Charity Fraud


BATON ROUGE, LA – The National Center for Disaster Fraud reminds the public to be aware of and report any instances of alleged fraudulent activity related to relief operations and funding for victims. Unfortunately, criminals can exploit disasters, such as Hurricane Harvey, for their own gain by sending fraudulent communications through email or social media and by creating phony websites designed to solicit contributions.

Tips should be reported to the National Center for Disaster Fraud at (866) 720-5721. The line is staffed 24 hours a day, seven days a week. Additionally, e-mails can be sent to (link sends e-mail), and information can be faxed to (225) 334-4707.

The U.S. Department of Justice established the National Center for Disaster Fraud to investigate, prosecute, and deter fraud in the wake of Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region. Its mission has expanded to include suspected fraud from any natural or manmade disaster. More than 30 federal, state, and local agencies participate in the National Center for Disaster Fraud, which allows the center to act as a centralized clearinghouse of information related to disaster relief fraud.

The public should remember to perform due diligence before giving contributions to anyone soliciting donations or individuals offering to provide assistance to those affected by the tornadoes. Solicitations can originate from social media, e-mails, websites, door-to-door collections, flyers, mailings, telephone calls, and other similar methods.

Before making a donation of any kind, consumers should adhere to certain guidelines, including:

  • Do not respond to any unsolicited (spam) incoming e-mails, including clicking links contained within those messages, because they may contain computer viruses.
  • Be skeptical of individuals representing themselves as members of charitable organizations or officials asking for donations via e-mail or social networking sites.
  • Beware of organizations with copy-cat names similar to but not exactly the same as those of reputable charities.
  • Rather than follow a purported link to a website, verify the legitimacy of nonprofit organizations by utilizing various Internet-based resources that may assist in confirming the group’s existence and its nonprofit status.
  • Be cautious of e-mails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
  • To ensure contributions are received and used for intended purposes, make contributions directly to known organizations rather than relying on others to make the donation on your behalf.
  • Do not be pressured into making contributions; reputable charities do not use such tactics.
  • Be aware of whom you are dealing with when providing your personal and financial information. Providing such information may compromise your identity and make you vulnerable to identity theft.
  • Avoid cash donations if possible. Pay by credit card or write a check directly to the charity. Do not make checks payable to individuals.
  • Legitimate charities do not normally solicit donations via money transfer services. Most legitimate charities’ websites end in .org rather than .com.

Helthcare Fraud: David Kirkwood Pleaded Guilty To Health Care Fraud

Helth Care Fraud

Doctor, Wife Plead Guilty to Running Pill Mill

DAYTON – David Kirkwood, 61, and Beverly Kirkwood, 50, of Dayton, pleaded guilty in U.S. District Court to health care fraud. David Kirkwood also pleaded guilty to one count of unlawful drug trafficking.

Benjamin C. Glassman, United States Attorney for the Southern District of Ohio, Ohio Attorney General Mike DeWine, Lamont Pugh III, Special Agent in Charge, U.S. Department of Health & Human Services Office of Inspector General (HHS-OIG) Chicago Region and Timothy J. Plancon, Special Agent in Charge, Drug Enforcement Administration (DEA) announced the pleas entered into before U.S. District Judge Water H. Rice.

According to the facts outlined in the plea agreements, David Kirkwood owned and operated Kirkwood Family Practice in Dayton beginning in 1986.

David Kirkwood distributed nearly 4,000 units of Oxycodone outside the scope of medical practice and not for a legitimate medical purpose. All of these units were paid for by Medicare or Medicaid.

The doctor often used the same billing code for his customers regardless of the service performed, and would accept health care insurance payments for examinations that were not medically appropriate or sufficient for the billing codes submitted. Those bills were submitted on behalf of the practice and with the assistance of Beverly Kirkwood.

According to the indictment, David Kirkwood saw up to 100 patients per day, charging $100 per office visit. The government has sought to seize approximately $2.5 million in proceeds from the conspiracy.

“When a doctor distributes Oxycodone without a legitimate medical purpose and outside the scope of medical practice, that’s not just bad practice. It’s unlawful drug trafficking,” U.S. Attorney Glassman said. “In pleading guilty, David Kirkwood admitted that he was distributing opioids and other controlled substances as a drug dealer, not as a doctor.”

“The investigation found that this doctor took advantage of those suffering from addiction in the Dayton area for personal gain,” said Attorney General DeWine. “The pills never should have been prescribed because they served no legitimate medical purpose, and I applaud the work of state, federal, and local authorities to hold him accountable for his actions.”

As part of David Kirkwood’s plea, he has agreed to pay restitution in the amount of nearly $160,000, which represents the loss to Medicare and Medicaid.

Both David and Beverly are scheduled for sentencing before Judge Rice on December 6.

U.S. Attorney Glassman commended the investigation of this case by the Ohio Attorney General’s Medicaid Fraud Control Unit, HHS-OIG and DEA, as well as Special Assistant United States Attorney Maritsa Flaherty and Assistant United States Attorney Timothy Oakley.

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Financial Fraud: Kim A. Earlycutt, Shannon A. King, And Marcia Farmer Sentence For Conspiring To Submit False Tax Returns

Financial Fraud

Three sentenced for five million dollar tax fraud

ATLANTA – Kim A. Earlycutt, Shannon A. King, and Marcia Farmer, have been sentenced for conspiring to submit false tax returns totaling more than $5 million over the course of four years.

“The defendants went to great lengths to steal tax money from the IRS, with the twist in this case that they used stolen identities of foreign nationals to seek phony refunds,” said U. S. Attorney John Horn. “It all comes back to basic theft to enrich themselves at the expense of the taxpayers.”

“Identity theft continues to victimize unknowing individuals as well as the Internal Revenue Service. If you steal someone’s identity and file false tax returns, you will be prosecuted,” said Acting Special Agent in Charge, James E. Dorsey, IRS Criminal Investigation. “These sentencings should serve as a clear message to the public, theft will cost you significant jail time.”

“This is a great example of a joint investigation in which the financial footprints of these defendants were uncovered to gather evidence to bring them to justice. The prison sentences sent a strong message that we will continue to aggressively investigate criminals that engage in fraudulent schemes,” said David M. McGinnis, U.S. Postal Inspector in Charge of the Charlotte Division. “Together we will continue to be vigilant in disrupting criminal organizations who illegally utilize the U.S. Postal Service.”

“The United States Secret Service will continue to collaborate with our law enforcement partners and prosecutors to ensure that nefarious individuals who violate their positions of trust to illegally enrich themselves are put behind bars,” said Kenneth Cronin, Special Agent in Charge of the U.S. Secret Service, Atlanta Field Office. “This sentencing should be a warning to other like-minded criminals and their conspirators that stealing from the American people will not go unpunished.”

According to U.S. Attorney Horn, the charges and other information presented in court: The three defendants obtained identity documents of foreign nationals and forged foreign identity documents in connection with their work at T&K Tax Services and More, which Earlycutt partially owned. Using these identity documents, the defendants submitted IRS W-7 forms to get individual taxpayer identification numbers (ITINs). The defendants then created false and fraudulent tax claim forms, specifically Forms 1040, or individual income tax returns, using these ITINs. Included with these Forms 1040 were falsified W-2 forms, which had fraudulent employer information, income, withholding amounts, and deduction amounts.

The defendants filed the fraudulent tax returns with the IRS, by mailing them and by using T&K’s electronic filing number. The tax returns all contained requests for refunds which were not actually due. The defendants enriched themselves by retaining a portion of the tax refunds that had been fraudulently obtained, including in some instances the entire refund. In all, they sought refunds in excess of $7 million and actually received over $5 million in fraudulent refunds. They used these fraudulent funds to pay personal expenses, including paying their personal automobile insurance. One defendant, Kim Earlycutt, used the fraudulent funds for gambling.

Kim A. Earlycutt, 54, of Covington, Georgia, was sentenced to nine years in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,222,634. Earlycutt was convicted on these charges on June 15, 2017, after she pleaded guilty.

Shannon A. King, 37, of Lithonia, Georgia, was sentenced to four years, six months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $2,596,169. King was convicted on these charges on June 15, 2017, after he pleaded guilty.

Marcia Farmer, 51, of Snellville, Georgia, was sentenced to one year, six months in prison to be followed by nine months of home confinement, and three years of supervised release. She was ordered to pay restitution in the amount of $3,370,811. Farmer was convicted on these charges on October 28, 2016, after she pleaded guilty.

All three were sentenced by U.S. District Judge Leigh Martin May.

This case was investigated by the Internal Revenue Service Criminal Investigation, the U.S. Postal Inspection Service, and the U.S. Secret Service.

Assistant U.S. Attorney Christopher J. Huber prosecuted the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at (link sends e-mail) or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is

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Financial Fraud: Alice Soard And Wendell James Pay To Resolve Federal And State False Claims Act Allegations

Financial Fraud

Action for Defrauding a Program for Individuals with Developmental Disabilities Settles for Approximately $2 M

SACRAMENTO, Calif. — Two Bay Area companies and the two individuals who head them will pay approximately $2 million to resolve federal and state False Claims Act allegations that they knowingly overbilled a program designed to serve Californians with developmental disabilities, U.S. Attorney Phillip A. Talbert announced today.

A federal lawsuit, filed by whistleblower Beverly McCaffery, contends that Alternative Learning Center, its president Alice Soard, Adult Educational Technologies Inc., and its executive director Wendell James defrauded California’s Department of Developmental Services (DDS) by billing for services that were never provided. The lawsuit was brought in the Eastern District of California because the false claims were submitted to the DDS in Sacramento.

