FBI: “Former NBA Player and CEO of the George Group Convicted on all Counts in $2 Million Ponzi Scheme”

October 2, 2013

The Federal Bureau of Investigation on September 30, 2013 released the following:

“TRENTON, NJ— C. Tate George, former NBA basketball player and the CEO of purported real estate development firm The George Group, was convicted today on all counts on which he was indicted in connection with his role in orchestrating a $2 million investment fraud scheme, U.S. Attorney Paul J. Fishman announced.

The jury deliberated four hours before convicting George, 45, of Newark, of four counts of wire fraud after a three-week trial before U.S. District Judge Mary L. Cooper. George was immediately remanded into federal custody to await sentencing, which is scheduled for Jan. 16, 2014.

According to documents filed in this case and evidence presented at trial:

George, a former player for the New Jersey Nets and Milwaukee Bucks professional basketball teams, held himself out as the CEO of The George Group and claimed to have more than $500 million in assets under management. He pitched prospective investors, including several former professional athletes, to invest with the firm and told them their money would be used to fund The George Group’s purchase and development of real estate development projects, including projects in Connecticut and New Jersey. George represented to some prospective investors that their funds would be held in an attorney trust account and personally guaranteed the return of their investments, with interest.

Based on George’s representations, investors invested more than $2 million in The George Group between 2005 and 2011, which he deposited in both the firm’s and his personal bank account. Instead of using investments to fund real estate development projects as promised, George used the money from new investors to pay existing investors in Ponzi-scheme fashion, as well as paying for his daughter’s Sweet 16, extensive renovations on his New Jersey home (that has since been foreclosed), the mortgage on a New Jersey home, the mortgage on a Florida home, taxes to the IRS, and traffic tickets. The defendant gave money to family members and friends. He also spent $2,905 for a reality video about himself (a “sizzle reel” for “The Tate Show,” is available on YouTube). The George Group had virtually no income-generating operations.

Each of the wire fraud counts on which he was convicted is punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; postal inspectors of the USPIS, under the direction of Postal Inspector in Charge Maria L. Kelokates; and criminal investigators with the U.S. Attorney’s Office, with the investigation leading to today’s conviction.

The government is represented by Assistant U.S. Attorneys Joseph B. Shumofsky and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit http://www.stopfraud.gov.”

Federal Wire Fraud Crimes – 18 U.S.C. § 1343

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“Attorney General, Manhattan U.S. Attorney, and FBI Assistant Director in Charge Announce Charges Against Two Derivatives Traders in Connection with Multi-Billion-Dollar Trading Loss at JPMorgan Chase & Company”

August 15, 2013

The New York Times on August 14, 2013 released the following:

Defendants Hid More Than Half-a-Billion Dollars in Losses Resulting from Derivatives Trading in JPMorgan’s Chief Investment Office; a Third Trader, Bruno Iksil, Entered a Non-Prosecution Cooperation Agreement

Eric Holder, the Attorney General; Preet Bharara, the United States Attorney for the Southern District of New York; and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced the unsealing of criminal complaints against Javier Martin-Artajo and Julien Grout for their alleged participation in a conspiracy to hide the true extent of losses in a credit derivatives trading portfolio maintained by the Chief Investment Office (CIO) of JPMorgan Chase & Company (JPMorgan). Martin-Artajo served as a managing director and head of Credit and Equity Trading for the CIO, and Grout was a vice president and derivatives trader in the CIO.

Attorney General Eric Holder said, “Our financial system has been hurt in recent years not just by risky bets gone bad but also, in some cases, by criminal wrongdoing. We will not stop pursuing those who violate the public trust and compromise the integrity of our markets. I applaud U.S. Attorney Bharara, his colleagues in the Southern District of New York, and all of our partners on the President’s Financial Fraud Enforcement Task Force for their longstanding commitment to combating all forms of financial fraud. And I pledge that we will continue to move both fairly and aggressively to bring the perpetrators of financial crimes to justice.”

Manhattan U.S. Attorney Preet Bharara said, “As alleged, the defendants, Javier Martin- Artajo and Julien Grout, deliberately and repeatedly lied about the fair value of billions of dollars in assets on JPMorgan’s books in order to cover up massive losses that mounted month after month at the beginning of 2012, which ultimately led JPMorgan to restate its losses by $660 million. The defendants’ alleged lies misled investors, regulators, and the public, and they constituted federal crimes. As has already been conceded, this was not a tempest in a teapot but rather a perfect storm of individual misconduct and inadequate internal controls. The difficulty inherent in precisely valuing certain kinds of financial positions does not give people a license to lie or mislead to cover up losses; it does not confer a license to create false books and records or to make false public filings. And that goes double for handsomely paid executives at a public company whose actions can roil markets and upend the economy.”

FBI Assistant Director in Charge George Venizelos said, “The complaints tell a story of a group of traders who got in over their heads, and to get out, doubled down on a series of risky positions. In the first quarter of 2012, boom turned to bust, as the defendants, concerned about losing control to other traders at the bank, fudged the numbers on their daily book and in some cases completely made them up. It brought a whole new meaning to ‘cooking the books.’”

In a separate action, the U.S. Securities and Exchange Commission (SEC) announced civil charges against Martin-Artajo and Grout.

According to the allegations in the criminal complaints unsealed today in Manhattan federal court:

JPMorgan’s CIO is a component of the bank’s Corporate/Private Equity line of business, which, according to the bank, exists to manage the bank’s excess deposits—approximately $350 billion in 2012. Since approximately 2007, the CIO’s investments have included a so-called Synthetic Credit Portfolio (SCP), which consists of indices and tranches of indices of credit default swaps (CDS). A credit default swap is essentially an insurance contract on an underlying credit risk, such as corporate bonds. CDS indices are collections of CDSes that are traded as one unit, while CDS tranches are portions of those indices, usually sliced up by riskiness.

