A federal jury in Pittsburgh on Wednesday convicted former Pennsylvania Superior Court Judge Michael Joyce on two counts of mail fraud and six counts of money laundering for giving false information to colllect an insurance settlement. Joyce collected $440,000 from two insurance companies after a slow-speed traffic accident in August 2001; evidence presented at trial showed that he used his official letterhead as part of his effort to obtain the settlement. He claimed to have debilitating neck and back injuries, but later engaged in physical activities in public, including golfing, scuba diving, rollerblading and piloting airplanes. Joyce was suspended last year after being indicted; he chose not to run for reelection. His sentencing is scheduled for March 10, 2009 (Law.com, AP).
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Kenneth Wade Pearson, the webmaster of the notorious St. Regis University diploma mill, was sentenced to 48 months in prison on Tuesday in US District Court in Spokane, Washington. He received a six month sentence for conspiracy to commit wire and mail fraud in connection with the St. Regis operation, and a concurrent 48 month sentence for receipt of child pornography. Pearson’s testimony was key in in implicating the Randock family, who ran the operation (earlier coverage). Owners Steven and Dixie Randock pleaded guilty and are currently serving 36 month prison sentences, while their daughter Heidi Lorhan is serving a 12 month sentence.
When Pearson was investigated during the diploma mill probe, authorities found over 11,000 child porn images on his computer. He claimed he had downloaded the porn images at Dixie Randock’s request so she could start a porn website, but she was never charged with porn possession. In any event, he immediately became a cooperating witness and provided critical information on the St. Regis operation, which resulted in prosecutors recommending a lesser sentence on the porn charge than called for by guidelines (Spokesman-Review).
In Baltimore on Friday. US District Judge Catherine Blake sentenced Alan Fabian of Cockeysville, Maryland to nine years in prison for operating two different investment schemes which defrauded a Georgia company, banks and other funding sources of an estimated $39.5 million. Fabian, a Republican donor and fundraiser, was co-chair of Mitt Romney’s national finance committee. He pleaded guilty in May to one count of mail fraud and one count of filing a false tax return (earlier) after being indicted in August 2007 on 26 counts including bankruptcy fraud, mail fraud, money laundering, obstruction of justice and perjury. In one scheme, Fabian used forged invoices and wire transfer receipts to convince Norcross, Georgia computer leasing company Solarcom into believing that he had purchased millions of dollars in computer equipment and software; he then sold the nonexistent products to Solarcom and leased them back, using the proceeds on a lavish lifestyle and to set up a nonprofit consulting firm. He took in $32 million from this operation. In a later scheme, he deceived Provident Bank, Wachovia Bank and an invoice discounting company into providing $7.5 million in funding for entities he controlled including the consulting firm he had set up with the stolen funds from his earlier scheme (Baltimore Sun, DOJ).
In East St. Louis, Illinois on Friday, US District Judge Michael J. Reagan sentenced Kyle Kimoto of St. George, Utah and Las Vegas to 350 months in prison for operating an advance fee telemarketing scheme that allegedly defrauded over 300,000 consumers of approximately $43 million. A jury convicted Kimoto in April on charges of conspiracy, mail fraud and wire fraud. In the scheme, consumers with substandard credit paid an advance processing fee of $159 or more, believing they would receive a MasterCard; what they actually got was a “benefits package” with an application for a stored value MasterCard — a debit card with no credit line which had to be “loaded” with funds before it could be used (St. Louis Post-Dispatch).
In Cincinnati on Wednesday, US District Judge Arthur Spiegel sentenced Steve Warshak, founder of Berkeley Premium Nutraceuticals, to 25 years in prison for selling at least $100 million of fraudulent “natural” remedies and refusing to accept returns when the products didn’t work despite a “double your money back” guarantee. Berkeley is infamous for marketing Enzyte, a “natural male enhancement” pill which promised permanent growth and for a time also claimed to help erectile disfunction.
Warshaw was convicted in February on 93 counts including conspiracy to commit money laundering, conspiracy to obstruct proceedings before the FTC, mail fraud, bank fraud and money laundering. Three others were also convicted, including his 75-year-old mother Harriet Warshak. Spiegel sentenced her to two years in prison (Kentucky Post).
