Monday, October 22, 2012
FORMER FBI SPECIAL AGENT INDICTED FOR OBSTRUCTING JUSTICE FOR MONEY
FROM: U.S. DEPARTMENT OF JUSTICEWASHINGTON – A federal grand jury in Salt Lake City today returned an 11-count indictment charging a former FBI special agent and two alleged accomplices with a scheme to use the agent’s official position to derail a federal investigation into the conduct of one of the alleged conspirators. The charges were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the District of Utah David B. Barlow and Department of Justice Inspector General Michael E. Horowitz.
The indictment charges former FBI special agent Robert G. Lustyik Jr., 50, of Sleepy Hollow, N.Y.; Michael L. Taylor, 51, of Harvard, Mass., the principal of Boston-based American International Security Corporation (AISC); and Johannes W. Thaler, 49, of New Fairfield, Conn., each with one count of conspiracy, eight counts of honest services wire fraud, one count of obstructing justice and one count of obstructing an agency proceeding.
"According to the indictment, while active in the FBI, former Special Agent Lustyik used his position in an attempt to stave off the criminal investigation of a business partner with whom he was pursuing lucrative security and energy contracts," said Assistant Attorney General Breuer. "He allegedly acted through a childhood friend to secure promises of cash, purported medical expenses and business proceeds in exchange for abusing his position as an FBI agent. The alleged conduct is outrageous, and we will do everything we can to ensure that justice is done in this case."
DOJ Inspector General Horowitz stated: "Law enforcement officers are sworn to uphold the law. Agents who would sell their badges and impede the administration of justice will be vigorously pursued."
According to the indictment, Robert Lustyik was an FBI special agent until September 2012, assigned to counterintelligence work in White Plains, N.Y. The indictment also states that from at least June 2011, the three alleged conspirators had a business relationship involving the pursuit of contracts for security services, electric power and energy development, among other things, in the Middle East, Africa and elsewhere.
The indictment alleges that in September 2011, Taylor learned of a federal criminal investigation, begun in Utah in 2010, into whether Taylor, his business and others committed fraud in the award and performance of a contract with the U.S. Department of Defense.
Soon thereafter, Taylor allegedly began to give and offer things of value to Lustyik in exchange for Lustyik’s agreement to use his official position to impair and impede the Utah investigation. The indictment also alleges that Thaler, a childhood friend of Lustyik’s, served as a conduit between Taylor and Lustyik, passing information and things of value.
Specifically, the indictment charges that Taylor offered Lustyik a $200,000 cash payment; money purportedly for the medical expenses of Lustyik’s minor child; and a share in the proceeds of several anticipated contracts worth millions of dollars.
According to the indictment, Lustyik used his official FBI position to impede the Utah investigation by, among other things, designating Taylor as an FBI confidential source, texting and calling the Utah investigators and prosecutors to dissuade them from charging Taylor and attempting to interview potential witnesses and targets in the Utah investigation. As alleged in the indictment, Lustyik wrote to Taylor that he was going to interview one of Taylor’s co-defendants and "blow the doors off this thing." Referring to the Utah investigation, Lustyik also allegedly assured Taylor that he would not stop in his "attempt to sway this your way."
According to the indictment, Lustyik, Taylor and Thaler attempted to conceal the full extent of Lustyik’s relationship with Taylor from the Utah prosecutors and agents, including by making and planning to make material misrepresentations and omissions to federal law enforcement involved in the investigation of Taylor.
For example, the indictment alleges that on Sept. 8, 2012, after Taylor was searched at the border and his computer seized, Lustyik sent a text message to Thaler, stating: "You might have to save me and testify that only you r doing business." Nine days later, according to the indictment, Thaler told federal law enforcement agents – in a voluntary, recorded interview – that Lustyik was not involved in Taylor’s and Thaler’s business.
The pair also allegedly used an email "dead drop" to avoid leaving a record of their interactions and used the names of football teams and nicknames as part of their coded communications.
Taylor and Lustyik were both previously arrested on prior criminal complaints in this case. Taylor has been detained pending trial and Lustyik received a $2 million bond. Thaler is expected to surrender to authorities tomorrow.
If convicted, the defendants each face a maximum potential penalty of five years in prison on the conspiracy charge, 20 years in prison on each of the wire fraud charges, 10 years in prison on the obstruction of justice charge and five years in prison on the obstruction of an agency proceeding charge. Each charge also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense. The indictment also seeks forfeiture of any proceeds traceable to the conspiracy, wire fraud and obstruction of justice offenses.
