FraudBaron.com

sec.gov | 7/31/08 | Press Release

The Securities and Exchange Commission today voted unanimously to provide new guidance to public companies about how to comply with the securities laws while developing their Web sites to serve as an effective means for disseminating important information to investors.

Issued in the form of an interpretive release, the SEC's guidance provides helpful information for companies considering providing investors with interactive content on their Web sites, as well as summary information and links to third-party information. The SEC's guidance addresses a recommendation made by the SEC's Advisory Committee on Improvements to Financial Reporting in its February 2008 Progress Report for the Commission to provide clarity on issues and questions that arise in connection with SEC rules against selective disclosure of material nonpublic information.

The Internet has changed significantly since 2000, when the SEC last issued extensive guidance on the use of Web sites and electronic media.

"The last time the SEC issued guidance in this area, the idea of 'social networks' hadn't yet been developed, and creating a social network where shareholders could meet and exchange views was barely imaginable," said SEC Chairman Christopher Cox. "Ongoing developments in technology have increased both the markets' and investors' demand for more timely company disclosure on the Web, and in turn, raised new securities law issues for public companies to consider. The guidance issued today clarifies the rules of the road so investors can gain — quickly and in a cost-effective manner — the benefits of Internet disclosure of the latest information on the companies they own or are considering buying."

The SEC's guidance is divided into four parts:

􀁺 The guidance clarifies how information posted on a company Web site can be considered "public" and provides guidance to help companies comply with public disclosure requirements under Regulation FD.

􀁺 The guidance clarifies the liability framework for certain types of electronic disclosure, including how companies can provide access to historical or archived data without it being considered reissued or republished every time it is accessed. It provides guidance on how companies can link to third party information or Web sites without having to "adopt" that content for liability purposes. It provides guidance on the appropriate use of summary information in the context of the securities laws' antifraud provisions. It also clarifies that the antifraud provisions apply to statements made by the company (or by a person acting on behalf of the company) in blogs and electronic shareholder forums, and companies cannot require investors to waive protections under the federal securities laws as a condition to enter or participate in a blog or electronic shareholder forum.

􀁺 The guidance clarifies that information posted on company Web sites would not generally be subject to rules under the Sarbanes-Oxley Act relating to a company's "disclosure controls and procedures."

The SEC's interpretive release will be effective upon its publication in the Federal Register.

Posted by at 7:55 AM | Permalink

yardkinripple.com | 7/30/08 | Andy Matthews

PILOT MOUNTAIN — A former superintendent of Pilot Mountain State Park is scheduled to appear in court next week on allegations that he embezzled more than $70,000.

Barry Andrew Whitaker, 49, of King, is facing 14 felony counts of embezzlement of state property and three felony counts of obtaining property by false pretenses.

According to arrest warrants and criminal indictments filed in the Surry County Clerk of Court's Office, the embezzlement charges range from a $625 hay spear to more than $20,000 that was supposed to pay for the operation of the park's wastewater treatment plant.  Altogether, the felony charges total $73,483.

Whitaker, who became the park superintendent in 1993, could not be reached for comment Tuesday. Attempts to reach his attorney, David Freeman, were also unsuccessful.

Whitaker, who began work at the park as a ranger, was dismissed last December because of irregularities in contract agreements and state procurements, state officials said at the time.

Matt Windsor succeeded Whitaker in February. Whitaker was arrested the following month and released from custody after posting a $5,000 secured bond. A grand jury indicted Whitaker in June on the felony charges. He is scheduled to appear Tuesday in Surry County Superior Court.

According to court documents, most of the alleged wrongdoings occurred between 2005 and 2007.

However, the felony embezzlement charge involving the park's wastewater plant, which totaled $20,164.50, extends from July 2001 to July 2007.

Arrest warrants also allege that Whitaker diverted $7,620.83 from the park's vending machines over a twoyear period and embezzled $12,682 worth of lime. The three felony obtaining property by false pretense charges involve $7,600.46 of flooring purchased at Burchette and Burchette Flooring Inc., $3,722.05 in kitchen appliances from Boles Hardware Inc., and $15,000 in cabinets.

The remaining embezzlement charges involve a variety of park equipment such as $1,252.31 in tractor tires, a $575 tractor bucket, a $399 tent and a $350 tractor quick connect, court documents allege.

Pilot Mountain State Park, which celebrated its 40th anniversary last week, encompasses 3,651 acres. The Yadkin River section of the park, which was added in 1970, includes 15-acre and 40-acre islands and approximately 300 acres in Yadkin County in the Shoals community.

Posted by at 7:48 AM | Permalink

news.yahoo.com | 7/31/08 | Chelsea Emery

Phillip Bennett, the former head of Refco Inc who was accused of orchestrating a fraud that led to the demise of the commodities broker, has reached a settlement with the U.S. Securities and Exchange Commission, according to court documents.

The SEC's complaint had alleged that Bennett inflated Refco's revenues through various means, including recording fictitious interest income and income from sham foreign exchange transactions.

Bennett did not admit or deny the allegations in the SEC's civil complaint and waived the right to appeal the final judgment, which prohibits him from acting as a officer or director of a public company.

The SEC had asked Bennett to return "unjust enrichment" that he received as a result of his actions, but the settlement did not mention or specify any financial agreements, according to the documents filed in U.S. District Court in Manhattan on Tuesday and signed by Judge Gerard Lynch.

Bennett had built Refco into a global commodities trading empire only to see it unravel in 2005 after the company disclosed an accounting deception.

In February, the former chief executive pleaded guilty to 20 counts of fraud, conspiracy, money laundering and lying to auditors and others.

Bennett was sentenced on July 3 to 16 years in prison for fleecing investors of more than $2.4 billion in a fraud that destroyed the world's largest independent commodities broker.  Refco filed for bankruptcy in 2005.

Posted by at 7:38 AM | Permalink

reuters.com | 7/30/08 |  John Poirier

WASHINGTON (Reuters) - E*Trade Financial Corp agreed to pay $1 million to settle allegations that two of its brokerage firms failed to follow U.S. rules designed to thwart money laundering, securities regulators said on Wednesday.

E*Trade Clearing LLC and E*Trade Securities LLC, without admitting or denying wrongdoing, agreed to settle an administrative proceeding brought by the Securities and Exchange Commission, the agency said.

The SEC alleged that from October 2003 to June 2005 the firms failed to properly document and verify the identities of more than 65,000 customers as required by several rules, including the U.S. Bank Secrecy Act.

According to the SEC order, the firms failed to identify the secondary holders in joint accounts as required by those regulations.  E*Trade is among many financial institutions such as banks, credit unions and casinos required to establish effective anti-money laundering programs under the BSA that call for regulatory reports if certain amounts of money are transacted.

Those rules are enforced by a host of U.S. agencies, including the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

"A compliance lapse of this type has the potential to undermine the nation's anti-terrorism and anti-money laundering efforts," Linda Thomsen, director of the SEC's division of enforcement, said in a statement.

SEC officials said the company did not take corrective steps until two years after a key compliance deadline.

"E*Trade fully supports the SEC in its efforts to curb the exploitation of the financial services industry by those who would seek to do harm to others," company spokeswoman Pam Erickson said.

The company, which has been assisting the SEC, other regulators and law enforcement officials, discovered the lapse in 2005 and conducted an internal audit. The results were also voluntarily reported to the SEC and other regulators in 2005.

The failure was systemic, and a lack of a cohesive organizational structure, adequate management oversight and communications among personnel in business groups contributed to the lapse, the markets watchdog said.

The company has agreed to a censure and will hire an independent consultant to verify its compliance program, the SEC said.

Posted by at 7:33 AM | Permalink

fbi.gov | 7/29/08 | Press Release

Jacob Kim, 53, pleaded guilty before U.S. District Judge Peter G. Sheridan to conspiracy to commit bank fraud. Judge Sheridan continued the defendant’s detention and scheduled sentencing for Nov. 6.

Kim, who was president of American Macro Growth (AMG) in Palisades Park, was indicted in June 2007 along with four AMG employees and eight AMG clients. Kim was a fugitive from justice until arrested on May 5 while taking swings at the Alley Pond Golf Center in Queens, N.Y.. The arrest capped off an intensive fugitive hunt that involved law enforcement personnel from the FBI, Federal Deposit Insurance Corporation and Bergen County Prosecutor’s Office.

