DOJ ANNOUNCE WITH DUTCH OF ENFORCEMENT ACTIONS AGAINST MAIL FRAUDSTERS TARGETING ELDERLY

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 2, 2016

Justice Department and Dutch Authorities Announce Simultaneous Enforcement Actions Against International Mass-Mailing Fraud Schemes Targeting the Elderly

Thousands of U.S. Victims Defrauded Out of Over $18 Million Annually

The United States filed a civil complaint in the U.S. District Court for the Eastern District of New York against an individual and two Dutch companies that allegedly engaged in multiple international mail fraud schemes that have defrauded elderly and vulnerable U.S. victims out of tens of millions of dollars, the Department of Justice announced.  The Department sought a temporary restraining order, which was entered by the court yesterday, as well as preliminary and permanent injunctions to prevent the defendants from further victimizing U.S. consumers.

According to the complaint, U.S. residents received fraudulent direct mail solicitations that falsely claimed that the individual recipient had won, or would soon win cash or valuable prizes or otherwise come into great fortune.  Victims sent payments through the U.S. and international mail systems to defendants Trends Service in Kommunikatie B.V. (Trends) and Kommunikatie Service Buitenland B.V. (KSB), both in Utrecht, Netherlands, and both owned and operated by defendant Erik Dekker, 54, of Langbroek, Netherlands.

At the same time that the Justice Department took this law enforcement action, Dutch law enforcement agents executed search warrants on the business address used by both companies and on Dekker’s home address.  The Dutch authorities also took control of the Dutch P.O. boxes used by the defendants to receive victim funds.  The coordinated U.S. and Dutch enforcement actions seek to immediately stop the use of Dutch P.O. boxes to receive payments from fraud victims and to immediately stop the defendants from continuing to victimize the elderly.  Learn more about the actions taken by Dutch authorities at: https://www.om.nl/actueel/nieuwsberichten/@94702/fiod-and-us-doj/ [external link]

“Schemes targeting elderly victims are increasingly international in scope, but geographic distance will not prevent us from seeking justice and holding bad actors accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Dutch authorities have done a great service to U.S. residents and elderly victims worldwide by addressing fraud facilitated within their borders.  The Justice Department will continue to work with our international law enforcement partners to put a stop to fraud schemes that exploit vulnerable Americans.”

“As alleged in the complaint, defendants act as the clearinghouses for multiple international mail fraud schemes, taking money from thousands of elderly and vulnerable victims not only in this district but also throughout the United States,” said U.S. Attorney Robert L. Capers for the Eastern District of New York.  “Together with the U.S. Postal Inspection Service and our international partner, the Fiscal Intelligence and Investigation Division of the Netherlands, we will track down, and stop, the schemes wherever they lead.”

“No one should ever be told they must pay a fee, or make a worthless purchase, to collect a prize,” said Inspector in Charge Regina L. Faulkerson of the U.S. Postal Inspection Service’s Criminal Investigation Group.  “When that happens, it’s fraud - plain and simple - and Postal Inspectors work to keep those falsehoods out of the U.S. mail.”

The complaint filed June 1 in U.S. federal court in the Eastern District of New York alleges that, since at least 2012, Trends, KSB and Dekker have used P.O. boxes in the Netherlands to receive payments from various predatory mass-mailing fraud schemes.  Solicitations are mailed from locations around the globe to residents in the United States.  The solicitations purport to be personalized to each individual recipient, even though they are form letters mailed to hundreds of thousands of potential victims.  Some solicitations instruct recipients to pay a processing fee in order to receive lottery winnings or other prizes; other solicitations urge recipients to purchase goods or services based on false promises that they will guarantee future lottery wins.

As alleged in the complaint, victims responded to the solicitations by completing a form and submitting a payment, usually around $15 to $55, via U.S. mail.  The solicitations contain pre-addressed envelopes in which victims send payments.  The envelopes are addressed to P.O. boxes in the Netherlands.  Trends and KSB operate more than 50 of these P.O. boxes.  Like other so-called “caging services,” Trends and KSB open the payment envelopes, remove the contents, enter payment and other personal information from the victims into a database and handle victim payments.  The U.S. government estimates that U.S. victims mail more than $18 million annually to the defendants’ P.O. boxes.        

The government is seeking an injunction under the Anti-Fraud Injunction Statute immediately shutting down the defendants’ role in the fraudulent schemes in order to protect U.S. victims from further harm.  The injunctions sought by the United States would enjoin the defendants from using the U.S. mail or causing the U.S. mail to be used, to distribute the fraudulent solicitations or to collect victim payments, and from selling lists of American victims who have responded to the solicitations.  If granted, a permanent injunction would allow the U.S. Postal Service to intercept mail heading to the defendants, and return that mail—along with any money being sent to the defendants—to U.S. victims.

U.S. District Court Judge I. Leo Glasser for the Eastern District of New York set a hearing on the preliminary injunction on July 18 at 10 a.m.

The Justice Department’s case is being handled by Trial Attorney Kerala Thie Cowart of the Civil Division’s Consumer Protection Branch, Assistant U.S. Attorney John Vagelatos of the U.S. Attorney’s Office in the Eastern District of New York and Postal Inspector Joseph R. Bizzarro of the U.S. Postal Inspection Service.

MAN SENTENCED ON ODOMETER TAMPERING CHARGES

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, December 20, 2013

North Carolina Man Sentenced on Odometer Tampering Charges

Francis Marimo was sentenced today in connection with an odometer tampering scheme, the Justice Department announced.  Marimo was sentenced by U.S. District Court Judge Louise Wood Flanagan in New Bern, N.C., to serve 18 months in prison and one year of supervised release.  Marimo also was ordered to pay $190,845 in restitution.

“Used car shoppers rely on mileage readings to judge both the value and safety of vehicles they might purchase,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Tampering with a vehicle’s odometer in order to swindle a would-be buyer is a federal crime that will be prosecuted.”

In June, Marimo pleaded guilty to two counts of odometer tampering.  According to the Information filed in the case, from 2008 through 2012, Marimo purchased used vehicles primarily through online advertisements, then replaced the existing odometers with odometers showing lower mileages.  Marimo sold these vehicles to consumers in the Raleigh, N.C., area while representing the low mileages on the replacement odometers as accurate.  Mileage for one of the vehicles described in the Information was “rolled back” more than 100,000 miles.  As part of a plea agreement, Marimo agreed that his conduct had caused between $120,000 and $200,000 in losses to consumers.

