Prosecutors rest fraud case against alleged Indy financier

June 19, 2012

The Herald Bulletin on June 19, 2012 released the following:

“Associated Press

INDIANAPOLIS — Federal prosecutors wrapped up their case Monday against a prominent Indianapolis businessman who they say bilked investors out of $200 million, much of it life savings.

For the past week, prosecutors have presented evidence against Tim Durham, business partner James F. Cochran and accountant Rick D. Snow. The men are accused of raiding the Akron, Ohio-based Fair Finance Co. and allegedly used a Ponzi scheme to steal the savings from about 5,000 mostly elderly investors. They are charged with 12 felony counts of wire fraud, securities fraud and conspiracy to commit wire and securities fraud.

One of them, Donald Russell of Doylestown, Ohio, testified that he lost $350,000, and his 82-year-old mother lost $125,000 and died a month later. He said he believes the stress of losing her life savings pushed her over the edge.

“They have no hearts or souls,” Russell said of Durham and his partners.

Defense attorney John Tompkins said Durham is innocent, but told The Indianapolis Star that he feels sorry for Russell.

“I don’t think that there are any words that could begin to address the situation that he faces,” Tompkins said. “He had a horrible circumstance, and words cannot console him.”

Prosecutors presented analyses of forensic accountants that showed money from Fair Finance being used to help pay for an expensive Playboy party, Durham’s classic cars and trips to luxury resorts and casinos.

Donald Fair, who sold his company to Durham and Cochran in 2002, testified that the men loaned investors’ money to themselves and their businesses and never repaid it.

Prosecutors played recorded phone calls in which Durham and Cochran allegedly made up excuses to give investors about why their interest checks had stopped and they couldn’t cash in. The men tried to persuade Ohio regulators to allow them to sell another $250 million in investment certificates, prosecutors said, and took cash deposits from investors to whom they promised to issue more investment certificates later.

Cochran doubted regulators would shut down the company, according to recordings played in court.

“If they’re gonna blow us up, we’re gonna blow them up,” Cochran allegedly said in a phone call with Durham on Nov. 13, 2009. “I mean nobody wins and everybody loses, but we lose the worst. … I mean it would be a catastrophic event in the state of Ohio. And I’m sure they don’t want that kind of headline.”

Prosecutors presented emails and recordings in which the men discussed layoffs, selling off assets and other ways to cut costs or conceal the loans, yet Cochran also asked to raise his salary to $1 million a year.

In the weeks before an FBI raid shut down Fair Finance in November 2009, prosecutors said Monday, Durham and his partners transferred $85 million from the parent company, DC Investments, to Fair’s books to show more assets on the company’s balance sheet, the Indianapolis Business Journal reported.

Defense attorneys are expected to present their case Tuesday morning, and closing arguments are scheduled for Tuesday afternoon. Jury deliberations are expected to begin Wednesday.

Attorneys for Cochran and Snow have declined to talk about the trial, and Tompkins refused to discuss his defense strategy. He said he didn’t know if Durham would testify in his own defense.

“That will be his decision, but I will advise him,” Tompkins said. “We haven’t had our discussion.””

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

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

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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.


Virginia Attorney Charged in Alleged South African Ponzi Scheme

June 7, 2012

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

“NORFOLK, VA— Brian Ray Dinning, 47, of Toronto, Canada, has been indicted by a federal grand jury on wire fraud charges.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after the indictment was returned by the grand jury. Dinning has been charged with 25 counts of wire fraud, which each carry a maximum penalty of 20 years in prison, if convicted.

According to the indictment, Dinning was a graduate of Regent University Law School and also obtained an LL.M in tax from the Georgetown University Law Center. From early 2005 until the present, Dinning allegedly recruited approximately 23 individuals to invest in his numerous “for-profit” corporations that he had established. He did this by falsely advising investors that they would accrue significant financial gains from South African projects, such as a luxury Oceanside housing development, a luxury Oceanside hotel and private residence club, as well as diamond and gold mining operations. The indictment alleges that Dinning also used “not-for-profit” corporations to obtain donations purportedly for charitable, environmental, agricultural medical and community projects for the tribal people of South Africa, as well as developing wildlife habitats for native African species.

Regardless of whether his investors made investments for profit or donations for charitable causes to Dinning’s various corporations, upon receipt of these funds from his investors, Dinning is alleged to have immediately used their money for personal and family gain, for payment of his and his family’s expenses, for payment of alimony and child support to his ex-wife, for payment of private school tuition for his children, and to make the down payment and subsequent mortgage payments on his new $975,000 home in Suffolk. As a result, Dinning allegedly obtained more than $2.9 million from his investors, of which he retained more than $2 million for his and his family’s benefit.

