MAN PLEADS GUILTY TO FRAUD FOR ROLE IN PRESCRIPTION DRUG DIVERSION SCHEME

FROM:  U.S. JUSTICE DEPARTMENT
Monday, June 22, 2015
California Man Pleads Guilty in Prescription Drug Diversion Scheme

A Corona, California, man pleaded guilty today in U.S. District Court in Cincinnati to one count of conspiracy to commit mail and wire fraud for his participation in a large-scale, nationwide prescription drug diversion scheme.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio, Special Agent In Charge Antoinette V. Henry of the U.S. Food and Drug Administration’s Office of Criminal Investigations (FDA-OCI) Metro Washington Field Office and Assistant Inspector in Charge Christopher White of the U.S. Postal Inspection Service (USPIS) Cincinnati Field Office announced the guilty plea, entered today by U.S. District Judge Timothy S. Black.

According to court documents, from May 2010 through December 2012, Vin Nguyen, 45, and others conspired to distribute illegally-diverted prescription drugs while concealing the true, illicit sources of the drugs.  Nguyen purchased prescription drugs, including HIV medications, anti-psychotic medications and other brand name drugs, from various unlicensed and illegal sources in California and Florida.  Working with co-conspirators, Nguyen then sold the drugs to other drug diverters without the statutorily required pedigree documents stating the origin of the drugs.  Nguyen and his co-conspirators sold more than $6.5 million worth of diverted drugs.

“Illegal prescription drug diversion threatens the security of America’s drug supply chain,” said Principal Deputy Assistant Attorney General Mizer.  “The Department of Justice will continue to protect American consumers by prosecuting those who engage in prescription drug diversion.”

From December 2011 through December 2012, Nguyen and others sold diverted prescription drugs to David Miller and his company, Minnesota Independent Cooperative (MIC).  On May 6, David Miller and MIC were indicted in the Southern District of Ohio and charged with one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud and one count of conspiracy to make false statements and to distribute prescription drugs without a wholesale license.  Those charges remain pending.

Nguyen and his co-conspirators used the company name “Modern Medical” when selling drugs to Miller and MIC.  Modern Medical is a real California company that had no involvement in the drug sales.  Nguyen and his co-conspirators simply hijacked the name to conceal their involvement and the true, illicit drug sources.

Miller and MIC, in turn, sold the prescription drugs obtained from Nguyen – and multiple other illegal sources – to wholesale and retail customers throughout the United States, including in the Southern District of Ohio.  Miller and MIC are alleged to have created fraudulent pedigree documents falsely stating that they had purchased the drugs from B&Y Wholesale, a company in Puerto Rico.  These false pedigrees covered up the illegitimate sources of the drugs – various illicit, unlicensed suppliers, including Nguyen – and falsely stated that B&Y Wholesale was an authorized distributor of the prescription drugs.

POLYGRAPH COMPANY OWNER PLEADS GUILTY TO TRAINING CUSTOMERS TO LIE DURING POLYGRAPH EXAMS

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, May 13, 2015
Owner of ‘Polygraph.Com’ Pleads Guilty to Training Customers to Lie During Federally Administered Polygraph Examinations

A former Oklahoma City law enforcement officer and owner of “Polygraph.com” pleaded guilty today to obstruction of justice and mail fraud for training customers to lie and conceal crimes during polygraph examinations.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Assistant Commissioner Anthony Triplett of U.S. Customs and Border Protection’s Office of Internal Affairs and Special Agent in Charge James E. Finch of the Federal Bureau of Investigation’s (FBI) Oklahoma City Field Office made the announcement.

“Lying, deception and fraud cannot be allowed to influence the hiring of national security and law enforcement officials, particularly when it might affect the security of our borders,” said Assistant Attorney General Caldwell.  “Today’s conviction sends a message that we pursue those who attempt to corrupt law enforcement wherever and however they may try to do so.”

Douglas Williams, 69, of Norman, Oklahoma, pleaded guilty to a five-count indictment charging him with mail fraud and obstruction.  Williams was indicted on Nov. 14, 2014, in the Western District of Oklahoma.