FINAL FOREIGN PORT VISIT FOR USS ENTERPRISE
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| 121015-N-AP176-041 STRAIT OF MESSINA (Oct. 15, 2012) The aircraft carrier USS Enterprise (CVN 65) transits the Strait of Messina. Enterprise is deployed to the U.S. 6th Fleet area of responsibility conducting maritime security operations and theater security cooperation efforts. (U.S. Navy photo by Mass Communication Specialist 3rd Class Jeff Atherton/Released) |
Enterprise Arrives in Naples, Italy for Final Foreign Port Visit
By Mass Communication Specialist 1st Class (SW) Steve Smith,
Enterprise Carrier Strike Group Public Affairs
USS ENTERPRISE, At Sea (NNS) -- Aircraft carrier USS Enterprise (CVN 65) anchored off the coast of Naples, Italy, for its final port visit following seven months at sea, Oct. 16.
The visit serves to demonstrate the Navy's commitment to regional stability and maritime security in the U.S. 6th Fleet Area of Responsibility and to help strengthen the already positive relationship between the U.S. and Italy.
While in Italy, the Sailors and Marines of Enterprise and Carrier Air Wing (CVW) 1, the "Big E's" embarked air wing, will experience the rich history and culture of the historic city of Naples and take advantage of Morale, Welfare and Recreation (MWR)-sponsored tours to Rome, Pisa and Florence.
Crew members are also scheduled to participate in community outreach programs with a local church and orphanage.
Enterprise departed her homeport of Norfolk, Va., March 11 for a regular deployment to the U.S. 5th and 6th Fleet areas of responsibility to conduct maritime security operations, theater security cooperation efforts and missions in support of Operation Enduring Freedom.
Enterprise is scheduled to inactivate in a ceremony on Dec. 1, 2012, following the completion of the ship's current deployment, bringing to an end 51 years of distinguished service.
10 WAYS TO SAVE YOUR MONEY, ENERGY THIS WINTER: AN EPA GUIDE
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| Photo Credit: National Science Foundation |
Ten Ways to Save Money, Energy and Protect Your Health This Winter
WASHINGTON – With winter quickly approaching, the U.S. Environmental Protection Agency (EPA) is highlighting ten tips for Americans to protect their health, save money, and lower energy while enjoying the winter holiday season.
1. Maintain your heating equipment to lower utility bills. Heating and cooling costs account for about $1,000 -- nearly half of a home's total annual energy bill. Maintaining the efficiency of your home's heating, ventilation, and air conditioning (HVAC) system can have a big effect on your utility bills. Dirt and neglect can impact the efficiency of your HVAC system and are some of the top causes of heating system failure. Schedule an HVAC checkup with a licensed HVAC contractor to make sure your system is operating at peak performance. Also, check your system’s air filter every month and change it when it's dirty or at a minimum, every three months. A dirty filter will slow down air flow and make the system work harder to keep you warm or cool — wasting energy. http://www.energystar.gov/homeimprovement
2. Download EPA’s free Apps to help protect your health. The AIRNow app allows users to enter a zip code and get current particle pollution and ozone levels and forecasts for more than 400 cities across the country. The Ultraviolet (UV) Index provides an hourly forecast of the UV radiation levels from the sun. Both are available for Apple and Android phones. Learn more about these apps and the others: http://m.epa.gov/apps/index.html
3. Decorate for the holidays with Energy Star light strings that can last up to 10 times longer. Energy Star-qualified light strings use about 65 percent less electricity than incandescent light strings and are available in a variety of colors, shapes and lengths. They save energy and are more durable, shock-resistant and cooler to the touch. If every decorative light string sold in the U.S. this year were Energy Star qualified, Americans would save $80 million in utility bills and one billion pounds of greenhouse gas emissions would be prevented. http://www.energystar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=DS
4. Lower the temperature in your home to increase savings up to 12 percent. Control your home’s temperature while away or asleep by using one of the pre-programmed settings. Programming the thermostat to turn the temperature down 8 degrees for 7 hours each night and an additional 7 hours each weekday could result in a seasonal heating savings of approximately 12 percent. For the average home, this could result in savings of about $180. http://www.energystar.gov/index.cfm?c=products.pr_save_energy_at_home
5. Check for water leaks and install WaterSense products to save approximately $170 per year. The average household spends as much as $500 per year on their water and sewer bill, but approximately $170 per year can be saved by installing water-efficient fixtures and appliances. http://www.epa.gov/watersense