This case was investigated by the Norfolk Division of the FBI. Assistant United States Attorney Steve Haynie is prosecuting the case on behalf of the United States.

Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless 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.


Stanford Should Get 230-Year Term in Ponzi Scheme, U.S. Says

June 7, 2012

San Francisco Chronicle on June 6, 2012 released the following:

“Laurel Brubaker Calkins,

June 6 (Bloomberg) — Convicted Ponzi scheme operator R. Allen Stanford should be sentenced to the maximum allowable term of 230 years in prison, federal prosecutors argued in court papers.

Stanford, who the government said is seeking a sentence of “time served,” is to be sentenced next week in U.S. District Court in Houston.

“Robert Allen Stanford is a ruthless predator responsible for one of the most egregious frauds in history,” the Justice Department said in a 34-page filing. “Displaying an audacity that only further illustrates his depravity, Stanford seeks a sentence of time served, brazenly arguing that there are no losses” and rehashing arguments rejected by the jury that convicted him in March.

Stanford, 62, was found guilty of defrauding more than 20,000 investors through the sale of what the government called bogus certificates of deposit at his Antigua-based Stanford International Bank Ltd. A court-appointed receiver marshalling the ex-billionaire’s assets has located less than $500 million in cash and assets that can be used to repay investors.

Stanford’s own sentencing recommendation was filed under seal. Prosecutors said he asked U.S. District Judge David Hittner for leniency, in part because he is a first-time offender.

Stripped of Assets

Stanford also denied that investors suffered any losses while he was running Stanford Financial Group and “complains that he was stripped of all his assets,” by the government, prosecutors said.

The recommended 230 years is at the top of the range of sentences for Stanford’s crime under federal guidelines, the prosecutors said in the filing.

“Nothing speaks more eloquently of Stanford’s character than his sentencing arguments in this case,” the Justice Department lawyers wrote. “After everything that he has done to so many innocent victims, Stanford does not show a hint of remorse for his misconduct, only the same arrogant, narcissistic behavior that led to it.”

Stanford has been incarcerated as a flight risk since his indictment in June 2009. He was charged about three months after U.S. securities regulators seized his companies on suspicion they were a “massive” Ponzi scheme, in which late-arriving investors’ funds were used to pay earlier investors.

Stanford’s Sentence Request

Stanford’s lawyers have requested a prison sentence of 31 to 44 months, prosecutors said.

Robert A. Scardino, one of Stanford’s criminal-defense lawyers, said by phone that his side is “hoping for the best and preparing for the worst” at the June 14 sentencing. Scardino declined to comment further, citing a court order not to speak publicly about the case.

A Justice Department spokeswoman, Alisa Finelli, didn’t immediately reply to e-mail or voice messages seeking comment on the filing.

The case is U.S. v. Stanford, 4:09-cr-0342, U.S. District Court, Southern District of Texas (Houston).”

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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.


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

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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.


Four Charged in Alleged $400 Million Long Island Ponzi Scheme

April 25, 2012

The Wall Street Journal on April 25, 2012 released the following:

“By Chad Bray

Four account representatives for a defunct Long Island investment firm have been charged with helping carry out a $400 million Ponzi scheme, federal prosecutors in Brooklyn said Wednesday.

The account representatives — Jason Keryc, Anthony Massaro, Anthony Ciccone and Diane Kaylor — worked for Hauppauge, N.Y.-based Agape World Inc. and Agape Merchant Advance LLC.

Nicholas Cosmo, Agape’s former owner and president, was sentenced to 25 years in prison in October after pleading guilty to mail fraud and wire fraud in 2010.

Prosecutors alleged the account representatives played a key role in the scheme by soliciting and obtaining hundreds of millions of dollars from investors.

“These defendants allegedly convinced thousands of men and women to part with their hard-earned money for what was supposed to be a safe investment,” said Loretta Lynch, the U.S. Attorney in Brooklyn. “In reality, the investors were duped into investing in a classic Ponzi scheme.”

They falsely represented to investors that the investments would only be used to make short-term, secured bridge loans to commercial borrowers or short-term loans to small businesses, and that investing in Agape or its sister company, AMA, carried little or no risk, prosecutors said.

