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Thursday 21 August 2014
Northern Cambria Woman Sentenced to Prison for Conspiring to Distribute HeroinRead the Press Release
JOHNSTOWN, Pa. - A resident of Northern Cambria, Pa., has been sentenced in federal court to one year and one day in prison and four years supervised release on her conviction of conspiracy to distribute heroin, United States Attorney David J. Hickton announced today.
United States District Judge Kim R. Gibson imposed the sentence on Casey Lex, 29.
According to information presented to the court, from April 2012 to March 8, 2013, Lex conspired with others to possess and distribute 100 grams or more of heroin.
Assistant United States Attorney John J. Valkovci, Jr., prosecuted this case on behalf of the government.
U.S. Attorney Hickton commended the Laurel Highlands Resident Agency of the Federal Bureau of Investigation and the Cambria County Drug Task Force for the investigation leading to the successful prosecution of Lex.
North Carolina Man, Robert Beckmann, Pleads Guilty to Creating and Selling Fake Mercedes-benz Automotive EquipmentRead the Press Release
U.S. Attorney Kenneth Allen Polite, Jr. announced that ROBERT BECKMANN, age 52, of Durham, North Carolina, pleaded guilty as charged yesterday before U.S. District Judge Kurt D. Engelhardt, to criminal infringement of a copyright, a misdemeanor, and his company, BECKMANN TECHNOLOGIES, INC., pleaded guilty to creating and selling non-authentic Mercedes-Benz diagnostic equipment.
According to court documents, BECKMANN owned BECKMANN TECHNOLOGIES, INC., a company that, among other things, sold remanufactured parts for Mercedes-Benz automobiles. Between about 2001 and July 2012, BECKMANN TECHNOLOGIES, INC., in conjunction with “Company A,” located in Harahan, Louisiana, “Company B,” located in Rancho Palos Verdes, California, and an individual in the United Kingdom, “J.C.,” produced and sold unauthorized, non-authentic versions of the Mercedes-Benz Star Diagnostic System (SDS), a hand-held computer containing proprietary, confidential software. The SDS is used by mechanics to diagnose problems with and assure the safety of Mercedes-Benz vehicles employing electronic control systems.
BECKMANN TECHNOLOGIES, INC. was responsible for creating hardware for the fake SDS units, including a “black box,” while Company A, with assistance from BECKMANN TECHNOLOGIES, INC. and others, obtained, modified, and duplicated the authentic SDS software so that it would operate on ordinary laptop computers and without Mercedes-Benz’s authorization or license. After learning that Mercedes-Benz had notified J.C. that his conduct was in violation of civil and/or criminal laws, representatives of BECKMANN TECHNOLOGIES, INC., Company A, and Company B discussed a plan to have J.C. “go underground and off the radar” and continue working on making fake SDS.
The “real” SDS sold for between $8,300 and $22,000 each, while the fake SDS sold for up to $11,000, depending on market factors. In total, Company A and Company B sold at least 795 fake SDS.
BECKMANN faces a maximum term of imprisonment of one (1) year and a $100,000 fine. BECKMANN TECHNOLOGIES, INC. faces a maximum fine of $500,000. Sentencing before Judge Engelhardt has been scheduled for December 10, 2014, at 9:00 a.m.
This case was investigated by agents from the Federal Bureau of Investigation. The prosecution of this case was handled by Assistant United States Attorney Jordan Ginsberg and Computer Crime and Intellectual Property Section (CCIPS) Senior Counsel Evan Williams.
(Download Factual Basis )
Newark Man Charged with Additional Counts of Producing Child Pornography for Recording His Sexual Abuse of GirlRead the Press Release
NEWARK, N.J. – A Newark man was indicted by a federal grand jury today on three additional counts of producing images of child sexual abuse for allegedly abusing a prepubescent girl repeatedly and filming the abuse, U.S. Attorney Paul J. Fishman announced.
Pedro Rios, 58, was charged in a superseding indictment with a total of five counts of production of child pornography and one count each of possession and distribution of child pornography. The case has been assigned to U.S. District Judge Stanley R. Chesler. An arraignment will be scheduled.
According to the documents filed in this case and statements made in court:Law enforcement officers executed a search warrant at Rios’s home in Newark on Feb. 5, 2013. A forensic review of the computer equipment seized revealed several video files of child pornography which appear to be self-produced and allegedly depict Rios on camera engaging in sexually explicit conduct with a prepubescent female in the rear of a cab of a tractor trailer truck.
Law enforcement officers identified and interviewed the female, who allegedly said Rios would periodically drive her to his tractor trailer truck in Union County, N.J., where he would undress her and have sexual contact and sexual relations with her and record the encounters. Rios allegedly threatened to hurt the victim’s family if she told anyone.
Each charge of sexual exploitation of a child carries a mandatory minimum penalty of 15 years in prison, a maximum potential penalty of 30 years in prison and a $250,000 fine. Rios remains detained.
U.S. Attorney Fishman credited special agents of the FBI Newark Division’s Child Exploitation Task Force, under the direction of Special Agent in Charge Aaron T. Ford in Newark, the Essex County Prosecutor’s Office, under the direction of Acting Prosecutor Carolyn A. Murray, and the N.J. Regional Computer Forensics Laboratory with the investigation leading to these charges.
The government is represented by Assistant U.S. Attorney Danielle Alfonzo Walsman of the U.S. Attorney’s Office Criminal Division in Newark.The charges and allegations contained in the indictment are merely accusations and the defendant is considered innocent unless and until proven guilty.
14-297
Defense counsel: Brian J. Neary Esq., Hackensack, N.J.
Rios, Pedro Superseding Indictment
Native of Guatemala Charged with Illegal ReentryRead the Press Release
Francisco Hernandez-Sintung, a/k/a “Gabriel Munoz,” a/k/a “Gavino Hernandez,” 47, of Reading, PA, was charged today by indictment with illegal reentry after deportation, announced United States Attorney Zane David Memeger. The indictment alleges that on or about April 1, 2014, Hernandez-Sintung, an alien, and native and citizen of Guatemala, was found in the United States after having been deported from the United States on or about January 7, 2006, June 14, 2007, November 2, 2007, March 17, 2008, and February 13, 2009.
If convicted the defendant faces a maximum possible sentence of two years.
The case was investigated by Immigration and Customs Enforcement, Enforcement and Removal Operations (“ERO”), and is being prosecuted by Assistant United States Attorney M. Beth Leahy.An Indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
Click here to view the indictment.
UNITED STATES ATTORNEY'S OFFICE, EASTERN DISTRICTof PENNSYLVANIA
Suite 1250, 615 Chestnut Street, Philadelphia, PA 19106
PATTY HARTMAN, Media Contact, 215-861-8525Morrisville Woman Charged with Defrauding Government AgenciesRead the Press Release
Revonia Jones, 54, of Morrisville, was charged today by information with one count of theft of government funds and one count of false statements, announced United States Attorney Zane David Memeger. According to the information, the defendant applied for and received Federal Emergency Management Agency (“FEMA”) benefits due to displacement from her home resulting from Tropical Storm Lee. However, Jones failed to report her receipt of Housing Choice Voucher payments from the U.S. Department of Housing and Urban Development (“HUD”). The information further alleges that Jones failed to tell HUD that she was receiving FEMA benefits. The defendant’s alleged actions resulted in a loss to the government of approximately $11,843.
If convicted, Jones faces a maximum possible sentence of 15 years in prison, a three year period of supervised release, restitution to the government of $11,843, a $500,000 fine, and a $200 special assessment.
The case was investigated by the Department of Homeland Security Office of Inspector General, and the United States Department of Housing and Urban Development Office of Inspector General. It is being prosecuted by Special Assistant United States Attorney Amanda R. Reinitz.
Click here to view the indictment
An Indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
UNITED STATES ATTORNEY'S OFFICE, EASTERN DISTRICTof PENNSYLVANIA
Suite 1250, 615 Chestnut Street, Philadelphia, PA 19106
PATTY HARTMAN, Media Contact, 215-861-8525Montgomery County Man Indicted on Charges Related to A Scheme to Defraud Elderly Individuals of More Than $1.1 MillionRead the Press Release
Conspirators Targeted Elderly Men and Women Found on Online Dating Websites
Greenbelt, Maryland - A federal grand jury has indicted Krist Koranteng, age 32, of Burtonsville and Laurel, Maryland, on conspiracy, mail fraud, wire fraud and money laundering charges, in connection with a scheme to defraud elderly individuals which involved the conspirators pretending to be romantically interested in the victims in order to cause the victims to wire, deposit, and mail money to Koranteng. The total losses to the victims as a result of the scheme are alleged to be over $1.1 million. The indictment was returned on August 11, 2014, and unsealed today upon the arrest of the defendant.The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Kathy A. Michalko of the United States Secret Service - Washington Field Office; and Chief J. Thomas Manger of the Montgomery County Police Department.
The 11 count indictment alleges that between September 2012 and February 2014, Koranteng and others executed a scheme in which the conspirators searched online dating websites, such as Chemistry.com and Match.com, to initiate romantic relationships with elderly men and women, in order to obtain money from those individuals. Members of the conspiracy used phone calls, emails, and text messages to form romantic relationships with the victims.
According to the indictment, the conspirators used a number of false stories and promises to convince the victims to give money to the members of the conspiracy, including: stories about investing in fake gold that required payments for shipping and storage; fictitious sick family members who needed money; fake hospital bills; and fake plane trips to visit the victims. Koranteng and members of the conspiracy convinced the victims to wire money into accounts controlled by Koranteng, or to mail checks to a corporation created and controlled by Koranteng.
To conceal the scheme from the victims, the conspirators created false documents, including false certificates of origin certifying the existence of gold bars, and false documentation creating the impression that the gold bars were being stored at a safe house for a fee.
Koranteng and other members of the conspiracy disbursed the money received from the victims by transferring money to other accounts, by withdrawing sums of money, and by writing checks to other individuals.
Koranteng faces a maximum sentence of 20 years in prison for each of eight counts of mail and wire fraud; and a maximum of 10 years in prison for each of three counts of money laundering. Koranteng had his initial appearance at 2:00 p.m. today in U.S. District Court in Greenbelt. Koranteng is detained pending a detention hearing scheduled for August 25, 2014, at 11:30 a.m.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
United States Attorney Rod J. Rosenstein praised the U.S. Secret Service and Montgomery County Police Department for their work in the investigation, and thanked the Ohio Attorney General’s Office for its assistance. Mr. Rosenstein thanked Assistant United States Attorneys Leah J. Bressack and David I. Salem, who are prosecuting the case.
Man Sentenced to 8.5 Years in Prison for Child Abuse Occuring Within Gila River Indian CommunityRead the Press Release
PHOENIX - Today, Christopher Earl Terry, 41, a member of the Gila River Indian Community, was sentenced by U.S. District Judge Diane J. Humetewa to 8.5 years in prison followed by three years of supervised release. Terry previously pleaded guilty to one count of child abuse.
Documents contained within the public record indicate that Terry seriously injured the victim, a small infant, while babysitting him at a residence within the Gila River Indian Community. The victim suffered significant physical injuries.
In deciding the sentence, Judge Humetewa rejected Terry’s contention that he injured the child during rough play, and instead noted his “egregious” conduct.
The investigation in this case was conducted by the Gila River Police Department. The prosecution was handled by Christine Keller, Assistant U.S. Attorney, District of Arizona, Phoenix.
CASE NUMBER: CR-14-00242-PHX-DJH
RELEASE NUMBER: 2014-048_TerryFor more information on the U.S. Attorney’s Office, District of Arizona, visit http://www.justice.gov/usao/az
Man Sentenced for Illegal Re-EntryRead the Press Release
Edgar Garay-Vasquez, 39, of Mexico, was sentenced by Federal District Court Judge Alan B. Johnson on August 15, 2014, for illegal re-entry of a previously deported alien into the United States. Garay-Vasquez was arrested in Worland, Wyoming. He received time served, plus ten days, was ordered to pay a $100.00 special assessment, and is subject to deportation upon release from custody. This case was investigated by the U.S. Department of Homeland Security, Immigration and Customs Enforcement.
Man Charged with Selling Drugs Out of Candy StoreRead the Press Release
Dwayne Howard, 35, from Dubuque, Iowa, has been charged with four counts of distributing crack cocaine near a school or playground. The charges are contained in an Indictment unsealed on August 18, 2014, in the United States District Court in Cedar Rapids.
The Indictment alleges that, on four different dates in January and February 2014, Howard sold crack cocaine to another person. Court records indicate that the person who purchased the crack cocaine was an undercover police officer. Three of the sales are alleged to have occurred inside “Wayne’s Candy,” a candy store operated by Howard in Dubuque, Iowa. The candy store is now closed.If convicted, Howard faces a mandatory minimum sentence of one year imprisonment without the possibility of parole, and a possible maximum sentence of 160 years’ imprisonment, an $8,000,000 fine, $400 in special assessments, and a term of supervised release of at least six years and up to life, following any imprisonment.
Howard appeared on August 18 and 20, 2014, in federal court in Cedar Rapids and was held without bond. Howard’s next appearance for a status hearing is set for September 24, 2014. Trial is scheduled for October 20, 2014.
As with any criminal case, a charge is merely an accusation and a defendant is presumed innocent until and unless proven guilty.
The case is being prosecuted by Assistant United States Attorney Justin Lightfoot and was investigated by the Iowa Division of Narcotics Enforcement and the Dubuque Drug Task Force, which is comprised of officers from the Dubuque Police Department and the Dubuque County Sheriff’s Office.
Court file information is available at https://ecf.iand.uscourts.gov/cgi-bin/ login.pl. The case file number is 14-CR-1013.
Los Angeles Women Sentenced to Prison for $2M Mortgage FraudRead the Press Release
LOS ANGELES – A Los Angeles woman was sentenced today to three years in federal prison for orchestrating a scheme that led to the fraudulent purchase of four properties worth more than $2 million.
Soo Kyung Hong, who also used the name “Maria Hong,” 48, a resident of the Miracle Mile section of Los Angeles, was sentenced today by United States District Judge John F. Walter. In addition to the 36-month prison term, Judge Walter ordered Hong to pay approximately $2 million in restitution, which includes losses from four additional properties fraudulently purchased in a related scheme.
Hong pleaded guilty in April to conspiracy to commit wire fraud, admitting that she falsified income and employment information to fraudulently obtain mortgages to purchase four properties in Hesperia, Laguna Niguel, and Hacienda Heights.
To further the scheme, Hong engaged a co-conspirator to allow Hong to falsely list the co-conspirator’s company as a place of employment on the fraudulent mortgage applications that were filed under the name of a person who did not know their name was being used. Hong instructed the co-conspirator to direct calls seeking employment verification to Hong. As part of the scheme, banks funded mortgages on four properties, all of which fell into foreclosure and caused losses of more than $1 million.
This case is being investigated by the Federal Housing Finance Agency, Office of Inspector General; the Federal Bureau of Investigation; IRS – Criminal Investigation; and the Los Angeles Sheriff’s Department. The case was prosecuted by the Fraud Section in the Criminal Division of the Department of Justice and the United States Attorney’s Office in Los Angeles.
Release No. 14-109
Leader of Guatemalan Drug Trafficking Organization Indicted for Conspiring to Import and Distribute Heroin and CocaineRead the Press Release
ALEXANDRIA, Va. – A leader of a drug trafficking organization based in Guatemala, along with a U.S.-based associate, were indicted by a federal grand jury today for participating in a conspiracy to import and distribute multiple kilograms of heroin and cocaine into the United States.
Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; and Clark E. Settles, Special Agent in Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations Washington (HSI), made the announcement.
Lelo Sandoval, 47, of Jalapa, Guatemala, and Cesar Duran, 55, of Chicago, Illinois, were indicted on four counts of conspiracy to import and distribute one kilogram or more of heroin and at least five kilograms of cocaine. Sandoval and Duran each face a maximum penalty of life in prison if convicted.
According to the indictment, from late 2009 until September 2013, Sandoval served as a leader of a drug trafficking organization in Guatemala that imported heroin and cocaine from Guatemala and Honduras into the United States through the use of human couriers. The couriers often traveled on commercial airliners that landed in various U.S. airports, including Dulles, JFK and O’Hare, and they smuggled the drugs within their luggage in containers marked as containing food and drinks—for example, juice boxes, refried beans and powdered milk. The couriers also drove vehicles carrying concealed heroin and cocaine over the U.S.-Mexico border, while other packages were delivered through the U.S. mail system.
After importation, the heroin and cocaine would be distributed and sold in the United States by members of the drug trafficking organization. The indictment identifies ten occasions from late 2009 through March 2013 in which members of the conspiracy smuggled or attempted to smuggle at least 28 kilograms of heroin and 13 kilograms of cocaine. In September 2013, Sandoval and Duran were arrested together in Guatemala while in possession of several kilograms of heroin.
This case was investigated by ICE-HSI, with assistance from the Drug Enforcement Administration and Customs and Border Protection. Special Assistant U.S. Attorney Catherine S. Ahn and Assistant U.S. Attorney Jonathan Fahey are prosecuting the case.
Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.
A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:14-cr-289.
Jury Convicts KC Man of Illegal Drugs, FirearmsRead the Press Release
KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., man was convicted in federal court today of illegally possessing a controlled substance and firearms.
Rashawn Long, 33, of Kansas City, was found guilty of both counts contained in a Nov. 15, 2013, federal indictment. Long was convicted of one count of possessing Buphedrone (also known as bath salts, a controlled substance similar to methamphetamine) with the intent to distribute and one count of being a felon in possession of firearms.
Kansas City, Mo., police officers responded to a call about a suspicious person on Oct. 26, 2013. Officers contacted a homeowner, who stated that a man she didn’t know had been knocking on her door. She also told officers that he parked his 2013 Dodge Avenger in her back yard area and left. She had no idea who the vehicle belonged to or why it was parked in her back yard.
Officers noticed that the vehicle had a strong brake pad odor, which was consistent with it having been recently driven at a high rate of speed with the brakes repeatedly engaged. One of the officers requested a tow truck to come pick up the vehicle. When the resident went to move her own vehicle so that the tow truck could get into her back yard, she found a note from Long, but addressed to another person, thanking that person for letting him park the vehicle in her yard.
A few minutes later, Long came running up the hill, waving his arms and yelling at the officers. He told the officers that he knew the owner of the residence and that he parked vehicles there before. Long also told officers that he was trying to hide his car from his fiancé while he visited another woman who lived down the block, and did not want anyone to see him. Long, who had two active arrest warrants, was taken into custody.
When officers searched Long’s vehicle, they found a backpack that contained a stun gun, a can of pepper spray, a digital scale with residue, a digital video camera and a Coke can. Inside the Coke can was a false compartment that contained 5.67 grams of Buphedrone.
When officers reviewed the contents of the digital video camera, they found at least two images in which Long flashed a Glock semi-automatic handgun.
Under federal law, it is illegal for anyone who has been convicted of a felony to be in possession of any firearm or ammunition. Long has prior felony convictions for second degree murder, armed criminal action, unlawful use of a weapon and trafficking drugs.
Under federal statutes, Long is subject to a sentence of up to 40 years in federal prison without parole, plus a fine up to $1,250,000. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
Following the presentation of evidence, the jury in the U.S. District Court in Kansas City, Mo., deliberated for about two hours before returning the guilty verdict to U.S. District Judge Brian C. Wimes, ending a trial that began Tuesday, Aug. 19, 2014.
This case is being prosecuted by Assistant U.S. Attorney Joseph M. Marquez and Special Assistant U.S. Attorney Jeffrey Q. McCarther. It was investigated by the Kansas City, Mo., Police Department and the Bureau of Alcohol, Tobacco, Firearms and Explosives.Investment Broker, Aaron Ortloff, Pleads Guilty to Wire Fraud Scheme Which Netted over $190,000Read the Press Release
U.S. Attorney Kenneth Allen Polite, Jr. announced that AARON ORTLOFF, age 42, of Kenner, Louisiana, plead guilty as charged yesterday before U.S. District Judge Stanwood R. Duval, Jr. to a one-count Bill of Information alleging a wire fraud investment scheme.
According to documents filed in court, ORTLOFF was an investment broker doing business as Ortloff Trading, L.L.C. ORTLOFF used a “gmail” email address to conduct business. Gmail servers are all located outside of the State of Louisiana, which gives federal authorities jurisdiction of interstate electronic transmissions.
From August 2007 through May 2012, ORTLOFF defrauded a victim of $191,000 by emailing monthly statements that represented that the victim’s investments were making a profit, when in reality Ortloff was stealing the money.
ORTLOFF faces a maximum of twenty years incarceration, a $250,000 fine, restitution and three years supervised release. Sentencing before Judge Duval has been scheduled for December 10, 2014.
This case was investigated by agents from the Federal Bureau of Investigation and prosecuted by Assistant United States Attorney Carter K.D. Guice, Jr. of the Fraud Unit.
(Download Factual Basis )
International “Con Man” Sentenced for Scamming Investors and Dodging TaxesRead the Press Release
Svein Erik Ulsteen, a former executive and shareholder of Anturion Limited, a company formed in the Channel Islands, was sentenced today to 46 months in custody for bilking investors of more than $2 million by selling them counterfeit and forged Anturion securities. Ulsteen used the investor funds to pay for his personal entertainment and living expenses—such as yacht and BMW payments—rather than to operate Anturion. Ulsteen was also sentenced in a separate case with corruptly preventing the Internal Revenue Service from determining his true tax liability, and attempting to cheat the IRS out of almost $400,000 in lawfully owed taxes. Ulsteen has been in custody since December 16, 2013, when he attempted to board a plane leaving for his home country of Norway. United States District Judge M. James Lorenz rejected Ulsteen’s request to be released from custody today, commenting that Ulsteen’s sole motivation to commit his crimes was to benefit himself, and “there are too many victims out there that have lost everything because of your greed. Now it’s time to make the defrauded public whole.” District Judge Lorenz also rejected Ulsteen’s attempt to characterize himself as a credible businessman, and instead commented, “You’re just a con man.”
According to court records and admissions by Ulsteen, between October 2011 and June 2013 Ulsteen solicited investors by pretending to either: (1) sell them shares of Anturion stock; or (2) borrow money on behalf of Anturion, which would be paid back with interest. In fact, however, Ulsteen was neither authorized to sell company stock nor borrow money on its behalf. To support his deceptive solicitations, Ulsteen created fake “subscription agreements” and phony “loan” documents that purported to be authentic securities of Anturion. Using these counterfeit securities, Ulsteen convinced investors throughout the United States to send more than $2 million to Ulsteen’s nominee accounts.
Personal Luxury Expenditures
Ulsteen admitted that instead of transferring these investments and loans to Anturion, he took the money for himself. For example, from a $300,000 loan one victim thought was going to Anturion, Ulsteen spent over $8,500 on his 82-foot yacht moored in Florida, over $42,000 paying personal credit card expenses, $5,000 in payments to his then-spouse, more than $4,600 in BMW car payments, over $66,650 in insurance premiums, as well as numerous other personal expenditures such as cell phone service, health care premiums and on-line dating services.Investors Received Nothing, or Worthless Shares
Multiple investors who thought they were purchasing stock in Anturion received nothing. Other investors eventually received shares, but by that time the price of Anturion stock had dramatically declined. This stock came from Ulsteen’s own personal holdings (and not directly from the company as Ulsteen had promised) and could not be sold through any investment firm in the United States. Indeed, trading in Anturion is presently suspended on London’s ISDX Growth Market, so there is no way to reliably value any of the shares Ulsteen eventually provided to his victims. And those individual victims who thought they were loaning money to Anturion were never repaid as promised.Tax Evasion
In addition to selling forged securities, Ulsteen admitted to corruptly obstructing the IRS’s attempts to assess his true tax liability. Between 2010 and 2012, Ulsteen earned over $1 million from various activities, including the sale of his Anturion stock. Although the IRS notified Ulsteen that he needed to file federal income tax returns as he owed taxes, penalties and interest, Ulsteen refused to file for any of these years, and took several steps to prevent the IRS from learning how much income he had earned. These steps included depositing investor funds into the nominee accounts he controlled and paying his personal expenses out of these company accounts.Ulsteen was ordered to return to court on December 11, 2014, for a hearing to determine how much restitution he owes to his victims.
Today’s sentencing was announced by United States Attorney for the Southern District of California Laura E. Duffy, who commended and thanked her colleague Benjamin B. Wagner, the United States Attorney for the Eastern District of California, for his Office’s excellent work on the case before Ulsteen’s arrest in San Diego late last year. That arrest and the prompt conviction of these fraud and tax charges was the result of coordinated investigations by the San Francisco and San Diego Divisions of the Federal Bureau of Investigation, and the San Diego Division of the Internal Revenue Service, Criminal Investigation.
DEFENDANT Case Numbers: 14CR0923-L (S.D. Cal.),
14CR0924-L (S.D. Cal.), and
3:14-CR-0067-WHA (N.D. Cal.) Svein Erik Ulsteen Age: 50 San Diego, CA CHARGESCounterfeit and Forged Securities, in violation of 18 U.S.C. § 513.
Maximum Penalties: 10 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Obstruction of Internal Revenue Laws, in violation of 26 U.S.C. § 7212(a).
INVESTIGATING AGENCY
Maximum Penalties: 3 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.Federal Bureau of Investigation – San Francisco Division and San Diego Division
Internal Revenue Service, Criminal Investigation*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Information: Federal Court ArraignmentsRead the Press Release
The United States Attorney's Office today announced that those persons listed below were arraigned before the U.S. Magistrate and the indictments handed down by the Grand Jury unsealed.
Appearing before U.S. Magistrate Judge Strong in Great Falls on August 21, 2014, and entering pleas of Not Guilty were:
ERIN ELLIOT HOLCOMB, an 18-year-old resident of Great Falls, appeared on charges of possession of an unregistered firearm and transfer of an unregistered firearm. If convicted of the most serious charge contained in the indictment, HOLCOMB faces 10 years in prison, $250,000 in fines and 3 years supervised release. The case was investigated by the Bureau of Alcohol, Tobacco and Firearms. PACER Case Reference: 14-59
JANA NYGARD, a 28-year-old resident of Brockton, appeared on charges of embezzlement of government property and theft of mail by an officer or employee. If convicted of the most serious charges contained in the indictment, NYGARD faces 10 years in prison, $250,000 in fines and 3 years supervised release. The case was investigated by the United States Postal Service. PACER Case Reference: 14-60
If any of the above cases are of interest to your media organization and the community it serves, we encourage you to monitor the progress of the case regularly through the U.S. District Court calendar and the PACER system so that you stay current and not miss any important developments in the case.
To establish a PACER account, which will allow you to review documents filed in the case, please go to, http://www.pacer.gov/register.html. To access the district court's calendar, please go to https://ecf.mtd.uscourts.gov/cgi-bin/PublicCalendar.pl.
Houston Man Pleads Guilty to Using Fake Credit Cards and Other Devices to Illegally Access Cash While at Louisiana CasinosRead the Press Release
LAKE CHARLES, La. –A Houston man pleaded guilty to charges that he used counterfeit credit cards and other financial access devices to steal thousands of dollars from Louisiana casinos, U.S. Attorney Stephanie A. Finley announced today.
Derick Demon Caples, 31, of Houston, pleaded guilty before U.S. District Judge Patricia Minaldi for one count of use of counterfeit access devices. According to evidence presented at the guilty plea, Caples used counterfeit credit cards and other access devices starting in November 11, 2012 to secure cash advances totaling $14,505.05 at Louisiana casinos such as the Isle of Capri, L’Auberge, Horseshoe, El Dorado, and Harrah’s Louisiana Downs. These access devices included Green Dot Visa cards, 123 Rewards cards, Chase cards, Wells Fargo cards, and Bank of America cards, among others. He presented false identifications with the credit cards to secure the cash advances.
Caples faces up to 10 years in prison, three years supervised release, a $250,000 fine and restitution. A sentencing date of November 20, 2014 was set.The U.S. Secret Service investigated the case. Assistant U.S. Attorney Howard C. Parker is prosecuting the case.
Gulfport Man Arrested for Sexual Activity with MinorsRead the Press Release
Gulfport, Miss - William Richard Pryor, 68, of Gulfport, was arrested by FBI agents pursuant to a criminal complaint charging him with transportation of minors with intent to engage in criminal sexual activity, announced U.S. Attorney Gregory K. Davis and Acting FBI Special Agent in Charge Johnnie Sharp.
William Richard Pryor was formerly employed as a math teacher at Bayou View Junior High School in Gulfport. According to the criminal complaint, beginning in approximately September, 1973 and continuing through the present, Pryor traveled and transported minor children in interstate commerce with the intent that the minor children would engage in sexual activity.
Pryor appeared today before U.S. Magistrate Judge John C. Gargiulo for an initial appearance. He remains in custody pending a preliminary and detention hearing on Tuesday, August 26, 2014.If you believe you have been a victim of fraud from a person or an organization soliciting relief funds on behalf of storm victims, contact the National Center for Disaster Fraud toll free at:
(866) 720-5721
You can also fax information to:
(225) 334-4707
or e-mail it to:
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Greenbrier County Man Pleads Guilty to Federal Drug ChargeRead the Press Release
Beckley, W.Va. – United States Attorney Booth Goodwin announced that a Greenbrier county man pled guilty to a federal drug charge in Beckley today. Seth Allen Carr, 24, of Alderson, admitted that on April 9, 2014, he used a telephone to facilitate a drug transaction. When he used the telephone he was in Lewisburg. Following the telephone conversation, Carr sold heroin to a confidential informant. Carr faces up to 4 years in prison and a $250,000 fine. United States District Judge Irene Berger scheduled his sentencing for January 8, 2015.
This case was investigated by the Greenbrier Valley Drug and Violent Crime Task Force and is being prosecuted by Assistant United States Attorney John File.
This case was prosecuted as part of an ongoing effort led by the United States Attorney’s Office for the Southern District of West Virginia to combat the illicit sale and misuse of prescription drugs and heroin. The United States Attorney’s Office, joined by federal, state and local law enforcement agencies, is committed to aggressively pursuing and shutting down illegal pill trafficking, eliminating open air drug markets, and curtailing the spread of opiate painkillers and heroin.
Fredericksburg Tax Preparer Sentenced to 37 Months in $598,000 Tax FraudRead the Press Release
RICHMOND, Va. – Daniel L. Jones, age 56, of Fredericksburg, Virginia was sentenced today to 37 months’ imprisonment for aiding in the preparation of fraudulent tax returns for his clients and making a false statement to the Internal Revenue Service.