6. Reduce your food waste. Feed people, not landfills. Food is the single largest type of waste going to landfills and incinerators. Americans disposed of approximately 33 million tons of food waste in 2010. When excess food, leftover food, and food scraps are disposed of in a landfill, they decompose and become a significant source of methane - a potent greenhouse gas. Much of the food that is discarded in landfills is actually safe, wholesome food that could have been used to feed people. So when you are thinking about making your family dinner, think about how you can reduce your food waste to save money, help communities, and protect the environment. http://www.epa.gov/osw/conserve/materials/organics/food/fd-house.htm
7. Look for the Design for the Environment label on more than 2,800 products during winter cleaning. EPA's Designed for the Environment (DfE) logo differentiates products that use only the safest ingredients to protect people, our pets, and the environment. In 2011, Americans using DfE products cut the use of harmful chemicals by more than 756 million pounds. http://www.epa.gov/dfe/
8. Test your home for radon gas, 1 in 15 homes may have elevated levels. Radon, a colorless odorless gas, is the leading cause of lung cancer among non-smokers and levels can increase during colder months. Purchase an affordable Do-It-Yourself test kit online or at a local hardware store to determine the level in your home. Addressing high levels often costs the same as other minor home repairs. http://www.epa.gov/radon
9. Learn before you burn and cut firewood use by more than 30 percent. The Burn Wise program has best burn practices to help better protect your home and your health. Never burn garbage, cardboard, ocean driftwood or wet wood. If you replace an old wood stove with a more efficient one, efficiency can increase by 50 percent, 1/3 less wood can be used for the same heat and 70 percent less particle pollution indoors and out are produced. http://www.epa.gov/burnwise/
10. Prevent Pests. Now is the time when pests such as insects and rodents may try to move indoors. Eliminate sources of food, water, and shelter to reduce pest problems. Prevent pests by using caulk to eliminate cracks, repair water leaks, remove clutter, and clean up crumbs and other food sources. If you decide to use a pesticide, read the label first. The pesticide label is your guide to using pesticides safely and effectively. It contains pertinent information that you should read and understand before you use a pesticide product. http://www.epa.gov/safepestcontrol/
ARMY RUNNER RUNS FAST
FROM: U.S. DEPARTMENT OF DEFENSEArmy Spc. Shernette Hyatt, a supply clerk stationed in South Korea with the 2nd Infantry Division, is a world-class sprinter and graduate of St. John's University in New York City. A native of Jamaica, Hyatt is determined to represent her country in the Olympic Games. U.S. Army courtesy photo
2nd Infantry Division
GYEONGGIDO, South Korea, Oct. 19, 2012 - The Army prides itself on recognizing excellence, and when it came across Spc. Shernette Hyatt leaders were astonished by her running ability.
Hyatt began running when she was 5 years old while she was living with her grandparents in Jamaica. While her grandfather wanted her to pursue her running, her grandmother forbade it. However, Hyatt's grandfather would secretly time her as she ran to the store, watching those times steadily decrease.
One day at school, Hyatt ran a sprint with her friends, not knowing her grandmother was walking by the school at that exact moment. Hyatt beat all her classmates with ease, and her grandmother saw everything.
As her grandmother approached, Hyatt apologized profusely, tears streaming. But, to her surprise, her grandmother gave her a big hug.
"I am so proud of you. I didn't know you could run like that," Hyatt's grandmother said. "Don't let anybody take this from you. This is your strength."
Moving to Long Island, N.Y., at the age of 13, Hyatt continued to hone her running skill throughout middle school and high school, making a name for herself in the athletic community.
She eventually accepted a full track and field scholarship to St. John's University in New York City after completing her associate's degree at Nassau Community College and earning two MVP awards in the 100-meter and 200-meter dash.
Hyatt eventually competed in Jamaica's Olympic trials, placing fifth. Unfortunately, budget constraints limited the number of athletes on the roster to only four. Hyatt was left out.
To continue her quest for athletic glory, Hyatt joined the North American, Central American and Caribbean Athletic Association. To financially support herself during this time, she began filling in as a substitute teacher in Florida.
Despite her continued athletic success, events in her personal life forced her to put running on hold. Soon after, she joined the Army. While serving as a Warrior Division supply clerk with Company B, Headquarters and Headquarters Battalion, her hopes were rekindled when she learned of the Army World Class Athlete Program, an opportunity she hopes to pursue in the near future.
Hyatt was recently inducted into the Nassau Community College's Athletic Hall of Fame, and the National Junior College Athletic Association Hall of Fame.
"I love where my life has taken me, from being a running child to the proud soldier I am today," she said.
As she leaves South Korea during her upcoming permanent change of station move to Hawaii, Hyatt offered this advice to other Army athletes. It is the same wisdom that has served as her inspiration for most of her life.
"This is your strength. Don't let anybody take it away from you," she said.
