Marc Dreier was sentenced to 20 years imprisonment yesterday by U.S. District Judge (SDNY) Jed Rakoff. The government had asked for 145 years. Dreier’s attorney, Gerald Shargel, requested 10 to 12 years for his client. With good time, Dreier should do about 17 years and be released at the age of 76. His children, now teenagers, will then be in their mid-thirties. Sobering numbers for those caught up in securities fraud and securities fraud investigations. When the SDNY prosecutors threaten you with life imprisonment if you don’t plead guilty and cooperate, you’d better believe they mean business. Dreier’s case is different since he pled guilty early on and had no higher-ups to implicate. It is unclear from the Wall Street Journal story here whether Judge Rakoff granted a downward variance, but I assume that he did. It is impossible to imagine such a “light” sentence under the old mandatory Sentencing Guidelines regime. This is not meant as a criticism of the sentence. Just a reminder that, even in the age of Booker-Gall-Kimbrough, the odds of receiving a substantial term of imprisonment are high for those who roll the dice, go to trial, and lose.
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Well, not exactly. Former Cendant Corp. CEO Walter Forbes is doing 12 years in Allenwood for accounting fraud. His sentence included a $3.275 billion restitution order. The federal government moved, post-sentencing, to liquidate Forbes’ assets in order to satisfy the restitution order. The feds wanted Forbes’ $5 million house, claiming that it was purchased with ill-gotten gains. Now Forbes’ wife Caren has filed for divorce seeking equitable division of the couple’s property. But the mansion is currently held in Caren’s name only, having been sold to her by Walter for a mere $10. Our government is not amused. Nora Dannehy, Acting U.S. Attorney for the District of Connecticut, has taken the highly unusual step of moving to intervene in the Bridgeport Superior Court divorce action. According to Dannehy’s motion: “This court should not allow the Forbes family to undermine the government’s work to enforce the restitution order under the guise of a simple, uncontested, family court matter.” The Connecticut Post story by Daniel Tepfer is here.
Federal judges are allowed, in imposing a sentence, to consider alleged criminal conduct against a defendant, even if the trial jury has already acquitted the defendant of those very charges. The sentencing court can use this “acquitted conduct” to increase the defendant’s sentence, provided that a preponderance of the evidence supports the allegations.
Today’s Washington Times has an interesting piece here by Jim McElhatton on the late Jim Caron, aka Juror Number 6. Caron sat for 10 months on a DC federal jury whose members ultimately acquitted defendant Antwuan Ball of all serious charges, convicting the defendant on only a minor drug count. When Caron found out that the government wanted Ball to get 40 years in prison and was using Ball’s acquitted conduct as part of its argument, Caron became furious and wrote a letter of complaint to the trial court. That letter has taken on a life of its own, and has been cited in federal appellate opinions and legal briefs.
McCourt Construction Company was sentenced on Friday to a $500,000 fine and three years probation by US District Judge Richard Stearns in Boston for its role in an overbilling scheme on Boston’s Big Dig project. Stearns also ordered the company to pay $600,000 restitution to the Massachusetts Turnpike Authority. McCourt pleaded guilty earlier this year to conspiracy to defraud the US government with respect to claims on a federal highway project. Two of its supervisors pleaded guilty conspiracy to commit highway project fraud by making false statements and were sentenced last month. The charges arose from overbilling on the I-93 Tip O’Neill Tunnel project. McCourt admitted participating in over 1500 instances of overbilling between 2002 and 2005 in which subcontractors charged journeyman labor rates for work actually done by apprentices (DOJ, Boston Bizjournal).
Ryan McCourt and Kenneth Hartley, both former managers for McCourt Construction Company, were sentenced on October 16 by US District Judge Joseph Tauro in Boston for their roles in an overbilling scheme on Boston’s Big Dig project. Ryan McCourt was sentenced to two years probation, while Kenneth Hartley was sentenced to six months in prison and two years of supervised release. Both men pleaded guilty in July to a single-count information charging conspiracy to commit highway project fraud by making false statements regarding the cost of work performed on a federal highway project, admitting that they took part in overbilling the I-93 Tip O’Neill Tunnel project in a scheme where subcontractors charged journeyman labor rates for work actually done by apprentices (earlier). McCourt Construction also pleaded guilty and will be sentenced on November 7 (Boston Globe, DOJ).
