The Washington Post editorializes here for a compromise in the U.S.-Switzerland cold war over UBS’ reluctance to release more names of purported American tax cheats to IRS and DOJ. I understand the Swiss position. It’s tough to be a grown up nation in the 21st Century when a key segment of your economy is devoted to facilitating tax fraud…..Andrew Cuomo is talking to Chuck but in a nasty way, according to this WSJ article. In a Friday letter, the New York AG threatened to sue Charles Schwab & Co. for fraud in connection with its marketing of auction-rate securities. Cuomo is open to a settlement, however, if Schwab buys back the securities from its investor clients. Schwab adamantly denies wrongdoing. Cuomo’s letter provides examples, allegedly supporting his fraud theory. They look pretty weak to me. Let’s see if Andy is as tough on recently departed Auto Task force Chief, and Democratic Party mega-money raiser, Steven Rattner. Fox News reported on his departure, here, last week…..Meanwhile, in the surprise of the century, Neil Barofsky, “the special inspector general overseeing the government’s financial rescue program,” reports that many of the banks receiving TARP money have used those funds for things other than lending! The uses include, investing, repaying debt, and buying other banks. About 80% of the banks spent at least some of their TARP funds in connection with new lending. Barofsky’s report comes out today, according to this Washington Post article. I have an idea to increase employment and reduce waste and fraud. Every company should be required to hire its own special inspector general at inception. Then, after the first special inspector general’s report is issued, the company should be forced to fire the special inspector general on trumped-up charges. We can keep a lot of people employed this way, and generate plenty of news stories about waste and abuse. We should also make every person hire a special inspector general at birth. Then we can ignore virtually every warning the special inspector general gives us and later suffer the consequences. Oh wait–I’ve already done that with Mom and Dad.
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In Sherman, Texas on Tuesday, US District Judge Richard Schell sentenced James Sandlin of Sherman to three years in prison in a bank fraud case. A jury convicted Sandlin in June on two counts of submitting a false statement to a federally insured financial institution (earlier); the indictment charged that he failed to disclose a $996,000 debt on financial statements he submitted to a Sherman bank (DOJ, AP).
Sandlin is former business associate of US Rep. Rick Renzi (R-Ariz.) and was indicted with Renzi in February in a different case (earlier).
A superseding federal indictment unsealed on Friday afternoon includes the previous immigration and bank fraud charges against former Agriprocesssors CEO Sholom Rubashkin and adds new counts. Rubashkin now faces charges of conspiracy to harbor undocumented aliens for profit, harboring undocumented aliens for profit, conspiracy to commit document fraud, aiding and abetting document fraud, six counts of aiding and abetting aggravated identity theft, and two counts of bank fraud.
Also named are the corporation and four other management team members: Brent Beebe, Hosam Amara, Zeev Levi and Karina Freund. Amara and Levi are believed to have fled to Israel after the May immigration raid at the Postville, Iowa kosher meat processing plant. Amara and Freund were named in an earlier indictment. The Iowa Independent has a full listing of the charges and background.
After a Wednesday bond hearing in Cedar Rapids, Iowa, US Magistrate Judge Jon Scoles ruled on Thursday that former Agriprocessors CEO Sholom Rubashkin must remain in federal custody pending his trial on bank fraud charges. Scoles ruled that Rubashkin is a serious flight risk, citing substantial evidence against Rubashkin and the $20,000 in cash and passports found in a travel bag in the Rubashkin home. Agriprocessors is the giant kosher slaughterhouse in Postville, Iowa that was raided in May by immigration officials, resulting in the arrest and detention of about 400 illegal immigrants.
Rubashkin was arrested last Friday on the bank fraud charges (earlier); he is accused of diverting millions of dollars in customer payments that were part of First Bank’s collateral and instructing an employee to delete evidence of the scheme from the company’s computers. His arrest came just one day after he posted bond on criminal immigration charges resulting from the May raid. His trial on the immigration charges is scheduled for January 20, but no date has been scheduled on the bank fraud charges (Des Moines Register, Iowa Independent).
Meanwhile tensions are reportedly very high in Postville, where the plant sits idle and workers have not been paid as promised. Threats of violence have been reported (Iowa Independent, Failed Messiah).