“These defendants took advantage of a government program designed to help some of our most vulnerable citizens, diverting funds over a number of years that may have been used to provide services to others in need,” said U.S. Attorney Talbert. “My office will continue to work closely with our federal and state partners to safeguard the integrity of this important program, and results like this one help accomplish that objective. We encourage anyone who has additional information about abuse of this program to come forward.”

“It is reprehensible that Adult Educational Technologies, Alternative Learning Center, Alice Soard, and Wendell James charged Medicaid for services that were never provided to developmentally disabled patients — services that were badly needed,” said Special Agent in Charge Steven J. Ryan of U.S. Department of Health and Human Services Office of Inspector General, San Francisco Regional Office. “Such repulsive scams, which cheat both patients and taxpayers, will not be tolerated. Thanks to our hardworking investigators and our law enforcement partners, these companies and executives will pay dearly for their heartless behavior.”

DDS administers programs that enable individuals with developmental disabilities to live in the community instead of being institutionalized. DDS contracts with nonprofit regional centers around the state, who in turn contract with “vendors,” such as Alternative Learning Center and Adult Educational Technologies Inc., who commit to provide in-home support to these individuals, including personal care and homemaking.

According to the settlement agreement, Alternative Learning Center and Adult Educational Technologies Inc. were authorized to provide services in Alameda and Contra Costa counties. It is alleged that the defendants submitted claims for payment for services that were never performed, fraudulently retained overpayments to which they knew they were not entitled and intentionally falsified documents to reflect services that were never actually performed in order to provide support for their false claims for payment.

The terms of the settlement require each defendant to make substantial up-front payments to the United States and California, along with additional payments over a period of time, plus interest. Alternative Learning Center will pay a total of $562,600, Adult Educational Technologies, Inc. will pay $322,500, Alice Soard will pay $159,400, and Wendell James will pay $107,500. Alice Soard has also agreed to sell her primary residence and remit the proceeds to the government.

The False Claims Act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery. Ms. McCaffery will receive a 20 percent share of all settlement proceeds paid to the United States.

This case was investigated by the United States Office of Inspector General of the U.S. Department of Health and Human Services, the Federal Bureau of Investigation, and the California Department of Justice, Office of the Attorney General, Bureau of Medi-Cal Fraud and Elder Abuse. Assistant U.S. Attorney Colleen M. Kennedy handled the case.

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Financial Fraud: Amechi Colvis Amuegbunam Sentenced In Business Email Compromise (BEC) Scheme

Financial Fraud

Nigerian Man Sentenced for Role in “Business Email Compromise” Scheme That Caused $3.7 Million Loss to U.S. Companies

DALLAS — A Nigerian citizen in the U.S. on a student visa was sentenced today before U.S. District Judge Ed Kinkeade to 46 months in federal prison and ordered to pay $615,555.12 in restitution for his role in what has become known as a “Business Email Compromise” (BEC) scheme, announced U.S. Attorney John Parker of the Northern District of Texas.

Amechi Colvis Amuegbunam, 30, of Lagos, Nigeria, pleaded guilty in March 2017 to one count of conspiracy to commit wire fraud. He has been in custody since the time of his arrest in August 2015.

According to plea documents in the case, from November 2013 through August 2015, Amuegbunam and other individuals, sent fraudulent emails to companies in the Northern District of Texas and elsewhere, containing misrepresentations that caused the companies to wire transfer funds as instructed on a pdf document that was attached to the email.

The investigation of this particular scheme began when two companies in the Dallas/Fort Worth area reported to the FBI Dallas office that they had received targeted spear phishing emails. These emails appeared to be a forwarded message, allegedly from a top executive at the company, sent to an employee in the company’s accounting department who had authority to make financial transfers for the company. Although the emails appeared to be coming from a company executive, the messages were actually coming from a false email account fraudulently created to look like a legitimate company email account. A fraudulent domain name was used that contained one small difference from the true company’s email address – such as transposed letters. After complying with the spear-phishing email instructions to transfer funds, the companies became victims of the BEC scheme. The investigation traced the creation of some of the pdfs to Amuegbunam.

According to the factual resume, the scheme involved at least ten victims totaling a loss of approximately $3,700,000.

The FBI investigated and Assistant U.S. Attorney C.S. Heath prosecuted. In May 2017, the FBI issued a Public Service Announcement about the BEC scheme.

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Financial Fraud: Robert Mark Seibert Accused of Running a Stock Investment Scheme That Allegedly Defrauded More Than 90 Victims

Financial Fraud

Palm Desert Man Arrested in Stock Scheme that Targeted Nearly 100 Elderly Victims across U.S. and Allegedly Caused over $1 Million in Losses

SANTA ANA, California – A Palm Desert man who is accused of running a stock investment scheme that allegedly defrauded more than 90 victims out of more than $1 million has been arrested on federal fraud charges.

Robert Mark Seibert, 64, was arrested in Bermuda Dunes Wednesday afternoon by FBI agents.

The arrest of Seibert was announced today by Acting United States Attorney Sandra R. Brown and Danny Kennedy, the FBI’s Acting Assistant Director in Charge of the Los Angeles Field Office.

Seibert, who allegedly used the alias “John Grey” when communicating with his victims, was arrested pursuant to a 16-count indictment returned by a federal grand jury on August 16.

Seibert had an initial appearance yesterday afternoon in United States District Court in Santa Ana, where a United States Magistrate Judge ordered him held without bond. Seibert pleaded not guilty to the charges in the indictment, and a trial was scheduled for October 17.

According to the indictment, Seibert operated his scheme through a series of businesses, including Universal Stock Transfer, National Discount Marketers, and New Global Productions. Seibert allegedly offered to sell victims stock in other companies – Intertech Solutions; Radio Shack; New Global Energy; SnackHealthy, Inc.; Uranium Energy Group; and Organovo Holdings – often at a discount from current market prices. After victims made investments, Seibert issued certificates as evidence of stock ownership and advised that if they did not earn a profit, he would return their money within 30 days.

The indictment alleges that Seibert did not hold or control any stock in other companies for sale, the victims’ money was not used to purchase stock, and they did not receive their money back after 30 days – or any time thereafter.

Investigators allege that Seibert defrauded at least 90 victims, who collectively sent more than $1 million to the defendant. According to the indictment, victims either mailed or wired amounts ranging from $2,000 to $21,000 to the companies operated by Seibert.

The indictment charges Seibert with 14 counts of mail fraud and two counts of wire fraud.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

The maximum statutory penalty for each of the 16 counts in the indictment is 20 years in federal prison.

This investigation is being conducted by the Federal Bureau of Investigation.

The case is being prosecuted by Assistant United States Attorney Gregory W. Staples of the Santa Ana Branch Office.

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Financial Fraud: Deborah Joy Durand Convicted of False Statements to Obtain Federal Employees Compensation Benefits, Wire Fraud, False Claims Relating to Workers Compensation Benefits, and Theft of Government Property

Financial Fraud

Former Postal Employee Convicted for Fraudulently Obtaining Workers’ Compensation Benefits

GREAT FALLS – The United States Attorney’s Office announced a federal court convicted Deborah Joy Durand of False Statements to Obtain Federal Employees’ Compensation Benefits, Wire Fraud, False Claims Relating to Workers’ Compensation Benefits, and Theft of Government Property. U.S. District Judge Brian Morris presided over the 3-day trial.

At trial, the government presented evidence that Durand had a back injury from her job at the Post Office. She had back surgery and was unable to work for a period of time. Instead of returning to work when capable, Durand lied to her doctors, embellished her symptoms, and ultimately obtained total disability. Agents from the Post Office conducted surveillance and saw that Durand was feeding horses, lifting hay bales, jogging in the mornings, clearing land, running chainsaws, removing stumps from fallen trees, building fences, mowing the lawn every week, riding horses twice a week, and many other physically challenging activities.

All total, Durand received over $693,403.63 based on her claims for workers’ compensation. Of that amount, she received $268, 892.18 for wages, despite having the ability to work at least a desk job at the Post Office.

In order to further prove the case, undercover federal agents called Durand and told her she won a free kayaking trip. During the ruse kayaking trip, Durand paddled approximately 30 miles in open ocean water over a three-day period. During the trip, Durand hiked, lifted heavy objects, and karate-kicked and judo-chopped an object held by an undercover federal agent. All of these activities were captured on video.

Two months after the kayaking trip, agents conducted a follow-up appointment with Durand to identify if she could work for the Post Office. Durand had no idea that the appointment was an undercover operation. During the interview, Durand claimed she could not sit or stand for long, and she was “totally sedentary.” She even claimed she was unable to work in any capacity.

This case was investigated by the United States Postal Service Office of Inspector General. Executive Special Agent in Charge Joanne Yarbrough said, “The majority of Postal Service employees are dedicated, hardworking, and trustworthy professionals who would never consider engaging in criminal conduct. However, when attempts to defraud the Federal Workers’ Compensation Program arise, those acts will not be tolerated, and they will be vigorously investigated by the USPS Office of Inspector General. The Workers’ Compensation Program is designed to ensure that individuals injured during the performance of their duties receive appropriate medical care and compensation. The conviction in this case is a result of the commitment between the United States Attorney’s Office, and the USPS Office of Inspector General, to ensure the integrity of the Federal Workers’ Compensation Program, and to hold those accountable for defrauding the program.”

Sentencing is set for November 30, 2017, at 1:30 p.m., at the Missouri River Courthouse, in Great Falls, Montana.

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Financial Fraud: James Robert Liang, a Volkswagen Engineer, Was Sentenced For His Role In a Nearly 10-Year Conspiracy to Defraud U.S.

Financial Fraud

Volkswagen Engineer Sentenced for His Role in Conspiracy to Cheat U.S. Emissions Tests

DETROIT, Michigan – James Robert Liang, a Volkswagen engineer, was sentenced today by U.S. District Judge Sean F. Cox of the Eastern District of Michigan to 40 months in federal prison for his role in a nearly 10-year conspiracy to defraud U.S. regulators and U.S. Volkswagen customers by implementing software specifically designed to cheat U.S. emissions tests in hundreds of thousands of Volkswagen “clean diesel” vehicles, the Justice Department announced today.

