Sunday, November 30, 2008

Oregon CFO Charged With Embezzlement

Gary A. Green, 50, CFO of Tidewater Contracting in Brookings, Oregon, was arrested last week and charged with aggravated theft after corporate counsel Ted Fitzgerald notified the sheriff's office and presented evidence implicating Green of stealing at least $300,000 from the company. Green is held on a $10 million bail as he is believed to be a high flight risk.

Read the story here.

Former Pennsylvania Nurse Recruiting Exec & Football Star Pleads Guilty To $400K Theft

Anthony J. Aliucci, 39, of Mars, Pennsylvania, pleaded guilty last week to one count of mail fraud admitting he embezzled some $400,000 from his employer, Global Nursing Solutions, Inc., based in Pittsburgh. Alliucci, who was once a star quarterback at Indiana University of Pennsylvania, was originally indicted last February on fraud charges alleging losses of as much as $1 million. He had been contracted originally by the company in 2003, but was later hired directly, becoming Chief Operating Officer in 2005. According to the criminal complaint, Aliucci claimed expenses intended for recruitment costs on nurses that went to him directly. Aliucci also secretly formed a shell company, IHC, to which the company paid for services never performed. Further, he had the company pay NNI, a company based in North Carolina to which Alucci was indebted substantially, "hundreds of thousand of dollars."

Read the story here, here and here.

Saturday, November 29, 2008

Former New York Bowling Exec Accused Of $274K Embezzlement; NY Chapter's Charter Is Rescinded

Stephen P. Donahue, 54, of Weedsport, New York, is accused of stealing some $274,000 from the New York chapter of the US Bowling Congress Association. Donahue was removed as the chapter head in May after 23 years at the helm. He allegedly withdrew cash from an association account using the organization's ATM card while he was at the Turning Stone Resort and Casino, in Verona, New York. The withdrawals occurred between September 2006 and May 2008. The fraud came to light after an annual audit of the association's books turned up discrepancies. He is charged with second-degree grand larceny and faces up to 15 years in prison if convicted.

Read the story here, here, here and here.

Friday, November 28, 2008

Minnesota Woman Charged With Swindling Business For Which She Was Bookkeeper

Cindy Lou Kutscher, 51, of Afton, Minnesota, was charged today with eight felony counts of "theft by swindle" for allegedly stealing more than $250,000 from Navy Island Plywood in West St. Paul for which she was employed as bookkeeper. Kutscher was hired in early 2004 and, according to investigators, the thefts date back to May 24, 2004 in which she forged signatures on checks and deposited them into her own personal accounts. All told, Kutscher allegedly forged signatures on 113 checks which she stole. She is next scheduled to appear in court on February 23, 2009.

Read the story here and here.

Read the DA's press release on this case here.

Motion To Dismiss Ohio Securities & Mortgage Fraud Case Denied

A defense motion to dismiss all 69 counts of fraud in the trial against Evergreen Corp.'s president, David B. Willan, 38, were rejected by Summit County Common Pleas Judge James E. Murphy after a 3 hour argument by the defense. Willan was charged with a host of felonies, including securities fraud, aggravated theft, "theft from the elderly," engaging in a pattern of corrupt activity, selling securities without a state license, making unlicensed small loans and being an unregistered second mortgage lender. Willan's sister, Sandra L. Langer, 52, also an Evergreen executive, was indicted on 20 fraud counts. She pleaded guilty to 3 of the counts, including engaging in a pattern of corrupt activity; securities fraud; and being an unlicensed securities dealer. 15 other co-defendants were charged in the original 147 count indictment.

Read the story here, here and here.

Connecticut Mortgage Broker Pleads Guilty To Mortgage Fraud

Fred Stevens, 52, of Easton, Connecticut and a mortgage broker in Westport, Connecticut, pleaded guilty Tuesday to charges of mortgage fraud. According to the criminal complaint, Stevens, working with real estate developers, appraisers, bankers, attorneys and others, defrauded IndyMac Bank by submitting false mortgage applications resulting in losses of more than $1 million to the bank. The fraud took place between April 2006 and September 2007, according to prosecutors. Sentencing is scheduled for February 13, 2009. Stevens faces up to 30 years in prison, plus a fine of up to $2 million and restitution.

Read the story here, here and here.

Read the DOJ announcement here.

Georgia Attorney Sentenced To Nearly 5 Years For Mortgage Fraud

Mary Reagan, 41, of Alpharetta, Georgia and principal of The Reagan Law Group, was sentenced yesterday to nearly five years in prison plus ordered to pay some $4 million in restitution for mortgage fraud. According to authorities, between mid-2004 and June 2006, Reagan closed millions of dollars in mortgages based upon inflated valuations or fictitious "straw" buyers. She then transferred the funds to co-conspirators by falsifying HUD-1 settlement statements and other documentation. Reagan's co-conspirators named in the indictment were Adriene Newby-Allen, aka Cassandra Miller, 41, of Alpharetta, Georgia, Brinson Allen, 40, of Alpharetta, Georgia and James Howard Bailey, III, 37, of Houston, Texas. Reagan plead guilty in July 2008, shortly before she was to go on trial.

Read the story here, here and here.

Read the DOJ indictment announcement here.

Read the FBI sentencing announcement here.

College Business Manager In Texas Pleads Guilty To Embezzlement

Aubrey Mervin Smart Jr., 61, the former business manager for Coastal Bend College in Corpus Christi, Texas, pleaded guilty Monday to one count of "embezzlement from an organization receiving federal funds." Smart admitted that he stole $127,541.85 between February 4 to April 22, 2008, by making electronic fund transfers to move the money from the college's general fund account to his own bank account, according to the criminal complaint. He faces up to 10 years in prison and a fine of $250,000, plus restitution at sentencing, which is scheduled for February 12, 2009. College president, Thomas Baynum is quoted as saying about Smart, "He came to us with absolutely impeccable credentials. He had worked as a vice president at Northeast Texas Community College. He had a great reputation there and had solid recommendations."

Read the story here, here and here.

Sometimes recommendations and credentials aren't enough. Circumstances change in people's lives that cause them to step over the line ethically. In this case, Smart reportedly used the funds to pay for personal expenses. He may have had financial problems going into this position as the thefts occurred almost immediately after he was hired. I suspect if one dug into his background a little harder, some evidence would emerge to show he had financial or other issues. Recommendations may also not be accurate as most organizations allow staff to provide only "name, rank and serial number" for fear of being sued. However, there is a growing body of case law holding organizations liable for NOT telling pertinent information about why a candidate left a prior job.

Thursday, November 27, 2008

Oregon Winery Bookkeeper Sentenced To More Than 6 Years For Embezzlement

Tiffany Lee Savastano, 33, of Redmond, Oregon, was sentenced this week to more than six years in prison for embezzling $229,000 from her former employer, Cooper Mountain Vineyards in Oregon. Investigators believe Savastano stole more than $500,000, but the statute of limitations ran out on her earlier older thefts. She was charged with the thefts since 2002 and arrested in July 2006.

Oddly, Savastano is still profiled on the Cooper Mountain Vineyards website here.

Interestingly, she has a listing as a freelance bookkeeper here.

Read the story here.

Don't be fooled by a sweet looking face. This innocent-looking woman nearly bankrupted the vineyard she worked for.

Unnamed Washington State Bookkeeper Arrested For Embezzlement, Theft From Art Gallery

The unnamed 36-year-old bookkeeper from Snohomish, Washington, for the Kenneth Behm Gallery in Bellevue, Washington, has been arrested for embezzling some $90,000 and stealing about $15,000 worth of art from the gallery for which he/she worked for more than 8 years. Gallery owner Kenneth Behm told police the bookkeeper he suspected of stealing company funds confessed promptly when confronted and admitted to stealing at least four prints and tens of thousands of dollars over a 6 year period. According to Behm, his internal investigation showed that the bookkeeper was using the gallery funds to pay for personal expenses, including a Cadillac Escalade.