U.S. DEPUTY SECRETARY BURNS INTERVIEWS WITH INDIAN MEDIA
Interview With Indian Media
Press Conference
William J. Burns
Deputy Secretary
New Delhi,, India
October 19, 2012
I am very happy to be back in New Delhi at the end of a trip that has also taken me to Japan, South Korea, China and Burma. I am also proud to have been able to contribute in a small way over the past five years, through two administrations, first as Under Secretary of State for Political Affairs and now as Deputy Secretary of State, to the development of an historic partnership between India and the United States. That period has spanned the completion of the civilian nuclear agreement in 2008 as well as the landmark visits of Prime Minister Singh to Washington in 2009 and President Obama to New Delhi and Mumbai in 2010. And today, I am very proud to reemphasize that our strategic partnership with India is of abiding importance to the United States and one in which both our governments continue to make broad and enduring investments.
Since Secretary Clinton hosted Minister Krishna in Washington in June for the third U.S.-India Strategic Dialogue, the interaction between our two governments has continued to deepen and expand. Strong support across the political spectrum in the United States, as well as in India, gives us reason for continued optimism about the bilateral relationship in the years ahead.
Bilateral trade, as you know, is flourishing, and is expected to surpass $100 billion this year. We have done a considerable amount to remove impediments to further expansion of our trade relationship, including in high technology and defense trade, but there is more that we can do. Concluding a Bilateral Investment Treaty should be a top priority for both our countries, and would send a positive signal to our business communities.
I look forward to exchanging views today on how we can continue to advance our civil nuclear cooperation, to which we remain committed, and to deepening our defense and counterterrorism cooperation.
We are encouraged by the Indian government’s recent bold steps toward economic reforms. As Treasury Secretary Geithner said, these reforms will foster economic growth, with increased investment, and greater prosperity. Once implemented, we are confident that U.S. investors will respond positively to these measures with concrete, job-creating projects and proposals.
I also look forward to exchanging views today on regional economic cooperation, including with Afghanistan and Pakistan. We welcome the progress the Indian government has made with Pakistan on building trade and investment ties and appreciate the leading role India has played in spurring private sector investment in Afghanistan.
India has an important voice in the Asia-Pacific region, and it is fitting that I conclude a trip to a number of leading Asia-Pacific powers with a stop in Delhi. I look forward to discussing our mutual goals for the East Asia Summit and the ASEAN Summit, along with our shared interested in promoting maritime security in the Indo-Pacific region and connectivity between India and Southeast Asia.
We appreciate India’s efforts to urge Iran’s compliance with its international obligations and to resume P5+1 talks on its nuclear program. In our judgment, tough sanctions are necessary to bring Iran back to the negotiating table and to abandon its nuclear weapons program.
I look forward to thanking my Indian colleagues for India’s immediate and strong statement of support following the attack on our diplomatic mission in Benghazi, Libya and for steps the government has taken to ensure the safety and security of our personnel throughout India.
India is a model of democratic governance, tolerance and rule of law, and can play a critical role throughout the Middle East and North Africa, as well as East Asia, to support the strengthening of democratic institutions, civil society, education, and many other fields. We look forward to partnering with India on these important challenges in the months and years to come.
HALFWAY HOUSE OWNER SENTENCED TO PRISON FOR MEDICARE FRAUD
FROM: U.S. DEPARTMENT OF JUSTICEThursday, October 18, 2012
Owner and Operator of Florida Halfway House Company Sentenced to 51 Months in Prison for Role in Medicare Fraud Scheme
WASHINGTON – The owner and operator of New Way Recovery Inc., a Florida corporation that operated several halfway houses, was sentenced today to serve 51 months in prison for his role in a $205 million Medicare fraud scheme involving fraudulent claims for purported partial hospitalization program (PHP) services, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent-in-Charge Christopher B. Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.
Hassan Collins, 41, was sentenced by U.S. District Judge Kevin Michael Moore in the Southern District of Florida. In addition to his prison term, Collins was sentenced to serve three years of supervised release and ordered to pay $2,413,675 in restitution, jointly and severally with co-conspirators.
On June 14, 2012, Collins pleaded guilty to one count of conspiracy to receive and pay health care fraud kickbacks.
According to court documents, from approximately April 2004 through approximately September 2010, Collins, along with co-conspirators, received kickback payments in exchange for referring Medicare beneficiaries, who did not qualify for PHP treatment, for purported PHP services to American Therapeutic Corporation (ATC), a Florida corporation that operated several purported PHPs throughout Florida. Collins and his co-conspirators caused false and fraudulent claims to be submitted to Medicare for PHP services purportedly provided to Medicare beneficiaries at ATC’s locations, when, in fact, the services were never provided.