According to admissions made in connection with his plea, Williams, the owner and operator of “Polygraph.com,” marketed his training services to people appearing for polygraph examinations before federal, state and local law enforcement agencies and federal intelligence agencies, as well as people required to take polygraph examinations under the terms of their parole or probation.

Williams further admitted that he trained an individual posing as a federal law enforcement officer to lie and conceal involvement in criminal activity from an internal agency investigation.  Williams also admitted to having trained a second individual posing as an applicant seeking federal employment to lie and conceal crimes in a pre-employment polygraph examination.  Williams, who was paid for both training sessions, admitted to having instructed the individuals to deny having received his polygraph training.

The investigation is being investigated by U.S. Custom and Border Protection’s Office of Internal Affairs and the FBI’s Oklahoma City Field Office.  The case is being prosecuted by Trial Attorneys Heidi Boutros Gesch and Brian K. Kidd of the Criminal Division’s Public Integrity Section.

LANDLORD CONVICTED OF FRAUD AND FORGERY

FROM:  U.S. JUSTICE DEPARTMENT 
Department of Justice
U.S. Attorney’s Office
District of Massachusetts
FOR IMMEDIATE RELEASE
Monday, December 22, 2014
Springfield Landlord Convicted of Fraud and Forgery Charges

SPRINGFIELD - A Springfield landlord was convicted in federal court today of fraud and related charged in connection with fires at two of his Springfield properties.

Wilkenson Knaggs, 43, was convicted by a jury following a five-day trial of three counts of mail fraud,  two counts of negotiating checks with forged endorsements, and two counts of spending the mail fraud proceeds.   U.S. District Judge Mark Mastroianni scheduled sentencing for March 20, 2015.

Following a Nov. 16, 2008 fire at 376-378 Franklin Street in Springfield, Knaggs submitted a fraudulent contract for rehabilitating the three-family house in order to obtain a payout on his homeowner’s policy.  He also forged the endorsement of the City of Springfield on a second check, cashing the check at a Boston check cashing company, and using the proceeds to buy a two-family house at 99 Central Street.  In addition, Knaggs recorded the title to 99 Central Street in the name of a relative and used the relative to make a claim on the insurance policy after a March 7, 2010, fire at the Central Street property.

The charging statutes provide for a sentence of no more than 20 years in prison, three years of supervised release and a $250,000 fine on each mail fraud count with lower maximum sentences on the other charges.  Actual sentences for federal crimes are typically less than the statutory maximum penalties.  Sentences are imposed by a federal district court judge based on the U.S. Sentencing Guidelines and other statutory factors.

United States Attorney Carmen M. Ortiz; William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigations in Boston; Shelley Binkowski , Postal Inspector in Charge, United States Postal Inspection Service; and Vincent Lisi, Special Agent in Charge of the Federal Bureau of Investigation’s Boston Field Division made the announcement today.  The case is being prosecuted by Assistant U.S. Attorneys Karen Goodwin and Deepika Shukla of Ortiz’s Springfield Branch Office.

USAO - District of Massachusetts
Updated December 22, 201

MAN INDICTED FOR ALLEGEDLY TEACHING CUSTOMERS TO LIE DURING POLYGRAPH EXAMINATIONS

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, November 14, 2014
Owner of 'Polygraph.com' Indicted for Allegedly Training Customers to Lie During Federally Administered Polygraph Examinations

A former Oklahoma City law enforcement officer and owner of “Polygraph.com” has been indicted on obstruction of justice and mail fraud charges for allegedly training customers to lie and conceal crimes during polygraph examinations.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Assistant Commissioner Mark Morgan of U.S. Customs and Border Protection’s Office of Internal Affairs and Special Agent in Charge James E. Finch of the FBI’s Oklahoma City Field Office made the announcement.

Douglas Williams, 69, of Norman, Oklahoma, was charged in a five-count indictment in the Western District of Oklahoma with mail fraud and obstruction.  According to allegations in the indictment, Williams, the owner and operator of “Polygraph.com,” marketed his training services to people appearing for polygraph examinations before federal law enforcement agencies, federal intelligence agencies, and state and local law enforcement agencies, as well as people required to take polygraph examinations under the terms of their parole or probation.