Read the story here and here.

Minnesota Woman Gets 3 Years For $175K Bank Embezzlement

Sara Vriesen, 54, of Champlin, Minnesota, who plead guilty to charges of embezzling some $174,000 from the bank she worked for, was sentenced yesterday to 3 years in prison. Vrieson's guilty plea in August 2008 was to one count of "misapplication and embezzlement of bank funds" and one count of money laundering. She had been employed by Farmer's Trust Savings Bank in Buffalo Center, Iowa and admitted to funneling funds through her children's accounts to her own account. Vrieson was also ordered to pay $183,000 in restitution.

Read the story here, here and here.

Read the DOJ press release here.

Wisconsin Woman Pleads Not Guilty To Embezzling $800K From Home Building Company

Kari Sue Clark-Branton, 39, of Delavan, Wisconsin, pleaded not guilty to charges she embezzled more than $800,000 from the home building company she worked for, Home Design Manufacturing of Walworth Township, Wisconsin. She served as a bookkeeper, responsible for accounts payable and receivable, since she was hired in 1992. According to the criminal complaint, Clark-Branton is accused of writing checks to herself and to a friend's company, Blue Hills Lippitt Morgans, over a period between 2001 and 2008. She is charged with 2 felony charges of "business theft" and 30 misdemeanor charges of forgery. Clark-Branton claims she overpaid herself in salary and bonuses and that she wanted her friend, Joanne Anderson, who also left the company after making unauthorized charges, realize her lifelong dream of owning a horse farm, according to police investigators.

Read the story here and here.

Update (11/3/11): A new criminal defendant, Joanne M. Anderson, 48, of Exeland, Wisconsin, has now been charged with receiving $413,507 from her friend, Clark-Branton in this case.  Faudulent checks in that amount were written out to Blue Hills Lippitt Morgans, Anderson's company.  Clark-Branton pleaded guilty to felony theft and 30 counts of forgery in 2009 and was sentenced to 30 months in prison.  She was also ordered to pay restitution in the amount of $960,000. 

California Woman Pleads Guilty To Emebezzling $466K From Orchard

Judith Kaye Power, 52, of Isleton, California, plead guilty Tuesday to charges she embezzled $466,000 from her employer, Steamboat Orchards, a pear farm in Walnut Creek. Power had been employed as a bookkeeper with responsibility for preparing payroll checks, with no signing authority, according to prosecutors. Investigators alleged that from October 16, 2001 to May 31, 2006, Power forged payroll checks and deposited them into her personal banking account. She also submitted fraudulent time cards and false IRS W-2 forms. She faces 10 years in prison, a fine of $250,000, plus restitution and supervised release upon sentenced, scheduled for February 17, 2009.

Read the story here, here and here.

Happy Thanksgiving

Have a happy, safe (and fraud free) Thanksgiving!

Former Oklahoma Tribal Representatives Indicted For Fraud, Conspiracy

William F. Blind Jr., 67 and his wife, Vinita H. Sankey, 54, were indicted Tuesday on charges that they had stolen more than $200,000 from the Lucky Stars Casino, which is owned by the Cheyenne and Arapaho tribes which they had represented. They are accused of enriching themselves through fraudulent travel reimbursements, among other things. Specifically, Blind and Sankey are each accused of one count of conspiracy. Blind is also charged with six counts of embezzlement and theft from a tribal organization and three counts of aiding and abetting embezzlement. Sankey is also accused of 16 counts of embezzlement and three counts of aiding and abetting. The couple used the money to pay for vehicles, computers and personal travel, according to the indictment. Each faces up to 5 years in prison, a fine of $250,000, plus restitution.

Read the story here and here.

Former Maryland School Superintendent Sentenced In Contract Funneling Scheme

Andre J. Hornsby, 55, the former superintendent of Maryland's Prince Georges County school system, was sentenced to 6 years in prison for fraud and kickbacks in a contract funneling scheme. He was also ordered to pay $90,000 in fines and restitution. Hornsby was originally indicted in August 2006 on 16 counts of mail fraud, wire fraud, witness and evidence tampering and obstruction of justice for allegedly steered educational software contracts to front companies controlled by an associate, Cynthia Joffrion, and his then-girlfriend, Sienna Owens. Six more fraud counts were added to the charges. In exchange for the contracts, Hornsby was to receive personal goods valued at at least $100,000, including a boat a truck and artwork, according to prosecutors. He was convicted on six of the 22 counts on July 23, 2008 after a jury had deliberated for about a week. Hornsby, formerly the Yonkers, New York school superintendent, was hired in 2003 by Prince Georges County.

View the video of Hornsby accepting a $1,000 kickback from Joffrion in a Bowie, Maryland hotel and agreeing to $100,000 in gifts.

Read the story here, here , here and here.

Wednesday, November 26, 2008

Bayer Healthcare Agrees To Nearly $100 Million Fine For Paying Kickbacks

Bayer Healthcare, Inc., based in Tarrytown, New York and a unit of German-based Bayer AG, agreed to pay a $97.5 million fine yesterday to settle charges that it paid kickbacks to diabetic suppliers and caused them to file fraudulent medicare claims. According to the US Department of Justice, Bayer paid the fine to settle charges that it had paid 11 diabetic suppliers to convert their patients to Bayer products from competitors' products. The violations occurred between 1998 and 2007. Under the terms of the consent decree, Bayer agreed to a corporate integrity program which requires it to review and update its employee training for employees who work with Medicare.

Read the story here and here.

We note that in 2003, Bayer Healthcare paid a $257 million fine to settle Medicaid fraud charges, which was the largest Medicaid fraud recovery to date. Read the story here. This company clearly has a systemic problem with the way it conducts business.

Former Interior Department Official Charged With Taking Bribes

Edgar A. Johnson, 59, of Bowie, Maryland, was charged Monday with accepting bribes in exchange for arranging meetings between businesses and government officials in the US Virgin Islands. Johnson was part of the Interior Department's Office of Insular Affairs, most recently serving as director of the Technical Assistance Division, which provides financing to the US Territories and to companies seeking development there. Specifically, Johnson was charged with one count of "honest services wire fraud" in connection with his alleged acceptance of a $10,000 bribe to arrange a meeting of unnamed insurance executives and USVI government officials in August 2007. Johnson, who has held government positions for 30 years, faces 20 years in prison and a $250,000 fine if convicted.

Read the story here.

We note that this is the second recent case involving public corruption in the US Virgin Islands. Read our earlier post here. It is unclear if the two cases are connected.

Tuesday, November 25, 2008

Former Deputy Director Of Tennessee Emergency Management Agency Indicted For Embezzlement

Eugene Nichols, 44, former deputy director of the Bedford County, Tennessee Emergency Management Agency, was indicted last week on 44 counts of theft and 26 counts of forgery involving the agency. According to the indictment, Nichols diverted at least $117,000 over a period between July 1, 2003 and July 30, 2007, for his own purposes. According to investigators, Nichols used the money to repay a personal loan.

Read the story here and here.

Colorado Woman Suspected In School District Embezzlement

Deanna Lynn Moore, 60, longtime administrator for the Woodland Park School District in Colorado, is suspected of embezzling more than $500,000 from the school system. Moore was recently fired from her position as "supervisor of finance" after an audit turned up the discrepancy. A police investigation is underway and computers, paperwork, software and other evidence has been seized at Moore's home. While details are sketchy, it has been reported that Moore's alleged theft occurred over a period of at least 4 years by "fraudulently manipulating our accounts," according to a school district release.

Read the story here, here and here.

Minnesota Woman Sentenced To 18 Months For Embezzlement At Bank

Lisa Ann Holzinger, 45, of Minneapolis, Minnesota, was sentenced yesterday to 18 months in prison for embezzling some $175,000 from Northeast Bank, where she was employed as an "operations officer." According to her plea agreement, Holzinger admitted to stealing $174,216 from the bank between January 2002 and July 2007, by manipulating the books and records. She was originally charged in June and plead guilty to one count of "theft and embezzlement by a bank employee."