Liang, 63, of Newbury Park, California, pleaded guilty last year to one count of conspiracy to defraud the United States, to commit wire fraud, and to violate the Clean Air Act. According to court records, from 1983 until May 2008, Liang was an employee of Volkswagen AG (VW), working in its diesel development department in Wolfsburg, Germany.

Acting United States Attorney Daniel L. Lemisch stated, “This sentence sends a strong message of deterrence to automotive engineers and executives who should think twice before knowingly breaking United States laws for the benefit of their employer.”

“The actions of James Robert Liang and others with which he conspired to fraudulently represent that Volkswagen AG was in compliance with regulatory emissions standards significantly impacted thousands of victim consumers”, said David P. Gelios, Special Agent in Charge, Detroit Division of the FBI. “Today’s sentencing is significant as it demonstrates there is and will be personal culpability for corporate executives who knowingly cheat American consumers, violate federal laws, and purposely utilize technologies that further endanger our environment.”

“As this case demonstrates, the U.S. Environmental Protection Agency is committed to ensuring a level playing field for companies that follow the rules and pursuing individuals whose actions create an unfair competitive advantage for their employer,” said Larry Starfield, Acting Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance.

Beginning in about 2006, he and his co-conspirators started to design a new “EA 189” diesel engine for sale in the United States, according to the plea agreement. When Liang and his co-conspirators realized that they could not design a diesel engine that would meet the stricter U.S. emissions standards, they designed and implemented software to recognize whether a vehicle was undergoing standard U.S. emissions testing on a dynamometer or being driven on the road under normal driving conditions (the defeat device), in order to cheat U.S. emissions tests. VW tasked Liang with making the defeat device work by calibrating it to recognize specific U.S. emissions tests’ drive cycles. In May 2008, Liang moved to the United States to assist in the launch of VW’s new “clean diesel” vehicles in the U.S. market. While working at VW’s testing facility in Oxnard, California, he held the title of Leader of Diesel Competence.

According to Liang’s plea agreement, for over eight years, employees of VW and its U.S. subsidiary met with the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) to seek the certifications required to sell each model year of its vehicles to U.S. customers. During these meetings, some of which Liang personally attended, Liang and his co-conspirators lied to the regulators by telling them that the VW diesel vehicles complied with U.S. emissions standards, when, in fact, they did not. Instead, these diesel vehicles were cheating the U.S. emissions test through use of the defeat device.

For each new model year from 2009 through 2016, Liang’s co-conspirators continued to falsely and fraudulently certify to EPA and CARB that VW diesel vehicles met U.S. emissions standards and complied with the Clean Air Act, according to the plea agreement. Liang admitted that during this time, he and his co-conspirators lied to the U.S. public by marketing VW diesel vehicles as “clean diesel” and environmentally-friendly, while, at the same time, promoting the vehicles’ increased fuel economy, a result achieved by using the defeat device. At the same time, Liang and his co-conspirators also continued to improve and refine the defeat device to better recognize when the VW diesel vehicles were being tested versus being driven on the road.

In connection with pleading guilty, Liang admitted that he helped his co-conspirators continue to lie to the EPA, CARB, and VW customers even after the regulatory agencies started raising questions about the vehicles’ on-road performance following an independent study commissioned by the International Council on Clean Transportation, which showed that the diesel vehicles’ emissions on the road were more than 30 times higher than shown on the dynamometer.

The FBI’s Detroit Office and EPA-CID are investigating the case. Deputy Chief Benjamin D. Singer and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section, Senior Trial Attorney Jennifer L. Blackwell of the Environment and Natural Resources Division, and Criminal Division Chief Mark Chutkow and Economic Crimes Unit Chief John K. Neal of the U.S. Attorney’s Office of the Eastern District of Michigan are prosecuting the case.

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Financial Fraud: MAHMOUD THIAM Was Sentenced For His Scheme to Launder $8.5 Million

Financial Fraud

Former Minister Of Mines For The Republic Of Guinea Sentenced To 7 Years In Prison For Receiving And Laundering $8.5 Million In Bribes From Chinese Companies

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Kenneth A. Blanco, the Acting Assistant Attorney General of the Department of Justice’s Criminal Division, announced that MAHMOUD THIAM was sentenced today in Manhattan federal court to seven years in prison by U.S. District Judge Denise L. Cote, for his scheme to launder $8.5 million in bribes that THIAM received from senior representatives of a Chinese conglomerate. THIAM received the bribes in exchange for using his official position as Minister of Mines for the Republic of Guinea to facilitate the award to the Chinese conglomerate of exclusive and highly valuable investment rights in various sectors of the Guinean economy. THIAM was found guilty on May 3, 2017, following a seven-day trial, of two counts of money laundering.

Acting Manhattan U.S. Attorney Joon H. Kim said: “As a unanimous jury found at trial, Thiam abused his position as Guinea’s Minister of Mines to take millions in bribes from a Chinese conglomerate, and then launder that money through the American financial system. Enriching himself at the expense of one Africa’s poorest countries, Thiam used some of the Chinese bribe money to pay his children’s Manhattan private school tuition and to buy a $3.75 million estate in Dutchess County. Today’s sentence shows that if you send your crime proceeds to New York, whether from drug dealing, tax evasion or international bribery, you may very well find yourself at the front end of long federal prison term.”

Acting Assistant Attorney General Kenneth A. Blanco said: “Mahmoud Thiam engaged in a corrupt scheme to benefit himself at the expense of the people of Guinea. Corruption is a cancer on society that destabilizes institutions, inhibits fair and free competition, and imposes significant burdens on ordinary law-abiding people just trying to live their everyday lives. Today’s sentence sends a strong message to corrupt individuals like Thiam that if they attempt to use the U.S. financial system to hide their bribe money they will be investigated, held accountable, and punished.”

According to the allegations in the Indictment, other filings in Manhattan federal court, and the evidence admitted at trial:

MAHMOUD THIAM, a United States citizen who was Minister of Mines and Geology of the Republic of Guinea in 2009 and 2010, engaged in a scheme to accept bribes from senior representatives of a Chinese conglomerate and to launder that money into the United States and elsewhere. In exchange for these multimillion-dollar bribe payments, THIAM used his position as Minister of Mines to facilitate the award to the Chinese conglomerate of exclusive and highly valuable investment rights in a wide range of sectors of the Guinean economy, including near-total control of Guinea’s significant mining sector.

In order to receive the bribes covertly, THIAM opened a bank account in Hong Kong (the “Hong Kong Account”) and misreported his occupation to the Hong Kong bank to conceal his status as a public official in Guinea. Upon receiving the bribes, THIAM transferred millions of dollars in bribe proceeds from the Hong Kong Account to, among others, THIAM’s bank accounts in the United States; a Malaysian company that facilitated and concealed THIAM’s purchase of a $3,750,000 estate in Dutchess County, New York; private preparatory schools in Manhattan attended by THIAM’s children; and at least one other West African public official.

To further conceal the unlawful source of the bribery proceeds that THIAM transferred from the Hong Kong Account to banks in the United States, THIAM lied to two banks based in Manhattan and on tax returns filed with the Internal Revenue Service regarding the bribe payments, his position as a foreign public official, and the source of the funds in the Hong Kong Account. In total, THIAM received approximately $8.5 million in bribes from the Chinese conglomerate.

In addition to the prison term, THIAM, 50, of Manhattan, was sentenced to three years of supervised release and was ordered to forfeit $8.5 million.

Mr. Kim praised and thanked the Department of Justice’s Criminal Division, as well as the Federal Bureau of Investigation for its outstanding investigative work. The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter. The Office is grateful to the government of Guinea for providing substantial assistance in gathering evidence during this investigation.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Elisha J. Kobre and Christopher J. DiMase and Trial Attorney Lorinda I. Laryea of the Fraud Section of the Justice Department’s Criminal Division are in charge of the prosecution.

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Tax Fraud: Kenneth J. Coleman Charged in a Nine-Count Indictment Filed of Second-Hand Prescription Drugs

Tax Fraud

Texas Residents Indicted for Laundering and Structuring Proceeds from Sale of Second-Hand Prescription Drugs

Income Allegedly Not Reported on Federal Tax Returns

A federal grand jury sitting in Houston, Texas returned an indictment, which was unsealed today, charging two Texas residents with conspiring to commit money laundering and structuring currency transactions, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Abe Martinez for the Southern District of Texas. One of the defendants was also charged with tax evasion, filing false tax returns and failing to file tax returns.

Kenneth J. Coleman, 50, and Marcus T. Weathersby, 44, are charged in a nine-count indictment filed in the Southern District of Texas. According to the indictment and information provided to the court, Coleman owned Acacia Pharma Distributors Inc. and Four Corner Suppliers Inc., which allegedly purchased bottles of prescription medications from illegitimate sources and then sold the medications to another wholesale distributor who then sold them to pharmacies as new. Federal regulation requires wholesale distributors of prescription medications to provide to a buyer a pedigree – a written statement identifying each prior sale, purchase or trade of the drugs being sold that includes the business name and information of all parties to the prior transactions, starting with the manufacturer. Coleman and Weathersby are alleged to have created false pedigrees, which were provided to the wholesale distributor to whom Acacia and Four Corners sold the drugs. That distributor allegedly withheld payment until these false pedigrees were received.

The indictment alleges that Coleman and Weathersby deposited proceeds from the fraudulent sale of these second-hand prescription drugs into Acacia’s and Four Corner’s business bank accounts and used the funds to pay the suppliers of the illicit pharmaceuticals. Coleman and Weathersby are also charged with making approximately 240 cash withdrawals, totaling over $2 million in amounts less than $10,000, to evade bank-reporting requirements.