In related cases, ATC, its management company, Medlink Professional Management Group Inc. and various owners, managers, doctors, therapists, patient brokers and marketers of ATC, were charged with various health care fraud, kickback, money laundering and other offenses in two indictments unsealed in February 2011. ATC, Medlink and more than 20 of the individual defendants charged in these cases have pleaded guilty or have been convicted at trial.
The case is being prosecuted by Fraud Section Trial Attorney Allan J. Medina. The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
A SALUTE TO THE USS FORT WORTH
FROM: U.S. NAVY
Vice Adm. Tom Copeman, commander of Naval Surface Force, U.S. Pacific Fleet, renders a salute during a pass in review by the Freedom-class littoral combat ship USS Fort Worth (LCS 3) as she arrives in San Diego. Fort Worth was commissioned Sept. 22, 2012, in Galveston, Texas, and will be assigned to U.S. Pacific Fleet. U.S. Navy photo by Mass Communication Specialist 2nd Class Rosalie Garcia (Released) 121018-N-DH124-060
FOREST AND THE BLOWN-DOWN TREES
Photo Credit: WikimediaFROM: NATIONAL SCIENCE FOUNDATION
In Blown-Down Forests, a Story of Survival
In newscasts after intense wind and ice storms, damaged trees stand out: snapped limbs, uprooted trunks, entire forests blown nearly flat.
In a storm's wake, landowners, municipalities and state agencies are faced with important financial and environmental decisions.
A study by Harvard University researchers, supported by the National Science Foundation (NSF) and published in the journal Ecology, yields a surprising result: when it comes to the health of forests, native plants and wildlife, the best management decision may be to do nothing.
Salvage logging is a common response to modern storm events in large woodlands. Acres of downed, leaning and broken trees are cut and hauled away.
Landowners and towns financially recoup with a sale of the damaged timber. But in a salvaged woodland landscape, the forest's original growth and biodiversity, on which many animals and ecological processes depend, is stripped away.
A thickly growing, early-successional forest made up of a few light-loving tree species develops in its place.
But what happens when wind-blown forests are left to their own devices?
The Ecology paper reports results of a 20-year study at NSF's Harvard Forest Long-Term Ecological Research (LTER) site in Massachusetts. Harvard Forest is one of 26 such NSF LTER sites around the world in ecosystems from coral reefs to deserts, grasslands to the polar regions.
"To manage sustainable ecosystems, we must understand how they recover from extreme, natural events, such as hurricanes, fires and floods," says Matt Kane, a program director at NSF for LTER. "This process can take decades. The NSF LTER program is uniquely able to support important experiments at the time scales needed."
At Harvard Forest in 1990, a team of scientists recreated a major hurricane in a two-acre patch of mature oak forest.
Eighty percent of the trees were flattened with a large winch and cable. Half the trees died within three years, and the scientists left the dead and damaged wood on the ground.
In the 20 years since, the researchers have monitored everything from soil chemistry to the density of leaves on the trees.
What they found is a remarkable story of recovery.
Initially, the site was a nearly impassable jumble of downed trees. But surviving, sprouting trees, along with many new seedlings of black birch and red maple--species original to the forest--thrived amid the dead wood.
Although weedy invasive plants initially tried to colonize the area, few persisted for long.
"Leaving a damaged forest intact means the original conditions recover more readily," says David Foster, co-author of the paper and director of the NSF Harvard Forest LTER site.
"Forests have been recovering from natural processes like windstorms, fire and ice for millions of years. What appears to us as devastation is actually, to a forest, a natural and important state of affairs."
After severe tornadoes in Massachusetts in June 2011, the Commonwealth of Massachusetts' Division of Fisheries and Wildlife pursued a watch-and-wait policy at a site in Southbridge, Mass.
There, salvage work is limited to providing access routes for public safety.
The area is quickly regaining lush, native vegetation. It supports everything from invertebrates to salamanders, and black bears that winter in thick brush piles and forage for insects in rotting logs.
While a range of economic, public safety and aesthetic reasons seems to compel landowners to salvage storm-damaged trees, paper co-author Audrey Barker-Plotkin of the Harvard Forest site suggests that improving forest health should not be one of them.
"Although a blown-down forest appears chaotic," she says, "it is functioning as a forest and doesn't need us to clean it up."
-NSF-
Sunday, October 21, 2012
BILLION DOLLAR HEDGE FUND ADVISORY FIRM CHARGED WITH COOKING THE BOOKS BY SEC
FROM: U.S SECURITIES AND EXCHANGE COMMISSIONWashington, D.C., Oct. 17, 2012 – The Securities and Exchange Commission today charged a former $1 billion hedge fund advisory firm and two executives with scheming to overvalue assets under management and exaggerate the reported returns of hedge funds they managed in order to hide losses and increase the fees collected from investors.
