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November 26, 2008

Bayer HealthCare LLC (Bayer) agreed $97.5 million settlement

usdoj.gov | 11/25/08 | $97.5 million | suspect: Bayer HealthCare LLC | victim: Medicare Bayer HealthCare LLC (Bayer) has agreed to pay the United States $97.5 million plus interest to settle allegations that it paid kickbacks to a number of diabetic suppliers and caused those suppliers to submit false claims to Medicare, the Justice Department announced today. The settlement resolves allegations that Bayer engaged in a cash-for-patient scheme through which the company paid 11 diabetic suppliers to convert their patients to Bayer's products from supplies manufactured by its competitors. Between 1998 and 2002, Bayer allegedly paid Liberty Medical Supply Inc., one of the largest direct-to-patient diabetic suppliers, approximately $2.5 million to convert its patients to Bayer supplies. The alleged kickbacks were based on the number of patients that Liberty successfully converted to Bayer supplies and were disguised as payments for advertising. In addition, Bayer allegedly paid kickbacks of approximately $375,000 to 10 other diabetic suppliers to convert patients to Bayer supplies. "If medical device manufacturers want to serve Medicare beneficiaries they must follow the law," said Gregory G. Katsas, Assistant Attorney General for the Civil Division. "Paying healthcare suppliers to place a particular brand of device with Medicare beneficiaries violates the law and will not be tolerated." The settlement resolves claims submitted to Medicare by the 11 suppliers for Bayer supplies from 1998 through 2007. Under the terms of the settlement, Bayer agreed to enter into a corporate integrity agreement with the Office of Inspector General for the Department of Health and Human Services (HHS).

Posted by at 2:28 PM |

CONNECTICUT ADMITS ROLE IN MORTGAGE FRAUD SCHEME

usdoj.gov | 11/25/08 | $1 million | suspect: Fred Stevens | victim: Indymac Bank Fred Stevens was a mortgage broker in Westport, Connecticut. Working with property developers, lawyers, "hard money" lenders, an appraiser, employees of financial institutions and others, Stevens submitted fraudulent mortgage applications with IndyMac Bank and other financial institutions to secure mortgages for certain clients. STEVENS earned a fee for the fraudulent mortgage applications that he submitted on his clients' behalf. The charge to which STEVENS pleaded guilty relates to a fraudulent mortgage application package submitted to IndyMac Bank, a federally insured bank, related to a property located at 35 Prospect Road in Westport. The mortgage application package contained numerous false pretenses and representations, including that it falsely inflated the borrower's income; falsely claimed the property was owner-occupied; failed to disclose a recent mortgage of more than a million dollars that the borrower had taken but that had not yet appeared on his credit report; included an appraisal that falsified the square footage of the property; and falsely claimed to IndyMac Bank that the payments that developers had made on the property were, in fact, a bonus given to the borrower by his employer. Based on the misrepresentations, IndyMac Bank approved the mortgage application. The loss resulting from STEVENS' scheme exceeded $1 million.

Posted by at 2:23 PM |

ATTORNEY SENTENCED TO FOR KICKBACK SCHEME

usdoj.gov | 11/25/08 | $1,717,737 | suspect: Eric Amoako | victim: Hartford Insurance Eric Amoako, 51, of Houston, was sentenced to federal prison for his role in an insurance fraud scheme, acting United States Attorney Tim Johnson announced today. Amoako was involved in a multi-million dollar insurance fraud scheme which operated from Sept. 2005 through June 2006 involving kickbacks paid to a The Hartford Insurance Company (The Hartford) Level III claims adjuster for causing checks to be mail to Amoako and others for services never rendered. Sandra Washington Johnson, The Hartford employee, Sandra Washington Johnson, was authorized to issue payments from The Hartford to medical clinics that had provided treatment to patients covered under The Hartford's workers compensation insurance plans. Johnson caused checks to be mailed to clinics owned by her friend Theresa Williams for treatment and services that were never actually provided. Williams then wrote kickback checks from the proceeds of the mail fraud scheme to "Charlie Johnson" or "C. Johnson Claims Service" to compensate Johnson for her role in the scheme. Williams introduced Johnson to Eric Amoako, Dianne Winzer, and Winzer's daughter Deandrea S. Wade. They also agreed to receive The Hartford checks from Johnson for services never rendered and agreed to pay Johnson and Williams kickbacks for sending the funds to them. Amoako, received $236,711 in fraudulent insurance checks from Johnson. Johnson sent a total of $1,717,737 in checks to Williams, Winzer, Amoako and Wade. Amoako has paid $65,000 in restitution to The Hartford. Today, Judge Atlas ordered Amoako to pay the balance of $171,711. Amoako will be permitted to remain on bond pending the issuance of a court order directing him to surrender to a U. S. Bureau of Prisons facility to be designated in the near future.

Posted by at 2:18 PM |

DETROIT MAN PLEADS GUILTY TO USING FAKE 1-800 NUMBERS

usdoj.gov | 11/24/08 | suspect: Cal Fizer | victim: Black & Decker Terrence Berg, Acting United States Attorney for the Eastern District of Michigan, announced today that a Detroit resident, who used fake 1-800 numbers to steal hundreds of credit card numbers and other personal identity information, entered a plea of guilty to the charges of credit card fraud, mail fraud, and aggravated identity theft. Information presented to the Court at the time of the pleas showed that Fizer defrauded hundreds of individuals across the country by establishing false toll free telephone numbers, through AT&T, under the Black and Decker Corporation and its Dewalt Industrial Tool Company division, in order to obtain customer credit card and identity information, and used that information to order merchandise. From on or about May, 2003, to on or about September 2006, over 42,000 calls were made to at least twenty-six different toll free telephone numbers established by Cal Fizer. According to information presented to the Court, individuals throughout the United States, seeking to purchase products from Black & Decker/Dewalt, obtained the fraudulent toll free numbers by calling national telephone directories. When a customer placed a call to a fraudulent toll free number established by Fizer, they were connected to an individual who falsely represented themselves to be a customer service employee of Black & Decker. During the conversation with the alleged customer service employee of Black & Decker, the customer would place an order for a Black & Decker product and provide credit card and identifying information to the alleged Black & Decker employee. The Black & Decker customers who placed orders via the fraudulent telephone numbers usually did not receive the product(s) they attempted to order. Instead, the credit card number provided during the telephone call was fraudulently used by Cal Fizer, and/or individuals aiding and abetting Cal Fizer, to purchase Black & Decker products or other various products including, among other things, power equipment from Grainger Company and gift cards from various vendors. The products ordered, using the fraudulently obtained credit card numbers, were shipped, at the direction of Defendant Cal Fizer and/or individuals aiding and abetting Cal Fizer, to addresses located in the Eastern District of Michigan.

Posted by at 2:13 PM |

November 25, 2008

MASS. MAN SENTENCED FOR PAYROLL SCHEME

usdoj.gov | 11/21/08 | $17 million | suspect: Xieu Van Son | victim: IRS/Workers Comp. The U.S. Attorney, FBI, and IRS announced that XIEU VAN SON of Lowell, Massachusetts, was sentenced to two years probation because of his role as a "straw owner" of a temporary employment agency operated by Aimee King McElroy and Daniel W. McElroy. It was revealed at trial that from the early 1990's to June 2001, the McElroys operated a temporary employment agency that did business under the names the Dan Agency, the Daily Agency, Daily A. King Labor, Inc., Pro Temp Company, PTC and Precission Temp Corp. To avoid paying employment taxes, such as Social Security and Medicare, and to fraudulently reduce the businesses' insurance premiums, the McElroys arranged to pay more than $43 million of their payroll in cash. The McElroys also recruited VAN SON to act as the nominal president of one of the entities to disguise their true ownership and control over the business. The hidden payroll resulted in a loss of approximately $10 million to the IRS and approximately $7 million to workers compensation insurance companies. The McElroys' accountant, Charles Wallace, previously was sentenced to 40 months imprisonment for his role in assisting the McElroys with filing false tax returns and fabricating payroll documents provided to the insurance companies. The other straw owner, Dich Trieu, also received a probationary sentence.

Posted by at 5:02 PM |

Travel agent booked for fraud

bizjournals.com | 11/25/08 | $90,000 | suspect: Joseph Ehrenreich | victims: multiple A Western New York travel company owner has been arrested for selling excursions to nonprofit entities and then failing to book those trips The state Attorney General's office said Tuesday it has placed numerous fraud and larceny counts against Joseph Ehrenreich, 40, owner of Destination Management Group of Buffalo. Investigators allege Ehrenreich allegedly stole more than $90,000 in payments from more than 20 consumers, businesses and nonprofits for cruises he never booked. Among the nonprofit groups, including workers and volunteers, who were victimized include the Hospice and Palliative Care Group of Niagara County, the Meals on Wheels Foundation of Western New York and the Beechwood/Blocher Foundation. The AG's complaint said Ehrenreich offered businesses and other organizations a program where they could pay to have unlimited access to cruise vouchers. Those organizations would then distribute the vouchers as fund-raising tools, marketing incentives or employee rewards. Ehrenreich allegedly claimed he would handle all travel arrangements, based on his extensive relationships with major cruise lines and his memberships with the International Airlines Travel Agents Network and the Cruise Lines International Association. In fact, investigators said, he was not affiliated with either trade group. According to the complaint, Ehrenreich often convinced the consumers to upgrade their vouchers, costing thousands of dollars more in additional charges. He would then require consumers to make immediate payment by check or cash to "hold" the reservation - he would not accept credit card payments. After receiving payment, Ehrenreich would issue an invoice with phony cruise line confirmation and IATAN accreditation codes. Consumers following up on such bookings later learned those trips were never reserved.

Posted by at 4:59 PM |

Online Fraud Costs May Be $5.3 Billion

sltrib.com | 11/25/08 | $5.3 billion Online criminals stole credit-card, bank and gaming accounts over a one-year period that were potentially worth $5.3 billion, fueling a thriving underground market for consumers' identities, a Symantec Corp. study found. Those committing fraud spent more than $276 million buying the pilfered account data, said Symantec, which is the biggest maker of security software and tracked activity between July 1, 2007, and June 30. The scope of the thefts, carried out by loosely allied groups in North America and organized crime rings in Eastern Europe, presents challenges for law enforcement, said Symantec, which has operations in Utah. The report also spotlighted the fragmented nature of the crimes. The sellers of account information may be different from those who stole it. The going rate for a bank, credit-card or online-gaming account can range from $10 to $1,000, depending on the account's balance, spending limit and whether it includes the user's personal-identification number and other validating information, said said Symantec's Vincent Weafer. Stolen credit-card information represented 59 percent of all accounts advertised for sale, Weafer said.

Posted by at 4:53 PM |

November 24, 2008

MEN SENTENCED IN $32 MILLION SCAM

usdoj.gov | 11/19/08 | $28 million | suspects: Robert Jennings and Arthur Simburg | victims: multiple An Inland Empire pastor has been sentenced to 12 years in federal prison for his role in an investment scam that led more than 500 victims to lose over $28 million after being told they could make money in coal mines and a gold transaction. Robert Jennings, 59, of Perris, was sentenced Monday afternoon by United States District Judge Percy Anderson in Los Angeles. A second man involved in the scheme, Arthur Simburg, 64, of Portland, Oregon (formerly of Los Angeles), was sentenced on Monday to nine years in federal prison. Judge Anderson described the defendants as "economic predators" and ordered them to pay $28 million in restitution. While the scheme collected more than $32 million, some of the money was returned to investors as part of the Ponzi scheme. A third defendant involved in the plot, Henry Jones, 53, a record company executive, formerly of Marina Del Rey, is expected to be sentenced in early 2009. Jones has been incarcerated since being extradited from Hong Kong last December. The three men involved in the scheme were convicted of bilking more than 500 investors out of more than $32 million. Jennings was found guilty in July following a three-week jury trial. The evidence at trial showed that Jones, Simburg and Jennings solicited investors for a coal mine venture and an alleged international gold transaction that purportedly involved the sale of 20,000 tons of gold between Israel and the United Arab Emirates. They duped investors largely through nightly conference calls in which investors were promised huge rates of return on their investments - as much as 300 percent within 60 days. Most of the conference calls included group prayer, during which investors were told that the gold transaction was "divinely inspired" and that it was God's will for it to come to fruition. Despite the promises of profitable investments, Jones spent more than $21 million of the victims' money on his own extravagant personal expenses and to fund his Marina Del Rey-based music business. Jones used the victims' money to, among other things, purchase a house in Marina Del Rey, a condominium in Culver City, a Ferrari Spider and a Porsche Cayenne. Simburg and Jennings also used victims' money to support themselves.

Posted by at 3:32 PM |

MODESTO WOMAN INDICTED FOR EMBEZZLEMENT

usdoj.gov | 11/21/08 | $1.6 million | suspect: Lisa Shae Allen | Hedgecock, Inc. United States Attorney McGregor W. Scott announced today that LISA SHAE ALLEN, 37, of Modesto, Calif., was arrested on a 47-count indictment charging her with mail fraud, money laundering, and criminal forfeiture stemming from her embezzlement of over $1.6 million from her former employer. According to Assistant United States Attorneys Stanley A. Boone and Ian Garriques, who are prosecuting the case, ALLEN was the former controller for G. Hedgecock Inc. (GHI), a grading and paving company located in Modesto, Calif. Beginning in January 2002 and continuing to March 20, 2007, ALLEN embezzled in excess of $1.6 million from GHI. Using an elaborate method to conceal her embezzlement from her employer, ALLEN was able to avoid audit detections of the company. She then spent the money for her personal use including the purchase of property in California and other states, credit card bills, a pool, and vehicles.

Posted by at 3:18 PM |

San Francisco Federal Court Halts Sales of Tax Schemes

usdoj.gov | 11/24/08 | $25 million | suspect: GSL Advisory Solutions | victim: IRS A San Francisco federal judge has ordered Edwin Lichtig III and his Walnut Creek, Calif.-based firm, GSL Advisory Solutions, to stop promoting unlawful tax schemes, the Justice Department announced today. The defendants agreed to the permanent injunction order without admitting the government's allegations against them. The United States sued Lichtig and GSL alleging that they promoted tax fraud schemes involving Individual Retirement Accounts (IRAs) that helped customers improperly avoid federal income tax on more than $25 million. According to the federal suit, Lichtig, a Lafayette, Calif., insurance salesman, promoted a scheme called PAT (Pension Asset Transfer). It allegedly helped customers improperly avoid income tax on untaxed assets held in their IRAs through the use of a series of transactions with sham businesses, self-employed retirement accounts and understatements of the value of life insurance policies. The government complaint said a second scheme called FROCO (Financed Roth Conversion Strategy) allegedly helped customers use annuities to transfer funds from their traditional IRAs to Roth IRAs without paying the proper amount of tax that is imposed on such transfers.