Under U.S. Generally Accepted Accounting Principles (GAAP) and according to JPMorgan policy, CDS traders were required to value the securities in their portfolios on a daily basis. Those values, or “marks,” became part of the bank’s daily books and records. Because CDS indices and tranches are not traded over an exchange, traders are required to look to various data points in order to value their securities, such as actual transaction prices, price quotations from market makers, and values provided by independent services (such as Totem and MarkIT). JPMorgan’s accounting policy, which used the same methodology employed by the independent services, provided that the “starting point for the valuation of a derivatives portfolio is mid-market,” meaning the mid-point between the price at which market-makers were willing to buy or sell a security. Through about January 2012, CIO traders generally marked the securities in the SCP approximately to this mid-point, which they sometimes referred to as the “crude mid.”

The SCP was extremely profitable for JPMorgan—it produced approximately $2 billion in gross revenues since its inception—but in the first quarter of 2012, the SCP began to sustain consistent and considerable losses. From at least March 2012, Martin-Artajo and Grout conspired to artificially manipulate the SCP marks to disguise those losses. They did so, among other reasons, to avoid losing control of the SCP to other traders at JPMorgan.

Although Martin-Artajo pressured his traders, including Grout, to “defend the positions” in early 2012 by executing trades at favorable prices, the SCP lost approximately $130 million in January and approximately $88 million in February. In March 2012, when the market moved even more aggressively against the CIO’s positions, Martin-Artajo specifically instructed Grout and the head SCP trader, Bruno Iksil (who has entered a non-prosecution agreement), not to report losses in the SCP unless they were tied to some identifiable market event, such as a bankruptcy filing by a company whose bonds were in the CDS index. Martin-Artajo explained that “New York”—meaning, among others, JPMorgan’s Chief Investment Officer—did not want to see losses attributable to market volatility.

By mid-March 2012, Grout was explicitly and admittedly “not marking at mids.” He maintained a spreadsheet that kept track of the difference between the price that Grout recorded in JPMorgan’s books and records on the one hand, and the “crude mids” on the other. By March 15, 2012, according to Grout’s spreadsheet, the difference had grown to approximately $292 million. In a recorded online chat the same day, Grout explained that he was trying to keep the marks for most of the SCP’s positions “relatively realistic,” with the marks for one particular security “put aside.” That is, Grout mispriced that one particular security, of which the SCP held billions of dollars’ worth, by the full $292 million. The following day, Iksil told Martin-Artajo that the difference had grown to $300 million, and “I reckon we get to 400 [million] difference very soon.” In a separate conversation, Iksil remarked to Grout that “I don’t know where he [Martin-Artajo] wants to stop, but it’s getting idiotic.”

In the days that followed, Grout at times ignored Iksil’s instructions on how to mark the positions and instead followed Martin-Artajo’s mandate to continue to hide the losses. By March 20, 2012, Iksil insisted that Grout show a significant loss: $40 million for the day. In a recorded call, Martin-Artajo excoriated Iksil, finally emphasizing, “I didn’t want to show the P&L [the profit and loss].” Throughout the remainder of March 2012, while Iksil continued to try to insist that Martin-Artajo acknowledge the reality of the losses, Grout, at Martin-Artajo’s instructions, continued to hide them. As of March 30, 2012—the last day of the first quarter of 2012—Grout continued to fraudulently understate the SCP’s losses. These incorrect figures in the SCP were not only integrated into JPMorgan’s books and records, but also—as Martin-Artajo and Grout were well aware—into the bank’s quarterly financial filing for the first quarter of 2012 with the SEC.

During the course of the mis-marking scheme carried out by Martin-Artajo and Grout, the CIO’s Valuation Control Group (VCG) was supposed to serve as an independent check on the valuations assigned by traders to the securities that the traders were marking at month-end. The VCG, however, was effectively only staffed by one person and did not perform any independent review of the valuations. Instead, the VCG tolerated valuations outside the bid-offer spread as presented by Martin-Artajo and other CIO traders.

In August 2012, after Martin-Artajo and Grout were stripped of their responsibilities over the SCP and their scheme was discovered, JPMorgan restated its first quarter 2012 earnings and recognized an additional loss of $660 million in net revenue attributable to the mismarking of the SCP. JPMorgan announced that it was restating its earnings because it had lost confidence in the “integrity” of the marks submitted by Grout, at Martin-Artajo’s direction.

* * *

Martin-Artajo, 49, a Spanish citizen, and Grout, 35, a French citizen, are charged in one count of conspiracy; one count of falsifying the books and records of JPMorgan; one count of wire fraud; and one count of causing false statements to be made in JPMorgan’s filings with the SEC. They each face a maximum sentence of five years in prison on the conspiracy count and 20 years in prison on each of the three remaining counts in the complaints and a fine of the greater of $5,000,000 or twice the gross gain or gross loss as to certain of the offenses.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.

Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.

Mr. Bharara praised the work of the FBI. He also thanked the SEC and the Department of Justice’s Office of International Affairs.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Eugene Ingoglia and Matthew L. Schwartz are in charge of the prosecutions.

The charges contained in the complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


FBI: Two Men Charged with Allegedly Defrauding Charter Flight Company, Other Luxury Brands of Hundreds of Thousands of Dollars

August 5, 2013

The Federal Bureau of Investigation (FBI) on August 5, 2013 released the following:

“NEWARK, NJ—Two men were arrested by federal agents early this morning in Akron, Ohio for conspiracy to defraud an aviation company out of charter flights and other businesses out of services and luxury goods, U.S. Attorney Paul J. Fishman announced.