It’s been a bad year for former Agriprocessors CEO Sholom Rubashkin. The giant kosher meat processing plant he ran for years was raided by ICE in May, resulting in the arrest and detention of about 400 illegal immigrants and his removal as CEO. The Postville, Iowa plant is owned by his father, Aaron Rubashkin. On October 30, Sholom Rubashkin was arrested and charged with charged with with conspiracy to harbor undocumented aliens for profit, aiding and abetting document fraud and aiding and abetting aggravated identity theft. On November 5, Agriprocessors filed Chapter 11 bankruptcy.
Last Friday, he was rearrested, this time on charges of bank fraud. He’s accused of defrauding a bank on Agriprocessors’ $35 million line of credit by diverting millions of dollars in customer payments that were part of the bank’s collateral. He also allegedly instructed an Agriprocessors employee to delete evidence of the scheme from the company’s computers.
Rubashkin had been released on bond Thursday on the October 30 immigration charges, but he was taken back into custody early Friday. After an initial appearance later on Friday before US Magistrate Judge Jon Scoles, he was ordered held pending a detention hearing scheduled for Wednesday (DOJ, Des Moines Register).
Andrew Parker of San Antonio, owner of San Antonio Trade Group, Inc., was sentenced on Monday to 117 months in prison by US District Judge Fred Biery for defrauding the Export-Import Bank of the US of $107 million. In an indictment unsealed on May 1, Parker was charged with conspiracy, wire fraud, use of a false document, money laundering, tax evasion and filing a false tax return. In August, he pleaded guilty to 11 of the 28 counts in the original indictment; Our earlier entries cover his alleged actions, which involved such a large percentage of the Ex-Im Bank’s loan portfolio that the bank’s management has had to revamp the whole program and cut back its offerings. Yet the Express-News quotes Parker as telling Judge Biery: “I was but a cog in this big machine. The truth is I’m caught in a system that, like with many agencies in Washington, is defective.” The DOJ Press Release (.pdf) is here.
Andrew Parker of San Antonio, owner of San Antonio Trade Group, Inc., pleaded guilty on Thursday to defrauding the Export-Import Bank of the US. WOAI reported Wednesday that US District Judge Fred Biery had given Parker one day to decide whether or not to accept a plea agreement. In an indictment unsealed May 1 (earlier here and here) Parker was accused of falsifying loan applications, submitting false reports that goods were bought with the loans, and diverting millions of the loan proceeds for his personal use. As much as $163 million was allegedly involved. He pleaded guilty to 11 of the 28 counts in the indictment, including conspiracy, wire fraud, money laundering, tax evasion, and filing false tax returns. Under the plea deal Parker faces up to ten years in prison and up to $10 million in restitution plus $495,000 in tax liability (WOAI, DOJ).
Ella Mae Letellier of Ontario, Oregon has been indicted by a federal grand jury in Boise on 29 counts of mail and wire fraud in connection with a Nigerian check scam she allegedly helped run out of Payette, Idaho. It’s a rerun of the scheme for which a Washington woman was sentenced to prison in June (earlier): a seller is paid with a phony check for more than the amount of the goods, returns the excess money and winds up liable for the entire amount when the counterfeit check is eventually returned. Letellier allegedly acted as an accomplice for Patrick Anthony of Nigeria by sending out counterfeit checks on his behalf (Idaho Statesman). This scheme has been so well publicized online that it boggles the mind that people still bite. David Hannum was right.
Attorney Paul Arparo of Hartford, Connecticut pleaded guilty on Thursday before US District Judge Alvin Thompson in Hartford to one count of conspiracy to commit financial institution bribery and one count of bank fraud in connection with a bid rigging scheme involving the sale of bank loans. Arparo admitted that between 2001 and 2007 he conspired with Kevin O’Keefe,a vice president of Fleet Bank (later acquired by Bank of America) and an unnamed real estate developer to rig the bidding process on portfolios of distressed loans that Fleet offered for sale. O’Keefe, who pleaded guilty in June, supplied Arparo and the developer with inside information and gave false information to other bidders so that the developer could submit the winning bid on the properties. Arparo acknowledged that he and O’Keefe shared $1.4 million in payoffs from the developer. Aparo faces a statutory maximum of 35 years in prison. His sentencing is scheduled for October 14 (Newsday, DOJ).
