refinery in Honduras where they were shown the pouring of gold bars.

Larry Lee Adair of Fort Lauderdale, Florida, and Martin M. Werner of Boca Raton, Florida, are also charged in the complaint.
 

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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.

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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.

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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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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.

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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.

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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.

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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.

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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.

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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,

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.

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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.

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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.

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An article on Easter Sunday in the Atlanta Journal Constitution states what most readers will probably guess—that the gloom of the economy and financial desperation are fueling an increase in cases of fraud. The article notes that Ponzi schemes, mortgage fraud and other frauds have increased nationwide as well as in Georgia. It relates some recent noteworthy frauds in the State:

• Georgia’s “Bernie Madoff,” Wendell Ray Spell, who bilked investors out of $60 million in a Ponzi scheme involving financing of construction equipment;
• CRE Capital, an Alpharetta firm which purported to pay investors 10 percent a month from trading U.S. and Japanese currencies, but which turned out to be a Ponzi scheme which defrauded at least 120 investors of more than $28 million. CRE’s President James G. Ossie was indicted in January in the Northern District of Georgia on 10 counts of wire fraud;
• Woodstock, Georgia, real estate agent Joseph S. Jetton was sentenced last year to 14 years in prison and ordered to pay $11.2 million in restitution for mortgage fraud; and
• Georgianne Carlisle, a former insurance company executive from Taylorsville, Georgia, pled guilty last week to embezzling $1.2 million in insurance premiums.

The article references FBI statistics, which relates that pending federal prosecutions for fraud more than doubled from 279 in 2003 to 529 in 2007, and that embezzlement arrests jumped by more than a third over the same period to more than 22,000. It quotes sources claiming that Atlanta is a hot spot for mortgage fraud. Katherine Addleman, Director of the Securities and Exchange Commission’s Atlanta regional office, is quoted as stating that the worsening economy actually serves to expose frauds, since the fraudulent schemes run out of money. The FBI’s most recent Preliminary Semiannual Uniform Crime Report for January to June 2008 showed the rate of larceny-theft down 1.2 percent nationwide, but with an increase of .5 percent in the Southeast. These numbers likely have increased and will undoubtedly increase further if financial desperation from the declining state of the economy grows.

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