Posted by at 3:15 PM |

KOREAN BUSINESSMAN DETAINED IN BRIBERY CONSPIRACY INVOLVING $206 MILLION CONTRACT

fbi.gov | 11/21/08 | suspect: Gi-Hwan Jeong | victim: AAFES A South Korean businessman was ordered detained today for his alleged role in a bribery conspiracy for a $206 million telecommunications contract involving employees of the Army Air Force Exchange Service (AAFES), Acting Assistant Attorney General Matthew Friedrich of the Criminal Division announced. Gi-Hwan Jeong, 44, was arrested in Dallas on Nov. 19, 2008, on a criminal complaint charging him with one count of conspiracy to defraud the United States, to commit wire fraud and to commit bribery, and one count of bribery. In ordering Jeong's detention, Magistrate Judge Paul D. Stickney of the Northern District of Texas found probable cause to support the charges and that Jeong was a flight risk. According to the affidavit in support of the complaint, AAFES provides goods and services worth billions of dollars to U.S. Armed Forces service members and their families around the world, often referred to as "PX services." The affidavit alleges that Jeong paid bribes to AAFES employees, who are considered U.S. government employees, to assist his company, SSRT, in connection with a $206 million contract to provide telecommunication services to AAFES customers. The affidavit further alleges that an AAFES employee attempted to terminate the contract with SSRT for poor performance, but supported the contract after receiving payments from Jeong. This case is being prosecuted by Senior Trial Attorney Richard C. Pilger and Trial Attorney Richard B. Evans of the Criminal Division's Public Integrity Section, headed by William M. Welch II, Chief. The case was investigated by the Air Force Office of Special Investigations, the FBI and the Internal Revenue Service, Criminal Investigation. A criminal complaint is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Posted by at 3:03 PM |

Tommy Hilfiger CFO Gets 66 Months For Fraud

northcountygazette.org | 11/24/08 | $19 million | suspect: Martin S. Bodner | victim: Tommy Hilfiger Handbags The former chief financial officer of Tommy Hilfiger Handbags and Small Leather Goods Inc., a licensee of the Tommy Hilfiger Group, has been sentenced to 66 months in prison on mail fraud and wire fraud charges to which he pleaded guilty on Sept. 15. The charges arose out of Martin S. Bodner's theft, between about the middle of 2000 and the end of December 2007, of over $19,090,000 from his employer. Prosecutors said Bodner, 60, of Manhattan, began working at THHB in Manhattan in March 2000, eventually becoming the company's CFO. Beginning in about the middle of that year, Bodner began stealing money from his employer by secretly increasing the amount of money that he was to be paid in salary and bonus; arranging to be reimbursed by THHB for phony expenses he purportedly had incurred in the course of his employment; adding one of his sons, who did not work for THHB during the years 2004 and 2005, to the company's payroll and arranging for his son to be paid approximately $225,500 during those years. He also caused hundreds of checks to be issued to various payees for the purpose of paying off Bodner's personal credit card bills, purchasing a luxury automobile for himself, paid for insurance for a home, apartments, and automobiles owned by Bodner, and paid for decorating services. Bodner also used stolen money in, among other ways, to purchase, decorate, and furnish three Manhattan apartments, two of which were combined into a larger apartment; purchase a home in Sands Point that he was in the process of rebuilding when his fraud was discovered; and purchase luxury cars, including two Jaguars and two Audis. In addition to the prison term, Bodner was sentenced to three years of supervised release, and ordered to pay a fine of $12,500 and $17,347,240.21 in restitution. In connection with his agreement to plead guilty, Bodner agreed to forfeit a home in Sands Point, a Manhattan apartment, cars, and various other property.

Posted by at 2:56 PM |

Colombian shoppers' dream built on pyramid scheme

ap.google.com | 11/24/08 | suspect: DMG Group Holdings SA | victim: Columbian citizens It was just three easy steps to the ultimate shopper's club reward: 1. Buy a prepaid card. 2. Cash it in for groceries, a flat-screen TV or a even new car. 3. Six months later, get all your cash back. That fantastic deal enriched legions of working-class Colombians before President Alvaro Uribe shut down DMG Group Holdings, S.A. last week, calling it a pyramid scheme that laundered drug money and raked in $435 million this year alone. Officials say DMG was the largest in a wave of scams that has swept Colombia, where a well-developed smuggling industry has nurtured some of the world's craftiest swindlers. The collapse of one such scheme this month sparked deadly riots by duped investors in more than a dozen southern Colombian towns. Those riots triggered Uribe's decision to shut down DMG before it could collapse, a move that outraged many of its 200,000 cardholders. They revere the company's founder, a 28-year-old former baker named David Murcia, for giving them a shot at the good life. "Where does the money come from? Believe me, I don't know," said housewife Lucia Lizca, 38, whose prepaid 5 million peso ($2,100) DMG card is now worthless. "But look, that cake maker showed himself to be smarter than a president. I don't know how he cooked it up, but good or bad, he gave a lot of hope to people who have nothing." The gangly, ponytailed Murcia was arrested last week in Panama, where he kept a yacht and a fleet of exotic cars. He and six other DMG officials -- including his mother, his wife and his brother-in-law -- face charges of money laundering, bribery and other crimes related to their rapidly expanding finanical empire. Murcia has long denied any wrongdoing, calling his business an "economic revolution" designed to provide opportunity to Colombia's poor. "What sin have I committed?" he asked in a message to customers posted on YouTube in June. "Giving people something to eat? Helping people to generate jobs with their additional income? Improving their quality of life?" At first glance, DMG stores worked much like any other discount shopper's club. Members would buy a prepaid card for any amount after providing the names and phone numbers of three friends who might want to join. But along with their blue debit card they recieved a matching black card, set to be activated in six months. That one held "points" as a reward for spreading the word about DMG. The value of the points varied from day to day -- anywhere from 70 percent to 300 percent of the initial investment. They could be redeemed to purchase goods at DMG stores, or simply be cashed in. Many customers took the money and immediately spent it on a new card. "If you want to buy a motorcycle, you would just buy the motorcycle with your DMG card, and then they'd give you back the same amount of money six months later," explained DMG customer Angel Salamanca. "It's a free motorcycle." At first, Salamanca used his card to buy beef, tomatoes, and onions for his hamburger stand. But he quickly developed a side business selling the plasma TVs he was getting from DMG for free. As the profits grew, so did his ambitions. He sold the vacant lot on which he had planned to build a small restaurant, using the 6 million pesos in proceeds to buy more DMG cards. Salamanca managed a wry chuckle as he pulled the cards from his pocket, his dream of becoming a restaurateur now reduced to worthless plastic. DMG began in 2003 in the town of Orito, deep in Colombia's coca-growing south, where Murcia started out selling motorcycles and electric generators. He told the newsmagazine Semana this year that he turned to the computerized cards in 2005 to streamline his rapidly growing operation before moving into the Colombian capital of Bogota. When the Semana reporter repeatedly pressed him to explain how he could offer such extravagant rewards, he suggested vaguely that it was a matter of "cash flow." A healthy slice of Murcia's profits appeared to come from electronics bought cheap in bulk and sold to DMG members at prices significantly higher than other stores. After moving into Bogota, Murcia took DMG international, opening offices in Ecuador, Venezuela and Panama. The company's wild success attracted a swarm of imitators. The largest was Proyecciones DRFE -- whose intitials boldly promised "Fast Money, Easy Cash" -- which skipped DMG's deparment-store model and simply offered outlandish interest rates for short-term investments. Authorities say it too was a pyramid scheme, offering dramatic returns by using money from a rapidly increasing pool of investors to pay off those who signed up first. The schemes collapse when the flow of new investment fails to cover everyone's promised returns. DRFE attracted many newly flush DMG investors but collapsed this month amid news that its owner had fled the country, leaving $270 million worth of investments in limbo. The ensuing riots left two investors dead. Colombian officials had been investigating DMG since 2007, when police uncovered $3.2 million in cash packed in cardboard boxes during a routine traffic stop outside Orito. The couriers said the money belonged to Murcia. Prosecutors said a recorded telephone conversation links Murcia to Carlos Mario Jimenez, a paramilitary leader extradited this year to the United States on drug-smuggling charges. "The average Colombian, knowing they were doing something wrong, simply cleared their conscience by saying, 'I want to join up with Robin Hood,'" said Ricardo Duran, a Bogota economist. "The only problem is this Robin Hood was as perverse as any drug trafficker." Some loyal customers still hope their hero will make good on one last investment. But thousands lined up outside the ticket booths of a Bogota soccer stadium, handing over their cards to register for a government plan to redistribute the cash seized at the company's offices. Some grudgingly admit they had qualms about an offer too good to resist -- and ultimately too good to be true. "I always thought that there was something dark about it all," said Bogota hairdresser Cristina Hinestrosa, 36, who doubled her original DMG investment of 5 million pesos ($2,100) in just 11 months before quiting this year on a hunch. "You're conscious that something so good can't exist, or can't last," she said. "But since you're not involved in the deal directly, the important thing is to get a profit."

Posted by at 2:49 PM |

Six charged with bilking settlement funds

philly.com | 11/21/08 | $41 million | suspect: multiple victims: NASDAQ/Cendant/B of A Claimants Six people, including two from the Philadelphia region, were charged yesterday with fraud in an alleged scheme to use dummy corporations, fake brokerage accounts, and virtual offices to steal $41 million from settlement funds that were themselves set up to resolve earlier securities-fraud cases. An accountant with a firm that was paying out investor claims from those settlement funds was labeled the "eyes and ears" for the group, advising a coconspirator on when to submit fraudulent claims and on the availability of funds. The funds had about $4.5 billion in assets. Kevin Waltzer, 41, of Washington Crossing, Bucks County, is accused of being the leader of a ring that filed false claims to get money from the funds, according to a criminal information unsealed by the U.S. attorney for the Eastern District of Pennsylvania. Acting U.S. Attorney Laurie Magid said that the ring, which also included a lawyer, went to great lengths to make the claims seem legitimate. Another member of the group, she said, even traveled to Singapore to mail documents to help make a fake company, KimCorp., appear real in its claim. Waltzer's attorney, Ursula Knight, of the Boston law firm Eckert, Seamans, Chernin & Mellott L.L.C., declined comment. Others charged in the case were Chris Penta, 38, of Southampton, Burlington County; Deborah Rice, 47, of Boca Raton, Fla.; James Hall 4th, 33, of Bel Air, Md.; Paul Negroni, 41, of Mount Kisco, N.Y.; and Stephen Porto, 51, of Boca Raton. Those five were indicted on charges of mail fraud, wire fraud and money laundering. Penta was an accountant with Heffler Radetich in Philadelphia, according to the U.S. attorney, and Rice was a lawyer in Florida. Waltzer is accused in a criminal information of the same charges; a criminal information usually is the prelude to a guilty plea. The U.S. Attorney's Office said Rice, Hall, Negroni and Porto were arrested yesterday and released on bail. Waltzer is expected to surrender next week, the U.S. Attorney General's Office said. Greg Paw, a lawyer with Pepper Hamilton L.L.P., of Philadelphia, said that Penta would surrender next week. Paw, who said he was reviewing the indictment, added that Penta was considering his options. Magid said the victims in this case were those who were entitled to money from the settlement funds. The defendants were allegedly "stealing from a fund that was set up to pay victims who have already been wronged," she said. The FBI and the IRS investigated the case. The settlement funds were from a trio of cases from the 1990s: the Nasdaq market-makers antitrust case, involving stock price and fee manipulation; Cendant Corp. litigation, which alleged that false statements artificially inflated stock prices; and BankAmerica Corp. litigation, which held that $372 million in losses for a bad loan were disclosed only after the merger of what became Bank of America, substantially diminishing the value of the stock.

Posted by at 2:44 PM |

Hotel Exec Gets One Day Probation For Tax Evasion

northcountygazette.org | 11/22/08 | $18 million: suspect: Stanley S. Tollman | victim: IRS An executive with Tollman-Hundley Hotels, a private company based in New York which owned and managed various Days Inn hotels throughout the U.S., has pleaded guilty to tax fraud charges relating to his participation in a multi-million tax evasion scheme utilizing foreign bank accounts. Stanley S. Tollman, 78, held management positions with The Travel Corporation, a British Virgins Island company that was and is the parent company of several travel and tourism companies including Trafalgar Tours International, Trafalgar Tours - USA, and the Red Carnation Group of hotels. Tollman admitted as part of his guilty plea that from 1994-1999, he and his wife, through Guernsey, Channel Islands, bank accounts, received from The Travel Corporation and its subsidiaries and affiliated companies approximately $18 million in income that he knowingly failed to report to the Internal Revenue Service. Tollman agreed as part of his plea to pay $60,381,691 in restitution to the IRS in the form of back taxes, interest, and fraud penalties. He also agreed to pay $44.7 million to settle a separate civil forfeiture action brought by the U.S. relating to the allegations in a 2002 indictment charging Tollman and six others with various fraud offenses. Just before that indictment was filed, prosecutors said Tollman fled the United States, and the United States sought his extradition from England. Earlier this year, English courts ruled that extradition of Tollman would be oppressive, citing the health condition of his wife. Tollman's four co-defendants -- Monty Hundley, Sanford Freedman, James Cutler and Howard Zukerman -- were convicted inFebruary 2004, after a two-month jury trial before U. S. District Judge Loretta A. Preska. Tollman's son, Brett Tollman, who was later added to the indictment, pleaded guilty to tax evasion charges in September 2003. The investigation previously resulted in the guilty plea of Richard Masefield, formerly an executive at Trafalgar Tours - USA, based on his use of ChannelIslands bank accounts to hide millions of dollars of income. The federal government also sought the extradition of Tollman's wife, Beatrice Nina Tollman, 77, who was separately charged with tax fraud in 2003. Also earlier this year, English courts ruled that the extradition of Mrs. Tollman to the U.S. would be oppressive due to her health. Tollman, who entered his plea from London, England, via video-link, was sentenced at the time of his plea to a one-day term of probation. Consistent with the plea agreement between Tollman and the Government, the court dismissed the open bank fraud and other remaining counts in the 2002 indictment, and the pending complaint against Mrs. Tollman.