At his plea hearing, Kim admitted that he engaged in a conspiracy with AMG employees and clients to fraudulently obtain millions of dollars in home equity and business lines of credit from at least 16 different lenders in northern New Jersey between February 2004 and November 2005. Kim specifically admitted receiving $59,519 in commission payments from one AMG client for assisting the client in obtaining lines of credit from 10 different banks, which totaled approximately $1.35 million, by using the same property as collateral for each of the loans. Kim also admitted that he obtained falsified income tax returns and submitted those returns to the banks on behalf of his clients. He further admitted instructing his employees in the means and methods of perpetrating the scheme.

Kim admitted that AMG and its clients executed the scheme by closing on multiple home equity lines of credit, or HELOCs, in a short period of time so that the earlier lenders’ security interests would not be publicly recorded at the time that later lenders closed on subsequent loans. The scheme effectively stripped lenders of security for the loans.

Ten people – all clients of Kim and AMG – pleaded guilty to conspiracy in January and March of this year. Since that time, three additional defendants also have pleaded guilty.  (Excerpt)

Posted by at 10:04 AM | Permalink

chron.com | 7/29/08 | Kristen Hays

The amount Lou Pai, 60, agreed to pay is the highest Enron-related settlement reached between an individual and the Securities and Exchange Commission, and the agency said it is one of the highest individual settlements in its history.

Other SEC fines gained in numerous Enron settlements since 2002 range from $30,000 to almost $2 million for individuals, though some higher amounts were split between the SEC and the Justice Department.

But Pai's settlement is a fraction of the $270 million or more that shareholders who sued him and other executives say he gained from stock sales.

"I'm just shaking my head. That makes me sick to my stomach," said Diana Peters, one of the thousands of employees left jobless when Enron collapsed in December 2001, months after Pai quit the company.

"He'll just move down the road and it won't even be a drop in the bucket for him," she said. "But if you've got that kind of money, I guess you can afford to buy yourself out of anything."

Pai's longtime attorney, Roger Zuckerman, noted that the deal came more than seven years after Pai's mid-2001 stock sales that were at the crux of the SEC's allegations.

"Mr. Pai is pleased to conclude his negotiations with the SEC in a settlement that involves no admission of wrongdoing," Zuckerman said.

Pai, who was chairman and chief executive of Enron's retail energy division, Enron Energy Services, was among the more colorful yet elusive figures at Enron.

He was known to frequent strip clubs as part of enjoying the great wealth he gained from the company's generous bonuses and stock options, a former employee told the Chronicle for a story in 2003. Yet he avoided the spotlight while at Enron, and has done so since he resigned from the company in May 2001.

The bulk of Pai's stock sales occurred as part of a divorce settlement more than a year before Enron crumbled. Pai has never been charged with crimes, and earlier this year was dropped as a defendant from a massive shareholder lawsuit in Houston.

The only Enron-related agreement with an individual higher than the one with Pai is the $45 million criminal fine former Enron CEO Jeffrey Skilling agreed to pay in 2006 after a jury convicted him on 19 counts of conspiracy, securities fraud, insider trading and lying to auditors.

That money, which is earmarked to go into a $7.2 billion pool of civil lawsuit settlements, is sitting untouched until his appeal is complete. It could be reduced if any of his convictions should be overturned.

Skilling, who is serving a 24-year sentence at a Minnesota prison, is awaiting word on his appeal from a panel of the U.S. 5th Circuit Court of Appeals.

The stock sales at the heart of the SEC complaint that Pai settled on Tuesday took place from May 18 to June 7, 2001. The SEC said he sold nearly 573,000 shares at $53.78 based on insider information that a division he once ran had financial troubles unknown to investors.

Specifically, the SEC complaint said Pai knew that Enron Energy Services faced substantial losses in the first quarter of 2001. The complaint notes that Enron's CEO and senior accounting personnel, along with Enron Energy Services management, "secretly revised" division reporting to avoid disclosing those losses. That revision came about by moving the retail division's trading arm into Enron's larger trading franchise, Enron Wholesale Services.

That action received much focus in the 2006 fraud and conspiracy trial of Skilling and Chairman Ken Lay. Skilling testified that the retail trading arm was moved into the larger division to combine like functions for efficiency's sake.

But David Delainey, Pai's successor as the head of Enron Energy Services, testified that the move was intended to hide millions of dollars in losses, the disclosure of which could threaten Enron's stock price and credit rating.

Richard Causey, then Enron's chief accounting officer, pleaded guilty to one count of securities fraud stemming from the decision to move the retail trading function into wholesale.

Causey is serving a 5½-year prison term at a federal lockup in Bastrop near Austin. Delainey, who pleaded guilty to one count of insider trading in 2003, served nine months of a 2½-year term at a U.S. prison before being transferred to a prison in his native Canada

Posted by at 9:55 AM | Permalink

fool.com | 7/29/08 |Bill Mann and Tim Hanson

We consider Mark Cuban a friend of the Fool. He's a passionate businessman and basketball team owner, a fiery commentator, and a generally interesting guy. But he's also prone to making bad decisions (see the Mavericks late-season trade for Jason Kidd) and even engaging in some questionable behavior.  July 23 provided an example of that latter point. His investigative financial blog Sharesleuth.com -- one that's dedicated to "exposing securities fraud and corporate chicanery" -- perhaps revealed that it's engaged in some chicanery of its own.

The crux of Carey's argument was that China Fire CEO Brian Lin had linked up with stock promoter Martin Sumichrast (a character with an indisputably checkered past) and was thus guilty by association. That guilt was confirmed, in the eyes of Sharesleuth, by a series of less-than-forthright disclosures by Lin and China Fire about the qualifications of a company director and the ownership interests in the company.

After the article was published, the stock promptly dropped more than 65%.

Mr. Carey also disclosed that Mr. Cuban had taken a short position in China Fire stock prior to the publication of Mr. Carey's research (as is the policy of Sharesleuth).

But our understanding of the website's strategy was that Mr. Cuban would short these stocks to zero or until resolution of the problems that prompted the Sharesleuth report. For example, according to Sharesleuth, Mr. Cuban remains short Xethanol and has profited as that stock has dropped from $12.65 per share to just $0.47 today.

In the case of China Fire, however, an updated post of Sharesleuth reveals that Mr. Cuban "has no position in any of the stocks mentioned in this story." In other words, he's already covered his short … a mere four months after Mr. Carey's attack on the company was published. The stock certainly hasn't gone to zero and Brian Lin remains the company's CEO.

We believed that China Fire had the potential to capitalize on an enormous growth opportunity as its home country enforces broader safety standards in the workplace. We also liked that the stock was trading for a compelling price.

By covering his short position in just a few months' time, Mr. Cuban likely made good money on this trade. Since China Fire has seen only a string of good news, including new contracts, positive earnings surprises, raised guidance, and share buybacks -- both before and after Sharesleuth's article ran -- it appears that Mr. Cuban's profits were earned solely from his website's attack on the stock. That, to us, smacks precisely of the kind of manipulation and executive enrichment at the expense of public shareholders that Sharesleuth itself was supposed to root out. And we have a  real problem with that.

While Sharesleuth could call itself a blog that should largely go unregulated, its opinions, as well as those of Mr. Carey, carry significant influence in the investor community. All of the publicly traded stocks Sharesleuth has profiled, for example, dropped significantly on the day Sharesleuth published its article. We believe Sharesleuth should hold itself to higher standards of accountability and transparency.  (Excpert)

Posted by at 9:50 AM | Permalink

 bizjournals.com | 7/30/08 | Staff Writer

The Securities and Exchange Commission has filed suit against two Denver companies and a handful of individuals, claiming they participated in a fraud scheme involving nonexistent high-yield bank notes.

According to the SEC’s complaint, the defendants engaged in what’s called a “prime bank fraud scheme.”  “While the details of the schemes vary, most involve the false premise that major international banks secretly buy and sell high yield bank instruments off the books to private traders who are allowed to buy the instruments at a discount and resell them for extremely high, unrealistic rates of return,” the complaint states.

Between April 2005 through at least July 2007, the defendants raised more than $5.1 million from more than 100 investors across the country, according to the SEC’s complaint. They told investors their money would be used to trade in European medium-term notes, described as investment-grade securities issued by reputable European banks and financial institutions.

Investors were promised returns of 200 percent to 1,000 percent, the SEC alleges.  But the medium-term notes program didn’t exist, and investors’ money was misappropriated.