Read the story here.

Read the DOJ guilty plea announcement here.

Is White Collar Fraud On The Rise?

According to the most recent annual report on fraud from the Association of Certified Fraud Examiners, white collar fraud is on the rise and becoming more costly. Some of the key findings in their annual report include:
  • US Organizations lose 7% of annual revenue due to fraud, on average
  • Annual losses, based upon projected GDP for 2008, will be nearly $1 trillion
  • Average occupational fraud goes undetected for 2 years
  • Average occupational fraud is $175,000
  • More than 25% of occupational frauds exceeded $1 million
  • Most common fraud is corruption, following by fraudulent billing schemes, each approximately 25% of total cases studied
  • Most cases are uncovered as a result of tips, rather than audits
  • Implementation of anti-fraud controls has a significant impact on reducing fraud losses
  • Manufacturing, banking and insurance were the most likely industries to experience a fraud
  • Small businesses are especially vulnerable to fraud
  • Lack of internal controls most commonly cited as reason for fraud occurrence
  • Occupational frauds most often perpetrated by the accounting department or upper management
  • Occupational fraudsters are generally first time offenders - only 7 percent of cases studied
The ACFE defines "occupational fraud" as "The use of one's occupation for personal enrichment through deliberate misuse or misapplication of the employing organization's resources or assets."

Read the ACFE's 2008 report here.

Here is a good article reflecting some of these statistics with the prediction that fraud is on the rise in an economic downturn.

I tend to agree with much of these findings. However, I suspect that the average size fraud and frequency of $1 million+ frauds are overstated. The reason is that this survey was conducted on a sampling of cases investigated by ACFE members which generally will miss cases on the lower end of the scale. Many fraud cases are simply too small to involve outside forensic accountants or investigators and are handled internally with no publicity. This is unfortunate, but a fact in modern society. The 7% overall loss number for US businesses has been around for some time and held steady for at least the 25 years I have been in the investigations business. Finally, with economic cycles, I would expect white collar cases to increase. However, there is always an ambient level of crime which fluctuates through the cycles. The dips and peaks may not be as pronounced as one might imagine. The fact is that in down cycles, when we would expect fraud to increase, so are organizations being more vigilant in their accounting and attempts to maximize profit. This factor, I believe, tends to shed more light on fraud cases. As my old boss Jules Kroll used to say (paraphrasing), "When the water starts to dry up in the river, the rocks begin to appear."

Monday, November 24, 2008

Update On Intel Theft Of Trade Secret Case: Suspect Former Employee Pleads Not Guilty

Bishwamohan Pani, 33, former engineer for Intel Corp., plead not guilty Thursday to five charges he stole trade secrets as he joined rival chip maker, Advanced Micro Devices. In his indictment, handed down on November 6, Pani was charged with downloading 13 "top secret" Intel documents while he was still technically an employee, having resigned but being paid for unused vacation days. Meanwhile, he had accepted a position with AMD and was receiving a salary from his new employer when the illegal downloads occurred.

See FraudTalk's earlier post on this case here.

Read the story here.

2 California Men, Including Pastor, Sentenced In $28 Million Investment Ponzi Scheme

Robert Jennings, 58, a pastor from Perris, California and Arthur Simburg, 64, now of Portland Oregon (formerly of California), were sentenced today for their role in defrauding more than 500 investors out of some$28 million in a Ponzi-type scheme involving a front company they created, Tri Energy, Inc., an alleged mining concern. Jennings was sentenced to 12 years in prison and Simburg 9 years. They were ordered to pay restitution of $28 million.

In September the two were indicted on 33 fraud counts, along with a third conspirator, Henry Jones, 54, formerly of DelRay Beach, California. The scheme involved enticing investors into an coal mine venture and gold transaction between Israel and the UAE with promises of incredible returns (as much as 300 percent). The three were convicted last July after a 3 week jury trial. Jones was arrested in Hong Kong in July and is expected to be extradited to be sentenced in early 2009. Jennings was originally indicted in October 2007 on three counts of mail fraud, 10 counts of wire fraud, six counts of securities fraud and one count of contempt of court. Simberg was indicted on three counts of mail fraud, 10 counts of wire fraud, six counts of securities fraud and two counts of contempt of court.

Read the FBI release here and here.

California Woman Indicted On $1.6 Million Embezzlement Charge

Lisa Shae Allen, 37, of Modesto, California, was indicted today on charges that she embezzled some $1.6 million from her employer, G. Hedgecock Inc., a grading and paving company. Specifically, Allen was indicted on 47 federal counts including mail fraud, money laundering, and criminal forfeiture stemming from what prosecutors described as an elaborate embezzlement scheme. According to the indictment, the embezzlement occurred between January 2002 and March 2007. Allen was employed as the company's controller and had access to all the books and records. She is reported to have spent the stolen funds on such items as real estate, a pool, vehicles and credit card bills. If convicted, Allen faces up to 20 years in prison and $250,000 in fines, plus restitution.

Read the story here.

See the indictment here.

Florida Steelworkers Union Treasurer Indicted On Embezzlment Charges

Tarris Dynell Dallas, 42, of Fernandina Beach, Florida and the former treasurer of the Nassau County, Florida chapter of the United Steelworkers International Union, was indicted today on charges that he embezzled more than $100,000 from the local. Dallas handling finances for Local No. 9-415 for approximately 10 years before he was fired last January, amid an investigation into missing funds. He has 24 hours to turn himself in to authorities.

Read the story here.

Bush Issues 14 Pardons

President George W. Bush issued 14 pardons today and commuted the prison sentences of two others. Those pardoned include:
  • Daniel Figh Pue III of Conroe, Texas; convicted of illegal treatment, storage and disposal of a hazardous waste without a permit.
  • Brenda Jean Dolenz-Helmer of Fort Worth, Texas; convicted of reporting or helping cover up a crime.
  • William Hoyle McCright Jr. of Midland, Texas; sentenced for making false entries, books, reports or statements to a bank.
  • Leslie Owen Collier of Charleston, Missouri; convicted of unauthorized use of a pesticide and violating the Bald and Golden Eagle Protection Act.
  • Milton Kirk Cordes of Rapid City, South Dakota; convicted of conspiracy to violate the Lacey Act, which prohibits importation into the country of wildlife taken in violation of conservation laws.
  • Richard Micheal Culpepper of Mahomet, Illinois; convicted of making false statements to the federal government.
  • Andrew Foster Harley of Falls Church, Virginia; convicted of wrongful use and distribution of marijuana and cocaine.
  • Obie Gene Helton of Rossville, Georgia; accused of unauthorized acquisition of food stamps.
  • Carey C. Hice of Travelers Rest, South Carolina; convicted of income tax evasion.
  • Geneva Yvonne Hogg of Jacksonville, Florida; convicted of bank embezzlement.
  • Paul Julian McCurdy of Sulphur, Oklahoma; sentenced for misapplication of bank funds.
  • Robert Earl Mohon Jr. of Grant, Alabama; convicted of conspiracy to distribute marijuana.
  • Ronald Alan Mohrhoff of Los Angeles, California; convicted for unlawful use of a telephone in a narcotics felony.
  • Orion Lynn Vick of White Hall, Arkansas; convicted of aiding and abetting the theft of government property

Bush also commuted the prison sentences of John Edward Forte of North Brunswick, New Jersey and James Russell Harris of Detroit, Michigan, who were both convicted of cocaine offenses.

Bush has only pardoned 171 individuals and commuted the sentences of 8. This is less than half the number Bill Clinton or Ronald Reagan made. Nevertheless, more are expected before the end of Bush's term. Among those who have petitioned for clemency is former financier convicted of fraud in the 1980s, Michael R. Milken.

See our entry on Milken in Marquet International's White Collar Rogue's Gallery.