Posted by at 2:37 PM |

November 21, 2008

Vilar convicted in New York

forbes.com | 11/21/08 | suspect: Alberto Vilar | victim: Amerindo Investments On Wednesday afternoon in a New York court, the once-fawned-over Cuban-American money manager and arts philanthropist was convicted on 12 counts of fraud. In May 2005, Vilar was arrested at Newark airport, federally charged with using an investor's $5.0 million for personal expenditures -- including a donation to Washington & Jefferson College, his alma mater -- instead of putting it into Amerindo Investment Advisers, his money management firm. The firm, which included partner Gary Tanaka, was wildly successful when it invested in the tech boom of the 1990s, but quickly lost ground as the dot-com bubble went from boom to bust. The $5.0 million sum came from actress Phoebe Cates' mother, Lily. The charges included conspiracy to commit securities, mail, wire and investment fraud. She testified that Vilar and his partner concealed the use of the money from her. Throughout Vilar's rise to fame, he duped his fans and critics by promising large donations, but never delivering, to trump up his own worth.Many opera houses across the world included full-sized pictures of the patron in their programs and even named sections of the house for Vilar. In 2005, the Metropolitan Opera's revival of Mozart's Cosi fan tutte brought with it a special acknowledgment for Vilar in the Playbill, for his "generous and deeply appreciated gift" in helping to put the production together (Vilar likely contributed more than $1.0 million -- though the Met wouldn't say exactly how much). (See "Indicted On Fraud, Vilar Saluted By NYC's Met Opera.") In September 2005, however, London's royal Opera House removed Vilar's name from its atrium after he failed to fork over the funds that he had promised. The opera houses weren't the only ones lured by this Pied Piper's song--Forbes fell for his charms as well in 2005 when it estimated his worth to be between $900.0 million to $950.0 million for the Forbes 400 Richest Americans list. (See "The Optimist and the Jail Cell.")

Posted by at 1:40 PM |

Ex-church official sentenced for embezzlement

eveningsun.com | 11/21/08 | $1.1 million | suspect: Barry Herr | victim: Evangelical Lutheran Church in America. A 62-year-old man was sentenced to 30 months in federal prison Friday for embezzling about $1.1 million from the church organization where he once worked. Barry R. Herr, who pleaded guilty in June to mail fraud, also was ordered to pay $800,000 in restitution to the Lower Susquehanna Synod of the Evangelical Lutheran Church in America. Prosecutors said Herr, of Lancaster, took the money over 22 years while working for the church group as treasurer. The theft was exposed after Herr was terminated for unrelated reasons and the church group discovered suspicious checks. Herr was ordered to begin serving his prison sentence four days after Christmas. He has already repaid the church $309,000, and his lawyer said Friday Herr intends to pay back the rest. Herr cooperated fully, said defense attorney Gerald Lord. "He went into court today expecting justice, and justice was done, in his opinion," Lord said. Lord said Herr spent the money on expensive cars and other personal items and is a gambling addict. The Harrisburg-based synod has about 122,000 members in nine mid-state counties.

Posted by at 1:35 PM |

Two guilty of fraud over Hawaiian Airlines

forbes.com | 11/21/08 | $500,000 | suspect: William Spencer and Paul Boghosian | victim: Hawaiian Airlines One man has been convicted and another has pleaded guilty in a multimillion-dollar scheme to defraud a bankruptcy court in the bidding to take over Hawaiian Airlines four years ago, U.S. officials said on Thursday. The two men, William Spencer and Paul Boghosian, were indicted in April 2005 on charges of falsely stating to the bankruptcy court in Hawaii that their Hawaiian Investment Partners could provide up to $500 million in financing to carry out its proposed reorganization plan for the airline. BuzzCourt documents said the plan was a hoax with no real financing to support it. Spencer, 77, the pastor of the House of Truth in Oakland, California, was convicted on Wednesday after a two-week jury trial in U.S. District Court in Manhattan, the office of the U.S. Attorney said in a statement. It said Boghosian, 54, of St. Louis, pleaded guilty on Oct. 29. Both men will be sentenced on Jan. 30, when they each face a maximum penalty of five years in prison. Hawaiian Airlines (amex: HA - news - people ), a subsidiary of Hawaiian Holdings Inc , filed for Chapter 11 bankruptcy protection in 2003. By November 2004, two competing reorganization plans, including the one by Spencer and Boghosian, were pending in the bankruptcy court. The airline emerged from bankruptcy in June 2005. The indictment had also said Boghosian, in an effort to obtain funding for his reorganization plan, had offered a $500,000 bribe to obtain a $2.5 million loan from a hedge fund. He was accused of trying to bribe an FBI undercover agent who portrayed himself as a hedge fund manager.

Posted by at 1:32 PM |

Michigan woman to face embezzlement charges

mlive.com | 11/20/08 | $2 million | suspect: Melissa Boseck | victim: Bell Title A Grand Blanc woman faces 17 felony charges after allegedly embezzling more than $2 million from her employer. Officials said Melissa Bosek, 32, stole the money from Bell Title, which began reviewing records because of a state investigation into an alleged $20-million mortgage scam that involved inflated property appraisal values. As part of the state's investigation, Bosek's insurance license was revoked, and a civil lawsuit judgment was filed against her. She has not been federally indicted. Her attorney, Richard Lustig, declined to comment, and Bosek could not be reached for comment. Bell Title officials began looking into Bosek after learning of the investigation by the state Department of Labor & Economic Growth. As part of the investigation, Kurt Heintz, a former Grand Blanc Township mortgage broker, was arraigned in September on federal fraud charges for his alleged involvement in the scam. Investigators believe Heintz bought about 70 properties in the area and paid appraisers to inflate their true market value. Investigators said Heintz then recruited investors to get mortgages based on the inflated values, then they defaulted on the loans. In Bosek's case, Bell Title's audit showed that about $400,000 had been transferred from the company's accounts to those operated by Bosek, Genesee County Prosecutor David Leyton said. "The owners came to Grand Blanc and confronted her," he said. "She said it was a mistake and allegedly went in another room and wired the money back." But Leyton said it appears that Bosek did not actually wire any money back to Bell Title but instead stole several company checks and took more money, totaling about $2.2 million. Grand Blanc Township police began a criminal investigation in July 2007. Bosek owned her own title company, Michigan Title, until she sold it to Bell Title in mid-2007. She stayed on as an employee. Bell Title is not involved in the state's investigation. Earlier this year, a judgment in a civil lawsuit filed by Bell Title was entered against Bosek. She was ordered to pay $2.1 million to Bell Title.

Posted by at 1:28 PM |

Woman accused of embezzling $104,000 from car dealer

redding.com | 11/20/08 | $104,000 | suspect: Phyllis Ann Chambers | victim: S.J. Denham A criminal complaint has been filed by the Shasta County district attorney's office against an Anderson woman who is suspected of embezzling more than $104,000 from a Redding car dealership. Phyllis Ann Chambers, 47, is accused of stealing the money from S.J. Denham between January 2004 and the end of July of this year, according to the complaint filed by the district attorney's office on Nov. 13. She is charged with one felony count of embezzlement and two related enhancements. Chambers, who is not considered to be a flight risk, was to turn herself in Wednesday night at the Shasta County jail in Redding, said Redding Police Investigator Rob Wilson. Chambers worked in S.J. Denham's finance department from July 2000 until she was fired in early August, according to an affidavit attached to a search warrant. Her duties included receiving the mail, bank statement reconciliation and accounts receivable, the affidavit said. She also made daily bank deposits, it added. A search warrant was served at Chamber's Flowers Lane home in October. That search resulted in the seizure of her computer, financial documents and other items, court documents said. Police also inspected her Tri-Counties Bank account information. The alleged thefts began to come to light in late July when an accounts payable clerk at the car dealership noticed an electronic transfer of $585.71 from the business to pay a Pacific Gas & Electric Co. bill, the affidavit said. Further investigation revealed that the funds went to pay Chambers' personal PG&E bill, it said. When later confronted about it, Chambers, who was fired that day, said that PG&E must have made a mistake. But S.J. Denham is on North Market Street in Redding, which receives power from Redding Electric Utility. The car dealership then began to further investigate areas in which Chambers was involved, which also led to an audit. Police interviewed S.J. Denham officials in early October to discuss their audit findings, the affidavit said. The audit disclosed that Chambers had written a number of personal checks that were deposited to the car dealership's account, the affidavit said. The amounts on the checks matched cash amounts that Chambers had received at the end of the day, it said. It is alleged that Chambers would remove the cash that she received and replace it by writing a personal check, it said, but the checks bounced. Chambers, who received the bank statements and checks, would pull out the bounced checks and try to cover up the loss through other means, the affidavit said. "There was a lot of effort to cover up" the alleged thefts, Dervin said. It's believed that Chambers, who reportedly has medical and financial problems, embezzled the money to pay living expenses, Wilson said. He said her husband had owned a trucking business that collapsed.

Posted by at 1:22 PM |

November 18, 2008

Mark Cuban created Web site in 2006 to expose securities fraud

dallasnews.com | 11/18/08 | suspect: Mark Cuban | victim: Mamma.com Long before the U.S. Securities and Exchange Commission accused Mark Cuban of insider trading in shares of a company called Mamma.com, the outspoken Dallas billionaire showed a keen interest of his own in uncovering securities fraud. He also tried to profit by exposing it. In 2006, Mr. Cuban founded Sharesleuth.com, a Web site that says its reporting is "aimed at exposing securities fraud and corporate chicanery." He hired a veteran business journalist to run it. But protecting innocent shareholders isn't Share sleuth's only goal. It says on its Web site that Mr. Cuban "is going to make personal investments based on information we uncover." In its first investigation into the alleged shortcomings of an Atlanta-based ethanol company, the Web site disclosed that Mr. Cuban had sold short 10,000 shares of the company's stock - meaning he would profit if the stock price fell. Not all of Sharesleuth's stories have doubled as trading opportunities. A recent piece about a Dallas-based oil and gas promoter said neither Mr. Cuban nor anyone else at Share sleuth had any financial interest in the company. Mr. Cuban said Monday that his experience with Mamma.com inspired him to launch the investigative Web site. "Sharesleuth was founded with the idea that there were other crooked companies out there like Mamma," he said in an e-mail. "I thought that like any other investor, I would trade on the public information we uncovered," he said. "By also sharing it, future investors could avoid the companies we covered." The chief executive Copernic Inc., the company that owns Mamma.com, didn't answer a voicemail message. The company's former CEO (in 2004, when Mr. Cuban owned his stake) declined to comment. The former CEO's lawyer also declined to comment. The SEC investigated Mamma.com in 2004 after a sudden rise in trading activity in the company's stock. As part of the probe, the SEC tried to determine whether a convicted stock promoter, Irving Kott, exercised undisclosed influence over the company. In 2007, Mamma.com settled a shareholder lawsuit that alleged Mr. Kott and his associates engaged in a "pump and dump" scheme to manipulate the stock's price. The lawsuit alleged that Mr. Kott was referred to as the company's "godfather." Mr. Kott could not be reached for comment. As for Mr. Cuban, he's expanding his foray into investigative journalism. Last month, he launched a Web site called BailoutSleuth to track how taxpayer money is being used in the U.S. government's $700 billion rescue package for the financial system, as well as the Federal Reserve's efforts to backstop key financial institutions.

Posted by at 8:57 PM |

Slain S.F. man's widow defrauded his business

sfgate.com | 11/18/08 | $1 million | suspect: Kathy Bach | victim: Victor Bach/Seymour Apple The widow of a slain San Francisco businessman has been convicted of 13 theft-related charges for defrauding his business and a private trust he oversaw of more than $1 million. Kathy Bach, 57, who now lives in Redding, was married to Victor Bach, 71, who was found beaten to death at his Western Plumbing and Heating business on Treat Avenue on Oct. 31, 2003. After his death, police discovered what prosecutors said was an elaborate scheme by Bach to cheat her husband's business as well as a trust he had been charged with supervising. Victor Bach met shortly before his death with an attorney about a possible audit of the trust he ran for the family of a longtime friend, Seymour Apple. Had the audit been performed, prosecutors said, Bach would have learned that as much as $800,000 had disappeared from the trust over the previous four years. A San Francisco Superior Court jury deliberated three days before finding Kathy Bach guilty Friday of charges that involved the loss of about $350,000 from her husband's business and the $800,000 from the Apple family trust. She was accused of signing her husband's or his partner's name to 200 checks that paid for jewelry, clothing and other luxury items. The defense argued that she could have written the checks with Bach's knowledge. The jury acquitted her of some charges and deadlocked on other theft and embezzlement charges involving Western Plumbing. (Excerpt).

Posted by at 8:52 PM |

SEC accuses 4 of inflating bank's portfolio

ap.google.com | 11/18/08 | suspect: David Lee/Edward O'Connor/Kevin Cassidy/Scott Connor | victim: Bank of Montreal Federal regulators on Tuesday accused four people of inflating the value of Bank of Montreal's trading portfolio to falsely enhance its financial results. One of the four pleaded guilty to related criminal charges and agreed to a civil settlement with the Securities and Exchange Commission. The SEC announced its charges, brought in a civil lawsuit in federal court in New York, against David Lee, a former managing director of the bank's commodity derivatives group. Also charged were Edward O'Connor, president of commodities brokerage firm Optionable Inc., and that company's former chief executive Kevin Cassidy, and former broker Scott Connor. The SEC's claims for civil penalties and restitution against Lee and all of its claims against Cassidy, O'Connor and Connor, 31, are pending. The agency is seeking injunctions, unspecified civil penalties and restitution against the current and former Optionable workers, as well as a ban against Cassidy and O'Connor, 55, from serving as officers or directors of any public company. The SEC alleged in its suit that Lee fraudulently overvalued Bank of Montreal's portfolio of natural gas options by hundreds of millions of dollars by deliberately "mismarking" trading positions for which market prices were unavailable, making the options difficult to sell. Lee was said to have conspired with Cassidy, O'Connor and Connor to have their brokerage firm "rubber-stamp" the inflated values that he recorded. After the scheme came to light, the Canadian bank had to restate its results by cutting its reported net income for the first quarter of fiscal 2007 by about $204 million U.S. dollars, or 68 percent, the SEC said. The four "engaged in an elaborate scheme to overvalue illiquid assets held on the books of a publicly traded bank," SEC Enforcement Director Linda Thomsen said in a statement. The SEC also accused Cassidy, 49, and O'Connor of deceiving shareholders of New York-based Optionable by hiding its role in the scheme. It also alleged that they defrauded the New York Mercantile Exchange by selling more than $10 million of their Optionable shares to the exchange in April 2007. An attorney for Lee, Amy Walsh, said her client "has accepted responsibility for what he did, and he has been cooperating with all the governmental authorities for quite some time now." Connor's lawyer, Michael McAllister, declined to comment. Attorneys for Cassidy and O'Connor didn't immediately return telephone calls seeking comment Tuesday afternoon.

