Other Fraud

At the request of the US Attorney’s Office, on Monday in Los Angeles US District Judge Robert Takasugi dismissed all charges against Eutiquio Sauceda of Downey, California and Gabriel Camacho of El Monte, California. The two men had been indicted in 2003 on counts of conspiracy and making false statements to a US government agency for allegedly falsely certifying the quality of parts used by commercial aircraft, NASA and the Pentagon; the alleged incidents date back to 1999. They had been scheduled to go on trial next month. No reason was given for the dismissal, but Camacho had turned down a plea that would have involved no prison time. Both men were managers at Temperform USA, a subsidiary of Hydroform USA. The men had been accused of ordering their employees to falsely state that parts had been properly heat treated. Temperform and Hydroform were also indicted; Temperform pleaded guilty in September 2004, paid a fine and closed down, but all charges against Hydroform were later dropped (San Francisco Chronicle).

In an opinion published Monday, the US Court of Appeals for the Eleventh Circuit upheld the convictions and prison sentences of Joya Williams and Ibrahim Dimson for conspiracy to commit theft of trade secrets. Williams, an executive assistant at Coca-Cola in Atlanta, was convicted in February 2007 of taking confidential trade information from Coke and trying to sell it to Pepsi through her friend Edmund Duhaney and Dimson. Pepsi contacted the FBI after being contacted by Dimson. Williams was sentenced to eight years in prison; Dimson received a five year sentence. Duhaney, who pleaded guilty and cooperated with prosecutors, was sentenced to two years in prison.

The appellate court rejected Williams’ claims that the presiding judge violated her Sixth Amendment rights by limiting her cross-examination of Duhaney and improperly instructed the jury on the meaning of reasonable doubt. The court also rejected Williams’ and Dimson’s claim that their sentences were unreasonable compared to Duhaney’s two-year sentence (AP/Forbes).

Andrew Bodnar, a doctor and former senior vice president of Bristol Myers-Squibb, on Wednesday was indicted in US District Court in Washington on one count of violating of the Federal False Statements Act for allegedly lying to the FTC about a secret settlement of a challenge to the company’s Plavix patent. The indictment charges that in 2006, he negotiated a secret agreement between Bristol Myers-Squibb and the Canadian generic drug manufacturer Apotex Inc., failed to submit it to the FTC and later lied to the FTC by denying the existence of the agreement. Apotex had filed suit against Bristol Myers challenging the validity of its patent on Plavix and was threatening to market a generic equivalent. In the supposedly undisclosed deal, Bristol Myers allegedly agreed not launch a generic version of Plavix when its patent expires in 2011 if Apotex agreed not to launch its Plavix generic until 2011. The charge carries a maximum sentence of five years in prison. Bristol Myers pleaded guilty to related charges in the case last June and paid a $1 million fine (Reuters, NYT).

It sounds like the plot for a yet-to-be-written Coen Brothers’ movie: according to a search warrant unsealed earlier this week in US District Court in Minneapolis, a St. Paul area man named Michael Anthony Powell is under investigation for allegedly swindling investors who were told he had contracts to deliver containerloads of carp worldwide for humanitarian purposes. The search warrant affidavit indicates that more than 40 people have invested in “fraudulent humanitarian carp proposals” with Powell since 1992, and six people have invested $694,000 into Powell’s ventures from 2000 through 2005. No one has been repaid, and Powell has allegedly converted the money to personal use. He has operated under a number of different company names. Among the ventures:

[The affidavit] said Powell allegedly told some investors in 2004 that he had a $1.2 million contract to deliver container loads of carp fillets to China; persuaded some business associates in 2005 to buy a fish plant in Pepin, Wis., where they were going to process carp for buyers he had supposedly lined up in Serbia, and pitched a deal as recently as last December to haul carp from Utah Lake that would be shipped as “humanitarian aid to countries around the globe.”

Minnesota is perhaps the only state where a bottom-dwelling sand-sucking primitive life form (the carp, not Powell) could generate such interest from investors (Star Tribune).

The latest updates to stories we’ve been following:

• Dickie Scruggs is still fighting disbarment but will not fight indefinite suspension of his law license in the meantime (Sun Herald, earlier).
• The four convicted National Century execs who were taken into custody (earlier) will stay in jail (Columbus Dispatch).
• Wannabe Tennessee Titan Reed Kyle Diehl (earlier) has now been indicted on nine counts of wire fraud and two counts of money laundering (AP).
• The government responds to Jamie Olis’ §2255 motion to set aside his conviction (earlier).