Dante G. Dixon, 45, of Miami, Florida, and Christopher L. Henderson, 32, of Akron, Ohio, were charged by complaint with conspiracy to commit wire fraud. They made their initial court appearances before U.S. Magistrate Judge Kathleen Burke in Akron federal court and were ordered held until they can be transported to New Jersey.

According to the complaint:

From May 2013 through June 2013, Dixon and Henderson and others allegedly conspired to fraudulently obtain at least four private charter flights from Jet Aviation, an international business aviation service with its United States’ headquarters in Teterboro, New Jersey. Dixon, Henderson, and others also conspired to obtain tens of thousands of dollars in other luxury goods and services, all via sham lines of credit issued to a well-known financial institution for the defendants and others’ use, by misrepresenting that they and others were employees at the financial institution.

On May 5, 2013, an individual using the name Josh Stevens called Jet Aviation’s offices in Chicago, Illinois and Van Nuys, California to inquire about its private charter flight services. That individual identified himself as being employed as a senior vice president at a well-known financial institution and provided an e-mail address purporting to be affiliated with the financial institution. It was later determined that this e-mail address was not, in fact, affiliated with the financial institution. A Jet Aviation employee sent an e-mail to the provided e-mail address. The e-mail from Jet Aviation contained a draft charter services agreement, which was signed by Josh Stevens and returned to Jet Aviation on May 9, 2013. The agreement falsely listed Josh Stevens as a senior vice president, Dixon as a vice president, and Henderson as a vice president of international affairs at the well-known financial institution.

On May 21, 2013, based on the false information provided by Josh Stevens, a Jet Aviation employee created an account and a $350,000 line of credit for the defendants and others. The line of credit was in the name of the financial institution on behalf and for the use of the defendants and others. Dixon and Henderson and others used the sham line of credit to take at least four private charter flights.

On June 7, 2013, a Jet Aviation employee at Teterboro met Dixon and Henderson before they boarded their charter flight to Miami, Florida. During the meeting, the defendants identified themselves as being employees at the financial institution. The Jet Aviation employee then contacted the financial institution and was informed that Dixon and Henderson and others were not, and had never been, employees at the financial institution.

As a result of their misrepresentations to Jet Aviation, Dixon and Henderson and others fraudulently obtained private high-end charter flights and limousine car services with a total value of $175,790. Jet Aviation never received payment from the defendants and others, or from the financial institution’s line of credit, for any of the services provided to the defendants and others, including the approximately $164,911 in charter flights and the approximately $10,879 in limousine services.

Dixon and Henderson and others made similar misrepresentations about their purported employment at the financial institution to other luxury service providers, including to a Tiffany & Co. store in Bal Harbour, Florida, and to The W South Beach Hotel in Miami, Florida. These misrepresentations resulted in the defendants and others fraudulently obtaining, via sham lines of credit with Tiffany and The W, approximately $19,991 in watches, sunglasses, sterling silver and leather business card holders, and men’s cologne from Tiffany, and approximately $25,466 in overnight hotel stays at The W.

The investigation has revealed that the financial institution was not aware that Dixon and Henderson and others were using its corporate identity. As a result of their scheme, Dixon and Henderson and others fraudulently obtained more than $220,000 in luxury goods and services.

The charge of conspiracy to commit wire fraud with which the defendants are charged is punishable by a maximum potential penalty of 20 years in prison, and a maximum fine of $250,000 or twice the gain or loss resulting from the defendants’ crimes.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford, with the investigation leading to today’s arrests.

The government is represented by Assistant U.S. Attorney Aaron Mendelsohn of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit http://www.stopfraud.gov.”

Federal Wire Fraud

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Florida Attorney Charged with Allegedly Laundering Purported Stock Fraud Proceeds

July 11, 2013

The Federal Bureau of Investigation (FBI) on July 10, 2013 released the following:

Michael Scaglione, Esq. Laundered More Than $750,000, was Placed Under Arrest After Accepting an Additional $500,000 in Cash to Launder

BROOKLYN, NY— Michael J. Scaglione, Esq., 41, an attorney in Coral Gables, Florida, was arrested this morning on charges that he laundered more than $750,000, which he believed were proceeds from a penny stock fraud scheme. The money was, in fact, provided to Scaglione by an undercover law enforcement agent who posed as a criminal stock promoter as part of a sting operation. Scaglione, who is a partner at Scaglione Law Firm P.A. in Coral Gables, Florida, was arrested after he took possession of an additional $500,000 in cash that he agreed to launder.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Toni Weirauch, Special Agent in Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).

According to the complaint unsealed this morning in the Eastern District of New York, Scaglione exploited his position as an attorney to launder money through an escrow account for an undercover law enforcement agent (“undercover agent”) who posed as a corrupt stock promoter. In his dealings with Scaglione, the undercover agent represented himself to be a middleman working with corrupt stock brokers who artificially inflated prices for worthless stock in exchange for high commissions. Scaglione agreed to launder what he believed were proceeds of this stock fraud through his attorney escrow account in order to hide that money from the United States Securities and Exchange Commission and the IRS. Scaglione then funneled over $750,000, including $88,000 in cash given to him in a Federal Express box in the lobby of a Miami Beach hotel, through the escrow account into the undercover agent’s bank account in Long Island, New York. Scaglione carefully structured the movement of these funds to avoid triggering financial reporting requirements. In exchange, Scaglione collected over $25,000 in fees. In recorded conversations, Scaglione assured the undercover agent that their conversations were “completely privileged” and that his money was “safe” with Scaglione. When the undercover agent explained to Scaglione that he did not “want to go to jail,” Scaglione stated to the undercover agent that the escrow account was “tight as can be.” Directly prior to his arrest this morning, at a hotel in Miami Beach, Florida, Scaglione accepted an additional $500,000 in cash from the undercover agent, which Scaglione believed to be proceeds from the penny stock fraud.