Posted by at 8:46 PM |

Indiana man arrested in $6M scheme

indystar.com | 11/18/08 | $6 million | suspect: Kem E. Linn | victim: Cubberleys A Carmel man will be formally charged today in connection with the theft of more than $6 million from an Evansville-based bank over the past five years, State Police and the Grant County prosecutor's office said. Kem E. Linn, 55, is a director for Cubberley's, a Marion wholesaler of tobacco products, candy and confections, according to his lawyer in a civil lawsuit. Old National Bank sued Cubberley's last week, saying the family business was tied to a check-kiting scheme dating back five years. Linn, who police said tried to commit suicide last week as the lawsuit was filed, was staying at the Cornerstone Behavioral Health Center in Marion, where he was arrested. Cubberley's opened in 1969 and has estimated annual sales of $7.9 million, according to an online company profile. Linn's lawyer in the civil lawsuit, Joe Certain, Marion, said Linn has been an officer of Cubberley's "for a good long time. His father operated it before him." Certain said he has filed no response to the lawsuit and had no additional comment. Linn resigned in March as the Grant County Democratic Party chairman after he was charged with making false emergency calls. The status of those charges was not immediately available. Heck declined an interview, and Grant County Prosecutor James Luttrull Jr. was out of the office Monday, a spokeswoman said. Linn was being held on a $6 million cash bond, police said. (Excerpt)

Posted by at 8:39 PM |

CPA gets 18 months for fraud schemes

bizjournals.com | 11/14/08 | $778,336 | suspect: James Elliot Coleman | victim: Westport Allen Village School A certified public accountant and former charter school president received an 18-month prison sentence and a $468,805 restitution order for his involvement in various mortgage and investment fraud schemes. James Elliott Coleman, 60, of Raytown, was formerly president of the Westport Allen Village School. He was accused of defrauding a widow and her daughter in a $778,336 mortgage fraud scheme, which he did to repay money he had stolen from the charter school. Coleman also was tied into the mortgage fraud scheme that involved former Jackson County Executive Katheryn Shields and her husband. In that scheme, Coleman supplied straw buyers for the Shields residence with letters that fraudulently claimed Larry and Linda Barshaw were self-employed when in fact Coleman didn't even know the Barshaws. Shields and her husband were acquitted in that case, but the other co-defendants in the scheme pleaded guilty or were found guilty.

Posted by at 8:26 PM |

November 17, 2008

Former CEO of Iowa kosher slaughterhouse arrested

news.google.com | 11/15/08 | $33 million | suspect:  Sholom Rubashkin | victim:  First Bank

A former executive of a kosher slaughterhouse that was the site of one of the nation's largest immigration raids was arrested Friday on a bank fraud charge and ordered jailed until at least next week.

Shalom Rubashkin, former chief executive officer at Agriprocessors and the son of company owner Abraham Aaron Rubashkin, shuffled into court Friday morning shackled at the ankles, waist and wrists.

This is the second time in less than a month that Sholom Rubashkin has been arrested on federal charges related to his operation of the plant, site of a May 12 immigration raid in which 389 people were arrested.

In the months following the raid, the company has faced state and federal allegations that it violated child labor laws, wage regulations and safety rules. The arrest Friday was related to the depositing of checks from customers and the alleged diversion of money.

Court records said that under a loan agreement with St. Louis-based First Bank, Rubashkin was supposed to deposit customer payments into an account at Decorah Bank & Trust as collateral on a loan.

Records show that Rubashkin instead diverted millions of dollars in customer payments into an Agriprocessors account at a different bank. The payments would then not be posted on the customers' Agriprocessors accounts until later.

That resulted in the inflation of the value of accounts receivable in Agriprocessors' books, allowing the company to borrow additional funds from the bank without proper collateral.

Rubashkin also is accused of telling an Agriprocessors employee to erase evidence of the scheme from company computers. The instructions allegedly began the day after Rubashkin was released after an Oct. 30 hearing in federal court, where he is facing charges of harboring illegal immigrants, document fraud and identity theft.

After the Oct. 30 hearing, Rubashkin was released on his own recognizance on the condition that he put up a $500,000 bond and wear a tracking device on his ankle.

Last week, Agriprocessors filed for bankruptcy protection as it faced allegations of making inaccurate and misleading statements to First Bank. The slaughterhouse owes First Bank at least $33 million.

Posted by at 11:30 AM |

Former Aspen CEO gets probation in fraud case

boston.com | 11/14/08 | suspect:  David McQuillin | victim:  Aspen Technologies, Inc.

David McQuillin, former chief executive of Aspen Technology Inc., of Burlington, was sentenced to three years' probation and a $12,000 fine in a federal court in New York after he pleaded guilty to conspiracy and securities fraud.

He was charged with falsifying the 2001 and 2002 revenue of Aspen, which makes software for managing chemical processes. McQuillin and Aspen's founder and chairman, Lawrence Evans, also settled civil fraud charges filed by the Securities and Exchange Commission. McQuillin has been ordered to pay an $85,000 civil penalty plus $28,381.61 in disgorgement and interest and is barred from serving as an officer or director of any public company. Evans must pay a $75,000 civil penalty and $21,478.01 in disgorgement and interest.

Posted by at 11:27 AM |

NY prosecutor picked to serve as bailout watchdog

ap.google.com | 11/15/08

The young prosecutor tapped to monitor the $700 billion financial rescue plan has brought down Colombian drug traffickers, gone after swindling corporate executives and now heads the mortgage fraud unit for the U.S. attorney's office in Manhattan.

On Friday, President George W. Bush nominated Assistant U.S. Attorney Neil M. Barofsky to become the Treasury Department's special inspector general in charge of auditing and investigating how the federal government spends bailout money. The pick requires Senate confirmation.

In turning to Barofsky, the president tapped a rising star in a Justice Department office known for its high-profile prosecution of crime on Wall Street.

Barofsky, 38, led the recent prosecution of top executives at Refco Inc., one of the world's largest commodities brokerages, which collapsed in an accounting scandal in 2005. Before that, he was lead prosecutor in a major narcotics trafficking case against dozens of leaders in the Revolutionary Armed Forces of Colombia, a leftist guerrilla group.

He was appointed in July to head a newly created mortgage fraud unit in the U.S. attorney's office for the Southern District of New York. The unit won one of its first victories this week, convicting the owners of a company that had run a fraudulent "foreclosure rescue" scheme that preyed on struggling homeowners.

Former U.S. Attorney David N. Kelley, one of Barofsky's old bosses, called him an "excellent prosecutor" who has the respect of law enforcement.

Attorney Gary Naftalis, who represented former Refco chief executive Phillip Bennett, called his former legal adversary a "first-class lawyer" capable of deciphering the inner workings of huge, troubled corporations.

Bennett pleaded guilty this year to conspiracy and fraud charges and was sentenced to 16 years in prison.

A 1995 graduate of New York University's law school, Barofsky worked for the law firms Weil, Gotshal & Manges and then Morvillo, Abramowitz, Grand, Iason & Silberverg before becoming an assistant U.S. attorney in 2000, joining an office whose alumni include former Mayor Rudy Giuliani.

Barofsky was part of a group of prosecutors who received an award last year for recovering more than $1.2 billion in assets from corporate fraudsters to be used to compensate swindled investors.

In his early years in the office, he also prosecuted a Hong Kong man who tried to fake his death in the Sept. 11, 2001, attacks to avoid facing charges in a passport fraud case.

The establishment of a special inspector general dedicated to the rescue program was one of the provisions added to the bailout legislation to secure its passage.

Other provisions intended to boost oversight of the massive program included a special oversight board and regular government audits.

If confirmed by the Senate, Barofsky's appointment would carry over into the next administration, though President-elect Barack Obama would also have the power to replace him.

Barofsky would be required to file a report to Congress within 60 days detailing the "purchases, obligations, expenditures and revenues" associated with the bailout plan.

He would not be the only overseer. The law also requires oversight from the Government Accountability Office.

Congress allocated $50 million to run the office.

Posted by at 11:24 AM |

Ex-Tech billionaire gets 9 years for stock fraud

news.google.com | 11/14/08 | $9.7 million | suspect:  Charles E. "Junior" Johnson | victim:  PurchasePro, Inc.

lashy Las Vegas entrepreneur who became a billionaire at the height of the dot-com bubble was sentenced Friday to nine years in prison for stock fraud, capping a seven-year investigation that led to seven convictions.

The sentence meted out to Charles E. "Junior" Johnson, founder and CEO of now-defunct PurchasePro Inc., was significantly less than that sought by federal prosecutors, who had recommended he spend between 16 and 17 1/2 years behind bars for defrauding investors in his now defunct software company in 2001.

U.S. District Judge Liam O'Grady ruled that because Johnson's crimes occurred more than seven years ago, he should be sentenced under older federal sentencing guidelines calling for a lesser sentence. Sentencing guidelines are not binding on judges, but frequently serve as a benchmark for their decisions.

Johnson was convicted last May of stock fraud, witness tampering and obstruction of justice.

Prosecutors said he was the ringleader of a scheme to falsely inflate PurchasePro's revenue in the first three months of 2001, as the high-tech economy was in freefall. Seven people were convicted in a long-running investigation, which also exposed improper accounting practices at America Online, which had been PurchasePro's business partner

Prosecutors said he orchestrated efforts in the first quarter of 2001 to inflate the company's revenue to meet the expectations of Wall Street analysts. The scheme, authorities said, included falsified and backdated contracts, and secret side deals with AOL, which had a marketing partnership with PurchasePro.

PurchasePro relied heavily on its partnership with AOL to sell its core product, a "marketplace license" and software that supposedly facilitated business-to-business commerce. But AOL could only sell the licenses by relying on the side deals in which PurchasePro agreed to buy equal amounts of goods and services from companies willing to buy from PurchasePro.

In all, seven PurchasePro employees, including Johnson, were convicted. Four others, including two midlevel executives at AOL, were acquitted of all charges.

While nobody at AOL was convicted of fraud, the company as a whole paid a $210 million fine in 2004 to settle criminal charges that it had aided and abetted stock fraud at PurchasePro.

Steer said Johnson is now essentially broke and will be unable to pay the $9.7 million in restitution that the judge could impose as a part of the sentence. Restitution is to be addressed at a later date.

Johnson also was convicted of obstruction of justice for trying, unsuccessfully, to sneak fabricated e-mails into evidence at his trial. His previous lawyers caught him and resigned from the case, resulting in a mistrial. Johnson was subsequently convicted at retrial.  (Excerpt)

Posted by at 11:15 AM |

Hitachi Exec Charged With Embezzlement

northcountygazette.com | 11/13/08 |$8 million | suspect:  Dennis M. Dowd | victim:  Hitachi American Ltd.

The former senior manager of human resources of Hitachi American Ltd., a New York and California based corporation, has been charged in connection with a scheme to defraud the Hitachi America Ltd. Group Health and Welfare Plan of approximately $8 million.

Hitachi America is a subsidiary of Hitachi Ltd., a Japanese corporation, and it markets and manufactures electronic equipment, computer systems, and consumer electronics, among other products, and provides industrial equipment and services throughout North America. Hitachi America maintained the Plan to provide health benefits to eligible employees of Hitachi America and certain of its corporate affiliates.

Dennis M. Dowd, 52, of Yorktown Heights, who was hired by Hitachi America in 1979, was a senior manager of corporate benefits for Hitachi America until March of this year. He was responsible for managing various aspects of Hitachi America’s employee benefits programs, including the “plan”.

In January 1997, Dowd opened a bank account in the name “Hitachi Group Insurance Health and Welfare Trust”, an account whose creation was allegedly not authorized by Hitachi America. Prosecutors say between 2000 and early 2008, Dowd deposited approximately $8 million into that account, approximately $4.9 million of which were payments for insurance claims belonging to the plan.

Checks totaling an additional approximately $2.9 million from, among other entities, insurance companies and health care providers that were made payable to the Plan or to Hitachi America (or to a corporate affiliate thereof), were also deposited into the account.

Dowd diverted the funds in the bank account he created to pay for personal expenses related to himself and his family, including, among other things at least $1 million in payments to credit cards held in Dowd’s name that were used to purchase, among other things, consumer goods; at least $2 million in checks made payable to Dowd using various spellings of Dowd’s name; approximately $42,000 paid for a Lexus automobile registered to Dowd; and approximately $625,000 paid to purchase a house in Ver oBeach, Florida.

Dowd is charged with one count of embezzlement in connection with health care, one count of health care fraud, and one count of money laundering. He faces a total maximum sentence of 30 years’ imprisonment if convicted.

Posted by at 11:11 AM |

Chesterfield accountant gets prison in Henrico embezzlement

inrich.com | 11/13/08 | $757,000 | suspect:  John N. Sacco

A one-man embezzlement scheme that drained $757,000 from a Henrico County cleaning-supply firm put the firm's former accountant behind bars today.

Fifteen months after he was arrested and released on $75,000 bond, John N. Sacco received a 28-month prison sentence.

Sacco pleaded guilty earlier in the year to six embezzlement charges and five counts of check forgery.

Sacco, who lost his home in the 3200 block of Fox Chase Road in Brandermill to settle civil proceedings from the theft, said he is receiving counseling to come to grips with what he did.

"I'm extremely embarrassed, extremely so," he told the judge. "I'll never be in trouble again, so help me God."

Sacco's lawyer, Michael Morchower, argued that rarely has an embezzlement case produced a restitution settlement before sentencing. He added that Sacco carries the burden of being a convicted felon.

"He's a multiple felon for life," Morchower said, noting that Sacco needed money to care for a special-needs child and has devoted time to volunteer organizations.

Sacco and Environmental Supply Co. Inc. settled civil proceedings this month that left about $300,000 of the $757,000 still owed to Environmental Supply's owner.

The agreement included language that the settlement terms resolved all differences between the two parties.

Sacco's former home, assessed at $279,700, cash payments and a car made up the bulk of the restitution.