The indictment further alleges that Williams trained an individual posing as a federal law enforcement officer to lie and conceal involvement in criminal activity from an internal agency investigation.  Williams is also alleged to have trained a second individual posing as an applicant seeking federal employment to lie and conceal crimes in a pre-employment polygraph examination.  Williams, who was paid for both training sessions, is alleged to have instructed the individuals to deny having received his polygraph training.

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

The investigation is being investigated by U.S. Custom and Border Protection’s Office of Internal Affairs and the FBI’s Oklahoma City Field Office.  The case is being prosecuted by Trial Attorneys Mark Angehr and Brian K. Kidd of the Criminal Division’s Public Integrity Section.

SIX FLORIDIANS PLEAD GUILTY TO MORTGAGE FRAUD INVOLVING CONDOMINIUM DEVELOPMENTS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, May 15, 2014

Six Miami-Area Residents Plead Guilty to Mortgage Fraud Scheme Involving Four Condominium Developments

Six Miami-area residents, including three former loan officers, pleaded guilty in the Southern District of Florida this week to participating in a fraudulent scheme designed to enrich real estate developers by selling condominium units to straw buyers.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, Special Agent in Charge Phyllis Robinson of the Department of Housing and Urban Development’s Office of the Inspector General (HUD-OIG) in Miami and Acting Inspector General Michael P. Stephens of the Federal Housing Finance Agency (FHFA) made the announcement.

Today, Leidy Masvidal, 42, of Miami, pleaded guilty before U.S. District Court Judge Marcia G. Cooke to conspiring to commit bank fraud.   Sentencing is scheduled for Sept. 24, 2014.   Alfredo Jesus Chacon, 48, of Orange Park, Florida, and Francisco Martos, 63, and Dorian Wong Magarino, 49, both of Miami, also pleaded guilty today to conspiring to commit wire fraud and mail fraud before U.S. District Court Judge Ursula Ungaro.   Sentencing is scheduled for Aug. 1, 2014.

On May 14, 2014, Tania Masvidal, 49, and Douglas Ponce, 40, both of Miami, each pleaded guilty before Judge Cooke to conspiring to commit bank fraud.  Sentencing is scheduled for July 30, 2014.

According to the defendants’ plea agreements and other court documents, the defendants participated in a scheme to pay straw buyers to submit false loan applications to lending institutions to purchase condominiums owned by co-conspirators.   Leidy Masvidal and Tania Masvidal used a mortgage brokerage they owned, EZY Mortgage Inc., to arrange financing for the purchases.   Because the straw buyers were not credit-worthy, the Masvidals secured loans in their names by submitting to lending institutions loan applications and other fraudulent documents containing false statements about the buyers’ income, employment and assets, and falsely stating that the buyers intended to reside in the properties.   Additionally, the Masvidals enabled their co-conspirators to secretly fund the buyers’ obligations to pay money at closing (known as “cash to close” obligations) by establishing shell corporations, which the co-conspirators used to funnel cash from conspirators to the escrow account used at closing, as well as paying the straw buyers.   The co-conspirators compensated the Masvidals for their role in the scheme by sending kickback payments taken from the loan proceeds to the Masvidals’ shell corporations for every straw buyer identified.

According to admissions in court records, Martos was a former loan officer at a mortgage company known as State Lending who helped secure financing for straw buyers in exchange for kickbacks by procuring false employment documents and by including false information in buyers’ loan applications. Chacon and Ponce recruited straw buyers to purchase properties owned by co-conspirators in exchange for kickbacks paid from the sales proceeds.   Chacon also allowed a company that he controlled to be used as a false employer for the straw buyers.   Magarino accepted payments to act as one of Chacon’s straw buyers and recruited other straw buyers into the scheme.   For the properties in which Margarino acted as the straw buyer, he represented to the lender that he personally met his cash-to-close obligations when in fact he knowingly paid these costs with funds supplied by conspirators.

