FY2005 Examples of Money Laundering Investigations
The following examples of money laundering fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted. Criminal Investigation special agents participated in these multi-agency money laundering investigations by conducting the complete financial investigative aspects of the case.
Haitian Cocaine Trafficker Draws Life Sentence
On September 30, 2005, in Miami, FL, Serge Edouard was sentenced to life in prison and a forfeiture of $17.6 million after being convicted by jury of conspiring to import more than five kilograms of cocaine in to the United States, conspiracy to commit money laundering, and nine individual counts of money laundering. Evidence presented at trial proved that from 1998 until 2004, Edouard was head of a large-scale cocaine smuggling organization that imported thousands of kilograms of cocaine from Haiti into Miami and New York. The smuggling organization returned millions of dollars in drug proceeds from the United States back to Edouard in Haiti. Edouard then laundered the proceeds in a variety of ways, including paying corrupt high-ranking Haitian officials to protect his drug activities.
$8 Million Foreign Investment Nets Prison Terms for Central Coast Father-and-Son Team
On September 27, 2005, in Los Angeles, CA, James Carroll Sexton was sentenced yesterday to 88 months in federal prison. His son, James Carroll Sexton Jr. was sentenced yesterday to 21 months in prison. The Sextons each pleaded guilty on March 10, 2005, Sexton Jr. pleaded guilty to four counts of mail fraud and a conspiracy to launder money. The elder Sexton pleaded guilty to 11 counts of mail fraud, two counts of wire fraud, four counts of money laundering, and one count of conspiracy to money launder. The elder Sexton posed as an attorney and told victims he would establish a "bank within a bank," or a trust account, at banks in Liechtenstein, a country near Switzerland with strict bank secrecy laws. Victims testified that they were told their money would be safe, secure and held under their sole control. Bank records and witnesses showed that between May 1998 and February 1999 victims transferred more than $8 million to the accounts ostensibly established on their behalf by Sexton. In reality, Sexton was the sole owner and controller of the accounts. When foreign bankers began to question Sexton about the true owners of the funds, he misrepresented the source of funds and, with the assistance of Sexton Jr., withdrew the victims' funds and moved the money through various other foreign bank accounts under fictitious names and nominees in an effort to conceal and disguise ownership. Liechtenstein law enforcement authorities provided extensive and prompt assistance to United States authorities and returned more than $4 million of the fraud proceeds to the U.S.
Drug Dealer Sentenced to 40 Years Imprisonment
On September 23, 2005, in Fort Worth, TX, Kevin Shed was sentenced to 480 months in prison for conspiracy to distribute controlled substances and 240 months for conspiracy to commit money laundering, to run concurrently. Shed had pled guilty to the two offenses in March 2004 and also agreed to forfeit a residence in Arlington, Texas. Shed admitted in his plea that beginning in 1999 and continuing until November 5, 2003, he and co-defendants Paula Holland, Quincy Levine, and Alan Williams conspired to possess with the intent to distribute cocaine and crack cocaine. Shed would obtain multi-kilogram quantities from suppliers of cocaine and then either sell the cocaine or produce crack cocaine fro distribution. Shed then had these co-defendants distribute the controlled substances as well as collect payments for the narcotics. Shed also admitted that during the same time period, he used the proceeds he generated from the distribution of controlled substances to acquire assets including luxury vehicles and a house and to take trips. Shed engaged the assistance of his father, Robert Shed, and others to purchase and title assets in their names while he gave them cash or money orders to make payments. These transactions were specifically intended to disguise the source, ownership, location and control of the proceeds. Co-defendants Paula Holland, Robert Shed, Alan Williams and Quincy Levine pled guilty and were sentenced for their involvement. Holland was sentenced to 151 months imprisonment; Robert Shed was sentenced to 24 months imprisonment; Alan Williams was sentenced to 15 years imprisonment; and Quincy Levine was sentenced to 30 years imprisonment.
Multi-Million Dollar Embezzlement Scheme and Largest Seizure of Funds for Forfeiture in Delaware History
On September 16, 2005, in Wilmington, DE, Josef F. Murphy was sentenced to 36 months in prison. Murphy pleaded guilty on June 16, 2005, to laundering 29 checks totaling $8,239,197 that he embezzled from his former employer. In pleading guilty, Murphy acknowledged he had taken nine additional fraudulent checks totaling $2,455,069. The 38 fraudulent checks embezzled by the defendant totaled $10,694,267. Murphy also pleaded guilty to using $87,000 of the proceeds of the crime towards the purchase of a $411,000 home in September 2004. According to the facts, an audit conducted by AMG revealed that Murphy, while employed as a credit collection manager, embezzled $10,694,267 by forging documents showing that various AMG customers were due refunds and then requisitioning checks payable to those customers. Murphy would request that the checks be given to him and emphasized that the checks should not be mailed to the customers in question. Murphy then deposited them in bank accounts he opened at Atlantic Bank of New York in the names of the payees on the checks. Investigators traced proceeds, which were frozen and seized for forfeiture, into accounts held by Murphy at TD Waterhouse and Ameritrade.
Elmsford, New York - Man Who Hid Income in Offshore Bank Accounts Sentenced on Tax Fraud Charges
On September 13, 2005, in White Plains, NY, Robert Martire was sentenced to 24 months imprison for trying to conceal income from the IRS by hiding money in offshore bank accounts in the Isle of Man. According to the information, in approximately 1994 Martire opened bank accounts on the Isle of Man in the names of several corporations that he controlled. By 1999, the values of these accounts exceeded $578,000. From 1996 to 1998, Matire transferred more than $358,000 out of the Isle of Man accounts, either to himself or to others to expend on his behalf. Matire failed to report this income on his tax returns for the years 1996 through 1998, and falsely claimed on those returns that he did not have an interest in or signature authority over a financial account in a foreign country. Matire also knowingly failed to disclose his authority over the Isle of Man accounts for the tax year 1999.
Stockton Man Sentenced to Seventy Months for Structuring Financial Transactions and Operating an Illegal Wire Transmitting Business
On September 12, 2005, in Sacramento, CA, Sekharith Be was sentenced to 70 months in prison based on his convictions for structuring financial transactions and for operating an illegal wire transmitting business. He was also ordered to pay a fine of $12,500, and to forfeit his interest in various assets including currency, gems and jewelry. Be pled guilty and admitted that during the period from June 2000 to May 2004, he repeatedly directed others to break down cash deposits that were in excess of $10,000 into deposits of smaller amounts in order to evade the federal Currency Transaction Reporting ("CTR") requirement. Under the CTR requirement, banks are obligated to report cash transactions involving more than $10,000. Be also admitted that, between October 2001 and October 2003, he operated an illegal wire transmitting business. In total, Be admitted to wire transferring approximately $22.7 million from bank accounts he controlled in the United States to a bank account in Cambodia.
Buncombe County Farmers Sentenced in Federal Crop Insurance Fraud Scheme
On September 8, 2005, in Charlotte, NC, Robert and Vicki Warren were sentenced on charges related to a massive crop insurance fraud scheme. Robert Warren was sentenced to 76 months in prison, followed by three years supervised release after pleading guilty to conspiracy to defraud the Federal Crop Insurance Corporation (“FCIC”) and conspiracy to commit money laundering. Vicki Warren was sentenced to 66 months in prison, followed by three years supervised release after pleading guilty to conspiracy to defraud the FCIC and to one count of mail fraud. The Warrens agreed to the forfeiture of $7.3 million in proceeds of their crimes, and $9.15 million in restitution to the USDA. According to the indictment, the defendant’s scheme began in 1997 to defraud the FCIC and private insurance companies insured by the FCIC of million of dollars. The Warren’s carried out the scheme by creating false records and reports relating planting, harvesting and overall tomato production on their farm. The Warren’s also staged false weather disasters to substantiate there false claims.
Oklahoma Investment Advisor Sentenced to 10 years in Prison and Ordered to Pay Over $9 Million in Restitution for Securities Fraud Ponzi Scheme
On September 7, 2005, in Oklahoma City, OK, Marsha Kay Schubert was sentenced on charges of money laundering. Schubert was sentenced to 120 months in federal prison and ordered to pay $9,114,747 in restitution to the victims of the fraud scheme. Schubert was a securities broker and investment advisor who operated the securities fraud ponzi scheme out of her Crescent, OK office. Schubert pled guilty in May 2005 to a one count information charging that on September 25, 2002, she engaged in money laundering when she transferred funds through a check of $97,704 drawn on an account at Farmers & Merchant Bank, knowing that the funds were derived from criminal conduct involving securities fraud. As part of the plea agreement, Schubert agreed that the offense involved violations of securities law and, at the time of the offense, the offense involved up to 250 victims.
Principal of Greybor Medical Transportation Sentenced to 108 Months in Prison in Health Care Fraud Case
On September 2, 2005, in Los Angeles, CA, Boris Shpirt, owner and operator of Greybor Medical Transportation, was sentenced to 108 months in prison, fined $50,000 and ordered to pay more than $2.4 million in restitution for federal health care fraud, money laundering and filing false tax returns. Shpirt’s wife Jenny Shpirt was sentenced to 18 months in prison and ordered to pay a $15,000 fine for filing false tax returns. Evidence presented at trial showed the Greybor regularly submitted claims to Medicare that falsely stated a patient’s status. These false statements to the government insurance program allowed Greybor to be reimbursed by Medicare when it was not entitled to receive payment. The Shpirt’s laundered proceeds from Greybor through a company they set up using the income for their own personal use. In 1999 and 2000, the Shpirts underreported their income by more than $1.1 million.
Orlando Business Tycoon and Accountant Sentenced
On September 2, 2005, in Orlando, FL, Mohammed Saleem Khanani, the owner and operator of several gift shops in the Orlando, Florida area, was sentenced Friday, September 6, 2005, to 70 months in prison for conspiracy, employment and income tax evasion, harboring illegal aliens, and mail and wire fraud. His accountant, David Portlock was sentenced to 48 months on the same charges. Khanani was also ordered to pay restitution to the State of Florida for sales tax collected but not remitted on goods sold in his stores and to cooperate fully with the IRS in the determination of employment and income taxes due and owing. Khanani and his business partner Jesse Maali, who died before being tried on the same charges, evaded approximately $1.6 million in employment and income taxes in a scheme that involved the skimming of sales proceeds for purposes of paying illegal aliens off the books.
Two Former Detroit Executives and Their Attorney Sentenced to Prison for Kickback Scheme
On August 30, 2005, in Detroit, MI, two former executives with Thyssen, Inc., a Detroit steel-processing company, and their attorney were sentenced to prison for orchestrating a $6.5 million kickback scheme. Kenneth Graham, former Thyssen Chief Executive Officer, was sentenced to 75 months in prison, followed by 36 months supervised release. He must also pay restitution of $8.8 million, joint and several with the other defendants. Former Thyssen Executive Vice President Kyle Dresbach was sentenced to 58 months in prison, followed by 36 months supervised release. His restitution was set at $8.4 million, joint and several with the other defendants. Graham and Dresbach’s attorney and CPA, Jerome Jay Allen received 34 months in prison, followed by 24 months supervised release. He must also pay restitution, joint and several, of $8 million. Graham and Dresbach caused Thyssen to enter into contracts with third-party vendors to purchase the multi-million dollar cranes and slitting machines at fraudulently inflated prices. They caused the vendors to submit fraudulently inflated invoices to Thyssen and paying inflated commissions to a consultant, who then paid kickbacks to more than a dozen entities controlled by Allen. Allen, in exchange for a portion of the kickbacks, laundered the proceeds of the mail fraud scheme through numerous bank accounts he controlled, including client trust accounts maintained by his law firms. During the ten year scheme, $6.5 million of kickbacks were paid to entities controlled by Allen, which he split with Graham and Dresbach, including using his client trust fund accounts to pay their personal expenses. As part of this conspiracy, Graham and Dresbach also conspired with Allen to file false individual income tax returns that did not report the kickback payments.