Former Director Of Breast Cancer Charity Pleads Guilty To Embezzlement

Mary E. Guinard, 35, of Meridian, Idaho, plead guilty today to embezzling more than $100,000 from the Boise, Idaho affiliate of Susan G. Komen for the Cure for which she served as director. According to prosecutors, between June 2007 and August 2008, Guinard stole $74,000 by writing some 20 unauthorized checks payable to herself and made $42,000 in unauthorized credit card charges. She also took two laptop computers and a television, without authorization. Guinard, who was arrested August 25th and originally charged with two counts of grand theft and seven counts of forgery, pleaded guilty today to one count of grand theft and one count of forgery with a recommendation by the prosecutor that she be sentenced to 28 years in prison. Sentencing is set for January 5, 2009.

Read the story here, here and here.

Yet another non-profit abused by its director. Lack of controls and oversight plague non-profits, especially a branch as in this case. Luckily Guinard was caught before she caused too much damage to the charity.

Convicted Ex-GenRe Execs Request Shorter Prison Sentences

Elizabeth Monrad, left and Ronald Ferguson, right, former CFO and CEO, respectively, of General Re Corp., who were recently convicted of fraud for their role in manipulating the financial statements of the company, filed a petition Friday to reduce guidelines for their prison sentences. Monrad and Ferguson, who along with other Ge Re executives were convicted of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission, argued that neither benefited personally nor were their actions the cause of American International Group's recent downfall. Monrad's brief stated in part, "The circumstances of this case offer no basis for treating Ms. Monrad, a first-time defendant convicted of a nonviolent offense, more harshly than murderers, rapists, arsonists or drug kingpins." They are scheduled to be sentenced on December 16th.

See FraudTalk's earlier post on this case here.

Read the story here.

Former New Jersey State Senator Wayne Bryant Guilty Of Corruption

Former New Jersey state senator, Wayne R. Bryant, 61, of Lawnside, New Jersey, was found guilty by a federal jury this past Wednesday on one count of bribery, and 11 counts of mail fraud and wire fraud. He was originally indicted March 29, 2007 on 20 counts of bribery, mail and wire fraud. Bryant was found guilty of paying a bribe to solicit a job at the School of Osteopathic Medicine in Stratford, New Jersey. He also arranged $10.5 million in state grant money for the institution. He was also found guilty of padding his pension by "taking on public positions for which he did no meaningful work." Also found guilty was R. Michael Gallagher, 60, of Haddonfield, New Jersey, who was the former dean of the school who arranged for the phony no-show job for Bryant. Sentencing is scheduled for March 20, 2009. Each face more than 15 years in prison.

Read the story here.

The Philadelphia Inquirer has a great spread on the whole sorry saga here.

Read the DOJ's announcement of Bryant's indictment here.

Read the indictment here.

Sunday, November 23, 2008

Tommy Hilfiger CFO Sentenced For $19 Million Embezzlement

Martin S. Bodner, 60, of New York City, was sentenced to 66 months in prison for stealing more than $19 million from Tommy Hilfiger Handbags and Small Leather Goods Inc. (a licensee of Tommy Hilfiger Group, Inc.) while employed by the company in various fiduciary positions, including ultimately CFO. Bodner plead guilty in September to mail fraud and wire fraud charges for the thefts which occurred between 2000 and 2007, according to the complaint. Bodner reportedly increased the amount of his own salary and bonuses, put his son on the payroll, submitted fraudulent expense reports and issued checks directly from the company to a variety of personal accounts and credit cards. He reportedly used the funds to purchase and decorate three Manhattan apartments, luxury cars, a vacation home and other personal items.

Read the story here and here.

Read the plea agreement here.

Saturday, November 22, 2008

80 Year Old Nebraska Former Banker Pleads Guilty To $11 Million Embezzlement

Ray Van Norman, 80, of Kearney, Nebraska and the former Chairman & CEO of the Minden Exchange Bank and Trust, pleaded guilty yesterday to embezzling $11.4 million from the bank over a nine year period. Norman admitted that he stole the money using a scheme involving making loans to corporate entities he controlled. He was originally charged with 26 counts of loan fraud with false collateral. Norman faces up to 50 years in prison and $1 million in fines, plus restitution.

Read the story here, here and here.

UK Company Pleads Guilty To Violating Foreign Corrupt Practices Act - Agrees To $4.2 Million Fine

Aibel Group Ltd., a UK company with operations in Houston, Texas, plead guilty yesterday to violating the anti-bribery provision of the Foreign Corrupt Practices Act and agreed to pay a $4.2 million criminal fine. According to court filings, beginning in February 2001, Aibel Group, through its predecessor entities, began providing engineering services for a Nigerian deep water oil drilling operation called the "Bonga Project." Aibel agents and employees were accused of making 378 corrupt payments totaling approximately $2.1 million to Nigerian customs and other government employees in exchange for favorable treatment. Two other Aibel Group entities have been found guilty of violating the FCPA. In July 2004, Vetco Gray UK, an Aibel Group entity, plead guilty and paid a criminal fine of $1 million. In February 2007, Vetco Gray Controls Inc., and related entities, also Aibel Group companies, was found guilty of FCPA violations and agreed to $26 million in criminal fines.

Read the story here and here.

See Willkie Farr's take on the Vetco guilty plea here.

Gibson Dunn also has a nice analysis on this case and the FCPA in general here.

Read also fcpablog's entry here.

See the DOJ announcement here.

Michigan Woman Accused In $2 Million Embezzlement, Turns Herself In

Melissa A. Bosek-Jordan, 32, of Grand Blanc, Michigan, pictured left at her arraignment, turned herself into authorities yesterday. As previously reported here in FraudTalk, Bosek is accused of stealing more than $2 million from the Bell Title Company where she had been employed. She was charged with 17 felony counts related to the theft and faces up to 20 years in prison if convicted of all charges.

Read the story here and here.

Former Illinois Bank Employee Embezzlement Trial Postponed For Writing Samples

The embezzlement trial for Sandra L. Savala, 40, of Silvis, Illinois, a former employee of Southeast National Bank in Moline, Illinois, scheduled to begin Monday has been postponed until March 30th. Prosecutors filed a motion that was granted compelling Savala to provide writing samples so that they can be compared to documents in evidence. Savala was charged in September with stealing $481,000 from the bank between July 1996 and February 2004, including one count of embezzlement and 33 counts of making false entries in bank records with the intent to defraud. She also is charged with making false statements to a federal investigator. Savala reportedly made false cash advance entries into bank books and records, transferring the funds to herself. If convicted on all counts, Savala faces up to 30 years in prison and $1 million in fines, plus restitution.

Read the story here, here and here.

Pennsylvania Church Treasurer Sentenced For $1.1 Million Embezzlement

Barry R. Herr, 62, of Lancaster, Pennsylvania, was sentenced yesterday to 30 months in federal prison for embezzling $1.1 million from the Lower Susquehanna Synod of the Evangelical Lutheran Church in America, where he had been employed as treasurer for 28 years. Herr, who pleaded guilty in June to mail fraud, also was ordered to pay $800,000 in restitution. He has already repaid $309,000, according to his attorney. According to reports, Herr spend the funds on a gambling habit, as well as on luxury automobiles and other personal items. The embezzlement reportedly went on over the 22 years he was employed by the church. Investigators said that Herr opened a fictitious bank account in 1985 under the name "Cardinal Investment Fund" and had been depositing and withdrawing church endowment funds into this account.

Read the story here, here and here.

Friday, November 21, 2008

Bankrupt Iowa Car Dealers Indicted On 28 Counts Of Fraud

Dan Nelson, and Christian Tapaken, Nelson's partner in the South Dakota-based Dan Nelson Automotive Group, were each indicted on 28 counts of bank, wire and mail fraud in connection with $21 million in bank losses resulting from fraudulent activity. According to the indictment, Nelson and Tapaken manipulated computer reports on information submitted to banks between 1997 and 2005. They each face up to 30 years in prison and $1 million in fines.