“Investors, with the exception of those who received Ponzi scheme-like payments ... lost their total investments,” the SEC alleges in the complaint.

Posted by at 9:27 AM | Permalink

independenttribune.com | 7/29/08 | Josh Lanier

CONCORD - Former Carolina International School financial officer Sandra Vielbaum, who was charged with embezzling more than $137,000 from the Harrisburg school, pleaded guilty to eight counts of embezzlement Monday afternoon.

Vielbaum will serve 24 to 32 months in prison - four, six-to-eight month sentences to be served consecutively, followed by 24 to 32 months under supervised probation. Vielbaum also will be made to pay $25,378.35 in restitution to the school for money she embezzled that was not reimbursed by the school’s insurance company. She will begin making payments when she is released from prison.

Vielbaum was charged with embezzlement greater than $100,000, but pleaded guilty to eight smaller counts of embezzlement.

“We’re glad to see this is over so we can move forward with the school,” said Connie Byrne, a grandparent of a rising CIS sixth grader, after the trial. “We’re glad this is behind us.”

Byrne addressed Superior Court Judge Richard Klass before sentencing was imposed and asked him to consider Vielbaum’s “complete violation of trust,” adding that her betrayal went beyond the embezzlement. Another parent and a school administrator that spoke before sentencing expressed similar sentiments.

“Money owed in back taxes, money owed to vendors, and the mismanaged funds is something we’ll be able to overcome,” Byrne said, “but the violation of trust is too much.”

Over the course of nearly two years, Vielbaum wrote 25 checks to her personal checking account or personal businesses, such as SLV Consulting, Assistant District Attorney Brandy Cook told the court, reading from police investigation notes. The largest deposit Vielbaum made at one time was $7,000.

Vielbaum was arrested Dec. 19 after then-school director Richard Beall discovered accounting discrepancies and called police. Since her arrest, Acadia NorthStar, an accounting firm hired to evaluate the school’s finances, found nearly $500,000 of school funds had been mismanaged, causing faculty layoffs and the elimination of some future projects. Some parents withdrew their children from the school, citing insecurity in the school’s finances.

Tim Rowe, a CIS board member, read a statement from Beall, who resigned in June, saying the money taken and mismanaged was predominantly donations from parents that would have been used to cover operating costs and purchase school lunches and uniforms for students.

In her guilty plea, Vielbaum accepted responsibility for the embezzlement but stopped short of admitting culpability for the mismanaged funds.

Vielbaum remained stoic through most of the 30-minute hearing but began crying when she read a prepared statement of her guilt. She faced a group of CIS parents and administrators seated in the front row of the gallery as she spoke.

Her court-appointed lawyer, Barrett Poppler, said Vielbaum expressed remorse for her actions and was “deeply sorry” for the trouble she had caused. He added the embezzlement wasn’t a complex scheme but more of a “simple paper trail.” Poppler said the embezzlement had become a “kind of addiction” for Vielbaum but that she had accepted responsibility since first being questioned by police. He said the money Vielbaum embezzled was used to pay off legal expenses for her sister and to purchase things like furniture.

All of the money Vielbaum took is gone, Poppler said.

Vielbaum currently has an outstanding 2003 warrant for fraudulent schemes in Arizona, but it’s the discretion of Maricopa County Attorney’s Office if officials there will prosecute the 57-year-old. Calls to the Maricopa Attorney’s Office were not immediately returned.

Vielbaum will be turned over to the Department of Corrections to serve her sentence in the coming weeks, but it is unclear when the transfer may occur, said Cabarrus County Sheriff’s Office Chief Deputy Paul Hunt. She will be sent to one of the state’s six corrections facilities for women.

Since Vielbaum’s arrest, several changes have been made to how much access and control financial officers would have over the school’s finances to prevent such a pervasive and continued theft operation, CIS officials previously said After imposing his sentence, Judge Klass wished Vielbaum luck, adding: “It looks like you messed up this school pretty bad. Do your time, get out and start making restitutions.”

Posted by at 7:49 AM | Permalink

reuters.com | 7/29/08 | Martha Graybow

A former JPMorgan Chase & Co private banking executive has been indicted on charges of embezzling about $5.4 million, according to federal court papers.

The indictment, filed in U.S. District Court in Manhattan, accuses former executive Hernan Arbizu of 15 criminal counts. Arbizu was arrested on Monday in Argentina, according to a person close to the matter who spoke on condition of anonymity.

The indictment contends Arbizu engaged in a scheme to withdraw funds from bank customers without their knowledge through the use of unauthorized wire transfers. The U.S. government is also seeking the forfeiture of the roughly $5.4 million it contends was embezzled.

The name of Arbizu's attorney was not immediately available. JPMorgan said in a statement that it "appreciates the cooperation and the prompt joint action of the Argentine and American authorities. However, the firm is unable to comment further due to pending litigation."

Last month, the investment bank's JP Morgan Securities unit sued Arbizu, accusing him of sharing sensitive information with other firms. The court papers in that case said Arbizu had lived in Connecticut while employed by JPMorgan, but fled to Argentina before being fired in June.

Arbizu had been responsible for handling business involving high-net-worth individuals in Argentina and Chile for JPMorgan, the lawsuit said.

Posted by at 7:44 AM | Permalink

postcrescent.com | 7/28/08 | Staff Writer

APPLETON — Prosecutors say an Appleton woman who was a board member of Fox Valley Unified Soccer Club stole as much as $63,000 of the club’s fund.

Rhonda L. Graphos, 41, 1737 N. Ballard Road, was charged Monday in Outagamie County Circuit Court with two counts of embezzlement — charges that carry a maximum penalty of 20 years of prison and extended supervision.

She was released on a signature bond with further proceedings set for Aug. 14.

Graphos handled the funds for the club in 2007 when coaches and referees complained they weren’t getting paid and checks were bouncing, according to the criminal complaint.

Graphos resisted requests from other board members to provide them with bank statements. When she was questioned about the status of the accounts, she told board members that their funds were accessed by a gang from Milwaukee and she was working with police to resolve the matter.

Board members then found out Graphos had opened a second account with soccer club funds — an account to which only she had access.

When board members accessed the records, they found that Graphos had converted between $50,000 and $63,000 to her personal use, the complaint said.

Posted by at 7:38 AM | Permalink

pe.com | 7/28/08 | Leslie Berkman

A US. District Court judge on Monday set an Aug. 18, 2009, trial date for three Murrieta men that the Securities and Exchange Commission has accused of operating a real estate scam that defrauded at least 95 investors of more than $11 million and forced many into foreclosure.

Judge Virginia A. Phillips chose that date to hear the SEC case that accuses James B. Duncan, Hendrix Montecastro and Maurice E. McLeod of violating federal securities laws and seeks civil penalties and restitution of "ill-gotten gains" derived from the scheme.

Also named as defendants are Pacific Wealth Management, Stonewood Consulting Inc. and Total Return Fund, all companies that Duncan, Montecasto and McLeod controlled.

Other defendants who are not accused of wrongdoing but who the SEC says obtained money through the investment scheme that the SEC wants returned are Christopher Oetting, Anthony Contrares and Biocybernaut Institute Inc.

The complaint says Oetting, who lives in Palm Desert, received at least $10 million from entities related to the alleged fraud; Contrares, a Murrieta resident, received at least $2.1 million, and Biocybernaut Institute, a Bay Area company that uses biofeedback to improve brain performance, received more than $700,000.

During the scheduling hearing in Riverside, SEC lawyer John B. Bulgozdy said the SEC recently learned from a witness that the defendants destroyed evidence. He said the witness testified that about February 2007 or late 2006 the defendants gathered documents from Stonewood Consulting and perhaps from Pacific Wealth Management and took them to a defendant's home and burned them. Also  Bulgozdy said some computers taken from these firms may have been broken, according to the witness Bulgozdy said the SEC is further investigating the witness's report.

Also he told the court the SEC is making progress in settlement negotiations with two of the defendants he declined to identify. Lawyer Paul Runes, who represented McLeod at the hearing, said McLeod was one of them.

Duncan, Montecastro and McLeod are accused of directing investors to purchase more than $118 million worth of homes, falsifying loan applications so they would afford to buy multiple houses.

According to the lawsuit, the defendants would obtain an inflated appraisal on the houses and pay themselves a fee from the excess mortgage proceeds.

The complaint said the defendants agreed to make the monthly mortgage payments on the houses only to entice other investors. When the mortgage payments ultimately stopped amid a cooling real estate market, the investment houses fell into foreclosure.