Agape and AMA actually was a Ponzi scheme where new investor money was used to pay returns to existing investors, prosecutors said. Also, about $100 million of investor money was used without their knowledge to trade in high-risk futures and securities, prosecutors said. Investors lost about $179 million in the scheme, prosecutors said.

When some investors became concerned about their investments, the account representatives allegedly offered them a fictitious insurance policy, promising the insurance plan would own a portion of liens that purportedly secured repayment of the bridge loans, prosecutors said. The scheme allegedly raised about $865,000 in additional funds from the bogus insurance pitch, prosecutors said.

The four account representatives allegedly received about $38 million combined in commissions, prosecutors said. They have been charged with conspiracy to commit mail fraud and face up to 20 years in prison.

“[Massaro] will plead not guilty because he is not guilty,” said Joseph Tacopina, a lawyer for Massaro. “He was fully cooperative with the government in its case against Nicholas Cosmo years ago, so suffice it to say that these charges come as quite a shock.”

Lawyers for Ciccone, Keryc and Kaylor didn’t immediately return phone calls seeking comment Wednesday.”

US v Keryc, et al- Federal Criminal Complaint and Supporting Affidavit

18 U.S.C. § 1349

Federal Mail 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.


FBI Arrests NY, Fla. Associates of Convicted Ponzi Schemer Nicholas Cosmo

April 25, 2012

ABC News on April 25, 2012 released the following:

“Associated Press

The FBI says it has arrested four associates of a New York man convicted in a $400 million Ponzi scheme.

FBI spokesman J. Peter Donald says three men and one woman were arrested without incident early Wednesday. Three of them were arrested on Long Island and a fourth was taken into custody in Florida.

The three New York suspects are due in U.S. District Court in Central Islip (EYE’-slihp) later Wednesday.

The four are associates of New York businessman Nicholas Cosmo. He was nicknamed “mini-Madoff” because he was arrested weeks after the notorious billion-dollar swindler was arrested in 2009.

Cosmo pleaded guilty to mail and wire fraud and is serving 25 years.

Bernard Madoff looted billions from victims that included charities, celebrities and institutions. Cosmo targeted mainly blue-collar workers.”

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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 and OFAC SDN Sanctions Removal.

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.


Feds: Irvine real estate broker deserves five years in prison

April 16, 2012

The Orange County Register on April 13, 2012 released the following:

“By BRIAN MARTINEZ

Federal prosecutors are recommending a sentence of no more than five years and three months for David R. Sparks, the Irvine real estate broker who swindled $4.3 million from 34 victims in a Ponzi scheme.

Sparks is a former planning commissioner for Irvine who resigned the post just after the FBI began investigating his business dealings. He took money from family members, close friends and acquaintances, prosecutors said.

U.S. attorneys filed their formal recommendation petition, the result of a plea agreement, on Thursday.

“The government notes that prior to being charged, defendant took full responsibility for his fraud and pleaded guilty,” the document states. “By doing so, defendant saved the government considerable resources which were, in turn, used to pursue other investigations.”

Sparks’ sentencing hearing is May 7 at the federal courthouse in Santa Ana. Judge Cormac J. Carney, who is handling the case, is not bound by the five-year recommendation. Sparks faces a maximum prison term of 20 years.

He pleaded guilty in July to one count of felony interstate wire fraud. The plea deal calls for Sparks to repay the $4.3 million he took from his victims.

That figure does not include any taxes the victims paid on the false profits, the costs incurred in the ordeal or interest payments and late fees promised in the investment agreements. Victims may seek reimbursement for that money via civil lawsuits.

He was first scheduled to be sentenced in December, but that was postponed at the request of his legal team when he encountered some health issues. Prosecutors supported the postponement so as to not burden the prison health care system with expensive medical procedures for Sparks that could have included heart surgery, court records show.

The real estate license for his company, Sparks Realty & Investment Inc., has yet to be revoked, according to a state-run online database.

Details from the criminal case documents, two uncontested civil lawsuits and victim statements to The Orange County Register paint a picture of Sparks as a charming man who claimed to be buying, rehabbing and selling foreclosed or pre-foreclosure homes that he never actually purchased.

He forged bank documents, used non-existent escrow companies, provided bogus status updates and falsely reported significant profits, the lawsuits claimed. If the investors did not want to reinvest their money with him, Sparks made up excuses for why he could not give it back.

The defendant started speculative real estate investing in the late 1980s, according to the plea agreement. In 2005, he believed that real property in Utah’s Cedar City was likely to see a dramatic increase in value, so he used his own funds and investor cash to buy 35 properties for approximately $7 million in Utah and California, the document says.