Coleman is also charged with evading Acacia’s and Four Corner’s income tax liabilities, filing false 2012 and 2013 individual income tax returns and failing to file individual and corporate tax returns. Weathersby was arraigned earlier today and detained pending his trial set for Oct. 16 in front of U.S. District Court Judge Lee H. Rosenthal. Coleman made his initial Court appearance earlier today and has been released on bond.

If convicted, Coleman and Weathersby face a statutory maximum sentence of 20 years in prison for the money laundering conspiracy and a maximum sentence of five years for the conspiracy to structure currency transactions. Coleman also faces a five-year statutory maximum sentence for each count of tax evasion, a maximum sentence of three years in prison for each count of filing a false tax return, and up to one year in jail for the failure-to-file charges. Both Coleman and Weathersby face a period of supervised release, restitution, forfeiture and monetary penalties.

An indictment is not a finding of guilt. It merely alleges that crimes have been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Martinez thanked agents of IRS Criminal Investigation, the FBI, and the Federal Department of Agriculture, who conducted the investigation, and Trial Attorneys Sean Beaty and Terri-Lei O’Malley of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.


Financial Fraud: The United States Filed Two Complaints That The Companies Have Participated in Schemes to Launder U.S. Dollars On Behalf of Sanctioned North Korean

Financial Fraud

United States Files Complaints to Forfeit More Than $11 Million From Companies That Allegedly Laundered Funds To Benefit Sanctioned North Korean Entities

WASHINGTON – The United States filed two complaints today seeking imposition of a civil money laundering penalty and to civilly forfeit more than $11 million from companies that allegedly acted as financial facilitators for North Korea, announced U.S. Attorney Channing D. Phillips, Michael DeLeon, Special Agent in Charge of the FBI’s Phoenix Field Office, and Michael J. Anderson, Special Agent in Charge of the FBI’s Chicago Field Office.

The actions, filed in the U.S. District Court for the District of Columbia, represent two of the largest seizures of North Korean funds by the Department of Justice. One complaint seeks $6,999,925 associated with Velmur Management Pte Ltd., a Singapore-based company. The other seeks $4,083,935 from Dandong Chengtai Trading Co. Ltd., also known as Dandong Zhicheng Metallic Material Co., Ltd., a company in Dandong, China.

The lawsuits follow a similar complaint, filed in June 2017, seeking more than $1.9 million from Mingzheng International Trading Limited, a company based in Shenyang, China.

The complaints allege that the companies have participated in schemes to launder U.S. dollars on behalf of sanctioned North Korean entities. According to the complaints, the companies participated in financial transactions in violation of the International Emergency Economic Powers Act (IEEPA), the North Korean Sanctions and Policy Enhancement Act of 2016, and federal conspiracy and money laundering statutes. Today’s complaints are the first filed actions based on the 2016 North Korean Sanctions and Policy Enhancement Act.

“These complaints show our determination to stop North Korean sanctioned banks and their foreign financial facilitators from aiding North Korea in illegally accessing the United States financial system to obtain goods and services in the global market place,” said U.S. Attorney Phillips. “According to the complaints, these front companies are supporting sanctioned North Korean entities, including North Korean military and North Korean weapons programs. Working with our law enforcement partners, we will vigorously enforce vital sanctions laws.”

“The complaints allege that these companies are assisting North Korea in evading sanctions, which is in direct conflict with our national security interests,” said Special Agent in Charge DeLeon, of the FBI’s Phoenix Field Division. “We will continue to use the necessary resources to expose these types of actions and investigate those who utilize the U.S. banking systems for illegal activities.”

U.S. v. Velmur Management Pte., Ltd. (Velmur) and Transatlantic Partners Pte. Ltd. (Transatlantic)

This complaint alleges that Velmur and Transatlantic Partners Pte. Ltd. (Transatlantic) laundered United States dollars on behalf of sanctioned North Korean banks that were seeking to procure petroleum products from JSC Independent Petroleum Company (IPC), a designated entity. The complaint also seeks a civil monetary penalty against Velmur and Transatlantic for prior sanctions and money laundering violations related to this scheme.

According to the complaint, designated North Korean banks to use front companies, including Transatlantic, to make U.S. dollar payments to Velmur. The complaint relates to funds that were transferred through four different companies and remitted to Velmur to wire funds to JSC Independent Petroleum Company (IPC), a Russian petroleum products supplier. On June 1, 2017, the Department of the Treasury’s Office of Foreign Asset Controls (OFAC) designated IPC. The designation noted that IPC had a contract to provide oil to North Korea and reportedly shipped over $1 million worth of petroleum products to North Korea.

The United Nations Panel of Experts reported in 2017 on the methods used by North Korean banks to evade sanctions and continue to access the international banking system. Specifically, despite strengthened financial sanctions, North Korean networks are adapting by using greater ingenuity in accessing formal banking channels. This includes maintaining correspondent bank accounts and representative offices abroad which are staffed by foreign nationals making use of front companies. These broad interwoven networks allow the North Korean banks to conduct illicit procurement and banking activity.

An FBI investigation revealed that Velmur’s and Transatlantic’s activities mirror this money laundering paradigm. Specifically, companies identified in the complaint and Transatlantic act as front companies for designated North Korean banks.

The government is seeking to forfeit $6,999,925 that was wired to Velmur in May 2017. The U.S. dollar payments, which cleared through the U.S., are alleged to violate U.S. law because the entities were surreptitiously making them on behalf of the designated North Korean Banks, whose designation precluded such U.S. dollar transactions. The government also is seeking imposition of a monetary penalty commensurate with the millions of dollars allegedly laundered by Velmur and Transatlantic.

U.S. v. Dandong Chengtai Trading Co., Ltd. (Dandong Chengtai), also known as Dandong Zhicheng Metallic Material Co., Ltd.

This complaint alleges that Dandong Chengtai and associated front companies controlled by Chi Yupeng, a Chinese national, comprise one of the largest financial facilitators for North Korea. According to the complaint, Dandong Chengtai conspired to evade U.S. economic sanctions by facilitating prohibited U.S. dollar transactions through the United States on behalf of the North Korean Workers’ Party, a sanctioned entity.

The complaint further alleges that the North Korean government relies on exports of coal as its primary means of obtaining access to foreign currency and that the North Korean military controls the amount of coal produced and its subsequent export. The North Korean government uses proceeds of coal sales to fund its weapons of mass destruction program and missile programs. Coal generates more than $1 billion in revenue per year for North Korea. The investigation revealed that Dandong Chengtai is one of the largest importers of North Korean coal in China, and has continued to engage in illicit U.S. dollar transactions related to its coal sales to benefit North Korea.

The complaint alleges that Dandong Chengtai facilitated wire transfers denominated in U.S. dollars for purchases of goods that are well outside the scope of a mineral trading company. Financial records reveal that purchases of bulk commodities such as sugar, rubber, petroleum products, and soybean oil, among others, were in fact destined for North Korea.

As reported in findings by the Treasury Department and the United Nations Panel of Experts, North Korean financial facilitators frequently establish and maintain offshore U.S. dollar accounts for the purposes of remitting wire transfers denominated in U.S. dollars on behalf of sanctioned North Korean entities. These broad interwoven networks allow sanctioned North Korean entities to conduct illicit procurement and banking activity.

The government is seeking to forfeit $4,083,935 that Dandong Chengtai wired on June 21, 2017, to Maison Trading, using their Chinese bank accounts. The investigation revealed that Maison Trading is a front company operated by a Dandong Chengtai employee. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because the recent North Korean sanctions law specifically barred U.S. dollar transactions involving North Korean coal and the proceeds of these transactions were for the benefit of the North Korea Worker’s Party, whose designation precluded such U.S. dollar transactions.

This case relates to a previously unsealed opinion from Chief Judge Beryl A. Howell of the U.S. District Court for the District of Columbia, which found that probable cause existed to seize funds belonging to Dandong Chengtai.

The claims made in the complaints are only allegations and do not constitute a determination of liability.

The FBI’s Phoenix Field Office is investigating the case involving Velmur Management Pte Ltd. and Transatlantic Partners Pte., Ltd. The FBI’s Chicago Field Office is investigating the case involving Dandong Chengtai Trading Co. Ltd. Both investigations are being supported by the FBI Counterproliferation Center.

Assistant U.S Attorneys Arvind K. Lal, Zia M. Faruqui, Christopher B. Brown, Deborah Curtis, Ari Redbord, and Brian P. Hudak, all of the U.S. Attorney’s Office for the District of Columbia, are prosecuting both cases. Paralegal Specialist Toni Anne Donato and Legal Assistant Jessica McCormick are providing assistance.

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Mortgage Fraud: LAURANCE H. FREED Convicted On Three Counts of Bank Fraud, One Count of Mail Fraud, And Four Counts of Making a False Statement To a Financial Institution

Mortgage Fraud

Real Estate Developer Sentenced to Three Years in Federal Prison for Defrauding Banks and the City of Chicago

CHICAGO — A federal judge today sentenced a Chicago real estate developer to three years in prison in connection with a fraud scheme related to a $105 million line of credit secured by city and suburban properties, including the Streets of Woodfield Mall in Schaumburg.

The fraud perpetrated by LAURANCE H. FREED, the president of Joseph Freed & Associates LLC, also involved the theft of millions of dollars from his business partner, Kimco Realty Corp. Freed also fraudulently obtained more than $575,000 in publicly funded loans from the city of Chicago, and attempted to fraudulently obtain an additional $1 million from the city.