Information Systems Manager Sentenced to 41 Months in Prison for Embezzling Nearly $600,000 from Employer
On August 29, 2005, in Trenton, NJ, Matthew McKenna was sentenced to 41 months in federal prison, followed by three years of supervised release and ordered to pay $592,034.50 in restitution and fines. McKenna pleaded guilty in January 2005 to charges of wire fraud and tax evasion. McKenna while employed as the head of the information systems for American Credit Alliance, Inc. (ACA) admitted he transferred $592,034 by directing approximately 176 unauthorized wire transfers from ACA's bank accounts. McKenna also admitted that he failed to report approximately $191,000 in taxable income on his 2002 U.S. Individual Income Tax Return, which he had taken from ACA. Resulting in additional tax due to the IRS of approximately $58,040.
Investment Fraud Scheme Nets 17 Year Prison Sentence
On August 29, 2005, in San Diego, CA, William McCray was sentenced to 211 months in prison, followed by three years supervised release and ordered to pay $11,680,886 in restitution. McCray was convicted on November 14, 2003, of mail fraud, wire fraud, perjury, money laundering, and tax fraud, for his leadership of the fraudulent operation of International Forex of California ("IFL") and Earthwise International ("EWI") -- two La Jolla-based entities that solicited the public to invest in "managed currency accounts" that purportedly traded in foreign currencies. According to the evidence presented at trial, McCray, along with co-defendant Paul Yates, (Yates was sentenced to 78 months' imprisonment on April 28, 2004, for his role in this case), used International Forex and Earthwise International to fraudulently obtain more than $30 million from members of the public by falsely representing, among other things, that the companies had achieved annual returns for their managed currency accounts from1992 through 1998 between 52% -79%; that investor funds were held in trust with the Bank of New York; that investor funds were insured; and that individual investors' accounts were earning substantial positive returns. The defendant's scheme ended up costing investors more than $11 million.
Former Bestbank Executives Convicted of Bank Fraud, Conspiracy, False Statements, and Wire Fraud in Connection with BestBank Failure
On August 29, 2005, in Denver, CO, Douglas R. Baetz and Glenn M. Gallant were convicted by a federal jury of bank fraud, false bank reports, wire fraud, and operating a continuing financial crimes enterprise. On May 28, 2003, Baetz, Gallant, and three other individuals were indicted on federal charges in connection with the failure of BestBank, located in Boulder, Colorado. The Colorado State Banking Commission and the FDIC declared BestBank insolvent in July 1998, making it one of the largest bank failures in the United States in the last 10 years. Depositors' losses exceeded $200,000,000. Baetz and Gallant each received more than $5,000,000 during the course of the fraudulent scheme. The indictment includes an asset forfeiture count, which seeks $100,000,000 to compensate victims for the loss as a result of the bank's failure.
Owner of Investment Company Sentenced for Involvement in $8 Million Investment Scam
On August 25, 2005, in Cincinnati, OH, John Patrick Kisor was sentenced to 90 months in prison, followed by three years supervised release and ordered to pay at least $6,901,674 in restitution to more than 140 victims of a fraudulent investment scheme he ran from January 1999 until September 2002. Kiser's sentence includes 90 months for one count each of wire fraud and money laundering, and 60 months for securities fraud. The sentences will be served concurrently. Kisor owned and operated PDK International, Inc. (PDK), which was originally set up as a Nevada Corporation, and later incorporated as PDK International LLC, A United States Virgin Islands Corporation. Kisor used PDK fraudulently to obtain funds through an investment scheme from individuals and entities believing their funds would be invested in a stock option trading program and other PDK investments. Kisor's victims included two groups of investors. One group, known as the PDK investors, consisted of Cincinnati area investors. There are approximately 30 PDK investors who suffered losses of at least $2.7 million on approximately $4 million they invested. The other group, known as the Agave Limited investors, consisted of investors from Ohio, Michigan, and various other locations. Agave Limited (Ltd) was an entity set up in the Cook Islands as a foreign private investment company. Approximately 100 Agave investors entrusted approximately $31 million with Kisor and lost at least $5 million. Most of these funds were invested through offshore bank accounts in the Cook Islands and Nevis/St. Kitts and wire transferred to brokerage and bank accounts controlled by Kisor in the United States. Kisor pled guilty on April 15, 2005 admitting to diverting $8,092,105.43 of investors' funds for his own personal use including the purchase of automobiles, paying for his personal living expenses and gambling. As part of the plea agreement Kisor also agreed to forfeiture of all of his assets up to a value of $8,092,105.43.
John Stamps Sentenced to 24 Months in Prison for Tax Evasion and False Statements
On August 22, 2005, in Nashville, TN, John Stamps was sentenced to 24 months in prison, followed by two years supervised release and ordered to pay all back taxes, after he pled guilty to four counts of tax evasion, and false statements.
Stamps admitted to omitting income for calendar years 1998 through 2001. Much of this omitted income resulted from personal items and expenditures that Stamps caused to be paid and deducted through one of his companies, Trade Mark Inns, Inc. so that he would not have to report the income associated with them on his personal tax returns. These expenditures included furniture and landscaping for his Monteagle home and numerous personal items purchased with a business credit card. Stamps also admitted to not reporting tens of thousands of dollars in income for 1999 and 2000 he received through his lobbying entity, Privatization Strategists, LLC. Stamps failed to provide much of this information to his accountant or the IRS by intentionally having the payments deposited into his brokerage account. Additionally, Stamps used Trade Mark Inns to pay a "salary" to a close relative, who was in fact attending college outside the state of Tennessee and not working for Trade Mark Inns. The payments were used by the close relative for college expenses and not for actual work performed, but were included as business deductions for Trade Mark Inns. The total tax loss to the United States for 1997 through 2001 was $127,467. Stamps also admitted to lying to State officials in connection with the nature and origins of Workforce Strategists, LLC, a company established by Stamps in 1999 which obtained a federally funded sole-source contract with the Tennessee Department of Labor.
Town & Country Woman Sentenced to Prison for Tax Evasion in Connection with a $2 Million Dollar Mortgage Fraud Scheme
On August 11, 2005 in St. Louis, MO, Kimberly Williams was sentenced to 18 months in prison after pleaded guilty in May to one count of income tax evasion. According to facts stated in court, from June 1999 to December 2000, Williams participated in a $2 million mortgage fraud scheme. Williams purchased residential properties for the true value of the property, paying cash and putting the properties in the name of a third party. Near the time of the original purchase, Williams arranged for each property to be sold to another person, obtaining a mortgage to fund the sale at a significantly higher price than the true value of the property. To further the scheme, Williams submitted false loan applications to justify the mortgage being applied for and used most of the proceeds received for personal items. Williams intentionally did not file a return for tax year 2000 to conceal her income and to avoid having to pay taxes on that income. Williams transferred funds into accounts not in her name, and used the names of others to make it appear that she was not receiving the income from the sales. Williams had an adjusted gross income of approximately $195,082 and the tax due on that amount was $63,586.25.
Former President of First Choice Management Services Sentenced to 168 Months in Prison; Ordered to Pay Over $20 Million in Restitution
On August 5, 2005, in Hammond, IN, Gary Van Waeyenberghe, former president of First Choice Management Services, was sentenced to 168 months in prison to be followed by two years supervised release. Van Waeyenberghe was also ordered to pay a $5,400 special assessment and $20,976,660 in restitution. On April 25, 2005, Van Waeyenberghe was convicted on 54 counts of conspiracy to commit mail and wire fraud, mail fraud, and money laundering. Evidence at trial showed that Van Waeyenberghe was president of First Choice Management Services from November 1999 through July 2000. First Choice marketed itself nationally as servicing consumer financial receivables in the form of two programs. Investors sent money to First Choice and First Choice represented that it would purchase receivables on their behalf. However, Van Waeyenberghe withdrew money or caused others to withdraw money on his behalf, transferred checks, obtained cashier’s checks, or transferred by wire money that came from investors for his personal benefit. The total amount of loss sustained by the victims was more than $20,000,000 but less than $40,000,000.
Defendant Evaded Over $415,000 in Federal Income Taxes
On August 4, 2005, in Pittsburgh, PA, Aaron Kamens was sentenced to 12 months and one day in prison and ordered to pay a $5,000 fine. According to information presented to the court, Kamens willfully failed to file his federal income tax returns for calendar years 1998, 1999, 2000, and 2001. The information also indicated that Kamens failed to pay $415,876 in federal income taxes over a period of 1982 through 2001.
Mississippi Woman Sentenced for Coordinating Submission of False “Fen-Phen” Claims and Tax Evasion
On August 1, 2005, in Jackson, MS, Eva Johnson was sentenced to 31 months in prison to be followed by three years supervised release and ordered to pay $750,000 in restitution. Johnson participated in a scheme to file false prescription documents on behalf of others in order to obtain funds from a $400 million settlement fund established following a suit against American Home Products, the maker of the diet drugs Redux and Pondomin, for injuries caused by fen-phen. Johnson pleaded guilty on December 29, 2004, to one count of conspiracy to commit wire fraud and one count of tax evasion.
Fish Business Owner Sentenced on Tax and Structuring Charges
On August 1, 2005, in Boston, MA, Jose J. Galinha, owner of J.G. Seafood, Co., Inc., was sentenced to 15 months in prison and ordered to pay $100,000 in restitution to the IRS. Galinha pleaded guilty on April 15, 2005, to a 21 count indictment charging him with willfully attempting to evade federal employment taxes and structuring cash transactions. At the plea hearing, evidence showed that Galinha failed to report cash wages paid to his employees on quarterly federal employment tax returns beginning with the first quarter of 1998 and ending with the last quarter of 2002. Galinha cashed company checks on a weekly basis, often in amounts just below the $10,000 federal reporting requirements, and used the cash to pay his employees’ wages “under the table.” When weekly cash wages exceeded $10,000, Galinha cashed company checks made payable to fictitious names at a local sports club, of which Galinha was the vice-president, and used that cash to pay employees the additional wages. The total tax loss was approximately $100,000.
Defendant Sentenced to 18 Months
On July 29, 2005, in San Antonio, TX, Kimberly Ann Borges was sentenced to 18 months in prison to be followed by three years supervised release for wire fraud and engaging in a monetary transaction in criminally derived property. Borges who was employed by Applied Materials, Inc. (AMAT), a multi electronics firm, devised a scheme to steal and acquire money belonging to AMAT and used the proceeds for her own personal use and benefit. In order to accomplish her scheme Borges altered, re-routed, or forged invoices payable to vendors of AMAT, then caused AMAT to pay these false invoices and had the payments wire transferred to her own personal bank accounts.
Former Detroit Police Department Officer Sentenced to 220 Months
On July 27, 2005, in Detroit, MI, Donald C. Hynes, a former Detroit Police Department Officer, was sentenced to 220 months in prison. Hynes was convicted by jury trial in March 2005 on charges of conspiracy to commit money laundering, embezzlement of property under the case, custody, and control of the Detroit Police Department and other federal charges. The offenses arose from Hynes’s involvement in the theft and embezzlement of at least 101 kilograms of cocaine from the Detroit Police Department evidence room from approximately 1994 through 2000.