Read the story here and here.

FBI Releases Bank Crime Statistics For 2nd Quarter Of 2008

The Federal Bureau of Investigation has released its bank crime statistics for the second quarter of 2008. According to the FBI, there were a total of 1,443 reported violations at financial institutions, including 1,406 robberies, 28 burglaries and nine larcenies, between April 1, 2008 and June 30, 2008. Some of the highlights include:

  • Of the 1,443 total reported violations, loot was taken in 1,311 incidents (91 percent). In contrast, loot was taken in 1,409 incidents (91 percent) during the first quarter of 2008.
  • The total amount taken was valued at more than $12.6 million dollars. This represents a decrease from the previous quarter in which more than $15 million was stolen.
  • A note was used in 815 incidents, a firearm was used in 373 incidents, and robbers threatened the use of a weapon in 567 incidents.
  • Seven deaths occurred during this reporting period, including five perpetrators and two others. No law enforcement officers were killed responding to these incidents.
  • Most violations occurred on Friday. Regardless of the day of the week, violations between the hours of 9:00 a.m. and 11:00 a.m. were the most common.
Read the whole report here.

Former Congressional Legislative Assistant Pleads Guilty To Illegal Gifts From Lobbyists

Fallout continues from the infamous Jack Abramoff (left) scandal as a former Congressional legislative assistant, Trevor L. Blackann, 34, plead guilty to receiving illegal gifts from lobbyists, including Abramoff. Blackann plead guilty to one count of making a false statement in his 2003 tax returns which failed to include $4,100 in income from lobbyist gifts. The gifts included such items as tickets to the World Series, travel, souvenirs, food and drinks and entertainment at a "gentleman's club." Blackann served as a legislative aide to U.S. Senator Kit Bond and Congressman Roy Blunt, both Republicans from Missouri.

Read the story here and here.

Read the FBI announcement here.

Minnesota Man Sentenced To 8 Years For Securities Fraud Ponzi Scheme

Eldon Phillip Anderson, 56, of Burnsville, Minnesota, was sentenced yesterday to 8 years in prison and order to pay nearly $1.5 million in restitution for securities fraud dating as far back as 1994. Anderson plead guilty to one count of securities fraud in March. He is alleged to have defrauded some 950 investors by selling securities in fake corporate ventures and promising returns of as much of 2,500 percent. Anderson presented himself to investors as the president and CEO of Epcom Ltd., Epcom Corp., Epcom Wireless Corp., and other entities involved in the wireless technology, bottled water and other enterprises. Epcom eventually went public. He was originally indicted on 14 counts of securities fraud and 12 counts of mail fraud. Anderson reportedly spent the ill-gotten gains on an extravagant lifestyle, including homes, cars, travel and college tuition. Now he is pleading poverty and being represented by a federal public defender. One bilked investor and former neighbor of Anderson, Carolyn White, reported that Anderson bragged about "stashing money in Panama."

Read the story here, here and here.

Washington State Couple Accused Of Embezzling From 2 Ad Agencies

Michelle A. Wing, 33 of Spokane, Washington, and her boyfriend Kenneth Marsh, 39, also of Spokane, were indicted yesterday on federal conspiracy and multiple bank fraud counts for embezzling $814,000 from two local advertising agencies. Wing was also charged with identity theft and credit card fraud. Both have been arrested and are in jail, pending hearings. According to the indictment, Wing was hired in December 2005 by Centaur Group of Spokane, jointly owned by Eric Hixson and Ryan Pirello who each own ad agencies E Media and Power Marketing Services, respectively. Wing was hired by Centaur through a temporary employment agency for bookkeeping services. Wing, using her access to books and records, proceeded to embezzle funds in a variety of ways, including forging checks, opening up credit card accounts in the owner's names, fraudulent expense reports and making unauthorized withdrawals and deposits in various corporate accounts in an attempt to conceal her activities. They had been assured that a criminal background check had been conducting on Wing by Centaur, according to reports. Unfortunately, Wing was at the time on supervised release following a 2001 conviction for bank fraud in Montana. Wing and Marsh proceeded to use the stolen funds to finance an extravagant lifestyle, including putting down payments on houses, purchasing luxury vehicles and travel, including airline tickets for a youth football team’s trip to California.

Read the story here and here.

Obviously the temp agency did not do a very good job on the "criminal check." Here is the problem: most online criminal background checks are wholly inadequate. The records they cover tend not to go back far enough in time or, more likely, simply do not cover the appropriate jurisdictions and courts. We find that any thorough background check requires physical searches of indices in the jurisdictions in which the subjects have lived and worked. While this is still not a 100% certainty, it is much more thorough than relying on on-line indexes.

Missouri Man Sentenced To Prison In $2.8 Million Prime Bank Scam

Jack A. Calvin, 67, of Ozark, Missouri, was sentenced to 16 years in prison yesterday for operating a "prime bank" securities fraud scheme. Calvin was originally indicted in January 2007 on 3 securities fraud counts to which he plead guilty to one count in November 2007. The indictment alleged that he had defrauded at least 115 investors out of more than $2.8 million between 1999 and 2002 by offering for sale securities in an entity called Growth Benefit Systems, a fictitious trading system business. Investors were told that investment funds would be pooled to purchase prime bank instruments that yielded as much as 20 percent returns. In 2003, the SEC took administrative action against Calvin and obtained a default judgment against him in excess of $6 million.

Read the story here.

Read the SEC's litigation release here.

Read the DOJ's announcement here.

Thursday, November 20, 2008

Idaho Woman Sentenced For Embezzling $400+K From Credit Union

Tammy Lyn Law, 33, of Mountain Home, Idaho, who pleaded guilty in June to federal embezzlement charges, was sentenced last month to 33 months in prison, plus restitution in the amount of $564,215. Law admitted to stealing more than $420,000 from the Pioneer Federal Credit Union, also in Mountain Home, Idaho. Law was employed by the credit union from 2002 to 2008, where she managed the collections department. The misappropriation was accomplished by the diversion of credit union funds and fraudulent expense reports for her own benefit.

Read the story here and here.

Read the FBI press release here.

Florida Law Firm Office Manager Charged In $1.67 Million Theft

Angela Marie Dees, 33, of Punta Gorda, Florida, was arrested yesterday and charged with stealing some $1.67 million from the now defunct law firm of Moore and Waksler. Dees was charged with 259 felony counts in connection with the alleged theft - specifically, 129 counts of grand theft, 114 counts of wire fraud and 16 counts of writing forged checks, and two misdemeanor counts of petty theft. The embezzlement occurred since 2002 when she was hired by the law firm whereby Dees would deposit firm checks or wire transfer company funds into her own personal accounts.

Read the story here and here.

Former Texas Banker Sentenced To Prison For Stealing From 2 Banks

Leslie Woodside Dial, 46, of Sinton, Texas, was sentenced to 33 months in prison for embezzling from 2 separate South Texas banks she worked for. Dial, formerly a Senior Vice President for both the Commercial State Bank of Sinton, Texas and State Bank and Trust in Beeville, Texas, pleaded guilty to two counts of "embezzlement by a bank officer" and money laundering in August. A total of $287,045 was embezzled from the two banks; $180,873 from State Bank and Trust and $106,172 from Commercial State Bank. According to investigators, audits at both banks revealed the theft which dated as far back as 1997. Dial made unauthorized deposits of funds to her own accounts and attempted to cover up the transfers by altering internal accounts. According to the prosecutors report, “External auditors were brought in and identified a total of 536 unauthorized deposits made into nine separate accounts held by Dial and members of her immediate family. These deposits were posted on 228 separate dates between November 1997 and February 2005. "

Read the story here and here.

See the FBI announcement here.