A federal jury last year convicted Freed, 54, of Chicago, on three counts of bank fraud, one count of mail fraud, and four counts of making a false statement to a financial institution. In addition to the 36-month prison term, U.S. District Judge Robert M. Dow also fined Freed $250,000, and ordered him to pay $575,759 in restitution to a victim bank.

The sentence was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph M. Ferguson, Inspector General for the City of Chicago.

“These were serious offenses that merit serious punishment,” Assistant U.S. Attorney Matthew F. Madden argued in the government’s sentencing memorandum. “The defendant was at the heart of this scheme to defraud and the lies told in furtherance of it.”

The investigation also resulted in the conviction of JFA’s vice president, CAROLINE WALTERS. Walters, of Palatine, pleaded guilty last year to one count of making a false statement to a financial institution. Judge Dow previously sentenced Walters to six months in prison.

According to evidence at Freed’s trial, the city of Chicago in 2002 issued two Tax Increment Financing notes to Uptown Goldblatts Venture LLC, a company formed by JFA to redevelop the former Goldblatt’s store in the Chicago’s Uptown neighborhood. The TIF notes had a combined principal of $6.7 million, and Freed pledged one of the notes to Cole Taylor Bank as collateral.

Four years later, JFA-affiliated entities entered into agreements with a bank consortium for a revolving line of credit worth up to $105 million. Uptown Goldblatts became a borrower under the revolving loan agreement through a subsequent deal with LaSalle Bank, which was one of the banks in the consortium and had recently been acquired by Bank of America. In the LaSalle deal, Uptown Goldblatts pledged the two TIF notes as collateral and also represented that the notes were owned free of other secured interests. The deal did not mention that one of the notes had already been pledged to Cole Taylor.

Evidence at trial also revealed that in 2009 and 2010 Freed signed false affidavits seeking to obtain more than $1.5 million in TIF payments from the city, knowing that he was not entitled to the payments.

As Freed’s business experienced financial difficulties, he withdrew more than $7 million from the Streets of Woodfield partnership without the knowledge and consent of his business partner Kimco, which owned 45% of the venture. Freed fraudulently recorded the money as “loans.”

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Financial Fraud: Michael Baker Guilty of One Count of Conspiracy to Commit Wire Fraud And Securities Fraud

Financial Fraud

Former CEO of Arthrocare Corporation Convicted for Orchestrating $750 Million Securities Fraud Scheme

A federal jury today convicted the former chief executive officer of ArthroCare Corporation, a publicly traded medical device company based in Austin, Texas, for his role in orchestrating a fraud scheme that resulted in shareholder losses of over $750 million.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Richard L. Durbin, Jr. of the Western District of Texas and Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field office made the announcement.

After a two-week trial, a jury in the Western District of Texas found the former CEO, Michael Baker, 58, of Austin, Texas, guilty of one count of conspiracy to commit wire fraud and securities fraud, seven counts of wire fraud, two counts of securities fraud and two counts of making false statements. Baker was charged in a superseding indictment unsealed on July 17, 2013.

Evidence at trial demonstrated that Baker, along with his co-conspirators, masterminded and executed a scheme to artificially inflate sales and revenue through a series of end-of-quarter transactions involving several of ArthroCare’s distributors beginning in 2005 and continuing until 2009. Co-conspirators David Applegate and John Raffle, both former senior vice presidents of ArthroCare, pleaded guilty to multiple felonies in 2013 in connection with their participation in the scheme. Co-conspirator Michael Gluk, former chief financial officer of ArthroCare, pleaded guilty to conspiracy to commit wire and securities fraud on June 14, in connection with his participation in the scheme.

The trial evidence showed that Baker, along with his co-conspirators, determined the type and amount of product to be shipped to distributors based on ArthroCare’s need to meet Wall Street analyst forecasts, rather than distributors’ actual orders. Baker and others then caused ArthroCare to “park” millions of dollars’ worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter. ArthroCare then reported these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

Evidence at trial further showed that ArthroCare’s distributors agreed to accept shipment of millions of dollars of products in exchange for special conditions, including substantial, upfront cash commissions, extended payment terms and the ability to return products, allowing ArthroCare to falsely inflate revenue by tens of millions of dollars. Baker and others used DiscoCare, a privately owned Delaware corporation, as one of the distributors to cover shortfalls in ArthroCare’s revenue. At Baker’s direction, ArthroCare shipped product to DiscoCare that far exceeded DiscoCare’s needs.

Baker and others lied to investors and analysts about ArthroCare’s relationships with its distributors, including DiscoCare; Baker caused ArthroCare to acquire DiscoCare specifically to conceal from the investing public, the nature and financial significance of ArthroCare’s relationship with DiscoCare, the evidence showed.

Evidence at trial also established that Baker lied when he was deposed by the U.S. Securities and Exchange Commission in November 2009 about ArthroCare’s relationship with DiscoCare.

Following today’s verdict, U.S. District Judge Sam Sparks of the Western District of Texas, who presided over the trial, remanded Baker into custody. A sentencing date for Baker has not yet been scheduled.

This case was investigated by the FBI’s San Antonio Field Office. The case is being prosecuted by the Fraud Section’s Securities and Financial Fraud Unit Chief Benjamin D. Singer, Assistant Chief Henry P. Van Dyck and Trial Attorney Caitlin Cottingham.

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Public Corruption And Financial Fraud: Captain Jesus Vasquez Cantu Charged so Far as Part of The Massive Fraud And Bribery Investigation

Financial Fraud

Former Assistant Chief of Staff of the U.S. Navy’s Seventh Fleet Charged in Massive Navy Corruption Scandal; Pleads Guilty to Bribery Conspiracy

Assistant U.S. Attorneys Mark W. Pletcher (619) 546-9714 and Patrick Hovakimian (619) 546-9718

SAN DIEGO – U.S. Navy Captain Jesus Vasquez Cantu admitted in federal court today that he accepted bribes in the form of parties and prostitutes while sneaking proprietary information to foreign defense contractor Leonard Glenn Francis and his Singapore-based firm, Glenn Defense Marine Asia.

Twenty-eight individuals, including 21 current and former Navy officials and five civilian defendants, plus GDMA, the corporation, have been charged so far as part of the massive fraud and bribery investigation. Nineteen of these defendants have pleaded guilty. Nine defendants await trial.

Cantu, 59, of Silverdale, Washington, pleaded guilty to one count of conspiracy to commit bribery and is scheduled to be sentenced on November 9, 2017 before U.S. District Judge Janis L. Sammartino.

In his plea agreement, Cantu acknowledged that Francis took him and others out for drinks and dinners at posh restaurants, nightclubs and karaoke bars and paid for lavish hotel rooms and the services of prostitutes on numerous occasions in 2012 and 2013. Cantu admitted that he provided proprietary U.S. Navy information to Francis, and that he used his power and influence to help Francis and GDMA with their business.

“The number of U.S. Navy officials who participated in this conspiracy is astounding,” said Acting U.S. Attorney Alana W. Robinson. “Like so many others, this defendant sold out the Navy and his country for cocktails and karaoke. We are pressing forward in this investigation until we are certain that all involved have been held accountable.”

“The guilty plea of Jesus Cantu is another sad chapter in the largest fraud and corruption scandal in the U.S. Navy’s history,” said Dermot O’Reilly, Deputy Inspector General for Investigations, Office of Inspector General, Department of Defense. “While the conduct of the vast majority of U.S. Navy personnel is beyond reproach, the unfortunate truth is that for years Leonard Francis and Glenn Defense Marine Asia, compromised the integrity of numerous members of the U.S. Navy. This investigation continues, and the Defense Criminal Investigative Service and its law enforcement partners will relentlessly pursue those individuals involved in this massive corruption scandal.”

NCIS Director Andrew Traver said of today’s events, “Captain Cantu, like others caught up in the GDMA scandal, dishonored his sworn oath of office. NCIS, in concert with our partner agencies, remains resolved to following the evidence wherever it may lead, to help hold accountable those who choose personal gratification over duty and professional responsibility.”

According to his plea agreement, Cantu served in the Navy until 2014. During the time he was accepting bribes from Francis in 2012 and 2013, Cantu was the deputy commander, Military Sealift Command (MSC) Far East in Singapore. He oversaw the MSC ships that provided logistical sustainment to Navy ships operating in the Seventh Fleet.

Cantu also admitted in his plea agreement that, in 2007, when he was the Assistant Chief of Staff for Logistics for the Commander of the U.S. Navy’s Seventh Fleet aboard the USS Blue Ridge, he and others participated in a bribery conspiracy with Francis. Cantu and other members of the conspiracy accepted more than $135,000 in meals, entertainment, travel and hotel expenses, and the services of prostitutes from Francis; in exchange, they worked together to help Francis as issues important to his business arose.

Cantu’s 2007 conduct described in the plea agreement is related to the March 2017 indictment of nine high-ranking Seventh Fleet U.S. Navy officers. Retired U.S. Navy Rear Admiral Bruce Loveless and others are accused of conspiring with Francis, trading military secrets and substantial influence for sex parties with prostitutes, extravagant dinners and luxury travel. The others include Captains David Newland, James Dolan, Donald Hornbeck and David Lausman; Colonel Enrico DeGuzman; Lt. Commander Stephen Shedd; Commander Mario Herrera and Chief Warrant Officer Robert Gorsuch. Their cases are pending.

The U.S. Navy’s Seventh Fleet represents a vital piece of the United States military’s projection of power as well as American foreign policy and national security. The largest numbered fleet in the U.S. Navy, the Seventh Fleet comprises 60-70 ships, 200-300 aircraft and approximately 40,000 Sailors and Marines. The Seventh Fleet is responsible for U.S. Navy ships and subordinate commands that operate in the Western Pacific throughout Southeast Asia, Pacific Islands, Australia, and Russia and the Indian Ocean territories, as well ships and personnel from other U.S. Navy Fleets that enter the Seventh Fleet’s area of responsibility. The USS Blue Ridge is the command ship of the Seventh Fleet and houses at-sea facilities for Seventh Fleet senior officials.