Convicted former class action attorney Bill Lerach has been transferred from the minimum security federal prison camp at Lompoc, California to the Federal Correctional Institution in Phoenix, “a medium security facility for male offenders.” Lompoc was a fenceless camp, Phoenix has prison cells. Officials won’t comment but the move is apparently in response to Lerach’s alleged offer to let a prison guard use his San Diego Chargers season tickets (earlier), which landed him in “administrative segregation” for 23 hours a day (Legal Pad, Portfolio).
Convicted former class action attorney Bill Lerach, sentenced to two years in prison for his role in his firm’s kickback scandal, has landed in hot water: shortly after arriving at the minimum security federal prison camp at Lompoc, California in May, he allegedly offered a guard use of his San Diego Chargers season tickets. The guard reported the incident and Lerach has reportedly been put in “administrative segregation” for 23 hours a day, pending a hearing. This is considered a “high category” offense for an inmate and could result in his transfer to a higher security prison and other sanctions (ABA Journal, Legal Week).
Lennox and Lester Parris, brothers and principals of now-defunct Jericho, New York-based bottled water distributor Queénch, Inc., were each sentenced last Wednesday in Brooklyn to 60 months in prison for securities fraud in connection with the manipulation of stock prices which allegedly cost investors over $2.5 million. They were convicted in 2007 on six counts including securities fraud, conspiracy to commit securities fraud, witness tampering and conspiracy to commit witness tampering. What’s unusual here, although the DOJ press release fails to mention it, is that US District Judge Frederic Block departed sharply downward from federal sentencing guidelines, which called for a recommended sentences of 30 years to life based on offense levels of 42 for both men. Block criticized the guidelines’ “fetish with absolute arithmetic”, writing that while the sentences were well-deserved, the crimes did not rise to the level of Enron, WorldCom and Computer Associates. Mark Fass’ NY Law Journal story has more, including a link to the decision.
US District Judge Naomi Reice Buchwald has sentenced former Refco Chairman and CEO Phillip Bennett to 16 years in prison. Bennett pleaded guilty in February to conspiracy, wire fraud, bank fraud, money laundering and making false SEC filings in connection with Refco’s 2005 collapse which cost investors an estimated $2.4 billion. Bennett will begin serving his sentence on September 4 and will be under house arrest until then (Reuters via Yahoo News).
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 ).
Sentencing for former Refco Chairman and CEO Phillip Bennett is now rescheduled (again) for July 3 before US District Judge Naomi Reice Buchwald in Manhttan. Bennett pleaded guilty in February to conspiracy, wire fraud, bank fraud, money laundering and making false SEC filings (earlier). Prosecutors are seeking a sentence in the same range as the 25 year sentence of former WorldCom CEO Bernie Ebbers. Bennett’s attorneys are asking for a non-guidelines sentence in the range of the 10 year sentence former Drexel Burnham Lambert junk bond ace Michael Milken received, noting Bennett’s cooperation with shareholders in their civil suit (New York Law Journal).
In Tampa on Wednesday, US District Judge Steven Merryday sentenced Luis Uribe to 102 months in prison for his role in a $6 million “equity stripping” mortgage fraud scheme that included identity theft. Uribe, a licensed mortgage broker, pleaded guilty on March 27 to one count of wire fraud and one count of aggravated identity theft. He was accused of obtaining 32 mortgage loans under false pretenses through a shell contracting company, using stolen identities, on the premise of additional construction work to be done, but no work was ever performed by the contracting company (earlier, DOJ, Tampa Tribune). On March 28, licensed title agent Andrea Batronie was sentenced to 30 months in prison for her role in the same scheme. In January, Uribe was sentenced to 34 months in prison in US District Court in Chicago for his role in a similar scheme.
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).
Former Credit Suisse investment banker Hafiz Muhammad Zubair Naseem was sentenced on Friday to 10 years in prison by US District Judge Robert Patterson in Manhattan. A jury convicted Naseem in February on one count of conspiracy and 28 counts of insider trading for tipping off a colleague in Pakistan who traded on inside information of upcoming mergers, resulting in a gain of $7.5 million (earlier). The colleague, Ajaz Rahim, is fighting extradition from Pakistan (Bloomberg).