About 20 angry investors, wearing distinctive orange t-shirts, attended Monday's hearing. One of them, James Lheureux, said he believes the defendants have been able to hire "high-priced lawyers"' with the victims' money and he would like to see them prosecuted criminally. "We are looking to put them in jail," he said.

No one involved in the alleged scam has been criminally prosecuted. However the organization is under investigation by the Riverside County District Attorney. Also the Federal Bureau of Investigation confirmed that it searched the Murrieta homes of Duncan and Montecastro in February as part of a criminal investigation. On Monday Runes told the court that in June the agency also served a search warrant on Oetting.

Posted by at 7:30 AM | Permalink

bizjournals.com | 7/28/08 | Staff Writer

A federal grand jury in Tampa returned a 47-count indictment against three Tampa Bay area businessmen and a lawyer, accusing them of crimes related to a scheme to defraud seven Federal Deposit Insurance Corp. insured banks.

A media release from U.S. Attorney Robert E. O’Neill identified those indicted as:

• John A. Yanchek, a Sarasota lawyer who represented Husani in some real estate deals; • Larry P. Nardelli, a Tampa businessman associated with various area real estate entities.

The grand jury indictment charges the four with conspiracy, making false statements in connection with bank loans and money laundering, the release said.

The FBI began reviewing land deals involving Husani in 2006 as part of a nationwide mortgage fraud investigation called Operation Malicious Mortgage that has resulted in arrests in Florida.

Husani could not be reached. He reportedly left the country after the FBI began its investigation.

A real estate investor from Venezuela, Husani purchased land parcels in Sarasota and Manatee counties between 2004 and 2006 for $42 million and sold them to Tringali and others for nearly $100 million while obtaining millions in loans from various banks.

Posted by at 7:27 AM | Permalink

centralvalleybusinesstimes.com | 7/24/08 | Anderson

Nancy Frances Fiske, 57, of Anderson has been charged with mail fraud by siphoning more than $1.3 million from her employer, Jerry L. Knighten Construction, Inc.

For more than five years she wrote over 500 business checks from the company’s bank accounts that were made payable to others for her own benefit, such as for her personal home improvements, credit card payments, and other expenses of her and her family members, according to Assistant U.S. Attorney Matthew Stegman, who is prosecuting the case.

Prosecutors say it added up to $1,352,882.  Ms. Fiske’s next court appearance is scheduled before U.S. District Court Judge Garland Burrell Jr., on Sept. 5.

Posted by at 12:16 PM | Permalink

lawfuel.com | 7/26/08 | Staff Writer

On July 23, 2008 Sheri Dawn Blackburn, a fugitive for nearly five years, pled guilty to one count of theft or embezzlement in connection with a health care benefit program, in violation of 18 U.S.C. 669, in U.S. District Court in Phoenix. Blackburn, 45, a former resident of Phoenix, had been indicted in August of 2003 for one count of theft in connection with a health care benefit program and one count of false statements relating to health care matters, but never appeared to answer these charges in court, and subsequently became a fugitive.

The case against Blackburn was based on an investigation by the U.S. Department of Labor’s Employee Benefits Security Administration, which indicated that in 1998 Blackburn was hired by Eldorado Claim Services, a benefit claims processing company, to supervise health plan claims processing. In this position, Blackburn processed and paid medical claims for the health care plan sponsored by Knipp Bros., a commercial construction company that was located in Glendale, Arizona. While performing this work, Blackburn created a fictitious physician identity, Doctor Joseph Patrick, and paid claims to this fictitious individual for services that were never rendered.   Blackburn then cashed a total of 14 checks that were issued to this fictitious identity, which totaled $88,441. 

Following her failure to appear to answer the indictment, Blackburn evaded prosecution for almost five years. In March 2008, investigators with the Employee Benefits Security Administration located Blackburn in Iowa, and alerted the U.S. Marshals Service. Blackburn was apprehended in Eddyville, Iowa, and was subsequently extradited to Arizona, where she has remained in federal custody.

A conviction for theft or embezzlement in connection with a health care benefit program is punishable by a maximum fine of $250,000, a maximum term of imprisonment of 10 years, or both, and a term of supervised release of three years. In determining an actual sentence, Judge Roslyn O. Silver will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.

Sentencing is set before Judge Silver on October 6, 2008.  The investigation in this case was conducted by the Los Angeles Regional Office of the Employee Benefits Security Administration. The prosecution is being handled by Howard Sukenic, Assistant U.S. Attorney, District of Arizona, Phoenix.

Posted by at 12:11 PM | Permalink

oregonlive.com | 7/26/08 | Associated Press

A Clackamas County judge has sentenced the former bookkeeper for the Estacada Fire District to more than 10 years in jail for embezzling $1.9 million in hundreds of transactions.

She was ordered to pay restitution and has turned over her house and  savings and agreed to cash in her retirement account.  Fire Chief Allen Hull said further investigation might have revealed theft closer to $3 million.

Investigators say the money was stolen in some 900 fraudulent transactions  over nine years.

Posted by at 12:07 PM | Permalink

Portland police are investigating allegations by a nonprofit agency that a former employee and Windham resident embezzled nearly $500,000 over an eight year span.

The Peregrine Corp., which does business as the Project for Supporting Living, alleges in a lawsuit filed in Cumberland County Superior Court that Kristin Johnson, 39, used her access to the organization's bookkeeping records to steal at least $478,777. Johnson worked as a bookkeeper, financial manager and financial director at the organization from the early 1990s until she left the job in April.

The Peregrine Corp. filed the suit July 3 after an internal investigation revealed numerous voided checks which were later found to have been made out to Johnson or to false vendors. The results of the review have now been turned over to Portland police, who are investigating.

According to affidavits filed in the lawsuit, Johnson, who had sole access to Peregrine's financial records, voided checks, then made out those checks to herself as well as bogus vendors. She would then remove or destroy monthly bank statements and falsify reconciliation reports to hide her theft.

Johnson resigned from Peregrine earlier this year to take a job with Choices Are For Everyone, a similar nonprofit agency run by her husband, Sam Johnson.

Posted by at 12:04 PM | Permalink

dallasnews.com | 7/25/08 | Jason Trahan

An FBI financial analyst from Dallas and her son pleaded not guilty Thursday to charges that they committed wire fraud and tax evasion for falsifying paperwork on several high-dollar vehicle loans.

The bureau placed Deborah Lee Stinson, 55, a 20-year FBI support employee, on administrative leave earlier this year after the allegations surfaced, officials said. She and her son, Mark Alan Stinson, 27, also of Dallas, turned themselves in Thursday after they were indicted the previous day.

Prosecutors say that last year, Ms. Stinson was given large amounts of cash by her son that she used to obtain loans for more than a quarter-million dollars' worth of vehicles. She falsely claimed they were hers, authorities allege.

The vehicles, all 2007 models, included a Mercedes E350, a Mercedes S550, a Cadillac Escalade and a Honda racing motorcycle.  Authorities did not comment on where Mr. Stinson got the tens of thousands of dollars used in the alleged straw purchases, but said that no FBI money was involved and no cases were compromised.

Mr. Stinson was cleared by a Dallas County grand jury in the Aug. 1 death of 24-year-old Mario Moreland. Mr. Moreland was with a group of home invaders that broke into Mr. Stinson's northeast Dallas home last year. Mr. Stinson shot at the intruders as they left, and Mr. Moreland died.

Dallas police detectives found several guns inside Mr. Stinson's home and also noticed several luxury vehicles there registered to Mr. Stinson's mother, who they found worked for the FBI.

Posted by at 11:58 AM | Permalink

venturacountystar.com | 7/24/08 | Staff Writer

A woman who led the Coalition to End Family Violence was arrested Wednesday on suspicion of embezzling more than $100,000 from the organization, Ventura County District Attorney Greg Totten said.

Cherie Lou Duval, 40, was booked into Ventura County Jail Wednesday on suspicion of grand theft, auto theft and false personification. She was being held this morning in lieu of $50,000 bail.  Duval has served as president and CEO of the non-profit Coalition to End Family Violence. Duval turned herself in Wednesday after learning that authorities were looking for her, Totten said. She is scheduled to appear in Ventura County court this morning.