Rhonda Harris of Wagoner, Oklahoma on Tuesday was sentenced to 168 months in prison by US District Judge Ronald A. White in Muskogee for embezzling millions from bank customers of Arvest Bank and its predecessors over a 25 year period. Harris pleaded guilty in March 2008 to one count of embezzlement by a bank officer and one count of money laundering; she also received 120 months on the money laundering count, to be served concurrently. From the sentencing press release:
On October 23, 2006, a bank customer went to the bank branch in Tulsa to cash a CD she had purchased at the Wagoner branch. Tulsa branch officers were unable to find evidence that the CD existed. The officials researched other accounts and determined that several accounts had been compromised.
An executive Vice President immediately confronted the defendant. She confessed that she had been stealing from the bank for 25 years. She was quickly removed from the bank and interviewed that day. She gave a partial list of affected customers, accounts, and amounts.
82 customers suffered losses and about $5.6 million has been paid to them by the bank and Chubb Insurance. That amount includes interest that would have been earned had the money not been stolen (The Oklahoman, DOJ).
Karen Baer of Westminster, Maryland on Monday pleaded guilty to bank fraud before US District Judge Andre M. Davis in Baltimore. Baer was a teller and teller supervisor from 1998 to 2007 at PNC Bank and its predecessors, Westminster Union Bank and Mercantile Bank. After PNC bought Mercantile last September, auditors uncovered a long running scheme in which Baer allegedly stole from the branch where she worked, $10,000 at a time. In the plea agreement, she admits to stealing “at least $400,000″ but the alleged total amount is $1.05 million. Baer has agreed to asset forfeiture; she faces a statutory maximum of 30 years in prison. Sentencing is scheduled for October 3 (DOJ).
In Tacoma on Wednesday, US District Judge Benjamin Settle sentenced Edna Fiedler of Olympia, Washington to two years in prison for her role as an accomplice in a Nigerian check scam. This is the all-too-familiar scheme in which a mark who has goods for sale is paid with a phony check for more than the amount and asked to return some of the proceeds, eventually winding up on the hook for the whole amount. Fiedler had pleaded guilty in March to conspiracy to commit bank, wire and mail fraud. She worked in connection with a man from Lagos, Nigeria who shipped counterfeit checks and money orders to her with instructions on how to fill them out and where to ship them. When she was arrested in December she had already shipped out over $600,000 in phony checks and money orders and had $1.1 million more ready to ship. No word on whether the people who fell for the scam will be investigated for terminal idiocy (Seattle Times).
US District Judge Leonard Sand on Wednesday reduced the sentences of Adelphia Communications founder and former CEO John Rigas and his son, former Adelphia CFO Timothy Rigas by three years each. Sand resentenced John Rigas, now 83, to 12 years in prison and Timothy Rigas to 17 years in prison. The resentencing came about after the US Circuit Court of Appeals for the Second Circuit in May 2007 reversed their conviction on one count of bank fraud, citing insufficient evidence. Judge Sand ruled that “a minimal adjustment is appropriate” in light of that reversal. An attorney for the Rigases said they plan an immediate appeal, calling the revised sentences “harsh beyond measure.” However, the Second Circuit did uphold their convictions on 22 of 23 counts and the US Supreme Court in March 2008 rejected their appeals without comment (Reuters, earlier here and here ).
James Sandlin of Sherman, Texas, former business associate of US Rep. Rick Renzi (R-Ariz.) who was indicted with Renzi in February (earlier), was convicted June 11 by a federal jury in Texas in an unrelated case on two counts of submitting a false statement to a federally insured financial institution. Sherman was indicted in November 2007 for submitting financial statements to the Independent Bank of Sherman which allegedly failed to disclose $996,000 in loans from a retired Sherman couple. The maximum penalty on each count is 30 years in prison; a sentencing date was not disclosed (Houston Chronicle, DOJ).
Sandlin has pleaded not guilty in the Renzi case, which is scheduled to go to trial on October 14. He is named in 27 counts in that indictment including conspiracy, wire fraud and honest services wire fraud, money laundering and extortion under color of official right. He and Renzi are accused of using Renzi’s office to extort investors trying to obtain mineral rights.