Joseph Brunson, Timothy McQueen and Tony Pough, the three African-American pastors/investment brokers who call themselves the “Three Hebrew Boys”, were indicted Thursday by a federal grand jury in Columbia, South Carolina on 12 counts of money laundering and 10 counts of transporting checks obtained by fraud. The new charges are in addition to the 35 counts of mail fraud they face from their May indictment which charged them with operating a fraudulent foreign currency trading scheme (earlier); they also face state securities fraud charges. The new counts arise from checks they received from investors which they allegedly converted to personal use. A September 3 arraignment is scheduled (WIS-TV).
Donna Gamble of Marietta, Georgia, a former Georgia Tech employee who pleaded guilty in May to all 22 counts of an indictment which charged mail fraud and theft from an organization receiving federal funds, was sentenced on Tuesday to 32 months in prison by Chief US District Judge Jack Camp in Atlanta. Gamble admitted using a Georgia Tech procurement card which was restricted to work-related expenses to make 2000 purchases of 3800 items for her personal use between 2002 and 2007. The procurement card was funded by a grant from the National Science Foundation. The total amount of Gamble’s illegal purchases was $316,000 and included personal watercraft, a popcorn machine, a wide-screen TV, robotic vacuums, a treadmill and Auburn University football tickets. Gamble hid the fraud by submitting fake receipts and making false entries in accounting records. Her activities were discovered after an audit and that was only conducted after a tip from an informant (Atlanta Journal Constitution, 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.
Reza Bahram Tabatabai of Beverley Hills was sentenced on Monday to 87 months in prison by US District Judge Florence-Marie Cooper in Los Angeles for operating fraud schemes in three states which cost lenders over $8 million. Tabatabai operated a series of so-called bust-out schemes in which legitimate businesses were taken over and their lines of credit used to purchase large amounts of merchandise which were essentially resold with no intention of repaying the lenders. He was convicted in 2006 on 55 counts including conspiracy, interstate transportation of fraudulently obtained property, mail fraud, wire fraud and money laundering (AP, DOJ).
Steven Randock, the third principal in the notorious St. Regis University diploma mill, was sentenced to 36 months in prison on August 5 by US District Judge Lonny Suko in Spokane, Washington for his role in the fraud. He ran the operation with his wife Dixie Randock and daughter Heidi Lorhan, who were sentenced on July 2 (earlier). All three pleaded guilty in March to conspiracy to commit wire and mail fraud; Steven Randock’s sentencing was delayed for medical reasons (Spokesman-Review, DOJ). The Spokesman-Review has also published a list of all known purchasers — 9,612 of them.
A St. Paul area pastor who called himself an apostle and his wife a prophetess was convicted on Friday of defrauding 519 people from Minnesota and Louisiana of $30 million in a Ponzi scheme which operated from April 2004 through December 2005. A federal jury in Minneapolis convicted Neulan Midkiff on eight counts of mail fraud, eight counts of wire fraud, one count of conspiracy and four counts of failure to file tax returns. Midkiff used his position as a minister to solicit investors with the typical promise of high rates of return on investments that were never made, using the funds to pay off earlier investors. He was initially part of a $390 million Ponzi scheme operated by Travis Correll of Atlanta, but Midkiff later started a separate operation of his own. Correll, who pleaded guilty and was sentenced to 12 years in prison, testified against Midkiff at the trial. Midkiff was immediately taken into custody following the verdict. His sentencing hearing has been scheduled for October 1 (Star Tribune, DOJ).
Martin Holtet of LaCrosse, Wisconsin, a former newspaper distributor for the NY Times, was arrested on Tuesday and charged with one count of mail fraud in a scheme which allegedly cost the paper about $325,000. Holtet is accused of creating a total of about 8500 fake customers under the Times’ policy of starting the subscription and billing later. He was paid for each subscription but allegedly just recycled the papers. The Times loss is estimated at about $227,000 in subscription fees paid to Holtet and another $98,000 in printing fees. He was arraigned in US District Court in Madison but the indictment is from the Southern District of New York, where he is scheduled to appear on September 9 (WEAU-TV, DOJ).