Dana J. Boente, United States Attorney for the Eastern District of Virginia; Special Agent in Charge Thomas J. Kelly, of the Internal Revenue Service, Washington Field Office; and Special Agent in Charge Robert M. Geary of the Treasury Inspector General for Tax Administration, Washington Field Office, made the announcement after the sentencing before United States District Judge Robert E. Payne.
According to court documents, Jones ran a tax preparation service for many years in Fredericksburg called the Tax Doctor Plus. To increase refunds for his clients, Jones regularly prepared and electronically filed tax returns that contained false entries and items. These included: (a) improperly splitting married couples into incorrect filings statuses in order to place both taxpayers into lower tax brackets and create earned income credit opportunities for both; (b) filing false Schedules C, Business Income or Loss, with enough false deductions so that the client would qualify for the earned income tax credit; (c) submitting false Schedule A expenses and education credits when there was no basis to claim such deductions or credits; and (d) false income with false W-2’s to qualify the taxpayers for the maximum amount of government credits, such as the earned income credit, various education credits, and the making work pay credit.In addition, in order to represent his clients before the Internal Revenue Service, Jones submitted to the IRS false Forms 2848 (Power of Attorney and Declaration of Representative) on which he falsely claimed he was a certified public accountant. He has agreed that the total tax loss from 2009 to 2012 is approximately $598,000. This amount was based on approximately 630 returns containing false educational credits.
This case was the product of an investigation by the Internal Revenue Service, Treasury Inspector General for Tax Administration and the United States Attorney’s Office. Assistant United States Attorney David T. Maguire is prosecuting the case on behalf of the United States.
A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 3:14-cr-049.
Former VA Contractor Arrested in Connection with Stolen Identity Refund FraudRead the Press Release
Tampa, Florida – United States Attorney A. Lee Bentley, III announces the unsealing of an indictment charging Willie Streater with five counts of wrongful disclosure of health information, two counts of access device fraud, and one count of aggravated identity theft. If convicted, Streater faces a maximum penalty of 10 years in federal prison on each count of wrongful disclosure of health information and access device fraud, to be followed by two additional years’ imprisonment on the aggravated identity theft charge. The indictment also notifies Streater that the United States is seeking a money judgment in the amount of $1,146,745.35, the proceeds of the charged criminal conduct.
According to the indictment and information presented in court, Streater is a former employee of a shredding company that had a contract with the U.S. Department of Veterans Affairs to shred documents at the James A. Haley Tampa VA Hospital. Streater stole documents intended for shredding that contained the personal identifying information of U.S. veterans. Streater then sold the stolen documents to individuals engaged in filing fraudulent tax returns in order to steal tax refunds from the U.S. Treasury.
“Today’s arrest was the result of a three-year multiagency investigation involving local, state, and federal offices,” said Special Agent in Charge Monty Stokes, U.S. Department of Veterans Affairs Office of Inspector General – Southeast Field Office. “It is representative of the cooperative efforts of law enforcement to protect veterans’ personally identifiable information and hold those accountable who engage in fraud against veterans.”
An indictment is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.
This case was investigated by the Department of Veterans Affairs, Office of Inspector General, the Internal Revenue Service Criminal Investigation, and the Tampa Police Department. It will be prosecuted by Assistant United States Attorney Sara C. Sweeney.
Former San Antonio Business Comptroller Sentenced to Federal PrisonRead the Press Release
In San Antonio today, former Watermark Group comptroller Monica R. Richardson, age 39, was sentenced to 37 months in federal prison followed by three years of supervised release in connection with an embezzlement scheme underlying her failure to remit company withholding taxes announced United States Attorney Robert Pitman and Internal Revenue Service--Criminal Investigation Special Agent in Charge Steven McCollough.
In addition to the prison term, United States District Judge Orlando Garcia ordered that Richardson pay $65,551.34 restitution to the Internal Revenue Service—the amount of personal tax due based on her embezzled income. Judge Garcia also ordered Richardson to report to federal authorities on or before October 15, 2014, to begin serving her prison term.
In July 2013, Richardson pleaded guilty to one count of failure to account for and pay payroll taxes. By pleading guilty, Richardson admitted that she stole over $287,000 from Watermark and caused Watermark to fail to account for and pay the Internal Revenue Service payroll taxes due.
This case was investigated by the Internal Revenue Service-Criminal Investigation and prosecuted by Assistant United States Attorney William R. Harris.
Former Montana Federal Prosecutor Receives Atf AwardRead the Press Release
HELENA - The United States Bureau of Alcohol, Tobacco and Firearms (ATF) has awarded a former Montana federal prosecutor the ATF Honor Award for her work on a multi-defendant operation that convicted 22 defendants in federal court in 2012 and 2013. Marcia Hurd, a former United States Assistant Attorney in Billings, Montana, prosecuted a series of cases as part of "Operation Billings Area Criminals (BAC)," a one-year, multi-agency covert investigation focusing on identifying and investigating the criminal activity of violent offenders in the Billings area. BAC was a collaborative effort between the ATF, Drug Enforcement Administration, United States Marshal's Service, Montana Division of Criminal Investigation, Billings Department and Yellowstone County Attorney's Office.
Following several 2009 and 2010 shootings in the Billings area associated with illegal narcotic and firearm activity, the ATF launched operation BAC. ATF personnel planned and executed a long-term undercover operation at a business in Billings. During the operation, undercover personnel infiltrated criminal organizations in the Billings community, stopped planned criminal activity from being commenced, stopped the distribution of methamphetamine, cocaine, marijuana, ecstasy and prescription pills, and took 52 unlawfully-possessed guns off the streets.
In addition to the federal prosecutions, the work of the undercover personnel involved in BAC resulted in the capture of Cleveland Boyer, a suspect in the murder of Danny Valenzuela. Valenzuela was shot outside a downtown Billings convenient store in 2010. Within 24 hours of the homicide, ATF personnel were able to put a plan in place, execute the plan, and take Boyer into custody in Bozeman, Montana. Boyer was charged with the murder of Danny Valenzuela in Yellowstone County District Court. ATF agents assisted in the trial by providing testimony. Boyer was ultimately convicted of the murder and sentenced to life imprisonment.
Operation BAC is a testament to the profound power of agency collaboration," said Michael Cotter, U.S. Attorney in the District of Montana. "Law enforcement identified a dangerous and escalating situation in our community and battled it head on. This award is a distinct honor for Ms. Hurd and the U.S. Attorney's Office for the District of Montana."
She worked tirelessly prosecuting and managing the legal aspects of this long-term and complex investigation," said Ken Bray, Resident Agent in Charge of ATF in Montana. "Ms. Hurd's substantial efforts have made the Billings area a safer place to live. We are proud to present her with this award."
Hurd is currently working in D.C. serving as Counsel to the Director in the Office of Tribal Justice at the U.S. Department of Justice. She received the award during the 18th Annual ATF Awards Ceremony on Thursday, August 21, 2014 at ATF National Headquarters in Washington, DC.
Former Belgrade Resident Convicted of Preparing False Tax ReturnsRead the Press Release
BUTTE - A former Belgrade woman was convicted on August 20, 2014 of five counts of aiding or advising a false tax return. Francis Bercaw faces 3 years in prison, $250,000 in fines, and 1 year supervised release for each count. Bercaw has been released pending sentencing on December 4, 2014, in Missoula.
During a three-day trial at the U.S. District Court in Butte, the government presented evidence that Frances Bercaw prepared false tax returns in order to boost clientele for her tax preparation business, Fran's Tax Service. Clients would patronize her business, and Bercaw would fabricate numbers on the clients' tax returns in order to maximize their refunds. Five former clients testified that Bercaw created false business expenses on their tax returns. Bercaw's scheme was revealed when the clients were audited by the IRS and the Montana Department of Revenue.
Bercaw started Fran's Tax Service in Virginia in 1974 before moving it to Montana in the early 2000s. In 2007, Bercaw's daughter-in-law Michelle Caudle joined her in Bozeman. Bercaw and Caudle consistently prepared false returns in order to increase their clients' refunds. Bercaw would create a Schedule C (Profit or Loss from a Sole Proprietorship) for her clients even though they did not own a business. Bercaw did not review the returns with the taxpayers prior to filing. They eventually discovered the false Schedules C after being audited.
Agents testified they interviewed Bercaw on April 14, 2010. When asked about the returns she prepared, Bercaw stated that all the mileage from the taxpayer's home to his or her work was treated a commuting, and she did not intentionally include commuting mileage as a business expense. According to Bercaw, if a person was trying to make a profit, it would be considered a Schedule C business. It would not be a business if someone was just engaged in a hobby. Bercaw also stated she tried to review all tax returns with her clients upon completion. She also stated that a taxpayer had to provide a receipt to get an expense. In fact, Bercaw previously told Caudle that driving back and forth to work is considered a deductible expense. Bercaw also told Caudle to create a Schedule C if someone hunts or fishes. Bercaw also stated it was okay to create a Schedule C for a hobby.
Caudle previously pleaded guilty to aiding or advising a false tax return and is scheduled to be sentenced on December 4, 2014 in Missoula.
The case was investigated by the Internal Revenue Service, Criminal Investigations Division. Assistant U.S. Attorney Chad Spraker prosecuted the case for the government.
Foreign National Indicted for Growing 3,724 Marijuana Plants in the Plumas National ForestRead the Press Release
SACRAMENTO, Calif. — A federal grand jury returned a three-count indictment today against Mexican national Alejandro Soto-Silva, 21, charging him with conspiracy to cultivate marijuana, cultivation of marijuana, and depredation of public lands and resources, United States Attorney Benjamin B. Wagner announced.
According to court documents, on July 30, 2014, United States Forest Service agents and Plumas County Sheriff’s deputies entered a large marijuana cultivation site on the Plumas National Forest near the Soda Creek drainage. Officers located more than 3,700 marijuana plants at the site. Soto-Silva was arrested after attempting to flee from approaching law enforcement. He is in custody. The marijuana cultivation caused significant damage to the land and natural resources of the Plumas National Forest. Law enforcement observed irrigation piping running from a water source to man-made reservoirs used to water the thousands of marijuana plants under cultivation. The cultivation site sits within an area that provides habitat for several threatened or endangered animals, including Delta smelt, Chinook salmon, and the California red-legged frog.
This case is the product of an investigation by the United States Forest Service and the Plumas County Sheriff’s Office. Assistant United States Attorney Christiaan Highsmith is prosecuting the case.
If convicted, Soto-Silva faces a maximum statutory penalty of 20 years in prison and a $1 million fine for the marijuana cultivation charges and 10 years in prison and a $250,000 fine for the depredation of public lands and resources charge. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Five Charged with Fraud in Wilkes-Barre City Employees Federal Credit Union InvestigationRead the Press Release
The United States Attorney's Office for the Middle District of Pennsylvania announced that a Grand Jury in Scranton returned indictments Tuesday charging five members of the Wilkes-Barre City Employees Federal Credit Union with conspiracy and bank fraud. The indictments were sealed pending the arrests and/or voluntary surrender of the defendants today.
According to United States Attorney Peter Smith, Tino Ninotti, age 35, Jason Anthony, age 34, Leo Glodzik, age 43, Amanda Magda, age 30, and Jeffrey Serafin, age 35, were charged in three separate indictments related to activities of the credit union. Glodzik is also charged with tampering with a witness. Magda was the assistant manager at the Credit Union; Jason Anthony is a Wilkes-Barre City Police Officer; Ninotti is a former Wilkes-Barre City Police officer; Glodzik is a contractor whose company had a towing contract with the City of Wilkes-Barre.
Four of the defendants appeared today before Magistrate Judge Karoline Mehalchick in federal court in Wilkes-Barre. Ninotti, Anthony and Glodzik were released from custody and ordered to report to pretrial services. Glodzik was ordered to surrender his passport. Serafin was released on his own recognizance. The hearing for Magda is expected to take place later today.
The indictments, unsealed today, allege that the defendants, during 2014, individually or by aiding and abetting one another, secured loans from the Credit Union by means of false and fraudulent pretenses, including the use of false collateral, the stolen identities of others who were not aware of loans in their names, and forgery. Magda and Anthony are charged in one indictment; Ninotti, Glodzik and Magda in a second indictment; and Serafin alone in the third indictment.
If convicted, the defendants face up to 30 years in prison and fines in the amount of $1,000,000.
According to the U.S. Attorney the charges are a significant step in an ongoing corruption investigation by the FBI. The case represents the pursuit of allegations against individuals; the FBI and the U.S. Attorney’s Office value the close working relationships they have with local police departments, including Wilkes-Barre’s, and with honest police officers. These relationships will continue.
The prosecution is the result of a joint investigation by the Federal Bureau of Investigation (FBI), and the Pennsylvania State Police (PSP) which plays an integral role in investigations of fraud and public corruption. Prosecution is assigned to Assistant United States Attorney Michelle Olshefski.
Luzerne County citizens, as well as employees and officials of local government are urged to come forward and provide relevant information about this case and others involving corruption in local government by contacting the Scranton FBI Office at 570-344-2404.
Indictments and Criminal Informations are only allegations. All persons charged are presumed to be innocent unless and until found guilty in court.
A sentence following a finding of guilty is imposed by the Judge after consideration of the applicable federal sentencing statutes and the Federal Sentencing Guidelines.
Under the Federal Sentencing Guidelines, the Judge is also required to consider and weigh a number of factors, including the nature, circumstances and seriousness of the offense; the history and characteristics of the defendant; and the need to punish the defendant, protect the public and provide for the defendant’s educational, vocational and medical needs. For these reasons, the statutory maximum penalty for the offense is not an accurate indicator of the potential sentence for a specific defendant.
Federal Jury Finds San Felipe Pueblo Man Guilty on Sexual Abuse ChargesRead the Press Release
ALBUQUERQUE – A federal jury sitting in Albuquerque, N.M., returned a guilty verdict today against Daniel Phillip Tenorio on sexual abuse charges after a four-day trial, announced U.S. Attorney Damon P. Martinez and DuWayne W. Honahni, Sr., Special Agent in Charge of District IV of BIA’s Office of Justice Services.
Tenorio, 55, a member and resident of San Felipe Pueblo in Sandoval County, N.M., was indicted in Sept. 2013, and charged with two counts of abusive sexual contact. According to the indictment, Tenorio had unlawful sexual contact with the victim between Jan. 2011 and Dec. 2011, in locations with San Felipe Pueblo in Sandoval County, N.M.
Trial of the case commenced on Aug. 18, 2014 and concluded this afternoon when the jury returned a verdict of guilty on both counts of the indictment.
The evidence at trial established that on Jan. 24, 2012, the BIA initiated an investigation into Tenorio after receiving a referral from a school counselor reporting that a 16-year-old San Felipe Pueblo girl had disclosed possible sexual abuse. According to the referral, the victim reported that Tenorio had sexually abused her by touching her in inappropriate ways and directing sexual comments at her. The victim testified about Tenorio’s practice of grabbing and fondling her breasts and bottom and making sexually explicit comments about what he wanted to do to her. Witnesses testified that they observed Tenorio grab and fondle the victim and direct sexually explicit remarks to her.