At a resentencing hearing in Manhattan on Thursday, an attorney for imprisoned Adelphia Communications founder and former CEO John Rigas and his son, former Adelphia CFO Timothy Rigas asked US District Judge Leonard Sand to reevaluate their sentences. The Rigases participated in the hearing by video hookup from prison. Both were convicted of securities fraud, bank fraud and conspiracy in 2004; John Rigas, now 83, was sentenced to 15 years in prison, while Timothy Rigas received a 20 year sentence. The US Circuit Court of Appeals for the Second Circuit upheld their convictions on 22 of 23 counts in May 2007; they began serving their sentences last August, and the US Supreme Court in March 2008 rejected their appeals without comment (earlier). But the Second Circuit reversed their conviction on one count of bank fraud, citing insufficient evidence, which led to the resentencing hearing.
Attorney Lawrence McMichael argued the reversal of the single count was due to a substantive error and therefore all counts should be reevaluated. He also asked the court to consider new sentencing rules and new evidence from civil proceedings that has come to light since the original trial. However, Judge Sand said the reversal was on a lesser count of bank fraud and not the bigger conspiracy charge, and he has already rejected a motion to reconsider based on new evidence. He could choose to let the sentences stand since the reversed count was being served concurrently; McMichael asked for both sentences to be reduced to only 12 months. Judge Sand declined to rule immediately, indicating that he would publish a written decision in the coming weeks. But he stated, “There’s no acceptance of any responsibility for what occurred at Adelphia, and I don’t think that’s an overstatement. I think the defendants are in total denial, and that’s very disturbing” (Reuters ).
Andrew Parker of San Antonio, the equipment exporter recently indicted for defrauding the Export-Import Bank of the US (earlier), was dating an employee of the bank. Parker was seen in public in DC with Mary Beth Adamchik “together in a very affectionate way.” And her title at the bank? “Relationship Manager.” No, really. She has not been charged, but federal authorities have been investigating her background and finances, and she resigned in February after being placed on administrative leave in January because of “a possible inappropriate relationship” between her and Parker. A bank spokesman claimed that she had no authority to approve or underwrite transactions, but the position paid $98,000 annually. Apparently a “Relationship Manager” doesn’t come cheap (San Antonio Express-News).
On Friday, US Magistrate Judge Nancy Nowak denied Parker’s request for release on bond pending trial. The Express-News described the hearing details as “worthy of a movie script,” including Parker’s alleged attempt to recruit an accomplice to “break legs” of his enemies and an alleged threat made against the attorney of a co-conspirator who is now cooperating with the FBI. The FBI agent who testified at the hearing identified Mary Beth Adamchik as a cooperating witness in the case and said that Parker gave her hush money.
Andrew Parker of San Antonio, who owns an equipment exporting company called San Antonio Trade Group, Inc., was indicted this week by a federal grand jury in San Antonio in connection with an alleged scheme to defraud the Export-Import Bank of the US. The 28-count indictment includes one count of conspiracy, nine counts of wire fraud, two counts of use of a false document, 12 counts of money laundering, two counts of tax evasion, and two counts of filing a false income tax return.
The Ex-Im Bank helps US companies export products by guaranteeing loans made by private banks to foreign businesses who use the proceeds to buy the products. Parker is accused of causing multi-million dollar losses to the Ex-Im Bank by falsifying loan applications, submitting false reports that goods were bought with the loans, and diverting millions of the loan proceeds for his personal use. In some cases, associates in Mexico allegedly received the proceeds as direct cash payments; in other cases, the businesses allegedly did not exist. Investigators say Parker and his company are involved in more than $163 million in loans and allege that none have yet been found to be legitimate (San Antonio Express-News, DOJ).
In Tucson on Wednesday, Scott Gompert of Phoenix was sentenced by Chief US District Judge John M. Roll to 26 months in prison for stealing more than $1.1 million from bank accounts of fraud suspects. Gompert pleaded guilty in October 2007, to a two-count information charging him with bank fraud and forging the signature of a judge or court officer; he also forfeited cash and other assets equal to the amount of the fraud. Gompert was formerly a special agent with the Office of Inspector General (OIG) of the US Department of Health & Human Services. He used his experience as an investigator to identify bank accounts holding funds seized from fraudulent activity. Three times in 2005 and 2006 he prepared fraudulent seizure warrants with forged signatures of US magistrate judges and presented the warrants to banks holding the funds; the warrants directed the banks to prepare cashier’s checks made out to a fake federal seizure account he controlled. AP, DOJ.
