“Prosecutors Expect More Arrests in Art-Fraud Scheme”

August 19, 2013

The New York Times on August 19, 2013 released the following:

By WILLIAM K. RASHBAUM

“Federal prosecutors handling the case against an obscure art dealer charged in one of the most audacious art frauds in recent memory told a judge on Monday that they expected more arrests in the continuing investigation. They also said they expected the case against the art dealer to be resolved soon.

The disclosures came at the arraignment of the dealer, Glafira Rosales, in United States District Court in Manhattan.

Ms. Rosales was arrested on money laundering and tax charges in connection with the scheme in May. She was arraigned Monday before Judge Katherine P. Failla on new charges contained in a superseding indictment that was handed up last week by a grand jury. She pleaded not guilty during the five-minute proceeding.

During the arraignment, Judge Failla asked one of the prosecutors, Jason P. Hernandez, an assistant United States attorney, if more arrests were expected.

“Yes,” he said.

Mr. Hernandez also said that the case against Ms. Rosales, which was the result of a lengthy F.B.I. investigation, was to be resolved in the coming weeks. He did not elaborate.

A lawyer for Ms. Rosales, Steven R. Kartagener, declined to comment on the new charges.

The charges issued last week revealed for the first time that all of the 63 phony art works at the heart of what prosecutors have described as a sweeping fraud scheme stretching over more than a decade were created by a single painter. The indictment identified him only as a painter who lives in Queens and said he had produced the canvases — purported to be by the hands of Modernist masters like Willem de Koonig, Jackson Pollock, Mark Rothko, Robert Motherwell and others — in his house and garage.

People briefed on the matter said he was Pei-Shen Qian, a struggling 73-year-old Chinese artist who came to the United States in 1981.

While he was paid a few thousand dollars for the canvases, they were later sold as works by Modernist masters for more than $80 million.

The indictment and other court papers said the painter who created the fake canvases was discovered selling his own art on the streets of Lower Manhattan in the early 1990s by Ms. Rosales’s boyfriend and business partner, an art dealer named Jose Carlos Bergantiños Diaz, who recruited him to make paintings in the style of celebrated Abstract Expressionists. The indictment does not name Mr. Bergantiños Diaz, but his identity is confirmed by other court records.

It is unclear whether Ms. Rosales has begun cooperating with the federal authorities since her arrest in May. But while the prosecutors handling her case initially argued then that she posed “a substantial flight risk” and that no bail conditions could assure her return to court, convincing a judge to detain her without bail, last week, after the new indictment was handed up, the prosecutors did not oppose her release on a $2.5 million bond.

Julie Bolcer, a spokeswoman for the office of Preet Bharara, the United States attorney in Manhattan, and an F.B.I. spokesman, James M. Margolin, declined to comment. Mr. Kartagener has refused to characterize his discussions with the prosecutors on the case, Mr. Hernandez and Daniel W. Levy.”

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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

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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.


L. Brian Whitfield, Marsha Whitfield, and D. Edwin Todd, Former Executives at Sommett Group, LLC, Indicted by a Nashville Federal Grand Jury Alleging Conspiracy, Wire Fraud, Theft From an Employee Pension Benefit Plan, and Money Laundering

March 5, 2012

The Federal Bureau of Investigation (FBI) on March 2, 2012 released the following:

“Former Executives at Sommett Group, LLC Charged with Conspiracy, Fraud, and Tax Charges

Indictment Alleges That Defendants Defrauded Clients in Various Ways, Including by Paying Clients $83 Million in Gross Wages but Only Reporting $4 Million to IRS

L. Brian Whitfield, 46, formerly of Franklin, Tennessee; Marsha Whitfield, 39, of Franklin, Tennessee; and D. Edwin Todd, 68, of Franklin, Tennessee, were charged yesterday by a federal grand jury for their roles in a multi-million-dollar fraud perpetrated by the Sommet Group, LLC, a payroll-processing company and former sponsor of the Nashville arena once known as the Sommet Center.