After a hearing in Los Angeles on Monday, US District Judge John Walter refused to dismiss the money laundering conspiracy indictment of the former Milberg Weiss firm (now renamed Milberg LLP), ruling that the firm was correctly charged. An attorney for the firm had argued that the count was a separate offense from the secret kickback scheme that has resulted in guilty pleas from current and former principals of the firm. The trial is scheduled for August 12 (ABA Journal).

Two Houston policemen, officer Tracie Bell and first-year probationary officer Kirshondra Richardson, were indicted last week by a Harris County grand jury on felony charges of theft of more than $100,000. The indictment alleges that they billed the Red Cross over $160,000 for a two-week basketball camp for 310 Hurricane Katrina refugees but the camp only lasted two days and had only 10 attendees. If convicted they could face up to 20 years in state prison. Houston Chronicle here, FoxHouston here.

This would never have happened if Herman Short were still chief of police.

Lou Pearlman, the promoter responsible for foisting N’Sync and the Backstreet Boys on an unsuspecting public, on Thursday pleaded guilty to two counts of conspiracy, one count of money laundering and one count of making a false claim in a bankruptcy in connection with long-running fraud schemes which caused losses to 250 investors estimated at $200 million and losses to 10 financial institutions estimated at $100 million. The plea was entered before US District Judge G. Kendall Sharp in Orlando. Pearlman could face up to 25 years in prison but has agreed to cooperate with authorities investigating other unnamed parties in exchange for the possibility of a reduction in sentence. Pearlman is currently in custody and appeared in court wearing shackles. Full details of the schemes have not been revealed but in court Pearlman acknowledged a Ponzi scheme involving the sale of “employee investment savings accounts,” a bank fraud involving faked financial statements, and a plot to siphon frozen assets from a bankruptcy case. Sentencing has been scheduled for May 21, 2008. Orlando Sentinel here, AP here.

In a plea agreement announced on Friday by US Attorney Michael Sullivan in Boston, McCourt Construction Company pleaded guilty to conspiracy to defraud the US government “with respect to claims on a federal highway project.” The company’s project manager Ryan McCourt, son of the owner, pleaded guilty to one count of conspiracy to submit false statements regarding a federal highway project. McCourt Construction was one of the main contractors on the project; the charges arose from overbilling on the I-93 Tip O’Neill Tunnel project. McCourt admitted participating in over 1500 instances of overbilling in which subcontractors charged journeyman labor rates for work actually done by apprentices. This scheme also increased McCourt’s profits because it was paid 10% of the billings as overhead and an additional 10% as allowable profit margin. The company has agreed to pay a $500,000 fine; Ryan McCourt could face up to 5 years in prison but prosecutors will recommend a sentence in the low end of the sentencing range. A DOJ press release here announces the filing of the information; an AP story on the plea agreement is here.

A federal jury in Houston on Thursday convicted three former natural gas traders from Houston-based El Paso Corporation on one count each of conspiracy and multiple counts of false reporting and wire fraud. The charges arose from the reporting of non-existent natural gas trades sent to industry publications Inside FERC and Natural Gas Intelligence from 2000 to 2002 for the alleged purpose of influencing natural gas prices in El Paso’s favor. James Brooks, former head of gas trading at El Paso and managing director of a wholly owned subsidiary, was convicted on 45 total counts; gas trader Wesley C. Walton was convicted on 23 counts; and gas trader James Patrick Phillips was convicted on 21 counts. US District Judge Melinda Harmon has scheduled sentencing for May 23, 2008; each count carries a possible five year sentence. Houston Chronicle here; AP here.

ChemNutra Inc., the American importer of melamine-tainted wheat gluten from China that made its way into many dog and cat foods last year, its owners Sally Qing Miller and Stephen S. Miller on Wednesday were indicted on 13 counts of introduction of adulterated food into interstate commerce, 13 counts of introduction of misbranded food into interstate commerce and one count of conspiracy to commit wire fraud. The Millers are alleged to have known of the contamination and concealed it from their customers. In a related case, the Chinese producer and the Chinese export brokerage company and their top executives were indicted on 13 counts of introduction of adulterated food into interstate commerce and 13 counts of introduction of misbranded food into interstate commerce. The charges were announced by the US Attorney’s Office in Kansas City, Missouri, where ChemNutra and the Millers took delivery of the product. AP here, DOJ Press Release here.