Texas Mother & Son Arrested In $400,000 Embezzlement Case

Ellen Prude, 57, of Palmer, Texas and her son, Christopher Clark, 32, of Red Oak, Texas, were arrested last week and charged with embezzling some $428,000 from Ennis Paint Company, where they were both employed. Prude was employed as a payroll clerk and Clark worked in the warehouse. An audit recently revealed the scheme, in which Prude diverted more than $400,000 in company funds to personal accounts for Clark and herself, according to investigators.

Read the story here and here.

California Woman Charged With Embezzling

Phyllis Chambers, 47, of Anderson, California was charged today with stealing $104,000 from her employer, the S.J. Denham auto dealership in Redding, California. The embezzlement occurred between January 2004 and July 2008. According to the criminal complaint, Chambers was responsible for bank statements, accounts receivable and daily bank deposits. The fraud was uncovered when a co-worker noticed an account transfer from the dealership to pay a $585 utility bill. She faces up to 5 years in prison if convicted.

Read the story here and here.

Former Bay Area Non-Profit Finance Director Pleads No-Contest To Embezzlement

Amado Villanueva, 69, of South San Francisco, California, plead no contest today to charges of embezzling $82,000 from Daly City-based non-profit, California Health Initiatives Inc. He will spend 90 days in the San Mateo County jail and must make restitution. Villanueva was employed as the treasurer of the non-profit and arrested more than 2 years ago when the executive director discovered the thefts, according to prosecutors. Over a three year period, Villanueva made numerous withdrawals from the agency's sole bank account to which he had access as treasurer. A hearing in January is set to determine the amount of restitution.

Read the story here.

Upstate New York Woman Charged With Embezzling $100K From Employer

Elizabeth Temple, 29, of Farmington, New York was charged today with multiple state felony counts alleging she embezzled at least $100,000 from her employer, Wesley Corporation of Macedon, New York. Specifically, Temple was charged with grand larceny, money laundering, forgery, possession of a forged instrument, falsifying business records and computer tampering. She was hired as a bookkeeper by Wesley in 2004 and shortly thereafter began stealing from the company, according to prosecutors. Temple allegedly wrote electronic checks to herself, requested wire transfers to her accounts, and placed herself on another company's payroll. Temple has reportedly confessed to the thefts and told investigators that she used the funds to make a down payment on a home she purchased as well as to buy a new car.

Michigan Woman Charged With Embezzling $2 Million From Title Company

Melissa Bosek-Jordan, 32, of Grand Blanc, Michigan, was charged with 17 state felony counts today alleging that she embezzled some $2.2 million from her employer, Bell Title Company. Specifically, the charges include one count of racketeering, eight counts of embezzlement, four counts of using a computer to commit a crime and four counts of "uttering and publishing." Bosek's license has been revoked by the state and she has also been sued in civil court as a result of her alleged fraud. In the civil case, a judgment has been entered against her in the amount of $2.1 million. According to state investigators, Bosek transferred $400,000 from company accounts to those that she controlled. When confronted by the owners, she claimed to have wired the money back. Instead, according to investigators, Bosek stole company checks and took additional funds, totalling more than $2 million. She ran her own title company, Michigan Title, which she sold to Bell Title thereby becoming an employee. She faces 70 years in prison if convicted on all counts. She has until tomorrow to turn herself into authorities or she will be arrested.

Read the story here and here.

Oklahoma Man Sentenced In $4 Million Bank Fraud Case

Ronald James Ladd, 46, of Altus, Oklahoma, was sentenced yesterday to 41 months in federal prison and ordered to pay some $4 million in restitution for his conviction on bank fraud charges. According to the criminal complaint, Ladd created a fake bond issued by the Assemblies of God Investment Center, which is listed as an asset and convinced several banks to lend him funds. The defrauded banks, all operating in Oklahoma, include: Shamrock Bank; Liberty National Bank; Great Plains National Bank; Farm Credit of Western Oklahoma; Stockmans Bank; and First State Bank of Alva. Ladd and his wife, Patricia Marianne Ladd, filed for bankruptcy last April.

Read the story here and here.

Read the FBI press release here.

Utah Man Pleads Guilty To 56 Counts Of Fraud

Jeffrey F. Geddes, 39 of Park City, Utah, plead guilty on Monday to 52 counts of bank fraud and 4 counts of wire fraud. Specifically, Geddes was accused of bilking Zions First National Bank by fraudulently convincing the bank to increase his corporate credit line to $30 million from $675,000 for his flooring materials company, Adagio Stone, LLC and related entities. To do so, Geddes created a "front" company, Home Depot Export LLC and told bank officials he had a contract to import materials from India to sell to Home Depot. Zions Bank has sued Geddes and his companies in civil court, seeking to recover some $14 million. If convicted of all counts, he faces as much as 30 years in prison, plus $7.7 million in restitution. Media reports suggest that Geddes had a prior criminal history including convictions for forgery and "theft by deception."

Read the story here and here.

Wednesday, November 19, 2008

Massachusetts State Senator Wilkerson Resigns Following Formal Indictment

Embattled Massachusetts state senator Dianne Wilkerson resigned today following her formal indictment yesterday on fraud and bribery charges. She was arrested three weeks ago but vowed to stay in her position while giving up her write in campaign for re-election, which she lost. Wilkerson was indicted yesterday by a federal grand jury on eight counts of attempted extortion stemming from an undercover sting operation. She was accused of accepting bribes for favorable treatment in obtaining legislation, among other things.

Read the story here.

Read the DOJ press release here.

Read our previous post on Wilkerson here.

I agree with state senator Hedlund. Wilkerson should have done the right thing from the outset and resigned.

SEC Charges Tennessee Investment Firm With Fraud

The Securities & Exchange Commission today charged Franklin, Tennessee-based investment firm, J.C. Reed & Company, Inc. with defrauding more than 100 investors some $11 million. Also charged are Barron A. Mathis, the head of its J.C. Reed Advisory Group Inc. subsidiary and the estate of the late John C. Reed, the firms founder and CEO who passed away last June. Both companies company have filed for bankruptcy.

See story here and here.

NY Arts Philanthropist Convicted Of Investment Fraud In Jury Trial

Alberto W. Vilar, 67, was convicted by a jury today on 12 counts of investment related fraud. Vilar, a patron of the arts, particularly the opera, became wealthy during the 1990s stock boom. He reportedly gave away millions to various cultural institutions and opera houses. However, prosecutors claim he began to have financial troubles as the tech bubble burst, triggering the fraud. Vilar was arrested in May 2005 on charges that included conspiracy to commit securities fraud, mail fraud, wire fraud and investment fraud. The allegations stem from charges that he misappropriated millions in investment funds entrusted to his firm, Amerindo Investment Advisors Inc. One such investor, Lily Cates, the mother of actress Phoebe Cates, testified that she lost $5 million as a result of Vilar's misappropriations. Vilar's business partner, Gary Tanaka, was previously found guilty of securities fraud and conspiracy.

Read the story here, here and here.

Disbarred Virginia Lawyer Sentenced For Embezzling $500+K

Michael D. Hancock, 51, of Henrico, Virginia, a disbarred attorney, has been sentenced to 2 years in prison for embezzling from client trust accounts. Hancock was accused of stealing from three accounts, totalling $514,000 which he admitted in his disbarment proceeding.

Read the story here and here.

See the Virginia State Bar's disbarment decision here.

Delaware Woman Pleads Guilty To Various Frauds, Including Embezzlement

Jody Chubbs, 32, of Middletown, Delaware, pleaded guilty yesterday to 15 counts of bank and credit card fraud amounting to nearly $370,000 over a 7 year period. In one scheme, Chubbs was employed by CVM Corp. as a bookkeeper, office manager and controller when, between 2000 and 2002, she wrote checks to herself and forged signatures. CVM's loss was some $132,000. In a more recent scheme, from 2006 and 2007, Chubbs deposited worthless checks into business accounts she controlled and then withdrew cash, netting some $200,000, according to prosecutors. She also made $30,000 in unauthorized charges, Chubbs Towing's credit card, a company she controlled, in 2007. Finally, she reportedly defrauded the Bank of America and Sovereign Bank by opening up accounts in other individuals' names. Chubbs faces as much as 45 years in prison, plus fines and restitution.

