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6 January 2009
Former Chief Operating Officer Pleads Guilty in $132 Million Scheme <br /> to Defraud Clients of Funds Allegedly Held in TrustRead the Press Release
WASHINGTON - A former chief operating officer of Investment Properties of America, based in Richmond, Va., pleaded guilty today to conspiring to commit mail and wire fraud and to making a material false statement to federal investigators, Acting Assistant Attorney General Matthew Friedrich of the Criminal Division and Acting U.S. Attorney Dana Boentefor the Eastern District of Virginia announced.
On July 10, 2008, a federal grand jury returned a superseding indictment against Lara Coleman, 40, for her role in a scheme to defraud and obtain millions of dollars in client funds held by the 1031 Tax Group (1031TG), a qualified intermediary company owned by the same person who owned Investment Properties of America.
Coleman, a resident of Houston, entered the guilty plea in U.S. District Court in Richmond before U.S. District Judge Robert E. Payne. Coleman pleaded guilty to one count of the superseding indictment that charged her with conspiracy to commit mail and wire fraud and to a one-count information charging her with making a material false statement to federal investigators.
According to the plea agreement and statement of facts, Coleman and others used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include various promises by the qualified intermediaries to clients regarding the safekeeping of exchange funds in trust.
In the plea agreement and statement of facts, Coleman admitted that 1031TG falsely represented that it would hold client funds solely to complete the clients’ 1031 exchanges. Coleman admitted that after obtaining clients’ exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds to support the lavish lifestyle of the owner of 1031TG, pay operating expenses for the owner’s various companies, invest in commercial real estate and purchase additional qualified intermediary companies to obtain access to additional client funds. In addition, Coleman admitted that she lied to federal investigators about statements that she had made in 2006 to internal attorneys for Investment Properties of America about the amount of money that she and others had misappropriated.
Coleman has agreed, under the terms of the plea, to a sentence of 10 years in prison. At sentencing, scheduled for May 1, 2009, she also faces a $500,000 fine. In addition, the indictment seeks forfeiture of all funds and assets owned by Coleman that were derived from or connected to the misappropriation of the approximately $132 million in 1031TG funds.
In related cases, Robert D. Field II and Richard E. Simring have pleaded guilty to participating in the conspiracy to defraud 1031TG customers. Field was the chief financial officer and Simring was the chief legal officer of a holding company that was set up, in part, to oversee both Investment Properties of America and 1031TG, however neither company was ever officially made a subsidiary of the holding company. Both men are also scheduled to be sentenced on May 1, 2009.
This case is being prosecuted by Assistant U.S. Attorney Michael S. Dry for the Eastern District of Virginia and Trial Attorney Brigham Cannon of the Criminal Division’s Fraud Section. This continuing investigation is being conducted by the U.S. Postal Inspection Service, Internal Revenue Service and the FBI.
Columbus, Ohio, Accountant Sentenced to 120 Months for FraudRead the Press Release
WASHINGTON – Dennis G. Sartain of Hilliard, Ohio, was sentenced to 120 months in prison by U.S. District Judge Michael H. Watson, the Justice Department and Internal Revenue Service (IRS) announced today. The judge found the tax loss to be more than $1million and the fraud loss to be nearly $3.7 million.
In November 2007, a federal grand jury returned a superseding indictment against Sartain, charging him with conspiracy to defraud the United States, four counts of aiding in the filing of false tax returns, one count of aiding and abetting credit and loan application fraud and one count of aiding and abetting money laundering. In February 2008, Sartain pleaded guilty to all charges. According to court documents, Sartain was the accountant for two Columbus, Ohio, businesses involved in home building and real estate brokerage services.
According to the indictment, Sartain conspired with others to pay the Realtors and others who worked for these two companies "under the table." Court documents asserted that Sartain either prepared false Forms 1099 that underreported the amount of compensation paid to the individuals working for the companies, or he did not prepare and file any Forms 1099 with the IRS reporting any compensation paid. In addition, the superseding indictment alleged that Sartain prepared or helped prepare false individual income tax returns that underreported the income earned and taxes owed by the individuals who had received payments from these companies. Finally, the indictment claimed that Sartain and others shredded and discarded documents and business records and concealed electronic records maintained on computers and memory sticks that were relevant to the investigation.
Sartain also pleaded guilty to filing false individual income tax returns on behalf of himself and his wife. He did not report all of the income he was paid by one of these companies in the years 2001 through 2004. According to the superseding indictment, in two of those four years, Sartain listed his occupation as "unemployed."
Additionally, Sartain admitted aiding in the submission of a false loan application by helping submit false payroll check stubs to a mortgage company. The false payroll stubs misrepresented the loan applicant’s position and salary for the purpose of fraudulently obtaining a mortgage.
Finally, Sartain aided and abetted money laundering by engaging in conduct that contributed to a $54,295 payment to the buyer of a home sold by a local real estate business, according to court documents. That payment represented excess fraudulently obtained loan proceeds derived from the credit and loan application fraud.