“The importance of accurate mileage readings on used car odometers cannot be overstated,” said U.S. Attorney for the Eastern District of North Carolina Thomas G. Walker.  “This case demonstrates our determination to protect the consumer from this type of fraud.”

The North Carolina Division of Motor Vehicles and the National Highway Traffic Safety Administration (NHTSA) Office of Odometer Fraud Investigation investigated this case.  The case was prosecuted by the Justice Department’s Civil Division, Consumer Protection Branch.

3 PATIENT RECRUITERS PLEAD GUILTY FOR PARTICIPATION IN $48 MILLION MEDICARE FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 
Tuesday, December 3, 2013
Three Patient Recruiters for Miami Home Health Company Plead Guilty for Roles in $48 Million Fraud Scheme

Three patient recruiters for a Miami health care company pleaded guilty today for their participation in a $48 million home health Medicare fraud scheme.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office, and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Office of Investigations Miami Office made the announcement.

Miami residents Marianela Martinez, 45; Omar Hernandez, 48; and Celia Santovenia, 49, pleaded guilty before U.S. District Judge Donald L. Graham in the Southern District of Florida to one count each of conspiracy to receive health care kickbacks.   Sentencing has been scheduled for Feb. 11, 2014.

According to court documents, Martinez, Hernandez and Santovenia were patient recruiters who worked for Caring Nurse Home Health Care Corp., and Santovenia also worked for Good Quality Home Health Care Inc.  Caring Nurse and Good Quality were Miami home health care agencies that purported to provide home health and therapy services to Medicare beneficiaries.

From approximately January 2006 through June 2011, the defendants would recruit patients for Caring Nurse and/or Good Quality and would solicit and receive kickbacks and bribes from the owners and operators of Caring Nurse and/or Good Quality in return for allowing the agency to bill the Medicare program on behalf of the recruited patients.  These Medicare beneficiaries were billed for home health care and therapy services that were medically unnecessary and/or not provided.

In a related case, on Feb. 27, 2013, Rogelio Rodriguez, 44, and Raymond Aday, 49, the owners and operators of Caring Nurse and Good Quality, were sentenced to serve 108 and 51 months in prison, respectively.  The sentencings followed their December 2012 guilty pleas to one count each of conspiracy to commit health care fraud charged in an October 2012 indictment, which alleged that from approximately January 2006 through June 2011, Caring Nurse and Good Quality submitted approximately $48 million in claims for home health services that were not medically necessary and/or not provided.  Medicare paid approximately $33 million for those fraudulent claims.

The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  This case is being prosecuted by Assistant Chief Joseph S. Beemsterboer of the Criminal Division’s Fraud Section.

Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,700 defendants who collectively have falsely billed the Medicare program for more than $5.5 billion.  In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

MAN SENT TO PRISON FOR STEALING IDENTITIES TO FILE FALSE TAX RETURNS FOR REFUNDS

FROM:  U.S. JUSTICE DEPARTMENT
Monday, December 2, 2013
Alabama Man Sentenced to Federal Prison for Stolen Identity Tax Refund Fraud Scheme

Clarence Hicks, of Montgomery, Ala., was sentenced to serve 57 months in federal prison and three years of supervised release and ordered to pay $210,555.62 in restitution for his role in a stolen identity refund fraud scheme, announced Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division and U.S. Attorney George L. Beck Jr. for the Middle District of Alabama.  Hicks had previously pleaded guilty to filing a false claim for a federal tax refund and to aggravated identity theft.

According to court documents, Hicks had access to an Internal Revenue Service (IRS) Electronic Filing Identification Number assigned to another person and used that number to file false federal income tax returns in the names of stolen identities.  The court found that Hicks intended to steal more than $300,000 from the IRS, which paid out $210,555.62 in false claims based on fraudulent returns Hicks filed.

This case was investigated by special agents of the Internal Revenue Service - Criminal Investigation.  Trial Attorneys Justin Gelfand and Jason Poole of the department's Tax Division prosecuted the case.

FTC SAYS FEDERAL JUDGE HALTED 'YELLOW PAGES' FRAUD

FROM:  FEDERAL TRACE COMMISSION 
FTC Stops Online 'Yellow Pages' Scam; Canada-Based Operation Targeted Small Businesses and Churches in United States

At the Federal Trade Commission’s request, a federal judge has temporarily halted, and frozen the assets of, a Montreal operation that bilked more than $14 million from small businesses and churches in the United States for unwanted listings in online business directories.  The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money – the scheme has generated more than 13,000 complaints from consumers.

“Hiding behind borders to scam churches and small businesses is a tactic that we’ve seen before,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “Scammers need to know that we have great relationships with our law enforcement partners in Canada and, as this case shows, we can and will work together to protect our consumers.”

According to court papers filed by the FTC, the defendants operated from Montreal, using corporate shells and mail drops in the U.S. to hide their actual location.  Typically, they made phone calls pretending they were verifying contact information to update or confirm existing directory listings.  In some cases, the defendants said they were calling in response to a cancellation request, and asked to verify the organization’s contact information to confirm the cancellation.  In fact, the defendants had no prior relationship with the consumers.

The bills sent by the defendants averaged $499.99 or more and had a “walking fingers” image often associated with a local yellow pages directory.  Some consumers paid, thinking someone in their organization had ordered these listings.  Other consumers paid after the defendants used partially recorded phone conversations with consumers who had verified their contact information to convince them that they had a binding oral contract with the defendants, according to the FTC’s complaint.

Consumers who ignored the bills or refused to pay received collection calls and dunning notices, often with added interest charges, late fees, and legal fees, as well as threats of collection agency referral, credit rating damage, and legal action, the FTC alleged.  To make consumers believe third-party debt collectors were involved, the defendants created two debt collection companies, CC Recovery and M&A Recovery, which also made threats.  The defendants’ threats convinced many consumers to pay the bills, the FTC alleged.

The FTC’s complaint alleges that the defendants violated the FTC Act by misrepresenting that they had a preexisting business relationship with consumers, that consumers had agreed to buy directory listings, and that consumers owed them money.