The evidence before the jury included two audio-taped interviews of Tenorio. During the first interview, Tenorio initially denied the victim’s allegations, but later admitted touching the victim in inappropriate ways and discussing sex in front of her. During the second interview, Tenorio admitted grabbing and fondling the victim’s chest and bottom and saying that he wanted to engage in sexual acts with her. He also admitted lying to the law enforcement officers when he initially denied the victim’s allegations. The evidence also included a handwritten statement by Tenorio in which he admitted having lied to the BIA and FBI when he denied the victim’s allegations, apologized for the way he treated the victim, and expressed remorse for his improper conduct.
Tenorio testified in his own defense and claimed that he was coerced into admitting that he had improper sexual contact with the victim.
Tenorio was remanded into federal custody after the jury returned its verdict and will remain detained pending his sentencing hearing, which has yet to be scheduled. Tenorio faces a statutory maximum of ten years in prison. He will be required to register as a sex offender after completing his prison sentence.
This case was investigated by the Southern Pueblos Agency of the BIA’s Office of Justice Services with assistance from the Albuquerque office of the FBI, and is being prosecuted by Assistant U.S. Attorneys Kyle T. Nayback and Novaline D. Wilson.
The case was brought pursuant to the Tribal Special Assistant U.S. Attorney (Tribal SAUSA) Pilot Project in the District of New Mexico which is sponsored by the Justice Department’s Office on Violence Against Women under a grant administered by the Pueblo of Laguna. The Tribal SAUSA Pilot Project seeks to train tribal prosecutors in federal law, procedure and investigative techniques to increase the likelihood that every viable violent offense against Native women is prosecuted in either federal court or tribal court, or both. The Tribal SAUSA Pilot Project was largely driven by input gathered from annual tribal consultations on violence against women, and is another step in the Justice Department's on-going efforts to increase engagement, coordination and action on public safety in tribal communities.
Federal Court Sentences Muscatine Man on Illegal Re-entry ChargeRead the Press Release
DAVENPORT, IA - On August 20, 2014, Jose Rodriguez Paz, age 31, a citizen of Mexico, was sentenced by United States District Court Chief Judge James E. Gritzner to 27 months imprisonment, after pleading guilty to illegal re-entry into the United States, announced United States Attorney Nicholas A. Klinefeldt. Rodriguez Paz was also ordered to serve one year of supervised release following imprisonment, and to pay $100 towards the Crime Victims Fund. After serving his sentence, Rodriguez Paz will be turned over to Immigration authorities for removal proceedings.
Rodriguez Paz was given an enhanced sentence based on a 2011 Iowa aggravated felony conviction for possession with intent to deliver cocaine, and after this State drug conviction was deported. Rodriguez Paz was most recently found in the United States on February 24, 2014, when he was turned over to federal authorities after a Muscatine arrest.
This case was investigated by the United States Department of Homeland Security Investigations, and the case was prosecuted by the United States Attorney’s Office for the Southern District of Iowa.
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Federal Court Bars Missouri Man from Preparing Federal Tax ReturnsRead the Press Release
A federal court has permanently barred William Naes of St. Charles, Missouri, from preparing federal tax returns for others, the Justice Department announced today. The permanent injunction order, to which Naes consented, was entered by U.S. District Judge E. Richard Webber of the U.S. District Court for the Eastern District of Missouri.
The government alleged that Naes prepared returns that fraudulently claimed tax deductions for his customers, including bogus deductions for charitable contributions and unreimbursed employee business expenses. According to the complaint, Naes also fabricated business expenses on Schedules C-Profit or Loss From Business, concocted a fake business for at least one customer and failed to properly identify himself as the paid preparer on many of the returns he prepared. As a result of his conduct, many of Naes’ customers paid less in taxes than they owed or improperly received tax refunds.
Return preparer fraud is one of the IRS' Dirty Dozen Tax Scams for 2014. The IRS has some tips on their website for choosing a tax preparer. In the past decade, the department’s Tax Division has obtained more than 500 injunctions to stop tax fraud promoters and tax return preparers. Information about these cases is available on the department website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
Related Materials:
United States v. William Naes
Stipulated Order for Permanent Injunction Against William NaesEufaula Man Sentenced to 46 Months for ConspiracyRead the Press Release
Muskogee, Oklahoma - The United States Attorney’s Office for the Eastern District of Oklahoma, announced that JON PAUL SHROPSHIRE, age 54, of Eufaula, Oklahoma, was sentenced to 46 months imprisonment, followed by 3 years of supervised release for Conspiracy, in Violation of Title 18, United States Code, Section 371.
The charge is a result of an investigation by the Oklahoma Bureau of Narcotics. The defendant was indicted in April, 2013 and pled guilty in May, 2014.
The Information alleged that from in or about September, 2011, until on or about September 26, 2012, within the Eastern District of Oklahoma and elsewhere, the defendant, did knowingly and intentionally conspire, confederate and agree with others both known and unknown to commit offenses against the United States.
The Honorable James H. Payne, District Judge in the United States District Court for the Eastern District of Oklahoma, in Muskogee, presided over the hearing. The defendant will remain in the custody of the United States Marshal Service pending transportation to the designated federal facility at which he will serve his nonparolable sentence.
Assistant United States Attorney Shannon Henson represented the United States.
Dias Kadyrbayev Pleads Guilty to Impeding Boston Marathon Bombing InvestigationRead the Press Release
BOSTON – Dias Kadyrbayev, 20, a close friend of alleged Boston Marathon bomber, Dzhokhar Tsarnaev, pleaded guilty today in federal court in Boston, to impeding the bombing investigation. Kadyrbayev pleaded guilty to conspiring to obstruct justice and obstructing justice with the intent to impede the Boston Marathon bombing investigation.
The terms of the plea agreement provide that the U.S. Attorney will recommend a sentence of seven years in prison. Kadyrbayev has agreed to be deported from the United States after serving his sentence. U.S. District Judge Douglas P. Woodlock scheduled sentencing for Nov. 18, 2014.
In August 2013, Kadyrbayev was indicted with Azamat Tazhayakov for obstructing the investigation of the Marathon bombings. Kadyrbayev and Tazhayakov are both nationals of Kazakhstan who were temporarily living in the United States on student visas while attending the University of Massachusetts Dartmouth (UMass). However, at the time of their arrests on May 1, 2013, their visas had been revoked.
At today’s hearing, Kadyrbayev admitted that on the evening of April 18, 2013, after he viewed images of the suspected Boston Marathon bombers released by the FBI, he exchanged text messages with Dzhokhar Tsarnaev. He then went with Azamat Tazhayakov to the University of Massachusetts at Dartmouth campus. At approximately 10:00 pm, Kadrybayev, Tazhaykaov and a third individual entered Dzhokhar Tsarnaev’s dormitory room at UMass.
While inside Tsarnaev’s dormitory room, Kadyrbayev searched it and found a backpack containing fireworks and a jar of Vaseline. The fireworks appeared to have been opened, manipulated, and some of the explosive powder appeared to have been removed. After finding this backpack and the fireworks, Kadyrbayev showed them to Tazhayakov and they both agreed to remove the backpack from Tsarnaev’s dormitory room. Kadyrbayev also found Tsarnaev’s laptop computer. At approximately 10:30 p.m., Kadrybayev, Tazhayakov and a third individual left Tsarnaev’s dormitory room. When they left, Kadyrbayev removed several items from Tsarnaev’s room, including Tsarnaev’s laptop computer and his backpack and its contents. Kadyrbayev, accompanied by Tazhayakov and the third individual, then brought the items back to the apartment he shared with Tazhayakov in New Bedford.
Kadyrbayev also admitted that, after returning to their apartment, on the evening of April 18, 2013 and the morning of April 19, 2013, he and Tazhayakov watched television news reports and read Internet news articles about the bombing investigation and the manhunt for the two suspected Boston Marathon bombers whom they believed were Dzhokhar and Tamerlan Tsarnaev. During the early morning hours of April 19, 2013, Kadrybayev and Tazhayakov discussed getting rid of Tsarnaev’s backpack and the fireworks. They both agreed that they should get rid of Tsarnaev’s backpack and as a result of their agreement, Kadyrbayev placed the backpack and its contents, including the fireworks, into a large black trash bag and threw the entire bag into the garbage dumpster in his apartment complex. After discarding the backpack in the garbage, Kadyrbayev decided to keep Tsarnaev’s laptop computer and continue to conceal it. He did not attempt to return it to Tsarnaev’s dormitory room, nor did he notify law enforcement that he had Tsarnaev’s computer.
On April 26, 2013, after 25 federal agents searched a landfill in New Bedford for two days, Tsarnaev’s backpack, containing fireworks, a jar of Vaseline, and a thumb drive, was found. Although these items were found, the condition of the backpack and its contents had been altered by the actions of Kadyrbayev and Tazhayakov.If the plea agreement is accepted by the Court, Kadyrbayev will be sentenced to no more than seven years in jail and three years of supervised release. Kadrybayev will also be deported after serving any sentence that the Court imposes.
In July 2014, Azamat Tazhayakov was found guilty by a federal jury in Boston of conspiring to obstruct justice and obstructing justice with the intent to impede the Boston Marathon bombing investigation. Sentencing is set for sentencing for Oct. 16, 2014.
United States Attorney Carmen M. Ortiz and Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation’s Boston Field Division, made the announcement today. This investigation was conducted by the FBI’s Boston Division and member agencies of the Boston Joint Terrorism Task Force (JTTF) which is comprised of more than 30 federal, state and local enforcement agencies. Homeland Security Investigations in Boston, Massachusetts State Police, University of Massachusetts Dartmouth Department of Public Safety, New Bedford Police Department, Dartmouth Police Department, U.S. Department of Transportation – Office of Inspector General, U.S. Treasury Inspector General for Tax Administration (TIGTA), Essex County Sheriff’s Office, and Internal Revenue Service’s Criminal Investigations in Boston, provided assistance to this investigation.
The case is being prosecuted by Assistant U.S. Attorneys B. Stephanie Siegmann and John A. Capin of Ortiz’s Anti-Terrorism and National Security Unit.D.C. Heroin Dealer Convicted at TrialRead the Press Release
ALEXANDRIA, Va. – Antowan Thorne, also known as “Smooth,” 37, of Washington, D.C., was convicted yesterday of conspiracy to distribute 100 grams or more of heroin following a bench trial before U.S. District Judge Leonie M. Brinkema. At least one individual died in Fairfax County, Virginia after using heroin provided by Thorne.
Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; Mark R. Herring, Attorney General of Virginia; Karl C. Colder, Special Agent in Charge for the Drug Enforcement Administration’s (DEA) Washington Field Division; and Colonel Edwin C. Roessler Jr., Fairfax County Chief of Police, made the announcement.
According to the evidence presented at trial, during 2012 and 2013, Thorne conspired with others to distribute extremely potent heroin, largely to customers from northern Virginia. On Aug. 21, 2013, four individuals from northern Virginia, including 16-year-old Emily Lonczak and Kyle Alifom, traveled to Washington, D.C. to purchase heroin from Thorne. After using the heroin, Lonczak became unconscious and later died of a heroin overdose.
Alifom previously pleaded guilty to tampering with evidence for hiding Lonczak’s body after her overdose death. Alifom was sentenced to 80 months in prison. Thorne will be sentenced on Nov. 14, 2014.
This case was investigated by the DEA’s Washington Field Division and the Fairfax County Police Department. Assistant U.S. Attorney Michael P. Ben’Ary and Virginia Assistant Attorney General and Special Assistant U.S. Attorney Marc J. Birnbaum are prosecuting the case.
A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:14-cr-165.
Cypress Man Convicted of Distributing Child PornographyRead the Press Release
HOUSTON - Jimmy Ortiz, 33, of Cypress, has entered a guilty plea to one count of distribution of child pornography, announced United States Attorney Kenneth Magidson.
Indicted Jan. 30, 2014, Ortiz later appeared for a detention hearing before U.S. Magistrate Judge George C. Hanks Jr. who found Ortiz to be a danger to the community and ordered he be detained.
The investigation revealed Ortiz was making child pornography available to others through the use of peer-to-peer software over the Internet. An FBI agent downloaded a video of child pornography from the files Ortiz was making available online. The video included two minor female children under the age of 12 performing oral sex on each other. Additionally, a FBI agent in Oklahoma also downloaded videos that contained child pornography from Ortiz.
A search warrant was executed Sept. 27, 2013. At that time, agents seized computer media including external hard drives which led to the discovery of more than 1500 digital images and approximately 49 videos containing child pornography.
U.S. District Judge Keith P. Ellison, who accepted the plea today, has set sentencing for Nov. 12, 2014. At that time, Ortiz faces a minimum of five and up to 20 years imprisonment as well as a possible $250,000 fine. He will also face a maximum of life on supervised release during which the court can impose a number of special conditions designed to protect children. He will also have to register as a sex offender.
These charges were the result of an investigation conducted by the FBI Innocent Images Task Force.
This case, prosecuted by Assistant United States Attorney Sherri L. Zack, was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys' Offices and the Criminal Division's Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to locate, apprehend and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. For more information about internet safety education, please visit www.usdoj.gov/psc and click on the tab "resources."Crack Cocaine Dealer Sentenced in Federal CourtRead the Press Release
Abraham Alfonia Malone, 58, of Mobile, was sentenced in federal court this morning on three counts of possession with intent to distribute crack cocaine. Malone had been convicted in 2003 for conspiracy to possess with intent to distribute crack cocaine and sentenced to 120 months custody. He was released in 2011 to an eight-year term of supervised released, and was arrested in February of 2014 on the new charges. Malone pled guilty to the three new counts in May of 2014.
United States District Court Judge William H. Steele conducted a hearing on the petition to revoke Malone’s supervised release term in connection with the sentencing hearing on the new charges. Judge Steele ordered Malone’s supervised release term revoked, and imposed a sentence of 51 months imprisonment. He also imposed a 24-month term of imprisonment on the new charges, but ordered that the sentences on the new charges would run consecutively to the sentence for the supervised release violation. Accordingly, Malone will serve a total of 75 months in custody. Judge Steele ordered that Malone serve another term of supervised release at the conclusion of his custody sentence, this time for six years. No fine was imposed, but the judge ordered that Malone would pay $300 in special mandatory assessments.
The case was investigated by the Mobile County Sheriff’s Office. It was prosecuted in the United States Attorney=s Office by Assistant United States Attorney Gloria Bedwell.
Crab Orchard Man Sentenced for Distributing OxycodoneRead the Press Release
BECKLEY, W.Va. – United States Attorney Booth Goodwin announced today that a Crab Orchard man was sentenced in federal court in Beckley for distributing oxycodone. Gene James, also known as “Butch,” 44, was sentenced to six months’ imprisonment. James previously pled guilty in May of 2014, to distributing oxycodone to a person cooperating with law enforcement authorities. The drug deal took place on Hot Coal Road in Sophia, West Virginia.
This case was investigated by the Beckley Raleigh County Drug and Violent Crime Task Force and was prosecuted under the Beckley Pill Initiative directed by the United States Attorney’s Office.
This case is part of an ongoing effort led by the United States Attorney’s Office for the Southern District of West Virginia to combat the illicit sale and misuse of prescription drugs and heroin. The U.S. Attorney’s Office, joined by federal, state and local law enforcement agencies, is committed to aggressively pursuing and shutting down illegal pill trafficking, eliminating open air drug markets, and curtailing the spread of pills and heroin in communities across the Southern District.
Correctional Officer, Michigan Women Charged with Conspiring to Smuggle Phone into Federal PrisonRead the Press Release
ALEXANDRIA, La. –A correctional officer at the U.S. Penitentiary in Pollock, La., along with a relative of an inmate, were charged with conspiring to introduce a cell phone into the prison, U.S. Attorney Stephanie A. Finley announced.
