Defendants Paid Bribes to a Bank Employee to Obtain $2.45 Million in Loans

PREET BHARARA, the United States Attorney for the Southern District of New York, JANICE FEDARCYK, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and CHARLES PINE, Special Agent in Charge of the New York Field Office of the Internal Revenue Service (“IRS”), announced the filing of charges against CHRISTOPHER CAVOUNIS and JAGDESH COOMA for orchestrating a scheme to defraud several banks of at least $10 million by obtaining commercial loans and lines of credit using false and fraudulent documents. As part of the scheme, CAVOUNIS and COOMA allegedly submitted applications for loans in the names of shell companies with no assets, and with straw owners, using fraudulent documents created to trick the banks into believing those entities were real. The defendants also paid bribes totaling over $135,000 to an employee of Citibank to obtain $2.45 million worth of loans.

Manhattan U.S. Attorney PREET BHARARA stated: “The defendants engaged in a breathtaking array of elaborate financial schemes, obtaining millions of dollars from banks using fraudulent documents and misappropriated identity information. These charges should send a message that, along with our partners at the FBI and IRS, we will vigorously pursue those who make it harder for law-abiding companies to obtain credit during these difficult economic times.”

FBI Assistant Director in Charge JANICE K. FEDARCYK stated: “The defendants concocted an intricate scheme using false documents and identity theft to fraudulently obtain $10 million in bank loans. By further using bribery and threats of violence, the defendants showed that their only objective was to make a profit themselves. Committing financial crimes of this magnitude undermines the integrity of the financial process created to help American businesses succeed.”

IRS Special Agent in Charge CHARLES PINE stated: “Bank fraud, like all financial crimes, adds to the underground economy, erodes the integrity of our tax system and threatens the financial health of our communities. IRS-Criminal Investigation is always ready to work with our law enforcement partners and lend its financial investigative expertise to investigations like this one.”

According to the indictment and the complaint previously filed in Manhattan federal court:

From at least 2009 to November 2010, CAVOUNIS and COOMA allegedly obtained, through fraud, at least 16 commercial loans and/or lines of credit, totaling at least $10 million, from eight different lenders—Capital One Bank, N.A.; Citibank, N.A. (“Citibank”); First Republic Bank; Herald National Bank; New York Commercial Bank; Signature Bank; Sovereign Bank; and TD Bank, N.A. (collectively, the “Lenders”). All of these loans are presently in default. To trick the Lenders into providing the loans, CAVOUNIS and COOMA engaged in an elaborate scheme in which they prepared and then submitted applications and supporting documentation for commercial loans that contained false and misleading information on behalf of empty shell companies with no existing business or assets.

As part of the alleged scheme, CAVOUNIS and COOMA recruited straw borrowers who provided personal identifying information to the defendants in exchange for future payment. With the information in hand, the defendants represented these individuals to be the owners or executives of various companies in applications for loans from the Lenders. In addition, CAVOUNIS and COOMA provided the Lenders with fraudulent documentation in support of those applications, which they had created, and which purported to accurately reflect the personal and financial information of each straw owner, and/or corresponding company. This documentation included falsified tax returns, identification documents, and bank or other financial statements. Unbeknownst to the Lenders, however, the straw borrowers were in no way affiliated with those companies, which were themselves complete shams with neither existing businesses nor actual earnings and income. CAVOUNIS, in connection with certain applications, also assumed the identity of another individual himself and provided financial institutions with a fraudulent driver’s license in the name of that individual.

Furthermore, to help obtain the loans, over the course of an approximately four month period in 2010, CAVOUNIS paid a Citibank employee in excess of $135,000 in bribes to secure approval for several lines of credit, in the total approximate amount of $2.45 million, which were issued to empty shell companies he controlled.

When one of the banks froze a line of credit obtained through the scheme, CAVOUNIS allegedly resorted to threats in an attempt to obtain the loan. For example, in October 2010, after Citibank approved a $450,000 line of credit but subsequently froze funding when CAVOUNIS attempted to withdraw that entire amount within mere days of approval, he threatened two Citibank bankers with physical violence unless the loan proceeds were made immediately available to him.