Oversight of Sacco's bookkeeping methods was so lax that he was able to write checks to himself, one for nearly $30,000, said Assistant Commonwealth's Attorney Richard Collins.

Collins asked for a sentence close to the six-year, three-month upper range given in sentencing guidelines. He said the amount of the theft was more than eight times larger than the $90,000 theft amount triggering the guidelines.

But Morchower, noting the settlement agreement and Sacco's clean prior record, argued that Sacco should serve no more than six to 12 months, far below the guideline's five-year midpoint.

Posted by at 11:07 AM |

November 13, 2008

Philanthropist's fraud trial reaches close in NY

forbes.com | 11/13/08 | suspect:  Alberto Vilar | victim:  Amerindo Investment Advisors Inc.

Federal prosecutors closed their fraud case against the philanthropist Alberto Vilar on Wednesday by telling jurors that the opera-loving investment adviser "flat out stole" from some clients when his firm ran into financial trouble in the high-tech stock crash.

Vilar and business partner Gary Tanaka are charged with improperly investing millions of dollars of their clients' money in risky stocks after telling them it was going into ultra-safe investments such as government bonds.

When the Internet bubble burst, their company, Amerindo Investment Advisors Inc., found itself "drowning in a sea of debt," Assistant U.S. Attorney Benjamin Naftalis said.  "So they decided to steal money from their clients instead," he said.

Prosecutors said Vilar and Tanaka, desperate to cover their own bills, illegally transferred hundreds of thousands of dollars out of Lily Cates' account without her knowledge after photocopying her signature onto a form to make it appear as if she had authorized the transaction.

Attorneys for the two men say they are innocent and never intentionally misled anyone.

Vilar's lawyer, Herald Price Fahringer, told the jury in his closing statement that his client was not some "scam artist who comes in and takes the money and is gone the next day."

He rattled off a list of Amerindo investors who had made a fortune with the company and said even when Vilar and Tanaka ran into financial problems they worked to get investors their money back, plus interest.

"That's not fraud, and we believe that the government hasn't proven fraud," he said.

Tanaka and Vilar, who pledged tens of millions of dollars to the Metropolitan Opera and other performing arts centers when their fortunes were soaring in the 1990s, each could face more than 10 years in prison if convicted.

The charges include conspiracy to commit securities, mail, wire and investment fraud.

Lawyers on both sides of the case began making their closing statements on Wednesday and were expected to continue on Thursday.

Posted by at 12:13 PM |

Va. Businessman Pleads Guilty to $33M Mortgage Fraud

washingtonpost.com | 11/13/08 | $33 million | suspect:  Vijay K. Taneja | victim:  multiple banks

Vijay K. Taneja, 47, admitted that he defrauded banks of at least $33 million through schemes in which he created bogus mortgage loans and obtained funds for the same loans from multiple banks. Prosecutors said the case is the largest in Virginia in at least 20 years.

bTaneja is well known in the local Indian American community, and he invested millions of his proceeds in Indian films and musical acts, officials said.

As Taneja, of Fairfax City, pleaded guilty to one count of conspiracy to commit money laundering in U.S. District Court in Alexandria, prosecutors indicated that the fraud might be larger than what they charged. "He has millions of dollars unaccounted for," Assistant U.S. Attorney Stephen Learned told Judge Claude M. Hilton. "There's so much money, and it's difficult to figure out where it all went."

Citing Taneja's ties to India and a possible seven-year prison sentence, Learned urged the judge to order Taneja to be electronically monitored to ensure he doesn't flee before his Jan. 30 sentencing. "We can't be unmindful of the crisis we're facing in mortgage frauds," he said.

But after defense lawyers emphasized that Taneja had cooperated with the government, Hilton ordered him released on a personal recognizance bond.

Experts in mortgage fraud said the amount of loss to the banks makes this case one of the nation's largest mortgage fraud prosecutions. Investigators are continuing to examine an upsurge in fraud triggered by the slumping housing market, and the FBI has ramped up investigations locally through a mortgage fraud task force begun late last year in its Washington field office.

Posted by at 12:05 PM |

Embezzlement nets 16-month prison term for former purchasing manager

indystar.com | 11/11/08 | $600,000 | suspect:  Robert Rosenberg | victim:  Sealed Air Corp.

An Indianapolis man was sentenced to 16 months in prison Monday after pleading guilty to embezzling more than $600,000 to buy car parts for his fledgling engine-making company, Chaos Drag Racing.

Robert Rosenberg, 41, was a purchasing manager at Sealed Air Corp. in Indianapolis and charged about $613,000 in personal purchases to his corporate credit card, prosecutors said.

U.S. District Chief Judge David F. Hamilton ordered Rosenberg, under a charge for wire fraud, to pay back the money and to serve two years of supervised release following his prison term.

A spokesman said Sealed Air, which is based in Elmwood Park, N.J., but employs about 200 workeres at a packaging materials plant in Indianapolis, is satisfied with Rosenberg's sentence.

"He not only defrauded the company, he caused personal pain and hardship to people he worked with," said company spokesman Ken Aurichio. "We feel it was an abuse of trust."

Rosenberg took the purchasing manager job with Sealed Air in 2001 but didn't make any unauthorized purchases until late 2003, authorities said.

He had a discretionary limit of up to $4,000 per transaction and up to $40,000 a month on his corporate card.

According to prosecutors, Rosenberg would buy car parts and have them delivered to the company's loading dock, where he would pick them up. Sealed Air first identified suspicious charges on Rosenberg's account in October 2007.

A subsequent search of a pole barn on his property uncovered hundreds of thousands of dollars in car parts, which corresponded to the purchases he made with the company credit card.

Rosenberg's attorney, John Tompkins, said Chaos Drag Racing will remain idle until Rosenberg gets out of prison. He ran the company by himself, building performance engines for professional drag racing teams.

Posted by at 11:59 AM |

Koger Pleads Guilty to Embezzlement

connectionnewspapers.com | 11/11/08 | $3 million | suspect:  Jeffery Scott Koger | victim:  multiple

Jeffrey Scott Koger admitted to embezzling approximately $3 million from 400 homeowner associations using 140 bank wire transfers, according to statement of facts filed Monday, Nov. 10 with his plea agreement in federal court in Alexandria.

Koger, 39 of Oak Hill, embezzled the money and invested funds in personal accounts and businesses he was involved in, including: $733,000 in Jordan’s 8 restaurant on Capitol Hill; $374,960 to pay a contractor to remodel his Oak Hill house and the Tri-Fitness, Inc. facility in Annandale; $40,000 for a down payment on a 2005 Chevrolet Corvette convertible; $60,000 for a down payment on a house in New Mexico; and $56,668 for windows and doors for his home.

Koger was the former chief financial officer of his father’s real estate management firm, Koger Management Group, which filed for bankruptcy in July 2007. Robert Koger, the father, reported to the Fairfax City Police in November 2006 that he believed his son Jeffrey Koger had embezzled $800,000, kicking off the investigation.

Jeffrey Koger pleaded guilty Monday, Nov. 10 in federal court in Alexandria to wire fraud and income tax evasion.

Jeffrey Koger, already jailed in Fairfax County Adult Detention Center on other charges, waived prosecution by indictment and consented that his plea agreement could continue Monday.

U.S. District Court Judge Leonie M. Brinkema is currently scheduled to sentence Jeffrey Koger in February.

He faces a maximum penalty of 25 years in prison, $500,000 in fines and full restitution, according to Acting U.S. Attorney Dana J. Boente.

“The defendant took various actions to conceal his scheme from the homeowners’ associations and their auditors,” according to agreed upon statement of facts. “If the defendant received a complaint that money was missing from a particular homeowners’ association account, he would provide a false explanation.”

Jeffrey Koger also evaded $775,273 in federal income taxes by failing to file personal income tax returns from 2003-2006, according to the Internal Revenue Service. In 2005, he received taxable income of more than $810,257.

The IRS, Secret Service, FBI, Fairfax City, Fairfax County and Alexandria City police departments investigated the case, which is being prosecuted by Assistant U.S. Attorney Jack Hanly and Trial Attorney Caryn Mark, of the Department of Justice’s Tax Division.

Posted by at 11:55 AM |

Former Garland school district bookkeeper gets prison time for embezzlement

dalllasnews.com | 11/11/08 | $84,000 | suspect:  Dolores Arriola Espino | victim:  Garland School District

A longtime Garland school district employee has been sentenced to 10 months in prison after admitting she embezzled at least $84,000 from federal education grants.

Dolores Arriola Espino, 47, pleaded guilty to embezzlement and theft from a program receiving federal funds. The former bookkeeper is to pay $92,112 in restitution and must report to prison in January, federal court records say.

Ms. Espino, who had worked for the district more than 20 years, was arrested in 2007. She was sentenced Friday.

She began her embezzlement scam in 2005, the records say, by creating a fake vendor that purportedly provided translation and interpretation services. She submitted invoices from the fake vendor, then deposited the payments into her own bank account.

Posted by at 11:52 AM |

Second man pleads to bank and mail fraud, money laundering

stargazette.com | 11/11/08 | $5.5 million | suspect:  Neal Gordon | victim:  Tennessee Valley Authority

A Newbern man pleaded guilty Monday to bank fraud, mail fraud and nine charges of money laundering charges.  Neal Gordon Wall admitted in U.S. District Court in Paducah, Ky., that he had taken part in misusing a $5 million bank loan and a $500,000 loan from the Tennessee Valley Authority.

His sentencing date had not been entered on the court docket as of Monday night, but he could be sent to prison for up to 130 years followed by up to five years of supervised release. He also could be fined up to $2.5 million, be ordered to pay $4.6 million restitution and be ordered to pay $1,100 in a special assessment.

Wall and his co-conspirator, Lloyd Aaron Smith of Dyersburg, were accused of obtaining a $5 million bank loan in 2003 to buy equipment for Hickman Mills. Each defendant reportedly held a 25 percent ownership in the Hickman, Ky., textile mill. Neal served as the company's president.

Instead of buying equipment, prosecutors said the men used $700,000 to pay off personal debts and attempted to cover up that fact by creating false bills of sale.

Then, the indictment claimed, the men created fake bills saying Hickman Mills owed $133,999.97 for goods and services. That money was deposited into an account for Midway Homes, a business the men owned and operated.

Neal and Wall secured the $5 million loan by using Hickman Mills equipment as collateral. The Citizens Bank of Hickman, Ky., understood the mill owned the equipment free and clear from any other liens, security interest or encumbrances. In reality, the indictment said, the same equipment had been used as collateral for another $5 million loan from Union Planters Bank in Dyersburg in 2002.

The men also are accused of fraudulently obtaining a $500,000 loan from the Tennessee Valley Authority to buy a tenter and nine nappers for Hickman Mills. Instead, the men deposited the $500,000 check into a Dyer Fabrics bank account in Dyersburg. Documents mailed to TVA supporting the application constituted mail fraud, the indictment alleged.

Twelve money-laundering charges were also listed in the indictment to cover the checks transferring money from one account to another.

Smith pleaded guilty Oct. 13 to one count each of bank fraud and mail fraud and nine counts of money laundering. He is scheduled for sentencing on Jan. 14 in Paducah.

Posted by at 11:46 AM |

November 11, 2008

Tiffani Thiessen to co-star in 'White Collar'

hollywoodreporter.com | 11/7/08

Tiffani Thiessen has been tapped to co-star on USA Network's pilot "White Collar."   The show from Fox TV Studios, centers on Neal (Matthew Bomer), a brilliant con artist who partners against his will with Peter (Tim DeKay), the head of the FBI's white-collar crime unit.  Thiessen will play Debbie, Peter's intelligent and supportive wife who works as an accountant.  "Beverly Hills, 90210" alumna Thiessen most recently co-starred on ABC's "What About Brian."

Posted by at 9:09 PM |

Photo developing machine fraud

thestar.com | 11/11/08 | $800,000 | suspect:  Xiandong Chen | victim:  multiple

A Toronto man has been arrested for defrauding GTA and Vancouver residents of about $800,000 through a digital photo developing machine scam.

Police say the suspect was operating the company Business Opportunity Solutions and posted advertisements in local Asian and East Indian newspapers. At sales seminars in Vaughan and at a satellite Vancouver office he advertised on-site digital photo machines that included Internet access.

Victims were convinced to purchase the machines and told they would be placed somewhere they would make a profit for the owner.  Police investigations uncovered the machines were never purchased. Xiandong Chen, 41, is charged with fraud and theft.

Posted by at 9:05 PM |

Mansion of Petters associate for sale

startribune.com | 11/7/08 | suspect:  Frank Vennes Jr | victim:  Investors of Tom Petters

Frank Vennes Jr., a Shorewood businessman who has been linked to an investment fraud scheme allegedly run by entrepreneur Tom Petters, got court approval Thursday to sell his Florida mansion for $5.8 million.

Vennes bought the 8,300-square-foot oceanfront home in Tequesta, on Florida's Atlantic coast north of Palm Beach, two years ago for $5.5 million. Built on a half-acre lot in 2005, it has four bedrooms, eight bathrooms and a guest house.

Vennes listed the property for $6.5 million. An appraiser put the value at $5.8 million.

U.S. District Judge Ann Montgomery approved the sale Thursday. After the home's two mortgages are paid off, net proceeds of $1,384,074 will be paid to the receiver overseeing Vennes' property pending the outcome of the investigation of Petters and his associates.

On Tuesday, Montgomery also approved the sale of a three-bedroom house Vennes had owned in Bismarck, N.D. He paid $160,000 for the 2,712-square-foot home in 2005, and it sold for $155,000. Net proceeds of $138,896 will be paid to the receiver.

Last month, Montgomery also authorized the sale of a golf club membership owned by Vennes. His attorney, James Volling of Faegre & Benson, put the value of the golf membership at about $80,000 and acknowledged that the proceeds would be subject to court control.

According to the government, Petters enticed investors into giving him money by telling them it would be used to buy merchandise that he would then resell for a substantial profit through big-box retail chains. The government says that the merchandise never existed, and that Petters used the money for other businesses, to make lulling payments to investors and for his lavish lifestyle.

Vennes, who has not been charged in the case, has told the FBI that he earned millions of dollars a year by referring investors to Petters.

Posted by at 8:57 PM |

Ex-Azar exec accused of embezzling

news-sentinel.com | $331,258 | supsect:  David L. Mozer | victim:  Azar Inc.

David L. Moser, 49, of Huntertown, is accused of cooking the books of a hotel and restaurant management company.