Maggie Kay Comeaux, 28, of Ball, La., and Paris Smith, 21, of Detroit, Mich., were indicted for the conspiracy by a federal grand jury and arraigned Wednesday, August 20, 2014, in federal court for one count of conspiracy, one count of bribing a public official, one count of receiving a bribe by a public official, and one count of providing contraband to a prisoner. According to the indictment, from January 2013 to April 2013, Comeaux accepted a $400 bribe from Smith and two other unnamed conspirators to smuggle a cell phone into the prison.
If convicted, they face a maximum of five years in prison and three years of supervised release for conspiracy; 15 years in prison and five years of supervised release for bribing a public official; 15 years in prison and five years of supervised release for receiving a bribe by a public official; and one year in prison and one year of supervised release for providing contraband to a prisoner. They also face up to a $250,000 fine.
The U.S. Department of Justice, Office of the Inspector General, investigated the case. Assistant U.S. Attorney Allison D. Bushnell is prosecuting the case.
An indictment is merely an accusation and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.
College Park Tax Preparer Pleads Guilty to Preparing and Filing False Tax ReturnsRead the Press Release
Also Used the Personal Information of Former Clients to Falsely Claim Them as Dependents on Current Clients’ Returns
Greenbelt, Maryland – Julius Valentine Williams, age 61, of College Park, Maryland pleaded guilty today to aiding and assisting in filing false tax returns, filing false tax returns, wire fraud and aggravated identity theft. Williams’ conduct resulted in a tax loss to the government of at least $1 million.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.“While most tax return preparers provide excellent service to their clients, a few dishonest return preparers give the industry a black eye. IRS-CI works year round to investigate dishonest return preparers and protect the American taxpayer’s money,” said Thomas J Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington D.C. Field Office. “Return preparers must comply with the same tax obligations as the clients that they serve. No one is above the law.”
According to his plea agreement, Williams was a tax return preparer who owned and operated Julius Williams Tax Service out of his home in College Park. During tax years 2007 through 2010, William prepared and submitted to the IRS more than 5,000 client individual tax returns. Many of Williams’ clients were from Jamaica and resided in the United States under a temporary worker program. At the end of their employment, they were required to return to their home countries. Williams admitted that when preparing tax returns for these clients, he added false items, such as false Schedule C businesses, false deductions, false Earned Income tax credits, and false education credits, in order to fraudulently increase the size of the refund to the client.
In addition, Williams kept detailed lists of identification information of former clients who had returned to their home countries, including names, social security numbers and dates of birth. Williams then used that identification information, without the former clients’ knowledge or permission, to claim them as dependents on the income tax returns of current clients, in order to fraudulently increase the refunds on those returns.
Williams also filed false personal tax returns for tax years 2007 through 2010, in which Williams underreported his income from his tax business by a total of more than $1 million. As a result, the tax loss to the government was approximately $411,056, for those years. Williams also used the personal identification information of his former clients to fraudulently claim them as dependents on his personal income tax returns, which increased his refund and resulted in additional the taxes owed to the government.
As a result of the fraudulent tax returns prepared by Williams for his clients, and his own fraudulent returns, the total tax loss to the government is at least $1 million. As part of his plea agreement, Williams and the government have agreed to recommend that the Court order restitution in the amount of $1 million.
Williams faces a maximum sentence of three years in prison for aiding and assisting in filing false tax returns, and for filing false tax returns; a maximum of 20 years in prison for wire fraud; and two years in prison, consecutive to any other sentence, for aggravated identity theft. U.S. District Judge Paul W. Grimm scheduled sentencing for November 25, 2014 at 1:00 p.m.
United States Attorney Rod J. Rosenstein praised the IRS-CI for its work in the investigation and thanked Assistant U.S. Attorneys Kelly O. Hayes and Sean Delaney, who are prosecuting the case.Chicago Defense Attorney Indicted for Perjury and Conspiracy to Obstruct JusticeRead the Press Release
James L. Santelle the United States Attorney for the Eastern District of Wisconsin announced today the indictment in the Northern District of Illinois of Attorney Beau B. Brindley (age: 36) and Marina Collazo (age: 30) of Chicago in connection with a scheme to present perjured testimony in the 2009 trial of United States v. Alexander Vasquez, in federal district court in Chicago.
Although the crime is alleged to have occurred in Chicago, the United States Attorney’s Office there has recused itself in the matter and it has been transferred to the United States Attorney’s Office for the Eastern District of Wisconsin, in Milwaukee. However, all legal proceedings in this case will take place in Chicago.
The indictment is based upon allegations that Mr. Brindley, a Chicago criminal defense attorney, caused Ms. Collazo to commit perjury in the trial of Mr. Vasquez, a Brindley client. The indictment contains five counts:
- Count One charges both defendants with a conspiracy to obstruct justice through the presentation of false testimony, in violation of 18 U.S.C. § 371. The maximum possible penalty for this offense is a fine of not more than $250,000, imprisonment for not more than five years, or both, plus a mandatory $100 special assessment and up to three years of supervised release to follow any term of incarceration.
- Counts Two through Four charge both defendants with perjury, in violation of 18 U.S.C. § 1623(a). The maximum possible penalty for each of those counts is a fine of not more than $250,000, imprisonment for not more than five years, or both, plus a mandatory $100 special assessment and up to three years of supervised release to follow any term of incarceration.
- Count Five charges Mr. Brindley with obstruction of justice, in violation of 18 U.S.C. § 1512(c)(2). The maximum possible penalty for this offense is a fine of not more than $250,000, imprisonment for not more than 20 years, or both, plus a mandatory $100 special assessment and up to three years of supervised release to follow any term of incarceration.
This case is being investigated by the Federal Bureau of Investigation. The case will be prosecuted by Assistant United States Attorneys Michael J. Chmelar and Mel S. Johnson.
The public is cautioned that an indictment is merely an accusation and the defendants are presumed innocent unless and until proven guilty.
# # # # #Cedar Rapids Fragrance Hut Owner Charged with Maintaining A Premises for Distributing Synthetic DrugsRead the Press Release
Matthew McCauley, age 39, from Cedar Rapids, Iowa, has been charged with one count of maintaining a drug-involved premises. The charges are contained in an Indictment filed on August 20, 2014, in United States District Court in Cedar Rapids.
The Indictment alleges that, between about February and August 2014, McCauley knowingly and intentionally used and maintained the Fragrance Hut located at 2902 First Avenue NE, Cedar Rapids, Iowa, for the purpose of distributing Schedule I controlled substances. An earlier Complaint filed on August 8, 2014, alleged McCauley told police in March 2014 that he opened the Fragrance Hut to sell “herbal incense.” According to the Complaint, the purported “incense” actually contained several synthetic cannabinoids, including Schedule I controlled substances UR-144, XLR-11, AM-2201, and AB-FUBINACA. The Complaint describes synthetic cannabinoid products as a mixture of an organic “carrier” medium, such as the herb-like substance Damiana, which is then typically sprayed or mixed with a synthetic compound chemically similar to THC (tetrahydrocannabinol), the psychoactive ingredient in marijuana.If convicted, McCauley faces a possible maximum sentence of 20 years’ imprisonment, a $1,000,000 fine, $100 in special assessments, and a lifetime of supervised release following any imprisonment.
McCauley first appeared on August 8, 2014, in federal court in Cedar Rapids. On August 20, 2014, he was ordered detained without bond. McCauley’s next appearance for an arraignment is set for August 22, 2014.
As with any criminal case, a charge is merely an accusation and a defendant is presumed innocent until and unless proven guilty.
The case is being prosecuted by Assistant United States Attorney Dan Chatham and was investigated by as part of the Organized Crime Drug Enforcement Task Force (OCDETF) program of the United States Department of Justice through a cooperative effort of the Drug Enforcement Administration (DEA) Task Force consisting of the DEA; the Linn County Sheriff's Office; the Cedar Rapids Police Department; the Marion Police Department; the Iowa Division of Narcotics Enforcement; and the Sixth Judicial District Department of Correctional Services.
Court file information is available at https://ecf.iand.uscourts.gov/cgi-bin/login.pl. The case file numbers are CR14-94-LRR and 14-MJ-186.
Captured Fugitive Is Sentenced to 10 Years in Federal Prison for Role in Scheme to Launder Mortgage Fraud ProceedsRead the Press Release
DALLAS — Hong Jae Kim, aka “Randy Kim,” 45, was sentenced today by U.S. District Judge Jane J. Boyle to 10 years in federal prison and ordered to pay $1,795,125 in restitution for his nearly two-year role in a scheme to launder mortgage fraud proceeds, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
A felony information was filed in February 2013 charging Kim with one count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity. He agreed to plead guilty to the offense, but failed to appear at an arraignment set for the following month. The Court issued a bench warrant, and special agents with IRS Criminal Investigation arrested Kim a few months later in California. He returned to the Northern District of Texas, where he entered his guilty plea in July 2013.
According to documents filed in the case, Kim, along with others, including Arlington, Texas, resident, David Joe Cano, a mortgage loan officer, conspired to engage in monetary transactions in property derived from specified unlawful activity. Cano was a mortgage loan officer at 1st Capital Investment located in Richardson, Texas. He pleaded guilty to the same offense and was sentenced in November 2013 to 87 months in federal prison and ordered to pay nearly $1.8 million in restitution.
From January 2006 to November 2007, Kim, Cano, along with other coconspirators, operated a scheme to obtain fraudulent loans from Bank of America and IndyMac Bank, as well as GreenPoint Mortgage Funding, Inc. and WMC Mortgage Corporation, both located in California, and Everett Financial Inc. dba Supreme Lending and America Homekey, Inc., both in Dallas. Kim, Cano and their co-conspirators then laundered the money from those loans back to themselves using shell corporations such as Comex International Korea Corporation, Eagle’s Marc Enterprises, Inc. and Sunko Construction.
To defraud the banks and mortgage lenders, Kim, Cano and their co-conspirators selected newly constructed or distressed properties whose value could be inflated without raising lenders’ suspicions. Kim, Cano and others then recruited individuals with good credit scores to act as loan applicants for the purchase of the properties and paid them to apply for loans using applications that falsely inflated the applicant’s income and assets. The applicants were deceitfully promised that the properties would be leased until they were sold at a profit and that the applicants would receive regular payments from the rental income that would be sufficient to repay their loans until the properties sold. In reality, the applicants were left with unpaid loans that ruined their credit scores.
As charged in the Information, the scheme focused on seven properties located at: St. George Place in DeSoto, Texas; Golden Pond Drive in Cedar Hill, Texas; Summerfield Court in Fairview, Texas; Tangleglen Drive in Dallas; Roma Court in Allen, Texas; Avondale Drive in Murphy, Texas; and Stephenville Drive in Frisco, Texas.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
IRS Criminal Investigation investigated the case, with assistance from the U.S. Postal Inspection Service and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. Assistant U.S. Attorney Walt M. Junker prosecuted.
California Woman Sentenced to 5 Years in Prison for Distributing MethRead the Press Release
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Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that KRISTEN LASCHOBER, 49, formerly of Laguna Niguel, Calif., was sentenced yesterday by Senior U.S. District Judge Alfred V. Covello in Hartford to 60 months of imprisonment, followed by five years of supervised release, for her role in a methamphetamine distribution ring.
According to court documents and statements made in court, this matter stems from a joint investigation by the Drug Enforcement Administration and the Connecticut State Police’s Statewide Narcotics Task Force. The investigation, which included the use of court-authorized wiretaps, controlled purchases of methamphetamine, physical surveillance an undercover officer, revealed that LASCHOBER and her boyfriend, Chad McCluskey, sent shipments of methamphetamine to Kevin Wallin of Waterbury for four years. After receiving the shipments, Wallin distributed the methamphetamine to other dealers as well as to his own customers. Some of the shipments were sent on consignment with the understanding that Wallin would pay LASCHOBER and McCluskey with proceeds generated from his distribution of the drug.
McCLUSKEY and Laschober were arrested in Las Vegas, Nev., on January 10, 2013. On April 23, 2013, LASCHOBER pleaded guilty to one count of conspiracy to distribute 500 grams or more of a mixture and substance containing methamphetamine.
Wallin was arrested on January 3, 2013. On April 2, 2013, he pleaded guilty to the same charge.
In June of this year, McCluskey was sentenced to 65 months of imprisonment. Wallin awaits sentencing.
This matter is being prosecuted by Assistant U.S. Attorneys Patrick Caruso and H. Gordon Hall.PUBLIC AFFAIRS CONTACT:
U.S. ATTORNEY'S OFFICE
Tom Carson
(203) 821-3722
[email protected]California Man, Theodore Platanitis, Pleads Guilty to Bank Fraud, Conspiracy to Commit Bank Fraud, and Health Care FraudRead the Press Release
U.S. Attorney Kenneth Allen Polite, Jr. announced that THEODORE PLATANITIS, age 44, of Rancho Cordova, California, pleaded guilty as charged yesterday before U. S. District Judge Kurt D. Engelhardt, to Conspiracy to Commit Health Care Fraud and Bank Fraud.
According to court documents, PLATANITIS worked as a money mule in an organization that hacked into the e-mail accounts of victims and then used that access to cause sums of money to be wired out of the victim’s bank accounts. PLATANITIS was recruited by unknown individuals to open bank account(s) in the United States to receive fraudulent wire transfers from the bank accounts of victims.
On August 24, 2011, the office manager for a New Orleans physician (“Doctor A”) received an e-mail from Doctor A’s America Online e-mail account, requesting that the office manager wire $32,300 from Doctor A’s bank account to PLATANITIS’S bank account. In fact, it was not Doctor A who sent the email, but rather another individual had taken control of Doctor A’s e-mail account, and, without Doctor A’s authorization, drafted and sent the e-mail to Doctor A’s office manager purporting to be Doctor A. Doctor A’s office manager complied with the e-mail and the money was wired to PLATANITIS’S account.
Once the deposit in the amount of approximately $32,000 had been fraudulently deposited into PLATANITIS’S account, PLATANITIS withdrew approximately $16,150 in cash and, acting upon instructions given to him, took the cash to stores with the capability of wiring money via Western Union located in Rancho Cordova, California, and wired different amounts to different locations in Malaysia in amounts not more than $5,000. Shortly thereafter, PLATANITIS returned to a bank branch and attempted to withdraw the remainder of the funds he had fraudulently obtained from Doctor A from his Bank of America business account.
PLATANITIS faces a maximum term of imprisonment of five years. Sentencing has been scheduled for December 10, 2014 at 9:00 a.m.
This case was investigated by the Federal Bureau of Investigation. The prosecution was handled by Assistant United States Attorney Jordan Ginsberg.
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Broken Arrow Man Sentenced to 36 Months Probation, $19,000 Restitution for Theft of Government FundsRead the Press Release
Muskogee, Oklahoma - The United States Attorney’s Office for the Eastern District of Oklahoma, announced that BOBBY GENE SMITH, age 43, of Broken Arrow, Oklahoma, was sentenced to 3 years of probation for Theft Of Government Funds, in violation of Title 18, United States Code, Section 641. As a condition of probation, SMITH was ordered to pay $19,076.00 in restitution.
The charge arose from an investigation by the United States Department of Labor, Office of Inspector General. SMITH pled guilty in March 2014.