The other current or retired Navy officials charged so far in the fraud and bribery investigation are U.S. Navy Admiral Robert Gilbeau; Captain Michael Brooks; Captain Daniel Dusek; Commander Michael Misiewicz; Commander Jose Luis Sanchez; Commander Bobby Pitts; Commander David Kapaun; Lt. Commander Gentry Debord; Lt. Commander Todd Malaki; Petty Officer First Class Daniel Layug; NCIS Supervisory Special Agent John Beliveau; and Paul Simpkins, a former DoD civilian, who oversaw contracting in Singapore.

All have pleaded guilty. On Jan. 21, 2016, Layug was sentenced to 27 months in prison and a $15,000 fine; on Jan. 29, 2016, Malaki was sentenced to 40 months in prison and to pay $15,000 in restitution to the Navy and a $15,000 fine. On March 25, 2016, Dusek was sentenced to 46 months in prison and to pay $30,000 in restitution to the Navy and a $70,000 fine; and on April 29, 2016, Misiewicz was sentenced to 78 months in prison and to pay a fine of $100,000 and to pay $95,000 in restitution to the Navy. Beliveau was sentenced on October 14, 2016 to 12 years in prison and to pay $20 million in restitution; Simpkins was sentenced on December 2, 2016 to 72 months in prison and ordered to pay a fine of $50,000, to forfeit $450,000 of the proceeds of the criminal activity, and to pay $450,000 in restitution to the U.S. Navy; Gilbeau was sentenced on May 17 to 18 months in prison and ordered to pay a $100,000 fine and $50,000 in restitution to the Navy; and Brooks was sentenced on June 16 to 41 months in prison and ordered to pay a $41,000 fine and $31,000 in restitution to the Navy. Sanchez, Pitts and Kapaun await sentencing.

Also charged are five GDMA executives – Francis, Alex Wisidagama, Ed Aruffo, Neil Peterson and Linda Raja. All have pleaded guilty; Wisidagama was sentenced on March 18, 2016 to 63 months and $34.8 million in restitution to the Navy; Peterson and Raja were extradited from Singapore in 2016 and sentenced on August 11 to 70 months and 46 months in prison, respectively. Francis and Aruffo await sentencing.

Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California and Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section are prosecuting the case.

Anyone with information relating to fraud or corruption should contact the NCIS anonymous tip line at or the DOD Hotline at, or call (800) 424-9098.


Case Number: 17CR2376-JLS

U.S. Navy Captain Jesus Vasquez Cantu

Age 59 Silverdale, Washington


Conspiracy to Commit Bribery, in violation of 18 U.S.C. § 371

Maximum Penalty: 5 years in prison, a $250,000 fine,


Defense Criminal Investigative Service

Naval Criminal Investigative Service

Defense Contract Audit Agency

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

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Financial Fraud: Common Investment Frauds

Investment Fraud

Investment scams prey on your hope to earn interest or a return on investment on the amount of money that you invest. The Securities and Exchange Commission (SEC) offers overviews of many common investment frauds, and tips to avoid being a victim.

If you are the victim of an investment fraud, you can file a complaint with the SEC or with your state’s securities administrator.

Types of Fraud

Investment fraud comes in many forms. Whether you are a first-time investor or have been investing for many years, here are some basic facts you should know about different types of fraud.

Affinity Fraud
Advance Fee Fraud
Binary Options Fraud
High Yield Investment Programs
Internet and Social Media Fraud
Microcap Fraud
Ponzi Scheme
Pre-IPO Investment Scams
Pyramid Schemes
“Prime Bank” Investments
Promissory Notes
Pump and Dump Schemes

Information on the following frauds is available on the Commodity Futures Trading Commission website at the links below.

Commodity Pool Fraud
Foreign Currency Trading Fraud
Precious Metals Fraud

Affinity Fraud

Affinity frauds target members of identifiable groups, such as the elderly, or religious or ethnic communities. The fraudsters involved in affinity scams often are – or pretend to be – members of the group. They may enlist respected leaders from the group to spread the word about the scheme, convincing them it is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraud they helped to promote.

These scams exploit the trust and friendship that exists in groups of people. Because of the tight-knit structure of many groups, outsiders may not know about the affinity scam. Victims may try to work things out within the group rather than notify authorities or pursue legal remedies.

Affinity scams often involve “Ponzi” or pyramid schemes where new investor money is used to pay earlier investors, making it appear as if the investment is successful and legitimate.

Advance Fee Fraud

Advance fee frauds ask investors to pay a fee up front – in advance of receiving any proceeds, money, stock, or warrants – in order for the deal to go through. The advance payment may be described as a fee, tax, commission, or incidental expense that will be repaid later. Some advance fee schemes target investors who already purchased underperforming securities and offer to sell those securities if an “advance fee” is paid, or target investors who have already lost money in investment schemes. Fraudsters often direct investors to wire advance fees to escrow agents or lawyers to give investors comfort and to lend an air of legitimacy to their schemes. Fraudsters also may try to fool investors with official-sounding websites and e-mail addresses.

Advance fee frauds may involve the sale of products or services, the offering of investments, lottery winnings, found money, or many other so-called opportunities. Fraudsters carrying out advance fee schemes may:

  • Offer common financial instruments such as bank guarantees, old government or corporate bonds, medium or long term notes, stand-by letters of credit, blocked funds programs, “fresh cut” or “seasoned” paper, and proofs of funds;
  • Offer to find financing arrangements for clients who pay a “finder’s fee” in advance; or
  • Pose as legitimate U.S. brokers or firms and offer to help investors recover their stock market losses by exchanging worthless stock, but requiring investors to pay an upfront “security deposit” or post an “insurance” or “performance bond.”

Binary Options Fraud

Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements and may be engaging in illegal activity.  Investors should be aware of fraudulent promotion schemes involving binary options and binary options trading platforms.

What is a Binary Option?

A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise above or fall below a specified amount.  Once the option is acquired, there is no further decision for the holder to make regarding the exercise of the binary option because binary options exercise automatically.  Unlike other types of options, a binary option does not give the holder the right to buy or sell the specified asset.  When the binary option expires, the option holder receives either a pre-determined amount of cash or nothing at all.

Investor Complaints Relating To Fraudulent Binary Options Trading Platforms

The SEC has received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms.  The complaints fall into at least three categories:

  1. Refusal to credit customer accounts or reimburse funds to customers

These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by “brokers” over the telephone to deposit additional funds into the customer account.  When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers’ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.

  1. Identity theft

These complaints allege that certain Internet-based binary options trading platforms may be collecting customer information (including copies of customers’ credit cards, passports, and driver’s licenses) for unspecified uses.  Do not provide personal data.

  1. Manipulation of software to generate losing trades

These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts.  For example, when a customer’s trade is “winning,” the countdown to expiration is extended arbitrarily until the trade becomes a loss.

Beware of Overstated Investment Returns for Binary Options

Additionally, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect, given the payout structure.

For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ company is above $5 per share when the option expires.  Assuming a 50/50 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative, resulting in a net loss to the customer.  This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain).  In this example, an investor could expect — on average — to lose money.

Always Check the Background of a Firm or Financial Professional

Before investing, check out the background, including registration or license status, of any firm or financial professional you are considering dealing with through the SEC’s Investment Adviser Public Disclosure (IAPD) database, available on, and the National Futures Association Background Affiliation Status Information Center’s BASIC Search.  If you cannot verify that they are registered, don’t trade with them, don’t give them any money, and don’t share your personal information with them.

High Yield Investment Programs

The Internet is awash in so-called “high-yield investment programs” or “HYIPs.” These are unregistered investments typically run by unlicensed individuals – and they are often frauds. The hallmark of an HYIP scam is the promise of incredible returns at little or no risk to the investor. A HYIP website might promise annual (or even monthly, weekly, or daily!) returns of 30 or 40 percent – or more. Some of these scams may use the term “prime bank” program. If you are approached online to invest in one of these, you should exercise extreme caution – it is likely a fraud.

Financial Fraud: Alfonso Liburd Pleaded Guilty to Improperly Aiding And Abetting Navy Port Engineer

Financial Fraud

Navy Contractor Admits Accepting Funds from Port Engineer Administering Contracts Involving his Company

Assistant U.S. Attorney Phillip L.B. Halpern (619) 546-6964

SAN DIEGO – Alfonso Liburd, the President and Chief Executive Officer of San Diego-based defense contractor NEVWEST, Inc. (“NevWest”), pleaded guilty today to improperly aiding and abetting Navy Port Engineer, John Nasshan (charged elsewhere), who improperly administered projects in which he (Nasshan) had a financial interest.

According to documents filed in Court, Nasshan had been employed at Southwest Regional Maintenance Center as a Combat Systems Port Engineer since March of 2009. As a Combat Systems Port Engineer, Nasshan drafted technical direction letters, recommended which contractors were qualified for jobs and verified and certified work performed on Navy ships by contractors. to federal law, Nasshan was prohibited from working on projects in which he had a personal financial interest. Despite this prohibition, Nasshan administered projects at the Navy’s Southwest Regional Maintenance Center involving work performed by Liburd and NevWest.

Nasshan made decisions and recommendations affecting Navy contracts with NevWest, Inc. even though he made personal loans to Liburd and NevWest, which is a conflict of interest. As detailed in government pleadings, between May 2011 and September 2015, Nasshan had a financial interest in the business affairs of NevWest. In particular, Nasshan loaned Liburd and NevWest more than $30,000 at the same time that NevWest was engaged in numerous subcontracts with Southwest Regional Maintenance Center. Liburd accepted these loans despite recognizing that Nasshan’s job required that he administer NevWest subcontracts.