Between 2001 and this year, Moser is accused of embezzling $331,258 from Azar Inc., for whom he worked as a controller, according to Moser's arrest affidavit written by Detective Scott R. Morales of the Fort Wayne Police Department. Yogesh S. Paraikh, Azar's CEO, became suspicious Aug. 6 when he received a check from a restaurant in Decatur that the company manages.

Paraikh - who didn't return a call for comment Monday - told Morales the check had a stamped signature and was written by Moser. Company policy allows for stamped signatures only on payroll checks, and checks are usually signed by Paraikh and owner George Azar.

Morales wrote that Paraikh noticed further discrepancies in several checks and confronted Moser, who admitted to stealing $175,000, and got a signed a confession.

“(Moser) was immediately terminated,” Morales wrote. “Mr. Paraikh advised that further investigation determined that he had taken nearly twice as much as he confessed to.”

Morales wrote that $103,441 of the $331,258 was paid to Moser's credit card accounts. Moser faces preliminary charges of theft and six counts of forgery. Moser, who couldn't be reached for comment Monday, has not yet been arrested.

Posted by at 8:53 PM |

More Than $1 Billion Recovered by Justice Department in Fraud Cases

prnewswire.com | 11/10/08 | $1 Billion | U.S. Justice Department

The United States secured $1.34 billion in settlements and judgments in the fiscal year ending Sept. 30, 2008, pursuing allegations of fraud against the federal government, the Justice Department announced today. This brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to more than $21 billion.

"Now, more than ever, it is crucial that taxpayer dollars aren't lost to fraud," said Gregory G. Katsas, Assistant Attorney General for the Department's Civil Division. "The billion dollars collected this year is only part of the story. By rooting out fraud and vigorously pursuing it, the Department, with the help of concerned citizens who report fraud in hotline calls and in qui tam complaints, undoubtedly saves the country many times that amount in aborted schemes and misconduct."

    Assistant Attorney General Katsas also paid tribute to Senator Charles Grassley of Iowa and Representative Howard L. Berman of California who sponsored the 1986 amendments to the False Claims Act, the government's primary weapon to fight government fraud. "Without this important
legislation strengthening the Act and, in particular, the qui tam provisions which encourage private citizens to uncover government fraud, such recoveries would not have been possible."

    Almost 78 percent of this year's recoveries are associated with suits initiated by private citizens (known as "relators") under the False Claims Act's qui tam provisions. These provisions authorize relators to file suit on behalf of the United States against those who have falsely or fraudulently claimed federal funds. Such cases run the gamut of federally funded programs from Medicare and Medicaid to defense procurement contracts, disaster assistance loans and agricultural subsidies. Persons who knowingly make false claims for federal funds are liable for three times the government's loss plus a civil penalty of $5,500 to $11,000 for each claim.

    Relators recover 15 to 25 percent of the proceeds of a successful suit if the United States intervenes in the qui tam action, and up to 30 percent if the government declines and the relator pursues the action alone. In fiscal year 2008, relators were awarded $198 million. (This figure does not include relator shares awarded after Sept. 30, 2008.) (Excerpt)

Posted by at 8:47 PM |

November 10, 2008

Web Posting Helps Police Find Embezzlement Suspect

tylerpaper.com | 11/10/08 | $107,000 | suspect:  Malinda Shea Lucas | victim:  Palestine Herald-Press

Within minutes of a story being posted on TylerPaper.com, detectives in Palestine began receiving phone calls Friday morning as to the whereabouts of a woman who allegedly embezzled more than $107,000 from the Palestine Herald-Press.

Palestine Police Detective Charles Steen said 34-year-old Malinda Shea Lucas was apprehended in Mount Alba Friday night and is in custody in the Anderson County Jail in lieu of a $100,000 bond.

Posted by at 1:05 PM |

Ex-bookkeeper pleads guilty to embezzlement

recordnet.com | 11/8/08 | $824,000  | supsect: Nancy Mulkey | victim:  ABF Farm Services, Inc.

A Stockton woman pleaded guilty in court Friday to embezzlement charges for taking $824,000 from ABF Farm Services Inc., north of Tracy, where she worked as the bookkeeper for the past decade.

Nancy Mulkey, 58, was sentenced to five years under a plea agreement with prosecutors that also requires her to explain what money she has left. She has to serve half of the sentence before she becomes eligible for release on parole.

Mulkey stood before San Joaquin County Superior Court Judge Franklin Stephenson and admitted guilt to grand theft and falsifying corporate books. Stephenson ordered her back to court in January when she will likely be taken to prison. She is out of jail on a bail.

She fell under suspicion when ABF was downsizing and her position was eliminated. A bookkeeping service organizing financial records discovered that Mulkey falsified checks and paid off her personal credit cards with corporate checks.

Platt said Mulkey maintains she was not alone, but he would not say in an interview after the hearing who his client blames. Mulkey will have to pay restitution to ABF for the rest of her life, making payments after she has enough to live on, Platt said.

ABF cultivates 2,600 acres of crops, including walnuts, blueberries, winegrapes, alfalfa and tomatoes. The office is in the Delta islands north of Tracy and west of Lathrop.

Posted by at 12:59 PM |

FEDS TAKE CONTROL OF TIDEWATER EMBEZZLEMENT CASE

currypilot.com | 11/8/08 | $350,000 | suspect:  Gary Alan Green | victim:  Tidewater Contracting

A Federal Grand Jury on Friday indicted Gary Alan Green on 12 counts of mail fraud for allegedly taking more than $350,000 from Tidewater Contracting while he was chief financial officer for the Brookings-based company from April 2007 to about Sept. 24, 2008.

Green, 50, Brookings, was charged in late September for the thefts and is being held in Curry County Jail on $10 million bail.

The federal indictment says the Green had a personal Visa credit card account with JPMorgan Chase.  "From about September 2007 through Sept. 24, 2008, in the District of Oregon, while the CFO of Tidewater, the defendant devised and carried out a material scheme to defraud and obtain money by means of materially false and fraudulent pretenses," the federal indictment says.

"During this period of time, defendant created bogus invoice/statements that purported to have come from Chase. The bogus invoices and statements had the Chase logo, they listed Tidewater as the insured along with three insurance policies, General Liability, Umbrella and Excess Umbrella, as well as the policy number and the amount owing on each policy, and listed the total premium due and payable to Chase Services. In actuality, Tidewater never had any insurance policies with Chase," the indictment says.

The indictment says that Green delivered the bogus invoices along with Tidewater check request forms to Tidewater's Accounts Payable, with the invoices used as supporting documents. Green requested that each check be returned to him when it was issued to attach financial information or reports with the checks.

The indictment said the first check was presented to John David Baldwin, vice president and secretary of Tidewater as payment for Tidewater insurance being financed through Chase Services. The check, and subsequent checks, were sent to Chase Services, indicating the checks were to be applied and used as payment for an account number that was Green's personal Visa account.

The first check, signed by Baldwin, was for $37,035.62, the indictment says. It was sent as payment for the account number that was actually Green's Visa account.

The next 11 counts were for checks signed by Green for $29,570.13 each, to be credited to the same account number.

The indictment says that, upon conviction of one or more of the mail fraud offenses alleged, Green is to forfeit to the United States any property that is a part of or derived from the money obtained directly or indirectly as a result of the violations.

At Curry County hearings, Sheriff's Detective Dave Gardiner said Green lived well on a $90,000 a year salary.

"We came up with at least 30-plus bank accounts," Gardiner said.

Gardiner said investigators got search warrants for Green's home, his office and his boat.

"The assessed value of the boat, the Bushwhacker, a 53-foot boat, in July was assessed with a market value of $190,500 with a value of $885,000 for replacement."  He said the boat was rigged for a sail around the world.

Gardiner also said Green was apparently buying cattle in Montana and that he apparently owned property elsewhere, including the Medford area, and cattle in Texas.

Rory Smith, CPA, partner with Cholwell, Benz & Hartwick Accountants and Consultants, said later that he uncovered a complex web of fraudulent transactions in the employee embezzlement case at Tidewater that brought the magnitude of the alleged embezzlement to $500,000.

Smith, who is directing the forensic audit at Tidewater, said that over a period of about one year, Green executed multiple fraudulent transactions that were disguised as legitimate payments.

"It appears that Mr. Green misdirected to a personal account of his with T. Rowe Price approximately $93,000, disguising it as professional services related to four separate rock quarries operated by Tidewater," Smith said.

Smith said his audit also uncovered two checks totaling $45,000 disguised as "geotechnical consulting." Smith said these transfers were tied to one of Green's personal accounts with a bank in the Midwest.

Dial, the Curry County DA, said Green was convicted in 2003 in Jackson County on three counts of aggravated theft and one of racketeering.   "He spent two years in jail on that," Dial said.

Green was an accountant for Darex Corp. when he was convicted in June, 2003, of embezzling nearly $650,000 from the Ashland company.  Green pleaded guilty in Jackson County Circuit Court to a charge of racketeering and three counts of first-degree aggravated theft. In exchange for Green's plea, Judge Lorenzo Mejia dismissed two additional counts of racketeering.

Employed with Darex for nearly six years, Green stole approximately 10 percent of the company's net sales – about half of its total profits – between April 2001 and July 2002, said Matt Chancellor, deputy district attorney for Jackson County.

Posted by at 12:54 PM |

Moreno Valley trader arrested on suspicion of investment fraud

pe.com | 11/8/08 | $800,000 | suspect:  Robert D. Barne | victim:  Forward Investment Group, LLC

A Moreno Valley man who runs an investment company was arrested this week and is being held on suspicion of investment wire fraud, an FBI spokeswoman said Friday.

Robert D. Bame, 38, who is listed on federal documents as the sole manager of Moreno Valley-based commodity trading company Forward Investment Group LLC, was arrested Tuesday and remains in custody, said Laura Eimiller, a spokeswoman for the FBI's Los Angeles field office. Bame appeared in federal court in Riverside on Friday.

In September, Bame was sued for fraud by the Commodity Futures Trading Commission. According to federal documents, Bame's records on Dec. 14, 2007, indicated he had more than a net value of $77 million in trading accounts. However, the lawsuit states he actually had $4,486 in his accounts on that date.

In a related matter, Bame has been named in a civil lawsuit filed by 11 Riverside County residents that alleges fraud, embezzlement, conspiracy and other offenses. The suit also alleges that a Temecula securities broker knew Forward Investment was fraudulent but misled the investors and steered them toward Bame's company.

The suit, which was filed Oct. 1, alleges the investors gave Bame close to $600,000 in 2007 and 2008 that is now unaccounted for. One investor, lead plaintiff Danisa Peralta, of Temecula, claims she has lost $200,000.

Kelly Shaw, the Temecula broker named in the lawsuit, said he is also a victim because he invested his own money. He said he also filed a suit against Bame and Forward Investment before Peralta filed her suit.

"I believed in Robert. I thought he was the real deal," Shaw said.

Shaw said he invested in Forward Investment for a year and did not know about any mismanaged funds. He said he found out about Bame's problems in June or July and has been trying to get those funds back since then.

Posted by at 12:49 PM |

Police find $1.6M in hidden car compartment

courierpostonline.com | 11/7/08 | $1.6 million | suspects:  Various

Police arrested 39-year-old Luis Reyes of Jersey City, 31-year-old Carlos Roman of Lyndhurst, and 29-year-old Mario Reynoso of Newark after finding more than $1.6 million in cash hidden inside an expensive SUV Reyes was driving.

More than $35,000 was in a center console and $1,000 in the glove box. The rest, police say, was inside shrink-wrapped packages hidden in the car's interior panels.

Police say more cash, a semiautomatic handgun and money laundering equipment were found inside homes connected to the men.

The men have been charged with money laundering and conspiracy. It was not immediately clear if they had attorneys.

Posted by at 12:44 PM |

Former Vorwood CEO sentenced to over 3 years for embezzlement

andersonvalleypost.com | 11/4/08 | $824,333 | supsect:  Peggy Kaye Witts | victim:  Vorwood Company

United States Attorney McGregor W. Scott announced today that Peggy Kaye Witts, 62, of Redding, was sentenced today by United States District Judge Frank C. Damrell Jr., to three years and 10 months in prison on federal wire fraud and tax evasion charges. Witts embezzled over $824,333 from the Voorwood Company Inc., of Anderson, and failed to report the stolen money as income on her federal tax returns. Witts pleaded guilty to the charges on July 21, 2008.

This case is the product of an extensive investigation by the Anderson Police Department, the U.S. Department of Labor’s Employee Benefits Security Administration and Office of Inspector General, and the Internal Revenue Service—Criminal Investigation Division.

According to Assistant United States Attorney Matthew Stegman, who prosecuted the case, Witts was employed by Voorwood beginning in 1991, becoming the chief financial officer in 1999 and president in 2002. She admitted that she engaged in a scheme to defraud the Voorwood Company by issuing duplicate paychecks to herself for over four years and issuing company checks to herself, family members, and others for her personal expenses. She also admitted to tax evasion based on her failure to report the embezzled money as income and to pay taxes on the money.

Judge Damrell, in sentencing the defendant, questioned why the defendant would commit this crime, given the amount of damage the defendant did to the company and her family by committing the theft. He then stated that, “greed is the only answer I can come up with.”

Judge Damrell also ordered Witts to pay full restitution for her crimes in the amount of $824,333 to the Voorwood Company and $199,858 to the Internal Revenue Service. After pleading guilty, the defendant turned over to the Voorwood Company, in partial satisfaction of her restitution obligation, the proceeds from the sale of her house in Redding, other real estate located in Shasta County, as well as all interest in her Voorwood retirement plan, and a Roth IRA.

Additionally, because the company is owned entirely by its Employee Stock Ownership Plan (ESOP) and Witts had been the president of the ESOP board of trustees, she is now prohibited for 13 years from participating in any way with administering an employee benefit plan, acting as an adviser to an employee benefit plan, or serving in any capacity that involves control of the assets of any employee benefit plan. The 13-year term is the statutory debarment period under federal law.

Posted by at 12:32 PM |

November 6, 2008

Recession-proof Career: Forensic Accounting

newswire.com | 11/6/08 | University of Alabama at Birmingham

The business of financial fraud at the corporate level historically spikes as those in desperate need of money manipulate company revenues and assets for personal gain, and the trend is the key reason why a career in forensic accounting and information technology (IT) auditing is not only recession-proof but recession-flourishing, according to Tommie Singleton, Ph.D., associate professor of Accounting at the University of Alabama at Birmingham (UAB).

