Former Corporate Officers of China North East Petroleum Holdings Limited (CNEP) Charged with Alleged Fraud and False Statements

May 29, 2013

The Federal Bureau of Investigation (FBI) on May 28, 2013 released the following press release:

“WASHINGTON—The former president and CEO and the former vice president of corporate finance of China North East Petroleum Holdings Limited (CNEP), an oil and gas company whose stock is traded in the United States, have been charged with defrauding investors in connection with public offerings of stock.

Acting Assistant Attorney General Mythili Raman of the Criminal Division; U.S. Attorney for the District of Columbia Ronald C. Machen, Jr.; Assistant Director in Charge George Venizelos of the FBI’s New York Field Office; and Chief Richard Weber of the Internal Revenue Service’s Criminal Investigation (IRS-CI) made the announcement.

Wang Hongjun, 41, and Chao Jiang, 32, both Chinese citizens residing in California and New York, respectively, were indicted on May 23, 2013, with one count of conspiracy to commit wire and securities fraud and four counts of securities fraud, which each carry a maximum penalty of 25 years in prison. Jiang is also charged with two counts of false statements to the U.S. Securities and Exchange Commission (SEC) during sworn testimony, which each carry a maximum penalty of five years in prison. The indictment was made public today.

According to the indictment, Hongjun served as the president and CEO of CNEP from 2009 to 2010 and as the chairman of the Board of Directors beginning in 2010. Jiang served as the vice president of corporate finance and corporate secretary of CNEP from 2008 until approximately 2011. The charges allege that in June of 2009, CNEP registered a shelf offering with the SEC proposing to sell up to $40 million of CNEP common stock in the United States on the New York Stock Exchange. In September and December 2009, CNEP made two separate offerings pursuant to the June registration. In documents filed with the SEC related to the offerings, and in other public statements to investors, Hongjun and Jiang informed investors that CNEP intended to use the funds raised from the securities offerings for general corporate purposes and to repay a prior corporate debt.

The indictment alleges that, instead of using the offering proceeds as represented to CNEP’s investors, Hongjun and Jiang misappropriated approximately $1,265,000 of the proceeds by wiring the money to bank accounts in the name of their family members—approximately $965,000 to Jiang’s father and approximately $300,000 to Hongjun’s wife—which was used, in part, to purchase a home in California, jewelry, and a Mercedes-Benz.

In addition, the indictment alleges that Jiang testified falsely under oath to the SEC in Washington, D.C., about these transactions. In that testimony, Jiang stated that none of his family members had received anything of value over $500 from CNEP, despite having wired $965,000 from CNEP’s bank account to the account of his father. Jiang also testified falsely regarding the use of proceeds from the securities offerings.

An indictment is merely an accusation, and defendants are presumed innocent until proven guilty in a court of law.

In a related action, the SEC had previously filed a civil enforcement action against Hongjun, Jiang, and others in the Southern District of New York.

The case was investigated by the FBI’s New York Field Office and IRS-CI. The Department wishes to thank the SEC for its significant assistance in this case. The investigation is continuing.

This case is being prosecuted by Trial Attorneys Daniel Kahn and Kevin Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David Johnson for the District of Columbia.”

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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.


Former President of Atlanta-Based Public Company Indicted in an Alleged Multi-Million-Dollar Securities Fraud Cover-Up

March 21, 2012

The Federal Bureau of Investigation (FBI) March 20, 2012 released the following:

“Served as Second-in-Command of Children’s Clothing Company Carter’s Inc.

ATLANTA— JOSEPH PACIFICO, 62, of Atlanta, was indicted today by a federal grand jury for securities fraud, causing the filing of false financial statements, and falsifying the books and records of a public company. The charges are part of a superseding indictment that charges PACIFICO and another former top executive, JOSEPH M. ELLES, 57, of Las Vegas, Nevada, with 37 federal crimes relating to their alleged roles in accounting irregularities at the major children’s clothing company Carter’s Inc. PACIFICO’s initial appearance in court on the charges has not yet been scheduled.

