Letter of Apology » Wire Fraud

Diploma Mill Webmaster Sentenced To Prison

Dave Westheimer — Fri, 31 Oct 2008 06:15:03 +0000

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).

San Antonio Exporter Sentenced To 117 Months In Prison For Ex-Im Bank Fraud

Dave Westheimer — Wed, 29 Oct 2008 06:52:32 +0000

Andrew Parker of San Antonio, owner of San Antonio Trade Group, Inc., was sentenced on Monday to 117 months in prison by US District Judge Fred Biery for defrauding the Export-Import Bank of the US of $107 million. In an indictment unsealed on May 1, Parker was charged with conspiracy, wire fraud, use of a false document, money laundering, tax evasion and filing a false tax return. In August, he pleaded guilty to 11 of the 28 counts in the original indictment; Our earlier entries cover his alleged actions, which involved such a large percentage of the Ex-Im Bank’s loan portfolio that the bank’s management has had to revamp the whole program and cut back its offerings. Yet the Express-News quotes Parker as telling Judge Biery: “I was but a cog in this big machine. The truth is I’m caught in a system that, like with many agencies in Washington, is defective.” The DOJ Press Release (.pdf) is here.

Two Kentucky Fen-Phen Attorneys Disbarred

Dave Westheimer — Mon, 27 Oct 2008 06:35:36 +0000

Kentucky Fen-Phen defendants William Gallion and Shirley Cunningham Jr., who are awaiting retrial on wire fraud and conspiracy charges after their first trial ended in a mistrial in July, were permanently disbarred on Thursday by order of the Kentucky Supreme Court. Both men had been charged with 22 ethical violations in connection with their handling of class action settlement funds from American Home Products on behalf of 440 Kentuckians harmed by the drug. Both agreed to admit to eight of the 22 charged violations; both filed motions to withdraw from the Kentucky Bar under those terms. From the Lexington Herald-Leader:

Gallion and Cunningham admitted in their disbarment orders that they failed to inform their clients in writing about fee arrangements in the fen-phen settlement; failed to tell clients that they were seeking fees greater than contingency fee agreements provided; failed to advise clients about the total amount of the settlement; and failed to get clients’ consent to place $20 million in settlement money in a charitable fund that the lawyers controlled.

The third defendant, Melbourne Mills Jr., has also been under suspension, but the jury acquitted him. His status is still pending. Gallion and Cunningham will be retried in February (earlier coverage).

Ex-CEO Of Giant Golf Pleads Guilty In $28 Million Fraud Scheme

Dave Westheimer — Thu, 23 Oct 2008 05:56:50 +0000

Colin Nathanson, formerly of Coto De Caza, California, on Monday pleaded guilty to six counts of wire fraud before US District Judge Cormac Carney in Santa Ana. Nathanson was president and CEO of former Orange County-based Giant Golf and Play Big Enterprises, which sold golf clubs and accessories. He admitted inducing several hundred people to invest about $28.4 million in a privately held internet technology company under false pretenses. The company, Nathanson Investment Trust, was fictitious. Instead he used the funds to prop up his golf businesses, which were losing money, and for lavish personal expenses including gambling debts.

Nathanson’s sentencing is scheduled for February 9, 2009; he faces a statutory maximum of 120 years in prison (DOJ).

Two Former Entellium Execs Charged With Wire Fraud

Dave Westheimer — Tue, 14 Oct 2008 06:29:08 +0000

Two former executives of Seattle-based privately held software company Entellium Corporation were charged with wire fraud on October 8 in US District Court in Seattle: Paul Thomas Johnston, former CEO, and Parrish Jones, former CFO. The two men founded the company in 2004. Entellium makes and sells programs which help companies track sales and customer information.

Johnston and Jones allegedly grossly overstated revenue from the beginning in order to attract about $50 million in private investment funds, including $19 million from Ignition Partners, a Bellevue,Washington venture capital firm. Late last month a human resources VP discovered the alleged fraud, which led to a quick resignation by Johnston and Jones. An attorney for the company reported it to the FBI (PC World, DOJ).