Further solidifying the career track’s durability, even in times of relative economic prosperity, are statistics from the Association of Certified Fraud Examiners (ACFE) that have shown an increase in fraud cases in each of the last two years. The ACFE reported accounting fraud at the business and corporate level is estimated by experts to be $994 billion in 2008.

“There is always motivation for financial gain or need behind every fraud case,” Singleton said. “So imagine now that the economy is slowing how much more motivation or desperation for financial gain will be out there.

“The cases of fraud will only climb as the country sinks into recession, and with that so will the demand for highly skilled, specialized forensic accountants to help prevent, detect and prosecute those looking to cheat the system,” Singleton said.

Singleton said accounting graduates from the UAB School of Business have a unique edge as they enter the workforce. He pointed to UAB’s standing as one of just a handful of accounting programs nationwide that offers a degree or concentration in forensic accounting.

“You’ve probably got 200 campuses out there that offer a single class or two on accounting fraud,” Singleton said. “At UAB, students have access to a four-course undergraduate curriculum concentration, and the university is just one of four that I know of that can say that.”

Adding to the reputation of UAB’s forensic accounting program is its focus on IT auditing, Singleton said. IT auditing courses train forensic accounting students to both understand the digital technologies that fraud suspects use in the commission of their crimes and how to use those same technologies to find the electronic fingerprints of fraudulent activity. Singleton said UAB’s national reputation as an IT auditing education leader was cemented when he was invited to co-author an article on the discipline for a 2007 series in the scholarly journal Issues in Accounting Education entitled Model Curriculum for Forensic Accounting.

“A highly skilled forensic accountant should know data mining techniques, how to read and follow digitized account transactions and pull critical information from hard drives that would otherwise remain hidden,” Singleton said.

Singleton said that there is range of opportunities available to forensic accountants, whether with a fraud investigation or examination firm, as a litigation support staffer at a law firm or as part of a corporation’s internal auditing office. Specific employers, he said, offer different responsibilities in investigating the life cycle of fraud that starts with prevention and continues into detection, auditing or investigation, evidence gathering and legal implementation.


This is one in a series of recession-proof career reports scheduled for release by the UAB Office of Media Relations in the coming weeks in response to the country’s ongoing economic crisis.

Posted by at 5:21 PM |

N.Y. woman appears in Indy fraud case

indystar.com | 11/6/08 | $12,000,000 | suspect:  Dina Wein-Reis | victim:  Roche Diagnostics Corp

A New York woman accused of running a scheme to defraud companies in Indiana and elsewhere over eight years appeared in federal court in Indianapolis today for the first time.  Millionaire Dina Wein-Reis was released from jail Tuesday on $10 million bond by a judge in New York and had her initial appearance at the U.S. District Court of Indianapolis this afternoon

One of the largest victims among at least 50 cited by prosecutors is Roche Diagnostics Corp. of Indianapolis. In a lawsuit filed by Roche against Wein-Reis and others last year, the company alleged that firms owned by Wein-Reis fraudulently arranged to buy nearly $12 million worth of diabetes care products at a steep discount.

But instead of distributing the products to pharmacies as promotional samples to build Roche's customer base, as promised, Wein-Reis' companies attempted to sell the products at a profit to Walgreens -- which flagged the suspicious-looking sale for Roche, the suit says.

The suit sought $10 million in compensation for the products' value and $30 million in punitive damages, but it was settled in February 2007 through a confidential agreement, a Roche spokeswoman said.

Wein-Reis, four current and former employees and a man who served as a paid reference for the "shell" companies were indicted Oct. 22 by a grand jury in Indianapolis. They face charges of wire fraud and conspiracy to commit wire fraud.

The scheme involved promises to companies to buy deeply discounted products and use them in promotions or to give them to nonprofit groups, the indictment says. Wein-Reis promised to make large purchases from the companies later at higher prices and distribute the products for sale at retail outlets for the companies.

The other defendants, who resided in New York, New Jersey and Illinois, are on release and have hearings scheduled this month in Indianapolis, said Tim Morrison, acting U.S. attorney for the Southern District of Indiana.

Posted by at 5:12 PM |

Ambac sues ex-Bear Stearns unit

reuters.com | 11/6/08 | $313 Million | suspect:  Bear Stearns | victim: Ambac Financial Group

Ambac Financial Group Inc on Wednesday sued EMC Mortage Corp, a former subsidiary of Bear Stearns, for breach of contract over mortgage-backed securities transactions.  The lawsuit filed in U.S. District Court in Manhattan claimed that contract breaches by EMC in three transactions lead to more than $313.7 million in losses and resulted in $78.8 million in claims paid by Ambac Assurance Corp, a unit of the group.

A fourth transaction suffered more than $321.4 million in losses, resulting in $52.6 million in claims paid by Ambac, the complaint said.

"The dramatically poor loan performance corroborates Ambac's findings that the entire pool of loans that EMC securitized in each transaction is plagued by rampant fraud and abdication of sound mortgage-origination and underwriting practices," according to the lawsuit.

EMC is a former subsidiary of Bear Stearns, which collapsed in the home mortgage meltdown and was taken over by JPMorgan in March. A JPMorgan spokesman declined comment on the lawsuit.

Ambac said in the complaint that the four separate transactions were sponsored by EMC in December 2005, January and September 2006 and April 2007.

Ambac charged that the "Bear Stearns securitization machine was a house of cards, supported not by real value and sound practices but by Bear Stearns appetite for loans and disregard as to the risks those loans represented."

It said the loans were underwritten without regard to standards of mortgage lending such as assessments of a borrowers ability and willingness to repay a loan.

The lawsuit said "EMC assured Ambac in explicitly worded contractual terms that Ambac need not be concerned about the risk that the loans would not conform to EMC's representations."

But Ambac said that after "profiting handsomely" from sposnsoring the securitizations, EMC "seeks to walk away from its explicit contractual representations and commitments as pervasive origination failures -- and thus EMC's pervasive breaches -- come to light."

Posted by at 5:09 PM |

West Michigan boat broker Michael Vorce indicted on bank fraud

mlive.com | 11/6/08 | $27,000,00 | suspect:  Michael Vorce | victim:  various banks

West Michigan boat broker Michael Vorce was indicted by a federal grand jury this afternoon on 15 counts ranging from bank fraud to using a false identity to open bank accounts. The indictment alleges Vorce fraudulently obtained more than $27 million from 10 lenders, most in the Grand Rapids area.

The indictment marks the first time Vorce, 32, has faced criminal charges related to loans taken out at the banks using bogus collateral and fraudulent title work.

Read the indictment against Michael Vorce

 

The largest loans were $9.2 million by Holland-based Macatawa Bank, $8.6 million by the Grandville branch of Irwin Union Financial and $4.7 million by Lake Michigan Credit Union, based in Grand Rapids.

Vorce even obtained one $300,000 loan from a Greensboro, N.C., man, the indictment alleges.

Other lenders mentioned in the indictment include National City Bank, Wachovia, Independent Bank, Michigan State University Credit Union, Bank of America, LaSalle Bank (now part of Bank of America), as well as Founders Trust Bank.

A Press investigation in 2007 found a trail of paperwork showing how Vorce used bogus paperwork to secure titles for boats he didn't own or that did not exist. He used those titles as collateral to borrow millions of dollars from banks.

Vorce apologized to the banks which had seized and auctioned his assets. Many sued him in civil court, but he was not charged criminally in West Michigan until today. He was living in a gated mansion in Alpine Township until his Chicago arrest.

The arrest occurred despite Vorce's apparent cooperation with law enforcement in the West Michigan case. Court records in Milwaukee indicate the case that led to his arrest was part of a larger, multi-state fraud case.

That arrest occurred despite Vorce knowing he was being watched by law enforcement officers in West Michigan as their investigation into his loan activity here dragged on. (Excpert)

Posted by at 5:05 PM |

No charges for ex-NY governor in prostitution case

news.yahoo.com | 11/6/08 | suspect: Elliot Spitzer |  victim:  DOJ

Federal prosecutors said Thursday that they will not bring criminal charges against Eliot Spitzer for his role in a prostitution scandal, removing a legal cloud that has surrounded the former New York governor since his epic downfall eight months ago.

U.S. Attorney Michael Garcia said investigators found no evidence that Spitzer or his office misused public or campaign funds for prostitution. Investigators found that Spitzer solicited high-priced call girls, but federal prosecutors typically do not prosecute clients of prostitution rings.

"In light of the policy of the Department of Justice with respect to prostitution offenses and the longstanding practice of this Office, as well as Mr. Spitzer's acceptance of responsibility for his conduct, we have concluded that the public interest would not be further advanced by filing criminal charges in this matter," Garcia said in a statement.

A remorseful Spitzer issued a statement in which he expressed relief that he will not face charges.

"I appreciate the impartiality and thoroughness of the investigation by the U.S. Attorney's Office, and I acknowledge and accept responsibility for the conduct it disclosed," he said. "I resigned my position as Governor because I recognized that conduct was unworthy of an elected official. I once again apologize for my actions."

Spitzer was out of town and unavailable for further comment. (Excerpt)

Posted by at 5:01 PM |

November 3, 2008

Newport insurance agent gets 10 years for $2.5 million fraud

ocregister.com | 11/3/08 | $2.5 million  | suspect:  Anthony David Medina | Multiple Customers

A Newport Beach insurance agent was sentenced today to 10 years in state prison after he admitted defrauding 18 business owners who paid him more than $2.5 million, prosecutors said.

Between June 2003 and November 2007, Anthony David Medina, 37, took money from clients including restaurants, plumbers, painters and other service businesses, under the pretense of obtaining workers' compensation and general liability insurance for them, prosecutors said.

Medina, who operated Prompt Insurance Agency, failed to take out insurance policies for many of the businesses and charged others more than the stated premiums. In some cases, he forged documents to finance insurance premiums instead of paying the full amount up front to the insurance company, despite the fact that the victims had paid him the full premium amount, prosecutors said. He issued false certificates of insurance to some victims, creating false policy numbers or using numbers that actually belonged to other businesses.

As a result, some business owners and employees suffered losses that should have been covered by insurance, prosecutors said.

Medina failed to pay taxes on his ill-gotten gains and used clients' money to fund an "extravagant lifestyle, including cars, homes and a boat," prosecutors said in a news release.

Medina pleaded guilty to 152 felony counts, including 85 counts of forgery, 33 counts of transacting as an insurance company without a certificate of authority, 19 counts of grand theft, five counts of filing false tax returns, four counts of willfully failing to file a tax return and four counts of identify theft. He faces a restitution hearing at 9 a.m. Nov. 12 in Department C-50 of the Central Justice Center, Santa Ana.

Medina's wife, Vanessa Chaverri, 37, pleaded guilty June 10 to one felony count of filing a false tax return. She was sentenced to 90 days in jail, three years' probation and ordered to pay $486,172 in restitution.

The case was jointly investigated by the California Franchise Tax Board, California Department of Insurance and the Orange County district attorney. The Department of Insurance began investigating when an insurance company filed a report after finding a discrepancy in a financed policy taken out through Prompt Insurance Agency.

Posted by at 10:29 PM |

Whistleblower to get $320,000 from paving firm

bostonherald.com | 11/4/08 | $320,000 | P.A. Landers, Inc.

Bridgewater man will collect $320,000 from a Hanover road construction firm that fired him after he unearthed a shrewd overbilling scheme that defrauded taxpayers, according to a settlement announced today.

Omar Ali, a former maintenance worker at P.A. Landers Inc.’s Plymouth asphalt plant, paved the way for a criminal probe that ended with the conviction of two top executives last year.

As a whistleblower, Ali stands to receive 20 percent of a $900,000 settlement of the civil case -- plus $140,000 for his "wrongful discharge," U.S. Attorney Michael Sullivan announced yesterday.

Ali, who could not be immediately reached for comment, will get another $20,000 to help cover a decade’s worth of legal bills.  He worked for P.A. Landers from 1990 to 1997, filing his lawsuit in 1999.  The government intervened as a plaintiff in the civil case in 2005.

The government alleged that from 1995 through at least 2003, P.A. Landers created fake and inflated weight slips for truckloads of asphalt for federally funded paving projects.

The company’s former president, Preston A. "Skip" Landers, ordered that a manual override device be installed in the Plymouth asphalt plant’s computer control room to overstate the amount of loads.

Landers and Vice President Gregory R. Keelan were convicted in May 2007 in a separate criminal case and are currently serving 42-month and 30-month prison terms, respectively.

The company -- founded in 1978 and known for its road projects around southeastern Massachusetts, as well as bringing in dirt to cover Big Dig tunnels -- was ordered to pay a $3 million fine and put on four years’ probation.  P.A. Landers started taking on state highway projects again in May.  The company denied the allegations in the civil complaint but agreed to the terms of the settlement with the federal government.

Richard Mansfield, who took over as president of P.A. Landers in February, said the settlement is a "difficult burden" for the 275-employee company but "that’s what the government determined we had to pay."

Posted by at 10:05 PM |

Former Voorwood president sentenced for embezzlement

redding.com | 11/3/08 | $800,000 | suspect:  Peggy Kaye Witts | victim:  Voorwood Co.

A 62-year-old Redding woman was sentenced this morning to 46 months in federal prison for stealing more than $800,000 from an Anderson company’s employee benefit plan.

Peggy Kaye Witts, who pleaded guilty in July to one count of wire fraud and one count of tax evasion, must pay $824,333 in restitution to the Voorwood Co., said Matthew Stegman, assistant U.S. attorney in Sacramento.

She must also pay $199,858 to the Internal Revenue Service, he said.

Witts, the former president and chief financial officer of Voorwood Co., is to report by Jan. 6 to U.S. Bureau of Prisons officials, who will determine where she will be incarcerated, Stegman said.

She has asked to be imprisoned at the federal correctional institution in Dublin, a low security facility housing female offenders.

It is about 20 miles southeast of Oakland on the Camp Parks Army Reserve Forces Training Area Military Base.

Witts was hired by Voorwood in 1991 and become the chief financial officer in 1999. She was promoted to president in 2002.

Stegman said that during a four-year period, she issued company checks to herself, family members and others for her personal expenses. She was arrested in June 2006.

Witts faced a 25-count federal grand jury indictment that alleged mail fraud, wire fraud, false filing of a pension plan document, money laundering and tax evasion.

She was indicted after a one-year investigation by Anderson police, the U.S. Department of Labor and the IRS. She had faced a maximum of 20 years in prison for each mail and wire fraud violation, plus as many as 10 years in prison for the money laundering charge, Stegman has said.