“As alleged in the complaint, Scaglione hid behind his license to practice law as he threw himself into the purported scheme to launder money. In so doing, he crossed the line from attorney to defendant,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI and the IRS for their swift action and effective work on this important investigation.”

FBI Assistant Director in Charge Venizelos stated, “As alleged, the defendant breached the code of ethics for his profession and flagrantly broke the law, in laundering what he believed to be the proceeds of criminal activity. Contrary to the counsel he gave, the attorney-client privilege is not a veil of secrecy to hide criminal conduct.”

IRS Special Agent in Charge Weirauch stated, “Criminal attempts to conceal reportable financial transactions from government agencies, including the Internal Revenue Service and the Securities and Exchange Commission, may appear to be victimless crimes to some. However, they erode our nation’s financial systems and ultimately harm the American public. In particular, the laundering of proceeds from illegitimate activities that are nevertheless taxable threatens our voluntary tax compliance system; failure to investigate and prosecute these types of crimes would erode public confidence.”

The defendant is scheduled to appear tomorrow before United States Magistrate Judge Alicia M. Otazo-Reyes at the United States Courthouse in Miami, Florida, for removal proceedings to the Eastern District of New York.

The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by Assistant United States Attorney Jacquelyn M. Kasulis.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Defendant:

Michael J. Scaglione
Age: 41
Miami Springs, Florida”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


“Oregon Man Indicted for Alleged Role in $50 Million Securities Fraud Scheme”

May 16, 2013

The U.S. Department of Justice Office of Public Affairs on May 16, 2013 released the following:

“An Oregon man has been charged with allegedly orchestrating a $50 million securities fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy of the Southern District of California.

Bradley Holcom, 55, of Canby, Ore., was arrested Tuesday following his indictment in U.S. District Court for the Southern District of California. The indictment, which was filed on May 9, 2013, and unsealed late yesterday, charges Holcom with eight counts of mail fraud, four counts of wire fraud and one count of securities fraud.

According to the indictment, Holcom made false statements to investors in connection with the sale of approximately $50 million worth of promissory notes that he sold to more than 150 investors located throughout the United States from at least 2004 through 2010. The indictment alleges that Holcom solicited investors to provide funds for the development of raw land for commercial and residential purposes through an investment program he operated called the Trust Deed Investment Program. Holcom allegedly falsely told investors who purchased notes through the Trust Deed Investment Program that they would receive a lien on a specific piece of property he was developing and that the lien would be in first position, which would allow investors to directly foreclose on the underlying development property if Holcom was unable to repay the principal due under the notes.

Despite his statements to investors, Holcom allegedly never provided investors with a lien on the property he was purportedly developing and instead conveyed to investors a lesser interest that did not allow investors to directly foreclose on the property to protect their investment. In addition, the indictment alleges that while Holcom promised investors that their purported lien would be in first position, Holcom solicited investments for properties that he knew were already encumbered by first position liens.

According to the indictment, Holcom also allegedly sold properties that were supposedly serving as the security for investors without informing investors that the property they had financed for development was gone.

The indictment alleges that by approximately 2008, Holcom’s financial condition had seriously deteriorated, but he continued to solicit investors for new funds by making misrepresentations about his true financial condition and the manner in which he was using investor money.

The maximum penalty for each wire fraud and mail fraud count is 20 years in prison. The count of securities fraud carries a maximum penalty of 25 years in prison.

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

This case was brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit http://www.StopFraud.gov .

This case was investigated by the FBI’s Phoenix Division – Yuma Resident Agency. The case is being prosecuted by Trial Attorney Henry P. Van Dyck and Deputy Chief Daniel Braun of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorney Stephen Clark of the U.S. Attorney’s Office for the Southern District of California. The department recognizes the substantial assistance of the U.S. Securities and Exchange Commission.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Klary Arcentales Indicted by a Federal Grand Jury For Conspiracy to Commit Bank Fraud and Bank Fraud in an Alleged $2 Million Mortgage Fraud Scheme

May 16, 2013

The Federal Bureau of Investigation (FBI) on May 15, 2013 released the following:

“Bergen County Woman Indicted in $2 Million Mortgage Fraud Scheme

NEWARK, NJ— A Bergen County, New Jersey woman was indicted today for her role in a long-running, large-scale mortgage fraud scheme that caused millions of dollars in losses, U.S. Attorney Paul J. Fishman announced.

Klary Arcentales, 44, of Lyndhurst, New Jersey, was charged in a five-count indictment with one count of conspiracy to commit bank fraud and four counts of bank fraud, all of which caused losses of at least $2 million.

According to the indictment and other documents filed in this case:

As early as 2006, Arcentales engaged in a mortgage fraud conspiracy through a company called Premier Mortgage Services (PMS). Arcentales, a loan officer at PMS, provided fraudulent documents to financial institutions in connection with mortgage loan applications on behalf of “straw buyers” to induce those financial institutions to fund mortgage loans. Relying upon those false documents, financial institutions funded mortgage loans. Arcentales then profited illegally by receiving a commission from PMS for each mortgage loan that she closed and also profited illegally by diverting portions of the fraudulently obtained mortgage proceeds for herself.

Conspirator Lester Soto, 56, previously charged by complaint, was a part-owner of PMS. He also acted as a loan officer on certain PMS mortgage loan applications. Soto took a percentage of PMS’s profits. Soto employed document makers to create fraudulent documents in furtherance of the scheme and put loan officers at PMS, including Arcentales, in contact with these document makers to create other false and fraudulent documents.