The indictments were announced today during a morning press conference by U.S. Attorney Jerry E. Martin, joined by Aaron T. Ford, special agent in charge (SAC), FBI-Memphis Division, and Christopher A. Henry, SAC, IRS-Criminal Investigation-Nashville Field Office.

Brian and Marsha Whitfield both face one count of conspiracy, three counts of wire fraud, three counts of theft from an employee pension benefit plan, and four counts of money laundering. In addition to those charges, Brian Whitfield alone faces four counts of filing a false tax return. Ed Todd faces a single count of criminal conspiracy. The different offenses carry varying maximum penalties from three years of imprisonment (for filing false return), five years (for conspiracy and for theft from a pension benefit plan), 10 years (for money laundering), and 20 years (for wire fraud).

“This case represents just the latest example of this U.S. Attorney’s Office and the Department of Justice’s ongoing commitment to prosecuting white-collar crime,” said United States Attorney Jerry E. Martin. “Sommet was a prominent Middle Tennessee business that had millions of dollars of client funds under its control. But instead of safeguarding that money and meeting their legal obligations to their clients and the IRS, these defendants diverted it to their own business and personal use. Citizens and businesses in the Middle District of Tennessee can be assured that this office, along with our many valued law enforcement partners, stand committed to rooting out and prosecuting such frauds. Would-be fraudsters can be assured that they will face stiff consequences for their crimes.”

According to the 24-page indictment, Sommet purported to be a payroll-processing company. For a fee, business clients provided Sommet their gross payroll and Sommet would allocate and distribute the funds in the appropriate amounts to state and federal taxing authorities, a health-insurance plan, 401(k) plans, and client employees’ paychecks. The indictment alleges that, instead of distributing those client funds in appropriate amounts at appropriate times, the defendants diverted those funds to the Whitfields’ personal use, including, among other things, the purchase of a houseboat and various home renovations and to prop up several start-up businesses affiliated with Sommet (referred to in the indictment as the “Sommet Business Units”). As a result, client employees’ 401(k) funds were not fully deposited into their 401(k) accounts, their medical and prescription drug claims were not fully paid by health insurance, and their gross wages were not fully reported to the IRS.

The indictment alleges that the defendants made various misrepresentations to clients, the IRS, and others regarding taxes, health insurance, and 401(k) plans.

“Fraud by well-known or high-profile companies get the biggest headlines, but it is important to remember how devastating fraud of this kind can be to the hard-working victims, who simply want justice,” said Aaron T. Ford, special agent in charge of the Memphis Division of the Federal Bureau of Investigation. “Today’s indictments underscore that the FBI, working with our law enforcement partners, will pursue fraudsters in whatever form and that we will use all the investigative techniques in our arsenal to find you, stop you, and bring you to justice.”

“This type of manipulation and deception by educated and skilled professionals who know better will not be tolerated,” stated Christopher A. Henry, special agent in charge, IRS Criminal Investigation-Nashville Field Office. “The defendants’ repeated and protracted deception over a two-year period resulted in a substantial loss of funds and is insulting and harmful to the honest, hard-working citizens. This is not a victimless crime. Employment tax evasion results in the loss of tax revenue to the United States government and the potential loss of future Social Security, Medicare, or retirement benefits as well as health-care coverage for employees.”

“Theft of employee benefit assets jeopardizes the benefits of workers. This case reaffirms the Labor Department’s commitment to protect workers’ benefits by identifying criminal activity wherever and whenever it occurs,” said Isabel Colon, regional director of the Employee Benefits Security Administration’s (EBSA) Atlanta Regional Office.

Regarding taxes, according to the indictment, the defendants misrepresented to clients that Sommet would report their gross wages on Sommet’s own employer quarterly federal tax return (IRS Form 941). Contrary to that representation, between Fourth Quarter 2008 and First Quarter 2010, Sommet paid approximately $83 million in gross wages to employees of Sommet, the Sommet business units, and certain Sommet clients known as Professional Employer Organizations (PEOs). During that same time period, however, Sommet only reported to the IRS approximately $4 million in gross wages for those same entities. The defendants also misrepresented that they would remit to the IRS the clients’ federal taxes in appropriate amounts. Sommet, however, only remitted approximately $1.23 million of the clients’ approximately $20 million tax liability.