Stockton Money Remitter Sentenced for Structuring
On July 26, 2005, in Sacramento, CA, Ry Prok was sentenced to 30 months in prison followed by three years supervised release, in connection with her conviction for four counts of structuring cash deposits into Wells Fargo Bank. As part of her guilty plea, Prok admitted that Cambodia Wire Express was an entity she controlled which engaged in the business of transmitting money from the United States abroad. As part of the business, Prok maintained a bank account at Wells Fargo Bank. According to bank records, as well as the corroborative testimony of bank tellers, between January 7, 2003 and November 9, 2004, Prok made multiple cash deposits each above $9,500 but under $10,000 at the Wells Fargo Bank branch, frequently on successive days, for an aggregate amount of $829,186. As part of her plea, Prok expressly admitted that she structured deposits on four days, September 8, 2003, September 9, 2003, September 11, 2003, and September 15, 2003, each in an amount below $10,000 for the purpose of evading the CTR requirement. Also as part of the plea, the defendant agreed to forfeit over $49,000 in structured funds to the government.
Former CEO of Gambling Business Sentenced and Ordered to Forfeit $19.7 Million; Business Ordered to Forfeit $99 Million
On July 14, 2005, in Fargo, ND, Susan Bala, former CEO, president, and sole shareholder of Racing Services Inc. (RSI), was sentenced to 27 months in prison and 2 years probation for her conviction on charges relating to a conspiracy to conduct an illegal gambling business and money laundering. A $19.7 million forfeiture judgment was also entered against Bala and RSI was ordered to forfeit $99 million. Between approximately October 2002 and April 2003, the illegal gambling business unlawfully took in nearly $100 million in wagers and paid out over $12 million in “rebates” to high-volume gamblers.
Defendant Sentenced to 46 Months in Prison
On July 11, 2005, in Hammond, IN, Luis Gamboa was sentenced to 46 months in prison to be followed by three years supervised release. Also sentenced was Sandra Gamboa to 6 months home detention and 3 years probation. The Gamboas agreed to forfeit three properties. Luis Gamboa used money obtained from Geraldo Galindo, a drug trafficker, to purchase money orders and cashiers checks. Gamboa and Galindo also took steps to conceal the source of funds used to purchase real estate. Sandra Gamboa made numerous cash deposits in amounts less than $10,000 in an attempt to avoid the filing of any currency transaction reports.
Former Attorney Sentenced for Defrauding Clients of Approximately $512,000
On July 7, 2005, in Kansas City, MO, David Leon Taylor, a former attorney, was sentenced to 24 months in prison to be followed by 6 months of home confinement. Taylor also was ordered to pay restitution in the amount of $511,860.44. Taylor was an attorney and sole shareholder in the law firm of Myers, Taylor, and Whitworth, P.C. The law firm maintained a trust account at Webb City Bank which contained funds received by the law firm from various clients to be held in trust until the funds were disbursed to the particular clients who were entitled to receive the funds. In his plea agreement, Taylor admitted that he illegally transferred money from that trust account into the law firm’s operating accounts at other banks. Taylor further admitting to taking hundreds of thousands of dollars, meant to be held in trust, and converting the money for his own use on several dates.
Oklahoma Man Sentenced for $2.7 Million Precious Metals Scheme and Income Tax Evasion
On July 6, 2005, in Tulsa, OK, Rusty K. Tuthill was sentenced to 63 months in prison and ordered to pay restitution of more than $2.7 million for his role in the theft of precious metals from Delphi Catalysts Corporation. Tuthill was also sentenced to 60 months in prison for income tax evasion to run concurrently with the first sentence. When released from prison, Tuthill will be on supervised release for three years. On February 16, 2005, Tuthill pleaded guilty to single counts of conspiracy, interstate transportation of stolen property, wire fraud, and money laundering by admitting he participated in a plot to steal platinum, nitrate, palladium and rhodium from Delphi Catalysts that was transported across state lines into Texas and Montreal, Canada and then sold to American Recycling Associates of Dallas, Texas, and KITCO Precious Metals of Montreal, Canada. Tuthill also admitted he transacted business in cash, cashier's checks and money orders in an attempt to hide or conceal his true income on his income tax return when he pleaded guilty to income tax evasion. Tuthill agreed to forfeit property and goods that he admitted were obtained with money gained through the criminal activity: a home in Owasso, Oklahoma, a 2004 Cadillac Escalade, a 2002 Lexus LX470, three all-terrain vehicles, $66,858 in cash, $100,000 in cashier's checks, and $117,293 in a bank account.
Hudson County Businessman Rene Abreu Gets Maximum 87 Months in Prison; Co-Defendants Gets Sentences Ranging from Six to 40 Months
On June 29, 2005, in Newark, NJ, Rene Abreu was sentenced to 87 months in federal prison, ordered to pay a $200,000 fine, as well as $499,563 in restitution to various banks suffering losses from the fraud. Abreu was convicted for running a series of real estate and bank fraud schemes that enriched him and his companies and involved numerous of his employees. Abreu was convicted on August 4, 2004, on 20 counts of the 29-count Indictment naming him, three employees and a senior vice president of Hudson United Bank. The counts of conviction against Abreu included conspiracy to commit mail fraud, conspiracy to defraud Hudson United Bank by engaging in a fraudulent check-kiting scheme, conspiracy to structure currency transactions and specific counts of mail fraud, bank fraud and cash structuring. Abreu's co-defendants were sentenced on June 27, and June 28, 2005, to the following terms:
• Ann Martell was sentenced to 30 months in prison and ordered to pay $499,563 in restitution.
• Kathy Giunta was sentenced to 24 months in prison and ordered to pay $499,563 in restitution.
• Fernando Jimenez was sentenced to six months in prison and ordered to pay $361,994 in restitution.
• Luis Nieves was sentenced to 40 months, ordered to pay a $10,000 fine, and was barred from the banking industry until the end of his three years of supervised release.
Former President of Fraudulent Health Card Company Sentenced to 41 Months in Prison
On June 29, 2005, in San Francisco, CA, John B. Hyde, the president of Interstate Services Incorporated (ISI), was sentenced to 41 months in prison and ordered to pay $1.3 million in restitution. Hyde was sentenced to prison for his role in a scheme in which he defrauded thousands of people throughout the United States. The victims purchased health insurance plans from Hyde's company, only to discover after illnesses or accidents that their health insurance was essentially worthless. Hyde was charged in a 64 count indictment on January 22, 2002, with nine counts of mail fraud, one count of health care fraud, and 52 counts of money laundering. In pleading guilty, Hyde admitted that he was president of ISI which marketed and sold a health plan known as the ERISA Employee Health Benefit Plan or the ERISA Advantage. The health plan was marketed and sold to thousands of people throughout the country who believed that they were covered by a legitimate health plan. According to the charges, Hyde and ISI collected over $2.8 million in premiums but deposited only a token amount into trust accounts at Riggs Bank in Washington, DC. Hyde used much of the money to pay his personal expenses, provide salaries for his family members, lease expensive cars, buy football tickets, pay office expenses, and pay commissions to so-called promoters who helped market the fraudulent plan.
Doctor and Co-Defendant Sentenced to Prison Terms for Conspiring to Defraud IRS
On June 23, 2005, in Ft. Lauderdale, FL, Dr. Richard Allen Hill, a formerly licensed osteopathic physician in the State of Florida was sentenced to 21 months in prison to be followed by two years of supervised release. He was also ordered to pay $202,390 in restitution. Anthony Fusco, Dr. Hill's co-defendant, was sentenced to 21 months in prison, to be followed by three years of supervised release. Hill and Fusco were initially indicted on October 7, 2004, along with co-defendant Joseph Steinberg. The nine count Indictment charged them with conspiracy to defraud the United States by structuring financial transactions to avoid financial institution reporting requirements and obstructing the Internal Revenue Service in their computation of federal income taxes, in violation Title 18, United States Code, Section 371. On April 5, 2005, Hill, Steinberg and Fusco pleaded guilty to Count One of the Indictment. A sentencing date for Joseph Steinberg has not yet been scheduled.
Ohio Man Sentenced to 27 Months in Prison
On June 23, 2005, in Cleveland, Ohio, Donald E. Simmons was sentenced to 27 months in prison to be followed by three years supervised release for conspiracy to commit bank fraud, filing a false tax return, wire fraud and being a felon in possession of a firearm. In addition, Simmons is required to pay the tax determined by the IRS as well as interest and penalties. Simmons entered into a conspiracy, devised and led by others, the objects of which were to induce mortgage lenders to provide mortgage loans in amounts based upon documentation fraudulently inflating the apparent purchase prices for the properties and for some of the conspirators to obtain the personal benefit of a portion of the loan proceeds to be used for repairs and improvements to the properties.
During 1998 through 2000, Simmons received income as compensation for security and property management services he rendered for a real estate company and as compensation for services he rendered for a numbers wagering business operated by another person. Simmons received cash payments from the real estate company by checks payable to another person, who negotiated the checks and provided him the cash. Simmons and his wife filed joint income returns for those years, which did not report his income. His wife caused the returns to be prepared and filed, reporting only income and losses attributable to her, due to Simmons misleading her into believing that he was unemployed and had no income during that time period. The returns failed to report Simmons’s income of approximately $31,100 from the real estate company and an unknown amount of income from the wagering business. Simmons also failed to file a tax return for the year 2001 on which he was required to report approximately $10,000 of income.
Two North Carolinians Sentenced for Conspiracy to Launder Money and Conspiracy to Distribute Cocaine
On June 21, 2005, in Greensboro, NC, Bautista Andaya-Penalosa and Alquer Herrera-Andaya were sentenced for conspiracy to launder money and conspiracy to distribute cocaine hydrochloride. Andaya-Penalosa was sentenced to life in prison without parole and Herrera-Andaya was sentenced to 180 months in prison and 60 months probation for being involved in a Mexican-based drug and money laundering organization. During the three-year investigation, agents seized in excess of 360 kilograms of cocaine hydrochloride and 18 firearms. An additional $1.4 million was seized during the investigation and multiple residence searches of organization members were conducted. Nine vehicles worth approximately $120,000 and four properties worth approximately $700,000 were also seized. Nine other members of the organization were also sentenced for their involvement in the conspiracy.
Defendant Sentenced to 48 Months in Prison for Effort to Steal Funds from IRS
On June 21, 2005, in Memphis, TN, Lorray Broden was sentenced to 48 months in prison to be followed by three years supervised release. Broden was also ordered to pay restitution to the IRS totaling $362,400. Broden pleaded guilty on March 23, 2005 to ten counts of theft of government property, ten counts of wire fraud, one count of conspiracy and six counts of money laundering. According to the indictment, Broden and others conspired to defraud the IRS of money and stole money of the IRS by diverting tax refunds in the amount of $351,068 and by attempting to divert an additional $154,949 of tax refunds due to taxpayers by routing the tax refunds to bank accounts controlled by the defendants.
Former St. Louis Man Sentenced on Fraud and Money Laundering Charges in Connection with Two Million Dollar Investment Scheme
On June 17, 2005, in St. Louis, MO, Rick D. Shirrell was sentenced to 51 months in prison for one felony count each of wire fraud and money laundering and ordered to pay $2,070,000 in restitution. In March 2005, Shirrell admitted during his plea that he paid three people a total of $205,500, a portion of which was commissions for referring lenders to him. Between November 1998 and March 1999, at least 13 lenders sent a total of $1,760,000 by means of wire transfers to Anguilla in the name of Phoenix Financial LTD. During 1998 and 1999, Shirrell, the founder and director of two companies, Phoenix Financial LTD in Anguilla, British West Indies and Financial Consulting Group, Inc. in the state of Missouri, induced individuals to lend money to his Phoenix Financial LTD company in Missouri, for a period of one year and one month and promised to pay interest to such lenders at 120 percent per year. Shirrell represented to the lenders that all of the money was to be used to purchase U.S. bonds or other comparable obligations and that all of their money would be insured. In addition, Shirrell told the lenders that the government bonds or other obligations purchased were to be used as collateral to obtain more money to be used to trade financial instruments in order to generate profits to repay the loans and earn interest.