Melvyn Weiss, pioneer of shareholder class action lawsuits and former name partner of the firm now known as Milberg LLP, was sentenced today to 30 months in prison by US District Judge John Walter in Los Angeles. In March Weiss agreed to plead guilty to a single count of racketeering, admitting that he engaged in a pattern of racketeering activity covering the period of 1979 to 2005 by paying kickbacks to plaintiffs (earlier). He must report to prison by August 28 (Bloomberg, AP).
Although he is lesser known than the principal defendants in the cases related to convicted former Rep. Duke Cunningham, financier Thomas Kontogiannis received a significant sentence: 97 months in prison for for his involvement in laundering bribe money from hundreds of defense contractors for Cunningham. The sentencing took place on May 16 before US District Judge Larry A. Burns in San Diego. Burns previously sentenced Cunningham to 8 years and 4 months and defense contractor Brent Wilkes to 12 years in prison. Kontogiannis had pleaded guilty in February 2007 to a single count of money laundering in connection with a fraudulent mortgage that allowed Cunningham to buy his mansion in Rancho Santa Fe; at the sentencing hearing, AUSA Jason Forge alleged that Kontogiannis had continued to make fraudulent mortgages after his guilty plea (DOJ, San Diego Union-Tribune).
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 ).
Lou Pearlman, the sadist pop music promoter who gave the world N’Sync and the Backstreet Boys, was sentenced on Wednesday to 300 months in prison by US District Judge G. Kendall Sharp in Orlando. Pearlman pleaded guilty in March (earlier) to two counts of conspiracy, one count of money laundering and one count of making a false claim in a bankruptcy in connection with a series of long-running fraud schemes which caused losses to 250 investors estimated at $200 million and losses to 10 financial institutions estimated at $100 million. His schemes included enticing individuals and banks to invest millions of dollars in two airline companies which existed only on paper, 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. Sharp offered Pearlman the opportunity to shorten his sentence by one month for every $1 million repaid to his bankruptcy trustee, but the assets recovered to date (including his mansion and Rolls) will not count toward the incentive (Reuters, MTV).
Fomer Alaska Republican state Representative Vic Kohring was sentenced last week to 42 months in prison by US District Court Judge John Sedwick in Anchorage for taking bribes as part of a scheme to keep Alaska oil taxes down. In November 2007 a jury convicted Kohring of bribery, attempted extortion, and conspiracy for soliciting and receiving multiple cash payments from executives of VECO Corporation, the now-defunct oilfield services company that was once the state’s largest, in exchange for his vote on a key oil production tax proposal and his agreement to lobby other legislators. Kohring is the third state Republican legislator to be sentenced to prison in the ongoing corruption investigation. Two top VECO executives and one former
lobbyist have already pleaded guilty. The VECO executives, former CEO Bill Allen and VP Rick Smith, are also cooperating and have implicated US Sen. Ted Stevens and his son, former Alaska state Senate President Ben Stevens; they have denied wrongdoing. US Rep. Don Young is also under investigation.
Kohring’s defense strategy was to claim the money he accepted was just gifts from friends, not bribes. At the sentencing hearing, he was defiant in proclaiming his innocence. His attorney characterized him as being like Andy Griffith, to which AUSA Joe Bottini responded, “”I don’t remember any episode of that show where Andy Griffith took cash from anybody” (Anchorage Daily News, DOJ).
US District Court Judge Robert Blackburn on April 29 sentenced 72-year-old Norman Schmidt of Denver to a mind-boggling 330 years in prison and ordered him to forfeit more than $38 million for his central role in a $56 million high-yield investment scam that allegedly defrauded about 1,000 investors. A jury convicted Schmidt in May 2007 on 37 counts including conspiracy, mail fraud, wire fraud, securities fraud and money laundering. Schmidt and his co-defendants — his wife Jannice and 5 others — allegedly used most of the investor funds for their own personal gain. In written response to an earlier government recommendation for such a sentence, Schmidt’s attorney Thomas Hammond called it outrageous and unreasonable and said it “threatens to make a mockery of the federal sentencing process” (Denver Post, Denver Bizjournal, DOJ).