In order to hide and conceal their illegal activity, Liburd and Nasshan agreed to keep their financial arrangement secret; to deal in cash when exchanging amounts over $10,000; and to structure the cash they were exchanging by dividing it up into amounts of $10,000 or less.

Liburd also lied to Defense Criminal Investigative Service agents regarding his relationship with Nasshan. In particular, on November 13, 2015, he falsely told a DCIS agent that he never: (i) received any money from Nasshan, including cash; (ii) paid Nasshan any money; or (iii) obtained any loans from Nasshan.

“As in all phases of the Government contracting process, it is essential that the work performed by contractors be done free of undue influence, bias, or favoritism,” said Acting U.S. Attorney Alana W. Robinson. “Accordingly, government officials and employees are prohibited from working on any and all matters that would affect their personal financial position.”

“The successful prosecution of this case was the direct result of collaborative teamwork between the Naval Criminal Investigative Service, our federal law enforcement partners and the U.S. Attorney’s Office,” said Gunnar Newquist, Special Agent in Charge of the NCIS Southwest Field Office. “Convictions like this should be a warning to those who would attempt to take advantage of the U.S. Navy, for personal gain. We are unified in our efforts to catch criminals who not only defraud the U.S. Navy, but specifically are stealing money from the American taxpayers at the direct loss to our warfighters.”

Chris Hendrickson, Special Agent in Charge of the Defense Criminal Investigative Service’s Western Field Office said: “DCIS and its partner agencies will aggressively investigate Department of Defense personnel who abuse their positions of trust and corruptly advance their own interests. This behavior tarnishes the integrity of the Department’s procurement processes and erodes the public’s faith in government.”

“The FBI seeks truth and justice in our investigations,” commented FBI Special Agent in Charge Eric S. Birnbaum. “Today’s conviction shows that the FBI, along with our investigative partners, will ultimately uncover the truth despite roadblocks created by those who stand to personally benefit from their lies.”

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Financial Fraud: Paul David Ward Indicted For Investment Fraud Scheme

Investment Fraud

Former Lebanon Airport Operator Indicted for $707,000 Fraud Scheme

JEFFERSON CITY, Mo. – Tom Larson, Acting United States Attorney for the Western District of Missouri, announced today that the former owner of a fixed base operation at the Lebanon, Mo., airport has been indicted by a federal grand jury for a $707,000 investment fraud scheme.

Paul David Ward, 61, of Camdenton, was charged with wire fraud in an indictment returned by a federal grand jury in Jefferson City, Mo., on Wednesday, Aug. 9, 2017.

Ward was the owner of Lebanon Aviation Service, Inc., which provided services to the users of the Lebanon airport, including the sale of aviation fuel, through a contract with the city of Lebanon. Ward purchased aviation fuel for his business from Avfuel Corporation, located in Ann Arbor, Michigan. In October 2014, Ward surrendered his contract with the city of Lebanon to sell aviation fuel at the airport. At that time, Ward was suffering monthly losses of $6,000 or greater.

The federal indictment alleges that, from Jan. 1, 2011, to Aug. 22, 2016, Ward engaged in a scheme to defraud friends and associates who invested in his company. Ward falsely and fraudulently claimed he would use the solicited investments in Lebanon Aviation Service, the indictment says, but he actually used the solicited investments for personal expenses and to make Ponzi-style payments to previous investors. In total, according to the indictment, Ward defrauded approximately 25 investors in Camden, Laclede and Cole Counties who suffered actual losses of approximately $264,720.

Ward solicited his friends and associates to invest in Lebanon Aviation Services. At various times, the indictment says, Ward falsely claimed that he needed additional capital to purchase aviation fuel, needed capital to purchase pleasure boats for resale, and that he needed capital for undisclosed purposes. Ward continued to solicit investments after Lebanon Aviation Services was dissolved by the Missouri Secretary of State in January 2015.

At the time of the investment, Ward provided the investor with a post-dated bank check in the amount of the principal plus interest. In most cases, when the investment became due and payable, the investor deposited the post-dated check, but the check was returned for insufficient funds. When an investor complained to Ward about the returned check, the indictment says, Ward falsely stated a reason for the returned check and provided a series of false excuses for the failure to pay to lull the investor and gain more time to repay the investor. Ward generally attempted to repay investors who threatened to tell his wife about his failure to repay the investment. When Ward’s attempts to stall an investor failed, he solicited additional investments for the purpose of paying off a previous investor.

The indictment also contains a forfeiture allegation, which would require Ward to forfeit to the government any property derived from the proceeds of the alleged offense, including a $264,720 money judgment.

Larson cautioned that the charge contained in this indictment is simply an accusation, and not evidence of guilt.

This case is being prosecuted by Assistant U.S. Attorney Ashley S. Turner. It was investigated by the FBI and the Missouri State Highway Patrol.

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Financial Fraud: PHH Corp., PHH Mortgage Corp. and PHH Home Loans (PHH) Have Agreed to Pay To Resolve Alleged False Claims Act Liability Arising From Mortgage Lending

Financial Fraud

PHH Agrees To Pay $74 Million To Resolve Alleged False Claims Act Liability Arising From Mortgage Lending

NEWARK, N.J. – PHH Corp., PHH Mortgage Corp. and PHH Home Loans (PHH) have agreed to pay the United States $74,453,802 to resolve allegations that they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), guaranteed by the United States Department of Veteran Affairs (VA), and purchased by the Federal Housing Finance Agency (FHFA) that did not meet applicable requirements, the Justice Department announced today. PHH Corp. and PHH Mortgage Corp. are headquartered in Mount Laurel, New Jersey, while PHH Home Loans is headquartered in Edina, Minnesota. PHH has agreed to pay $65 million to resolve the FHA allegations and $9.45 million to resolve the VA and FHFA allegations.

“This settlement requires PHH to pay back to the taxpayers of the United States millions of dollars in loans that never should have been made,” Acting U.S. Attorney William E. Fitzpatrick for the District of New Jersey said. “By failing to ensure the creditworthiness of borrowers and otherwise failing to make sure the loans met HUD underwriting requirements, loans were insured by FHA that should not have been.”

“Government mortgage programs designed to assist homeowners — including programs offered by the FHA, VA, Fannie Mae and Freddie Mac — depend on lenders to approve only eligible loans,” said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division. “The Department has and will continue to hold accountable lenders that knowingly cause the government to guarantee, insure, or purchase loans that are materially deficient and put both the homeowner and the taxpayers at risk.”

The settlements announced today resolve allegations that PHH failed to comply with certain FHA, VA, and FHFA origination, underwriting, and quality control requirements.

Since January 2006, PHH has participated as a Direct Endorsement Lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, the FHA does not review a loan before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, but instead relies on the efforts of the DEL to verify compliance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance.

As part of the settlement, PHH admitted the following facts concerning the FHA loans:

Between Jan. 1, 2006, and Dec. 31, 2011, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s self-reporting requirements. Examples of loan defects that PHH admitted resulted in loans being ineligible for FHA mortgage insurance included:

Failing to document the borrowers’ creditworthiness, including paystubs, verification of employment, proper credit reports, and verification of the borrowers’ earnest money deposit and funds to close.

Failing to document the borrower’s claimed net equity in a prior residence or documentation showing that the borrower had paid off significant debts. Including these debts in the borrower’s liabilities resulted in the borrower exceeding HUD’s debt-to-income ratio requirements for FHA-insured loans.

Insuring a loan for FHA mortgage insurance even though the borrower did not meet HUD’s minimum statutory investment for the loan.

In 2007, PHH audited a targeted sample of government loans for closing or pre-insuring requirements and found that its “percent accurate” did not exceed 50 percent during 2007. Since 2006, HUD has required self-reporting of material violations of FHA requirements. However, between Jan.1, 2006, and Dec. 31, 2011, PHH Home Loans did not self-report any loans to HUD until 2013, after the United States commenced its investigation resulting in this Settlement Agreement.

As a result of PHH’s conduct and omissions, PHH admitted, HUD insured loans endorsed by PHH that were not eligible for FHA mortgage insurance under the DEL program, and that HUD would not otherwise have insured. It admitted that HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

In addition, from at least 2005 to2012, PHH was a VA approved lender, originating and underwriting mortgage loans and obtaining VA loan guarantees. Also from at least 2009 to 2013, PHH sold mortgage loans to the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac). The FHFA provides oversight to Fannie Mae and Freddie Mac. The settlement resolves the United States’ contentions that PHH originated and underwrote VA loans that were ineligible for the loan guarantee program, and sold loans to the Freddie Mac and Fannie Mae that did not meet their requirements.

“This case demonstrates HUD’s resolve in protecting the integrity of its mortgage insurance programs for the benefit of all Americans, and in particular, first time homebuyers,” said Dane Narode, HUD’s Associate General Counsel for Program Enforcement. “We are gratified that PHH has accepted responsibility for its actions.”

“This settlement resolves allegations of reckless origination and underwriting of VA guaranteed mortgage loans,” said Michael J. Missal, Inspector General, for the Office of Inspector General for the Department of Veteran Affairs (VA OIG). “It sends a clear message that the VA OIG will aggressively protect the integrity of this crucial program which helps so many of our veterans buy, build, or repair their homes. I would also like to thank the U.S. Attorney’s Offices for partnering with us to achieve this significant result.”

An investigation into the allegations resolved by these settlements was commenced jointly by the U.S. Attorney’s Offices for the Districts of New Jersey, Minnesota and the Southern District of Florida, in conjunction with the Department of Justice’s Civil Division. After the investigation was commenced, a whistleblower lawsuit was filed under the False Claims Act by a former employee of PHH, raising similar as well as additional allegations of fraud. Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.