The defendants are Mohamad Khaled Kaddoura, Derek Cessford, and Aaron Kirby, and 15 companies they ran:  Modern Technology Inc., also doing business as Online Local Yellow Pages; Strategic Advertisement Ltd., also d/b/a Local Business Yellow Pages; Dynamic Ad Corp., also d/b/a Yellow National Directory and Yellowpages Local Directory; Wisetak Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Wisetak, Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Internet Solutions LLC, also d/b/a Public Yellow Pages; Yellow Pages Express Inc., also d/b/a Yellow Pages Express; Yellow Pages Online Inc., also d/b/a Yellow Pages Online; CessTech Inc., also d/b/a Yellow US Pages; SEO Online Inc., also d/b/a Yellow Local Directory; SEO Online LLC; SEOOnline, also d/b/a Public Yellow Pages; SEM Pundits Inc., also d/b/a Yellow Pages Online; CC Recovery Corporation, also d/b/a CC Recovery; and M&A Recovery Inc., also d/b/a MA Recovery.

The FTC would like to thank the Canadian Anti-Fraud Centre; the Attorneys General of Illinois, Florida, New York, Nevada and Vermont; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Better Business Bureaus of Arkansas and of Chicago and Northern Illinois; and the Kahnawake Mohawk Peacekeepers for their valuable assistance with this matter.

The FTC also would like to acknowledge the Royal Canadian Mounted Police (RCMP news release in English and French) and the Centre of Operations Linked to Telemarketing Fraud (Project COLT) for their valuable assistance.  Launched in 1998, Project COLT combats telemarketing-related crime, and includes members of the Royal Canadian Mounted Police, Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, Canada Post, U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement and the U.S. Secret Service), the U.S. Postal Inspection Service, the Federal Trade Commission, and the Federal Bureau of Investigation.  Since its inception, Project COLT has recovered $22 million for victims of telemarketing fraud.

FORMER INVESTMENT FIRM PRESIDENT CHARGED WITH FRAUD BY SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Former President of California-Based Investment Firm with Fraud

On September 24, 2013, the Securities and Exchange Commission charged the former president of a purported private equity real estate firm based in San Bernardino, Calif., with defrauding nearly 500 investors who purchased promissory notes under the false premise that they were secured by specific properties or other collateral.

The SEC alleges that Larry Polhill used his company American Pacific Financial Corporation (APFC) to buy and sell real estate and distressed assets, and he offered investors the opportunity to invest in the company through unregistered notes that would yield them interest payments of 5 to 17 percent per year. However, the collateral that Polhill and APFC claimed made the investments secure was often non-existent or otherwise impaired. The properties underlying the investments were sometimes even sold without notice to investors. When APFC eventually filed for bankruptcy, it named the investors as unsecured creditors who were owed nearly $160 million. None of Polhill's investment offerings were registered with the SEC.

Polhill agreed to settle the SEC's charges and be barred from acting as the officer or director of any public company. The settlement is subject to the approval of the U.S. District Court for the Central District of California, which would decide monetary sanctions at a later date.

According to the SEC's complaint, in addition to promissory notes, investors also could invest in APFC-sponsored funds that pooled investor money to make loans to APFC. The company made regularly scheduled interest payments to investors in the notes and the funds from the mid-1980s to 2007. As a result, its investor base continually grew and the company began making larger and larger investments in distressed assets by buying numerous companies out of bankruptcy. While a few of APFC's investments were successful, the vast majority failed unbeknownst to investors. Consequently, the assets held by APFC that were securing the notes and loans held by investors decreased in value. In early 2008, APFC ceased making its scheduled payments to most investors, but continued to issue newsletters, pay preferred investors, and engage in other activities designed to create a false sense of security about the investments in the company.

The SEC alleges that Polhill made several material misrepresentations to investors. Specifically, he told investors that the notes were secured by collateral when no such security interest existed. He failed to disclose that the collateral securing some investors' notes already had been pledged to other lenders. Polhill represented that he would notify investors if their collateral went into default when that was often not the case. For instance, one investor's note specifically stated it was secured by property located in Hesperia, Calif., that was owned by APFC and pledged as collateral. However, APFC sold the collateral in 2004, and neither Polhill nor APFC informed the investor that his collateral had been sold and there was no longer any asset securing the note.

The SEC's complaint charges Polhill with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act. Polhill has consented to the entry of an order that permanently enjoins him from violating these laws and permanently bars him from acting as an officer or director of any public company.

The SEC's investigation was conducted by Marc Blau, Sara Kalin, and Peter Del Greco of the Los Angeles Regional Office. The SEC's litigation will be led by Lynn Dean.

CONSUMERS LOOSE OVER $5 MILLION IN AN ALLEGED PAYDAY LOAN BROKER SCAM

FROM:  FEDERAL TRADE COMMISSION 
At the FTC's Request, Court Halts Alleged Phony Payday Loan Broker

Consumer Losses Estimated at More Than $5 Million; Defendants Promised to Help People Find Loans, But Instead Just Debited Their Bank Accounts, FTC Alleges
At the request of the Federal Trade Commission, a U.S. district court has halted a Tampa, Florida-based operation that promised to help consumers get payday loans.  Instead of loans, the defendants used consumers’ personal financial information to debit their bank accounts in increments of $30 without their authorization, the FTC alleged.

Claiming to be affiliated with a network of 120 potential payday lenders, the defendants misrepresented that 80 percent of applicants got loans in as soon as one hour, according to the FTC.  The court order freezes the defendants’ assets to preserve the possibility of providing redress to consumers.

“Repeatedly, we’ve seen situations where consumers provide sensitive financial information when inquiring about a payday loan online, and that information falls into the wrong hands,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “The FTC is committed to shutting down these fraudulent operations.”

The FTC alleged that defendants Sean C. Mulrooney and Odafe Stephen Ogaga and five companies they controlled used websites with the names Vantage Funding, Ideal Advance, Loan Assistance Company, Palm Loan Advances, Loan Tree Advances, Pacific Advances, and Your Loan Funding to collect consumers’ names, Social Security numbers, bank routing numbers, and bank account numbers, which allowed them to access consumers’ checking accounts.

The defendants obtained other consumers’ financial information by paying more than $500,000 to third parties, and debited those consumers’ accounts without authorization as well, according to documents filed with the court.  In all, the defendants victimized tens of thousands of consumers, taking more than $5 million from their bank accounts.  Many of the victims were in difficult financial straits to begin with, and as an added insult, often began receiving harassing telemarketing and debt collection calls shortly after the defendants made their unauthorized withdrawals, according to the FTC.  Consumers who complained to Defendants’ Philippines-based customer service agents were frequently offered refunds and $100 gasoline vouchers that never materialized, according to the FTC.