United States Attorney Sally Quillian Yates said of the case, “The indictment of this case investigated by the President’s Financial Fraud Task Force demonstrates that we will follow the evidence wherever it leads, even to the top of the corporate ladder. Joseph Pacifico, the former number two executive at Carter’s Inc., based in Atlanta, is accused of trying to hide a multi-million-dollar fraud, lying to shareholders, and committing additional crimes in the course of the attempted cover-up. Shareholders expect and deserve far more from their corporate leaders.”

Brian D. Lamkin, Special Agent in Charge, FBI Atlanta Field Office, stated, “Such actions by a senior corporate officer as charged in the superseding indictment impact not only the company in which he served but the many shareholders who make investment decisions based on that company’s financial statements. The FBI will continue to work with its various law enforcement partners and the U.S. Attorney’s Office as it aggressively investigates those who engage in corporate fraud.”

According to United States Attorney Yates, the charges, and other information presented in court: PACIFICO served as president of the Atlanta-based children’s clothing company Carter’s Inc. from 2004 until December 2009. PACIFICO was a senior executive officer of the company and the highest-ranking executive in the Carter’s sales organization. He supervised the company’s head of wholesale sales, defendant JOSEPH M. ELLES, and the company’s wholesale sales accounts, including Kohl’s Department Stores.

Carter’s is registered with the U.S. Securities and Exchange Commission (“SEC”), and its stock is publicly traded on the New York Stock Exchange. It is obligated to report its financial results in annual and quarterly filings with the SEC, so that members of the public can make informed investment decisions. The securities laws also require Carter’s to make and keep accurate corporate books and records.

The superseding indictment alleges that, at least by April 2009, PACIFICO was aware that ELLES and others had been deliberately causing Carter’s to falsely record in its accounting books millions of dollars in rebates that ELLES had agreed to pay to Kohl’s and other retailers. The superseding indictment alleges that, from 2006 and into 2009, at the end of each fiscal year and at the end of several fiscal quarters, ELLES agreed to pay rebates to Kohl’s and other retailers referred to as “margin support” or “accommodations.” These rebates, which are common in the apparel industry, help compensate the retailer in certain circumstances where the retailer was unable to make its expected profit margins from the sale of Carter’s goods. These rebates are expenses that reduce Carter’s net sales revenue and profits.

The superseding indictment alleges that ELLES manipulated the company’s accounting for millions of dollars in rebates to Kohl’s by misrepresenting that the rebates related to sales made in current fiscal years or quarters, rather than the prior years or quarters in which the sales were actually made. This caused Carter’s to record all of the sales revenue from selling goods in a particular year or quarter without accounting for all of the expenses (“accommodations” or “margin support”) that the company was incurring in connection with those sales.

The superseding indictment alleges that at least by April 2009 and continuing through November 2009, PACIFICO was aware of millions of dollars in undisclosed rebates and attempted to keep them hidden from other members of senior management, Carter’s shareholders, internal and external auditors, and others. The superseding indictment alleges that PACIFICO did so by lying to other members of senior management and other employees, signing false documents, and instructing subordinates not to relay information about the rebates to senior management or dissuading them from doing so.

The superseding indictment alleges that, as a result of the fraud and attempted cover-up, PACIFICO caused Carter’s to materially misstate its net income and other items in its publicly filed financial statements from April 2009 through July 2009 and falsified and caused to be falsified certain corporate books and records during that period. The superseding indictment alleges that ELLES caused Carter’s to file materially false financial statements for several years and quarters from at least November 2006 through July 2009, and that he also falsified or caused to be falsified multiple corporate books and records during that period.