Eastern Shore Woman Sentenced for Money Laundering of Drug Proceeds
On June 9, 2005, in Baltimore, MD, Natasha Adams was sentenced to two years in prison, followed by two years of supervised release for money laundering of drug proceeds. During her guilty plea, the government proved that between 1997 and 2003, Jermaine Wallace, Adams boyfriend, and others conspired to distribute, and distributed cocaine hydrochloride and cocaine base. Distribution of the controlled substances by Wallace and others in the conspiracy generated large sums of money. Wallace solicited Adams to conceal the illegal proceeds. Adams used various bank accounts which contained cash provided by Wallace to send wire transfers to and on behalf of Wallace. Between 1998 and 2002, Adams’s bank account reflected deposits totaling $364,142.41, of which approximately $191,374.32 were in cash. Adams, aware that the monies were proceeds of Wallace’s drug sales, used the drug proceeds to for her own personal use including the purchase of a 2000 BMW and to obtain a loan for $206,275 to purchase a home in December 2002.
Minnesota Man Sentenced to 188 Months for Securities Fraud Scheme
On June 7, 2005 in Minneapolis, MN, Alan Bistrup was sentenced to 188 months in prison and ordered to pay $2,941,067 in restitution for operating a securities fraud scheme and bilking victims of more than $2.3 million. Bistrup was convicted in June 2004 on mail fraud, bank fraud, false statements to a bank, securities fraud, wire fraud and money laundering. Evidence at trial showed from 1997 to July 2003, Bistrup operated a securities fraud scheme, soliciting investors by telephone and in person. Bistrup falsely represented that investors’ money would be safe and secure and that they could get their money back within 60 days. He lulled investors by giving them false fraudulent documents, including promissory notes as receipts of investors’ funds. Bistrup failed to disclose to the investors that he would not and had not invested their money in securities, rather, he diverted the money to his own use. Bistrup made false statements and representations to qualify for refinancing of a luxury $1.1 million home, for which he and a developer entered into an agreement where the developer would finance the down payment on a contract for a deed, which would not be disclosed to Bistrup’s financing banks. Nancy Bistrup, his wife, was sentenced to time served in prison and was ordered to pay a $1,000 fine and perform 100 hours of community service for two counts each of bank fraud, mail fraud and false statements to a bank.
Inland Empire Man Who Orchestrated $26 Million Ponzi Scheme Sentenced to 14 Years in Prison
On June 7, 2005, in Riverside, CA, John C. Jeffers was sentenced to 168 months in prison and ordered to pay $26,245,712 in restitution to more than 80 victims. Jeffers, owner of J.C. Jeffers & Company, the company at the center of a Ponzi scheme, pleaded guilty to three counts of money laundering last July. John Minderhout, a second defendant, pleaded guilty to three counts of wire fraud last July and was sentenced in November 2004 to 57 months in prison and ordered to pay $2,313,500 in restitution. The Ponzi scheme they called the “Short-Term Financing Transaction” was a bogus “high-yield investment program” that allowed Jeffers to collect more than $26 million and use the money to pay commissions to salespeople, to make payments to investors to keep the scam alive and to pay his own personal expenses. Jeffers sent letters to some victims that falsely claimed the program had been licensed by the Federal Reserve and that the program had a relationship with the International Monetary Fund and the United States Treasury.
Idaho Falls Day-Trader Sentenced; Investors Lost More Than $1 Million
On June 6, 2005, in Boise, ID, Robert O. McClung was sentenced to 37 months in prison to be followed by three years supervised release and ordered to pay $1,264,821 in restitution to the victims of his scheme. McClung operated RRLM and Spenlee, Inc., both Nevada corporations doing business in Idaho Falls. Approximately 100 clients invested a total of $1.7 million on the promise of a good rate of return and minimal risk through day trading. However, McClung did not do the trading he promised investors, but diverted much of the money to his own personal use. The total loss to investors was more than $1.2 million. To keep the investments coming in McClung prepared monthly statements for each investor, falsely representing that he engaged in day trading on a regular basis and that he was earning money for them.
Former Insurance Executive Sentenced for defrauding Investors of Approximately $3,700,000
On May 20, 2005, in Indianapolis, IN, James R. Harrold was sentenced to 78 months in prison following his earlier plea to mail fraud, wire fraud, interstate transportation of securities by fraud and money laundering. Harrold, a retired manager for American Family Life Assurance Company, Inc. (“AFLAC”), solicited a group of marketers to invest in an investment program which would earn monthly profits of 20% on a minimum investment of $5,000. Harrold stated that the funds, which had to remain invested for at least one year, would be sent to Rubix Services, LLC, a company in England that would deposit the funds at Midland Bank, PFC, in England. Midland, through Rubix, would then invest the funds in prime bank debenture instruments that would generate a 20% monthly profit. Through word of mouth individuals in Indiana, Ohio, Colorado, Nebraska, Minnesota, Missouri and Florida invested in the program. None of the funds provided to Harrold by investors were sent to England, or invested in prime bank debenture instruments and did not generate a 20% monthly profit. Instead Harrold used the funds for business costs and personal use. Through the execution of his scheme, Harrold defrauded approximately 345 investors of approximately $3,700,000 between April, 1999 and November, 2001.
Pair Sentenced to Over 6 Years in Prison on Drug and Money Laundering Charges
On May 19, 2005, in San Francisco, CA, Dennis Hunter and Roy Mercer were each sentenced to serve 78 months in prison to be followed by five years supervised release. Hunter and Mercer pleaded guilty in July 2003, to conspiring to manufacture 1,000 or more marijuana plants as well as one count of conspiring to conduct illegal financial transactions involving the sale of the marijuana. This was a joint investigation with CI, DEA and county and local law enforcement.
Four Defendants Sentenced on Drug and Money Laundering Charges
On May 19, 2005, in London, KY, Ricardo Rene Flores, a.k.a. Richard Flores; Robert Vaughn; Adalberto Eugenio Scaff, a.k.a. Tito; and Melvin Jerome Wilson, a.k.a. Jerry Wilson, were sentenced for their roles in a drug organization. The defendants pleaded guilty between June 2004 and October 2004 to various money laundering and drug conspiracy charges. Flores was sentenced to 72 months in prison to be followed by three years supervised release and ordered to pay a $200 special assessment. Vaughn was sentenced to 94 months in prison to be followed by five years of supervised release and ordered to pay a $200 special assessment. Scaff was sentenced to 84 months in prison to be followed by five years supervised release and ordered by pay a $200 special assessment. Scaff was also ordered to forfeit in excess of $198,000 in U.S. currency and a 1998 Chevrolet pick-up truck. Wilson was sentenced to 60 months in prison to be ordered to pay a $300 special assessment.
Tax Attorney Sentenced to Prison for 15 Years
On May 5, 2005, in Little Rock, AR, Bobby Keith Moser, a former Little Rock tax lawyer, was sentenced to serve 15 years in prison. Moser was sentenced for violations of tax evasion, obstruction of justice, and money laundering. He was ordered to pay $2.25 million in restitution for sophisticated schemes carried out between 1996 and last year. Part of the restitution included $212,648 to the IRS. Moser was scheduled to enter a guilty plea in Detroit Michigan, but instead, he drove to Montreal, boarded a plane to Paris, and then flew to Madagascar, where federal agents tracked him down in March 2004 — about the same time they discovered he had been bilking his clients’ trust funds. Moser admitted that he arranged for about $7 million in profits from the sale of a 1996 communications company to be hidden from the IRS. More than $1 million in Moser’s assets have been recovered by the government and forfeiture proceedings are pending. These funds will be used to repay some of his victims.
Kennard Sentenced in $9 Million Fraud Against Churches
On May 5, 2005, in Atlanta, GA, Abraham Kennard was sentenced to 17 years and three months in prison to be followed by three years supervised release. Kennard was also ordered to pay $7.9 million in restitution to victims and more than $598,000 in restitution to the IRS. With penalties and interest the IRS restitution totaled over $1 million. On February 7, 2005, Kennard was found guilty on 116 counts of income tax evasion, money laundering, conspiracy to commit money laundering, and mail fraud. Kennard defrauded more than 1,600 churches and other non-profit organizations out of over $9 million between May 2001 and October 2002. Evidence at trial showed Kennard siphoned off approximately $3 million of the fraud proceeds for himself, his girlfriend, and numerous members of his family.
Former Americable Comptroller Sentenced to 78 Months in Prison
On May 3, 2005, in Miami, FL, Alice Pirchesky was sentenced to 78 months in prison and ordered to forfeit $200,000. Pirchesky was convicted on 72 counts of an Indictment charging her with offenses arising out of schemes to defraud the IRS, Department of Defense (DOD) and numerous cable television networks, and to launder the proceeds of the fraud. Her co-defendant, Charles Hermanowski, was arrested in January 2002 in Australia and remains in custody pending extradition proceedings. The charges against Pirchesky arose from an investigation that focused on various frauds conducted in the course of the operations of Americable International, Inc., and other affiliated cable television companies controlled by Hermanowski. In the early 1990s, the DOD began to close various military bases in the United States, including the bases where Americable companies had provided cable television service. Pirchesky prepared termination settlement proposals which included costs that were based on false invoices for work that had never been performed and costs that never had been incurred by the Americable companies. In response to a DOD auditor’s request for records, Pirchesky provided the auditor with false invoices totaling approximately $8 million. Pirchesky would oversee the entry of false invoices into company records. The false invoices yielded approximately $40 million in checks during 1995 and 1996 that Hermanowski falsely endorsed and deposit into bank accounts he controlled. Hermanowski did not report any of these funds on his federal income tax returns for 1995 and 1996. Pirchesky’s false invoices allowed Americable to claim $5 million in false depreciation deductions for 1996. Pirchesky met with accountants who prepared the tax returns for the Americable companies and provided false records that resulted in the inflated depreciation deductions.
Former California Chief Financial Officer Sentenced to Prison for Role in Ponzi Scheme
On May 2, 2005, in San Diego, CA, John D. Garitta was sentenced to 48 months in prison followed by five years of supervised release. Garitta was also ordered to pay $241 million in restitution, jointly with his co-conspirators. Garitta, former chief financial officer of PinnFund, Inc., pleaded guilty in August 2002 to one count of conspiracy to commit wire fraud, one count of conspiracy to commit money laundering, three counts of tax evasion, and one count of filing a false statement with the Department of Housing and Urban Development. In total, Garitta and his co-conspirators fraudulently attracted more than $330 million in investor funds. Garitta’s co-conspirators, Michael Fanghella and Keith Grubba, previously pleaded guilty to similar charges and were sentenced to 120 months in prison and 63 months in prison, respectively.
Man Sentenced to 40 Years for Computer Software Scheme
On April 27, 2005, in Sherman, TX, Donald Tarnawa was sentenced to 480 months in prison for wire fraud, bank fraud and money laundering in a scheme that cost investors about $13.5 million. According to information presented in court, Tarnawa claimed to have invented a revolutionary new software program that could compress huge amounts of data and transmit the compressed data over standard telephone lines. Tarnawa claimed that this program was at least 100 times more powerful than the state of the art programs currently available. Tarnawa sold or licensed the software to three different investment groups, receiving about $12.5 million from the investors but never delivered the product to any of the groups. In order to evade law enforcement, Tarnawa used numerous identities and shell corporations and moved across the country from Florida, to Ohio, to California, to Texas and then to Colorado where he was arrested on September 25, 2003.