Read the story here and here.

Indiana Man Charged In $6 Million Bank Fraud Scheme

Kem E. Linn, 55, of Carmel, Indiana, was arrested yesterday and charged with one count of corrupt business influence, one count of fraud on a financial institution and 48 counts of forgery in connection with a scheme to defraud Evansville, Illinois-based Old National Bank. Linn is an officer of Cubberley's, a Marion, Illinois-based wholesaler of tobacco products, candy and confections. According to a civil complaint filed by the bank against Cubberley's, Linn was at the center of a check-kiting scheme for at least the past five years. Linn reportedly attempted to commit suicide last week and was recovering at the Cornerstone Behavioral Health Center. If convicted on all 50 felony charges, Linn could face as much as 400 years in prison and fines of up to $500,000. Separately, Linn resigned as Grant County Democratic Party chairman after he was charged with making false emergency calls. Details of that case are unavailable.

Read the story here, here and here.

3 More Sentenced In Florida HIV-Infusion Medicare Fraud

Dilcia Marinez, Juan Carlos Castaneda and Luis Frias, all of Miami, Florida, were sentenced to prison yesterday for their role in defrauding the Medicare program in reimbursements of some $14 million for fraudulent HIV infusions and illegally laundering the funds. Marinez, who pleaded guilty on Sept. 15, 2008, to conspiracy to commit healthcare fraud and conspiracy to commit money laundering, was sentenced to 57 months in prison, three years of probation and payment of a $24,000 fine. Marinez was also ordered to pay $43,000 in forfeiture. Castaneda, who pleaded guilty to one count of money laundering conspiracy on Aug. 27, 2008, was sentenced to 87 months in prison, three years of probation and payment of a $100 special assessment. Frias, who on Sept. 23, 2008, also pleaded guilty to one count of conspiracy to launder money, was sentenced to 27 months in prison, three years of probation and payment of a $100 special assessment. The fraud occurred between 2003 and 2004 and involved G&S Medical Center Inc., a Miami-based health care center for which Marinez acted as the president and director. According to the complaint, G&S, at Marinez direction, falsely sent reimbursement claims to Medicare for HIV infusion that never occurred. Castandea and Lrias admitted in to aiding Marinez in laundering the ill-gotten gains.

Read our earlier posts on related cases here and here.

Read the FBI release here.

Eric Holder Tapped To Be Next AG

According to media accounts, sources close to the Obama transition team reported that Eric Holder has been picked to be the next Attorney General. He still has to go through the vetting process. Read the Newsweek article here which broke the story yesterday. Holder, 57, was Deputy Attorney General in the Clinton administration and is set to be the first African American Attorney General, if confirmed. Holder's role in a number of controversial pardons, including members of the Weather Underground and FALN terrorists, and the fugitive Marc Rich (see our blurb on Rich in the White Collar Rogues Gallery here), has created some questions, however.

2 Indicted For Defrauding Investors In Ponzi Scheme

As we reported recently, Steven Byers, 46, of Oakbrook, Illinois, and Joseph Shereshevsky, 51, of Norfolk, Virginia (right and left in 2006 photo here), were indicted last week on one count each of securities fraud and conspiracy for defrauding investors in a $9.2 million fraud scheme. Byers and Shereshevshky, principals of WexTrust Capital LLC, based in Chicago, Illinois, had been charged by the SEC in late August of running a massive $255 million Ponzi scheme which targeted members of the Orthodox Jewish community. According to the SEC complaint, the scheme convinced some 1200 investors to invest in WexTrust and various affiliates since at least 2005 through a series of securities offerings and private placements. The SEC complaint alleged that "at least $100 million had been diverted for unauthorized purposes." It turns out that Shereshevsky, who has used a variety of aliases, has a prior criminal history in that he plead guilty to one felony count of bank fraud in June 2003. He also has a bank fraud conviction in 1994, according to published reports.

Read our earlier post here.

Read more of the ongoing saga, here, here, here and here.

Update (4/13/10): Steven Byers, now 47, pleaded guilty today to one count of securities fraud and one count of conspiracy in connection with his part in running a $255 million Ponzi-type investment fraud scheme that targeted the Jewish investment community. Byers faces a sentence of 151 to 188 months in prison under his plea agreement, and he could be ordered to forfeit $9.2 million in illegally obtained investment funds.

Tuesday, November 18, 2008

New York Executive (With A History) Charged With Securities Fraud

Kevin P. Cassidy, 49, of Bedford Hills, New York, was arrested today on securities fraud charges in connection with his actions as CEO with Optionable, Inc., an oil derivatives trading company based in Valhalla, New York. The six-count indictment charges him with conspiracy, wire fraud, aiding and abetting the making of false statements, and securities fraud. The allegations involve a scheme to defraud the Bank of Montreal by overvaluing certain derivitive instruments, which reported a loss of CN$800 million as a result, according to published reports. Cassidy resigned as CEO of Optionable in May 2007 amid a controversy involving his prior criminal past. Cassidy was sentenced to 30 months for a felony conviction on credit card fraud in 1997 and six months for income tax evasion in 1993. The board of New York Mercantile Exchange (nymex), which purchased a 19 percent interest in Optionable, apparently forced Cassidy to resign when his past was revealed. Optionable's former president, Edward O'Connor and broker, Scott Connor, were also charged by the SEC in this case. David Lee, a former Managing Director of Bank of Montreal, plead guilty to separate charges and was ordered to pay forfeiture of $4.41 million for his role in the scheme.

Read the story here, here and here.

See the SEC complaint here.

This is a good example of failure to do one's due diligence. Nymex should have resolved the Cassidy criminal past before making their investment. See our article on Conducting Effective Due Diligence and the Top Ten Resume Lies.

Texas Woman Arraigned In Health Care Embezzlement Case

Laura Cullars Minor, 52, of Abilene, Texas, was arraigned yesterday on federal charges of embezzling more than $850,000 from the Hendrick Health System ("HHS") where she previously was employed. She entered a plea of not guilty. Minor is accused of the embezzlement scheme, along with Sheri Lynn Mitchell, 48, of Cleveland, Tennessee. Minor and Mitchell were charged in October with one count of conspiracy to commit mail fraud and health care fraud, eleven counts of mail fraud and aiding and abetting, and eleven counts of theft. The alleged embezzlement occurred between April 2002 and November 2007 wherein Mitchell would submit fraudulent invoices to HHS for physician recruiting services that were not provided, according to the complaint. Mitchell would then kickback to Minor approximately one-third to one-half of the payment, totalling some $280,000 in kickbacks. Minor faces up to 280 years in prison, plus fines of as much as $5.75 million. A trial is set for January 5, 2009.

Read the story here, here and here.

Read the DOJ announcement here.

Today is female embezzlement day. Read on below...

Former Pennsylvania Town Treasurer Sentenced For Embezzling

Deborah Perry, 52, of Ridley Park, Pennsylvania and former treasurer for Thornbury Township, pleaded guilty to embezzling from the Township over an 8 year period and sentenced to 3-6 years in prison, plus fines and restitution of $303,000. Perry was reportedly ratted out by her former boyfriend, Robert James Hance, who was accused of spending $40,000 of the ill gotten funds. She joins a list of other Delaware County public employees who have stolen from taxpayers. Mary Arnold was convicted last year of embezzling $287,000 in lunch money funds from the Southeast Delco School District and Carol Ackley, who pleaded guilty in March to stealing nearly $600,000 from the Ridley School District for which she was employed as payroll coordinator.

Read the story here and here.