Conspirator Linda Cohen, 55, previously charged by Complaint, was a paralegal who closed transactions on behalf of a licensed New Jersey attorney. Cohen served as the settlement agent on mortgage loans brokered by Arcentales for various properties. Cohen convened closings, received funds from lenders, and prepared HUD-1 forms—which itemize services and fees charged to borrowers for mortgage loans—that purported to reflect the sources and destinations of funds for mortgages on subject properties. In fact, the HUD-1s were neither true nor accurate. At or following the closings, Cohen disbursed mortgage loan proceeds directly to PMS, herself, and others, including in amounts not reflected on the HUD-1s. Cohen received a fee for each fraudulent loan in which she participated.

Conspirator Antonio Pimenta, 45, previously charged by complaint, owned and managed Kelmar Construction Co., which built properties that were then sold to straw buyers utilizing fraudulent mortgage loans brokered by Arcentales.

The indictment charges Arcentales with one count of bank fraud conspiracy and four counts of bank fraud, each punishable by a maximum potential penalty of 30 years in prison and a fine of $1,000,000.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to today’s charges. Fishman also thanked the Social Security Administration-Office of Inspector General, under the direction of Special Agent in Charge Edward Ryan, for its participation in the investigation.

The government is represented by Assistant U.S. Attorneys Rahul Agarwal of the U.S. Attorney’s Office General Crimes Unit and Zach Intrater of the Economic Crimes Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit http://www.stopfraud.gov.

The charges and allegations contained in the indictment and complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.”

Federal Bank Fraud Crimes – 18 U.S.C. 1344

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Grand Jury Indicts 11 Allegedly Linked to an Inland Empire Loan Modification Scam That Targeted Financially Distressed Homeowners

September 13, 2012

The Federal Bureau of Investigation (FBI) on September 12, 2012 released the following:

“LOS ANGELES— Federal agents this morning arrested 10 defendants who worked at a Rancho Cucamonga-based business that allegedly offered bogus loan modification programs to financially distressed homeowners. As a result of the scheme allegedly run out of 21st Century Real Estate Investment Corp. and several related companies, more than 4,000 financially distressed homeowners lost at least $7 million in fees they paid to the company, and many homeowners lost their homes to foreclosure.

Those taken into custody this morning were among 11 defendants named in a federal indictment unsealed today following an investigation by the Federal Bureau of Investigation, IRS-Criminal Investigation, the United States Postal Inspection Service, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Federal Housing Finance Agency, Office of Inspector General.

According to the indictment, during an 18-month period that began in June 2008, a Rancho Cucamonga woman, Andrea Ramirez, operated 21st Century and several other companies. According to the indictment, 21st Century “defrauded financially distressed homeowners by making false promises and guarantees regarding 21st Century’s ability to negotiate loan modifications from the homeowners’ mortgage lenders, falsely representing that 21st Century was operating a loan modification program sponsored by the United States government, instructing homeowners to cease communication with their mortgage lenders and to cease making their mortgage payments.”

“The housing crisis provided fraud artists a new avenue to exploit people in financial distress,” said United States Attorney André Birotte Jr. “Many of the victims in this alleged scheme were in desperate financial straits, and shameless financial predators promised relief they could not deliver. As a result, many homeowners went into foreclosure and now have to deal with the ramifications of losing their homes.”

Ramirez and the other 21st Century employees contacted distressed homeowners through cold calls, newspaper ads and mailings, and various 21st Century-controlled websites that advertised loan modification services. Once they contacted the distressed homeowners, according to the indictment, Ramirez and other 21st Century employees often falsely told clients that the company was operating through a federal government program, that they would be able to obtain new mortgages with specific interest rates and reduced payments, and that attorneys would negotiate loan modifications with their lenders. Ramirez and other 21st Century employees regularly instructed financially distressed homeowners to cease making mortgage payments to their lenders and to cut off all contact with their lenders because they were being represented by 21st Century. On some occasions, Ramirez and other 21st Century employees would tell homeowners that 21st Century was using the fees paid by the homeowner to make mortgage payments, when in fact Ramirez and 21st Century simply were keeping the homeowner’s money.

Christy Romero, Special Inspector General at SIGTARP, stated: “Ramirez and her co-conspirators are charged with fraudulently operating 21st Century to exploit the hardships of homeowners fighting to keep a roof over their head. As alleged, these con artists swindled distressed homeowners by lying about their affiliation with federal housing programs and giving money-back guarantees that the homeowners would get a lower mortgage payment if they paid an advance fee. SIGTARP and our law enforcement partners are committed to shutting down schemes that prey on those who can least afford it by falsely claiming an affiliation with TARP’s housing programs.”

Leslie P. DeMarco, Special Agent in Charge of the IRS-Criminal Investigation’s Los Angeles Field Office, said: “Using the guise of a federally sponsored loan modification program and the assurance of a qualified legal team, the defendants preyed on financially distressed homeowners allegedly depriving them of much needed money and property. Those who find ways to fraudulently benefit from government programs meant to help struggling homeowners keep their homes will be brought to justice.”