Mulrooney and Ogaga apparently used proceeds from their allegedly illegal scheme to finance a lavish lifestyle.  Mulrooney is the registered owner of a 2012 Maserati GranTurismo, while Ogaga owns a 2011 Rolls Royce Ghost and a 2006 Ferrari 430, according to documents filed with the court.

This is the FTC’s third recent case involving allegedly fraudulent online payday-loan-related operations, and the first one in which the defendants claimed to broker payday loans.  In two previous cases, American Credit Crunchers, LLC and Broadway Global Master Inc., the defendants allegedly attempted to collect on payday loan debts that either did not exist or weren’t owed to them.

The complaint charges the defendants with violating the Federal Trade Commission Act by using unfair billing practices, and by misrepresenting that they will help consumers find a payday loan and use their personal and financial information to get the loan.  The complaint also alleges that the defendants untruthfully claim four of five consumers who applied were approved for a payday loan.  

For more consumer information on this topic, see, Online Payday Loans.

In addition to Mulrooney and Ogaga, the Vantage Funding complaint names Caprice Marketing LLC; Nuvue Partners LLC; Capital Advance LLC; Loan Assistance Company LLC; and Ilife Funding, LLC, formerly known as Guaranteed Funding Partners LLC.

The Commission vote authorizing the staff to file the Vantage complaint was 4-0.  The complaint and request for a temporary restraining order were filed in the U.S. District Court for the Northern District of Illinois.  On August 29, 2013, the court granted the FTC’s request.

NOTE:  The Commission a files complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistantor call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

CFTC GETS DEFAULT JUDGMENT AGAINST FLORIDA RESIDENT FOR FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION

CFTC Obtains Default Judgment against Christopher Smithers of Florida for Fraud in Connection with Futures Contracts, Fraud in Connection with Contracts of Sale of a Commodity in Interstate Commerce, and Violations of a United States District Court’s Prior Orders

Defendant defrauded customers in trading commodity futures contracts and in the purchase of gold bullion

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Kenneth A. Marra of the U.S. District Court for the Southern District of Florida entered an Order of default judgment and permanent injunction against Christopher Smithers of Jupiter, Florida. The Order requires Smithers to pay a $590,940 civil monetary penalty and $196,980 in restitution, imposes permanent trading and registration bans against Smithers, and prohibits Smithers from violating the Commodity Exchange Act (CEA) and CFTC regulations, as charged.

The court’s Order, entered on July 31, 2013, stems from a CFTC Complaint filed on October 22, 2012, charging Smithers with violating anti-fraud provisions of the CEA and CFTC regulations as well as provisions of the CEA proscribing violations of a court Order. The case is U.S. Commodity Futures Trading Commission v. Christopher Smithers, Case No. 9:12-cv-81165-KAM (see CFTC Press Release 6397-12).

The court’s Order finds that from October 2008 to March 2009, Smithers misrepresented to customers that his commodity futures trading was profitable when it actually resulted in losses of $220,000. Further, the court’s Order finds that from June 22, 2011, through November 2011, Smithers falsely represented to various Futures Commission Merchants the identity of the person who opened and controlled commodity futures trading accounts that, in reality, he had opened and controlled. Smithers made such misrepresentations to circumvent prior U.S. District Court Orders that prohibited him from trading commodity futures contracts.

In addition, the court’s Order finds that in 2011, Smithers misappropriated $162,980 of a customer’s funds that were provided to him for the purchase of gold bullion, and that he fraudulently solicited a customer for funds with which to trade commodity futures. Finally, the court’s Order finds that Smithers’ commodity futures trading was in violation of two previous U.S. District Court for the Southern District of Florida Orders of permanent injunction entered against him in CFTC v. Matrix Trading Group., Inc., David Weeden, and Christopher Smithers, Civil Action No. 00-8880-CIV-ZLOCH (S.D. Fla. Oct. 3, 2002), and CFTC v. Christopher Smithers, Prosperity Consultants, Inc., and Jack Smithers, Case No. 05-80592-CIV-Hurley (S.D. Fla. Nov. 6, 2006).

CFTC Division of Enforcement staff responsible for this case are Harry E. Wedewer, Dmitriy Vilenskiy, Danielle E. Karst, John Einstman, Paul G. Hayeck, and Joan M. Manley.

FLORIDA MAN SENTENCED FOR ROLE IN FRAUD SCHEME, ATTEMPTING TO MURDER A WITNESS AND MURDER FOR HIRE

FROM:  U.S. JUSTICE DEPARTMENT 
Thursday, August 1, 2013

Florida Man Sentenced to 30 Years in Prison for Orchestrating a Fraud Scheme, Attempting to Murder a Witness and Murder for Hire

Paul S. Kruse, 60, of Jacksonville, Fla., was sentenced late yesterday to serve 30 years in prison for wire fraud, wire fraud conspiracy, attempting to murder a government witness and murder-for-hire, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and Acting U.S. Attorney A. Lee Bentley III of the Middle District of Florida.

Kruse was sentenced by Senior U.S. District Judge Harvey E. Schlesinger in the Middle District of Florida.   In addition to his prison term, Kruse was sentenced to serve five years of supervised release and ordered to pay a money judgment of $897,960, which represents the net proceeds of the charged criminal conduct.

On Feb. 11, 2013, Kruse was found guilty by a federal jury in Jacksonville.

According to court documents, beginning in 2010, Kruse and his brother conspired to recruit and defraud a number of clients to whom they provided financial advisory services. As part of the scheme, Kruse established a sham investment firm called Yorkshire Financial Services.  He and his brother convinced their clients, a number of whom were retirees, to move their savings to Yorkshire.  Kruse and his brother deceptively told clients that Yorkshire had been in business for more than 30 years, had a staff of experienced securities traders, and traded in a combination of stocks, bonds and currencies appropriate for individual retirement accounts (IRAs).  In reality, Kruse did not invest the investors' funds.  Rather, he spent the investors’ money on luxury cars, home improvements and personal items and made hundreds of thousands of dollars in cash withdrawals.   As a result of the scheme, Kruse stole $931,844 from 21 victims.

In 2011, Kruse hired a personal assistant who witnessed Kruse's conduct. The assistant reported Kruse’s conduct to the FBI, and the Yorkshire scam unraveled shortly thereafter.