Many of the straw buyers defaulted on their loans after the conspirators stopped making their mortgage payments on their behalf, causing millions of dollars in losses to lenders.

On March 31, 2014, Luis Mendez, Stavroula Mendez, Luis Michael Mendez, Lazaro Mendez, Marie Mendez, Wilkie Perez and Enrique Angulo were indicted in the Southern District of Florida for their alleged participation in this scheme.   They have pleaded not guilty and trial is currently set for Sept. 8, 2014.   The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

The case is being investigated by HUD-OIG and FHFA-OIG.  The case is being prosecuted by Trial Attorneys Gary A. Winters and Brian Young of the Criminal Division’s Fraud Section.

3 TENNESSEANS PLEAD GUILTY IN PONZI SCHEME

FROM:  JUSTICE DEPARTMENT 
Friday, January 31, 2014

Three Tennessee Men Plead Guilty in $18 Million Ponzi Scheme

Top officers and a salesman for an investment company based in Nashville, Tenn., have pleaded guilty for their roles in an $18 million Ponzi scheme.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney David Rivera of the Middle District of Tennessee, Special Agent in Charge Todd McCall of the FBI’s Memphis Division and Special Agent in Charge Christopher Henry of the IRS-Criminal Investigation in Nashville made the announcement today after the pleas were accepted by U.S. District Judge Todd J. Campbell in the Middle District of Tennessee.

Terry Kretz, 61, of Gallatin, Tenn., the chief executive officer for Hanover Corporation, and Daryl Bornstein, 54, of College Grove, Tenn., a Hanover salesman, pleaded guilty today to securities fraud, money laundering, and conspiracy to commit securities fraud, wire fraud and mail fraud.   On Jan. 29, 2014, Hanover’s chief financial officer, Robert Haley, 54, pleaded guilty to the same charges.   Kretz and Haley also pleaded guilty to mail fraud.

“The three men who pleaded guilty today schemed, lied, and stole at the expense of innocent investors,” said Acting Assistant Attorney General Raman.  “They ran a classic Ponzi scheme until the bottom fell out, and their clients – people looking to provide stability for their families or save for their retirements – suffered serious financial harm.  We will stay vigilant to ensure that fraudsters like Kretz, Bornstein and Haley are held accountable.”

“Ponzi schemes typically leave unsuspecting investors in financial ruin and many have lost their life’s savings,” said U.S. Attorney Rivera.   “The U.S. Attorney’s Office and our law enforcement partners will continue to place a great emphasis on educating the public about investment fraud and will vigorously pursue those who prey upon unsuspecting investors.”

“It is a priority of the FBI to target fraudsters who use criminal investment and Ponzi schemes to scam innocent working families and retirees out of their hard earned money,” said FBI SAC McCall. “These pleas demonstrate the effectiveness of state and federal law enforcement working together to protect the public from financial fraudsters and bring those responsible to justice.”

“Promoters of Ponzi schemes prey upon trusting investors and then steal their hard earned money,” said IRS-CI SAC Henry.  “Investors should be wary of programs promising unbelievable returns and investments should be looked at carefully.   Remember the old cliché, ‘If it seems too good to be true, it probably is’.

The three men were indicted by a federal grand jury on July 27, 2011.   Sentencing is scheduled for April 2, 2014.

According to court documents, the defendants carried out the fraudulent scheme from October 2004 through August 2006.   During that period, Kretz and Bornstein offered clients the opportunity to invest in Hanover through promissory notes bearing high interest rates.   Through representations in the promissory notes, as well as their own discussions with investors, Kretz and Bornstein told clients that their money would be used for specific purposes, such as investing in stock options and startup companies.   In fact, as all three defendants knew, more than half the money invested in Hanover went to repay earlier investors, to pay Hanover’s salaries and overhead, or to benefit the defendants personally.   Such personal benefits included the purchase of a $600,000 residential building lot in the name of Kretz personally, contributing more than $176,000 to a church, and paying for golf memberships.