The 11 defendants named in the indictment are:

  • Andrea Ramirez, who also used the names Andrea Parker and Lisa Evans, 44, of Rancho Cucamonga;
  • Christopher Paul George, 42, Rancho Cucamonga, who surrendered this morning to authorities;
  • Michael Bruce Bates, who also used the names Michael Bruce Myers and Robert Allen Castro, 61, of Moreno Valley;
  • Crystal Taiwana Buck, 37, of Long Beach;
  • Michael Lewis Parker, 34, of Pomona, who is currently a fugitive being sought by federal authorities;
  • Catalina Deleon, 35, of Glendora;
  • Hamid Reza Shalviri, 50, Montebello, who self-surrendered this morning after being contacted by federal agents;
  • Yadira Garcia Padilla, 35, of Rancho Cucamonga;
  • Mindy Sue Holt, 53, of San Bernardino;
  • Iris Melissa Pelayo, 42, of Upland; and
  • Albert DiRoberto, 59, of Fullerton.

The defendants arrested this morning are expected to be arraigned this afternoon during their initial court appearances in United States District Court in Riverside.

“Fraudulent loan modification scams affect consumers at the most basic level, jeopardizing their ability to retain ownership of their homes,” said B. Bernard Ferguson, Inspector in Charge of the U.S. Postal Inspection Service-Los Angeles Division. “The U.S. Postal Inspection Service will investigate these crimes to protect consumers and when the nation’s mail system is used for illegal or dangerous use.”

Steve Linick, the Federal Housing Finance Agency Inspector General, stated: “The government created programs intended to assist homeowners by allowing them to remain in their homes during these troubling financial times. Anyone attempting to engage in schemes designed to exploit struggling homeowners and the government programs created to help those same homeowners will ultimately be brought to justice.”

All 11 defendants are charged with nine felony counts—five counts of mail fraud, three counts of wire fraud, and one count of conspiracy. Each count in the indictment carries a statutory maximum penalty of 20 years’ imprisonment.

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.

This prosecution is part of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 United States Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit http://www.stopfraud.gov.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Jerry Williams to ask for leniency in Tuesday’s federal court sentencing

June 12, 2012

NaplesNews.com on June 11, 2012 released the following:

“By LAURA LAYDEN

FORT MYERS — Once facing fraud charges that could have put him away for life, Jerry Williams, the ex-CEO of Orion Bank in Naples, won’t spend more than 15 years in prison.

Under his plea agreement, he can’t get any more time than that for his crimes.

But he’s asking for a sentence of no more than five years, arguing through his attorneys that when he crossed the line it was an “isolated mistake.”

His sentencing hearing is at 1 p.m. Tuesday in federal court in Fort Myers.

Williams, 52, pleaded guilty to three counts involving bank fraud at Orion, with each count carrying a sentence of up to five years. He faces fines of at least $250,000 and he’s agreed to pay restitution to his victims. Charges in his original 13-count indictment carried a maximum sentence of 220 years in prison.

“Based on the fact he only pleaded to three of the 13 charges I see no reason for any additional leniency,” said Patrick Miller, Orion’s former senior vice president and one of the hundreds of shareholders in Orion’s holding company who lost millions when the bank failed in November 2009.

Williams admitted to orchestrating a complex scheme that involved illegally raising more capital for Orion and selling off bad loans to a borrower to make the failing bank appear in better financial shape than it was to its regulators.

Williams isn’t the only bank executive to find himself in trouble after doctoring financial documents and lying to state and federal regulators. Some of the more recent cases resulted in sentences ranging from a few months to more than six years in prison:

** In late 2011, a former Georgia banker was sentenced to six years in federal prison for a scheme that netted him kickbacks for fraudulent loans made to a Florida real estate developer. On top of his sentence, banker S. Pope Cleghorn Jr., the former president and CEO of Hometown Bank, had to pay more than $2.5 million in restitution to SunTrust, which acquired the bank after its collapse in 2008.

** Earlier this year, Mary S. Becker, a former vice president of Jersey State Bank in Illinois, was sent to prison for five years and three months for bank fraud and ordered to pay restitution after siphoning $4.45 million from the bank, putting it into her accounts.

** About a year ago, William Sandison, the former CEO of Community National Bank in Minnesota, got a four-month prison sentence and had to pay a $30,000 fine after he pleaded guilty to defrauding nearly two dozen other banks that invested millions of dollars in a failed town center project.

** A little more than two years ago, David Kennelly, a former executive with the Bank of Clark County in Washington, was sentenced to four months in prison after he hid appraisals on 17 properties that had fallen in value. Based on the appraisals, regulators would have required his bank to set aside nearly $17 million in reserves for loan losses.

** In late 2010, Jeffrey Thompson, former president of Hume Bank in Missouri, got a 6-and-1/2-year prison sentence after admitting he concealed problem loans from regulators and altered records. Loan losses caused the bank to fail in March 2008.

Peter Turecek, a senior managing director in the New York office of Kroll, a leading risk consulting company, said though plea deals can often result in lighter sentences for the accused, there are benefits to others. There doesn’t have to be a costly trial, saving taxpayer money, and it keeps the courts from getting clogged.

If Williams went to prison for life he wouldn’t be able to pay restitution, Turecek noted.

Bank fraud often doesn’t involve hardened criminals, he said.

“They are people who probably went into it with a high ideal and a desire to run a business and somewhere along the way something came up and when faced with an ethical decision or hard decision they made the wrong choices,” he said. “Then they tried to continue to cover it up, which led to more lies.”

Fred Gibson, deputy inspector general for the Federal Deposit Insurance Corp. and a bank regulator, said his office has 210 open investigations and about half of those cases involve allegations of criminal activity against bank officials.

Some think there hasn’t been enough prosecution of bankers.

“The general feeling of a lot of people is that with this current crisis there weren’t enough put in jail,” said Ken Thomas, a Miami-based economist and independent banking consultant. “There is a public sentiment out there that ‘How could we have this terrible crisis with so many losses and very few people going to jail?'”

In the case of financial fraud, a judge needs to look closely at the victims and consider how they’ve been hurt, he said.