One day later, 72-year-old defendant Charles Lewis was sentenced by Judge Blackburn to 30 years in prison for his role (Denver Post). Blackburn previously sentenced Jannice Schmidt to nine years in prison.
Hat tip to AUSA Mark Barrett for forwarding this story to us.
“She walked into the vault and took stacks and stacks of money.” That’s how AUSA Susan Dowd described the actions of Patricia Sherman of New Albany, Indiana, former head teller for Obelisk Federal Credit Union in New Albany. Willie Sutton would have pointed out that that’s where they keep it. Sherman, who had pleaded guilty to a single count of embezzlement by a credit union employee, was sentenced on April 25 to 97 months in prison by US District Judge David Hamilton in New Albany. She admitted embezzling $7 million from Obelisk over a 46 month period starting in 2003 until she was caught in early 2007. According to the DOJ press release:
She accomplished her embezzlement by taking large amounts of currency from the vault, secreting it on her person and taking it out of the credit union. She was able to conceal the embezzlement by making journal entries to the Vault Cash account whenever there was an audit or cash count by the credit union supervisory committee and then making adjusting entries after those counts were completed. In addition, when Sherman was going on vacation or had jury duty, she would make an entry to the cash account before she left so that it would properly reflect the amount of cash in the vault; when she returned, she would reverse the entry. As Head Teller she was responsible for ordering and accounting for all cash replenishments for the credit union. She was also responsible for reconciling and overseeing vault activity. She also was responsible for the general ledger and reconciling the vault cash account to the physical count of cash on hand.
As a direct result of Sherman’s actions, Obelisk had to merge with another credit union in July 2007 after the NCUA placed it into conservatorship and determined that it was no longer viable. Judge Hamilton stated “This is a theft, a case of grand theft, on an astonishing scale, driving what had been a healthy credit union into insolvency” (News and Tribune).
Laura I. Flores of Arlington, Virginia, a former congressional office manager for House Democrats Jane Harman of California and Neil Abercrombie of Hawaii, was sentenced on Friday to six months in prison for wire fraud by US District Judge Leonie M. Brinkema in Alexandria. Flores, who pleaded guilty to a single wire fraud count in January (earlier), admitted receiving approximately $200,000 from false expense vouchers she submitted during 2005 and 2006 and diverting the funds to her personal account.
The Washington Post story here reports that prosecutors filed petitions to reduce her sentence because she is helping them with a previously unreported investigation into whether members of Congress used phones, supplies and staff time for campaign purposes. The motions were filed under seal.
Convicted spammer Eddie Davidson of Louisville, Colorado was sentenced to 21 months in prison on Monday by US District Judge Marcia Krieger in Denver. He was also ordered to pay $714,000 to the IRS. Davidson was indicted in May 2007 in connection with a 5 year long operation during which he allegedly sent hundreds of thousands of spam emails on behalf of 19 clients who paid him at least $3.5 million. The spam, which promoted penny stocks and merchandise such as cheap watches and perfume, was sent with fake email headers to disguise the source. He pleaded guilty in December to charges of tax evasion and falsifying email headers in violation of the CAN-SPAM Act (PC World, DOJ).
In Sacramento on Friday, US District Judge Garland Burrell sentenced Joel Nathan Ward of Turlock, California to nine years in prison in connection with a fraudulent foreign currency exchange trading scheme in which about 100 investors lost $11.3 million. He pleaded guilty in August 2007 to wire fraud, mail fraud and money laundering. Although he had no financial training, Ward lured investors through trade shows, online columns and infomercials in which he represented himself as a skilled trader. His Joel Nathan Forex Fund took in $15 million from early 2003 to late 2006. He paid back $3.7 million to early investors in what essentially was a Ponzi scheme but he diverted 85% of the rest for personal use. He actually invested only $2 million and lost almost all of that. After Ward revealed to investors in late 2006 that all their money was gone, his personal journal became public, thanks to his now ex-wife. In it, he described himself as a “financial serial killer” and “just another scumbag con artist bilking old people out of their retirement money” (Modesto Bee, DOJ).