Former Executive of Vans Shoe Company Sentenced to Prison for Taking Bribes from Chinese Manufacturers
On April 25, 2005, in Los Angeles, CA, Scott Andrew Brabson, former Vice president of Vans Inc., was sentenced to 71 months in prison. A second defendant Jay William Rosendahl was also sentenced to 71 months in prison. Both defendants were also ordered to pay $4.7 million in restitution to Vans. Brabson and Rosendahl pled guilty to conspiracy, foreign travel to promote bribery, "honest services" wire fraud and money laundering. Between November 1997 and December 2000, Brabson, was the vice president of sourcing of Vans, Inc., a position that had him overseeing the company's manufacturing operation. Brabson arranged for Vans to hire Rosendahl as a product development consultant. Brabson and Rosendahl met with owners and managers of Chinese factories and informed them that in order to continue receiving product orders from Vans, the factories would have to send kickbacks amounting to three percent of Vans' orders. The defendants provided the factories with the number of a Hong Kong bank account and the factories wire-transferred the kickbacks into the account they had established. Shortly after Brabson left Vans, he moved almost $3 million into accounts at a Luxembourg bank. Brabson then transferred about $1.3 million into different Hong Kong bank accounts controlled by Rosendahl. Each defendant withdrew hundreds of thousands of dollars in cash.
Four Defendants Sentenced in $120 Million International Tax Shelter Case
On April 22, 2005, in Seattle, WA, four Anderson’s Ark and Associates (AAA) defendants were sentenced to prison terms ranging from eight to 20 years. The defendants received the following sentences:
• Keith Anderson was sentenced to 20 years of prison to be followed by three years supervised release and a ordered to pay restitution of $63,525,860;
• Wayne Anderson was sentenced to 15 years of prison to be followed by three years supervised release and ordered to pay restitution of $63,525,860 and a fine of $25,000;
• Richard Marks was sentenced to 15 years of prison to be followed by three years supervised release and ordered to pay restitution of $42,311,742 and a fine of $25,000;
• Karolyn Grosnickle was sentenced to eight years of prison to be followed by three years supervised release and ordered to pay restitution of $42,311,742.
Each of the defendants was also ordered to pay costs of prosecution of $66,288. Additionally, seven properties located in Costa Rica, the AAA Administrative Office, and $28 million in laundered funds were ordered forfeited. AAA spanned five countries and over 1,500 clients. Both Andersons, Marks and Grosnickle, were convicted on charges of conspiracy to defraud the government, mail and wire fraud, money laundering and aiding and assisting the filing of false tax returns. From 1997 through early 2001, the defendants earned tens of millions of dollars in fees from the sale of several fraudulent tax shelter plans over the Internet.
Nikolai Tehin Sentenced to Over 14 Years in Prison
On April 19, 2005, in San Francisco, CA, Nikolai Tehin was sentenced to 170 months in prison following his October 14, 2004 conviction of mail fraud and money laundering. The amount of restitution to victims will be determined at a later hearing. Tehin, the principal partner in the law firm of Tehin + Partners, was convicted in connection with his theft and misuse of more than $2 million in settlement funds belonging to his clients. Tehin's abuses included stealing hundreds of thousands of dollars from lawsuit settlements that should have gone to disabled infants in medical malpractice suits and low-income tenants who sued their landlord for maintaining substandard living conditions. He used this money to fund an extravagant personal lifestyle and to cover the operating expenses of his law firm.
Guntersville Man and His Mother Sentenced to Prison On Federal Drug and Money Laundering Charges
On March 30, 2005, in Birmingham, AL, Jeremy Lamar Harris and his mother, Estella Havis, were sentenced to terms of imprisonment on drug and money laundering charges. Harris was sentenced to 20 years on one count of conspiracy to traffic cocaine, one count of possession with intent to distribute cocaine, one count of conspiracy to commit money laundering, and nine counts of money laundering. Havis was sentenced to 20 months in federal prison for conspiring with Harris to commit money laundering. Harris and Havis were also sentenced to 5 and 3 years of supervised release, respectively, after their prison terms have ended.
Tyler Jet Executives Sentenced to Prison
On March 23, 2005, in Tyler, TX, two former executives of the Tyler Jet Company were sentenced to federal prison for money laundering. Timothy Beverley was sentenced to 72 months in prison and Gregory Hopper was sentenced to 42 months. Both were jointly ordered to pay restitution of $18,171,756. They both had pleaded guilty and signed plea agreements in January 2004 admitting to widespread fraud involving between $10 million and $20 million. Beverley was the president and manager of Tyler Jet, a Tyler company which bought sold and refurbished jet aircraft before being forced into bankruptcy in 2002. Hopper was the Chief Financial Officer of Tyler Jet. According to information presented in court, Beverley and Hopper admitted they provided repair estimates to a bank and a Florida company in order to have the Florida company secure a loan from the bank for the repair of an airplane. However, after the $300,000 loan was obtained, Beverley and Hopper diverted $280,000 of the loan proceeds to Tyler Jet for their own purposes and the repairs were never done.
Brothers Sentenced for Roles in Drug Trafficking and Money Laundering Conspiracy
On March 17, 2005, in Milwaukee, WI, Timothy W. Spence, a/k/a James Schoeneker, and his brother, Michael P. Spence, were sentenced for their respective roles in a drug trafficking and money laundering conspiracy. This case was investigated as part of an OCDETF Task Force. Timothy Spence was sentenced to 150 months imprisonment, four years of supervised releases and ordered to pay a $5,000 fine. Michael P. Spence received 3 years of probation, with 300 days of home confinement, and a $1,000 fine. They were two of four defendants charged to date in this case. The investigation showed that the conspirators were bringing marijuana across the U.S.-Mexican border and flying it into the Midwest. This drug conspiracy involved hundred of pounds of marijuana. This organization also laundered drug proceeds through wire transfers to Mexico and credit card transactions to facilitate the purchase of the drugs.
Pharmacist and Stepfather Sentenced in Internet Pharmacy Case
On March 16, 2005, in Dallas, TX, Pharmacist Clayton H. Fuchs, was sentenced to 20 years imprisonment. Fuchs’ stepfather, Eugene Gonzales was also sentenced to 30 months. Clayton H. Fuchs was found guilty on all counts of a federal superseding indictment that charged various felony offenses related to his operation of a web-based pharmacy and the illegal dispensing of controlled substances. The jury found Fuchs guilty on all six counts charged that included conspiracy to dispense a controlled substance, operating a Continuing Criminal Enterprise and money laundering. At the trial, Eugene Gonzales, was found guilty of conspiracy to launder money with Fuchs. Fuchs and the other defendants were also ordered to forfeit the proceeds they acquired with the illegal funds.
Two Defendants Sentenced to Terms of More Than 17 Years in Prison in Nationwide Multi-Million Dollar Investment Fraud
On March 15, 2005, in Miami, FL, defendants, Larry E. Schwartz, Raphael Raymond Levy, a/k/a R. Ray Levy, and Edward Meyer were sentenced on charges arising from their involvement in a nationwide multi-million dollar investment fraud case. Schwartz was sentenced to 210 months imprisonment and three years of supervised release; Levy was sentenced to 235 months imprisonment and three years supervised release. Restitution was ordered for Schwartz and Levy, but the amount will be determined at a future hearing. Edward Meyer was sentenced to 48 months imprisonment and three years supervised release and was ordered to permanently relinquish his Certified Public Accountant license. All or some of the defendants were convicted of fraud conspiracy, mail fraud and transportation of stolen property, conspiracy to commit money laundering and various money laundering counts. The defendants unlawfully enriched themselves by causing people to send money to U.S. Capital Funding, Inc., and First Capital Services, Inc. based on false representations and concealed material facts. Schwartz and Levy recruited people to invest in Promissory Notes, representing that the money would be invested in various types of accounts receivables. Levy recruited hundreds of insurance agents throughout the country to solicit approximately $48 million to be sent to U.S. Capital Funding from approximately 400 investors residing in Florida, New York, Indiana, Virginia, Maine, New Hampshire, and Washington. According to evidence presented in court, of the $48 million, approximately $33 million represented obliged moneys between U.S. Capital and First Capital. The entire $33 million was lost.
Vacaville Woman Sentenced to Over 7 Years In Prison for Embezzling Over $12 Million from Bank of America
On March 14, 2005, in San Francisco, CA, Michele Serrao, was sentenced to serve 87 months in federal prison, 5 years supervised release, $900 special assessment, and was ordered to forfeit $11,849,269, jointly and severally with her co-defendant Bryan Douglas Rosenquist, for embezzling over $12 million from Bank of America. From 1998 through 2001, the defendants embezzled over $12 million in cash from the vault belonging to Bank of America to support gambling at casinos and the purchase, of among other things: thoroughbred race horses for their horse racing business, expensive vehicles, and jewelry. The defendants concealed their embezzlement by creating false balance sheets which they sent to Bank of America. Michele Serrao was convicted of all but one count, along with her co-defendant Rosenquist, who was convicted of all counts. The charges included: one count of conspiracy to embezzle funds belonging to the Bank of America, one count of bank fraud, one count of conspiracy to money launder, numerous counts of money laundering and several counts of tax evasion.
Jonesboro, TN Resident Sentenced in Healthcare Fraud Case
On March 7, 2005, in Jonesboro, TN, Mailee Lodge was sentenced to 60 month in prison. Lodge was previously convicted of over two dozen health care-related charges to include expenditure money laundering and promotion money laundering. Lodge and her then husband, Craig Lodge, submitted false claims to Medicare and received over $1.25 million in payments, which were spent, in part, in order to maintain a lavish lifestyle. Craig Lodge, who entered into a guilty plea and testified against his now ex-wife, was previously sentenced to 33 month term of incarceration. Both were held jointly and severally liable for restitution in the amount of $1,311,848.
Znetix Stock Salesmen Sentenced for Fraud and Conspiracy
On March 4, 2005, Seattle, WA, Larry L. Beaman, Michael J. Culp and Harvey W. Kuiken were sentenced to lengthy prison terms for multiple felonies relating to their sale of stock in Znetix, Inc., Health Maintenance Centers, Inc., Cascade Pointe LLC, and affiliated entities. Beaman was sentenced to 12 ½ years in prison, 3 years of supervised release and $5,264,366 in restitution, Culp was sentenced to 8 years in prison and 3 years of supervised release, and Kuiken was sentenced to 9 years in prison and 3 years of supervised release. Restitution will be determined at a later hearing for Culp and Kuiken. Beaman was convicted of 26 felony counts, including conspiracy, securities fraud, wire fraud, and money laundering. Culp was convicted of 12 counts, including conspiracy, securities fraud, and money laundering. Kuiken was convicted of 14 counts, including conspiracy, securities fraud, and engaging in unlawful monetary transactions.
Over the course of about seven years, Kevin L. Lawrence, the conspiracy's ringleader currently serving a 20 year sentence, and his co-conspirators, including Beaman, Culp, Kuiken, and six additional defendants defrauded thousands of investors out of approximately $91 million through a massive conspiracy involving false representations and failures to disclose truthful and accurate information in connection with the sale of the securities of Znetix, Inc., Health Maintenance Centers, Inc., Cascade Pointe, LLC, and affiliated entities.
