Wire Fraud

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.

A jury in US District Court in Miami on Monday convicted Nicholas Bachynsky on one count of conspiracy, three counts of wire fraud and one count of securities fraud after a six and a half week trial. The charges arose from a cancer cure marketing scheme that raised $6 million from investors, most of whom lost all their money. Bachynsky was cofounder and medical director of Helvetia Pharmaceuticals, which was launched in 2001 to administer and develop a cancer treatment in Europe known as intracellular hyperthermia therapy. Helvetia solicited investors with significant misrepresentations, including falsifying results of unsuccessful laboratory and clinical trials to claim that the therapy was successful, and making false claims that Helvetia owned exclusive rights to the therapy when Bachynsky had actually sold the rights years before to a former business partner. Most of the $6 million in investor funds was converted for personal use by Bachynsky and his three co-defendants, all of whom have previously pleaded guilty. Bachynsky is scheduled to be sentenced on September 5 before US District Judge Adalberto Jordan (South Florida Business Journal, DOJ).

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).

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).

In Tyler, Texas on Thursday Kenneth Elgin of Tyler was sentenced to 33 months in prison by US District Judge Michael Schneider in connection with a fraudulent oil and gas exploration scheme. He was indicted on seven counts of wire fraud in May 2007 and pleaded guilty in November. Elgin was CEO of Trinidad Exploration Inc. and West Coast Resources Inc., purportedly formed to conduct the explorations. He solicited seven Washington State residents who invested a total of $805,000 in projects Elgin represented to them as legitimate oil and gas drilling ventures when in fact he did not own or control the mineral rights and his license to operate had expired. He converted the funds for his personal use, including spending over $200,000 at a hotel and casino in Las Vegas (Tyler Morning Telegraph, AP).

Two Arizona men pleaded guilty last week in US District Court in Phoenix in connection with a scheme that defrauded First Data Corp. of $2.3 million between August 1997 and February 2006. Anthony McCutcheon of Gilbert and his brother-in-law Warren Rice Jr. of Tucson each pleaded guilty to one count of conspiracy to commit mail and wire fraud and one count of wire fraud. Colorado-based First Data  is the country’s largest credit card processor. McCutcheon was the director of the corporation’s First Data Resources data center in Chandler and oversaw payment authorization for goods and services provided to the center. Rice represented Andalusia Companies, allegedly a provider of telecommunications and networking hardware but which actually was a dummy company. McCutcheon and Rice worked together to charge First Data Resources for products that were never delivered. Sentencing is scheduled for June 16; each faces a possible maximum sentence of five years on the conspiracy count and 20 years on the wire fraud count. The Arizona Republic has the story here.

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.

Reed Kyle Diehl of Coto de Caza,California was arrested last Tuesday after a complaint was filed in US District Court in Santa Ana charging him with wire fraud. The charge arises from an alleged offer to secure a $24 million line of credit for a developer who was planning to build a resort project in Mexico. The complaint alleges that the developer was required to deposit $2.5 million in a designated account for collateral, but that Diehl withdrew the money, used it to pay off others who had invested with him and never obtained a line of credit. Diehl is also being investigated in connection with a number of earlier schemes dating back several years.

The DOJ Press Release describes Diehl as a former Tennessee Titan but according to the KNBC Los Angeles story he was signed as an undrafted free agent in 2001 and released before the season started; he played football at University of California and is currently a high school football coach in Santa Ana. Could this be the first confirmed instance of Titans’ owner Bud Adams exercising good judgment?

Paul and Zibia Gunther, the father and daughter arrested last week in connection with a $70 million international stock fraud scheme involving fake shares in hijacked dormant companies (earlier), made their initial appearances Monday before US Magistrate Judge Thomas McCoun in Tampa. McCoun agreed to release Zibia Gunther on a $150,000 bond secured by property, but he denied release to Paul Gunter, who had offered a $500,000 property-secured bond. Calling Paul Gunter a flight risk, McCoun said he will require at least $1 million posted from his family and friends before he said he would consider his release, stating “I want people to come forward and say they have so much faith in him that they’ll put up their house.” Paul Gunter holds English citizenship. Further details of the government’s case emerged: a prosecutor alleged that financial transactions have been tracked to numerous accounts controlled by Paul Gunter in at least nine different countries. However, he is currently represented by a public defender. Attorneys for both defendants claim they are only escrow agents acting for others. Tampa Tribune, Tampa Bay Times.