Posted by at 3:31 PM | Permalink

miamiherald.com | 7/21/08  | MATTHEW HAGGMAN, ROB BARRY AND JACK DOLAN

Gary Kafka, former body builder with a long rap sheet and violent past, wrote millions of dollars in mortgages in South Florida without ever applying for a state license.  Fresh out of prison after serving time for bank fraud, he never went through a criminal background check before selling loans. He never took a competency exam.

He never had to.

More than half the mortgage professionals registered in Florida -- 120,563 -- entered the industry this decade without being licensed by the state, The Miami Herald found.  Known as loan originators, they perform the same job as mortgage brokers but aren't bound by the same rules.

Time and again, industry leaders asked Florida regulators to bring this group under their watch by imposing mandatory licensing. But regulators refused to press for any changes, claiming that lawmakers would never approve.

The state's refusal proved costly during the biggest housing boom in Florida history: Thousands of loan originators entered the industry with criminal histories, state records show.

While The Miami Herald found breakdowns in the state's licensing system for mortgage brokers, the lack of controls over originators created even more problems for an industry steeped in the highest fraud rate in the nation.

The special group was created by state lawmakers 17 years ago to make it easier for lenders to hire people as the industry was growing.

But in the past eight years, more people with criminal records jumped into the business as loan originators than as any other category of mortgage professionals.

``It was pretty easy for someone to enter the industry because there were no standards. If there's no one policing, anyone who wanted to join the industry could do so.''

A review of thousands of pages of court documents, state industry reports, internal e-mails and police reports shows that from 2000 to 2007:

• 5,306 people with criminal histories became loan originators -- a rate of nearly two a day. Worse, those include 2,201 who had committed financial crimes, such as fraud, money laundering and grand theft.

• Even large lenders hired loan originators with criminal backgrounds. The Miami Herald found that in at least 30 companies with 50 or more employees, more than one in five originators had a criminal record.

• Nearly two dozen people stripped of their licenses as mortgage brokers were able to sidestep regulators by becoming loan originators. Nine others who were denied licenses because of prior crimes or regulatory violations were able to do the same.

''It's a huge hole,'' said Ronald Brenner, a former Florida mortgage regulator who once led the agency's Miami office. ``You could get the worst thief in the world, a fraudster to the nth degree, and when he gets out of jail he can come work at your mortgage operation, and if he doesn't have a broker's license, all the better.''

Kafka, 48, joined America's Best Lending in Boynton Beach in 2004 after living in a halfway house. While his federal probation officer said in court records that Kakfa should not be working in the mortgage industry, he went on to join two other firms without disclosing his past. Two years after he began to peddle mortgages, he was convicted of cheating lenders of $2.7 million in loans at America's Best Lending by inflating incomes, boosting assets and misrepresenting other finances.

''You never would have guessed it,'' said Philip Sencer, who hired Kafka at a Wellington firm in 2006. ``He was the type of guy you'd invite to your home for a barbeque.''

State regulators say they don't license loan originators, but they regulate those who hire them: mortgage lenders. The 1991 law allowing originators made it clear: The burden is on the lenders to ensure that everyone follows the law.

If a lender refuses to act on complaints against a loan originator, the state can discipline the lender, said Terry Straub, recently appointed director of the Office of Financial Regulation's Division of Finance.

''We hold them accountable,'' he said. But The Miami Herald found that in at least nine major cases when originators were arrested for mortgage fraud, no action was taken against their lenders.

While Florida requires lenders to report the names of their loan originators every quarter, the newspaper found that hundreds of companies don't follow the law. In the first half of 2005 -- during the peak of the boom -- 355 didn't file required reports, according to the state's own records.

Falk, the former president of the National Association of Mortgage Brokers, said the lack of reporting in the state system allows too many gaps.

The lack of tracking leads to even more problems: Without any central registration and with no requirements for entry, loan originators with criminal histories can move from firm to firm without divulging their past. There is no state law requiring lenders to check their background.  If they had, they would have found that Kafka spent nearly three years in federal prison for loan fraud in 1999 and illegally keeping an arsenal of guns and ammunition while a resident of Ocean Ridge, near Boynton Beach.

Sencer, who hired Kafka at Financial Security in Wellington, said he learned of Kafka's police record only after federal Alcohol, Tobacco and Firearms agents showed up at his office in 2005. Sencer said that when he met with prosecutors, 'they told me, ``You got duped.' ''

Assistant U.S. Attorney Neil Karadbil, who prosecuted Kafka, said the former loan originator was able to conceal his past while peddling loans, partly because he didn't have to submit to criminal background checks.

''There has to be some way to know in this industry whether you're dealing with a convicted felon,'' Karadbil said. ``At least borrowers or employers should know that.''

Even before his latest conviction, Kafka had a criminal record dating to 1977, including 15 arrests and four felony convictions, court records show. The charges include grand theft, burglary and possession of contraband in prison. He is now back in prison -- serving 57 months -- for the most recent mortgage scheme.

Harry Rolle was a convicted felon who had declared personal bankruptcy three times before he became a loan originator in 2001 for International Lenders of South Florida in Oakland Park.

Within months, he found his first victim: Elsa Erarte, a single mother who worked at Walgreens in Miami. Rolle pocketed a $16,000 down payment she had given him while he was supposed to help her  find a home, saying it was nonrefundable.

She sued Rolle in Miami-Dade Circuit Court and got her money back in a judgment in 2004. ''It was all the money she had,'' recalled her attorney, Joel Friedman. ``She had spent years saving it.''  But the court case didn't stop Rolle.

The 53-year-old loan salesman went on to cheat four more borrowers through a variety of means:  pocketing their down payments, skimming from their loans, and selling their homes without their approval, court records state.

''The guy was a consummate con artist,'' said Joseph Wilson, an investigator for the Office of Financial Regulation, who referred the case to police. ``He had the ability to gain people's confidence by saying what people wanted to hear.''

In 2005, the Miami-Dade County state attorney's office finally prosecuted Rolle as a habitual offender on fraud charges -- for ripping off Erarte and others. A judge gave him a year in jail. (Excerpt)

Posted by at 12:43 PM | Permalink

istockanalyst.com | 7/22/08 | Francine Sawyer

Susan Manning Barney made her first appearance in Craven County Superior Court on Tuesday after a grand jury indicted her on four counts of embezzling a total of $760,657 from a church.

District Attorney Scott Thomas said there could be another indictment involving additional stolen money, which would bring the total to $929,137. Barney has paid $45,000 in restitution to Garber United Methodist Church.

That money came from equity in her house. In court Tuesday, Thomas said restitution payments stopped after the State Bureau of Investigation was asked to investigate.

If she is convicted, Barney could be sentenced to 97 months on each of the four counts, or a total of 32 years and four months in prison.

Superior Court Judge Ken Crow set the bail at $1 million. That includes $200,000 of secured and $800,000 of unsecured bail.  She made no comment during the proceedings except for telling the judge that she understood the charges.

The alleged embezzlement time line determined by the SBI was September 2001 to January 2008.  Barney is 51. She worked for the church for 13 years. The first five years she worked part time and the past eight years she worked full time in the finance department of the church.

Barney's husband, Rick Barney is a seasoned law enforcement officer and an investigator with the Craven County Sheriff's Office.

He was at his wife's side with his hand on her shoulder as she sat and dabbed her eyes with tissue during the proceedings.

Craven County Sheriff Jerry Monette told the Sun Journal in May that Rick Barney was given three independent polygraph examinations and "he passed them all."  The sheriff said the examinations showed that Rick Barney did not know about his wife's embezzlement.

Hill said that his client acknowledged her guilt. He said much of the money went to her son's drug addiction. Rick Barney said after the story broke in February that their son was hooked on heroin and had been in and out of rehab.  Her son is in a rehabilitation center in Greenville, S.C.

"I want to be sure that there is not a pile of money hidden somewhere. There is no secret pile of money outside the U.S., is there?" Crow asked.

Crow wanted to know if there was any offshore account in the names of Barney. Thomas said none had been found.

"I am concerned that the Barneys have hired an attorney. Mr. Hill does not come cheaply," Crow said before setting the bond.

Several members of the administrative council of Garber United Methodist Church declined to comment and referred all call to New Bern lawyer Gary Clemmons. Clemmons was hired by the church to look out for Garber's interest. He is not a member of the church.  Reached at his office, Clemmons said he had no comment.

Church officials learned about the missing money in late January. They confronted Barney in February and placed her on leave of absence without pay. She then resigned.