The SEC alleges that New Jersey-based Yorkville Advisors LLC, founder and president Mark Angelo, and chief financial officer Edward Schinik enticed pension funds and other investors to invest in their hedge funds by falsely portraying Yorkville as a firm that managed a highly-collateralized investment portfolio and employed a robust valuation procedure. They misrepresented the safety and liquidity of the investments made by the hedge funds, and charged excessive fees to the funds based on the fraudulently inflated values of the investments.
This is the seventh case arising from the SEC’s Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny.
"The analytics put Yorkville front and center on our radar screen," said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. "When we looked further we found lies to investors and the firm’s auditors as well as a scheme to inflate fees by grossly overvaluing fund assets. We will continue to pursue hedge fund managers whose success is based on fiction rather than fact."
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Yorkville, Angelo, and Schinik defrauded investors in the YA Global Investments (U.S.) LP and YA Offshore Global Investments Ltd hedge funds.
The SEC alleges that Yorkville and the two executives:
Ignored negative information about certain investments by the funds.
Withheld adverse information about fund investments from Yorkville’s auditor, which enabled Yorkville to carry some of its largest investments at inflated values.
Misled investors about the liquidity of the funds, collateral underlying the investments, and Yorkville’s use of a third-party valuation firm.
The SEC alleges that by fraudulently making Yorkville’s funds more attractive to potential investors, Angelo and Schinik enticed more than $280 million in investments from pension funds and funds of funds. This enabled Yorkville to charge the funds at least $10 million in excess fees based on the inflated values of Yorkville’s assets under management.
The SEC’s complaint charges Yorkville with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. Yorkville also is charged with violating Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. Angelo is charged with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1), (2) and (4) of the Advisers Act and Rule 206(4)-8. He also is charged with aiding and abetting Yorkville’s violations of the Exchange Act and Advisers Act. Schinik is charged with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, and with aiding and abetting Yorkville’s violations of the Exchange Act and Advisers Act.
The SEC’s Aberrational Performance Inquiry is a joint effort among staff in its Division of Enforcement, Office of Compliance, Inspections and Examinations, and Division of Risk, Strategy and Financial Innovation. The SEC’s investigation was conducted by Stephen B. Holden, Brian Fitzpatrick, and Kenneth Gottlieb with the support of Frank Milewski under the supervision of Valerie A. Szczepanik and Ken Joseph. The SEC’s litigation is being led by Todd Brody.
SEC CHARGES FORMER PRESIDENT OF CARTER'S INC., WITH ENGAGING IN FINANCIAL FRAUD
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
On October 18, 2012, the Securities and Exchange Commission charged Joseph Pacifico, a former President of Carter’s, Inc., the Atlanta-based marketer of children’s clothing, for engaging in financial fraud at Carter’s. The SEC alleges that Pacifico’s misconduct caused Carter’s to materially misstate its net income and expenses in several financial reporting periods between 2004 and 2009.
The SEC’s complaint, filed in the United States District Court for the Northern District of Georgia, alleges that between 2004 and 2009, Carter’s Executive Vice President of Sales, Joseph Elles, who reported to Pacifico, fraudulently manipulated the amount of discounts that Carter’s granted to its largest wholesale customer in order to induce that customer—itself a large national department store—to purchase greater quantities of Carter’s clothing for resale. Elles then concealed his conduct by persuading the customer to defer subtracting the discounts from payments until later periods and creating and signing false documents misrepresenting the timing and amount of those discounts to Carter’s accounting personnel.
After Pacifico discovered Elles’s scheme, the complaint alleges that Pacifico signed a false certification to Carter’s accounting personnel that understated the amount discounts that Carter’s owed to the customer. The complained also alleges that Pacifico signed false internal forms that also misstated that discounts to be paid to the customer related to sales in 2009 when, in fact, the discounts related to prior financial periods. After conducting its own internal investigation, Carter’s was required to issue restated financial results for the affected periods.
The SEC’s complaint alleges that Pacifico violated Section 17(a)(2) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5(b) and 13b2-1 thereunder, and aided and abetted Carter’s violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5(b),12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The SEC is seeking permanent injunctive relief, financial penalties, and an officer and director bar against Pacifico.
FORMER EXECUTIVES GO TO PRISON FOR INVOLVEMENT IN INVESTMENT BOND CONSPIRACY
Thursday, October 18, 2012
Three Former Financial Services Executives Sentenced to Serve Time in Prison for Roles in Conspiracies Involving Investment Contracts for the Proceeds of Municipal Bonds
WASHINGTON – Three former financial services executives were sentenced today in U.S. District Court for the Southern District of New York, for their participation in conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced. The three former executives were convicted after a three week trial on May 11, 2012.