Leslie Anderson and David Dalglish, both of Toronto, Ontario, were sentenced earlier this week to 280 months and 235 months in prison, respectively, by US District Judge William Stiehl in East St. Louis, Illinois for their roles in a multi-million dollar telemarketing scam. The sentencing of co-conspirator Lloyd Prudenza was rescheduled for October 1. Dalglish, Anderson and Prudenza operated the Toronto-based First Capital Consumers Group. The firm targeted US residents with substandard credit, promising them a credit card for an advance fee of between $189 and $219 but never delivering a credit card. Prosecutors said that about 40,000 victims paid the defendants and their co-conspirators about $8 million in fees. Anderson was convicted by a jury in March on one count of conspiracy, five counts of mail fraud and eighteen counts of wire fraud. Dalglish and Prudenza pleaded guilty to the same charges in February (Canwest, DOJ).
On Thursday, Steven Winter and Sean McVicar, both also of Toronto, surrendered to US authorities and pleaded guilty in US District Court in East St. Louis to one count of conspiracy and one count of mail fraud in a separate but similar Canadian-based scheme. In this case, their companies sold bogus “credit protection services” and collected advance processing fees for credit cards, allegedly bilking 37,000 consumers out of about $10.5 million. Their sentencing has been scheduled for November 2 (St. Louis Bizjournal, DOJ).
Prosecutors in the Southern District of Illinois won another conviction earlier this year in the Kyle Kimoto case, a $43 million fraud of the same type. His sentencing is scheduled for September 5.
Federal prosecutors in Miami on Friday announced that Dasford Demetrius of Broward County (home of the dimpled chad) has been indicted on 46 counts of mail fraud in connection with a “work-at-home” scheme he promoted. Demetrius allegedly offered customers opportunities to make money by mailing promotional materials from home, requiring upfront fees from $40 to as much as $299 and “guaranteeing” payments of $30 per package mailed.The indictment alleges that he collected over $1.5 million in upfront fees and never compensated any of the participants. The indictment also states that Demetrius has a history of engaged in fraudulent work-at-home schemes and has twice before been under a Consent Order with the USPS, promising to cease and desist (Sun-Sentinel, DOJ)
Jeremiah Mondello of Eugene, Oregon was sentenced to four years in prison on Wednesday by US District Judge Ann Aiken in Portland for criminal copyright infringement, aggravated identity theft and mail fraud. Mondello pleaded guilty to the charges in May. He admitted using computer viruses to install keystroke logging software which he used to steal financial data from at least 40 victims. He then used the stolen data to set up multiple bank, eBay and PayPal accounts under which he sold counterfeited software between 2005 and 2007. He made about $400,000 but the loss to the copyright owners was an estimated $1.2 million (Wired News, DOJ).
A federal grand jury in Richmond, Virginia on July 10 returned a superseding indictment in the case of Edward Okun of Miami, who was indicted in March (earlier) in connection with the theft of $132 million in client funds held in trust by 1031 Tax Group (1031TG), his qualified intermediary company. Okun allegedly converted the funds for his personal and business use, including the purchase of a $6.7 million house and a $15.5 million yacht. There are allegedly 577 victims in the case. The 27 count superseding indictment charges Okun and Lara Coleman of Richmond, his Chief Operating Officer,with conspiracy wire fraud, mail fraud, money laundering and bulk cash smuggling and forfeiture. Okun also faces one count of making false statements. Coleman made her initial appearance in the case on July 10. Both Okun and Coleman pleaded not guilty on July 18 (Richmond Times-Dispatch, DOJ).