Proscutors got what they wanted: In Ocala, Florida on Thursday, US District Judge William Terrell Hodges sentenced actor Wesley Snipes to three years in prison. Snipes was convicted February 1 on three misdemeanor counts of failure to file federal income tax returns for 1999-2001 but acquitted on two felony tax counts and three more failure to file misdemeanor counts. Hodges sentenced Snipes to the maximum of one year on each count, to be served consecutively. He said “these are serious crimes, albeit misdemeanors, because he has a history of contempt over time.” Hodges also sentenced Snipes’ co-defendants Douglas Rosile and Eddie Ray Kahn, both convicted on the felony counts. Rosile was sentenced to 4 years and six months in prison and Kahn was sentenced to ten years in prison. Judge Hodges was obviously not swayed by a large number of celebrities asking him to sentence Snipes to probation. Among them were Woody Harrelson, Judge Joe Brown and Judge Greg Mathis. It’s hard to believe any federal judge would be influenced by requests from the son of Charles Harrison and two TV show judges. Bloomberg, Orlando Sentinel, DOJ (via PR Newswire).
In Anchorage, Alaska on Thursday, US District Judge Ralph Besitline sentenced Mark Avery of Anchorage to 8 1/2 years in prison for embezzling the entire $52 million trust fund of May Wong Smith, a wealthy San Francisco widow who suffered from Alzheimer’s; she died in 2006. Avery pleaded guilty to wire fraud and money laundering charges in March 2007.
Avery is a former San Francisco prosecutor who had moved to Alaska. The fund had been administered by his father, a prominent trust attorney; he took over administration of the fund after his father’s death in 2001. He withdrew all the funds during a six month period in 2005 and started several companies including Security Aviation in Anchorage. His spending spree brought him to the attention of federal investigators, “ especially the purchase of weapons, body armor, fighter jets and rocket launchers” (Anchorage Daily News, San Francisco Chronicle).
Prosecutors on Monday filed a sentencing memorandum which recommends that actor Wesley Snipes be sentenced to three years in prison and fined $5 million. Snipes was convicted February 1 on three misdemeanor counts of failure to file federal income tax returns for 1999-2001; however, he was acquitted on the two felony counts he faced andon three misdemeanor failure to file counts for 2002-2004. In calling for the maximum sentence and an upward departure from the guidelines for the fine, the government appears to be seeking enhancements for the acquitted charges. Snipes is scheduled to be sentenced on April 24 (Reuters, Snipes sentencing memorandum).
Mary Lou Hernandez, owner of Angel Care Medical Supply in San Antonio, was sentenced on April 9 by US District Judge W. Royal Furgeson to 24 months in prison. In November 2006, Hernandez pleaded guilty to a 3-count Information charging her with conspiracy, health care fraud and violation of the anti-kickback statute. She admitted paying $800 to$1000 kickbacks to five area doctors for Certificates of Medical Necessity which were needed to get reimbursement for motorized wheelchairs or scooters from Medicare and Medicaid. She then fraudulently billed approximately $3 million to Medicare and $1.4 million to Medicaid for the unnecessary equipment between 2001 and 2004. The doctors involved have not yet been charged (San Antonio Express-News, DOJ).
Samuel Israel III, co-founder of now-defunct hedge fund Bayou Group LLC, was sentenced to 20 years in prison on Monday by US District Judge Colleen McMahon in Manhattan. Israel and former Bayou CFO Daniel Marino had pleaded guilty to conspiracy, wire fraud and investment advisor fraud in September 2005, about a month after Bayou Group collapsed into bankruptcy. McMahon sentenced Marino to 20 years in prison in January (earlier). Israel and Marino admitted presenting fraudulent results and using a phony auditing firm to lure investors. Prosecutors said investors were defrauded of more than $400 million when the firm failed. Bloomberg News has the story here.