Former National Republican Congressional Committee (”NRCC”)Treasurer Christopher J. Ward has been accused by GOP officials of diverting up to $1 million from various campaign coffers to his personal accounts. The Washington Post has Paul Kane’s story here.

The US Attorney’s Office in Tampa on Thursday announced the filing of a criminal complaint against Paul Robert Gunter of Odessa, Florida and his daughter, Zibiah Joy Gunter of Oldsmar, Florida. The complaint alleges that they “conspired to commit, and committed substantive acts of, mail fraud, wire fraud, securities fraud, and money laundering” by engaging (with unnamed others) in a securities fraud scheme. They were arrested on Thursday morning and were scheduled to make an initial appearance later in the day. The alleged scheme involved hijacking the identities of about 54 dormant publicly held companies, issuing fake stock in the companies to conspirators and selling the shares to “victim-investors” in the UK. An estimated 15,000 people, mostly elderly, invested in excess of $70 million; the Gunters allegedly converted the funds for their personal use. Reuters here, DOJ press release here.

The US Attorney’s Office in Alexandria, Virginia announced yesterday the March 6 indictments of Linda Woolf, of Sandy, Utah, and David Gengler, of Draper, Utah, on charges of wire fraud and conspiracy to commit wire and mail fraud. The SEC has also filed civil fraud charges against them. Woolf and Gengler star in the “Teach Me To Trade” infomercials and investor workshops which promote a get-rich-quick system for picking stocks. They represent themselves as highly successful stock trading experts, but the indictment alleges that they lied or omitted material information about their profits and that they actually are contract commission employees of Whitney Information Network, which owns the brand name and runs the seminars. The indictment also alleges that the actual purpose of the infomercials and free informational workshops is not to offer investment advice but to sell expensive advance training seminars. Business Week/AP story here.

Patricia Jacoby of Raleigh, North Carolina on Wednesday pleaded guilty in US District Court to a single count of wire fraud in connection with a pyramid scheme that cost investors an estimated $3 million. Jacoby owned a Raleigh shop called POSH! Fine Arts and Antiques; she allegedly lured investors with the promise of a 22% return in 30 days; the funds were said to finance the purchase of estate lots of antiques to be sold to waiting buyers. The scheme collapsed when investors wanted their money back. A sentencing date has not been announced. According to news reports here and here, Jacoby has been convicted twice before on similar charges, was still on probation from a 2006 conviction, and used some of the money from this scheme to pay restitution from the 2006 case.

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 Washington Post reports here on the two year sentence handed down yesterday in Manhattan federal district court to Texas oilman David B. Chalmers. Chalmers pled guilty in August to conspiracy to commit wire fraud, based on kickbacks he and his company paid to Saddam Hussein’s regime during the pendency of the U.N. Oil-For-Food Program. U.S. District Judge Denny Chin also fined Chalmers $9 million dollars and sentenced his companies, Bayoil USA and Bayoil Supply & Trading, to three years probation.

Bexar County, Texas DA Susan Reed has sent a letter to USA Johnny Sutton (Western District of Texas) with a copy to Texas AG Greg Abbott, offering to allow an independent investigation of her office’s role in the purchase and use of stolen tickets from Southwest Airlines. The tickets were stolen and resold by Althea and James Jackson, who pleaded guilty on February 12 to federal wire fraud charges (earlier). Reed’s letter repeats her previous public assertion that she and other buyers were not aware the tickets were stolen. The San Antonio Express-News has the story here.

Althea Jackson and her husband James Jackson soon will no longer be free to move about the country. The Jacksons pleaded guilty to wire fraud last Tuesday in US District Court in San Antonio in connection with the theft and resale of more than 5,600 ticket vouchers from Southwest Airlines. Althea Jackson, formerly an administrative aide at Southwest Airlines’ Dallas headquarters, admitted taking the “Non Revenue Must Ride” ticket vouchers over a three year period. The vouchers are normally reserved for inconvenienced passengers, but James Jackson resold them for far less than market value, mainly in the San Antonio area. The loss to Southwest was estimated by prosecutors to be at least $1.8 million.

The unusual aspect of this case is that James Jackson was a bailiff for Bexar County Court-at-Law Judge Monica Guerrero in San Antonio, and many of the stolen ticket vouchers wound up in the hands of several Bexar County public officials including Judge Guerrero and District Attorney Susan Reed and their staffs, as well as some local attorneys.

Sentencing is scheduled for May 8, 2008. The Jacksons are expected to serve 24 to 30 months in prison under the plea agreement. The San Antonio Express-News has the story here and further details of county employees’ involvement here.

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.