In 2012, Kruse’s co-conspirator brother committed suicide. Subsequently, while Kruse was being held in pre-trial detention, Kruse hired hit men to murder his former personal assistant, who was scheduled to be a government witness.  Kruse stated that he wanted the former assistant killed to both prevent her from testifying and avenge his brother’s death. Kruse also hired the hit men to rob and kill two former business partners, who Kruse contended had cheated him. Unbeknownst to Kruse, the hit men were undercover federal agents.

This case was investigated by the FBI and the Bureau of Alcohol, Tobacco, Firearms and Explosives.   It was prosecuted by Assistant U.S. Attorney Mark B. Devereaux and Trial Attorney Ryan Rohlfsen of the Criminal Division’s Fraud Section.

SECURITIES FRAUDSTER SENTENCED TO 20 YEAR PRISON TERM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Minneapolis-Based Fraudster Patrick Joseph Kiley Sentenced to 20 Years in Priso
The Securities and Exchange Commission announced that on July 15, 2013, the Honorable Chief Judge Michael J. Davis of the United States District Court for the District of Minnesota sentenced Patrick J. Kiley to 20 years in prison and ordered him to pay $155 million in restitution.  The sentence was based on Kiley’s conviction on 15 criminal counts including mail and wire fraud, conspiracy to commit mail and wire fraud, and money laundering for his role in a $194 million foreign currency trading scheme that defrauded approximately 1,000 investors.  Kiley was charged on July 19, 2011, and a jury found him guilty on June 12, 2012.

Kiley is one of the defendants in a pending civil injunctive action filed by the Commission on November 23, 2009 in the United States District Court for the District of Minnesota.  The Commission’s action against Kiley arose out of the same facts that are the subject of the criminal case against him.

The Commission’s complaint alleges that from at least July 2006 through at least July 2009, Kiley and co-defendant Trevor G. Cook of Minneapolis, Minnesota, raised at least $190 million (later determined to be $194 million) from 1,000 investors through the unregistered offer and sale of investments in a purported foreign currency trading venture.  According to the Commission’s complaint, Cook and Kiley pooled investors’ funds in bank and trading accounts in the names of entities they controlled.  The Commission’s complaint alleges that the foreign currency trading they conducted resulted in millions of dollars in losses, and they misused approximately one half of the investor funds to make Ponzi-like payments to earlier investors and pay for, among other things, Cook's gambling losses and the purchase of the historic Van Dusen Mansion in Minneapolis.

The Commission’s complaint charges Cook and Kiley with violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  On November 23, 2009, the Court entered a preliminary injunction order against Cook and Kiley and froze all of their assets.  On March 7, 2011, the Commission also filed a civil complaint in the U.S. District Court in Minneapolis against Jason Bo-Alan Beckman and his registered investment advisory firm Oxford Private Client Group, LLC, for their roles in this scheme.  On August 27, 2010, the Court entered an order of permanent injunction against Cook.  The Court also appointed a receiver to marshal and preserve all of the Defendants’ assets.

MAN COVICTED FOR ROLE IN $72 MILLION LEGISI PONZI SCHEME SENTENCED TO 5 YEARS IN PRISON

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Serial Fraudster Matthew J. Gagnon Sentenced to Five Years in Prison

The Securities and Exchange Commission announced that on July 9, 2013, the Honorable Mark A. Goldsmith of the United States District Court for the Eastern District of Michigan sentenced Matthew J. Gagnon to five years of incarceration followed by three years of supervised release and ordered Gagnon to pay over $4.4 million in restitution to his victims.  Gagnon, 45, of Portland, Oregon, pleaded guilty to one count of criminal securities fraud for promoting a securities offering without fully disclosing the amount of his compensation in connection with his promotion of the $72 million Legisi Ponzi scheme in 2006 and 2007, in violation of Section 17(b) of the Securities Act of 1933.

The criminal charges arose out of the same facts that were the subject of a civil injunctive action that the Commission filed against Gagnon on May 11, 2010.  The Commission's complaint alleged that since 1997, Gagnon had billed himself as an Internet business opportunity expert and his website as “the world’s first and largest opportunity review website.”  According to the SEC’s complaint, from January 2006 through approximately August 2007, Gagnon helped orchestrate a massive Ponzi scheme conducted by Gregory N. McKnight and his company, Legisi Holdings, LLC, which raised a total of approximately $72 million from over 3,000 investors by promising returns of upwards of 15% a month.  The complaint also alleged that Gagnon promoted Legisi but in doing so misled investors by claiming, among other things, that he had thoroughly researched McKnight and Legisi and had determined Legisi to be a legitimate and safe investment.  The complaint alleged that Gagnon had no basis for the claims he made about McKnight and Legisi.  Gagnon also failed to disclose to investors that he was to receive 50% of Legisi's purported "profits" under his agreement with McKnight.  According to the complaint, Gagnon received a net of approximately $3.8 million in Legisi investor funds from McKnight for his participation in the scheme.

The SEC's complaint further alleged that beginning in August 2007, Gagnon fraudulently offered and sold securities representing interests in a new company that purportedly was to develop resort properties.  The complaint alleged that Gagnon, among other things, falsely claimed that the investment was risk-free and "SEC compliant," and guaranteed a 200% return in 14 months.  In reality, however, Gagnon sent the money to a twice-convicted felon, did not register the investment with the SEC, and knew such an outlandish return was impossible.  Gagnon took in at least $361,865 from 21 investors.

The SEC's complaint also alleged that in April 2009, Gagnon began promoting a fraudulent offering of interests in a purported Forex trading venture.  Gagnon guaranteed that the venture would generate returns of 2% a month or 30% a year for his investors.  Gagnon's claims were false, and he had had no basis for making them because Gagnon never reviewed his friend’s trading records before promoting the offering, which would have shown over $150,000 in losses over the previous nine months.

The SEC's complaint charged Gagnon with violating Sections 5(a), 5(c), 17(a) and 17(b) of the Securities Act of 1933 and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  The complaint sought preliminary and permanent injunctions, disgorgement, and civil penalties from Gagnon.  On May 24, 2010, the SEC obtained an emergency order freezing Gagnon’s assets and other preliminary relief.  Subsequently, on August 6, 2010, the Court granted an order of preliminary injunction against Gagnon pursuant to his consent. On March 22, 2012, the Court granted the SEC’s motion for summary judgment and entered a final judgment against Gagnon.  The Court found that Gagnon violated the registration, anti-fraud, and anti-touting provisions of the federal securities laws.  The Court’s final judgment against Gagnon permanently enjoined him from future violations of Sections 5(a), 5(c), 17(a) and 17(b) of the Securities Act of 1933 and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordered Gagnon to pay $3,613,259 in disgorgement, $488,570.47 in prejudgment interest, and a $100,000 civil penalty.