Dominick P. Carollo, Steven E. Goldberg and Peter S. Grimm, all former executives of General Electric Co. (GE) affiliates, were sentenced by District Court Judge Harold Baer Jr. for their roles in the conspiracies. Carollo was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine. Goldberg was sentenced to serve 48 months in prison and to pay a $90,000 criminal fine. Grimm was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine.
"By manipulating the competitive bidding process, the conspirators cheated cities and towns out of money for important public works projects," said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. "The division and its law enforcement partners remain committed to rooting out such corruption."
According to evidence presented at trial, while employed at GE affiliates, Carollo, Goldberg and Grimm participated in separate fraud conspiracies with various financial institutions and insurance companies and their representatives from as early as 1999 until 2006. These institutions and companies, or "providers," offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Goldberg also participated in the conspiracies while employed at Financial Security Assurance Capital Management Services LLC.
At trial, the Department of Justice asserted that Carollo, Goldberg, Grimm and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to the provider companies where they were employed. Carollo, Goldberg and Grimm deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country millions of dollars.
"Today’s sentencing of Carollo, Goldberg and Grimm for their involvement manipulating a competitive bidding process of public contracts is the final step in a case that demonstrates the FBI’s commitment to investigate and prosecute those who illegally influence the financial markets for their own profit," said Mary E. Galligan, Acting Assistant Special Agent Charge of the FBI in New York. "The co-conspirators scheme over many years deprived municipalities across the country of competitive interest rates on bonds, a yield that most cities would say they greatly need. The FBI will continue to work with our law enforcement partners to enforce the laws that protect our financial markets."
"The sentences handed down today send a clear message that crime motivated by outright greed will land you in jail," said Richard Weber, Chief, Internal Revenue Service – Criminal Investigation (IRS-CI). "Quite simply, the defendants stole money from taxpayers and conspired to manipulate the competitive bidding system to benefit themselves instead of the towns and cities that needed this money for important public works projects. IRS Criminal Investigation is committed to working with our law enforcement partners to uncover this kind of corruption and secure justice for American taxpayers."
Carollo was found guilty on two counts of conspiracy to commit wire fraud and defraud the United States, Goldberg was found guilty on four counts of conspiracy to commit wire fraud and defraud the United States and Grimm was found guilty on three counts of conspiracy to commit wire fraud and defraud the United States.
A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation. Including today’s convictions, a total of 19 individuals have been convicted or pleaded guilty, and one awaits trial. Additionally, one company has pleaded guilty.
The sentences announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York Office, the FBI and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
Today’s convictions are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov .
SEC CHARGES THREE INDIVIDUALS FOR THEIR ROLES IN A $5.77 MILLION INVESTMENT SCHEME
FROM: SECURITIES AND EXCAHNGE COMISSIONOn October 18, 2012, the United States Securities and Exchange Commission charged Geoffrey H. Lunn, Darlene A. Bishop and Vincent G. Curry for their roles in making false and misleading statements to investors and misappropriating investors’ money in connection with a $5.77 million investment scheme under the name of Dresdner Financial, a fictitious financial services company purportedly based in Chicago, Illinois.
The SEC’s complaint, filed in the U.S. District Court for the District of Colorado, alleged that between February 2010 and February 2011, the defendants raised $5.77 million from at least 70 investors located throughout the United States and several foreign countries. According to the complaint, Lunn solicited marketers and investors to the scheme by telling them that he was the Vice-President of Dresdner and that Dresdner’s principals had connections to Dresdner Bank (formerly one of Germany’s largest banks). As marketers, Bishop and Curry played significant roles in the scheme by soliciting and lulling investors while receiving payments from the investors’ money. The complaint alleged that Lunn, Bishop and Curry told investors that Dresdner offered 100% guaranteed rates of return through a process involving the lease and monetization of bank instruments. For example, the defendants told investors that by investing $44,000 in Dresdner’s .44 Magnum Leveraged Financing Program, they would receive a payment of $2 million within 10-12 banking days. When they were unable to repay investors after the promised 10-12 days, the defendants perpetuated the scheme by repeatedly postponing the payout dates and claiming that the delays were due to holds placed by banks or the government. In reality, all of these statements were false and Dresdner and its investment programs were nothing more than an elaborate hoax.
According to the complaint, Lunn did not invest any of the investors’ funds as promised. Instead, Lunn began making cash withdrawals from the investors’ money after the very first deposit. Over the course of the scheme, Lunn withdrew over $1 million in cash and Western Union transfers which he claims to have given to Dresdner’s creator, a one-eyed man who used the alias "Robert Perello." Lunn also gave at least $848,500 to three Las Vegas call girls, paid over $1.3 million to marketers (including over $650,000 to Bishop and Curry), paid $1 million to a favored investor in a Ponzi-like payment, and using the remaining investor funds to pay for his personal and business expenses.