Kretz and Bornstein also issued Hanover promissory notes to reimburse individuals who had previously lost money investing in ventures recommended by Bornstein before he joined Hanover.   In some cases, these old investors contributed new money to Hanover, while in other cases, they invested nothing.   In both cases, money from new investors in Hanover was used to make payments on promissory notes issued to cover non-Hanover losses without the Hanover investors’ knowledge.

Haley, in his role as chief financial officer, furthered the fraud by sending note holders checks that purported to be for “interest” — but were in fact simply transfers of money recently taken in from new investors.   Haley also prepared a false balance sheet that overstated Hanover’s financial health and that he knew would be shown to note holders.

The case was investigated by the FBI, IRS-CI, the Tennessee Bureau of Investigation, and the Tennessee Department of Commerce and Insurance.   The case is being prosecuted by Assistant United States Attorney Scarlett S. Nokes of the Middle District of Tennessee and Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section.

MAN PLEADS GUILTY IN STOLEN PRISONER NAMES IDENTITY FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, October 25, 2013

Alabama Man Pleads Guilty to His Involvement in an Identity Theft Scheme Using Stolen Prisoner Names and a Corrupt Postal Employee

Harvey James pleaded guilty to one count of mail fraud and one count of aggravated identity theft for his role in a Stolen Identity Refund Fraud (“SIRF”) scheme , announced Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division and U.S. Attorney for the Middle District of Alabama George L. Beck Jr.

According to court documents and court proceedings, Harvey James obtained stolen identities from individuals who had access to inmate information from the Alabama Department of Corrections.  For several years, James, his sister, Jacqueline Slaton, and others used those inmate names to file false federal and state tax returns.  James and Slaton directed some of the false refunds to be sent to either prepaid debit cards or issued via check.  In 2012, James and Slaton enlisted the assistance of U.S. Postal Service mail carrier Vernon Harrison in the scheme.  Harrison, who provided James and his co-conspirators with mailing addresses to which they could mail debit cards, retrieved the debit cards from the mail and delivered them to James and his co-conspirators.  In exchange, Harrison received substantial payments.  Between 2010 and 2012, James and his co-conspirators filed hundreds of federal and state income tax returns that claimed over $1,000,000 in fraudulent tax refunds.

Sentencing has not yet been scheduled.  James faces a minimum sentence of two years in prison and a maximum sentence of twenty-two years in prison, three years of supervised release, restitution and a maximum fine of $250,000.  Slaton already pleaded guilty and was sentenced to 70 months in prison.  In July 2013, Harrison was found guilty by a jury for his role in the scheme.  Harrison will be sentenced on Oct. 31, 2013.

The case was investigated by Special Agents of the IRS - Criminal Investigation.  Trial Attorneys Jason H. Poole and Michael Boteler of the Justice Department’s Tax Division and Assistant U.S. Attorney Todd Brown are prosecuting the case.

PEST CONTROL COMPANY CHARGED WITH UNLAWFUL APPLICATION OF PESTICIDES

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, September 11, 2013
Pest Control Company and Its Owner Charged with Unlawful Application of Pesticides and Falsification

A pest control services company and its owner have been charged today in the U.S. District Court for the Middle District of Georgia with conspiracy, unlawful use of pesticides, false statements, falsification of records and mail fraud, announced Robert G. Dreher, Acting Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division and Michael J. Moore, U.S. Attorney for the Middle District of Georgia.

Steven A. Murray, 54, of Pelham, Ala., and his company, Bio-Tech Management Inc., were charged in a felony indictment with one count of conspiracy, 10 counts of making false statements, 20 counts of falsifying records, 10 counts of mail fraud and 10 counts of unlawful use of a pesticide.

The indictment alleges that from October 2005 to June 2009, Steven Murray and Bio-Tech repeatedly misapplied the registered pesticide Termidor SC in nursing homes in the state of Georgia and falsified documents to conceal the unlawful use.  The indictment further alleges that Murray and Bio-Tech sent invoices through the U.S. Mail to their nursing home clients to solicit payment for the unlawful pesticide applications.  