The Information alleged that from on or about May 8, 2010 to on or about May 7, 2011, in the Eastern District of Oklahoma, the Defendant, did willfully and knowingly embezzle, steal and convert to his own use, money and things of value from the Oklahoma Employment Security Commission, an agency receiving and administering funds on behalf of the United States, which had been paid to the defendant as unemployment insurance compensation benefits to which the defendant knew he was not entitled, and having a value in excess of $1,000.
The Honorable Ronald A. White, District Judge in the United States District Court for the Eastern District of Oklahoma, presided over the hearing.
Assistant United States Attorney Chris Wilson represented the United States.
Bloods Gang Member Sentenced to 10 Years in Prison for Racketeering Conspiracy in TennesseeRead the Press Release
A Tennessee Bloods gang member was sentenced today to serve 10 years in prison, to be followed by three years of supervised release for his role in a violent racketeering conspiracy.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney David Rivera of the Middle District of Tennessee and Special Agent in Charge Glenn N. Anderson of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Nashville Field Division made the announcement. The sentence was imposed by U.S. District Judge Aleta Trauger of the Middle District of Tennessee.
Kenneth Gaddie, aka “K.G.,” 24, of Nashville, Tennessee, pleaded guilty on May 23, 2014, and was the last of 37 gang members to be convicted in the Middle District of Tennessee for involvement in the Bloods gang.
According to court documents, from 2006 through December 2011, Gaddie was a member of the Bloods gang. He and other Bloods gang members committed multiple acts of murder, robbery and narcotics trafficking on behalf of the gang.
Gaddie and other Bloods gang members met at various locations in the Nashville area, including Shelby Park, Cedar Hill Park and the Galaxy Star Drug Awareness and Gang Prevention Center, on a regular basis to report on gang-related business, collect dues, commit disciplinary actions against fellow gang members, discuss acts of violence against rival gang members and initiate or “jump in” new members by beating them.
Further, according to court documents, on June 25, 2008, Gaddie shot and wounded an individual on behalf of the gang. Less than one month after this incident, on July 17, 2008, Gaddie and others shot at another individual.
The investigation was conducted by the ATF; the Metropolitan Nashville Police Department; the U.S. Marshals Service; the La Vergne, Tennessee, Police Department; and the Davidson County, Tennessee, Sheriff’s Office. The case was prosecuted by Trial Attorney Kevin L. Rosenberg of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Scarlett S. Nokes of the Middle District of Tennessee.Bloods Gang Member Sentenced to Ten Years in Prison for Role in Racketeering ConspiracyRead the Press Release
Final Defendant Sentenced in Racketeering Case
More Than 30 Defendants Collectively Sentenced to Approximately 400 Years in PrisonNASHVILLE, Tenn. – August 21, 2014 – Kenneth Gaddie, 24, a/k/a “K.G.,” of Nashville, Tennessee, has been sentenced to ten years in prison for conspiring to participate in racketeering activity related to his membership in the Bloods criminal enterprise by U.S. District Judge Aleta Trauger, announced David Rivera, U.S. Attorney for the Middle District of Tennessee. Gaddie is the final defendant to be sentenced in the case and pleaded guilty to the racketeering conspiracy on May 23, 2014.
According to court documents, from approximately 2006 until December 2011, Bloods gang members committed and conspired to commit acts of murder, attempted murder, robbery and drug trafficking. Evidence at the 2012 trial of co-defendants Keairus Wilson and Rondarius Williamson showed that the Bloods gang members met regularly to plan and agree upon the crimes to commit, including murder; maintained and circulated a collection of firearms for use in criminal activity by Bloods members; distributed cocaine, cocaine base, marijuana and hydromorphone; and used the proceeds of those drug transactions to help finance the gang’s illegal activities. Bloods gang members committed murder and other acts of violence against rival gang members and others during the course of the conspiracy.
More than 30 individuals have pleaded to, or have been found guilty in the Middle District of Tennessee of various crimes related to their involvement in the Bloods gang.
Lonnie Greenlee, 54, of Nashville, co-founder of the Galaxy Star Drug Awareness and Gang Prevention Center in Nashville and father of lead defendant Lonnie Newsome, allowed Bloods gang members to use the facility to conduct gang meetings. According to evidence presented at trial, Greenlee provided numerous Bloods gang members with fraudulent documentation of court-ordered community service hours in exchange for money. Greenlee pleaded guilty in May 2011 to one count of racketeering conspiracy and was sentenced to 24 months’ in prison on April 2, 2012.
The remaining defendants and prior sentences imposed include:Rondarius Williamson of Nashville Life +60 years in prison;
Keairus Wilson a/k/a “Key Thang,” of Nashville Life +35 years in prison;
Montez Hall a/k/a “Tez,” 22, of Nashville, 360 months in prison;
Anthony Brooks a/k/a “A.B.,” 25, of Nashville, 300 months in prison;
Lonnie Newsome a/k/a “Big Lonnie,” 26, of Nashville, 240 months in prison;
Kerry Pettus a/k/a “Lil Kerry,” 24, of Nashville, 240 months in prison;
Tim Allen a/k/a “Lil Tim,” 22, of Nashville, 216 months in prison;
Cedric Woods a/k/a “Lil Ced,” 23, of Nashville, 210 months in prison;
Jeffrey Albea a/k/a “Lil Jeff,” 20, of Nashville, 120 months in prison;
Aaron Gooch a/k/a “A-Ron,” 23, of Nashville, 120 months in prison;
Deshaune Jones a/k/a “Mexico,” 23, of Nashville, 120 months in prison;
William Walden a/k/a “Wild Bill,” 23, of Nashville, 120 months in prison;
Anthony Lampkins a/k/a “Doo Daddy,” 23, of Nashville, 96 months in prison;
Antonio Washington a/k/a “T.O.,” 23, of Nashville, 96 months in prison;
William Bartlett a/k/a “Face Mob,” 29 of Gallatin, Tenn., 88 months in prison;
Ricky Williams a/k/a “Big Rick,” 26, of Nashville, 85 months in prison;
Jermaine Tate a/k/a “Maine Maine,” 23, of Nashville, 85 months in prison;
Alonzo McLaurine a/k/a “Zo,” 22, of Nashville, 84 months in prison;
Shayne Gibson, 20, of Nashville, 84 months in prison;
Karlos Taylor a/k/a “Los,” 22, of Nashville, 80 months in prison;Alexander McDonald a/k/a “Dominique,” 22, of Nashville, 60 months in prison;
Anthony Campbell a/k/a “Dante,” 22, of Nashville, 57 months in prison;
Jermaine Coward a/k/a “Maine Maine,” 21, of Nashville, 52 months in prison;
Joedon Bradley a/k/a “Jo Jo,” 24, of Nashville, 48 months in prison;
Adrian Montgomery, 21, of Nashville, 48 months in prison;
Donald Dowell a/k/a “D-Dow,” 26, of Nashville, 47 months in prison;
Torey Cohen Boseman, 26, of Nashville, 36 months in prison;
James House a/k/a “Bam,” 39, of Nashville, 30 months in prison;
Shawn Howell, 25, of Nashville, 27 months in prison;
Rodney Britton, 24, of Nashville, 24 months in prison;
Kaylon Cunningham, 26, of Nashville, 60 months’ probation;
Corneilus Primm, 27, of Nashville, 36 months’ probation;
Brandon Prince, 24, of Nashville, 36 months’ probation.The investigation was a joint operation conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Metropolitan Nashville Police Department; the U.S. Marshals Service; the LaVergne, Tennessee Police Department; and the Davidson County, Tennessee Sheriff’s Office. The case was prosecuted by Assistant United States Attorney Scarlett S. Nokes for the Middle District of Tennessee, Trial Attorney Kevin Rosenberg, of the Criminal Division?s Organized Crime and Gang Section and Cody L. Skipper, formerly a Trial Attorney assigned to the Organized Crime and Gang Section.
Bergen County, N.J., Man and Disbarred New York Attorney Indicted for Real Estate Investment Fraud SchemeRead the Press Release
NEWARK, N.J. – Two men were indicted by a federal grand jury today for allegedly using a real estate investment scheme to defraud 15 victims of more than $3 million, U.S. Attorney Paul J. Fishman announced.
Paul Mancuso, 46, of Glen Rock, New Jersey, is charged by indictment with one count of conspiracy to commit wire fraud and five counts of wire fraud. Pasquale Stiso, 52, of West Harrison, New York, is charged by indictment with one count of conspiracy to commit wire fraud and one count of wire fraud.
According to documents filed in this case:
Since 2009, Mancuso posed as a real estate investor, broker and developer, as well as a “hard money” lender for other investments. Stiso, a disbarred attorney, held himself out as an individual working with Mancuso on various investment projects.
Mancuso and Stiso fraudulently obtained financing for projects that did not exist or in which they had no actual involvement. Some of the purported projects touted by Mancuso, Stiso, and other conspirators included investments in a phony ticket scam, the development of a pizzeria at a resort in the Bahamas, the development of a casino in Atlantic City, the development of a commercial shopping center, and the “flipping” of a piece of real estate in Matawan.
Victims lost all of their investments or life savings in Mancuso’s schemes. Instead of funding the purported projects, Mancuso and Stiso used the money for personal expenses and financing their involvement in illegal gambling pursuits.
The charge of wire fraud conspiracy and each substantive count of wire fraud carry a maximum potential penalty of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss associated with the offense, whichever is greater. The indictment also includes a notice of forfeiture of $3,425,750, representing the fraudulent payments Mancuso and Stiso received from the scheme.
U.S. Attorney Fishman credited criminal investigators of the U.S. Attorney’s Office; special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; and special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen, for the investigation leading to today’s indictment.
The government is represented by Assistant U.S. Attorneys Lisa M. Colone and Francisco J. Navarro of the U.S. Attorney’s Office Criminal Division in Newark.
The charges and allegations in the indictment are merely accusations and the defendants are considered innocent unless and until proven guilty.
14-296Defense counsel:
Mancuso: Mary Frances Palisano Esq., Newark
Stiso: Henry E. Klingeman Esq., NewarkMancuso, Paul, and Stiso, Pasquale Indictment
Beckley Man Pleads Guilty to Obtaining Oxycodone by FraudRead the Press Release
BECKLEY, W.Va. – United States Attorney Booth Goodwin announced today that a Beckley man pled guilty in federal court to obtaining oxycodone by fraud. Daniel Michael Koehler, 30, admitted that he coaxed his girlfriend, a former pharmacy technician at ByPass Pharmacy in Beckley, to steal oxycodone for him. Koehler and his girlfriend avoided detection by stealing the drugs beyond the view of security cameras in the area in which the drugs were stored. Koehler admitted that he sold some of the oxycodone and used the rest. Koehler faces up to four years in prison, a $250,000 fine, and a term of supervised release when he is sentenced on December 4, 2014.
This case was investigated by the United States Drug Enforcement Administration.
This case was prosecuted as part of an ongoing effort led by the United States Attorney’s Office for the Southern District of West Virginia to combat the illicit sale and misuse of prescription drugs and heroin. The United States Attorney’s Office, joined by federal, state and local law enforcement agencies, is committed to aggressively pursuing and shutting down illegal pill trafficking, eliminating open air drug markets, and curtailing the spread of opiate painkillers and heroin.
Beckley Man Pleads Guilty to Heroin DistributionRead the Press Release
BECKLEY, W.Va. – United States Attorney Booth Goodwin announced today that Michael J. Dow, 44, of Beckley, West Virginia, pled guilty in federal court in Beckley to distribution of heroin. Dow admitted that on March 2, 2014, he sold heroin to a person who was cooperating with law enforcement authorities. The drug deal took place on F Street in Beckley, West Virginia.
Dow faces up to 20 years in prison and a $1,000,000 fine. United States District Judge Irene C. Berger scheduled the sentencing for December 4, 2014.
The Beckley/Raleigh County Drug and Violent Crime Unit conducted the investigation.
This case was prosecuted as part of an ongoing effort led by the United States Attorney’s Office for the Southern District of West Virginia to combat the illicit sale and misuse of prescription drugs and heroin. The United States Attorney’s Office, joined by federal, state and local law enforcement agencies, is committed to aggressively pursuing and shutting down illegal pill trafficking, eliminating open air drug markets, and curtailing the spread of opiate painkillers and heroin.
Bank of America to Pay $16.65 Billion in Historic Justice Department Settlement for Financial Fraud Leading up to and During the Financial CrisisRead the Press Release
Attorney General Eric Holder and Associate Attorney General Tony West announced today that the Department of Justice has reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history — to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. As part of this global resolution, the bank has agreed to pay a $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever – and provide billions of dollars of relief to struggling homeowners, including funds that will help defray tax liability as a result of mortgage modification, forbearance or forgiveness. The settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.
“This historic resolution - the largest such settlement on record - goes far beyond ‘the cost of doing business,’” said Attorney General Holder. "Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group, which has recovered $36.65 billion to date for American consumers and investors.
“At nearly $17 billion, today’s resolution with Bank of America is the largest the department has ever reached with a single entity in American history,” said Associate Attorney General West. “But the significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America’s conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis.”
The Justice Department and the bank settled several of the department’s ongoing civil investigations related to the packaging, marketing, sale, arrangement, structuring and issuance of RMBS, collateralized debt obligations (CDOs), and the bank’s practices concerning the underwriting and origination of mortgage loans. The settlement includes a statement of facts, in which the bank has acknowledged that it sold billions of dollars of RMBS without disclosing to investors key facts about the quality of the securitized loans. When the RMBS collapsed, investors, including federally insured financial institutions, suffered billions of dollars in losses. The bank has also conceded that it originated risky mortgage loans and made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).
Of the record-breaking $16.65 billion resolution, almost $10 billion will be paid to settle federal and state civil claims by various entities related to RMBS, CDOs and other types of fraud. Bank of America will pay a $5 billion civil penalty to settle the Justice Department claims under FIRREA. Approximately $1.8 billion will be paid to settle federal fraud claims related to the bank’s origination and sale of mortgages, $1.03 billion will be paid to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $135.84 million will be paid to settle claims by the Securities and Exchange Commission. In addition, $300 million will be paid to settle claims by the state of California, $45 million to settle claims by the state of Delaware, $200 million to settle claims by the state of Illinois, $23 million to settle claims by the Commonwealth of Kentucky, $75 million to settle claims by the state of Maryland, and $300 million to settle claims by the state of New York.
Bank of America will provide the remaining $7 billion in the form of relief to aid hundreds of thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of Bank of America, Merrill Lynch and Countrywide. That relief will take various forms, including principal reduction loan modifications that result in numerous homeowners no longer being underwater on their mortgages and finally having substantial equity in their homes. It will also include new loans to credit worthy borrowers struggling to get a loan, donations to assist communities in recovering from the financial crisis, and financing for affordable rental housing. Finally, Bank of America has agreed to place over $490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.
An independent monitor will be appointed to determine whether Bank of America is satisfying its obligations. If Bank of America fails to live up to its agreement by Aug. 31, 2018, it must pay liquidated damages in the amount of the shortfall to organizations that will use the funds for state-based Interest on Lawyers’ Trust Account (IOLTA) organizations and NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development. The organizations will use the funds for foreclosure prevention and community redevelopment, legal assistance, housing counselling and neighborhood stabilization.