All in the family: Chad Wickline and his father Dan Wickline, both of Pickerington, Ohio, pleaded guilty on Thursday in connection with a so-called debt-elimination service they ran. The pleas came in the middle of their trial before US District Judge Algenon Marbley in Columbus. Chad Wickline pleaded guilty to one count of mail fraud and one count of conspiracy to commit money laundering; Dan Wickline pleaded guilty only to the conspiracy count. The Wicklines’ company, Liberty Resources, advertised a “100% legal” and “100% successful” plan to eliminate credit card debts, charging a $7,500 fee to reveal the “little-known fact that federally insured banks really don’t have the authority to issue credit.” And about 400 idiots people actually fell for it, going further in debt, dmaging their credit and in some cases going into bankruptcy. Sentencing will be scheduled later (Columbus Dispatch, DOJ).
Two of the three principals in a notorious diploma mill operation were sentenced to prison on July 2 by US District Judge Lonny R. Suko in Spokane, Washington. Dixie Randock, who operated Saint Regis University with her husband Steven Randock, was sentenced to three years in prison. Their daughter, Heidi Lorhan, was sentenced to one year in prison. Steven Randock’s sentencing was postponed until August 5 as he is recovering from open-heart surgery. All three pleaded guilty in March to conspiracy to commit wire and mail fraud. They sold degrees ranging from high school diplomas through Ph.D. degrees, as well as phony transcripts and professorships, from Saint Regis and other imaginary universities. Officials in Liberia were bribed to say the schools were acccredited. In addition, they sold counterfeit diplomas purporting to be from legitimate universities, including University of Maryland, George Washington University, Missouri University and Texas A&M University. From August 1999 to August 2005, about $6.3 million of fraudulent products were sold to about 10,000 people (Seattle Times, DOJ).
Michael Kyereme of Piscataway, New Jersey pleaded guilty in US District Court in Newark last Wednesday to a two count information charging him with mail fraud and tax evasion, in connection with a scheme which defrauded Cisco Systems of $6.9 million in computer networking equipment. It’s a case with disturbing similarities to the Kent Andrews case. Kyereme was an independent contractor for the City of Newark who handled IT support for city employees. He was authorized to order replacement equipment under its contract with Cisco, which allowed the city to order replacement parts and return the defective parts later. He allegedly ordered 280 pieces of equipment from Cisco under false pretenses, only returning a defective part in about half the cases — and most of those were different parts of much lower value. He admitted fencing the parts to a third party in California. The specific mail fraud count involves a single part he ordered worth $260,000, for which he returned a different part worth $2,000. When he was arrested, he had over $3 million in Cisco parts in his home and car. He faces a maximum of 20 years in prison on the mail fraud count. US District Judge Katharine Hayden scheduled sentencing for November 5 (DOJ press release, information). Again, where were Cisco’s auditors?
Greg Jaunich pleaded guilty in US District Court in Minneapolis last Tuesday to one count of mail fraud for falsely billing almost 2 million kilowatt hours of non-existent wind turbine generated electricty. Xcel Energy was defrauded of about $400,000 in the scheme. Jaunich managed an alternative power company in southwest Minnesota. Xcel is required under the law to buy wind generated energy. Jaunich admitted instructing employees to bill 1.84 million kwh from 2 generators in 2003 and 2004 when he knew they only produced a total of 20,000 kwh between them during the period. US District Judge Paul Magnuson accepted the plea but has not yet scheduled a sentencing date (Star Tribune).
A Chicago doctor and businessman connected to Stuart Levine, the government’s star witness against convicted Illinois developer and Democratic fundraiser Tony Rezko, has been indicted by a federal grand jury in a case involving Levine. Robert J. Weinstein was indicted last Thursday on three counts: one count each of wire fraud, mail fraud and making false statements. He is accused of joining with Levine to siphon and pocket millions of dollars from two organizations, the Rosalind Franklin University of Medicine and Science, formerly the Chicago Medical School, and the Northshore Support Organization, a charity he founded allegedly to support the medical school. He and Levine were trustees of both organizations; the loss to the Northshore Support Organization alone is alleged to be $6 million. The false statement count arose from statements he made to FBI agents in the Rezko case which were contradicted by his conversations with Levine which were wiretapped. Levine has pleaded guilty in the case and is cooperating with prosecutors (Chicago Tribune, 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).