Texas Woman, Longtime Civic Leader, Sentenced In Embezzlement Case

Margaret Mills, 67, of Waco, Texas and longtime executive director of Downtown Waco, Inc., a redevelopment agency, was recently sentenced to 9 years in prison for stealing from the agency. Mills was originally indicted in November 2007 on charges of felony theft, but plead guity to a lesser charge of third-degree felony theft. Prosecuors alleged that Mills deposited as many as 116 checks - donations meant for the agency - into her personal accounts, totalling $237,000. Investigators believe she stole as much as $511,000. Mills' arrest and conviction shocked the Waco community, where she is reported to have served as a tireless advocate and champion for the rehabilitation of Waco. Her husband, Coke Mills, is a prominent attorney in town.

Read the story here, here and here.

Once again, a non-proft gets looted by its executive director. Lax controls, typically due to lack of funding, are generally the cause. Speculation in this case as to motive seems to be that Mills sought to maintain a certain lifestyle as her husband's law practice suffered.

Former Head Of Texas Credit Union Faces Embezzlement Charge

Joanna Lynn McGee, 39, of Wichita Falls, Texas was indicted recently on charges that she embezzled as much as $1.9 million from her former employer, Texdot Wichita Falls Credit Union. Court filings claim McGee created 129 fictitious loans that generated $3.1 million from which she pilfered funds for her own use.

Read the story here.

Virginia Corporate Accountant Sentenced To Prison For $757K Embezzlement

John N. Sacco, 66, of Chesterfield, Virginia, was sentenced last week to 28 months in prison for embezzling some $757,000 from his former employer, Environmental Supply Co. Inc. Sacco served as the company's accountant and managed to siphon the funds from the corporate accounts for his own benefit. Sacco pleaded guilty earlier in the year to six embezzlement charges and five counts of check forgery. According to prosecutors, there was little oversight of Sacco's bookkeeping methods such that he was able to write checks to himself, one for nearly $30,000.

Read the story here.

Former Aspen Tech CEO Receives Probation For Financial Statement Fraud

David McQuillin, 50, of Sudbury, Massachusetts, and former CEO of Burlington, Massachusetts-based Aspen Technology, was sentenced last week to 3 years probation and fined $12,000 for his role in falsifying the company's reported revenue in 2001 and 2002. McQuillin pleaded guilty to conspiracy and securities fraud charges. He also settled a civil case brought by the SEC in which he was ordered to pay a $85,000 fine, plus disgorgement of $28,381.61 and is barred from serving as an officer or director of any public company. Aspen Technology founder Lawrence Evans settled similar charges.

Read the story here, here and here.

Massachusetts Man Pleads Guilty & Sentenced In Embezzlement Case

Brian Doane, 37, of Burlington, Massachusetts, was sentenced yesterday to 2 1/2 years in prison for stealing nearly $430,000 from his employer. Doane plead guilty to larceny and falsifying corporate books, admitting to embezzling $427,500 between March 2004 and October 2006 from Boston-based staffing firm, KNF&T Inc., for whom he was employed as financial controller. According to prosecutors, Doane made unauthorized transfers from company accounts to his personal accounts.

Read the story here, here and here.

Read the AG's announcement here.

Mark Cuban Accused Of Insider Trading By The SEC

Mark Cuban, Dallas, Texas-based entrepreneur, was charged yesterday with insider trading in a civil suit filed by the SEC. According to the complaint, Cuban, who owns the Dallas Mavericks, sold 600,000 shares of the search engine in June 2004, right before the stock was to be diluted. Cuban, who denied the charges in a written statement issued by his attorney, Ralph C. Ferrara, Esq. of Washington, DC-based Dewey & LeBoeuf.

Developing story...

California Law Firm Administrator Accused Of $1 Million Theft

Regina M. Schenck, 45, of Herald, California, was fired last Friday and accused of embezzling more than $1 million from the law firm she worked for in Sacramento. Schenck had been an administrator with Diepenbrock Harrison since 1994 and most recently held the position of "office administrator" since 2000. Court filings allege that Schenck's embezzlement went as far back as 1999 and she used the funds to pay her personal credit card bills and other personal items, including a prize winning horse. While no one has yet been charged criminally, there is an active federal investigation ongoing and certain records have been seized at her home. Schenck and her husband, Emerson Schenck, 47, are the owners of Diamond K Enterprises, for which certain records were also seized by federal authorities.

Read the story here and here.

New York Man Charged In $8 Million Embezzlement Case

Dennis Dowd, 52, of Yorktown Heights, New York, was charged last week of embezzling $8 million from his employer, Hitachi America of Tarrytown. Dowd had been employed by Hitachi since 1979, most recently as Senior Manager of Corporate Benefits. According to court filings, between 2000 and early 2008, Dowd opened a bank account in the company's name to pay health benefits for employees and then diverted $8 million from the account to a personal bank account. He allegedly used $1 million of the money to pay off credit-card bills, purchase a Lexus and used $625,000 to buy a house in Florida. If convicted on all counts, including embezzlement, health-care fraud and money laundering, Dowd faces 30 years in prison, plus fines. He is out on $1 million bond.

Read the story here and here.

Monday, November 17, 2008

Michigan Credit Union Manager Pleads Guilty To $1.3 Million Theft

Ronald Alan Tran, 45, of Plainwell, Michigan, pleaded guilty last week to embezzlement, money laundering and financial institution fraud charges and admitted to stealing $1.3 million from the Plainwell Community Federal Credit Union where he served as General Manager. The embezzlement occurred between 2002 and 2004, according to prosecutors. Tran faces up to 30 years in prison and $1 million in fines upon sentencing, which is scheduled for February 23, 2009.

Read the story here and here.

See the DOJ announcement here.

Virginia Physicist Pleads Guilty To Illegal Export Of Space Launch Data To China

Shu Quan-Sheng, 68, a native of China, and a naturalized U.S. citizen, pleaded guilty today to charges that he illegally exported space launch technical data and defense services to the People’s Republic of China (PRC) and offered bribes to Chinese government officials. Shu, a physicist by training, is the President, Secretary and Treasurer of AMAC International Inc., based in Newport News, Virginia. He plead guilty to three counts of a criminal information. The first alleges that from January 2003 through October 2007, Shu violated the Arms Export Control Act by exporting defense services without licensing or State Department approval. The second count alleges that on Dec. 20, 2003, Shu violated the Arms Export Control Act by willfully exporting a defense article to the PRC without approval or license. The third count involves a violation of the Foreign Corrupt Practices Act wherein Shu "offered, paid, promised and authorized" the payment of bribes to Chinese government officials to influence their decisions in his and AMAC's favor. He paid some $4 million in bribes, according to the criminal information. Shu faces up to 25 years in prison and a fine as high as $2,250,000 upon sentencing, scheduled for April 6, 2009.

Read the story here and here.

Virginia Attorney Pleads Guilty To $2 Million Embezzlement

Lawrence H. Bidwell, 49, pleaded guilty to stealing $2 million from the Virginia Farm Bureau, where he previously worked as claims counsel. According to prosecutors, Bidwell's embezzlement scheme dates back to at least 1996. Specifically, Bidwell plead guilty to five counts of embezzlement and one count of forgery. The scheme was not discovered until last August, when employees at the Farm Bureau noticed a $30,000 claims check was deposited into an account of Bidwell. While he is charged with $2 million theft, prosecutors suggested that the loss is probably closer to $3 million. During a hearing Bidwell admitted to having a gambling problem. He faces up to 110 years in prison and is due to be sentenced on February 3rd, 2009.

Read the story here, here and here.

Indictment In New Hampshire Embezzlement Case

Rebecca McGuire, 51, of Amherst, New Hampshire, was arrested last week after she was indicted on felony embezzlement charges. McGuire is accused of stealing more than $300,000 from the Jasper Swim and Tennis Club. The indictment includes three felony counts of "theft by unauthorized taking." She had served as the club treasurer for 9 years until she was terminated in 2007.

See our previous post here.

Read the updated story here and here.