As part of the RMBS Working Group, the U.S. Attorney’s Office for the District of New Jersey conducted a FIRREA investigation into misrepresentations made by Merrill Lynch to investors in 72 RMBS throughout 2006 and 2007. As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.”
“In the run-up to the financial crisis, Merrill Lynch bought more and more mortgage loans, packaged them together, and sold them off in securities – even when the bank knew a substantial number of those loans were defective,” said U.S. Attorney Paul J. Fishman for the District of New Jersey. “The failure to disclose known risks undermines investor confidence in our financial institutions. Today’s record-breaking settlement, which includes the resolution of our office’s imminent multibillion-dollar suit for FIRREA penalties, reflects the seriousness of the lapses that caused staggering losses and wider economic damage.”
This settlement also resolves the complaint filed against Bank of America in August 2013 by the U.S. Attorney’s Office for the Western District of North Carolina concerning an $850 million securitization. Bank of America acknowledges that it marketed this securitization as being backed by bank-originated “prime” mortgages that were underwritten in accordance with its underwriting guidelines. Yet, Bank of America knew that a significant number of loans in the security were “wholesale” mortgages originated through mortgage brokers and that based on its internal reporting, such loans were experiencing a marked increase in underwriting defects and a noticeable decrease in performance. Notwithstanding these red flags, the bank sold these RMBS to federally backed financial institutions without conducting any third party due diligence on the securitized loans and without disclosing key facts to investors in the offering documents filed with the SEC. A related case concerning the same securitization was filed by the SEC against Bank of America and is also being resolved as part of this settlement.
“Today’s settlement attests to the fact that fraud pervaded every level of the RMBS industry, including purportedly prime securities, which formed the basis of our filed complaint,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina. “Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers. As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. Today’s settlement makes clear that my office will not sit idly while fraud occurs in our backyard.”
The U.S. Attorney’s Office for the Central District of California has been investigating the origination and securitization practices of Countrywide as part of the RMBS Working Group effort. The statement of facts describes how Countrywide typically represented to investors that it originated loans based on underwriting standards that were designed to ensure that borrowers could repay their loans, although Countrywide had information that certain borrowers had a high probability of defaulting on their loans. Countrywide also concealed from RMBS investors its use of “shadow guidelines” that permitted loans to riskier borrowers than Countrywide’s underwriting guidelines would otherwise permit. Countrywide’s origination arm was motivated by the “saleability” of loans and Countrywide was willing to originate “exception loans” (i.e., loans that fell outside of its underwriting guidelines) so long as the loans, and the attendant risk, could be sold. This led Countrywide to expand its loan offerings to include, for example, “Extreme Alt-A” loans, which one Countrywide executive described as a “hazardous product,” although Countrywide failed to tell RMBS investors that these loans were being originated outside of Countrywide’s underwriting guidelines. Countrywide knew that these exception loans were performing far worse than loans originated without exceptions, although it never disclosed this fact to investors.
“The Central District of California has taken the lead in the department’s investigation of Countrywide Financial Corporation,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California. “Countrywide’s improper securitization practices resulted in billions of dollars of losses to federally-insured financial institutions. We are pleased that this investigation has resulted in a multibillion-dollar recovery to compensate the United States for the losses caused by Countrywide’s misconduct.”
In addition to the matters relating to the securitization of toxic mortgages, today’s settlement also resolves claims arising out of misrepresentations made to government entities concerning the origination of residential mortgages.
The U.S. Attorney’s Office for the Southern District of New York, along with the Federal Housing Finance Agency’s Office of Inspector General and the Special Inspector General for the Troubled Asset Relief Program, conducted investigations into the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and Bank of America’s Retail Lending Division as well as the fraudulent sale of such loans to the government sponsored enterprises Fannie Mae and Freddie Mac (the “GSEs”). The investigation into these practices, as well as three private whistleblower lawsuits filed under seal pursuant to the False Claims Act, are resolved in connection with this settlement. As part of the settlement, Countrywide and Bank of America have agreed to pay $1 billion to resolve their liability under the False Claims Act. The FIRREA penalty to be paid by Bank of America as part of the settlement also resolves the government’s claims against Bank of America and Countrywide under FIRREA for loans fraudulently sold to Fannie Mae and Freddie Mac. In addition, Countrywide and Bank of America made admissions concerning their conduct, including that they were aware that many of the residential mortgage loans they had made to borrowers were defective, that many of the representations and warranties they made to the GSEs about the quality of the loans were inaccurate, and that they did not self-report to the GSEs mortgage loans they had internally identified as defective.
“For years, Countrywide and Bank of America unloaded toxic mortgage loans on the government sponsored enterprises Fannie Mae and Freddie Mac with false representations that the loans were quality investments,” said U.S. Attorney Preet Bharara for the Southern District of New York. “This office has already obtained a jury verdict of fraud and a judgment for over a billion dollars against Countrywide and Bank of America for engaging in similar conduct. Now, this settlement, which requires the bank to pay another billion dollars for false statements to the GSEs, continues to send a clear message to Wall Street that mortgage fraud cannot be a cost of doing business.”
The U.S. Attorney’s Office for the Eastern District of New York, together with its partners from the Department of Housing and Urban Development (HUD), conducted a two-year investigation into whether Bank of America knowingly made loans insured by the FHA in violation of applicable underwriting guidelines. The investigation established that the bank caused the FHA to insure loans that were not eligible for FHA mortgage insurance. As a result, HUD incurred hundreds of millions of dollars of losses. Moreover, many of Bank of America’s borrowers have defaulted on their FHA mortgage loans and have either lost or are in the process of losing their homes to foreclosure.
“As a Direct Endorser of FHA insured loans, Bank of America performs a critical role in home lending,” said U.S. Attorney Loretta E. Lynch for the Eastern District of New York. “It is a gatekeeper entrusted with the authority to commit government funds earmarked for facilitating mortgage lending to first-time and low-income homebuyers, senior citizen homeowners and others seeking or owning homes throughout the nation, including many who live in the Eastern District of New York. In obtaining a payment of $800 million and sweeping relief for troubled homeowners, we have not just secured a meaningful remedy for the bank’s conduct, but have sent a powerful message of deterrence.”
“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” said Rhea Kemble Dignam, Regional Director of the SEC’s Atlanta Office. “Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws.”
“Today’s settlement with Bank of America is another important step in the Obama Administration’s efforts to provide relief to American homeowners who were hurt during the housing crisis,” said U.S. Department of Housing and Urban Development (HUD) Secretary Julián Castro. “This global settlement will strengthen the FHA fund and Ginnie Mae, and it will provide $7 billion in consumer relief with a focus on helping borrowers in areas that were the hardest hit during the crisis. HUD will continue working with the Department of Justice, state attorneys general, and other partners to take appropriate action to hold financial institutions accountable and provide consumers with the relief they need to stay in their homes. HUD remains committed to solidifying the housing recovery and creating more opportunities for Americans to succeed.”
“Bank of America and the banks it bought securitized billions of dollars of defective mortgages,” said Acting Inspector General Michael P. Stephens of the FHFA-OIG. “Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing RMBS from Bank of America, Countrywide and Merrill Lynch not knowing about those defects. Today’s settlement is a significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit.”
The attorneys general of California, Delaware, Illinois, Kentucky, Maryland and New York also conducted related investigations that were critical to bringing about this settlement. In addition, the settlement resolves investigations conducted by the Securities and Exchange Commission (SEC) and litigation filed by the Federal Deposit Insurance Company (FDIC).
The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. Attorneys’ Offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state attorneys general offices around the country.
The RMBS Working Group is led by Director Geoffrey Graber and five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Assistant Attorney General for the Criminal Division Leslie Caldwell, Director of the SEC’s Division of Enforcement Andrew Ceresney, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.
Investigations were led by Assistant U.S. Attorneys Leticia Vandehaar of the District of New Jersey; Dan Ryan and Mark Odulio of the Western District of North Carolina; George Cardona and Lee Weidman of the Central District of Carolina; Richard Hayes and Kenneth Abell of the Eastern District of New York; and Pierre Armand and Jaimie Nawaday of the Southern District of New York.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov
Related Materials:
Settlement Agreement
Annex 1 - Statement of Facts
Annex 2 - Consumer Relief
Annex 2 - Exhibit 1 - Loan List
Annex 2 - Exhibit 2 - Model VA Agreement
Annex 3 - Tax Fund
Annex 4 - Transaction List
Exhibit A--FDIC
Exhibit B - SEC Bank of America Settlement DocumentsBank of America to Pay $16.65 Billion in Historic Justice Department Settlement for Financial Fraud Leading up to and During the Financial CrisisRead the Press Release
WASHINGTON - Attorney General Eric Holder and Associate Attorney General Tony West announced today that the Department of Justice has reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history ¬— to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. As part of this global resolution, the bank has agreed to pay a $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever – and provide billions of dollars of relief to struggling homeowners, including funds that will help defray tax liability as a result of mortgage modification, forbearance or forgiveness. The settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.
“This historic resolution - the largest such settlement on record - goes far beyond ‘the cost of doing business,’” said Attorney General Holder. "Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group, which has recovered $36.65 billion to date for American consumers and investors.
“At nearly $17 billion, today’s resolution with Bank of America is the largest the department has ever reached with a single entity in American history,” said Associate Attorney General West. “But the significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America’s conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis.”
The Justice Department and the bank settled several of the department’s ongoing civil investigations related to the packaging, marketing, sale, arrangement, structuring and issuance of RMBS, collateralized debt obligations (CDOs), and the bank’s practices concerning the underwriting and origination of mortgage loans. The settlement includes a statement of facts, in which the bank has acknowledged that it sold billions of dollars of RMBS without disclosing to investors key facts about the quality of the securitized loans. When the RMBS collapsed, investors, including federally insured financial institutions, suffered billions of dollars in losses. The bank has also conceded that it originated risky mortgage loans and made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).
Of the record-breaking $16.65 billion resolution, almost $10 billion will be paid to settle federal and state civil claims by various entities related to RMBS, CDOs and other types of fraud. Bank of America will pay a $5 billion civil penalty to settle the Justice Department claims under FIRREA. Approximately $1.8 billion will be paid to settle federal fraud claims related to the bank’s origination and sale of mortgages, $1.03 billion will be paid to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $135.84 million will be paid to settle claims by the Securities and Exchange Commission. In addition, $300 million will be paid to settle claims by the state of California, $45 million to settle claims by the state of Delaware, $200 million to settle claims by the state of Illinois, $23 million to settle claims by the Commonwealth of Kentucky, $75 million to settle claims by the state of Maryland, and $300 million to settle claims by the state of New York.
Bank of America will provide the remaining $7 billion in the form of relief to aid hundreds of thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of Bank of America, Merrill Lynch and Countrywide. That relief will take various forms, including principal reduction loan modifications that result in numerous homeowners no longer being underwater on their mortgages and finally having substantial equity in their homes. It will also include new loans to credit worthy borrowers struggling to get a loan, donations to assist communities in recovering from the financial crisis, and financing for affordable rental housing. Finally, Bank of America has agreed to place over $490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.
An independent monitor will be appointed to determine whether Bank of America is satisfying its obligations. If Bank of America fails to live up to its agreement by Aug. 31, 2018, it must pay liquidated damages in the amount of the shortfall to organizations that will use the funds for state-based Interest on Lawyers’ Trust Account (IOLTA) organizations and NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development. The organizations will use the funds for foreclosure prevention and community redevelopment, legal assistance, housing counselling and neighborhood stabilization.
As part of the RMBS Working Group, the U.S. Attorney’s Office for the District of New Jersey conducted a FIRREA investigation into misrepresentations made by Merrill Lynch to investors in 72 RMBS throughout 2006 and 2007. As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.”
“In the run-up to the financial crisis, Merrill Lynch bought more and more mortgage loans, packaged them together, and sold them off in securities – even when the bank knew a substantial number of those loans were defective,” said U.S. Attorney Paul J. Fishman for the District of New Jersey. “The failure to disclose known risks undermines investor confidence in our financial institutions. Today’s record-breaking settlement, which includes the resolution of our office’s imminent multibillion-dollar suit for FIRREA penalties, reflects the seriousness of the lapses that caused staggering losses and wider economic damage.”
This settlement also resolves the complaint filed against Bank of America in August 2013 by the U.S. Attorney’s Office for the Western District of North Carolina concerning an $850 million securitization. Bank of America acknowledges that it marketed this securitization as being backed by bank-originated “prime” mortgages that were underwritten in accordance with its underwriting guidelines. Yet, Bank of America knew that a significant number of loans in the security were “wholesale” mortgages originated through mortgage brokers and that based on its internal reporting, such loans were experiencing a marked increase in underwriting defects and a noticeable decrease in performance. Notwithstanding these red flags, the bank sold these RMBS to federally backed financial institutions without conducting any third party due diligence on the securitized loans and without disclosing key facts to investors in the offering documents filed with the SEC. A related case concerning the same securitization was filed by the SEC against Bank of America and is also being resolved as part of this settlement.
“Today’s settlement attests to the fact that fraud pervaded every level of the RMBS industry, including purportedly prime securities, which formed the basis of our filed complaint,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina. “Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers. As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. Today’s settlement makes clear that my office will not sit idly while fraud occurs in our backyard.”
The U.S. Attorney’s Office for the Central District of California has been investigating the origination and securitization practices of Countrywide as part of the RMBS Working Group effort. The statement of facts describes how Countrywide typically represented to investors that it originated loans based on underwriting standards that were designed to ensure that borrowers could repay their loans, although Countrywide had information that certain borrowers had a high probability of defaulting on their loans. Countrywide also concealed from RMBS investors its use of “shadow guidelines” that permitted loans to riskier borrowers than Countrywide’s underwriting guidelines would otherwise permit. Countrywide’s origination arm was motivated by the “saleability” of loans and Countrywide was willing to originate “exception loans” (i.e., loans that fell outside of its underwriting guidelines) so long as the loans, and the attendant risk, could be sold. This led Countrywide to expand its loan offerings to include, for example, “Extreme Alt-A” loans, which one Countrywide executive described as a “hazardous product,” although Countrywide failed to tell RMBS investors that these loans were being originated outside of Countrywide’s underwriting guidelines. Countrywide knew that these exception loans were performing far worse than loans originated without exceptions, although it never disclosed this fact to investors.
“The Central District of California has taken the lead in the department’s investigation of Countrywide Financial Corporation,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California. “Countrywide’s improper securitization practices resulted in billions of dollars of losses to federally-insured financial institutions. We are pleased that this investigation has resulted in a multibillion-dollar recovery to compensate the United States for the losses caused by Countrywide’s misconduct.”
In addition to the matters relating to the securitization of toxic mortgages, today’s settlement also resolves claims arising out of misrepresentations made to government entities concerning the origination of residential mortgages.
The U.S. Attorney’s Office for the Southern District of New York, along with the Federal Housing Finance Agency’s Office of Inspector General and the Special Inspector General for the Troubled Asset Relief Program, conducted investigations into the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and Bank of America’s Retail Lending Division as well as the fraudulent sale of such loans to the government sponsored enterprises Fannie Mae and Freddie Mac (the “GSEs”). The investigation into these practices, as well as three private whistleblower lawsuits filed under seal pursuant to the False Claims Act, are resolved in connection with this settlement. As part of the settlement, Countrywide and Bank of America have agreed to pay $1 billion to resolve their liability under the False Claims Act. The FIRREA penalty to be paid by Bank of America as part of the settlement also resolves the government’s claims against Bank of America and Countrywide under FIRREA for loans fraudulently sold to Fannie Mae and Freddie Mac. In addition, Countrywide and Bank of America made admissions concerning their conduct, including that they were aware that many of the residential mortgage loans they had made to borrowers were defective, that many of the representations and warranties they made to the GSEs about the quality of the loans were inaccurate, and that they did not self-report to the GSEs mortgage loans they had internally identified as defective.