According to the indictment, Steve Murray and Bio-Tech provided monthly pest control services to nursing homes in Georgia by spraying pesticides in and around their clients’ facilities.  The indictment alleges that, at the direction of Murray, Bio-Tech employees routinely applied the pesticide Termidor indoors more than twice a year, contrary to the manufacturer’s label instructions.  The indictment further alleges that after the Georgia Department of Agriculture made inquiries regarding Bio-Tech’s misuse of Termidor and other pesticides, Murray directed several of his Bio-Tech employees to alter company service reports with the intent to obstruct an investigation.        

U.S. Environmental Protection Agency (EPA) regulations require that all pesticides be registered, properly labeled, and applied as specified by manufacturer’s labeling to protect public health and the environment.

A criminal indictment is not a finding of guilt.  An individual or company charged by criminal indictment is presumed innocent unless and until proven guilty in a court of law.

The falsifying records and mail fraud charge carry a maximum sentence of 20 years in prison and $250,000 fine per count.  The false statements charges each carry a maximum sentence of five years in prison and a $250,000 fine.

These cases are being investigated by Special Agents of the EPA’s Criminal Investigations Division in Atlanta and prosecuted by Trial Attorneys Richard J. Powers and Adam C. Cullman of the Justice Department’s Environment and Natural Resources Division, Environmental Crimes Section.

ARIZONA MAN GETS NINE YEARS IN PRISON FOR TAX CRIMES

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, August 10, 2012
Arizona Tax Defier Sentenced to Nine Years in Prison for Fraud and Tax Conspiracy

Richard Kellogg Armstrong, 77, of Prescott, Ariz., was sentenced today by U.S. District Court Judge Robert E. Blackburn to 108 months in prison followed by three years of supervised release. Judge Blackburn ordered the sentence to run consecutively to the 660 day prison term and $1,021,500 of fines cumulatively imposed upon Armstrong as punitive sanctions for 10 acts of contempt of court. He also ordered Armstrong to pay restitution to the Internal Revenue Service (IRS) in the amount of $1,678,834 and to forfeit two residences and a personal aircraft. The sentence was announced by the Justice Department’s Tax Division, the U.S. Attorney’s Office for the District of Colorado and the IRS Criminal Investigation Denver Field Office. Codefendant Curtis L. Morris, age 43, of Elizabeth, Colo., is scheduled to be sentenced on Nov. 6, 2012.

Armstrong was found guilty on April 30, 2012, after a three week jury trial, of one count of mail fraud, eight counts of filing false claims against the United States, three counts of engaging in monetary transactions in property derived from mail fraud, and one count of conspiracy to defraud the United States. According to the testimony at trial, Armstrong, Morris and others conspired to file false tax returns claiming large tax refunds based upon fictitious federal income tax withholdings taken from bogus IRS Forms 1099-OID for themselves and others. Armstrong personally received over $1.6 million in fraudulent tax refunds and, according to the testimony at trial, quickly moved most of this money into accounts in the names of shell entities and offshore bank accounts.

"The sentence in this case demonstrates that those who defy the tax laws by preparing or filing false and frivolous tax returns will be prosecuted and punished for their conduct," said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division. "The Tax Division remains committed to prosecuting conduct that attempts to defy our nation’s tax laws."

"The intent of this refund fraud scheme was to swindle the government and the taxpaying public" said Richard Weber, Chief, IRS-Criminal Investigation. "Today's sentencing of Mr. Armstrong again emphasizes that the Internal Revenue Service and Department of Justice will continue their aggressive pursuit of those who would attempt to defraud America's tax system."

Assistant Attorney General Keneally commended the efforts of IRS-Criminal Investigation special agents, who investigated the case, and Assistant U.S. Attorney Kenneth Harmon and Special Assistant U.S. Attorney Kevin F. Sweeney, who prosecuted the case. Kevin Sweeney is a trial attorney from the Tax Division, currently on detail to the U.S. Attorney’s Office.