In late October 2009 and continuing into December 2009, Carter’s announced that it had discovered the accounting regularities and that it intended to re-state several years’ worth of previously-published financial statements. Carter’s stock price fell over 20 percent on the day it announced that it would delay the release of its financial information for the third quarter of 2009 in order to review its accounting for accommodations. PACIFICO was placed on administrative leave in November 2009 and then resigned in December 2009. ELLES left the company earlier in 2009, working for the company in a consulting capacity for three months after resigning in March 2009.

The grand jury previously returned a 32-count indictment against ELLES on September 21, 2011 containing charges for securities fraud, causing the filing of false financial statements, falsifying corporate books and records, wire fraud, and mail fraud.

The securities fraud charges against PACIFICO and ELLES each carry a maximum sentence of 25 years in prison and a fine of up to $250,000. The charges against PACIFICO and ELLES for causing the filing of false financial statements with the SEC and the falsification of corporate books and records, in violation of the Securities Exchange Act of 1934, each carry a maximum sentence of 20 years in prison and a fine of up to $5 million. The wire and mail fraud charges against ELLES alone each carry a maximum sentence of 20 years in prison and a fine of up to $250,000. In determining the actual sentence, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement 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.

This case is being investigated by special agents of the Federal Bureau of Investigation. The SEC has conducted a separate investigation of possible civil violations of the U.S. securities laws, and in December 2010 reached a non-prosecution agreement with Carter’s and filed a civil enforcement action against ELLES alleging securities fraud, insider trading, and other securities violations. That case remains pending.

Assistant United States Attorney David M. Chaiken is prosecuting the case.

Members of the public are reminded that the indictment contains only allegations. A defendant is presumed innocent of the charges, and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.”

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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 C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


FBI sees more hedge fund trading probe informants

February 27, 2012

The Baltimore Sun on February 27, 2012 released the following:

“Grant McCool
Reuters

NEW YORK (Reuters) – The FBI says it has enough informants lined up to keep its investigations of suspected illegal insider trading at hedge funds going for at least five more years.

In a briefing on Monday with reporters at the New York office of the Federal Bureau of Investigation just blocks away from Wall Street, agents who manage squads of investigators likened the probes to penetrating a secret society.

The investigations are building on a mission dubbed “Perfect Hedge” that have led to the prosecutions of multimillionaire Galleon Group hedge fund founder Raj Rajaratnam and dozens of traders, executives and research consultants since late 2009.

“We have cooperators set up for years to come,” said David Chaves, a supervisory special agent for securities and commodities fraud investigations.

He told reporters that the informants include cooperating witnesses — people who have been identified as conducting illegal trading but who have agreed to assist authorities to catch others in the hopes of receiving a lighter sentence — and sources within hedge funds.

“I don’t want to say it’s infinite, but clearly in five years we think we will be working it,” Chaves said.

The Galleon prosecution and other recent insider-trading cases have used secretly-recorded telephone conversations to gather evidence, an investigatory tool traditionally used in organized crime or narcotics cases.

The use of wiretaps sent a chill through the hedge fund industry closed to outsiders and what the FBI calls “undercover resistant.”

Investigators have tracked mobile phone calls, instant messaging and social media to collect evidence.

The FBI says it is alert to new ways in which people may try to exchange information on publicly traded companies to gain an illegal edge.

“We will go to whatever lengths we have to keep up with changes in technology,” said Richard Jacobs, another FBI supervisory special agent for white-collar crime cases.

Both officials emphasized that law enforcement believes that the overwhelming majority of hedge funds and their traders are law-abiding and run their firms responsibly.

A similar briefing was given to reporters in Washington on Monday, where officials discussed the agency’s shift in focus of the past 10 years to financial fraud cases involving larger amounts of money than in the past.

For example, out of the 2,600 mortgage fraud investigations open nationally, 70 percent involve more than $1 million, compared with smaller bank frauds under $25,000 that were previously typical of the caseload.

In New York, the FBI said that to date, out of 64 arrests made in “Perfect Hedge,” 59 people have been convicted or have pleaded guilty. These prosecutions, in partnership with the office of the Manhattan U.S. Attorney and the U.S. Securities and Exchange Commission, have been an important deterrent, the agents said.