Memphis Man Sentenced In $3.5 Million Securities Fraud Scheme
On March 3, 2005, in Memphis, TN, Ricardo Gant was sentenced to ten years in prison and ordered to pay $3.5 million in restitution for tax evasion and securities fraud. Gant operated the scheme from 1997 through 2001 from his business, Capital Plus Worldwide Financial Services, Inc., by soliciting individuals and churches to invest in "Joint Venture Partnerships" that purportedly guaranteed the safety and security of the investment, and promised gains of 60 percent to 200 percent annually. The investigation revealed that these funds were not invested but were used by Gant to build a new home, invest in horses, purchase antiques, travel within and outside the United States, and were converted to his own personal investment portfolios. The scheme was a version of a Ponzi scheme. The defendants preyed on church members and people in the African American community, recruiting investors by claiming that they shared religious beliefs, values and ideas. This type of fraud is called "affinity fraud" and is difficult to prosecute because the victims are reluctant to make charges against someone who allegedly shares their beliefs, values and ideas. Victim investments ranged from $2,000 to $200,000.
Ocala Attorney Sentenced to Seven Years for Tax Fraud
On February 18, 2005, in Orlando, Fl, Daniel M. Boyar was sentenced to seven years in prison, followed by two years supervised release, 100 hours of community service and a $200 special assessment to the US after previously pleading guilty to tax evasion and filing a false tax return. Boyar evaded paying more than $1.5 million in assessed taxes, penalties and interest that he owed the IRS by transferring his assets to family members and friends, and by placing his assets in teh names of corporations that he controlled. In 1997 and 1998, Boyar sold more than $11.4 million of WestAmerican Corporation common stock that he gained through a wire fraud scheme. Boyar transferred the proceeds of his stock sales through escrow accounts and other accounts that were not in his name to conceal from the IRS the substantial assets that he had available to pay his outstanding taxes. Boyar also failed to report the income he received from selling his WestAmerica Corporation stock on his 1997 tax return. As part of his plea, Boyar surrendered his license to practice law in Florida.
Chicago Man Receives Prison Sentence
On February 2, 2005, in Chicago, Piotr Krasinski was sentenced to 292 months in prison, 3 years supervised release, immediate deportation and ordered to forfeit $224,000. Last May, Krasinski plead guilty to money laundering conspiracy and Narcotics conspiracy. Krasinski along with others were involved in the distribution of a controlled substance commonly known as "Ecstasy" in the Chicago area. The organization that Krasinski was associated with was responsible for the distribution of over 3 million pills over a four year period. Krasinski's codefendant is facing a mandatory life in prison, but is currently a fugitive.
Defendant Sentenced to 10 Years in Prison for his Involvement in a Tax Evasion Scheme
On February 8, 2005 in West Palm Beach, Fl, Robert Jabbour was sentenced to 10 years imprisonment, followed by three years supervised release, and ordered to pay $1.6 million in restitution for his role in a tax evasion scheme. In August 2004, Jabbour was convicted of conspiring with co-defendant Nicholas D. DeAngelis to defraud the United States by impairing and impeding the Internal Revenue Service and of aiding and abetting DeAngelis's tax evasion. On the first day of his trial, Jabbour pleaded guilty to evading his own income tax liabilities. Jabbour and DeAngelis worked in concert to hide their assets and income. They used a complex web of nominee bank accounts and corporations to evade the payment of their tax liabilities. DeAngelis was sentenced earlier to 25 years imprisonment for his involvement in this tax scheme, as well as a related $1.5 million investment fraud scheme.
Former Attorney Sentenced in Fraud, Other Federal Charges
On February 3, 2005, in Springfield, MO, Gary A. Love was sentenced to 108 months in prison and ordered to pay $2,442,564 in restitution. Love pled guilty to charges contained in three separate federal indictments, including money laundering charges for defrauding more than $1.6 million from a group of his clients and others through an investment scheme, filing a false tax return, making false statements in support of a bank loan application, and failure to appear in court. Love was a practicing attorney making false statements in support of a bank loan application in the Springfield area from 1973 until his disbarment in September 2000. Love induced a number of individuals, including clients of his law firm, to invest funds with him through New Horizon, Inc., by false and fraudulent pretenses. Love claimed that New Horizon was engaged in the business of factoring accounts receivables in the trucking industry and that, due to his knowledge and experience, there was little or no risk of loss of investment. However, Love did not invest those funds as promised. Instead, he used the money to make periodic payments that he told victims were returns on their investment. Love converted more than $1 million of the fraudulently obtained money to his own use. Love was indicted for three counts of filing a false tax return, for the years 1995, 1996, and 1997, but he pled guilty to the 1995 count. Love also acknowledged false statements on his tax returns for 1996 and 1997 that were considered as relevant conduct for the purposes of sentencing. Love admitted to the total tax loss for the three-year period of $158,152.
San Diego County Inventor Sentenced for Failing to Pay Taxes on Sale of Company
On January 31, 2005, in Los Angeles, CA, John Zentmyer was sentenced to 33 months in prison for failing to pay income taxes on money generated from the sale of his company. Zentmyer was found guilty of tax evasion, one count of loan fraud and three counts of structuring cash transactions to avoid federal reporting requirements. Zentmyer invented a wheel-locking device to be used on four-wheel-drive off-road vehicles. After forming a company to market his product, he sold the company for $1,008,000. Zentmyer failed to file a tax return that reported any of the funds generated by the sale, nor did he pay any taxes on the income. Instead, he placed the funds into offshore bank accounts, used bank accounts in the names of other persons and entities, and conducted financial transactions using large amounts of cash. Zentmyer owes $264,335 in back taxes. The loan fraud conviction was based on the submission of a false employment letter in connection with a loan application to purchase a house. Zentmyer, who represented himself at the beginning of the trial and later represented himself jointly with an advisory counsel, argued that he was not guilty of tax evasion because he believed in good faith that he did not have to pay income taxes after reviewing old Supreme Court cases. He also claimed that he structured his financial transactions only because the bank required his social security number to file its report with the government and his religious beliefs prevented him from divulging his social security number.
Retired County Sheriff’s Inspector and Former School Superintendent Sentenced
On January 31, 2005, in Detroit, MI, Ronald Lupo, a retired Macomb County Sheriff’s Inspector, was sentenced to 80 months in prison and ordered to pay $300,000 in restitution. Lupo and co-defendant John Gardnier were convicted of conspiracy to commit racketeering, conspiracy to commit extortion, and extortion. Evidence presented during trial, indicated Lupo and Gardiner accepted bribes from a construction owner who received various contracts with the East Detroit public schools. Gardiner was earlier sentenced to 46 months in prison.
Defendant Sentenced to 25 Years in Prison for his Involvement in Investment Fraud and Tax Evasion Scheme
On January 28, 2005, in a Ft. Lauderdale, FL, Nicholas D. DeAngelis was sentenced to 25 years in prison, followed by three years supervised release, and ordered to pay $4,219,249 in restitution for his part in an investor scheme that defrauded the government of $2.6 million in unpaid federal income taxes. In June 2004 DeAngelis was convicted of a fifty-one (51) count Indictment, which charged DeAngelis with wire and mail fraud, money laundering, obstruction of justice, perjury, conspiracy, identity theft, and tax evasion. During the years 2000 to 2003, DeAngelis used false representations to induce investor victims, including several senior citizens, to send approximately $1.5 million to his Palm Beach investment companies, Velvet Hammer Consulting Group and GIASI, Inc.
Cambridge Woman Sentenced for Role in Fraud, Money Laundering Conspiracy
On January 27, 2005, in Columbus, OH, Debbie K. Lent was sentenced to 57 months in prison followed by three years of supervised release, and fined $12,500 for her role in a scheme to set up “ghost agents” in order to collect insurance commissions and other payments in eastern Ohio. Lent was convicted along with, Coshocton County insurance district sales manager, Peter J. Vasilakos on June 9, 2004 on eight counts of mail fraud, one count each of conspiracy to commit mail fraud, conspiracy to defraud the Internal Revenue Service, and conspiracy to launder money. Also convicted was Steven L. Baker on eight counts of mail fraud. According to testimony in 1998, Vasilakos, Lent and Baker set up a scheme to keep agents on the roles as active sales agents even though they were no longer selling policies for the company. They created false reports, forged documents and signatures, and mailed them to the insurance company in Chicago. By reporting these “ghost agents”, the conspirators continued to receive commission checks, overrides, renewals and bonuses issued by the company as the result of the reported sales activity. Lent was ordered to surrender no later than February 28, 2005 to begin serving her prison sentence. Vasilakos and Baker are scheduled to be sentenced March 3, 2005.
Former Memphis Police Department Employee Sentenced
On January 26, 2005, in Memphis, TN, Carl Johnson, a former employee of the Memphis Police Department (MPD), was sentenced to seven years in prison for violating one count of drug conspiracy, one count of attempting to evade the filing of an IRS Form 8300, twenty-one counts of money laundering, and one count of structuring currency transactions in order to avoid Currency Transaction Reports. Johnson conspired with other individuals to steal cocaine from the MPD Property and Evidence Room (PER) from November 2000 through September 2003 and then sold the stolen cocaine to Memphis area drug dealers. Johnson structured approximately $60,000 in order to avoid Currency Transaction Reports and that he laundered approximately $63,000 in drug proceeds in order to conceal the proceeds from authorities.
Judge Sentences Another Top Figure in PinnFund Scam
On January 24, 2005 in San Diego, CA, Keith G. Grubba, former President of PinnFund, USA, Inc., was sentenced to 63 months in prison, followed by five years of supervised release and ordered to pay restitution in the amount of $187,665,543, less amounts recovered by the government and the court-appointed receiver for the company. Grubba pled guilty in January 2003 to conspiracy to commit wire fraud, conspiracy to commit money laundering, tax evasion and filing false statements with the Department of Housing and Urban Development. Grubba admitted that he conspired with Michael Fanghella and John Garitta to deceive investors and thereby perpetrate the Ponzi scheme by various means, including the preparation and dissemination of false financial statements. In total, the three fraudulently obtained over $330 million in investor funds. Grubba also admitted that he evaded reporting over $6.7 million in gross income for the tax years 1997 through 2000, with a tax due and owing of approximately $2.5 million. Michael Fanghella was sentenced to 120 months in prison and Garitta is scheduled to be sentenced on March 7, 2005.
Operator of Illegal Internet Pharmacy Sentenced to Prison
On January 21, 2005, in San Diego, CA, Mark Kolowich was sentenced to 51 months in prison and forfeit substantial cash proceeds for his role in operating one of the largest internet pharmacy schemes ever prosecuted. Kolowich previously pled guilty to conspiracy to commit money laundering, conspiracy to sell counterfeit pharmaceuticals, and smuggling charges. Kolowich was the owner of World Express Rx and operated an illegal internet pharmacy in San Diego which allowed customers to order prescription drugs without having a prescription. Kolowich caused counterfeit drugs to be manufactured in Mexico and co-conspirators smuggled the phony drugs across the border into California. From November 1999 through March 2004, the World Express Rx website sold just under $7 million in pharmaceuticals. This investigation has resulted in over $1 million in seized assets.
Florida Man Sentenced to Seven Years in Prison in Scheme that Defrauded Businesses Across the Nation
On January 19, 2005, in Los Angeles, CA, Ronald S. Stern was sentenced to 84 months in prison and ordered to pay nearly $1.9 million in restitution to the businesses and individuals who lost money because of his scheme. Stern pleaded guilty in July 2004 to mail fraud, wire fraud, and money laundering. Stern operated a Fort Lauderdale –based collection agency promising prospective clients that he would collect the delinquent accounts for a fee. However, when Stern collected the delinquent monies, he kept the funds for himself. Stern also charged clients for fictitious collection efforts and fraudulently obtained additional money from the victims companies’ bank accounts by misappropriating identifying information and using fraudulent authorizations to obtain loans and transfers.