CAVOUNIS, 30, of Fresh Meadows, New York, and COOMA, 27, of Fresh Meadows, New York, are each charged with one count of conspiracy to commit bank fraud and four substantive counts of bank fraud, each of which carry a maximum sentence of 30 years in prison, as well as one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison which must run consecutively to any other sentence imposed. CAVOUNIS and COOMA were previously charged in a complaint and were arrested on November 26, 2010. The case is assigned to U.S. District Judge ROBERT P. PATTERSON.

BIRMINGHAM—A federal grand jury today indicted an Odenville man and former employee of First Financial Bank for bank fraud, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick Maley, FDIC Office of Inspector General Special Agent in Charge Jason Moran, and Postal Inspector/Domicile Coordinator Frank Dyer.

The one-count indictment charges MARC COREY MITCHELL, 41, a former manager of the First Financial Bank branch in McCalla, with bank fraud related to his solicitation of money from a bank customer while the customer was attempting to conduct bank business.

“While most bank employees are honest and helpful, those who aren’t must be held to account,” Vance said. “My office will continue to prosecute these individuals,” she said.

“The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the United States Attorney’s Office and our law enforcement colleagues from the FBI in announcing this indictment,” said FDIC Inspector General Jon T. Rymer. “We are particularly concerned when former senior bank officials, who have held positions of trust within their institutions, are alleged to have been involved in criminal activity. We will continue to aggressively pursue bank officials and others who victimize financial institutions,” Rymer said.

Upon conviction, Mitchell faces a maximum sentence of 30 years in prison and a $1 million fine.

This case was investigated by the FBI, the Inspector General’s Office of the Federal Deposit Insurance Corporation, and the U.S. Postal Inspection Service. Assistant U.S. Attorney Melissa K. Atwood is prosecuting the case.

NEWARK, NJ—A Bloomfield, N.J., man was sentenced today to a year and a day in prison for his role in a mortgage fraud scheme carried out by the owner and employees of Elite Financial Solutions, a company based in Scotch Plains, N.J., which claimed to be a home foreclosure rescue company, U.S. Attorney Paul J. Fishman announced.

Michael Martino, 47, who as an employee of Elite was responsible for recruiting straw buyers for properties in foreclosure, previously pleaded guilty before U.S. District Judge William J. Martini to one count of wire fraud conspiracy. Judge Martini also imposed the sentence today in Newark federal court.

According to documents filed in this and related cases and statements made in court:

Beginning in February 2005, Elite’s owner and operator Stephen French devised a scheme to fraudulently induce financial institutions to provide mortgage loans to unqualified borrowers, enabling French, Martino, and their co-conspirators to earn consulting fees from the sales of properties financed by the fraudulently induced loans.

French, Martino, and others at Elite targeted New Jersey homeowners who couldn’t make mortgage payments and were facing foreclosure. They would promise the homeowners that Elite would help them keep their homes and repair their damaged credit. The homeowners would be instructed to permit title to their homes to be put in the names of straw buyers for one or two years. French promised to improve their credit ratings during that time, help them obtain more favorable mortgages, and ultimately return title to their homes.

French, Martino, and others at Elite told the homeowners that equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses and to repair their credit. Instead, Elite took a “consulting fee” of $25,000 per property, and the remaining equity was deposited into bank accounts French controlled.

Martino admitted that he recruited straw buyers for the scheme. French, Martino, and others at Elite paid the straw buyers $10,000 for use of their names and credit histories in the transactions, and submitted fraudulent loan applications to mortgage lenders in the straw buyers’ names in order to ensure the loans would be approved.

In addition to the prison term, Judge Martini sentenced Martino to three years of supervised release and ordered him to pay $275,000 in restitution.

French, 53, of Scotch Plains, N.J., previously pleaded guilty before Judge Martini to one count of wire fraud conspiracy, admitting he caused more than $1 million in losses through the scheme. He is currently scheduled to be sentenced on April 21, 2011.