Brent Detelich of Clearwater, Florida, formerly a chiropractor in Hermitage, Pennsylvania, was sentenced on Friday to three years in prison by US District Judge Joy Conti in Pittsburgh. Detelich was convicted by jury trial in March 2007 on one count of health care fraud and one count of mail fraud. Detelich owned and operated Detelich Chiropractic and Advanced Medical and Holistic of Hermitage. Between 1996 and 2000, he submitted over $91,000 in fraudulent claims to Highmark Blue Cross/Blue Shield for chiropractic treatment and services which were never rendered. When Highmark paid the claims, he split the payments with some of his patients who were involved in the fraud (AP).
We note that Detelich authored a chapter in a PowerPoint presentation for chiros published in 2005 called The Complete Insurance Guide. His contribution: “Dr. Detelich focuses on the billing- and insurance-related aspects of a chiropractic activecare approach.” No kidding!
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.
A mother and daughter who formerly operated a travel agency in McKinney, Texas were sentenced to federal prison on Monday by US District Judge Richard Schell in Sherman, Texas. Carol Ribaudo of Clearwater, Florida received a 57 month prison sentence; her daughter Sonia Ritz, also of Clearwater, received 37 months in prison. Both were convicted by a jury last August on one count of conspiracy, five counts of mail fraud and nine counts of wire fraud in connection with a scheme to sell bookings for a cruise that never existed. The travel agency they operated between July 2003 and January 2004 sold at least $210,000 in bookings to about 50 people for a charter cruise that was to sail in February 2004 out of Miami, but they never actually planned a trip or contracted with any cruise line.
The KTVT-CBS 11 Dallas story states that Judge Schell “announced in court on Monday that Ribaudo told a probation officer that she and her daughter had no intention of serving any time in prison” and ordered both women taken into immediate custody as flight risks. DOJ Press Release.
Conrad Black reported to prison on Monday (earlier), but he defends himself in a well-reasoned opinion page feature in the New York Sun, explaining his actions and excoriating the prosecution for “insufficient respect for the Fifth, Sixth, and Eighth Amendment guarantees of due process, of the grand jury as an assurance against capricious prosecution, of no seizure of assets without just compensation, of speedy justice, access to counsel, and reasonable bail.” Read the full article 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 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.
US District Judge Stephen Wilson in Los Angeles on Monday sentenced two men to prison in connection with a hedge fund fraud scheme that caused investor losses of $6 million. Keith Gilabert of Valencia, California, who operated a company called Capital Management Group, was sentenced to 60 months in prison; he had pleaded guilty in June 2006 to conspiracy to commit mail fraud, wire fraud and securities fraud. He collected about $6 million from 2000 to 2005 from 40 clients who invested in a hedge fund called the GLT Venture Fund, with the promise of high rates of return; but Gilabert admitted losing most of the money and misappropriating the rest. Justin Paperny of Studio City, a former account VP at UBS Financial Services, was sentenced to 18 months in prison; he also had pleaded guilty to the same charges and admitted conspiring with Gilabert to mislead hedge fund investors by telling them the fund was fully backed by UBS. Lawfuel has the DOJ Press Release here.
It was not Gilabert’s first brush with Judge Wilson. He and his mother-in-law had been indicted for obstruction of justice for allegedly telling a mortgage broker to lie to FBI agents investigating the sale of two plots of land in Valencia. That case went to trial this past December, but Wilson acquitted them after calling the broker’s testimony “an abomination … maybe the worst I’ve ever seen.” (story here).
Brent Wilkes, owner and founder of defense contractor ADCS Inc., was sentenced on Tuesday to 12 years in prison by US District Judge Larry A. Burns in San Diego. Wilkes was convicted by jury trial in November, 2007 on 13 counts including conspiracy, bribery, money laundering and wire fraud in connection with the Duke Cunningham bribery scandal. The sentence was far less than the 25 years sought by prosecutors and the 60 year sentence recommended by the federal probation office, but Judge Burns specifically rejected the government’s assertion that Wilkes was the mastermind of the bribery scheme. Wilkes maintained his innocence and refused to admit any wrongdoing at the hearing; his attorneys had sought a sentence no longer than the 8 year, 4 month sentence that Cunningham is currently serving. In a related case, Judge Burns approved an agreement to drop conspiracy, wire fraud and money laundering charges against Wilkes in the corruption case of former CIA official Dusty Foggo, and to move the prosecution of Foggo on the same counts to US District Court in Alexandria, Virginia. San Diego Union-Tribune here, AP here.