“You’re not talking about a lost life or someone who has lost a leg, or who is injured for life or paralyzed,” Thomas said. “But financial disaster can also ruin lives. They cause relationships to break up, foreclosures, lost homes, lost businesses.”

Williams’ co-conspirators already are serving time in federal prison and will have to pay restitution to the Federal Deposit Insurance Corp., which lost $844 million when Orion failed. Their sentences ranged from two years to 5-and-1/2-years.

Nicole Waid, the federal prosecutor in the Orion case, wrote in a memorandum to the judge that Williams “clearly had the most to gain financially” from the fraud. He owned 24 percent of Orion Bancorp’s stock and was the largest single shareholder.

In 2009, Williams reported a net worth of about $78 million, but if his bank had failed at that time and his stock had become worthless his net worth would have dropped to $65,000, according to the court filing.

Waid’s recommending the court not go easy on Williams.

In a motion for a lighter sentence, Williams’ attorneys paint him as a community leader, a family man, a philanthropist, a caring employer. Attached to the motion are letters from his wife, Heather, and other supporters.

“He offers neither excuses nor qualifications,” his attorneys wrote. “And yet the facts of this case compel one to recognize it for what it is: a critical aberration from an otherwise exemplary life and career.””

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Appeal

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Former Council Chairman Kwame R. Brown Pleads Guilty to Bank Fraud and Campaign Finance Violation

June 11, 2012

7thSpace.com on June 9, 2012 released the following:

“WASHINGTON— Kwame R Brown, the former Chairman of the Council of the District of Columbia, pled guilty today to a federal charge of bank fraud and a second criminal charge involving a violation of the District of Columbia’s campaign finance laws.

The guilty pleas were announced by United States Attorney Ronald C Machen Jr; Ronald T Hosko, Special Agent in Charge of the FBI Washington Field Office’s Criminal Division; and Rick A Raven, Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI).

Brown, 41, pled guilty to the bank fraud charge in the United States District Court for the District of Columbia. In a separate proceeding, he pled guilty in the Superior Court of the District of Columbia to the campaign finance violation. As part of the plea agreement, he agreed to submit his immediate resignation from the District of Columbia Council. Brown also has agreed to cooperate as the investigation continues.

The Honorable Richard J Leon scheduled sentencing in the federal case for 11 AM on September 20, 2012.

The Honorable Juliet McKenna scheduled sentencing in the campaign finance case for 2:30 PM on the same date.

The bank fraud charge carries up to 30 years in prison. Under federal sentencing guidelines, the parties have agreed that the applicable range for this offense would be up to six months in prison and a possible fine of up to $5,000. The campaign finance charge carries a maximum of six months of incarceration and a possible fine of up to $5,000.

Brown is the second member of the Council of the District of Columbia to plead guilty to criminal charges this year. In January, in a separate and unrelated case, Harry L Thomas, Jr pled guilty to federal theft and tax charges.

Thomas, who resigned as part of his plea agreement, has since been sentenced to a prison term of 38 months. Thomas was the first sitting member of the DC. Council to be charged with and convicted of a felony.

The charges against Kwame Brown involve two separate matters. In one case, Brown admitted providing false documentation to secure two personal loans, totaling more than $220,000.

In the other, Brown admitted aiding and abetting another individual, a relative, to make a cash payment of $1,500 to a campaign worker for the 2008 council campaign. The relative was a signatory on the campaign’s bank accounts; Brown also admitted failing to disclose the relative’s identity to the District of Columbia Office of Campaign Finance.

“For the second time this year, a member of the DC. Council has pled guilty to a felony offense and been forced to resign,” said United States Attorney Machen. “While sitting on the council, Kwame Brown repeatedly falsified and forged documents to deceive the bank into giving him money, even faxing one of the fraudulent documents from his council office.

Brown also gave a family member free license to make illegal and untraceable cash expenditures from his 2008 campaign in violation of DC. law. The people of the District of Columbia deserve better from their elected officials. Today’s pleas take us one step closer to a culture of integrity and accountability that will not tolerate politicians engaging in dishonesty and self dealing.”

“This week, Mr Brown admitted to forging bank documents and withholding information about his re-election campaign finances,” said Special Agent in Charge Hosko.

“This investigation and today’s guilty pleas demonstrate that the FBI and our law enforcement partners will pursue all allegations of illegal conduct that clouds the judgment of our elected officials and deprives our citizens of the honest government to which they are entitled.”

“No matter what your position, it is unacceptable to submit false information to a financial institution in an effort to secure a loan,” said Special Agent in Charge Raven. “IRS-Criminal Investigation will make every effort to aggressively investigate financial fraud of any kind and not give a free pass to anyone who blatantly fails to comply with the law.”

Brown was elected as an at-large member of the District of Columbia Council in 2004 and took office in January 2005. He was re-elected in 2008, and then, in 2010, he was elected chairman. He took office in that position in January 2011.

According to a statement of offense signed by the government as well as the defendant, Brown submitted false information in securing a $166,000 home equity loan, as well as a $55,335 loan that he used to purchase a boat.

Both loans were issued by Industrial Bank, NA.

In paperwork for the home equity loan, which Brown sent by facsimile from his council office on September 26, 2005, Brown provided a Verification of Employment Form. In it, he falsely wrote that he held the position of “Vice President of Strategy” in an unnamed company; that he earned $3,000 per month; that his probability of continued employment was “great”; that he was projected to earn a $10,000 pay increase on January 3, 2006; and that he was a full-time employee. At the bottom of this form, Brown forged the name and signature of a friend from college who was purportedly the president of the company. In fact, Brown did not have his friend’s permission to sign this form, and his friend was never Brown’s employer.