Tameka Broadhurst, 27, of Plainfield, N.J., a secretary and loan processor at Elite, previously pleaded guilty before Judge Martini to one count of wire fraud conspiracy and was sentenced on November 4, 2010, to a day in prison followed by 18 months of supervised release. Martini also ordered Broadhurst to pay $355,000 in restitution. During her guilty plea, Broadhurst admitted that she recruited straw buyers for the scheme and submitted fraudulent loan applications to mortgage lenders in straw buyers’ names.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorney Jacob T. Elberg of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

This case was brought in coordination with 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.

WASHINGTON—Teresa Kelly, a former operations supervisor in Colonial Bank’s Mortgage Warehouse Lending Division (MWLD), pleaded guilty today to conspiring to commit bank, wire, and securities fraud for her role in a fraud scheme that contributed to the failures of Colonial Bank and Taylor, Bean & Whitaker (TBW).

The guilty plea was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Special Inspector General Neil Barofsky for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA OIG); and Victor F.O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.

Kelly, 35, of Ocoee, Fla., pleaded guilty before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Kelly faces a maximum penalty of five years in prison when she is sentenced on June 17, 2011. In a related action, the U.S. Securities and Exchange Commission (SEC) today filed civil charges against Kelly in the Eastern District of Virginia.

According to court documents, Kelly admitted that from 2002 through August 2009, she and her co-conspirators at Colonial Bank and TBW engaged in a scheme to defraud various entities and individuals, including Colonial Bank, a federally-insured bank; Colonial BancGroup Inc.; and the investing public. Kelly admitted that she knowingly and intentionally placed Colonial Bank and Colonial BancGroup at significant risk by causing them to purchase more than $400 million in assets that had no value.

Court documents state that in early 2002, TBW began running overdrafts in its master bank account at Colonial Bank because of TBW’s inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. Kelly and her co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious “sales” of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed “Plan B.” The conspirators accomplished this by sending mortgage data to Colonial Bank for loans that did not exist or that TBW had already committed or sold to other third-party investors. Kelly admitted that she knew and understood she and her co-conspirators had caused Colonial Bank to pay TBW for assets that were worthless to the bank.

According to court documents, Kelly and her conspirators also caused TBW to engage in sales to Colonial Bank of fictitious trades that had no collateral backing them and had no value. To obtain fraudulent funding through these trades, TBW co-conspirators would contact Kelly or another co-conspirator at Colonial Bank when the mortgage company needed an advance from the bank. Conspirators at TBW would wire a request that included false documentation purporting to represent the sale of the trades to Colonial Bank to support the release of the funds. Kelly and others caused the false information to be entered into Colonial Bank’s books and records, giving the appearance that Colonial Bank owned a 99 percent interest in legitimate securities, when in fact the securities had no value and could not be sold.

Kelly admitted today that she and her co-conspirators took steps to hide the fraud scheme from Colonial Bank’s and Colonial BancGroup’s senior management, auditors and regulators, and Colonial BancGroup’s shareholders, including by providing materially false information that significantly overstated assets held in the MWLD portfolio. Kelly knew that these actions caused materially false financial data to be reported to Colonial BancGroup and incorporated in its publicly filed statements.

In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.

Raymond Bowman, the former president of TBW; Desiree Brown, the former treasurer of TBW; and Catherine Kissick, a former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division, previously pleaded guilty for their roles in the fraud scheme.

The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC OIG, HUD OIG, FHFA OIG, and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.

This prosecution was brought in coordination with 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.

Receives 18 Months in Prison and Ordered to Pay Over $337,000 in Restitution

TYLER, TX—U.S. Attorney John M. Bales announced today that a 47-year-old Tyler, Texas woman has been sentenced to federal prison for a mortgage fraud scheme in the Eastern District of Texas.

TAHMEANE ELROD pleaded guilty on Nov. 4, 2009, to conspiracy to commit wire fraud and was sentenced to 18 months in federal prison on Mar 24, 2010 by U.S. District Judge Michael H. Schneider. Elrod was also ordered to pay restitution in the amount of $337,709.58.