By 2007, the rents Sparks was collecting from the properties were no longer sufficient to cover the debt service. Sparks began soliciting cash from investors to cover the debts – deliberately lying to them by telling them the funds would be used to buy new properties.

To back up his lies to investors, Sparks created false paperwork.

Sparks took in about $4.8 million under the false pretenses. He spent about $500,000 on “lulling payments” to the investors and about $4.3 million on his debt, the plea agreement states.

Some assets are to be transferred to the United States government to liquidate. If his current assets and cash can’t cover the restitution, he will presumably have to pay the rest of it back from his earnings once he gets out of prison, if he goes to prison.

Two lawsuits were already filed in January – one by a 22-year friend of Sparks from Santa Ana and one by a married couple from Wisconsin. Sparks never responded to the courts, which handed the plaintiffs default judgments.

The FBI’s investigation did not find any evidence that Sparks is in possession of a large sum of money. But some victims still believe he has money stashed away somewhere.

The FBI began investigating Sparks in January of 2011. Sparks resigned from the Irvine Planning Commission in February of the same year.”

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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 Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Crimes Watch 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 and OFAC SDN Sanctions Removal.

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.


Houston Federal Jury Convicts R. Allen Stanford on 13 out of 14 Counts

March 6, 2012

The Wall Street Journal on March 6, 2012 released the following:

“Allen Stanford Convicted on 13 of 14 Counts

By Daniel Gilbert

A federal jury on Tuesday convicted international financier R. Allen Stanford on 13 out of 14 charges of money laundering and fraud in what prosecutors called a Ponzi scheme that lost billions of dollars for investors.

The jury of eight men and four women found him not guilty on one count of wire fraud.

The verdict, coming on the fourth full day of deliberation after a monthlong trial, marks a stunning comedown for Mr. Stanford, 61 years old, who rose from owning a bodybuilding gym in Texas to become a billionaire knighted in Antigua.

As the verdict was read Mr. Stanford, wearing a dark suit, turned to where his family members were sitting and appeared the mouth the words, “It’s okay.”

The verdict caps a three-year criminal prosecution that has blocked investors from attempting to recover hundreds of millions of dollars from Mr. Stanford, and which has stalled a civil lawsuit against him brought by the U.S. Securities and Exchange Commission. It came a day after jurors said they could not reach a unanimous verdict on all counts, and U.S. District Judge David Hittner ordered them to keep deliberating.

Prosecutors had accused Mr. Stanford, 61 years old, of swindling thousands of investors by selling them certificates of deposit issued by a bank he controlled in Antigua. They say he invested these proceeds in risky real-estate assets and his own businesses, funding a lavish lifestyle aboard yachts and jets and even sponsoring cricket tournaments.

Mr. Stanford’s lawyers, who ultimately chose not to let him testify in his own defense, countered that he ran a legitimate business that was ruined when the SEC raided his office in 2009 and froze his assets. They portrayed Mr. Stanford as an absentee chief executive, and argued that any fraud would have been committed by his chief financial officer, James Davis, a key government witness.”

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To find additional federal criminal news, please read Federal Crimes Watch 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 and OFAC SDN Sanctions Removal.

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


A Charlotte Federal Grand Jury Indicted Four in an Alleged $40 Million Ponzi Scheme

February 24, 2012

The Federal Bureau of Investigation (FBI) on February 23, 2012 released the following:

“Four Hedge Fund Managers Indicted in $40 Million Ponzi Scheme

Defendants Join Seven Others and CommunityONE Bank Charged in Connection with the Scheme

CHARLOTTE, NC—A federal grand jury sitting in Charlotte returned an indictment against Jonathan D. Davey, 47, of Newark, Ohio, Jeffrey M. Toft, 49, of Oviedo, Fla., Chad A. Sloat, 33, of Kansas City, Mo., and Michael J. Murphy, 51, of Deep Haven, Minn., on February 22, 2012, on four criminal charges relating to an investment fraud conspiracy, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina.

Joining U.S. Attorney Tompkins in making today’s announcement are Chris Briese, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division (IRS-CI).