Frankel Associate Sentenced to 48 Months
On January 4, 2005, in New Haven, CT, John Hackney was sentenced to 48 months of imprisonment, followed by two years of supervised release, and ordered to pay restitution in the amount of $204,164,215.79 for his role in Martin Frankel’s scheme to defraud several insurance companies of more than $200 million. On September 22, 2000, Hackney pleaded guilty to one-count of a RICO conspiracy and one count of money laundering.
Hackney was hired by Martin Frankel to purchase a bank in the southeastern United States with Frankel remained anonymous in any transactions. Hackney and others made several attempts to locate appropriate financial institutions, and then insurance companies. In order to conceal Frankel’s participation further, Frankel and others formed “The Thunor Trust,” the sole Trustee of which would be Hackney. Three individuals were listed as “grantors” of the trust and were identified as the individuals who provided the funds for the formation of the trust and the trust’s first purchase, the Franklin American Corporation (FAC) and its subsidiary, Franklin American Life Insurance Company (FALIC). However, Hackney knew that the funds were not provided by the grantors, but by Frankel himself. Hackney assumed the position of President and CEO of FALIC. With the purchase of FAC, and subsequent insurance companies over the next several years, Hackney repeatedly created false and fictitious records that were filed with state and federal regulators and made false statements, misrepresenting his role in The Thunor Trust, and protecting Frankel’s anonymity. From 1992 to 1999, Hackney received from Frankel more than $7,000,000 in compensation. On December 10, 2004, Martin Frankel was sentenced to 200 months of imprisonment.
Major Distributor of Anabolic Steroids Sentenced in Money Laundering Case
On December 22, 2004, in Sherman, TX, Eric Lee Stetzel was sentenced to 51 months in prison for conspiracy to launder money and a concurrent sentence of 41 months for five counts of wire fraud. According to information presented in court, Stetzel was involved in an extensive anabolic steroid distribution ring in the United States. Operating out of Allen, Texas, Stetzel marketed and distributed steroids across the U.S. via the Internet. Stetzel would receive payment for steroids often totaling $1,200 to $1,500 per day, by means of wire transfers.
Couple Sentenced in Fraud Case
On December 20, 2004, in Ft. Smith, Arkansas, Jeffrey Lenn Smith and Kaylene Rae Smith were sentenced for their roles in a bank fraud scheme. Jeffrey Smith had previously pleaded guilty to bank fraud and structuring of currency transactions to evade federal reporting requirements to the IRS. He was sentenced to 46 months in prison to be followed by five years of supervised release. Kaylene Smith had previously pleaded guilty to misprision of felony relating to her role in the structuring activity. She was sentenced to four months of house detention followed by five years of probation. The Smiths were also ordered to pay restitution of $3,346,787 to the defrauded financial institution. The judge also ordered that $782,900 in currency and a 2002 Mercedes seized from the Smith’s home during the execution of a search warrant be forfeited and applied to the restitution. Jeffrey Smith diverted assets of his corporation, JLS Capital Holdings and its related entities, which had been listed in a security agreement with the defrauded financial institution. The Smiths also signed a personal guarantee with the financial institution. Beginning in July 2001 and continuing through February 2002 the Smiths utilized fifteen bank accounts to convert their business and personal assets into over $1,250,000 in currency. The Smiths systematically conduct over 180 currency withdrawals in amounts under $10,000 in order to evade the currency transaction reporting requirements and to conceal these assets from the financial institution.
Custom Home Builder Sentenced to 51 Months in Prison
On December 16, 2004, in Charlotte, NC, David Simonini, a Charlotte builder who specialized in luxury custom homes, was sentenced to 51 months in prison to be followed by three years of supervised release and ordered to pay approximately $4.9 million in restitution. Simonini pleaded guilty on July 10, 2003, to conspiracy to commit fraud and money laundering. According to the indictment, Simonini and others devised and executed a scheme whereby they provided false information in order to obtain millions of dollars in loan proceeds purportedly secured by homes, cars, and boats.
Orange County Business Owner Sentenced in Tax Fraud Scheme Involving Imports of Asian Delicacy
On December 15, 2004, in Los Angeles, CA, Alexander The was sentenced to 15 months in prison after pleading guilty to smuggling goods into the U.S., structuring financial transactions to avoid reporting requirements and failing to pay federal income taxes. The owed and operated a business that sold edible birds nests. He admitted in his plea agreement that he knowingly caused false commercial invoices to be submitted to the U.S. Customs and Border Protection for the entry of packages of edible birds nests. These fraudulent invoices substantially undervalued the imported birds nests. The admitted that he structured deposits totaling over $1.4 million of cash, deposited the funds into various banks and different branches of the same bank in amounts under $10,000 for the purpose of evading the reporting requirements. The also admitted to failing to pay personal income taxes and corporate income taxes for the tax years 2000 and 2001. Two other defendants involved in the case, Mientje Perwata, The’s wife, and Agnes Wardhana, The’s sister, have pleaded guilty and are scheduled to be sentenced in February 2005.
Frankel Sentenced in $200 Million Insurance Fraud Scheme
On December 13, 2004, in New Haven, CT, Martin Frankel was sentenced to 16 years and 8 months in prison after pleading guilty in May 2002 to securities fraud, racketeering, racketeering conspiracy and wire fraud in connection to a multi-million dollar fraud against several insurance companies. Frankel admitted that he controlled a racketeering enterprise, made up of himself and others, that the government claims resulted in losses of over $200 million by several insurance companies in the Southeastern United States. Frankel admitted he anonymously controlled the "Thunor Trust" the entity through which he first purchased and then controlled the insurance companies. By gaining control of these insurance companies, Frankel was able to access the cash reserves of the companies, which he then sent to a brokerage firm, ostensibly for investment, called LNS, Inc. Once the cash reserves and other company assets were received into LNS, Inc. accounts, Frankel and others then converted, embezzled and stole those assets for their own benefit.
Fannie Mae to Forfeit $7.5 Million to the United States
On December 8, 2004, in Charlotte, NC, a Consent Order was entered in the case of United States v. James Edward McLean, Jr. The Order states that the Federal National Mortgage Association (Fannie Mae) will pay to the United States $7,500,516.08 which represents funds forfeitable under federal law that were paid to Fannie Mae by defendants in the criminal case. Specifically, this amount includes $6,522,188.08 that Fannie Mae received from First Beneficial Mortgage Corporation (First Beneficial) after First Beneficial obtained that money by fraud from the Government National Mortgage Association (Ginnie Mae) plus an additional $978,328 of stipulated interest. On November 22, 2002, James Edward McLean Jr. and others involved with First Beneficial were convicted of numerous counts of conspiracy, wire fraud, and money laundering in connection with a multi-million dollar mortgage fraud scheme.
Clinical Psychologist Sentenced to Imprisonment for Three Years for Medicare Fraud
On December 7, 2004, in Sacramento, CA, Dr. Jordan Rosenberg, Ph.D., was sentenced to three years in prison as a result of his conviction of healthcare fraud, mail fraud, and making false statements to the United States. Rosenberg was ordered to pay $250,000 in restitution and forfeited all interest in the real estate in Oakland, the proceeds of the fraud, and his interest in all the bank accounts used in the fraud. Rosenberg admitted that he had laundered over $250,000 of the proceeds from the Medicare fraud into the purchase of real estate in Oakland and other assets, all of which were held in the name of alter ego nominees. Rosenberg admitted that he used a sophisticated scheme to defraud, that he abused a special position of trust or special skill in his fraudulent scheme, and that the scheme involved more than minimal planning.
Disbarred Ocean County Attorney Sentenced to 78 Months in Prison for Fleecing of Charitable Foundation
On December 6, 2004, in Trenton, NJ, Charles D. Conway was sentenced to the maximum term of 78 months in federal prison followed by three year of supervised release and ordered to pay $295,238 in restitution after pleading guilty to charges of mail fraud, money laundering, obstruction of justice, witness tampering, perjury and tax evasion for his scheme to steal more than $1.4 million from a foundation that he created when representing the estate of a woman who willed all her assets to charity. As part of Conway's guilty plea, Conway agreed to forfeit any property derived from the scheme, including his residence and four bank accounts to satisfy the $1,431,356 loss suffered by the Rita and Harry Greenberger Foundation, Inc. (R&HGF), a not-for-profit charitable organization. Conway admitted that in early 1995 he devised a scheme to defraud the Greenberger Foundation of funds he then used for his own financial enrichment.
Drug Distributor Sentenced
On December 6, 2004, in Knoxville, TN, Ronnie Rodgers was sentenced to 162 months in prison, to conspiracy to distribute cocaine and crack and money laundering. Ronnie admitted that he was responsible for at least 150 kilos of cocaine and used proceeds from the sale of cocaine to furnish a lavish lifestyle. The investigation showed that Rodgers was one of the leaders of the Rodgers Drug Trafficking organization. This organization had been involved in a 10 year drug and money laundering conspiracy and had imported over a thousand kilos of cocaine over that 10 year period. Ronnie owned five homes and numerous vehicles including a $67,000 Lexus sport coup, an antique show car worth $80,000, a $45,000 Ford F-350, and numerous pieces of expensive jewelry including a Presidential Rolex worth $30,000. Ronnie agreed to forfeit his interest in all of the above mentioned property and all other property seized by government agents.
Memphis Police Department Property Room Supervisor Sentenced
On November 23, 2004, in Memphis, TN, Kenneth Dansberry, a former supervisor with the Memphis Police Department (MPD), was sentenced to 10 years in prison for his conviction on one count of drug conspiracy, one count of theft or bribery concerning programs receiving Federal funds, one count of money laundering, and one count of structuring. The indictment charged that Dansberry, while performing his duties as an MPD supervisor, conspired with other individuals to steal over 250 kilograms of cocaine from the MPD Property and Evidence Room (PER) from November 2000 through September 2003 and then selling the stolen cocaine to Memphis drug dealers. The indictment also alleged that Dansberry structured currency transactions at Memphis, TN banks totaling approximately $160,000 over a one year period; that he conducted financial transactions in a manner to conceal the nature and source of his drug proceeds (for the purchase of a home and several vehicles valued at over $340,000); and that he stole over $130,000 in currency from the MPD. Dansberry's co-defendants, which include three other MPD employees, two large scale drug dealers, among others, have all pleaded guilty and are awaiting sentencing. To date, over $1.5 million in currency, over $2 million in real estate, and approximately $1 million in vehicles have been seized in this investigation.
Father and Son Sentenced for Fraudulent Investment Scheme
On November 22, 2004, in Oklahoma City, OK, Merl William Hickman, Sr. and his son, Merl William Hickman, Jr., were sentenced for their roles in an investment scheme that bilked investors our of $8.5 million. Hickman, Sr. was sentenced to 97 months in prison and ordered to forfeit $32,000 and pay restitution in the amount of $8,561,299. Hickman, Jr. was sentenced to 60 months in prison and order to pay restitution in the amount of $8,561,299.92. The Hickmans pleaded guilty in June 2004 to federal charges including money laundering.
Pharmacist Sentenced for Illegally Distributing Drugs
On November 22, 2004, in Pittsburgh, PA, Daniel C. Gebbia, a licensed pharmacist doing business as Crown Drug, Inc., was sentenced to 51 months in prison to be followed by three years of supervised release. Gebbia was also ordered to forfeit property in excess of $750,000. According to information presented to the court, Gebbia owned and operated an Internet pharmacy and sold prescription drugs to people over the Internet without a legitimate doctor’s prescription. Gebbia had customers pay him in various forms, including cash, check, credit card, and direct payments to his PayPal account. Gebbia was convicted on federal charges of conspiracy to commit money laundering, conspiracy to distribute drugs, and transmitting a threatening communication via the Internet.