Another tool for deterrence is the publicity the cases have generated in the United States and abroad.

To that end, Michael Douglas, the Academy Award-winning star of the 1987 movie “Wall Street,” agreed to a request from the FBI to record a public service announcement.

“In the movie ‘Wall Street’ I played Gordon Gekko, who cheated to profit while innocent investors lost their savings,” Douglas, 67, says in the video recording released on Monday.

“The movie was fiction but the problem is real,” Douglas says in the video. “Our economy is increasingly dependent on the success and integrity of the financial markets. If a deal looks too good to be true, it probably is.””

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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.


U.S. presents evidence to grand jury in Avon case: report

February 13, 2012

Reuters on February 13, 2012 released the following:

“(Reuters) – Federal prosecutors have presented evidence to a grand jury against U.S. executives of cosmetics company Avon Products (AVP.N), in a case that probes whether those executives broke foreign bribery laws, the Wall Street Journal said.

In 2008, Avon said that it had started an internal investigation into whether it had violated the Foreign Corrupt Practices Act, which bars U.S.-linked companies from paying bribes to officials of foreign governments.

U.S. authorities are studying a 2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials in violation of the Foreign Corrupt Practices Act, the Journal said, citing three people familiar with the matter.

The federal authorities are probing whether current or former executives ignored the audit’s findings or actively took steps to conceal the problems, both potential offences, the newspaper said.

“We’re not aware that a federal grand jury is investigating this,” an Avon spokeswoman told the Journal.

She declined to confirm to the paper whether there had been an audit in 2005 and declined to discuss how executives handled any such audit.

Avon could not immediately be reached for comment by Reuters outside regular U.S. business hours.

In January, Avon’s former CFO Charles Cramb left the company amidst a probe initiated by the U.S. Securities and Exchange Commission.

(Reporting by Sakthi Prasad; Editing by Muralikumar Anantharaman)”

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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

————————————————————–

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.


U.S. charges 7 in Alleged $62 million Dell insider-trading case

January 19, 2012

Reuters on January 18, 2012 released the following:

“By Basil Katz and Grant McCool

(Reuters) – U.S. prosecutors charged seven people, described as a circle of friends who formed a criminal club, with running a $62 million insider trading scheme – the latest salvo in a years-long probe of suspicious trading at hedge funds.

The FBI in New York arrested four people on Wednesday and authorities announced previously secret charges against three others, making it one of the largest sweeps in the government’s investigation.

The seven charged worked for five different hedge funds and investment firms and reaped nearly $62 million in illegal profits on trades in Dell Inc, the prosecutors said. That is similar in magnitude to insider trading gains made by Raj Rajaratnam, the convicted founder of the Galleon Group hedge fund.

The charging document told “by now, a sadly familiar story,” Manhattan U.S. Attorney Preet Bharara said at a news conference.

“It describes a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered lucrative inside information,” Bharara said.

Dubbed “Operation Perfect Hedge” by the FBI, the probe has examined suspected sharing of confidential business information with hedge fund managers and analysts. Rajaratnam was arrested as part of the investigation and is now serving an 11-year prison term following his conviction by jury trial last year.

The defendants arrested on Wednesday include Anthony Chiasson, who co-founded the Level Global Investors hedge fund. He turned himself in to the FBI in New York, an agency spokesman said. A U.S. magistrate judge released him on $5 million bail during a brief appearance in Manhattan federal court. Chiasson was not asked to enter a plea, but his lawyer, Gregory Morvillo, said his client denied the charges.

Todd Newman, who headed technology trading for hedge fund Diamondback Capital Management from Boston, was also arrested. Diamondback said in a letter to investors on Wednesday that it had been “proactively assisting” criminal prosecutors and the U.S. Securities and Exchange Commission in the case against Newman and another former employee, Jesse Tortora.