According to the criminal indictment, the defendants operated “hedge funds” as part of a conspiracy that took in $40 million from victims for a Ponzi scheme operating under the name Black Diamond Capital Solutions (Black Diamond). The indictment alleges that the conspiracy lasted from about October 2007 through about April 2010. The indictment alleges that the defendants lied to get money from their victims by claiming, among other things, that they had done due diligence on Black Diamond and were operating legitimate hedge funds with significant safeguards, when in reality, neither claim was true. The indictment also alleges that, as Black Diamond began collapsing, the defendants and others created a new Ponzi scheme and with a separate Ponzi account that Davey administered. Thereafter, new victim money was deposited into the Ponzi account and used to make Ponzi payments to other victims and to fund the defendants’ lifestyles.

The indictment also charges Davey with tax evasion for claiming to the IRS on his 2008 tax return that $810,000 that Davey stole from victims was a “loan.” In reality, the indictment charges, Davey stole that $810,000, plus approximately $500,000 in 2009, from victims to build Davey’s personal mansion. Davey attempted to evade the taxes due and owing in 2008 by calling the money a “loan” from his investors to “Sovereign Grace, Inc.,” a Belizian corporation that Davey created as a diversion for his victims and the IRS.

The first charge against all four defendants, alleging conspiracy to commit securities fraud, carries a maximum sentence of five years’ imprisonment and a fine of up to $250,000. The second charge against all four defendants, alleging conspiracy to commit wire fraud, carries a maximum sentence of 20 years’ imprisonment and a fine of up to $250,000. The third charge against all four defendants, alleging a money laundering conspiracy, carries a maximum sentence of 20 years’ imprisonment and a fine of $250,000 or twice the amount of criminally derived proceeds. The final charge against Davey only, alleging tax evasion, carries a maximum sentence of five years’ imprisonment and a fine of up to $250,000.

The defendants will be making their initial appearances in U.S. District Court in the coming weeks.

This indictment follows a series of convictions and other charges in this matter. On December 16, 2010, Keith Simmons was convicted following a jury trial of securities fraud, wire fraud, and money laundering. Simmons is in custody awaiting sentencing.

On April 27, 2011, a criminal bill of information and a Deferred Prosecution Agreement were filed against CommunityONE Bank, N.A., for its failure to maintain an effective anti-money laundering program. As alleged in that bill of information, Simmons was a customer of CommunityONE, and used various accounts with the Bank in furtherance of the Ponzi scheme. However, as alleged in that bill of information, the Bank did not file any suspicious activity reports on Simmons, despite the hundreds of suspicious transactions that took place in his accounts.

Other defendants convicted in this case are set forth below. It should be noted that those defendants already sentenced had their sentences reduced by the Court to reflect their cooperation with the United States in its investigation and prosecution of others.

  • Bryan Keith Coats, 51, of Clayton, N.C., pled guilty on October 24, 2011, to conspiracy to commit securities fraud and money laundering conspiracy. Coats is awaiting sentencing.
  • Deanna Ray Salazar, 54, of Yucca Valley, Calif., pled guilty on December 7, 2010, to conspiracy to commit securities fraud and tax evasion. Salazar is awaiting sentencing.
  • Jeffrey M. Muyres, 36, of Matthews, N.C., pled guilty on May 17, 2011, to conspiracy to commit securities fraud and money laundering conspiracy. Muyres was sentenced to 23 months’ imprisonment by Chief Judge Robert Conrad, Jr., on January 18, 2012.
  • Roy E. Scarboro, 47, of Archdale, N.C., pled guilty on December 3, 2010, to securities fraud, money laundering, and making false statements to the FBI. Scarboro was sentenced to 26 months’ imprisonment by Chief Judge Robert Conrad, Jr., on May 4, 2011.
  • James D. Jordan, 49, of El Paso, Texas, pled guilty on September 14, 2010, to conspiracy to commit securities fraud. Jordan was sentenced to 18 months’ imprisonment by Chief Judge Robert Conrad, Jr., on June 29, 2011.
  • Stephen D. Lacy, 52, of Pawleys Island, S.C., pled guilty on December 9, 2010, to conspiracy to commit securities fraud. Lacy was sentenced to six months’ imprisonment by Chief Judge Robert Conrad, Jr., on May 4, 2011.

The details contained in this indictment are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. The conviction or guilty plea of any other person is not evidence of the guilt of any of the defendants.

This matter is being prosecuted by Assistant United States Attorneys Kurt W. Meyers and Mark T. Odulio of the Western District of North Carolina, and the case against Jeffrey Muyres was prosecuted by Assistant United States Attorney Mark T. Odulio. The investigation is being handled by the FBI and the IRS.”

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

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

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To find additional federal criminal news, please read Federal Crimes Watch 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 and OFAC SDN Sanctions Removal.