Leadership of Drug Conspiracy Sentenced to 17 Years
On November 19, 2004, in Fargo, ND, Alejandrino Angulo Guerrero was sentenced to 17 years in prison to be followed by 5 years of supervised release. Guerrero was also ordered to pay a $300 special assessment to the Crime Victim’s Fund and ordered to forfeit to the United States two residences in Fresno, CA, and a bank account in Rancho Cordova, CA. On May 13, 2004, Guerrero pleaded guilty to his leadership role in a narcotics-trafficking conspiracy. Guerrero was the principal leader and organizer of a wide-ranging conspiracy through which he and co-defendants transferred or arranged the transfer of methamphetamine, cocaine, marijuana, and heroin from Fresno, CA, to areas in North Dakota.
Adoption Agency Used in Conspiracy Scheme
On November 19, 2004, in Seattle, WA, Lauryn Galindo was sentenced to 18 months in prison to be followed by three years supervised release and 300 hours community service. Galindo was also ordered to pay $60,000 in restitution and forfeit proceeds of her crime to the government which includes a home in Hawaii and a Jaguar. In July 2004, Galindo admitted she organized a scheme whereby some Cambodian children were taken from their families and represented on immigration forms as orphans. Galindo was sentenced on federal charges that included conspiracy to commit Visa fraud, conspiracy to launder money, and structuring financial transactions.
Albuquerque Narcotics Dealer Sentenced to Life
On November 17, 2004, in Albuquerque, NM, Eva Palma Atencio was sentenced to life in prison for conspiracy and operating a continuing criminal enterprise. She also received twenty years for maintaining a place for the distribution of controlled substances, and for possession with the intent to distribute more than 50 kilograms of marijuana. A 60 month sentence was also imposed for the transportation of money derived from a criminal offense (all sentences run concurrently). In addition to jail time, Atencio was ordered to pay an assessment of $800. The investigation revealed the Atencio and her husband, Edward, were the leaders of a narcotic enterprise that involved numerous residences used in the manufacture and distribution of narcotics. Edward Atencio is scheduled to be sentenced in January 2005.
Upper Arlington Man Admits Money Laundering Conspiracy
On November 17, 2004, in Columbus, OH, John Allen Snoble pleaded guilty to conspiracy to launder the proceeds of securities fraud in connection with his role in management positions with the National Century Financial Enterprises, Inc. (NCFE). Snoble admitted working with other conspirators to hide company losses estimated to be between $2.1 and $2.9 billion between 1994 and 2002. Snoble and others are alleged to have regularly moved hundreds of millions of dollars between and among bank accounts to hide the company’s shortages. Additionally, Snoble and his co-conspirators falsified records to hide the losses from auditors, investment rating companies and investors. Snoble faces up to five years in prison, mandatory restitution and three years of supervised release.
Former Northridge Water Board General Manager Sentenced for Tax Fraud Scheme
On November 12, 2004, in Sacramento, CA, Dewight Frances Kramer was sentenced to four months in prison to be followed by two years supervised release, including four months in home detention. Kramer was also ordered to pay a $15,000 fine. On February 20, 2004, Kramer pleaded guilty to conspiring to defraud the United States. Kramer admitted that while he was the General Manager for Northridge Water District (NWD) he conspired with co-defendant Jerry Ness to conceal from the IRS hundreds of thousands of dollars in taxable income earned by themselves and other NWD employees. Kramer admitted that he and Ness caused the compensation for unused sick leave and vacation pay for the NWD employees to be issued through accounts payable rather than payroll, resulting in no Form 1099’s or other notifications being issued to the IRS. Kramer also issued himself bonuses, salary advances and a car allowance, all of which were also run through NWD’s accounts payable, rather than payroll, resulting in no withholding of federal taxes. In total, Kramer admitted that during the period of January 1999 through December 2002, approximately $516,332 in compensation issued to Kramer, Ness, and other NWD employees was run through the NWD accounts payable system in order to conceal it from the IRS.
Ballance Pleads Guilty to Mishandling Public Money
On November 9, 2004, in Elizabeth City, NC, Frank W. Ballance, Jr. pled guilty to one count of conspiracy to commit honest services mail fraud, mail fraud of money, and money laundering. As part of his plea agreement, Ballance also has agreed to make restitution to the State of North Carolina in the amount of $61,917 and to forfeit all funds in the escrow account at Wachovia Bank in the name of the John A. Hyman Memorial Youth Foundation, Inc. According to the indictment and evidence presented in court, Ballance, while serving as a state senator, defrauded the state of North Carolina by using his office to obtain over two million dollars in appropriations for the Hyman Foundation, which he controlled, knowing that more than one hundred thousand dollars in Hyman Foundation funds were going to the personal benefit of Ballance, members of his family, and the church where he served as Chairman of the Board of Deacons. As part of the scheme, Ballance forged or caused to be forged the notarized signature of the Executive Director of the Hyman Foundation on 10 official disbursement requests to the State of North Carolina, as well as a statement of conflict of interest policy submitted to the state. Finally, Ballance used financial transactions to conceal the proceeds of these fraudulent schemes.
Ordered to Pay More than $1.5 Million in Outstanding Taxes
On October 29, 2004, in Columbus, OH, Eugene Everett Armold was sentenced to 45 months in prison for making false statements on income tax returns and failing to report more than $4 million in adjusted gross income for 1999 and 2000. Armold was also ordered to pay outstanding income tax liability to the Internal Revenue Service in the form of restitution of $1,564,215. At the trial, it was revealed that the $4,000,000 of unreported income came from Armold's operation and ownership of Purchase Plus Buyer's Group. He paid himself a consulting fee by transferring the money to a Nevada corporation known as Simba Financial Inc. This corporation had no business of its own or employees. It simply existed to receive this $4,000,000 and then funnel it to several other shell corporations until Armold either used the money for his personal use or sent it ($3,000,000) to an account overseas. Armold subsequently brought the money back into the country through one of his attorney's escrow accounts and used it to finance other businesses. The jury found that Armold filed an amended income tax return on June 8, 2001, claiming that his adjusted gross income for 1999 was $450,932, when in fact his true income for the year was at least $2,400,000. The jury also convicted him on a second count which stated that, on October 17, 2001, Armold filed an income tax return for the calendar year 2000 reporting an adjusted gross income of $1,143,520 when he knew his adjusted gross income for the year was at least $3,200,000.
Gambler Sentenced to 15 Months
On October 18, 2004, in Ft. Myers, FL, John J. Rodney, Jr. was sentenced to 15 months in prison, two years probation and a $5,000 fine. Rodney pled guilty in June to conspiracy, operating an illegal gambling business and money laundering. Rodney was the owner of Players Edge, Inc. aka National Sports Consultants operating in Ft. Myers, FL. Rodney offered his expertise in sports betting via internet websites, a syndicated radio talk show broadcast nationwide and through the telephone. Rodney, known as “Dan ‘the Man’ Wilson” on radio broadcasts in major markets throughout the United States, claimed extensive experience in sports betting to attract willing betters and to buy information from Players Edge. Fourteen other members of this gambling ring have also pled guilty in related investigations. This case was worked by a multi-agency task force which has seized more than $8 million in illegal profits including bank accounts, property, luxury automobiles and sports memorabilia.
Abdurahman Alamoudi Sentenced to Jail in Terrorism Case
On October 15, 2004, in Alexandria, VA, Aldurahman M. Alamoudi, founder and former executive director of the American Muslim Council (AMC), the founder of the American Muslim Foundation (AMF), and was an influential member of other Islamic political and charitable organizations, was sentenced to 276 months in jail after entering a guilty plea in July 2004 to three federal offenses: one count of violating the International Emergency Economic Powers Act (IEEPA), which imposes terrorism-related sanctions prohibiting unlicensed travel to and commerce with Libya; one count of false statements made in his application for naturalization; and a tax offense involving a long-term scheme to conceal from the IRS his financial transactions with Libya and his foreign bank accounts and to omit material information from the tax returns filed by his charities. As part of a plea agreement, Alamoudi agreed to cooperate fully and truthfully in any and all investigations, including an ongoing investigation into a plot to assassinate an ally in the war against terrorism. Under the terms of that plea agreement, Alamoudi also agreed that he should be sentenced under the terrorism provision of the federal sentencing guidelines, and he agreed to forfeit all proceeds from his illegal dealings with Libya, which total at least $910,000, including $340,000 seized from him in the United Kingdom.
Court documents filed in conjunction with his plea agreement describe how, from November 1995 to September 2003, Alamoudi devised a scheme to obtain money from Libya and other sources overseas for transmission into the United States without attracting the attention of federal immigration, customs and law enforcement officials. Alamoudi admitted to participating in a comprehensive scheme to conceal prohibited financial transactions related to Libya, his travel to Libya, and financial transactions designed to evade currency reporting requirements, among other things.
Attorney Sentenced to Federal Prison in Mortgage Fraud
On October 6, 2004, in Atlanta, GA, Jerry Wayne Frazier was sentenced 33 months in prison, followed by three years supervised release. Frazier was also ordered to pay $593,337 in restitution, to file tax returns for the past four years, and to surrender his law license. Frazier pleaded guilty to charges of conspiracy to commit bank, wire and bankruptcy fraud, identity theft and money laundering. From in or about April, 1998, through September, 1998, Frazier was part of a mortgage fraud scheme that would contract or otherwise arrange for the purchase of residential and commercial properties for resale at higher prices, often using the proceeds of the resale to pay for the initial purchase. Co-conspirators, commonly referred to as "straw sellers," would falsely claim current ownership of these properties, to appear at the closings where the properties are sold to unqualified "straw borrowers," to disburse the sale proceeds at the direction of the defendant and his coconspirators, and on some occasions purchase with portions of the sale proceeds the same properties which were just sold. Frazier would file false satisfaction, cancellation and assignment of security deeds on a number of these properties, thereby eliminating the security interest of legitimate lenders, through either fraudulently transferring such interest to a coconspirator's company or showing the properties to be free of all mortgage liens before obtaining additional mortgage loans on the properties. Several of the new mortgage loans were obtained in stolen identities, including that of a dead woman. Frazier and his coconspirators also formed and/or used shell companies as employment for unqualified straw borrowers, as names for the establishment of bank accounts to receive scheme proceeds and as "mail drops" for scheme related correspondence.
Former Accutel Executive Sentenced to Over 19 Years in Prison
On October 1, 2004, in Ft. Lauderdale, Fl, Arne Soreide, former Chief Economic Officer of Accutel Communications Inc., was sentenced to 236 months in prison, followed by three years supervised release, ordered to pay $7,603,959 in restitution, and the amount of $6,800 as a special assessment. The Judge also ordered the forfeiture of $7.5 million in criminal proceeds, including the defendant’s Boca Raton waterfront residence. Soreide was convicted of conspiring to defraud long distance telephone customers and suppliers of telecommunication services by “slamming” and “cramming” telephone customers’ long distance telephone service and defrauding the suppliers, mail and wire fraud, money laundering, and filing false tax returns. “Slamming” refers to the practice of deceptively switching a telephone customer’s long distance carrier, without the customer’s permission. “Cramming” refers to the practice of placing unsolicited monthly recurring charges on a customer’s bills. Evidence at trial showed that the defendant obtained long distance service from wholesale long distance carriers without fully paying for those services and that then contracted with rating or billing companies to facilitate the billing of Accutel’s purported telephone customers while not fully paying them and diverted Accutel assets for his personal use. Soreide also laundered the proceeds of his fraudulent scheme and filed income tax returns that misrepresented his true individual and corporate 1998 income by approximately over $2 million.
FY 2004 Archive Examples of Money Laundering Fraud Investigations
Table of Contents - Money Laundering