Chiasson and Newman are accused of illegally trading ahead of computer maker Dell’s earnings announcements for the first and second quarters of 2008, netting them profits, respectively, of $57 million and $3.8 million. Another defendant, Jon Horvath, is accused of making an illegal $1 million trade in Dell. Horvath was released on $750,000 bail after a court appearance in New York.

In a parallel civil action, the SEC said investment analyst Sandeep “Sandy” Goyal of Princeton, New Jersey, obtained Dell quarterly earnings information and other performance data from an insider at Dell in advance of earnings announcements in 2008.

Goyal tipped then Diamondback analyst Tortora of Pembroke Pines, Florida, with the inside information, and Tortora in turn tipped several others, leading to insider trades on behalf of Diamondback and Level Global hedge funds.

The fourth man arrested was California-based hedge fund manager Danny Kuo, officials said.

A Dell representative said the company had cooperated with authorities.

The SEC charged Diamondback Capital and Level Global as well as the individuals.

SEC: SYSTEMIC DISHONESTY

At Wednesday’s news conference, SEC Enforcement Division chief Robert Khuzami said the cases, along with Galleon and prosecutions of some so-called expert network firms, “reflect systemic dishonesty and exposes a deeply-embedded level of corruption.”

Newman had been placed on leave of absence from Diamondback in 2010 and subsequently was let go by that firm. Reuters in November reported the government’s interest in Newman.

Chiasson, Newman, Horvath and Kuo were charged in U.S. District Court in Manhattan with one count each of conspiracy to commit securities fraud and securities fraud, according to court documents.

Horvath, who was also arrested on Wednesday, is currently employed at Sigma Capital management, a unit of Steven Cohen’s $14 billion hedge fund SAC Capital, said a person familiar with the case who is not authorized to speak publicly. A spokesman for SAC Capital could not immediately be reached for comment.

Criminal charges also were made public against Goyal, Tortora and Spyridon Adondakis, a former junior analyst at Level Global who all previously pleaded guilty and are cooperating.

Lawyers for the three men could not be reached to comment.

Lawyers for Newman and Kuo also could not be reached to comment.

FBI Assistant Director-in-Charge Janice Fedarcyk said in a statement that the agency has arrested more than 60 people in the crackdown.

“This initiative is far from over,” she said. “If you are engaged in insider trading, what distinguishes you from the dozens who have been charged is not that you haven’t been caught; it’s that you haven’t been caught yet.”

The criminal complaint – signed by FBI agent David Makol, who was assigned to the Galleon investigation – accused Newman and Chiasson of using information obtained by the three cooperators and their network of sources at companies to make illegal trades.

MORE HEADACHES FOR SAC

Horvath’s arrest creates more headaches for fund industry titan Cohen, who has not been accused of wrongdoing.

Federal investigators have been looking into allegations of wrongful trading at SAC for more than four years, Reuters has previously reported, and Horvath’s arrest comes after criminal cases of others who have been tied to SAC.

Donald Longueuil, a one-time SAC portfolio manager, last year was sentenced to 2-1/2 years in prison for insider trading while Noah Freeman, another former SAC portfolio manager, cooperated with the government and pleaded guilty.

The investigations of insider trading began at least eight years ago and were first made public in October 2009. Most of the dozens of defendants charged have pleaded guilty or been convicted.

Many of the cases have been based at least in part on the use of government wiretaps authorized by federal judges. Four hedge fund firms – Level Global, Diamondback, Loch Capital Management and Barai Capital Management – were raided by the FBI in late 2010. Level Global, Loch and Barai have since folded.

Rajaratnam remains the best-known investor implicated in the probe. Rajat Gupta, a former chief of the consulting firm McKinsey & Co and director of both Goldman Sachs Group Inc and Procter & Gamble Co, has been charged with providing illegal tips to Rajaratnam. He is fighting those charges.