A three-judge panel of the US Court of Appeals for the Seventh Circuit on Wednesday unanimously affirmed the mail fraud convictions of former Hollinger Inc. CEO and chairman Conrad Black, as well as the convictions of his co-defendants Jack Boultbee, Peter Atkinson and Mark Kipnis.The court also upheld Black’s obstruction conviction which arose from his removal of boxes of documents from his Toronto office in violation of a court order. The Canadian Press covers the decision here. Black was sentenced in December to 78 months in prison; he began serving his term on March 3 after the Seventh Circuit denied his request to remain free on bond during his appeal. Boultbee, Atkinson and Kipnis have been free on bond during the appeal.
In Camden, New Jersey on Monday, Glyn Richards of Haddon Heights pleaded guilty before US District Judge Renée Marie Bumb to a two-count information charging him with mail fraud and money laundering in connection with the operation of a Ponzi scheme. Richards operated a company called Air Freight Logistics. He allegedly solicited investors by telling them his company had Defense Department contracts to ship military equipment overseas and needed funds to pay up-front costs, typically promising 44% return on a 120-day $25,000 investment. However, his business never had any such contracts and he was simply operating a typical Ponzi scheme. The overall loss amount has not been determined but he is said to have taken in over $10 million from more than 100 investors. Sentencing is scheduled for October 14 (Philadelphia Inquirer, DOJ).
Former Chicago Bears fullback Roland Harper pleaded guilty last Tuesday to one count of mail fraud for allowing his landscaping business to be used as a front by a white-owned firm to land contracts from the Chicago Public Schools that were set aside for minority-owned businesses. Harper, who is black, admitted that he allowed the real contractor, Monahan Landscape, to use his Rohar Construction to secure $1.5 million in contracts between 2003 and 2006. Harper’s plea came six days after Aidan Monahan, owner of Monahan Landscape and a Democratic Party fund-raiser, pleaded guilty to one count of mail fraud in the case.
Both pleas were entered before US District Judge John Darrah. Harper will be sentenced on October 14 and prosecutors will ask for approximately 16 months in prison. Monahan has agreed to pay $100,000 restitution and is also facing prison time; his sentencing is scheduled for September 30 (Chicago Sun-Times on Harper, Monahan).
Andrew Yao of Bryn Mawr, Pennsylvania, former CEO and sole owner of bankrupt Delaware-based Student Finance Corp., last Wednesday pleaded guilty in US District Court in Philadelphia to 10 counts including wire fraud, mail fraud, making false statements and money laundering; the plea came the day his trial was to start. Yao admitted lying about his income and assets between 1998 in 2002 to obtain $40 million in loans for his company and personal expenses including his jet and a $3 million mortgage refinance. Prosecutors said the charges carry a guideline sentence of about four to five years; US District Judge Petrese Tucker released Yao on bond and set sentencing for September 5. Yao was convicted of bankruptcy fraud last year in US District Court in Delaware last year and was sentenced to one year and one day in prison. He has been free on bond pending appeal in that case, and he faces civil fraud suits in connection with the bankruptcy, which left over $400 million in debt (AP/Forbes, Journal News).
In Madison on Wednesday, US District Judge Barbara Crabb sentenced Daniel TePoel of Barnes, Wisconsin to 11 1/2 years in prison for defrauding 22 investors of more than $2.5 million. TePoel was convicted by a jury in March on one count of conspiracy, four counts of mail fraud, two counts of wire fraud and one count of lying to the FBI. TePoel and his business partner Gary Milosevich allegedly solicited the money from friends and neighbors over a ten year period promising high rates of return at low risk in a purported prime bank scheme but never actually invested any funds. Instead, the funds were converted for personal use, including travel and personal living expenses and construction materials and equipment for a failed resort project in Grenada. Both men were indicted in 2007 but Milosevich remains at large. TePoel, who represented himself, blamed everything on his former partner (Capital Times, DOJ).