According to information presented in court, in September 2007, Elrod devised a scheme to defraud mortgage financing companies by submitting false documents in order to qualify for mortgages for the purchase of a residential property. Elrod falsely inflated levels of earned income and forged signatures on a Request for Verification of Employment form as part of a loan application package. A federal grand jury returned an indictment on May 6, 2009, charging Elrod with conspiracy to commit wire fraud.

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.

This case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney Frank Coan.

Real Estate Investor Ordered to Pay Over $4.1 Million in Restitution

SHERMAN, TX—U.S. Attorney John M. Bales announced today that a 38-year-old Grapevine, Texas man has been sentenced to federal prison for his role in a mortgage fraud scheme in the Eastern District of Texas.

Esshan Samuel “Sam” Agha pleaded guilty on Oct. 19, 2009, to conspiracy to commit mail fraud and was sentenced to 51 months in federal prison today by U.S. District Judge Marcia Crone. Agha was also ordered to pay restitution in the amount of $4,127,131.50.

According to information presented in court, from Oct. 2005 to Feb. 2008, Agha, a real estate investor, devised a scheme in which he solicited others to buy homes that in most cases were in fact owned by himself or an unnamed co-conspirator. A smaller number of homes were also owned by a third party for whom Agha brokered the sales. Agha facilitated the scheme by making false statements that included misrepresentations such as overstating the buyers’ income and stating that the buyers intended to occupy the homes as their primary residence. All of the loans involved in the scheme went into default when the buyers failed to make the mortgage payments on the homes, which included 24 properties in Collin County and one in Tarrant County.

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.

These cases were investigated by the FBI and prosecuted by Assistant U.S. Attorney J. Andrew Williams.

HOUSTON—Vincent Wallace Aldridge and Tori Aldridge, both of Fresno, Texas, surrendered themselves to federal authorities as a result of the return of a 19-count indictment arising from an alleged scheme to defraud residential mortgage lenders of more than $3.7 million in connection with home purchases in the Houston area, United States Attorney José Angel Moreno, FBI Special Agent in Charge Richard C. Powers, and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Rodney E. Clarke announced today. Vincent Aldridge, 45, is a former fee attorney of First Southwestern Title Company and attorney with Aldridge and Associates, while Tori Aldridge, 32, is a former employee of the same title company.

Vincent and Tori Aldridge surrendered to special agents of the FBI and IRS-CI at the FBI this morning and both are expected to make their initial appearances before U.S. Magistrate Judge John R. Froeschner in Houston later today. A third defendant, Gilbert Barry Isgar, 50, of Katy, Texas, the co-owner of Waterford Homes, appeared before U.S. Magistrate Judge John R. Froeschner earlier this week pursuant to a summons. Isgar was arraigned and his case was set for jury selection and trial before U.S. District Court Judge Sim Lake on May 24, 2010.

The 19-count indictment returned by a Houston grand jury on Thursday, March 25, 2010, accuses Vincent Aldridge, Tori Aldridge, and Isgar of conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering, and money laundering.

According to the allegations in the indictment, Vincent and Tori Aldridge and Isgar conspired to devise and execute a scheme during 2004 and 2005 to receive proceeds from real estate transactions based upon materially fraudulent information that was intentionally supplied to at least three lending institutions as the basis for an agreement between the lending institutions and borrowers.

Vincent Aldridge allegedly lured borrowers by representing the scheme as an investment opportunity. For the use of the borrowers’ credit to obtain mortgage loans, they were promised $10,000 after the closing of their respective property. They were also allegedly told that the property would be sold after a year for a profit. Once a borrower agreed to the deal, Vincent Aldridge and Tori Aldridge acting as both an escrow officer and a loan processor and met with the borrower to obtain the necessary personal identifying information to complete the borrower’s lending package.

Prior to the submission of the lending packages to the lending institutions, it is alleged that Vincent and Tori Aldridge modified the lending package to enhance the borrower’s ability to qualify for the requested loan. These enhancements, according to the indictment, included fraudulently overstating the borrower’s income, misrepresenting the borrower’s principal residence as rental property and misrepresenting the purchase property as the principal residence. The mortgage loans totaled approximately $3,700,000. Each property sold in amounts between $344,000 and $365,000 and were funded to First Southwestern Title Company by wire.