Members were told in a letter that the money taken was hidden from the Finance Committee and Administrative Council.

Posted by at 12:36 PM | Permalink

webcpa.com | 7/23/08 | Staff Writer

Joe Francis, founder of the Girls Gone Wild video series, pleaded not guilty to two counts of federal tax evasion, saying he was being victimized by the Internal Revenue Service's whistleblower program.

Francis claimed over $20 million in phony business expenses on his corporate tax returns, according to the indictment, including $3.8 million for a house in Mexico and $10.4 million in consulting charges. He allegedly transferred $15 million from an offshore bank account to a California brokerage account named after a Cayman Islands business he controlled.

"This ain't Girls Gone Wild," he said to the LA Times. "This is the IRS gone wild." Bernhoft has also defended Wesley Snipes against tax charges. Francis's representative at Mantra Films did not immediately respond to a request for comment.

Francis has already served 11 months on tax-related charges. In March, he pleaded no contest to child abuse and prostitution charges in Florida after underage girls appeared in his racy videos.

Posted by at 11:52 AM | Permalink

cfo.com | 7/23/08 | Stephen Taub

The former CFO of a company that produces electronic databases of archived information from publishers settled charges made by the Securities and Exchange Commission that, with the use of spreadsheet aids, he made fraudulent monthly and quarterly and accounting entries for more than five years.

As part of the alleged scheme, Scott Hirth, who was vice president of finance and CFO of the information and learning division of ProQuest Company from 1999 through 2005, created false documentation to back up the balances in accounts he allegedly manipulated, according to the SEC. His account-reconciliation spreadsheets, for instance, contained "hidden rows" so that false account entries didn't show up when they were printed in hard copy, according to the complaint.

The former finance chief also allegedly covered up false information by rendering it invisible through the use of "white font," or white-colored text, in the spreadsheets, the commission charged.

"Hirth’s deceptive intent in carrying out his fraudulent accounting scheme is further evident in a number of notes he authored," according to the SEC. The notes referred to being "caught" for accounting problems, "cooking the books," the possibility of going to "jail," and the accounting scandals at "Enron and Worldcom," the commission charged.

The motive for the fraudulent scheme was Hirth's desire to rise through the management ranks to become the president of the division and, eventually, the chief executive officer of ProQuest, according to the SEC. The company's senior management had identified him as a future leader of the company. Indeed, he served as acting president of the division during the summer of 2005. "Consistent with this desire, Hirth was fearful that his ambitions would not be realized if he reported [the division's] true financial position," the SEC asserted.

Like the company, which also settled allegations with the SEC, Hirth neither admitted nor denied the charges.

He agreed to pay about $420,000 to settle civil charges, was permanently enjoined from committing future violations of the federal securities laws, and consented to be permanently barred from serving as an officer or director of a public company and from practicing as an accountant before the commission.

The SEC also alleged that ProQuest failed to put together and run a system of internal accounting controls that might have prevented Hirth's scheme and that the company failed to apply other basic accounting principles properly. Under its settlement, ProQuest, which was not fined, is permanently enjoined from future violations of the internal controls, books and records, and reporting provisions of the federal securities laws.

The SEC charged that Hirth made false accounting entries that materially inflated ProQuest's reported pre-tax earnings for 2001 through 2004 and the first three quarters of 2005. The scheme ultimately cost the company more than $437 million in market capitalization and caused its stock price to drop from $29.41 to $12.31 per share between February and April 2006.

ProQuest, now known as Voyager Learning Co., was known as Bell & Howell Co. from 1907 to 2001. Before March 28, 2007, ProQuest was a publicly traded corporation on the New York Stock Exchange. On March 28 of that year, the NYSE suspended trading in ProQuest’s shares because it failed to file its 2005 annual report and certain of its 2006 fiscal quarterly reports in a timely way.

On June 30, 2007, ProQuest changed its name to Voyager, which currently trades its securities on the Pink Sheets Electronic OTC Markets.

Posted by at 11:49 AM | Permalink

usatoday.com | 7/22/08 | Associated Press

Three Americans who ran an Internet money-transmitting company in the Caribbean have pleaded guilty to money laundering and other charges, U.S. Justice Department officials said Monday.

Their Nevis-based business allowed clients to buy "e-gold" and use it as money for international transactions, according to the e-Gold website.

The Justice Department said directors of e-Gold and its corporate affiliate, Gold & Silver Reserve Inc. knew that funds from their company were being used for criminal activities including identity theft and investment scams.

Douglas Jackson, 51, of Melbourne, Florida, pleaded guilty to conspiracy to engage in money laundering and operating an unlicensed money-transmitting business, according to a Justice Department statement. He faces up to 25 years in prison.

Also pleading guilty were attorney Barry Downey, 48, of Baltimore, and Reid Jackson, 45, of Melbourne. They each face up to five years in prison. Sentencing for all three is scheduled for Nov. 20.

Authorities said E-gold did not ask for account holders' true identity, and company officials helped criminals distribute their money to other accounts if they were caught.

Posted by at 4:05 PM | Permalink

fayobserver.com | 7/22/08 | Associated Press

A former worker has pleaded guilty to embezzling $100,000 from the North Carolina Division of Motor Vehicles over a five-year period.

The Wilmington Star-News reported Tuesday that 61-year-old Annie Daphine Ross Prince entered the plea Monday in Brunswick County Superior Court and was sentenced to at least five years in prison.

The newspaper said Prince has admitted taking $388,795 from the Oak Island license plate agency where she worked from January 2001 to February 2006.

The N.C. Department of Transportation has filed a civil suit in Wake County Superior Court seeking the $388,795 from Prince and Oak Island Mayor Johnie Vereen, who held the DMV office license. Vereen isn't charged criminally and his lawyer, R.C. Soles, said the lawsuit was on hold because Prince filed for bankruptcy protection.

Witnesses for Prince said the crime didn't fit with her outward character.

During the hearing, Superior Court Judge Gary Locklear said he almost got emotional as he listened to testimony about Prince's roots in the community. Friends and family filled nearly two rows in the courtroom.

Her son was late Boiling Spring Lakes police Officer Mitchell Prince, who was shot to death in 2005 after he stopped a car.

"This lady has gone through a lot in her life," said defense lawyer Roy Trest, adding that her sister had fatal cancer.

Trest said Prince took small amounts of money at first to help other people and that the embezzlement got bigger over time.

Assistant District Attorney Brooke Smith agreed the case was sad, but said embezzlement was a serious crime that had to be punished.

The judge agreed and said if Prince had been able to return some of the money her sentence might have been shorter.

"The amount, the volume, is what makes this so serious," Locklear said.

The DMV suspended operations at the license plate office on Feb. 9, 2006, after auditors founds that bills of sale for vehicles were changed showing less money was reported to the state than was received for vehicle licenses. Fees were based on the vehicle value.

Posted by at 4:00 PM | Permalink

courierpress.com | 7/20/08 | Len Wells

A Southern Illinois man with a lengthy history of defrauding investors in oil deals and his daughter have entered guilty pleas to charges they used an Internet pitch to scam investors out of millions of dollars in bogus oil well ventures.

The case culminated as the price of locally produced crude oil is holding above the $120 a barrel mark.  Carl E. Royse of Fairfield, Ill., and his daughter, Jeanette Riley of Olney, pleaded guilty Thursday in U.S. District Court to charges of conspiracy to engage in fraudulent interstate transactions and the sale of unregistered securities.

Each faces up to five years in federal prison, a fine of up to $8 million, plus mandatory restitution of $4 million.  Sentencing has been set for Oct. 20.  In a stipulation of facts filed in the case, Royse and Riley, along with their company, Hughes Energy Inc., admitted that between July 2003 and June 2007, they engaged in a fraudulent investment scheme in which they offered and sold to the public unregistered securities in the form of fractional, undivided interests in oil and gas projects.

The pair admitted they misrepresented the risk and safety of the investment, Royse's oil field background, his past business success and the return on investment that could be expected from the investment.

In one example, federal prosecutors laid out evidence that the defendants developed the "Rotchford Well Project" between March and August 2006.

The defendants' company collected $230,000 from 10 investors to develop the oil lease, but no well ever was drilled, and no drilling permit was issued.

Between March and August 2006, Royse and Riley sent out e-mails to their investors stating that drilling was in progress, but weather had slowed the project.

Investigators later determined Royse and Riley had operated a Ponzi scheme, in which they used funds from new investors to pay off old investors, and other investors who started to complain about the lack of progress in various oil well projects.