In her July plea agreement, Witts admitted to tax evasion based on her failure to report the embezzled money as income and for failing to pay taxes on the money, Stegman said.

He said that as president/CFO and as president of the board of the pension plan, Witts was in control of all the information and guarded the mail and all the financial records. As such, she was able to hide the thefts from the rest of the company.

Since Voorwood is entirely owned by its employee stock-ownership plan, Witts’ plea agreement requires that she will be prohibited for the next 13 years from working in a position where she has access to employee-owned stocks.

Vorwood manufactures machinery for the wood products industry at a plant on Barney Street in Anderson.

Posted by at 9:44 PM |

AIG reserves fraud caused big investor loss

reuters.com | 11/2/08 | $500 million | suspects: Former Executives | victim:  American International Group

A financial manipulation scheme cost American International Group Inc investors at least $544 million, a judge has estimated, a finding that could mean the five former executives convicted in the fraud will face lengthy prison terms when sentenced.

The case is unrelated to AIG's mortgage-related losses that led to a near collapse of the company in September and an $85 billion emergency line of credit from the U.S. Federal Reserve.

Four former executives at General Re Corp, a unit of Warren Buffett's Berkshire Hathaway Inc, and one former AIG executive were found guilty by a federal jury in Connecticut in February of fraud and conspiracy. The charges stemmed from a reinsurance deal in 2000 that prosecutors said misled investors about AIG's financial condition.

A sentencing date has not yet been set, but the judge's written ruling on Friday on the size of the investors' losses means that each defendant is expected to face stringent sentencing guidelines when their penalties are determined.

In economic crimes, victims' financial losses are central in calculating sentencing guidelines for defendants. The judge's finding that the fraud had more than 250 victims also ratchets up the potential prison time each defendant may face.

Federal sentencing guidelines are advisory for judges, who can depart from them if they choose.

Based on the judge's calculations, the sentencing guidelines in the case likely will be "through the roof," said Douglas Berman, a law professor at Ohio State University and expert in white-collar sentencing matters.

"We're looking at a suggested guideline range of at least decades" of prison time for each defendant, he said. "There is a separate question of whether the judge will consider it necessary and appropriate to impose a prison sentence that is so long, particularly because these are first-time offenders."

Convicted at trial were General Re's former chief executive Ronald Ferguson, former chief financial officer Elizabeth Monrad, former assistant general counsel Robert Graham, former senior vice president Christopher Garand, and AIG former vice president of reinsurance Christian Milton.

Prosecutors, in court papers, have sought "substantial" prison terms. Defense lawyers have pleaded for leniency.

At the center of the case was a finite reinsurance transaction that prosecutors said allowed AIG to improperly boost loss reserves by $500 million in 2000 and 2001, artificially bolstering its share price.

In estimating the investor losses, U.S. District Judge Christopher Droney rejected calculations by a government expert that they could be as high as $1.4 billion. The judge concluded that the same expert, using a different methodology, made a "reasonable estimate" of losses between $544 million and $597 million.

Posted by at 9:36 PM |

November 2, 2008

Ex-health care CEO convicted in $1.9B fraud case

ap.google.com | 10/31/08 | $1.9 Billion | suspect:  Lance Poulsen | victim:  National Century Financial

 A federal jury on Friday convicted the former CEO of a failed health-care financing company in a $1.9 billion fraud case that prosecutors likened to the Enron or WorldCom scandals.

Lance Poulsen, 65, founder of National Century Financial Enterprises, was accused of fabricating data, moving money between accounts to hide shortfalls and misleading investors who funded his business model.

He had been on trial for the past month on charges of securities fraud and money laundering. He was convicted on all 20 counts.

His attorneys said they will file an appeal. Poulsen faces up to 135 years in prison, although his actual sentence will likely be shorter under federal-sentencing guidelines. No sentencing date was set.

In closing arguments Thursday, U.S. trial attorney Leo Wise called the case one of the largest frauds ever investigated by the FBI.

Poulsen, who was convicted in March and sentenced to 10 years in prison for attempting to bribe a witness, characterized himself as a rags-to-riches success story whose legitimate business was destroyed by the government.

Poulsen remains disappointed that U.S. District Court Judge Algenon Marbley allowed jurors to hear evidence of Poulsen's bribery conviction, defense attorney Pete Anderson said Friday.

Anderson said that information should have been excluded under rules of evidence. It's always a risk when a jury learns of a previous conviction, he said.

Prosecutors declined to comment.

Poulsen had testified he did nothing illegal and was guilty at most of overseeing a company that might have grown too fast.

But the government's key witness, former company executive Sherry Gibson, testified that she falsified numbers in investors' reports on Poulsen's orders. Gibson pleaded guilty in 2003 to conspiracy to commit wire and securities fraud.

The government said Poulsen kept two sets of books and signed off on falsified reports.

Poulsen founded National Century Financial Enterprises in Dublin, Ohio, in the early 1990s.

At its height, the company employed more than 300 people, most of them in the Columbus area. Executives made millions, with Poulsen alone earning more than $9.1 million between 1996 and 2002, according to the government. He also owned a yacht, a private corporate jet and a Florida mansion.

National Century offered financing to small hospitals, nursing homes and other health-care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn't have to wait for insurance payments. National Century then collected the full amount of the payments.

The company raised the money to fund its business by selling bonds to investors. It declared bankruptcy in 2002 after the FBI raided its offices.

At least nine former National Century executives have been convicted of corporate fraud related to the case.

Posted by at 8:33 PM |

Former banker will see prison for stealing from customers

seattlepi.com | 10/30/08 | $100,000 | suspect: Ruben Salazar | victim:  Key Bank

A former branch manager at Key Bank who pleaded guilty to embezzling more than $100,000 from customers' accounts was sentenced Friday to 14 months in prison.  Ruben Salazar, 35, of Puyallup, also must pay $103,997 in restitution. 

Salazar, manager of a Key Bank branch on South Tacoma Way, targeted the elderly and in one case, a customer who was deceased.

Court documents show that Salazar used the money to try to get his family out of debt, and his lawyer asked U.S. District Judge Ronald B. Leighton to impose a sentence of home arrest. But Leighton rejected that request.

For several months between September 2007 and January 2008, Salazar, using his position as manager, ordered checks on certain customers' accounts. He imprinted these checks with other peoples' names and then made out the fraudulent checks to himself, depositing them into his own account.

In one particularly egregious instance, he found a Key Bank customer with $400,000 in her account who planned to donate the money to the University of Washington. Salazar siphoned nearly $51,000 from that account.

He used similar tactics to embezzle $26,000 from a deceased Key Bank customer. The son of the victim noticed withdrawals on the account and alerted Key Bank to the fraud.

Posted by at 8:25 PM |

Ohio woman accused of embezzling from hospice

newarkadvocate.com | 10/30/08 | $300,000 | suspect:  Kathleen Lee | victim:  Hospice of Central Ohio

Kathleen A Lee woman was accused of embezzling at least $330,000 from the Hospice of Central Ohio has been charged with grand theft. 

She had been employed by the Hospice of Central Ohio since January 1995, according to court documents.

On Monday, the Hospice of Central Ohio contacted Newark police in reference to theft of money from its operating account. After speaking with hospice officials, Lee was interviewed by a detective and allegedly confessed to printing numerous checks to herself over the past several years.

She also allegedly admitted she embezzled the money covertly and without the knowledge of others.

A statement released by Michele Layman, CEO and President of Hospice of Central Ohio, noted the organization is "fully cooperating with the local law enforcement's investigation and will share more information with the public as soon as possible."

The release stated the alleged criminal misconduct "was not detected by annual audits, the most recent of which was conducted in March."

"Our audits are handled by reputable third-party firms that review our financial transactions and internal controls," it states. "Hospice of Central Ohio has always complied with these mandated audits, and will continue to do so."

No monetary donations were involved in the embezzlement, as the donations go directly to the foundation's account, according to the statement.

"We are thankful that the community's generous support of our organization was not affected by this horrible misconduct," the release stated.

Hospice officials are working with bank officials to determine the exact amount of money stolen. As of Wednesday, the date of the filing of the affidavit, Lee was accused of embezzling approximately $330,000 since sometime in 2005.

Lee was terminated from her job and arrested Tuesday and taken to the Licking County Justice Center. Judge Michael Higgins set her bond at $300,000.

Additional charges of forgery and corrupt activity also will be considered by the Licking County grand jury, according to a bond recommendation.

Layman stated that Hospice of Central Ohio is taking steps to safeguard against similar events in the future.

"We are proud of what we do, and this investigation will not deter us from focusing on the important work we do each day," Layman's statement reads.

Posted by at 8:12 PM |

Grand jury indicts GSA worker for embezzlement

bizjournals.com | 10/30/08 | $600,000 | suspect:  Michael Harrington | victim:  GSA

A federal grand jury on Thursday indicted a supervisory accountant at the General Services Administration for allegedly embezzling nearly $600,000 from the government.

Michael Harrington, 44, of Lee’s Summit, was charged with three counts of money laundering between May 9, 2006, and May 5 of this year.

The indictment alleges that Harrington would create government refund payment vouchers payable to a fictitious business entity of his creation and direct those checks to a bank account under the entity’s name.

“Those who are thinking of abusing their public trust should beware,” Brian Miller, GSA Inspector General, said in a written statement. “The (Office of the Inspector General) is actively seeking out corruption in the federal workplace, and will be bringing thieves to justice.”

Posted by at 8:00 PM |

Former St. Louis controller gets 1 year for embezzlement

bizjournals.com | 10/30/08 | $70,000 | suspect:  Sylvia York | victim:  Emmis Communications

Sylvia York, formerly of St. Louis, was sentenced to a year in prison on wire fraud charges for embezzling $70,000 from her ex-employer, Emmis Communications, First Assistant U.S. Attorney Michael Reap said Thursday.

York, 40, of Lubbock, Texas, the former controller of Emmis Communications in St. Louis, had responsibility for paying company bills and the expenses of company executives, including her own. Between 2005 and 2007, York fraudulently paid more than $70,000 to her American Express account to cover personal travel, clothing and dining charges and used her knowledge of company financial controls to cover the payments up, prosecutors said.

York was also ordered to pay Emmis back $70,633.56 in restitution and has submitted an early payment of $7,000 toward that figure. After completing a term of imprisonment, York will serve six months of home detention and two more years of supervised release.


Posted by at 7:50 PM |

'America's sheriff' faces Calif. corruption trial

ap.google.com | 10/30/08 | $700,000 | suspect:  Michael Carona | victim:  Orange County Sheriff

More than a year ago, Orange County Sheriff Michael Carona nibbled on crab cakes at a ritzy, seaside restaurant and praised his dinner companion for unflinching loyalty and friendship.  Carona didn't know the man he considered his best friend was wearing a wire as part of a federal corruption investigation that would upend the nation's fifth-largest sheriff's department and snuff out Carona's rising star.

Three months after that dinner, the government filed charges against Carona that cost him and key supporters their jobs in a case that features hidden cameras in Carona's office, profanity-laced recordings and allegations of misconduct by prosecutors.

Opening statements are expected Wednesday in the trial of the lawman once hailed as "America's Sheriff" by CNN's Larry King.

Carona, 53, has vigorously denied the felony charges of conspiracy, mail fraud and witness tampering. The charges carry up to 85 years in prison, but he could be sentenced to much less if convicted.

His wife will stand trial later. She has pleaded not guilty to one count of conspiracy.

A woman described as Carona's mistress is being tried with him. The woman, an attorney, has pleaded not guilty to conspiracy, mail fraud and bankruptcy fraud.

The trial is expected to last two months and the taped conversations — which contain sexual remarks and racial slurs — promise to figure prominently.

Legal experts said the allegations of political corruption make it a high-stakes trial for the government.

"To a certain degree, the average citizen expects that when people are in a position of power, they're going to use it to ... benefit their friends," said Jean Rosenbluth, a law professor at the University of Southern California and a former federal prosecutor. "But it's the extent of it and the nature of how engrained it was that's disturbing in this case."

The intrigue grew after the acting sheriff discovered a secret room in Carona's old office that contained a video recording system and cameras hidden in the ceiling. The tapes were turned over to prosecutors.

In court papers, the government accuses the square-jawed, three-term sheriff and his friends of accepting nearly $700,000 in cash, gifts, kickbacks and questionable loans in exchange for political favors beginning in 1998. Prosecutors say many of those bribes came from Don Haidl, a wealthy businessman.

In exchange, authorities say, Carona made Haidl an assistant sheriff and put him in charge of a new reserve deputy program that allowed him to hand out badges and concealed weapons permits in a pay-to-play scheme.

Haidl pleaded guilty last year to tax fraud and agreed to become an undercover informant.

It's unclear if Carona will testify in his own defense, but prosecutors plan to present a laundry-list of cooperating witnesses, including two of Carona's former assistant sheriffs and an attorney who allegedly provided kickbacks for legal referrals.

During the taped meeting last summer, Haidl and Carona appeared to get their stories straight as the threat of federal grand jury testimony loomed.

"I don't give a (expletive) if George was in the room, whatever we did, as long as our stories are straight, I'm OK, as long as I know there's no trail anywhere," Haidl said on the tape, referring to another assistant sheriff and alleged co-conspirator.

"No trail anywhere," Carona replied. "Period. Period. In fact, not even close to being a trail."

In another exchange about bribery allegations, Carona appeared to refer to a hidden camera.

"Unless there was a pinhole in your ceiling that evening, it never (expletive) happened because it never (expletive) happened, Don," Carona said on the tape. "And that part is why I sleep real well at night."

Carona's attorney, Brian Sun, declined to comment on the case or the tapes. During a hearing this week, he said he might subpoena Gov. Arnold Schwarzenegger to testify about how he once offered Carona a job as his chief of staff.

In legal filings, Carona's attorneys have argued their client was a dedicated lawman unfairly targeted by overzealous prosecutors with a flawed case.

Carona attracted the national spotlight and the praise of CNN's King in 2002, after the quick arrest of a man who was later convicted of killing a 5-year-old girl.

At trial, Carona's defense will likely highlight Carona's popularity and ask jurors to question the trustworthiness of the cooperating witnesses.

His attorneys also question the tactics of prosecutors who provided phony grand jury subpoena attachments to help Haidl get Carona to talk and allege that grand jury witnesses gave potentially false testimony.

A judge rejected a defense motion to suppress the tapes but did bar some portions where Carona makes sexually explicit and racially offensive remarks.

Posted by at 7:44 PM |