Isidro Garza, Jr., the former manager of the Kickapoo Traditional Tribe of Texas, was sentenced last week to 235 months in prison by US District Judge Walter Smith in Waco for his role in the embezzlement of over $2 million from tribal funds, including over $1.7 million from tribal community health services and more than $200,000 from the tribal casino. Also sentenced were his son, former state Rep. Timoteo Garza, who received a 78 month prison sentence; his wife Martha Garza, sentenced to 24 months in prison; and former tribal casino manager Lee Martin, sentenced to 60 moths in prison. All four are non-Indians. In October 2007 they were convicted after a jury trial on multiple counts of substantive theft from an Indian gaming establishment and other charges including conspiracy and tax evasion. AP here, San Antonio Express-News here.
Tax accountant Kalil Khalil of Dearborn Heights, Michigan was sentenced to 60 months in prison on Thursday by US District Judge David Lawson in Detroit. Khalil had pleaded guilty in May 2007 to one count of wire fraud for his part in a mortgage fraud scheme he operated with co-defendant Tariq Hamad which caused lenders to suffer $21 million in losses from 2001 to 2003. He admitted preparing fraudulent loan applications and loan documents with fake borrowers, fake employment histories and forged or inflated appraisals, and not using loan proceeds for their intended purposes. Hamad was sentenced in September 2007 to nine years in prison; Khalil’s sentence was reduced for cooperation. The Detroit Free Press story is here.
The Los Angeles Times has the story here on Lerach’s sentence, handed down today in federal court. After his release from prison, Lerach will be subject to supervised release for a period of two years. Lerach’s lawyers, arguing for leniency, asked for 6 months in prison and 6 in home confinement. The judge was having none of it, noting that Lerach “got a lot of forgiveness in the plea agreement.” The government had recommended 1 to 2 years in prison. The charges stem from Lerach’s payment of kickbacks to plaintiffs in class action suits.
We reported below on former Wal-Mart Executive Thomas Coughlin’s Friday re-sentencing. Coughlin was originally sentenced by U.S. District Judge Robert T. Dawson to five years probation and 27 months of electronically monitored home confinement; far, far below Coughlin’s advisory U.S. Guidelines range. The Eighth Circuit reversed in August 2007. Between that reversal and Friday’s re-sentencing, the U.S. Supreme Court decided Gall v. U.S. (Dec. 2007), which drastically increased the discretion of federal district courts to render below-Guidelines sentences–provided they adequately articulate their reasons. Prior to Gall, most federal appellate courts routinely reversed the below-Guidelines sentences of district courts, presuming them to be unreasonable, under appellate review standards that effectively gutted the Supreme Court’s Booker opinion. (Booker had first held the U.S. Sentencing Guidelines to be advisory.) On last Friday, Dawson re-sentenced Coughlin, adding only 1,500 hours of community service to the original sentence. To support the new sentence, Judge Dawson submitted his own 30-page Sentencing Memorandum (Coughlin Sentencing) . The U.S. is deciding whether to appeal. The U.S. Circuit Courts of Appeals have already started applying Gall, and a new era in district court discretionary sentencing is upon us. If Coughlin’s sentence is appealed and upheld by the Eighth Circuit, it will be an even further indication that of how broad that discretion truly is.
Former Wal-Mart COO Tom Coughlin was sentenced on Friday to 27 months home confinement, 60 months probation and 1500 hours of community service by US District Judge Robert Dawson in Fort Smith, Arkansas. The addition of the community service hours was the only change from the sentence originally handed down by Judge Dawson in 2006. Coughlin had pleaded guilty in January 2006 to wire fraud and tax evasion in connection with the theft of gift cards and equipment from Wal-Mart, resulting in a loss of about $500,000. Prosecutors objected to the absence of prison time and appealed the sentence to the Eighth US Circuit Court of Appeals. Last year the Eighth Court agreed and sent the case back for resentencing, but Judge Dawson again declined to send Coughlin to prison. Prosecutors have not yet decided whether to appeal the sentence again. The International Herald Tribune/AP story is here.