The case is U.S.A v. Todd Newman et al, U.S. District Court for the Southern District of New York, No. 12-0124.”

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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

————————————————————–

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.


Executives Facing US Accusations Under FCPA May Be Encouraged to Fight Charges

January 13, 2012

Bloomberg Businessweek on January 13, 2012 released the following:

“(Updates with SEC broker fiduciary rule and Hong Kong ‘professional investor’ in Compliance Policy, French stock-ADRs in Compliance Action, Alliance One in Courts, Keneally and Kerr in Interviews and Vaughan and Kim Hak Heon in Comings and Goings/Notable Passings.)

Jan. 13 (Bloomberg) — Executives facing trial in U.S. courts over accusations of bribing foreign officials may be encouraged to fight charges as prosecutors regroup after two courtroom setbacks and await a verdict in their largest overseas corruption probe targeting individuals.

One of two cases hailed by the government as milestones in its enforcement of the Foreign Corrupt Practices Act was dismissed last year by a judge who said the jury verdict convicting two men at an electricity tower company of bribing Mexican officials was tainted by prosecutor misconduct in “a sloppy, incomplete and notably over-zealous investigation.”

In the first prosecution under the FCPA based on a sting operation, a judge declared a mistrial for four of 22 defendants accused of participating in a fake $15 million weapons deal involving Gabon. A separate trial is under way for a second group of defendants.

The 2011 outcomes will make individual defendants in FCPA cases more confident in contesting charges. This is so in particular because they may face long prison terms under the plea deals the Justice Department offers, even as corporations continue to self-report and settle, said Philip Urofsky, a former FCPA prosecutor who now defends cases at Shearman & Sterling LLP.

In a crackdown on overseas bribery that started during the Bush administration, the government settled 57 cases against companies from 2005 through 2011 without trial, reaping $4.1 billion for the U.S. treasury, according to Justice Department data. A push to prosecute more individual defendants during the same period has produced mixed results, with some beating charges outright and others getting less punishment than prosecutors sought.

Laura Sweeney, a spokeswoman for the Justice Department, said the government has had “great success” against individuals since increasing its enforcement actions in 2009.

The 1977 law bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S.”

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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 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.


Henry Fecker, III, and Steven Steiner Indicted by a Federal Grand Jury in a Fifty-Four Count Federal Indictment

August 25, 2011

The U.S. Attorney’s Office Southern District of Florida on August 24, 2011 released the following:

“TWO FT. LAUDERDALE MEN INDICTED FOR MONEY LAUNDERING AND OBSTRUCTION OF JUSTICE IN CONNECTION WITH MUTUAL BENEFITS CORPORATION FRAUD

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and José A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced the unsealing of a fifty-four count indictment against defendants Henry Fecker, III, 57, and Steven Steiner, a/k/a “Steven Steinger,”59, for their participation in a scheme to launder and conceal proceeds in connection with the Mutual Benefits Corporation (“MBC”) fraud. More specifically, Fecker and Steiner are charged with receiving more than $10 million into the account of Camden Consulting, a company they controlled, and then hiding and concealing assets from the U.S. Securities and Exchange Commission (“SEC”) and the United States District Court. Both defendants were arrested and appeared in court earlier today. A pre-trial detention hearing is scheduled for Tuesday, August 30, 2011 at 1:30 p.m. before U.S. Magistrate Judge Andrea M. Simonton.

As alleged in the indictment, from approximately 1994 to May 2004, MBC purchased life insurance policies and sold them in fractionalized form to investors. MBC and its employees and agents eventually defrauded approximately 30,000 investors by, among other things, misleading them about the accuracy of life expectancies of the insureds and the expenses required to maintain the insurance policies via premium payments. New investor money was thus used to pay premiums on life insurance policies purchased by earlier investors. As the scheme continued, more investor money was required to prevent the Ponzi-scheme from collapsing. After the MBC business collapsed in 2004, investors eventually suffered more than $830 million in losses.