TWO ALLEGED REAL ESTATE FORECLOSURE BID RIGGERS INDICTED

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, June 28, 2012
Two Alabama Real Estate Investors and Their Company Indicted for Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions

WASHINGTON – A federal grand jury in Mobile, Ala., returned an indictment today against two real estate investors and their company, charging them with participating in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions held in southern Alabama, the Department of Justice announced today.

The department said the father and son real estate investors, Robert M. Brannon of Laurel, Miss., and Jason R. Brannon of Mobile, respectively, and their Mobile-based company, J & R Properties LLC, conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. The indictment, returned in the U.S. District Court for the Southern District of Alabama, charges that after a designated bidder bought a property at a public auction, which typically takes place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.

The Brannons and J & R Properties were also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. Jason Brannon, Robert Brannon and J & R Properties are charged with participating in the bid-rigging and mail fraud schemes from as early as October 2004 until at least August 2007.

“Today’s indictment underscores the commitment of the Antitrust Division to prosecute those who illegally profit on the real estate market at the expense of distressed homeowners,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “The division will pursue vigorously those who engage in collusive schemes to eliminate competition in the marketplace.”  

FBI Acting Special Agent in Charge Patrick Kiernan reaffirmed his commitment to pursuing these complex economic investigations stating, “This investigation has sent a strong message to the community at large, and the real estate community specifically, that abuses within the real estate industry will not be tolerated. Fraud related to home mortgage investments can have financial implications both locally and nationally, and the integrity of the system must be vigilantly maintained.”
         
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals, and a $100 million fine for companies. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals, and a fine of $500,000 for companies. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.
     
The investigation into fraud and bid rigging at certain real estate foreclosure auctions in southern Alabama is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI’s Mobile Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. To date, five individuals—Harold H. Buchman, Allen K. French, Bobby Threlkeld Jr., Steven J. Cox and  Lawrence B. Stacy—and one company—M & B Builders LLC— have pleaded guilty in the U.S. District Court for the Southern District of Alabama in connection with the investigation. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.

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

TWO CALIFORNIA REAL ESTATE INVESTORS PLEAD GUILTY TO BID RIGGING AT FORECLOSURE AUCTIONS

FROM:  U.S. DEPARTMENT OF JUSTICE ANTITRUST DIVISION
Investigation Has Yielded 24 Plea Agreements to Date
WASHINGTON — Two Northern California real estate investors have agreed to plead guilty for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in Oakland, Calif., against Douglas Ditmer of San Ramon, Calif. and Keith Slipper of Oakland.

To date, as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California, 24 individuals, including Ditmer and Slipper, have agreed to plead or have pleaded guilty.

“By agreeing not to compete with one another in the bidding process, these investors illegally profited and undermined the integrity of the real estate market,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program.  “The conspiracy eliminated competition and prevented lenders and distressed homeowners from getting fair market prices for their property.”

According to court documents, Ditmer and Slipper participated in conspiracies to rig bids and commit mail fraud by agreeing to stop bidding or to refrain from bidding for properties at public foreclosure auctions in Contra Costa and Alameda counties, Calif., negotiating payoffs with other conspirators not to compete, purchasing selected properties at public auctions at suppressed prices, and participating in second, private auctions open only to members of the conspiracy, where the property was awarded to the conspirator who submitted the highest bid.

The department said Ditmer conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in Contra Costa County beginning as early as July 2008 and continuing until about January 2011, and in Alameda County beginning as early as June 2007 and continuing until about January 2011.  Slipper conspired with others to rig bids and commit mail fraud at public foreclosure auctions in Contra Costa County beginning as early as June 2008 and continuing until about December 2010, and in Alameda County beginning as early as March 2009 and continuing until about May 2009

 “The FBI continues to work closely with the Antitrust Division to target those individuals who engage in fraudulent bid rigging and other anticompetitive activities at foreclosure auctions,” said FBI Special Agent in Charge Stephanie Douglas of the San Francisco Field Office.  “We are committed to bringing to justice those who engage in illegal and unfair practices that adversely impact legitimate home buyers and sellers.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition in order to obtain selected real estate offered at Contra Costa and Alameda county public foreclosure auctions at non-competitive prices.  When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.  According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million.  Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine.  The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

The charges today are the latest cases filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif.