Federal court records show Royse and Riley and companies they have operated have a history of being the subject of regulatory actions. At the time of the current case against them, they had been permanently enjoined by a federal court in an action filed by the Securities and Exchange Commission from engaging in the fraudulent unregistered sale of gas and oil investments.

Officials with the U.S. Attorney's office in Fairview Heights, Ill., said the two used an Internet Web site, printed offering documents and a limited number of sales representatives to carry out their bogus oil drilling operation.

The plea agreement reached between federal prosecutors and the two defendants states that prosecutors will recommend a sentence that is at the low end of possible sentencing range, not to exceed five years. Mandatory restitution to the victims of $4 million is also part of the plea agreement.

In a financial affidavit submitted by Royse, he claims to receive $1,750 per month from his companies, Hughes Energy and DC Energy. He also lists $36 a month in pension income and $1,316 in Social Security benefits.

The financial affidavit of Riley shows she receives $2,000 a month income from Riley Appraisal Services, plus $15,000 a year in proceeds from rental properties.  The case against Royse and Riley was developed through an investigation carried out by the U.S. Postal Inspectors and the Illinois Securities Department.

Posted by at 9:15 PM | Permalink

baltimoresun.com | 7/18/08 | Associated Press

A federal judge has sentenced a Mount Airy woman to prison for defrauding a client, a Cub Scout pack and a PTA out of $236,000.

Angela Hiltz, 43, was sentenced to three years. She was a bookkeeper at a business where she pleaded guilty to embezzling about $180,000 from 2006 to 2007.

Federal prosecutors said she embezzled the funds from a client of her company by forging her employer's signature.

She was also a treasurer for a Howard County elementary school's PTA and a Cub Scout pack. Total losses for those organizations was about $52,000. Prosecutors said she has to pay restitution to all three victims.

According to authorities, she used the money to buy Ravens' tickets, pay bills and furnish a home she had in Little River, S.C.

Posted by at 7:01 AM | Permalink

chron.com | 7/19/08 | Dave Kolpak

FARGO, N.D. — A man accused of setting up a bogus bank trading program to defraud investors out of millions of dollars is being allowed to live in his recreational vehicle in Minnesota while he awaits trial.

Verlin Swartzendruber of Laredo, Texas, is charged with 11 felony counts, including money laundering and wire fraud. Prosecutors want him to pay back nearly $15 million. He has pleaded not guilty.

U.S. Magistrate Judge Karen Klein set Swartzendruber's trial for Sept. 2, then gave him permission to live in his RV near Pelican Rapids, Minn., while the case is decided.

"I believe you deserve some credit for traveling here and bringing your passport with you," Klein said Thursday.

Swartzendruber, 66, was indicted in December 2006, but was not arrested until last month. He made his first court appearance in Texas before the case was transferred to North Dakota.

Swartzendruber's attorney, Clint Broden, of Dallas, and U.S. Attorney Drew Wrigley did not return phone calls seeking comment.

Swartzendruber allegedly told investors in North Dakota and elsewhere that he had unique access to international trading programs that would generate high rates of returns, when he knew that such funds did not exist. He recruited investors through promoters, who often received bonuses, the indictment said.

One of Swartzendruber's alleged partners, Minot commodities broker Fredrick Keiser Jr., was convicted on 22 counts and sentenced to 12 years in prison. During Keiser's sentencing, U.S. District Judge Ralph Erickson told Keiser he was either "incredibly stupid or incredibly unsophisticated" to believe the program would work.

Prosecutors said Swartzendruber and Keiser used foreign corporations, offshore bank accounts and other means to hide money and avoid paying federal income taxes. Swartzendruber allegedly told authorities during a 2004 interview that he had renounced his U.S. citizenship and was not subject to the Internal Revenue Service.

In 1998, state officials in North Dakota and South Dakota ordered him to stop recruiting investors and pay back any money he collected.

"We issue about 10 to 20 cease and desist orders a year," said Michael Daley, the attorney for the North Dakota Securities Commission. "What that basically means is that they must stop the illegal activity they are doing."

Swartzendruber's son, Byron, is charged in the case with one count of conspiracy to defraud the United States. He has pleaded not guilty.

Posted by at 6:57 AM | Permalink

seattle-times.com | 7/19/08 | Isaac Arnsdorf

Carolyn M. Gudmundson, the former Microsoft employee who pleaded guilty in January to embezzling about $1 million, was sentenced in federal court Friday to 22 months in prison.

The 44-year-old Kirkland woman will also serve three years of supervised release and repay Microsoft some $923,000 in restitution.

A Microsoft employee from 1987 to 2004, Gudmundson became a program manager in the MSN division in 2000, responsible for acquiring, registering and renewing Internet domain names.

In that post, over the next three years, Gudmundson used her personal credit card to make payments, then altered her American Express receipts to overstate her expenses and collect higher reimbursements, said Assistant U.S. Attorney Kate Crisham.

She also submitted invoices to Expedia, payable to herself, for domain-name registrations that had already been paid through an arrangement between Microsoft and Expedia.

In another scheme, she asked Microsoft to reimburse a Glendale, Calif., company for domain names it supposedly bought on Microsoft's behalf, many of which Microsoft already owned. In turn she told that company to send checks to her mother's address, the U.S. attorney said in court.

As part of the plea bargain, the U.S. attorney agreed to drop 17 other counts of wire and mail fraud. The sentencing had been delayed three times, originally scheduled for April, as the parties disagreed over how to calculate the damages.

U.S. District Judge Ricardo Martinez sentenced Gudmundson to less prison time than the U.S. attorney's recommendation of 27 months and the probation office's recommendation of 36 months.

Martinez said the lower sentence was appropriate since she pleaded guilty.

Gudmundson, choking back tears throughout Friday's hearing, will report to serve jail time after Sept. 15 so she can be with her two daughters through the start of the school year.

Posted by at 6:54 AM | Permalink

t-g.com | 7/18/08 | David Melson

An employee of CalsonicKansei North America's business office allegedly embezzled more than $60,000 during a period of at least two years, Shelbyville police said Thursday.

Yolanda Danette Johnson, 44, of Lewisburg, admitted to altering company checks and making them payable to herself, Detective Brian Crews said. The total amount allegedly embezzled is still uncertain, but Crews says it is at least $60,000.

Johnson was charged Monday with theft of property over $60,000, Crews said, and was fired by Calsonic. She is free on $100,000 bond, Bedford County Jail records show. "Members of Calsonic Human Resources contacted me and Lt. Mathis and reported suspicious activity on one of their accounts," Crews said. "They requested that we conduct an investigation into possible embezzlement by Yolanda Johnson. Johnson worked in the accounts payable department and had access to outgoing checks to businesses that did work for CalsonicKansei.

"During the course of her employment with Calsonic it was discovered that Johnson fabricated invoices and altered checks, making them payable to herself, and then deposited the proceeds into her personal checking accounts. After preliminary investigation, it is believed that Johnson acted alone and was the only one who benefited in the proceeds."

The embezzlement began at least as far back as March 2006, Crews said, and is suspected to have begun earlier.

"She admitted to altering the invoices and checks and depositing the money into her accounts at First Farmers (First Farmers and Merchants Bank of Lewisburg) and Heritage South Community Credit Union. She described how she was able to commit the offenses."

Detective Sgt. Jason Williams was also involved in the investigation, Crews said.

Posted by at 6:51 AM | Permalink

bizjournals.com | 7/17/08 | Bob Mook

The self-described multimillionaire, real estate guru and founder of Mile High Capital Group LLC was found guilty of violations of the organized crime control act, conspiracy to commit securities fraud, securities fraud and theft. He was found not guilty of 14 counts of securities fraud and two counts of theft.

Dryer, his wife, Amy, and members of his family showed no emotion, but looked attentive as Judge Anne Mansfield read the verdict.  While leaving the courtroom, juror Ann King said the jury members — who deliberated for nearly three days — worked very hard not to let emotion overcome them.

The nearly month-long trial featured sometimes emotional testimony from investors — some of who lost hundreds of thousands of dollars in Mile High and its sister companies.

Prosecutors said Dryer used Mile High and its affiliates to cover the cost of promotional seminars held in luxury hotels and convention centers across the country, and to cover payroll instead of real estate acquisitions, as was promised.