As charged in the indictment, Steiner was a founder and Vice President of MBC and was paid by MBC using the account of Camden Consulting. Fecker was the owner of Camden Consulting. In this way, the MBC funds were used to support a lavish lifestyle for Steiner and Fecker, who lived together and jointly owned waterfront homes in Ft. Lauderdale and Camden, Maine, and a luxury apartment in New York City.

According to the indictment, in May 2004, MBC was sued by the SEC in the civil action, S.E.C. vs. Mutual Benefits Corp., et al., No. 04-60573-CIV-MORENO (S.D. Fla.) (the “SEC Fraud Action”). The SEC obtained a restraining order to halt the alleged fraud at MBC, and thereafter a receiver was appointed by the United States District Court for the Southern District of Florida (the “MBC Receiver”), to identify and trace the assets of MBC. Steiner was a named defendant in the SEC Fraud Action and Fecker was a party due to his control of Camden Consulting.

According to the indictment, after 2004 when MBC was shut down, Fecker and Steiner engaged in a series of transactions to hide assets from the SEC and the MBC Receiver by placing funds attributable to Steiner with third parties or in Fecker’s name alone, and later by causing third parties to make payments of monies due to Steiner, instead to Fecker. In 2006, for example, Fecker obtained a refinance of the Maine property and placed the proceeds of approximately $480,000 into a series of certified checks to conceal their existence from authorities. Fecker began cashing these checks in 2008 and continued this through July 2011, using the funds to support a lavish lifestyle for Fecker and Steiner.

To obtain a favorable settlement of their liability with the SEC, the indictment alleges that in 2006 and early 2007, Fecker and Steiner submitted a series of false and misleading documents to conceal their true financial condition. Based on this documentation, around April 2007, the SEC agreed to settled their liability for $5 million and further agreed to a reduced penalty of $3.95 million, and the court in the SEC Fraud Action thereafter ordered that these sums be paid by order dated April 10, 2007. The indictment alleges that, to date, Steiner and Fecker have paid only $750,000.

The indictment further alleges in late 2009, to further conceal assets from the SEC and the SEC receiver, Steiner sold the luxury New York apartment for $1.3 million, but caused false documents to state that the sales price was $1.1 million and submitted these documents to the SEC and the MBC Receiver. To further thwart the SEC’s efforts to recover assets attributable to MBC, Steiner allegedly provided false and misleading testimony under oath to the MBC Receiver concerning his assets and financial condition.

Previously, in a separate case also in the Southern District of Florida, Steiner was charged in United States v. Joel Steinger, et al. (Case No. 08-CR-21158), with conspiracy to commit mail and wire fraud and money laundering, in relation to the MBC fraud scheme. Trial in that matter is scheduled for February 2013 before U.S. District Judge Adalberto Jordan.

United States Attorney Wifredo A. Ferrer stated, “Ponzi-schemes, like the MBC investment scheme, defraud unwitting investors out of their lives savings. These defendants compounded their legal troubles by then laundering the proceeds of the fraud and attempting to hide assets. Such abuse will not be tolerated.”

“We will vigorously investigate and prosecute individuals who obstruct justice by making false statements and concealing assets from an agency of the United States attempting to carry out its mission, such as the SEC’s efforts to protect investors here,” said FBI Special Agent in Charge John V. Gillies.

“We will hold accountable those who engage in the laundering of funds derived from fraud, particularly through concealment and spending of funds through sophisticated transactions, like the ones employed here,” said IRS Special Agent in Charge José A. Gonzalez.

Mr. Ferrer commended the investigative efforts of the FBI and the IRS-CID, and the Miami Regional Office of the SEC, which previously brought a civil action against MBC and its principals. The matter is being prosecuted by Assistant U.S. Attorney Jerrob Duffy.

An indictment is only a charging document, and a defendant is presumed innocent unless and until proven guilty.”

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 extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN List 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.

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