The settlements were the result of joint investigations conducted by HUD, the HUD Office of Inspector General, the Veterans Administration’s Office of Inspector General, the FHFA Office of Inspector General, the Department of Justice’s Civil Division, and the U.S. Attorney’s Offices for the District of Minnesota, District of New Jersey, Southern District of Florida, and Eastern District of New York. Assistant United States Attorneys Anthony LaBruna and Mark Orlowski represented the District of New Jersey in this investigation and settlement: Ann Bildtsen represented the District of Minnesota, and James Weinkle represented the Southern District of Florida. The claims asserted against PHH are allegations only, and there has been no determination of liability.

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Financial Fraud: PETER G. JOHNSON, PETER B. JOHNSON, And THOMAS REICH Charged With Defrauding a Group of Lenders (the “Banks”)

Financial Fraud

Former Cocoa Company Executives Arrested For Defrauding Lenders Of $400 Million

Peter G. Johnson, Peter B. Johnson, and Thomas Reich submitted false financial reports to banks to secure and maintain a $400 million credit line to Transmar Commodity Group Ltd.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging PETER G. JOHNSON, PETER B. JOHNSON, and THOMAS REICH with defrauding a group of lenders (the “Banks”) with false “borrowing base” reports designed to secure and maintain a $400 million line of credit for their company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”). PETER G. JOHNSON was Transmar’s president and chief executive officer. PETER B. JOHNSON, the son of PETER G. JOHNSON, was responsible for the operations of Transmar affiliate Euromar Commodities GMBH (“Euromar”), and was also involved in Transmar’s affairs. THOMAS REICH was a vice president in Transmar’s finance department. When Transmar filed for bankruptcy in December 2016, it owed the Banks approximately $360 million. PETER G. JOHNSON and PETER B. JOHNSON were arrested at their New Jersey homes this morning. THOMAS REICH surrendered to the FBI this afternoon.

Acting Manhattan U.S. Attorney Joon H. Kim said: “As alleged, these executives of a major cocoa company that supplied some of the world’s largest confectionary conglomerates defrauded lenders out of hundreds of millions of dollars by lying repeatedly about the financial condition of their company. As they allegedly deceived lenders about the collateral available to secure their borrowings, the defendants regularly emailed each other about how the paperwork was fake. Together with our partners at the FBI, we remain committed to rooting out corporate fraud of all types and holding the alleged perpetrators accountable.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “As alleged, Johnson, Johnson, and Reich falsely represented Transmar’s financials, manipulating their monetary value in more ways than one, in order to receive loans they didn’t qualify for – plain and simple. In the end, it became clear the payoff would be a score they couldn’t settle. This is not a crime to be taken lightly, as our charges today prove.”

According to the allegations in the Indictment[1] unsealed today in Manhattan federal court:

From at least 2014 through at least December 2016, Transmar maintained a credit facility from the Banks that varied from approximately $250 million to approximately $400 million. To secure and maintain these hundreds of millions of dollars in credit, PETER G. JOHNSON, PETER B. JOHNSON, THOMAS REICH, and others schemed to misrepresent material information about Transmar’s finances, making it appear that Transmar had far more credit-eligible collateral than it actually had.

The scheme centered on periodic “borrowing base” reports (“BB Reports”) that the Banks required Transmar to submit, sometimes as frequently as weekly, as a condition to continued credit extension. The BB Reports were supposed to accurately reflect and quantify those portions of Transmar’s collateral that qualified for financing under the terms of credit agreements between Transmar and the Banks.

Beginning no later than 2014, THOMAS REICH and others manipulated the BB Reports and related documents to give the false impression that Transmar had sufficient eligible collateral to support the amount of credit the Banks were extending. PETER G. JOHNSON and PETER B. JOHNSON directed and encouraged this manipulation. The manipulation involved, among other devices, counting inventory that Transmar had already sold, counting accounts receivable for which Transmar had already received payment, recording fake accounts receivable, and arranging “circle” transactions with amenable third-party intermediaries which agreed to “buy” goods from Transmar with Transmar’s own money, funneled to the third parties through Euromar.

The defendants acknowledged their manipulative devices in internal Transmar correspondence. On June 14, 2016, for example, PETER B. JOHNSON responded to an email from REICH about a circle arrangement by lamenting, “this is the problem with fake circles and non-existent last minute intermediary deals, there is never a payment to settle them.” After suggesting a further device to rectify an immediate problem related to a BB Report, JOHNSON continued, “[t]here isn’t going to be an audit [of the BB Report] for a year and its [sic] causing huge problems to keep writing up fictitious contracts and paperwork.”

PETER G. JOHNSON, 68, of Harding Township, New Jersey, PETER B. JOHNSON, 38, of Morristown, New Jersey, and THOMAS REICH, 59, of Montvale, New Jersey, have each been charged in the Indictment with one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution, one count of bank fraud, and one count of wire fraud affecting a financial institution. Each charge carries a maximum prison term of 30 years.

Mr. Kim praised the investigative work of the FBI.

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorneys Sarah Eddy and Benet Kearney are in charge of the prosecution.

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Car Insurance Premiums Fraud

Insurance Car Fraud

Did you commit fraud when you bought car insurance?

Americans might agree that auto insurance companies aren’t perfect in regards to deciding how much policyholders should pay in premiums. Most of all of us think our rates should be lower. Yet a study by insurance industry data collector Verisk Stats indicates that – at least for some people – auto insurance premiums should be even higher.

The moment auto insurers are deciding whether to offer or renew coverage, they accumulate information from potential clients. But that data is now so packed with false information that it could cost auto insurers 14 percent of the twelve-monthly monthly premiums they accumulate each yr. It’s a loss that Dorothy Kelly, Verisk’s overseer of product management, conditions “leakage. ” Others simply refer to it as “fraud. ”

“This is a $29 billion gross annual problem, ” she said in a recent online briefing.

Such concerns come each time when the auto insurance industry is reeling. In February, the nation’s major property-casualty insurer, State Town, reported a $7 million underwriting loss for the 2016 car insurance business. Other auto insurers have suffered similar setbacks.

Insurance fraud is front and centre in Congress, too with the U. S. United states senate Subcommittee on Consumer Security on Thursday holding a hearing on the subject matter.

Insurance companies the absence of accurate information means that they aren’t recharging enough for drivers who slam into other automobiles and damage their own vehicles, as well as those who simply may provide insurers with genuine information about who’s traveling and how much.

Info is often left off the application, Kelly said, and some of can be submitted is incorrect for reasons that may change from negligence to outright fraud. Either way, it’s “GIGO: Garbage in and rubbish out, ” she said.

In past times, driving accidents – and the amount insurance firms paid for the statements arising from them – declined, so there was more tolerance for information gaps. “We were in a market where expansion for growth’s sake was acceptable, ” Kelly said. Now, accident rates are soaring, and as automobiles get costlier even fender-benders are becoming more expensive.

There’s also a “growth in remote applications” for auto insurance (read “the Internet”). With little or no personal interaction, the insurance firm doesn’t know the dimensions of the applicant, the lady said.

Then simply there’s the issue of job seekers who purchased their coverage from independent providers. “They might not exactly be taken to do what you would like, inch Kelly said. Even brokers who work for the company itself need to be incentivized to take the time to fill up out an exact application.

Although the biggest challenge – and cost – for auto insurers is the more than $10 billion dollars for “unrecognized drivers”: young adults who attain driving era but aren’t added to the policy until it comes up for revival the next year. Or perhaps millennials who moved home after college or university and now drive the family car and so become another source of “uncaptured premium. inch

More than $5 billion dollars is lost because car owners underestimate mileage.

“Getting accurate data is absolutely challenging, ” Kelly said. Motorists often say their car is employed for pleasure when it’s actually on the road all day each week commuting to and from work.

Unreported violations and accidents would add more than $3 billion to premiums, estimates Kelly, while slightly less than $3 billion originates from “garaging, ” or in which the car is supposedly parked. Smart automobile owners know that car insurance for areas that routinely experience stuffed up traffic is more expensive, of course, if possible will use a home address with cheaper rates as the car’s major location.

Outright fraud is yet another concern.

“Fraud is what we’re really talking about here, very well said Steve Weisbart, key economis at the Insurance Information Institute (III), which represents the property-casualty industry, including auto insurers. “It might not exactly feel like fraud to those who no longer report new drivers in their family or where they keep their car, but that’s what it is. inches

Weisbart said that if the industry caught more of these fraudsters, it could “charge lower premiums to those who are honest. very well

While Kelly didn’t get into specifics, a specific area where there is a lot of fuzziness is motor vehicle infractions, such as speeding. The former president of the III, Robert Hartwig, said that an old analyze he conducted showed a top percentage of DWI – driving while under the influence of drugs or alcohol – cases were missing from what this individual called the “notoriously bad department of automobile sources. ”

“Infractions were either not entered or expunged, ” said Hartwig, whoms now a finance mentor at the University of South Carolina.

And obviously it hasn’t changed. A large number of states have “diversion” programs which allow drivers guilty of motor vehicle infractions like speeding or dangerous driving to avoid having “points” on their generating record. These points – which reflect violations such as speeding – are being used by auto insurers to rate drivers and normally bring about increased twelve-monthly payments.

“Diversion programs are incredibly common and a major business, inch said Director of Site visitors Safety Jake Nelson at the AAA’s federation of motor clubs, which may have 56 million members. “Pay a fine, take a 20 minute-class and you’re in the clear. They are obviously abused by many drivers. ”

While car insurers might see Verisk’s study as grounds to tighten up underwriting requirements to curb fraud, consumers may want to double-check the information insurers are using about them for accuracy, said Mark Latino, director of the insurance claims project for the Consumer Federation of America (CFA), a watchdog firm that is also testifying before Congress.

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