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


Former North Carolina Resident Pleads Guilty to Money Laundering Conspiracy

February 12, 2012

The Federal Bureau of Investigation (FBI) on February 10, 2012 released the following:

“Defendant Engaged in Money Laundering Scheme in Connection with Queen Shoals Ponzi Scheme

CHARLOTTE, NC— A former North Carolina resident pleaded guilty to conducting a money laundering conspiracy in connection with the $32.5 million Queen Shoals Ponzi scheme announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Gary D. Martin, 60, of St. Augustine, Fla. entered his guilty plea on Wednesday, February 8, 2012, before U.S. Magistrate Judge David C. Keesler.

Joining U.S. Attorney Tompkins in making today’s announcement are Chris Briese, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and the North Carolina Secretary of State Elaine F. Marshall.

A criminal bill of information filed on January 25, 2012, charged Martin with engaging in a money laundering conspiracy in connection with the Queen Shoals Ponzi scheme. According to court documents and court proceedings, on or about December 2007, Martin formed Queen Shoals Consultants, LLC (QSC) in North Carolina. Thereafter, Martin and others induced victims to invest over $28.5 million in the Queen Shoals Ponzi scheme operated by Sidney Hanson. Although Hanson never directly told Martin that Queen Shoals was a Ponzi scheme, Martin induced victims to invest in the Queen Shoals Ponzi scheme through a series of false and fraudulent representations, omissions of material facts and deceptive half truths. Specifically, Martin admitted to falsely claiming that QSC had over 20 years experience in financial services and international finance and that he had a vast background in financial services, including the silver, gold, and foreign currency trading markets. In truth and fact, Martin had no such experience, held no professional licenses related to finance or investments, and never had engaged in any silver, gold, or foreign currency trading.

According to court documents, Martin, through the QSC website and other means, also made false claims about, among other things, QSC’s financial expertise in “Self-Directed IRA Strategies and Fixed Rate Accounts.” Martin held QSC out as “leaders in Professional Private Placement Retirement Planning” and claimed that QSC had a “proven method of diversification [that] spreads the risk nicely for a balanced portfolio.” In truth and fact, QSC offered no such diversification, funneled victim funds solely into the Queen Shoals Ponzi scheme, and had received no recognition as “leaders in Professional Private Placement Retirement Planning.” Martin admitted that he routinely vouched for the success and reliability of Queen Shoals by claiming to have personally invested a significant amount of his own money into Queen Shoals. On at least one occasion, Martin claimed that he invested his retirement life savings in Queen Shoals. In truth and fact, while Martin and others induced victims to invest over $28.5 million in Queen Shoals through QSC, Martin personally invested only $4,000.

According to the plea agreement and other filed documents, Martin engaged in money laundering transactions by utilizing the referral fees he received from Hanson to pay commissions to himself and the so-called QSC consultants. From in or about 2007 to in or about 2009, Martin received over $1.9 million in referral fees from Hanson and paid the consultants over $1.5 million during the relevant time period in return for inducing victims to invest in the Queen Shoals Ponzi scheme. These payments caused QSC consultants to induce additional victims to invest in the Queen Shoals Ponzi scheme, thereby perpetuating the scheme.

The bill of information filed against Martin includes a notice of forfeiture, which gives notice that the defendant must forfeit to the United States all of the property involved in the offenses charged in the information, and all property which is proceeds of such offenses.

Martin, who was charged with and pled guilty to one count of money laundering conspiracy, has been released on bond. At sentencing, he faces a maximum of 10 years’ imprisonment and a $250,000 fine or a fine of not more than twice the amount of criminally derived property involved in the money laundering conspiracy. A sentencing date has not been set yet.

Martin’s guilty plea is the second conviction arising from the Queen Shoals Ponzi scheme investigation. Sidney Hanson pled guilty to securities fraud and wire fraud and was sentenced on March 31, 2011 to 22 years in prison by Chief U.S. District Judge Robert J. Conrad, Jr.

The case was investigated by the FBI with assistance from the Securities Division of the North Carolina Department of the Secretary of State. U.S. Attorney Tompkins also acknowledges the invaluable assistance provided by the Commodities Futures Trading Commission and the Florida Office of Financial Regulation, Bureau of Financial Investigations in this case. The prosecution is handled by Assistant United States Attorney Mark T. Odulio, of the U.S. Attorney’s Office in Charlotte.”

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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 Crimes Watch 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 and OFAC SDN Sanctions Removal.

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