Brown filed and submitted this form to overstate his annual income in an effort to win approval of his loan application, believing that, without artificially inflating his income, his request would be rejected.

Based on Brown’s purported income, Industrial Bank issued a loan to Brown on October 12, 2005, in the amount of $166,000.

Brown submitted the second loan application on July 25, 2007, this time seeking money for the purpose of purchasing a boat. As part of the application, he submitted an Internal Revenue Service form, purporting to be from a company for which he had worked as a consultant. The form that Brown submitted showed his 2006 income from the company to be $85,000. In fact, Brown’s income from the firm that year totaled $35,000.

Before submitting the form, Brown had altered the “3” on the document to an “8,” so that it appeared he earned $85,000, not $35,000.

As with the 2005 loan, Brown believed that this loan would not be approved without artificially inflating his income. Based on Brown’s purported income, Industrial Bank issued a loan to Brown on August 30, 2007, in the amount of $55,335.

In the campaign finance case, Brown admitted aiding and abetting an unlawful cash campaign expenditure, in excess of the $50 limit imposed on individual cash transactions. According to a statement of offense in that matter, signed by the government as well as the defendant, the “Committee to Re-Elect Kwame Brown” was formed for Brown’s 2008 re-election campaign for the at-large seat on the council.

In or around April 2007, Brown allowed a relative to be a signatory on the committee’s bank account, which was held at Industrial Bank. The relative and the committee’s treasurer jointly opened the account.

In his Statement of Candidacy, filed with the Office of Campaign Finance, Brown listed this account as the committee’s sole bank account. He failed, however, to disclose that his relative was a signatory on the account.

In August 2008, with Brown’s knowledge and permission, the relative opened a second bank account at Industrial Bank, called the “side account,” purportedly to pay for “get-out-the-vote” campaign activities. Brown authorized the relative to make withdrawals on behalf of the committee from the side account. However, he failed to amend his Statement of Candidacy to disclose the existence of the second account.

Later, on or about September 11, 2009, Brown’s relative paid an expense in the amount of $1,500 related to the 2008 re-election campaign, using cash withdrawn from the side account.

This case was investigated by the FBI’s Washington Field Office and the Washington Field Office of IRS-Criminal Investigation.

In announcing the guilty pleas, United States Attorney Machen, Special Agent in Charge Hosko, and Special Agent in Charge Raven commended those who investigated the case for the FBI and IRS-CI.

They also acknowledged the efforts of Assistant United States Attorneys David S Johnson, Maia L Miller, Matt Graves, Ellen Chubin Epstein, and Daniel Butler of the Fraud and Public Corruption Section of the United States Attorney’s Office; Assistant United States Attorney Anthony Saler of the Asset Forfeiture and Money Laundering Section of the United States Attorney’s Office; and Trial Attorney Peter Mason of the Public Integrity Section of the Department of Justice’s Criminal Division, who have prosecuted the case.

Finally, they expressed appreciation to Forensic Accountant Crystal Boodoo; Paralegal Specialists Diane Hayes, Lenisse Edloe, Tasha Harris, Shanna Hays, and Sarah Reis; Legal Assistants Krishawn Graham, Nicole Wattelet, and Christopher Samson; former Legal Assistant Jared Forney; Criminal Investigators Matthew Kutz and Duncan Templeton; Litigation Support Services Specialist Thomas Royal; Information Technology Specialist Kimberly Austin; Victim-Witness Coordinator Dawn Tolson-Hightower; former Student Law Clerks Carl Barnes, Iris Postelnicu, and Danielle Rosborough; and Intelligence Specialist Lawrence Grasso, all of the United States Attorney’s Office for the District of Columbia.

Reported by: FBI”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Chicago Man Indicted for Allegedly Causing 15 Investors to Lose Approximately $600,000 in Ponzi-Type Fraud Scheme

June 6, 2012

The Federal Bureau of Investigation (FBI) on June 6, 2012 released the following:

“CHICAGO— A Chicago man who operated an investment trading pool allegedly fraudulently obtained approximately $1.4 million and caused some 15 individual investors to lose about $600,000, federal law enforcement officials announced today. The defendant, Christopher Varlesi, was charged with six counts of mail and wire fraud in an indictment returned yesterday by a federal grand jury. Varlesi allegedly misappropriated a substantial portion of investor funds for his own benefit, including misusing $99,750 in May 2010 to pay for a year’s rent for an apartment in the Trump International Hotel and Tower in Chicago and to make Ponzi-type payments to other investors.

Varlesi, 53, of Chicago, will be arraigned at a later date in U.S. District Court. He was the sole proprietor of Gold Coast Futures & Forex, which purported to buy and sell securities and commodities and operate a pool of investor money for trading purposes but was not actually registered or licensed to do so. The indictment seeks forfeiture of approximately $600,000.

The charges were announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois Securities Department assisted in the investigation, as did the Commodity Futures Trading Commission, which filed a civil enforcement lawsuit against Varlesi in March of this year.

According to the indictment, between July 2008 and January 2012, Varlesi made false representations to clients about using their money to trade gold, commodity futures, and foreign currency, the expected return on their investments, and the security of their money. He fraudulently retained investors’ funds and concealed the scheme by creating and distributing false account statements and making Ponzi-type payments to investors, the charges allege. Varlesi also allegedly told clients that their investments were guaranteed to be profitable, with no risk of losing principal. As part of the scheme, the charges allege that he provided promissory notes to certain investors, falsely promising to return the entire principal amount of their investment, as well as guaranteed interest ranging between five to 7.5 percent per month.

The government is being represented by Assistant U.S. Attorney Sarah E. Streicker.

Each count of wire and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: http://www.stopfraud.gov.

An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.