On May 2, 2012, the SEC instituted related administrative proceedings against Gagnon to determine what, if any, remedial action was appropriate and in the public interest.  On July 31, 2012, the SEC issued an Order Making Findings and Imposing Sanctions by Default barring Gagnon from association with any broker or dealer.

MAN INDICTED FOR ATTEMPTING TO DEFRAUD PRESIDENTIAL CANDIDATE MIT ROMNEY

FROM: U.S. DEPARTMENT OF JUSTICE

Wednesday, June 26, 2013

Tennessee Man Indicted for Romney Tax Return Fraud and Extortion Scheme

Michael Mancil Brown was indicted today by a federal grand jury in Nashville, Tenn., for allegedly engaging in an extortion and wire fraud scheme involving former Presidential candidate Mitt Romney’s tax returns, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and Todd Hudson, Special Agent in Charge of the U.S. Secret Service, Nashville Field Office.


Brown, 34, of Franklin, Tenn., was charged in U.S. District Court in the Middle District of Tennessee with six counts of wire fraud and six counts of extortion.

The indictment alleges that Brown devised a scheme to defraud Romney, the accounting firm of PricewaterhouseCoopers LLP and others by falsely claiming that he had gained access to the PricewaterhouseCoopers internal computer network and had stolen tax documents for Romney and his wife, Ann D. Romney, for tax years prior to 2010.

According to the indictment, Brown allegedly caused a letter to be delivered in August 2012 to the offices of PricewaterhouseCoopers in Franklin. The letter demanded that $1 million worth of the digital currency Bitcoin be deposited to a specific Bitcoin account to prevent the release of the purportedly stolen Romney tax returns. The letter also invited interested parties who wanted the allegedly stolen Romney tax documents to be released to contribute $1 million to another Bitcoin account.

The indictment alleges that Brown delivered similar letters to the offices of the Democratic and Republican parties in Franklin and caused similar statements to be posted to Pastebin.com.

The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

This case was investigated by the Nashville Field Office of the U.S. Secret Service with assistance from the Nashville Resident Agency of the FBI. The case is being prosecuted Senior Counsel Anthony V. Teelucksingh of the Criminal Division's Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Byron Jones of the Middle District of Tennessee.

MAN SENTENCED FOR MASTERMINDNG $31 MILLION DISADVANTAGED SMALL BUSINESS FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, June 21, 2013

Former Security Contractor CEO Sentenced for Masterminding $31 Million Disadvantaged Small Business Fraud Scheme

The former chief executive officer of a Virginia-based security contracting firm was sentenced in the Eastern District of Virginia to 72 months in prison for creating a front company to obtain more than $31 million intended for disadvantaged small businesses and for bribing the former regional director for the National Capital Region of the Federal Protective Service (FPS) as part of the scheme. The front company obtained the contracts through the Small Business Administration’s (SBA) Section 8(a) program, which allows qualified small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses.


Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Neil H. MacBride of the Eastern District of Virginia; National Aeronautics and Space Administration (NASA) Inspector General Paul K. Martin; SBA Inspector General Peggy E. Gustafson; Defense Criminal Investigative Service (DCIS) Special Agent in Charge of Mid-Atlantic Field Office Robert E. Craig; General Services Administration (GSA) Inspector General Brian D. Miller; and Department of Homeland Security (DHS) Deputy Inspector General Charles K. Edwards made the announcement after sentencing by United States District Judge Gerald Bruce Lee.

"Keith Hedman used his expertise gleaned from decades as a government contractor to cheat the system and steal tens of millions from minority-owned small business owners," said Acting Assistant Attorney General Raman. "Today’s sentence shows that those who resort to deceit and bribery to secure federal contracts will be caught and held accountable."

"Keith Hedman tried to game the system and take advantage of a government program designed to help minority-owned small businesses," said U.S. Attorney Neil H. MacBride. "He committed fraud, he undermined the trust of the U.S. government and this type of conduct will not be tolerated. My office is committed to prosecuting those who cheat the government to the fullest extent of the law."

"I commend the outstanding efforts of our agents and the other law enforcement agencies involved in this case in protecting the integrity of the Federal Government’s procurement program and taxpayer dollars" said NASA Inspector General Paul K. Martin.

Keith Hedman, 53, of Arlington, Va., was sentenced today after pleading guilty to major government fraud and conspiracy to commit bribery on March 13, 2013. Hedman was also ordered to forfeit approximately $6.1 million.

According to court documents, in or about 2011 Hedman formed Company A, which was approved to participate in the 8(a) program based on the 8(a) eligibility of its listed president and CEO, an African-American female. When the listed president and CEO left Company A in 2003, Hedman became its sole owner, and the company was no longer 8(a)-eligible.

In 2003, Hedman created Company B, another Arlington-based security contractor, to ensure that he could continue to gain access to 8(a) contracting preferences for which Company A was no longer qualified. Prior to applying for Company B’s 8(a) status, Hedman selected an employee, Dawn Hamilton, 48, of Brownsville, Md., to serve as a figurehead owner based on her Portuguese heritage and history of social disadvantage. In reality, the new company was managed by Hedman and Company A senior leadership in violation of 8(a) rules and regulations. To deceive the SBA, the co-conspirators falsely claimed that Hamilton formed and founded the company and that she was the only member of the company’s management. Based on those misrepresentations, Company B obtained 8(a) status in 2004.

From 2004 through February 2012, Hedman – not Hamilton – impermissibly exercised ultimate decision-making authority and control over Company B by directing its finances, allocation of personnel, and government contracting activities. Hedman nonetheless maintained the impression that Hamilton was leading the company, including through forgeries of signatures of Hamilton to documents she had not seen or drafted. Hedman also retained ultimate control over the shell business’s bank accounts throughout its existence. In 2010, Hedman withdrew $1 million in cash from Company B’s accounts and gave the funds in cash to Hamilton and three other conspirators. In 2011, Hedman approached Hamilton’s brother about starting another shell company to continue the scheme. The trio submitted another fraudulent application to the SBA, but it was rejected.