The SEC’s complaint alleges that Lunn, Bishop and Curry violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933, the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the broker registration provisions of Section 15(a) of the Exchange Act. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest and civil penalties against all three defendants.
U.S.-INDIA SECURITY TIES
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| Map: India. Credit: U.S. State Department |
Pacom Chief Encourages Closer U.S.-India Security Ties
By Donna Miles
American Forces Press Service
WASHINGTON, Oct. 15, 2012 - In his first visit to India as commander of U.S. Pacific Command, Navy Adm. Samuel J. Locklear III encouraged a closer defense relationship between the United States and India in which they address shared interests to promote long-term regional security and stability.
Locklear emphasized the U.S. interest in taking its relationship with India to the next level during meetings with Defense Minister A.K. Antony, Chief of Integrated Defense Staff Vice Adm. SPS Cheema and other officials in New Delhi.
"Building a strong military relationship with India builds understanding and deepens established ties that will contribute to the larger Asia-Pacific region," Locklear said during an Oct. 12 roundtable discussion at the Observer Research Foundation think tank following the sessions.
Locklear, who made a priority of developing the U.S.-India strategic partnership when he took the helm at Pacom in March, noted the two countries' common values and their mutual interest in a secure environment that promotes stability and allows economies to grow.
He emphasized the impact of globalization, which has increased the importance of sea lanes as a conduit of global commerce and the free flow of information in cyberspace.
"The economic system is so interlocked that a disruption of the flow of ... goods that disrupts the economy, in and of itself, is a security threat," the admiral told a Hindustan Times reporter.
But globalization also has given rise to terrorist structures and groups conducting illicit activities no longer limited by national borders, he noted. That demands closer cooperation among regional nations so they can work together to support their shared concerns, Locklear said.
"We're seeing an environment that demands more multilateralism," he said. "A regional environment utilizing strengthened partnerships and alliances will uphold long-term diplomacy, security and prosperity."
Locklear noted a "quite productive" effort to increase compatibility between the U.S. and Indian militaries, particularly in the maritime domain. But he encouraged closer future cooperation in two additional areas: counterterrorism and disaster response.
"I believe that where we have the most to gain in interaction is counterterrorism," he said. "We both have similar concerns, not just about counterterrorism in the immediate area of any one country. It's the spread of that terrorism, and its ability to upset the security environment in a way not productive for the future."
Locklear also recognized the value of regional collaboration to provide better responses to natural disasters and reduce suffering. "Militaries have a role in being able to respond early and jump start [that response]," he said. "I believe the United States and India share a very similar perspective on the importance of that."
To improve their ability to work cooperatively, the admiral acknowledged the need to increase technology-sharing. Defense Secretary Leon E. Panetta made that point when he visited India in June, and Deputy Defense Secretary Ashton B. Carter re-emphasized it during his follow-up visit to New Delhi in July.
"When it relates to our defense trade initiatives, there needs to be some streamlining, with more efficiency in it," Locklear agreed. "Certainly the timelines and bureaucracies on both sides need to be streamlined."
He applauded efforts both countries are making in that direction, recognizing that increasing compatibility benefits the entire region.
"We ... need the Indian military to have the very best equipment it can," Locklear said. "It is in the best interest of Pacom, and I believe of the security of the Asia-Pacific region, for the United States and our partners and allies in this region to be able for us to come together in a military way and be able to operate together effectively when necessary."
Asked about China's role, Locklear emphasized the importance of engaging positively with China as it emerges as a regional and global power and leader.
"If you step back and look at the strategic rise of China, it shouldn't be unexpected that as China rises in both economic and military power, they will start to have a greater influence on their neighbors and the region in which they live, and eventually, on the global environment," he said.
"The question is, 'How do we as a global community ... attempt to allow China to ... become a productive member of the security environment?'" Locklear said. "India and the U.S. share that as a common concern, and it should be a common objective."
The alternative, he said, is not good for anyone. Historically, turmoil has occurred when emerging powers like China entered into mature security environments that included a superpower like the United States. "In the past, we haven't had a lot of success with that happening without conflict," Locklear said.
"But today, the stakes are different. The world population is much more interlocked than in the past," he said. "We must see a future where China emerges productively and is contributing to a secure, peaceful environment and is not on the outside, looking in, or vice versa."
(Army Staff Sgt. Carl N. Hudson of U.S. Pacific Command contributed to this article.)
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