Reports from the Thursday hearing before a three-judge panel of the Seventh Circuit in Conrad Black’s appeal (earlier) indicate that oral arguments did not go well for Black’s defense team. As expected, Black’s appellate attorney Andrew Frey argued that Black didn’t intend to obstruct justice when he removed boxes of documents from his Toronto office in violation of a court order, that the money Black and his co-defendants took was a legimate arrangement that didn’t hurt Hollinger shareholders and that US District Judge Amy St. Eve erred in giving the jury the so-called “ostrich” instruction. But the judges, especially US Appeals Court Judge Richard Posner, were unusually aggressive in their questioning of Frey. Former AUSA Eric Sussman, who led the team that prosecuted Black, said he heard “a lot more skepticism from the Court of Appeals than in the ordinary appeal.” Posner called the document removal “bizarre” and said “the bulk of the evidence has to do with pretty naked fraud” (Chicago Tribune, Canadian Press).
A three-judge panel of the US Court of Appeals for the Seventh Circuit will hear oral arguments today in the appeal of former Hollinger Inc. CEO and chairman Conrad Black, as well as the appeals of his co-defendants Jack Boultbee, Peter Atkinson and Mark Kipnis. Black was convicted last July on three counts of mail fraud and one count of obstruction of justice; he and his three co-defendants were accused of defrauding Hollinger and its shareholders of $60 million. He was sentenced in December to 78 months in prison; he began serving his term on March 3 after the Seventh Circuit denied his request to remain free on bond during his appeal (Canadian Press).
One day after indicted Rep. William Jefferson (D-La.) endorsed Sen. Barack Obama for President, three of Jefferson’s relatives were charged in a 31-count federal indictment made public on Wednesday in New Orleans. Betty Jefferson, a publicly elected district tax assessor, her brother Mose Jefferson and her daughter Angela Coleman have been indicted on counts of conspiracy to commit mail fraud, federal program fraud, aggravated identity theft, substantive program fraud, mail fraud and conspiracy to commit money laundering, for allegedly looting charitable organizations under their control (Times-Picayune, DOJ).
Joseph Brunson, Timothy McQueen and Tony Pough, the the self-styled “Three Hebrew Boys” of the Capital Consortium Group, were arrested Wednesday in Columbia, South Carolina and charged with conspiracy to commit mail fraud. The charges stem from a scheme in which prosecutors say the three men collected about $80 milliion from about 7,000 investors. They allegedly sold various debt elimination schemes, primarily through military bases and churches, by telling investors that their funds would be invested in the foreign exchange (forex) currency trading market and claiming return yields of between 200% and 500% per night. They allegedly operated a Ponzi scheme, with some early investors being paid off with later investor funds, but prosecutors said that $1 billion is owed (on paper) by the end of this year and that less than $40,000 was actually invested. Investor funds were said to be used to fund lavish purchases, including a $5 million jet and a $1 million motor coach.
The three men are pastors at African-American churches; since pleading not guilty last year to state charges of selling investments without a license, they have denied any wrongdoing and have claimed their financial work is religious and exempt from securities laws. They have been out on bond on the state charges but were jailed after their arraignment Wednesday before US Magistrate Judge Joseph R. McCrorey in Columbia. A detention hearing is scheduled for June 3; the men each face up to 20 years in prison (The State, AP, FBI).
Four days after a federal jury in Atlanta convicted him on 47 counts including mail fraud, securities fraud and money laundering in a massive hedge fund fraud (earlier), former IMA and IMAAG head Kirk Wright was found hanged in his jail cell in Union City (Atlanta area), where he was being held pending sentencing. He was 37. Betty Honey, an investigator with the Fulton County Medical Examiner said it was a suicide and that no foul play is suspected. Wright faced a statutory maximum of 710 years in prison (AP, Atlanta Journal-Constitution).