In Newark, New Jersey on Monday, US District Judge Stanley Chesler sentenced former Suprema Specialties Inc. CFO Steven Venechanos to eight years in prison and ordered him to pay $115 million restitution. Venechanos and former Suprema Specialties CEO Mark Cocchiola were convicted in April 2007 on 38 counts including conspiracy, bank fraud, making false statements to the SEC, wire fraud and mail fraud for their roles in a fraud that caused the Paterson, New Jersey cheesemaker to collapse in 2002. Cocchiola was sentenced to 15 years in prison on March 27 (earlier). The seven year long scheme involved fraudulently inflating inventories and billing $400 million in non-existent sales, causing a loss to investors and banks estimated at more than $177 million. New Jersey Star-Ledger, Forbes/AP.
In Newark, New Jersey on Thursday, US District Judge Stanley Chesler sentenced former Suprema Specialties Inc. President and CEO Mark Cocchiola to 15 years in prison for his role in a fraud that caused the Paterson, New Jersey cheesemaker to collapse in 2002. He was also ordered to pay $115 million restitution to investors and banks; the total loss has been estimated at more than $177 million. Cocchiola and Suprema Specialties CFO Steve Venechanos were convicted in April 2007 on 38 counts including conspiracy, bank fraud, making false statements to the SEC,wire fraud and mail fraud. The charges arose from a complex and long-running scheme to increase the company’s stock price by fraudulently inflating inventories and by billing $400 million in non-existent sales. Venechanos is scheduled for sentencing on April 7. New Jersey Star-Ledger, AP.
Marble dealer John Byors of Williston, Vermont pleaded guilty on Tuesday in US District Court in Burlington to 16 counts including bank fraud, mail fraud, travel fraud, wire fraud and money laundering in connection with a scheme that cost investors an estimated $8 million. The plea was described as a surprise and came the day before his trial was scheduled to begin. A revised 42 count indictment alleged that Byors solicited about $10 million from 78 investors between 2000 and 2005 to finance the harvesting of a rare red marble, promising a high rate of return, but that he diverted most of the money for personal use and only repaid 16 investors. Byors was originally indicted in 2006 and had backed out of an earlier plea agreement. He has been incarcerated for two years. Sentencing has been scheduled for late September. Burlington Free Press story here.
The US Supreme Court on Monday rejected without comment the appeals of Adelphia Communications founder and former CEO John Rigas and his son, former Adelphia CFO John Rigas. Both were convicted of securities fraud, bank fraud and conspiracy in 2004. The charges arose out of Adelphia’s 2002 collapse into bankruptcy after the company revealed $2.2 billion in previously unreported liabilities. John Rigas, now 83, was sentenced to 15 years in prison, while Timothy Rigas received a 20 year sentence. They appealed, claiming that accounting terms had not been properly explained to the jury and that they had followed generally accepted accounting principles; but the US Circuit Court of Appeals for the Second Circuit upheld their convictions last year and they began serving their sentences last August. AP/Washington Post story here.
David Villongco of San Mateo, California was sentenced to 33 months in prison on Friday by US District Judge Richard W. Roberts for defrauding the US Export-Import Bank of $20 million. Villongco, former co-owner and manager of PBJ Venture International Corporation, pleaded guilty in March 2007 to one count of conspiracy and one count of mail fraud. He admitted that he and a co-conspirator borrowed $20 million from the bank from 2001 to 2004 under fraudulent pretenses. The funds were to be used to purchase goods for export to the Philippines, but he and co-conspirators in the US and the Philippines misappropriated about $16 million. Six others have pleaded guilty in the scheme and four more have been indicted. Bizjournal here, San Mateo County Times here.
A US District court jury in Tampa on Monday convicted former Bartow, Florida auto dealer John Giovanetti on 11 counts of wire fraud, 11 counts of bank fraud and one count of conspiracy in connection with $2.5 million in car loan proceeds obtained fraudulently from SunTrust Bank. Giovanetti formerly owned Big Oaks Pontiac Buick GMC in Bartow. Evidence presented at trial showed that on at least 11 different occasions, he had employees fax loan funding requests to SunTrust Bank for cars no longer in his dealership’s possession, “resulting in the unlawful receipt by Big Oaks of over $2.5 million.” Giovanetti faces up to 30 years on each wire fraud and bank fraud count and up to 5 years on the conspiracy count. Sentencing is scheduled for May 12, 2008 before U.S. District Judge James Whittemore. Tampa Bay Business Journal here, DOJ here.