Later in 2011, Hedman agreed to pay Derek Matthews, 47, of Harwood, Md., the former FPS Regional Director for the National Capital Region, $50,000 and a percentage of new business in exchange for Matthews helping Company B obtain contracts. During the bribery scheme, Matthews served as FPS Deputy Assistant Director for Operations, a law enforcement position in which he had daily oversight of physical security programs and oversight of approximately 13,000 FPS officers at approximately 9,000 federal buildings.

In total, the scheme netted government contracts valued at more than $153 million, from which Company B obtained more than $31 million in contract payments. The various conspirators netted more than $6.1 million that they were not entitled to receive from those payments. Seven other defendants have pleaded guilty in the scheme.

This case is being investigated by NASA Office of the Inspector General (OIG), the SBA -OIG, DCIS-OIG, GSA-OIG, and DHS-OIG, with assistance from the Defense Contract Audit Agency. Assistant U.S. Attorneys Chad Golder and Ryan Faulconer, a former Trial Attorney for the Criminal Division’s Fraud Section, are prosecuting the case on behalf of the United States.

CONVICTED FORMER ENRON CEO JEFFREY SKILLING RESENTENCED

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, June 21, 2013

Former Enron CEO Jeffrey Skilling Resentenced to 168 Months for Fraud, Conspiracy Charges

Former Enron Chief Executive Officer Jeffrey K. Skilling has been resentenced to 168 months in prison on conspiracy, securities fraud, and other charges related to the collapse of Enron Corporation. In addition to the prison sentence, Skilling, 59, was ordered to forfeit approximately $42 million to be applied toward restitution for the victims of the fraud at Enron.


Acting Assistant Attorney General Mythili Raman of the Criminal Division made the announcement after Skilling was resentenced before U.S. District Judge Sim Lake at the U.S. District Court in Houston.

"The sentence handed down today ends years of litigation, imposes significant punishment upon the defendant and precludes him from ever challenging his conviction or sentence," said Acting Assistant Attorney General Raman. "With today’s court action, victims of Skilling’s crimes will finally receive more than $40 million that he owes them. We appreciate the hard work and dedication of all the prosecutors and agents who have handled this important case from the initial investigation to today’s successful conclusion."

A federal jury found Skilling guilty in Houston on May 25, 2006, of one count of conspiracy, 12 counts of securities fraud, one count of insider trading, and five counts of making false statements to auditors. Judge Lake initially sentenced Skilling to serve 292 months of imprisonment on Oct. 23, 2006. On Jan. 6, 2009, the United States Court of Appeals for the Fifth Circuit affirmed Skilling’s convictions but vacated his sentence and remanded for a new sentencing hearing. The court of appeals concluded that the district court erred by increasing Skilling’s sentence for having substantially jeopardized the safety and soundness of a financial institution – that is, Enron’s pension plan. As a result, the court of appeals effectively reduced Skilling’s guidelines range of imprisonment by approximately nine years.

In May 2013, the government and Skilling entered into an agreement to recommend jointly to the district court a sentence between 168 months and 210 months of imprisonment, a limited reduction in Skilling’s guidelines range of imprisonment in exchange for Skilling agreeing, among other things, not to contest the original forfeiture and restitution order and to waive all appeals and other litigation. As court documents make clear, the government entered into this agreement, in part, to bring finality to Skilling’s convictions and thereby allow the government to promptly seek the distribution of approximately $42 million to victims of Skilling’s crimes.

Skilling’s convictions stemmed from a scheme to deceive the investing public, the U.S. Securities and Exchange Commission, and others about the true performance of Enron’s businesses. The scheme was designed to make it appear that Enron was growing at a healthy and predictable rate, consistent with analysts’ published expectations, that Enron did not have significant write-offs or debt and was worthy of an investment-grade credit rating, that Enron was comprised of a number of successful business units, and that the company had an appropriate cash flow. This scheme had the effect of artificially inflating Enron’s stock price, which increased from approximately $30 per share in early 1998 to over $80 per share in January 2001, and artificially stemming the decline of the stock during the first three quarters of 2001.

The fraud scheme eventually unraveled and Enron filed for bankruptcy in December 2001, making its stock virtually worthless.

The investigation into Enron’s collapse was conducted by the Enron Task Force, a team of federal prosecutors supervised by the Justice Department’s Criminal Division, and Special Agents from the FBI and IRS Criminal Investigation. The Task Force received considerable assistance from the Securities and Exchange Commission. The resentencing hearing was handled by Patrick Stokes, Albert Stieglitz and Robert Heberle of the Criminal Division’s Fraud Section.

AMERICAN AND ARMENIAN POWER ASSOCIATES CONVICTED FOR IDENTITY THEFT

The following excerpt is from the Department of Justice website:
Thursday, March 22, 2012
Armenian Power Member and Three Armenian Power Associates Convicted in Los Angeles for Roles in Identity Theft Ring
WASHINGTON – After a five week trial, four defendants have been convicted for their roles in one of the largest bank fraud and identity theft schemes in California history, with dozens of victims in four states and millions of dollars in losses.

The convictions were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Andre Birotte Jr. of the Central District of California, Assistant Director in Charge of the FBI’s Los Angeles Field Office Steven Martinez and Special Agent in Charge of the U.S. Secret Service (USSS) Joseph Beaty.

Arman Sharopetrosian, Karen Markosian, Artush Margaryan and Kristine Ogandzhanyan were found guilty of conspiring to commit bank fraud, attempted bank fraud and various counts of aggravated identity theft.  Sharopetrosian, Markosian and Ogandzhanyan waived a jury trial and consented to trial by the judge, and Margaryan proceeded with a jury trial.

Yesterday, U.S. District Judge David O. Carter found Ogandzhanyan, 28, of Burbank, Calif., guilty of one count of bank fraud conspiracy, two counts of attempted bank fraud and four counts of aggravated identity theft.  On March 16, 2012, the judge found Sharopetrosian, 33, of Burbank, guilty of one count of bank fraud conspiracy, four counts of bank fraud and seven counts of aggravated identify theft.  On March 16, 2012, the judge also found Markosian, 39, of Glendale, Calif., guilty of one count of bank fraud conspiracy, one count of attempted bank fraud and two counts of aggravated identity theft.  A jury convicted the fourth defendant, Artush Margaryan, 28, of Van Nuys, Calif., on March 16, 2012, of one count of bank fraud conspiracy, one count of attempted bank fraud and three counts of aggravated identity theft.