In addition, the indictment alleges that Brian Whitfield filed four false federal tax returns for Sommet and the Sommet Business Units, in which returns only reported $2.4 million in gross wages instead of the $6.2 million in gross wages it had paid to employees.

Regarding health insurance, the indictment alleges that Sommet offered a health insurance plan to clients but failed to adequately fund that health insurance plan with clients’ premiums. Because Sommet failed to fund the plan, two third-party administrators (companies that process health insurance claims) terminated their relationship with Sommet. The defendants attempted to conceal this and other problems related to health insurance by providing clients with false excuses and misleading information. By June 2010, Sommet had outstanding unpaid health insurance claims of approximately $3.8 million.

Regarding 401(k) funds, the indictment alleges that Sommet offered clients a 401(k) plan. Instead of directing employees’ designated retirement funds to that plan, the defendants diverted it to Sommet’s business or their personal use. Approximately $44,000 of employer and employee contributions were never forwarded to the 401(k) plan.

The indictment in this case followed a July 2010 search warrant executed by federal agents on Sommet’s offices. The case was investigated by agents with the Internal Revenue Service-Criminal Investigation, the Federal Bureau of Investigation, and the Department of Labor-Employee Benefits Security Administration. The United States is represented by Assistant U.S. Attorney Ty Howard and Tax Division Trial Attorney Kathryn Ward. An indictment is merely an accusation and is not evidence of guilt. All defendants are presumed innocent unless and until proven guilty in a court of law.”

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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 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 Detroit Public Schools Accountant, Teacher Indicted on Fraud and Money Laundering Charges

February 2, 2012

The Federal Bureau of Investigation (FBI) on February 1, 2012 released the following:

“Sandra Campbell, a former Detroit Public Schools contract accountant and school board candidate, and her daughter, Domonique Campbell, a Detroit Public Schools teacher, were indicted by a federal grand jury in Detroit on charges of program fraud conspiracy, money laundering conspiracy, and tax charges, United States Attorney Barbara L. McQuade announced today.

McQuade was joined in the announcement by Special Agent in Charge Andrew Arena, Federal Bureau of Investigation, and Special Agent in Charge, Erick Martinez, Internal Revenue Service, Criminal Investigation.

The nine-count indictment charges that between 2004 and 2008, Sandra Campbell, 56, and Domonique Campbell, 37, obtained in excess of $530,000.00 from the Detroit Public Schools through a fraudulent scheme in which orders were placed with the Campbells’ sham company for books and educational materials never provided to the schools. The indictment further alleges that Sandra Campbell and Domonique Campbell conspired to defraud the Internal Revenue Service and failed to report the money they fraudulently obtained from the Detroit Public Schools as income on their tax returns.

Sandra Campbell is also charged in the indictment with wire fraud. This count alleges that Campbell obtained a $40,000 discount payoff of a $250,000 mortgage on her home through a fraudulent “short sale” of the property to her mother.

United States Attorney Barbara L. McQuade said, “Anyone who considers stealing from our school children should take note that we are scrutinizing records and conduct, and will prosecute wrongdoers. “

FBI Special Agent in Charge Andrew Arena stated, “The FBI would like to thank all of our partners who continue to assist us in battling corruption. In particular, I would like to note the continued support of DPS Inspector General Van Marsh and his team, The alleged actions of these subjects do nothing more than steal the opportunity for quality education from our children. Such actions can not be tolerated and will be pursued by the FBI and it’s partners.”

IRS Special Agent in Charge Erick Martinez stated, “”Those who profit at the expense of our children and steal from our community will be held accountable for their greedy actions.”

The case was investigated by special agents of the FBI, IRS, and Department of Education, Office of Inspector General, with the assistance of Detroit Public Schools, Office of Inspector General. The case is being investigated and prosecuted by Assistant United States Attorneys J. Michael Buckley and Pamela Thompson of the Public Corruption Unit.”

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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.