“The Analyzer” Held Without Bond After US Seeks Extradition

Dave Westheimer — Wed, 08 Oct 2008 06:14:55 +0000

Israeli national Ehud Tenenbaum, a/k/a “The Analyzer” of Pentagon hacking infamy who was charged last month in a $1.8 million fraud scheme in Canada (earlier), was ordered held without bond on Friday by a judge in Calgary on a US extradition warrant. The order came a day after he was granted bail on the Canadian charges, but he was rearrested before he ever left the remand facility where he was being held. The US allegations involve “potentially hundreds of financial institutions in Russia, Turkey, the Netherlands, Sweden, Belgium, Germany and other countries.” (Calgary Sun, Haaretz)

Rezko Possibly Cooperating With Prosecutors; Judge Freezes $105K

Dave Westheimer — Thu, 02 Oct 2008 06:48:56 +0000

Convicted Illinois developer and Democratic fundraiser Tony Rezko may be talking to prosecutors in the hopes of reducing his sentence. The Chicago Tribune and AP report that he has been visiting the federal courthouse and that several attorneys have reported that prosecutors have called them with details only Rezko would know. Rezko was convicted in June on 16 counts including mail fraud, wire fraud, money laundering and aiding and abetting bribery, and acquitted on eight other counts (earlier). His sentencing was scheduled for September 3 but has been moved back to October 28.

On Wednesday, US District Judge Amy St. Eve froze $105,000 of Rezko’s $380,000 in bond money, an indication that she plans to grant the prosecution’s request to order asset forfeiture (Chicago Trib/AP).

Ten Israelis Indicted In $2 Million Lottery Scam In US

Dave Westheimer — Wed, 01 Oct 2008 16:05:16 +0000

Ten residents of Israel were indicted on Friday in US District Court in Manhattan in connection with a lottery telemarketing scheme which allegedly bilked elderly US residents out of more than $2 million. Nine have been arrested in anticipation of extradition; one is at large. Each faces two counts of wire fraud and one count of conspiracy. The scheme was said to be a boiler room operation in which the victims were notified by operators claiming to be from a New York law firm that they had won large amounts of money in an international sweepstakes and told that they needed to wire thousands of dollars to accounts in Israel to cover fees and taxes. No such prizes were awarded, the sweepstakes never existed. There are allegedly hundreds of victims who wired as much as $40,000 in the hopes that somehow they were going to get rich from a sweepstakes they had never entered (DOJ, Jerusalem Post).

California Political Activist Gets One Year Prison Sentence

Dave Westheimer — Thu, 25 Sep 2008 06:04:40 +0000

In Sacramento on Wednesday, US District Judge Lawrence Karlton sentenced community activist and fundraiser Julie Lee of San Francisco to one year and one day in prison in connection with the illegal diversion of state grant money to a political campaign. In July, a federal jury convicted Lee on two counts of mail fraud and three counts of attempted witness tampering. Evidence showed that she took $125,000 of a $500,000 state grant to develop a community center (which was never built) and funneled it through intermediaries to the Secretary of State campaign of Kevin Shelley. She also allegedly attempted to persude three witnesses not to cooperate with the investigation of her activities. Shelley resigned in 2005 after the story broke but has never been charged and has denied invovement. Lee still faces state charges in the matter (San Francisco Chronicle, DOJ).

New Hampshire Man Admits Stealing $1.6 Million From Daughter

Dave Westheimer — Fri, 19 Sep 2008 06:38:30 +0000

David Burns, formerly of Kingston, New Hampshire, on Monday pleaded guilty in US District Court in Concord to wire fraud charges in connection with the theft of $1.6 million from his disabled daughter. Burns is now in state prison after being convicted in 2004 of trying to strangle his girlfriend. Burns’ daughter was born with brain damage and was awarded over $2.4 million in damages (including interest) from a malpractice suit. The indictment alleged that in the 47 months after the money was deposited in an account managed by a Boston law firm in 1999, Burns withdrew over $1.6 million and spent it on purposes not related to his daughter, including attorneys fees, bail on criminal charges, drug rehabilitation expenses, race cars, funeral expenses, and illegal drugs.

Burns’ sentening is scheduled for Decemeber 16; he faces a statutory maximum of 20 years in prison. New Hampshire’s Office of Public Guardian sued the Boston law firm and reached a settlement which made the daughter whole financially, according to AUSA Arnold Huftalen (Union Leader, DOJ).