"Today’s sentence shows that taxpayers who fail to comply with their federal tax obligations or assist others in doing so will pay a heavy price," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "Mr. Sartain has been branded a convicted felon for the rest of his life, will spend ten years in prison, and still has to pay back all of the taxes plus interest and steep penalties."
"Paying individuals ‘under the table’ in an effort to circumvent the tax laws is criminal activity," said Eileen Mayer, IRS Chief, Criminal Investigation. "Unfortunately, there are individuals who are relentless in their efforts to thwart our nation's tax laws; however, we are equally relentless in our efforts to investigative these individuals and hold them accountable."
In addition to the charges for which he was sentenced today, Sartain faces additional charges stemming from a September 2008 indictment for conspiracy, obstruction of justice and witness tampering. This matter is currently scheduled for a December 2008 trial.
Assistant Attorney General Hochman commended the IRS special agents who investigated the case, as well as Tax Division trial attorneys Richard M. Rolwing, Jill M. Cassara and Sean B. O’ Connell, who prosecuted the case.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at http://www.usdoj.gov/tax/
Chicago Advertising Firm Pays United States $15.5 Million to Settle Overbilling Allegations on Army ContractRead the Press Release
WASHINGTON - Leo Burnett Company, a Chicago advertising firm, has agreed to pay the U.S. $15.5 million to settle allegations that the company submitted false claims to the U.S. Army, the Justice Department announced today. The firm had a contract from 2000 to 2005 with the Army to provide advertising services for the military service’s recruiting mission.
The settlement resolves allegations that Leo Burnett improperly billed the Army while developing the recruiting Web site and for advertising under the "Army of One" multimedia advertising campaign. Leo Burnett will make a cash payment of $12.1 million and credit the Army $3.4 million in work performed, but not billed.
"The Justice Department is committed to vigorously pursuing all those who knowingly submit false claims with respect to military contracts," said Gregory G. Katsas, Assistant Attorney General for the Civil Division.
The settlement resolves the lawsuit filed on behalf of the U.S. government by former Leo Burnett employees, Greg Hamilton and Michele Casey, who received $2,790,000 as their share of the recovery in the case. Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery obtained by the government.
The litigation and settlement of this case were conducted by the U.S. Attorney’s Office for the Northern District of Illinois and the Justice Department’s Civil Division.
"The Pentagon’s Defense Criminal Investigative Service will aggressively pursue allegations of fraud that are perpetrated against the Department of Defense," said Sharon Woods, Defense Criminal Investigative Service director.
"The American people trust us to ensure their tax dollars are spent appropriately and we will continue to aggressively seek out and investigate those who intend to defraud the Army and the American taxpayer," said Brigadier General Rodney Johnson, Commanding General of the U.S. Army Criminal Investigation Command.
The case was investigated by the Defense Criminal Investigative Service of the Inspector General for the Department of Defense, the U.S. Department of the Army Criminal Investigation Command - Major Procurement Fraud Unit, and the Defense Contract Audit Agency.
This case was prosecuted as part of a National Procurement Fraud Initiative. In October 2006, the Deputy Attorney General announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force is chaired by the Assistant Attorney General for the Criminal Division and includes the Civil Division, the U.S. Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as others brought by members of the task force, demonstrate the Justice Department’s commitment to helping ensure the integrity of the government procurement process.
5 January 2009
Statement of Attorney General Michael B. Mukasey on the Death of Former Attorney General Griffin BellRead the Press Release
"Judge Bell’s long record of public service, especially his efforts to enact FISA and champion civil rights, exemplified his dedication, integrity, and fearless pursuit of justice. He was not only an outstanding Attorney General, but also a true gentleman. The Justice Department mourns his passing."
Former South Carolina Highway Patrol Trooper Pleads Guilty to Civil Rights ViolationRead the Press Release
WASHINGTON – John B. Sawyer, a former trooper with the South Carolina Highway Patrol, pleaded guilty today in federal court in Charleston, S.C., to using excessive force during an arrest.
During his plea, Sawyer acknowledged that he abused his authority as a law enforcement officer when, on May 26, 2006, he unnecessarily and repeatedly kicked the head and neck area of a man who had been apprehended in Sumter County after a chase on Interstate 95. Sawyer agreed that his conduct violated federal law and the constitutional rights of the arrested man.
"The overwhelming majority of police officers perform their duties with honor and professionalism," said Grace Chung Becker, Acting Assistant Attorney General for the Civil Rights Division. "However, if an officer commits a criminal act by violating another person’s civil rights, the Justice Department will not hesitate to step in and vigorously enforce the law."
"This is an important case, as the public places great trust in law enforcement to protect and serve them," said Walt Wilkins, U.S. Attorney for the District of South Carolina. "When an officer violates this oath, and the civil rights of those he encounters, the public’s trust is eroded and fellow officers suffer as a result. We are dedicated to prosecuting those who engage in abusive police conduct, and who tarnish the reputation of the dedicated officers who serve each day with honor and distinction."
The case was investigated by the Federal Bureau of Investigation and the South Carolina Law Enforcement Division and was prosecuted by Assistant U.S. Attorney Alston C. Badger and Special Assistant U.S. Attorney Brent Alan Gray formerly of the Civil Rights Division.