The ongoing investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office.

ALABAMA MAN PLEADS GUILTY TO RIGGING BIDS AT REAL ESTATE FORECLOSURE AUCTIONS

FROM:  DEPARTMENT OF JUSTICE
Friday, April 27, 2012
Alabama Real Estate Investor Agrees to Plead Guilty to Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions Agrees to Serve One Year in Prison

WASHINGTON – An Alabama real estate investor has agreed to plead guilty and to serve one year in prison for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama, the Department of Justice announced today.  To date, as a result of the ongoing investigation, four individuals and one company have pleaded guilty.

Charges were filed yesterday in the U.S. District Court for the Southern District of Alabama in Mobile, Ala., against Steven J. Cox of Mobile.  Cox was charged with one count of bid rigging and one count of conspiracy to commit mail fraud.  According to the plea agreement, which is subject to court approval, Cox has agreed to serve one year in prison, to pay a $10,000 criminal fine and to cooperate with the department’s ongoing investigation.

According to court documents, Cox conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama.  After a designated bidder bought a property at the public auctions, which typically take place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay.  The highest bidder at the secret, second auction won the property.

Cox was also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties.  Cox participated in the bid-rigging and mail fraud conspiracies from as early as January 2004 until at least May 2010.
           
“The Antitrust Division continues to work with its law enforcement partners to ensure that real estate foreclosure auctions are fair and competitive,” said Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division Sharis A. Pozen.  “The division will vigorously pursue those who engage in collusive schemes to eliminate competition in the marketplace.”

FBI Special Agent in Charge of the Mobile FBI Office Lewis M. Chapman recognized the perseverance of agents and prosecutors in this complex investigation.  Chapman stated, “This investigation sends the message that real estate fraud including antitrust violations will continue to be pursued in these tough economic times, no matter how intricate the scheme.”

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum fine.  Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

DIVERSION OF DISCOUNTED DRUGS LEADS FLORIDA DOCTOR TO POSSIBLE JAIL CELL

The following excerpt is from the Department of Justice website:

Tuesday, February 21, 2012
“Michael Schoenwald of Hollywood, Fla., has pleaded guilty before Judge Herman Weber in Cincinnati to one count of conspiracy to commit mail and wire fraud in connection with a drug diversion scheme in which he was involved, the Justice Department announced.

The government information alleged that Dr. Schoenwald purchased prescription Lupron, an injectable drug used to treat prostate cancer, at discount rates due to his status as a health care provider.   Governing law prohibited Schoenwald from re-selling the drugs, and his agreement with the manufacturer provided that he would not do so.

Nevertheless, Schoenwald sold the Lupron to Gregory Pfizenmayer, who, in turn, sold the drugs to legitimate wholesalers in Ohio and elsewhere.   Pfizenmayer sold the drugs accompanied by documents, required by law, that contained false information about the source of the drugs.   A co-conspirator arranged the transactions between Schoenwald and Pfizenmayer.   Pfizenmayer pleaded guilty to one charge of conspiracy to commit mail and wire fraud in February 2011 and awaits sentencing.

Schoenwald received compensation from Pfizenmayer for the prescription drugs through wire transfers, and in turn paid his co-conspirator a share of the profits.   All told, Schoenwald, Pfizenm ayer and their co-conspirator sold over $1 million dollars worth of prescription drugs through this scheme.

“Diversion of prescription drugs casts doubt on the safety and quality of the medicines people rely on every day,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division.  “As this criminal prosecution demonstrates, we are committed to fighting these diversion schemes so that our prescription drugs in the United States remain the safest in the world.”

The case is being prosecuted by Assistant U.S. Attorney Anne Porter of the Southern District of Ohio and Assistant Director Mark Josephs of the Justice Department’s Consumer Protection Branch.   The investigation was conducted by the Food and Drug Administration, Office of Criminal Investigations and the U.S. Postal Inspection Service.”