After a two week trial, a federal jury in Atlanta on Wednesday convicted former hedge fund manager Kirk Wright on multiple counts including mail fraud, securities fraud and money laundering. Wright’s firms IMA and IMAAG took in over $155 million in investor funds which purportedly were to be invested in marketable securities and cash, but he allegedly used part of the funds in a Ponzi scheme and diverted most of the rest for personal use over a period of at least five years. Only a small portion was actually invested and that lost value. As of late 2005, Wright had represented to investors and the SEC that over $150 million was under management, but when firms collapsed in early 2006 it was discovered that only about $500,000 was left and investors had typically received statements showing 1000 times what they actually had, including falsified brokerage statements from Ameritrade for non-existent accounts. Wright could face up to 710 years in prison; sentencing is scheduled for August 26 before US District Judge Clarence Cooper. He has been in custody since his May 2006 arrest following two months in hiding (Atlanta Bizjournal, DOJ).
In Dallas on Tuesday, James Retz of Fort Worth, former president of oil and gas exploration company Big Rock Ranches, Inc., pleaded guilty before US Magistrate Judge Paul Stickney to an information charging one count of mail fraud. Retz admitted that from 1999 to 2005, he ran an investment scheme in which he concealed well production data from his employees and investors. He allegedly sent fraudulent royalty payment checks, financial statements and newsletters to mislead investors about their investments. He sold percentages of 245 oil and gas wells in Texas and Wyoming which were represented as drilled and producing but only a handful were actually drilled and none were producing. Investor losses were not disclosed. Sentencing is scheduled for September 2 before US District Judge Sam Lindsay; Retz faces a statutory maximum of 20 years in prison (Dallas Bizjournal, DOJ).
In Dallas on Tuesday, Oscar Black of Weatherford, Texas pleaded guilty to an information charging one count of mail fraud in connection with an investment scheme that caused $6.7 million in losses to investors and two banks. Black, who operated OB Cattle, promised investors a guaranteed 12% rate of return, but when his cattle company started losing money, he mailed false statements to his investors to keep them from withdrawing funds and also made false representations to Wells Fargo Bank and First National Bank of Weatherford. In all, investors lost about $3.1 million and the two banks lost $3.6 million when the scheme collapsed. Sentencing is scheduled for September 2 before US District Judge Sam Lindsay; no sentencing agreement was announced but Black faces a maximum of 20 years in prison (AP, DOJ).
After a two-week trial in US District Court in East St. Louis, Illinois, a jury on Friday convicted Kyle Kimoto of St. George, Utah and Las Vegas on one count of conspiracy to commit mail fraud, wire fraud and money laundering, one count of mail fraud and 12 counts of wire fraud. The charges arose from a telemarketing scheme he operated in 2001 and 2002 through his Utah-based Assail, Inc. and a network of call centers; people with substandard credit were led to believe they would receive a MasterCard after paying a processing fee of $159 or more; what the consumers actually received was a “benefits package” which contained an application for a stored value MasterCard, a form of debit card that had no credit line and which had to be “loaded” with funds before it could be used. Over 300,000 consumers paid approximately $43 million to Kimoto’s various companies. Kimoto faces a sentence of up to 175 years in prison; sentencing is scheduled for September 5 (St. Louis Post-Dispatch, DOJ).
A federal grand jury in Richmond, Virginia on Monday indicted Edward Okun of Miami on three counts in connection with a scheme which allegedly defrauded clients of $132 million. Okun was charged with one count of mail fraud, one count of bulk cash smuggling and one count of false statements and forfeiture. Okun operated 1031 Tax Group (1031TG), a qualified intermediary company which acted as a neutral party to hold transaction funds for property investors deferring taxes under IRS Section 1031. The indictment alleges that between 2005 and 2007, Okun misappropriated $132 million in client funds held in trust under agreements and converted it for his personal and business use. He was arrested in Miami and has waived extradition to Virginia. AP, DOJ (via PRNewswire).
A three-judge panel of the Seventh US Circuit Court of Appeals on Thursday denied Conrad Black’s request to remain free on bond during his appeal of his convictions. Black, former CEO and chairman of Hollinger Inc., was convicted last July on three counts of mail fraud and one count of obstruction of justice; he and three other defendants were accused of defrauding Hollinger and its shareholders of $60 million. He was sentenced in December to 78 months in prison. Thursday’s ruling means that barring further appeal, Black must report to prison by March 3, as previously ordered by US District Judge Amy St. Eve. Reuters has the story here.