Evidence was presented at trial that Sharopetrosian is a member of the Armenian Power organized crime group, and Margaryan, Markosian and Ogandzhanyan are Armenian Power associates.

According to evidence presented at trial, Sharopetrosian directed the massive fraud scheme along with co-defendant Angus Brown, while the two were incarcerated at Avenal State Prison.  Using cellular telephones that were smuggled into the prison, Sharopetrosian and Brown worked from behind bars to coordinate with others, including Ogandzhanyn, Markosian and Margaryan, to obtain confidential bank profile information and steal money from victim account holders.  Often targeting high-value bank accounts, the defendants used account holders’ personal identifying information – including names, Social Security numbers and dates of birth – to impersonate victims in phone calls to the bank.  The defendants gathered account information, transferred funds between victims’ accounts and placed unauthorized check orders for the accounts.  They then stole the checks, obtained the victims’ signatures from public documents and paid conspirators to cash the forged checks.  Over the course of the six-year conspiracy, the defendants and their co-conspirators caused more than $10 million dollars in losses to victims in Southern California, Nevada, Arizona and Texas.

“These defendants, including two individuals who were operating from a prison cell, perpetrated a massive fraudulent scheme on behalf of a dangerous criminal enterprise,” said Assistant Attorney General Breuer.  “As members and associates of Armenian Power, they stole sensitive personal and financial information from innocent consumers and caused millions of dollars in losses.  Whether organized criminal groups traffic in drugs, commit financial fraud or wreak other havoc to keep themselves going, they must be stopped.  We are doing everything possible to shut down dangerous gangs like Armenian Power.”

“The safety and sanctity of confidential financial information is paramount in today’s society,” said U.S. Attorney Birotte.  “Identity theft is a fundamental invasion of consumer privacy that cannot be tolerated.  These convictions demonstrate that violators, whoever and wherever they may be, will be caught and will be prosecuted to the fullest extent of the federal law.”

“The defendants were convicted in a trial that uncovered a sophisticated and lengthy scheme that targeted victims in multiple states, and included disturbing details, such as orders made from within prison walls and assistance from bank insiders enlisted by the defendants,” said FBI Assistant Director Martinez.  “This case is also indicative of the growing trend of gang or organized crime-affiliated groups now engaging in identity theft and other financial crimes in furtherance of their enterprise.”  

These defendants are four of 20 defendants who were charged with operating the bank fraud and identity theft scheme in one of a series of federal indictments unsealed on Feb. 16, 2011.  The indictments allege various federal crimes against members and associates of the Armenian Power criminal organization.  To date, 19 of the 20 defendants charged in the bank fraud indictment have been convicted, including Brown.  One defendant, Faye Bell, was arrested earlier this year and is still awaiting trial.

Sharopetrosian, Margaryan, Markosian and Ogandzhanyan face maximum sentences of 30 years in federal prison for each count of bank fraud, 30 years for each count of conspiracy to commit bank fraud and additional mandatory two year sentences for each count of aggravated identity theft.

 Sentencing for all four defendants is scheduled for Aug. 6, 2012, before Judge Carter.

The case is being prosecuted by Assistant U.S. Attorneys Martin Estrada and Joseph McNally of the Central District of California and Trial Attorney Cristina Moreno of the Organized Crime and Gang Section in the Justice Department’s Criminal Division.  The case was investigated by the Eurasian Organized Crime Task Force, which includes the FBI, the USSS, the Los Angeles Police Department, the Glendale Police Department, the Burbank Police Department, the Internal Revenue Service and the U.S. Immigration and Customs Enforcement.

FOUR INDIVIDUALS, THREE CORPORATIONS CONVICTED IN KICKBACK SCHEME TO DEFRAUD HOSPITAL

The following excerpt is from the Department of Justice Website:

“WASHINGTON — A Manhattan jury convicted four individuals and three corporations for their participation in an eight-year conspiracy, involving kickbacks in excess of $2 million, to defraud New York Presbyterian Hospital (NYPH), the Department of Justice announced. In addition to today's convictions, previously 10 individuals and three companies have pleaded guilty to date to charges arising out of this investigation.

After a four week trial, Michael Yaron and two companies owned by him, Cambridge Environmental & Construction Corp., which does business as National Environmental Associates (Cambridge/NEA), an asbestos abatement company, and Oxford Construction & Development Corp., a construction company; Moshe Buchnik, the president of two asbestos abatement companies; Santo Saglimbeni, a former vice president of facilities operations at NYPH; Artech Corporation, a company owned by a relative of Saglimbeni; and Emilio "Tony" Figueroa, a former director of facilities operations at NYPH were each convicted of engaging in a wire fraud conspiracy to defraud NYPH. Additionally, Yaron, Cambridge/NEA, Oxford, Buchnik, Saglimbeni and Artech were also convicted of wire fraud for transferring money electronically from the bank account of one co-conspirator to Artech's bank account.

"We are very pleased that the jury found these individuals and companies guilty of conspiracy to defraud New York Presbyterian Hospital," said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department's Antitrust Division. "This verdict sends a clear message that corrupt purchasing officials and the contractors who paid them kickbacks will be held accountable for this type of illegal conduct."

According to the court document, the scheme to defraud NYPH centered on Saglimbeni, with the assistance of Figueroa, awarding asbestos abatement, air monitoring and general construction contracts to Yaron, Buchnik, Cambridge/NEA and Oxford in return for over $2.3 million in kickbacks paid to Saglimbeni. A portion of those kickbacks were funneled by Yaron to Saglimbeni through Artech, a sham company Saglimbeni created in the name of his mother in order to conceal the kickbacks. Counts three and four of the superseding indictment charging Saglimbeni and Figueroa with mail fraud conspiracy and mail fraud were severed from the matter and will be tried on April 16, 2012, in U.S. District Court in Manhattan.

Sentencing for all defendants is scheduled for June 20, 2012, before Judge George B. Daniels. The wire fraud and wire fraud conspiracy charges each carry a maximum penalty of 20 years in prison for individuals and a $1 million criminal fine for individuals and companies. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The convictions announced today resulted from a federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses in the award of construction, maintenance and service contracts to the facilities operations department of NYPH.
The investigation is being conducted by the Antitrust Division's New York Field Office with the assistance of the FBI and the Internal Revenue Service-Criminal Investigation's New York Field Office.”