Dryer, who has been convicted twice on securities fraud, in Wisconsin and Boulder, faces a minimum sentence of eight years and a maximum sentence of 523 years in prison.  His sentencing hearing is scheduled for Sept. 12 in Denver District Court. After the verdict, Dryer was handcuffed and remanded to custody, where he’s expected to post a $750,000 bond. Dryer resides in North Carolina, where he works as a real estate consultant.

An attorney from Dryer’s defense team said Dryer will appeal the decision.

Early Thursday afternoon, the verdict was put on hold briefly after a juror informed the judge that one of the counts might’ve been an error.

The jurors were sequestered over lunch break, as a bailiff tried to locate a juror who had left the courtroom and couldn’t be reached. However, Mansfield decided to affirm the verdict shortly after 3 p.m. Thursday.

Founded in 2000, Mile High sold contracts for planned rental duplexes that were intended, once built, to generate cash for investors while appreciating in value.

But after selling more than 1,000 contracts and generating $44 million in sales, the company had built only 40 duplex units. While Mile High encountered significant obstacles in developing other projects, it continued to sell investment opportunities anyway, witnesses testified.

The company also wrote promissory notes for future land acquisitions and mediated taxdeferred real estate exchanges through one of its sister companies, Replacement Property Solutions.

Deputy District Attorney Joe Morales said Dryer was acquitted mostly in cases where investors put down $16,500 or more to secure rental units. He speculated that jurors weren’t convinced that acquisition of a property violated securities laws.  Dryer was convicted on all but two of the theft charges.

Morales said the case was difficult to present to the jury because of its complexity, and that getting cooperation from dozens of out-of-state investors was “a logistical nightmare.”

Lora Thorne-Smith, 70, who testified about losing $75,000 in Mile High investments, said she’s confident she won’t get any restitution, but pleased that Dryer was convicted.  “I’m glad they put him away,” she said.

The Boulder resident said she ultimately “felt foolish” for investing in the company, although she said she diligently researched the enterprise and visited the company’s development in Milliken, which “looked legitimate.”

A San Diego attorney who received his degree from Harvard Law School also testified that he invested nearly $450,000 in 15 Mile High units.

Mile High’s assets are being liquidated in U.S. Bankruptcy Court. Two former executives  from the company, Andy McFaul and Jeffrey Dietz, have agreed to pay settlements in the bankruptcy case to pay back investors.

Dietz, the former COO at Mile High, agreed to pay $25,000 in restitution to the bankruptcy trustee, and struck a plea bargain with prosecutors last year in exchange for cooperating in the case against Dryer. He pleaded guilty to one count of securities fraud, for which he was sentenced to two years’ probation. Dietz agreed to pay $1 million in restitution in the criminal case.

According to bankruptcy court records, McFaul agreed to pay the trustee $150,000 for his role Dryer guilty on 44 counts Richard Darrow, the one-time president of RPS, is serving a two-year work-release sentence in Denver County Jail for his involvement in the real estate scheme. An eight-time convicted felon, Darrow was ordered to pay victim restitution of $1.1 million.  The trustee has helped 523 investors find other properties at an additional cost.

Posted by at 6:44 AM | Permalink

latimes.com | 7/17/08 | Tony Barboza

An El Segundo accountant has been charged with stealing $2.7 million from a pet insurance company and transferring it into international bank accounts, authorities said.

An El Segundo accountant has been charged with stealing $2.7 million from a pet insurance company and transferring it into international bank accounts, authorities said.

Stephen Anthony Frlekin, 58, allegedly stole the money between February and June 2008 while he worked as an accountant for Veterinary Pet Insurance in Brea, according to an Orange County district attorney's office news release.

Frlekin is accused of diverting the money to his personal bank account, then wiretransferring most of it to accounts that he had opened in Asia, Europe and the Caribbean. He allegedly laundered as much as $1 million in a 24-hour period.

Frlekin is expected to be arraigned Friday on 103 felony counts of money laundering, 48 felony counts of computer access and fraud, one felony count of grand theft and white-collar sentencing enhancements. He faces a maximum sentence of 114 years and eight months in prison if convicted.

Posted by at 6:37 AM | Permalink

baltimoresun.com | 7/16/08 Larry Neumister

NEW YORK (AP) _ A supervisor assigned to investigate fraud in New York City's child services agency was among four people charged with embezzling $450,000 meant for needy children.

Nigel Osarenkhoe, who supervised adoption payments for the Administration for Children's Services, "truly betrayed the trust" of the agency, said Rose Gill Hearn, commissioner of the city's Department of Investigation.

Osarenkhoe used his access to create phantom adoptions under aliases, thus obtaining adoption subsidies for himself, Hearn said at a news conference.  She said an investigation of the city agency that distributes $74 million a month in adoption subsidies and payments to not-for-profit foster care agencies revealed a "hornet's nest" of problems, beginning with poor financial accountability.

Hearn said Osarenkhoe was assigned to help investigate fraud last year after the city decided to examine the agency's adoption practices in the wake of the Judith Leekin case.  Leekin was sentenced Tuesday to 11 years in prison for stealing more than $1.6 million by making false claims that allowed her to adopt 11 disabled children in New York since 1998. After adopting the children, she moved to Florida and is accused there of abusing the children. She denies those allegations.

U.S. Attorney Michael Garcia said the four defendants in this case were involved in two schemes:  falsely posing as adoptive parents to receive subsidies or faking a bill for computer services and then authorizing its payment.

Two defendants, both foster agency workers, were arrested Tuesday when they brazenly went to pick up a $711,420 payment from the other official, Lethem Duncan, who by then had agreed to cooperate,  Garcia said.

Osarenkhoe was charged with mail fraud conspiracy. The foster agency workers charged with mail fraud conspiracy, embezzlement conspiracy and money laundering. All three were released on $250,000 bond each.

At a hearing Wednesday, Osarenkhoe's attorney told the judge his client was a pastor who needed to attend a church conference this weekend in Minnesota. The judge granted permission for the trip over the objections of prosecutors, who alleged that he funneled some of the agency money to his congregants.

Afterward, defense attorney John Rodriguez said Osarenkhoe "looks forward to his day in court."  Duncan, who since 1998 has served as a deputy director at the Administration for Children's Services, was charged with conspiracy to commit mail fraud, mail fraud, conspiracy to commit embezzlement, embezzlement, money laundering and accepting illegal gratuities.

Duncan appeared in court on Tuesday and was released without bail, prosecutors said. His attorney did not respond to a telephone message seeking comment Wednesday.

Posted by at 12:12 PM | Permalink

beaumontenterprise.com | 7/17/08 | Ryan Myers

BEAUMONT - The former city secretary of China will be sentenced next month after being found guilty Thursday of embezzling more than $60,000 from the small community in west Jefferson County.

Jurors convicted Heather Lyn Harrison, 30, after about 3½ hours of deliberation following her two-day trial.

Guilty of third-degree felony theft, Harrison faces up to 10 years in prison when she is sentenced Aug. 18 by Criminal District Court Judge John Stevens. She also could receive probation and be ordered to pay restitution.

From January 2004 through July 2005, Harrison pocketed about $60,000 in cash paid by China residents for their monthly water bills instead of depositing the money with other forms of payment such as checks and money orders, testimony indicted.

Investigators testified that Harrison admitted her crime when she was interviewed after an audit revealed missing funds.

Harrison's defense attorney, J.D. Hamm, argued the interview was conducted inappropriately and urged jurors to disregard Harrison's admission.  Harrison did not testify.

China, home to about 1,200 residents, last year changed how it collects and processes payments in hope of preventing a similar loss.

"We've got different procedures and we don't accept cash any longer," Mayor William "Butch" Sanders said.  If Harrison does not pay restitution, Sanders said, the town can collect on a $50,000 bond.

Despite extensive evidence and testimony tracking individual bank deposits against the missing cash, investigators acknowledged on the stand that Harrison's admission was the only conclusive link between her and the theft.

Hamm told jurors investigators violated Harrison's rights, conducting an improper interrogation by intimidating her and coercing her to confess.  Because her admission was made under this duress, Hamm argued, jurors should not consider it.  In a hearing outside the presence of the jury, Stevens sided with prosecutor Ramon Rodriguez, ruling Harrison's statements in the interview were admissible because she was not in custody when questioned.

District attorney's investigator Carl Rose testified Harrison freely admitted taking cash from the regular water payments when he and three other deputies interviewed her at work after the audit.

Posted by at 12:10 PM | Permalink<