“For years, Countrywide and Bank of America unloaded toxic mortgage loans on the government sponsored enterprises Fannie Mae and Freddie Mac with false representations that the loans were quality investments,” said U.S. Attorney Preet Bharara for the Southern District of New York. “This office has already obtained a jury verdict of fraud and a judgment for over a billion dollars against Countrywide and Bank of America for engaging in similar conduct. Now, this settlement, which requires the bank to pay another billion dollars for false statements to the GSEs, continues to send a clear message to Wall Street that mortgage fraud cannot be a cost of doing business.”
The U.S. Attorney’s Office for the Eastern District of New York, together with its partners from the Department of Housing and Urban Development (HUD), conducted a two-year investigation into whether Bank of America knowingly made loans insured by the FHA in violation of applicable underwriting guidelines. The investigation established that the bank caused the FHA to insure loans that were not eligible for FHA mortgage insurance. As a result, HUD incurred hundreds of millions of dollars of losses. Moreover, many of Bank of America’s borrowers have defaulted on their FHA mortgage loans and have either lost or are in the process of losing their homes to foreclosure.
“As a Direct Endorser of FHA insured loans, Bank of America performs a critical role in home lending,” said U.S. Attorney Loretta E. Lynch for the Eastern District of New York. “It is a gatekeeper entrusted with the authority to commit government funds earmarked for facilitating mortgage lending to first-time and low-income homebuyers, senior citizen homeowners and others seeking or owning homes throughout the nation, including many who live in the Eastern District of New York. In obtaining a payment of $800 million and sweeping relief for troubled homeowners, we have not just secured a meaningful remedy for the bank’s conduct, but have sent a powerful message of deterrence.”
“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” said Rhea Kemble Dignam, Regional Director of the SEC’s Atlanta Office. “Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws.”
“Today’s settlement with Bank of America is another important step in the Obama Administration’s efforts to provide relief to American homeowners who were hurt during the housing crisis,” said U.S. Department of Housing and Urban Development (HUD) Secretary Juliàn Castro. “This global settlement will strengthen the FHA fund and Ginnie Mae, and it will provide $7 billion in consumer relief with a focus on helping borrowers in areas that were the hardest hit during the crisis. HUD will continue working with the Department of Justice, state attorneys general, and other partners to take appropriate action to hold financial institutions accountable and provide consumers with the relief they need to stay in their homes. HUD remains committed to solidifying the housing recovery and creating more opportunities for Americans to succeed.” “Bank of America and the banks it bought securitized billions of dollars of defective mortgages,” said Acting Inspector General Michael P. Stephens of the FHFA-OIG. “Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing RMBS from Bank of America, Countrywide and Merrill Lynch not knowing about those defects. Today’s settlement is a significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit.”
The attorneys general of California, Delaware, Illinois, Kentucky, Maryland and New York also conducted related investigations that were critical to bringing about this settlement. In addition, the settlement resolves investigations conducted by the Securities and Exchange Commission (SEC) and litigation filed by the Federal Deposit Insurance Company (FDIC).
The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. Attorneys’ Offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state attorneys general offices around the country.
The RMBS Working Group is led by Director Geoffrey Graber and five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Assistant Attorney General for the Criminal Division Leslie Caldwell, Director of the SEC’s Division of Enforcement Andrew Ceresney, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.
Investigations were led by Assistant U.S. Attorneys Leticia Vandehaar of the District of New Jersey; Dan Ryan and Mark Odulio of the Western District of North Carolina; George Cardona and Lee Weidman of the Central District of Carolina; Richard Hayes and Kenneth Abell of the Eastern District of New York; and Pierre Armand and Jaimie Nawaday of the Southern District of New York.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at:www.stopfraud.gov.
Related Material:
DV Conference Training Announcement & Registration Form
Settlement Agreement
Annex 1 - Statement of Facts
Annex 2 - Consumer Relief
Annex 3 - Tax Fund
Annex 3 - Transaction List
Exhibit A - FDIC
Exhibit B - SEC Documents
Bank of America to Pay $16.65 Billion in Historic Justice Department Settlement for Financial Fraud Leading up to and During the Financial CrisisRead the Press Release
Attorney General Eric Holder and Associate Attorney General Tony West announced today that the Department of Justice has reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history — to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. As part of this global resolution, the bank has agreed to pay a $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever – and provide billions of dollars of relief to struggling homeowners, including funds that will help defray tax liability as a result of mortgage modification, forbearance or forgiveness. The settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.
“This historic resolution - the largest such settlement on record - goes far beyond ‘the cost of doing business,’” said Attorney General Holder. "Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group, which has recovered $36.65 billion to date for American consumers and investors.
“At nearly $17 billion, today’s resolution with Bank of America is the largest the department has ever reached with a single entity in American history,” said Associate Attorney General West. “But the significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America’s conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis.”
The Justice Department and the bank settled several of the department’s ongoing civil investigations related to the packaging, marketing, sale, arrangement, structuring and issuance of RMBS, collateralized debt obligations (CDOs), and the bank’s practices concerning the underwriting and origination of mortgage loans. The settlement includes a statement of facts, in which the bank has acknowledged that it sold billions of dollars of RMBS without disclosing to investors key facts about the quality of the securitized loans. When the RMBS collapsed, investors, including federally insured financial institutions, suffered billions of dollars in losses. The bank has also conceded that it originated risky mortgage loans and made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).
Of the record-breaking $16.65 billion resolution, almost $10 billion will be paid to settle federal and state civil claims by various entities related to RMBS, CDOs and other types of fraud. Bank of America will pay a $5 billion civil penalty to settle the Justice Department claims under FIRREA. Approximately $1.8 billion will be paid to settle federal fraud claims related to the bank’s origination and sale of mortgages, $1.03 billion will be paid to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $135.84 million will be paid to settle claims by the Securities and Exchange Commission. In addition, $300 million will be paid to settle claims by the state of California, $45 million to settle claims by the state of Delaware, $200 million to settle claims by the state of Illinois, $23 million to settle claims by the Commonwealth of Kentucky, $75 million to settle claims by the state of Maryland, and $300 million to settle claims by the state of New York.
Bank of America will provide the remaining $7 billion in the form of relief to aid hundreds of thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of Bank of America, Merrill Lynch and Countrywide. That relief will take various forms, including principal reduction loan modifications that result in numerous homeowners no longer being underwater on their mortgages and finally having substantial equity in their homes. It will also include new loans to credit worthy borrowers struggling to get a loan, donations to assist communities in recovering from the financial crisis, and financing for affordable rental housing. Finally, Bank of America has agreed to place over $490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.
An independent monitor will be appointed to determine whether Bank of America is satisfying its obligations. If Bank of America fails to live up to its agreement by Aug. 31, 2018, it must pay liquidated damages in the amount of the shortfall to organizations that will use the funds for state-based Interest on Lawyers’ Trust Account (IOLTA) organizations and NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development. The organizations will use the funds for foreclosure prevention and community redevelopment, legal assistance, housing counselling and neighborhood stabilization.
As part of the RMBS Working Group, the U.S. Attorney’s Office for the District of New Jersey conducted a FIRREA investigation into misrepresentations made by Merrill Lynch to investors in 72 RMBS throughout 2006 and 2007. As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.”
“In the run-up to the financial crisis, Merrill Lynch bought more and more mortgage loans, packaged them together, and sold them off in securities – even when the bank knew a substantial number of those loans were defective,” said U.S. Attorney Paul J. Fishman for the District of New Jersey. “The failure to disclose known risks undermines investor confidence in our financial institutions. Today’s record-breaking settlement, which includes the resolution of our office’s imminent multibillion-dollar suit for FIRREA penalties, reflects the seriousness of the lapses that caused staggering losses and wider economic damage.”
This settlement also resolves the complaint filed against Bank of America in August 2013 by the U.S. Attorney’s Office for the Western District of North Carolina concerning an $850 million securitization. Bank of America acknowledges that it marketed this securitization as being backed by bank-originated “prime” mortgages that were underwritten in accordance with its underwriting guidelines. Yet, Bank of America knew that a significant number of loans in the security were “wholesale” mortgages originated through mortgage brokers and that based on its internal reporting, such loans were experiencing a marked increase in underwriting defects and a noticeable decrease in performance. Notwithstanding these red flags, the bank sold these RMBS to federally backed financial institutions without conducting any third party due diligence on the securitized loans and without disclosing key facts to investors in the offering documents filed with the SEC. A related case concerning the same securitization was filed by the SEC against Bank of America and is also being resolved as part of this settlement.
“Today’s settlement attests to the fact that fraud pervaded every level of the RMBS industry, including purportedly prime securities, which formed the basis of our filed complaint,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina. “Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers. As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. Today’s settlement makes clear that my office will not sit idly while fraud occurs in our backyard.”
The U.S. Attorney’s Office for the Central District of California has been investigating the origination and securitization practices of Countrywide as part of the RMBS Working Group effort. The statement of facts describes how Countrywide typically represented to investors that it originated loans based on underwriting standards that were designed to ensure that borrowers could repay their loans, although Countrywide had information that certain borrowers had a high probability of defaulting on their loans. Countrywide also concealed from RMBS investors its use of “shadow guidelines” that permitted loans to riskier borrowers than Countrywide’s underwriting guidelines would otherwise permit. Countrywide’s origination arm was motivated by the “saleability” of loans and Countrywide was willing to originate “exception loans” (i.e., loans that fell outside of its underwriting guidelines) so long as the loans, and the attendant risk, could be sold. This led Countrywide to expand its loan offerings to include, for example, “Extreme Alt-A” loans, which one Countrywide executive described as a “hazardous product,” although Countrywide failed to tell RMBS investors that these loans were being originated outside of Countrywide’s underwriting guidelines. Countrywide knew that these exception loans were performing far worse than loans originated without exceptions, although it never disclosed this fact to investors.
“The Central District of California has taken the lead in the department’s investigation of Countrywide Financial Corporation,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California. “Countrywide’s improper securitization practices resulted in billions of dollars of losses to federally-insured financial institutions. We are pleased that this investigation has resulted in a multibillion-dollar recovery to compensate the United States for the losses caused by Countrywide’s misconduct.”
In addition to the matters relating to the securitization of toxic mortgages, today’s settlement also resolves claims arising out of misrepresentations made to government entities concerning the origination of residential mortgages.
The U.S. Attorney’s Office for the Southern District of New York, along with the Federal Housing Finance Agency’s Office of Inspector General and the Special Inspector General for the Troubled Asset Relief Program, conducted investigations into the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and Bank of America’s Retail Lending Division as well as the fraudulent sale of such loans to the government sponsored enterprises Fannie Mae and Freddie Mac (the “GSEs”). The investigation into these practices, as well as three private whistleblower lawsuits filed under seal pursuant to the False Claims Act, are resolved in connection with this settlement. As part of the settlement, Countrywide and Bank of America have agreed to pay $1 billion to resolve their liability under the False Claims Act. The FIRREA penalty to be paid by Bank of America as part of the settlement also resolves the government’s claims against Bank of America and Countrywide under FIRREA for loans fraudulently sold to Fannie Mae and Freddie Mac. In addition, Countrywide and Bank of America made admissions concerning their conduct, including that they were aware that many of the residential mortgage loans they had made to borrowers were defective, that many of the representations and warranties they made to the GSEs about the quality of the loans were inaccurate, and that they did not self-report to the GSEs mortgage loans they had internally identified as defective.
“For years, Countrywide and Bank of America unloaded toxic mortgage loans on the government sponsored enterprises Fannie Mae and Freddie Mac with false representations that the loans were quality investments,” said U.S. Attorney Preet Bharara for the Southern District of New York. “This office has already obtained a jury verdict of fraud and a judgment for over a billion dollars against Countrywide and Bank of America for engaging in similar conduct. Now, this settlement, which requires the bank to pay another billion dollars for false statements to the GSEs, continues to send a clear message to Wall Street that mortgage fraud cannot be a cost of doing business.”
The U.S. Attorney’s Office for the Eastern District of New York, together with its partners from the Department of Housing and Urban Development (HUD), conducted a two-year investigation into whether Bank of America knowingly made loans insured by the FHA in violation of applicable underwriting guidelines. The investigation established that the bank caused the FHA to insure loans that were not eligible for FHA mortgage insurance. As a result, HUD incurred hundreds of millions of dollars of losses. Moreover, many of Bank of America’s borrowers have defaulted on their FHA mortgage loans and have either lost or are in the process of losing their homes to foreclosure.
“As a Direct Endorser of FHA insured loans, Bank of America performs a critical role in home lending,” said U.S. Attorney Loretta E. Lynch for the Eastern District of New York. “It is a gatekeeper entrusted with the authority to commit government funds earmarked for facilitating mortgage lending to first-time and low-income homebuyers, senior citizen homeowners and others seeking or owning homes throughout the nation, including many who live in the Eastern District of New York. In obtaining a payment of $800 million and sweeping relief for troubled homeowners, we have not just secured a meaningful remedy for the bank’s conduct, but have sent a powerful message of deterrence.”
“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” said Rhea Kemble Dignam, Regional Director of the SEC’s Atlanta Office. “Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws.”
“Today’s settlement with Bank of America is another important step in the Obama Administration’s efforts to provide relief to American homeowners who were hurt during the housing crisis,” said U.S. Department of Housing and Urban Development (HUD) Secretary Julián Castro. “This global settlement will strengthen the FHA fund and Ginnie Mae, and it will provide $7 billion in consumer relief with a focus on helping borrowers in areas that were the hardest hit during the crisis. HUD will continue working with the Department of Justice, state attorneys general, and other partners to take appropriate action to hold financial institutions accountable and provide consumers with the relief they need to stay in their homes. HUD remains committed to solidifying the housing recovery and creating more opportunities for Americans to succeed.”
“Bank of America and the banks it bought securitized billions of dollars of defective mortgages,” said Acting Inspector General Michael P. Stephens of the FHFA-OIG. “Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing RMBS from Bank of America, Countrywide and Merrill Lynch not knowing about those defects. Today’s settlement is a significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit.”
The attorneys general of California, Delaware, Illinois, Kentucky, Maryland and New York also conducted related investigations that were critical to bringing about this settlement. In addition, the settlement resolves investigations conducted by the Securities and Exchange Commission (SEC) and litigation filed by the Federal Deposit Insurance Company (FDIC).
The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. Attorneys’ Offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state attorneys general offices around the country.
The RMBS Working Group is led by Director Geoffrey Graber and five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Assistant Attorney General for the Criminal Division Leslie Caldwell, Director of the SEC’s Division of Enforcement Andrew Ceresney, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.
Investigations were led by Assistant U.S. Attorneys Leticia Vandehaar of the District of New Jersey; Dan Ryan and Mark Odulio of the Western District of North Carolina; George Cardona and Lee Weidman of the Central District of Carolina; Richard Hayes and Kenneth Abell of the Eastern District of New York; and Pierre Armand and Jaimie Nawaday of the Southern District of New York.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov .
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