As a part of the scheme, the indictment alleges that Isgar, co-owner of Waterford Custom Homes, inflated the sales price of the properties to be purchased by the aforementioned recruited borrowers. As a part of the alleged illicit agreement between the Aldridges and Isgar, the Aldridges were to receive the proceeds of their scheme by including disbursement authorizations for attorney’s fees signed by Isgar to the title company prior to closing. These amounts were listed on the loan closing documents as seller disbursements for attorney fees and were in addition to the attorney’s fees stated on the attorney fee line in the closing documents.

Once the loans were funded to the title company, the Aldridges are accused of causing several checks to be drawn on the account of the title company, each totaling more than $10,000, payable to a bank account controlled by Aldridge & Associates. The checks totaled approximately $442,089 and represented a portion of the illicit proceeds obtained through the mortgage fraud scheme.

The maximum penalty, upon conviction, for the conspiracy to commit wire fraud and each of the 11 wire fraud counts is 20 years in prison as well as substantial fines. The maximum penalty for the conspiracy to launder money and for each of the six money laundering counts is 10 years in prison. A conviction for money laundering carries the most significant fine of $250,000 or twice the amount of the criminally derived property, whichever is greater.

Assistant United States Attorney Jennifer Lowery is prosecuting the case.

The investigation leading to the charges was conducted by the FBI and IRS-CI, members of President Obama’s Financial Fraud Task Force. The President established the interagency Financial Fraud Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task fforce 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.

Press Releases | Houston Home

PLANO, TX—U.S. Attorney John M. Bales announced today that 40 individuals have been arrested and charged in connection with a major mortgage fraud scheme in the Eastern District of Texas.

The 16-count indictment was returned by a federal grand jury on March 10, 2010, and includes one count of conspiracy to commit mail and wire fraud, 12 counts of mail fraud, and three counts of money laundering. All 40 defendants, from Texas, Florida, Massachusetts, Tennessee, and Georgia, are charged with one count of conspiracy to commit mail and wire fraud. Many of the defendants are also charged with various counts of mail fraud and money laundering.

According to the indictment, beginning in 2004, John Barry, 41, of Windemere, Fla., owned and operated, TKI Group, Inc. and JAB Consulting, businesses out of Florida through which he solicited real estate agents, property finders, mortgage brokers, title company attorneys or escrow officers, property appraisers, and straw buyers to facilitate this scheme. The purpose of the scheme was to defraud lending institutions by convincing them to approve mortgage loans for residential properties for which the property values had been fraudulently inflated. The indictment specifically lists 114 residential properties located in the Texas cities of Allen, Arlington, Cedar Hill, Coppell, Corinth, Cypress, Dallas, Flower Mound, Fort Worth, Frisco, Granbury, Heath, Highland Village, Houston, Keller, Lantana, Lewisville, Little Elm, Lubbock, Magnolia, McKinney, Plano, Roanoke, Southlake, Spring, The Woodlands, and Willis.

In announcing the indictment, U.S. Attorney Bales specifically noted the breadth of the financial scheme, “This indictment brings to light a criminal scheme that is quite breathtaking in its scope and beyond disturbing as far as the boldness of the fraud. The agents have done a remarkable job putting together this investigation and we look forward to presenting all of the evidence in court. Hopefully, others involved in mortgage fraud will be taking notice—we will be relentless in discovering, exposing and holding accountable those who have committed similar crimes.”

If convicted, the defendants face up to 20 years in federal prison for the conspiracy charge, up to 20 years in federal prison for each count of mail fraud charge, and up to 10 years in federal prison for each count of money laundering.

“Mortgage fraud creates so much harm to individuals, businesses and our economy, but today’s indictment is a strong reminder how serious our system considers this criminal activity,” said Erick Martinez, Assistant Special Agent in Charge, IRS-Criminal Investigation, Dallas Field office. “Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable.”

“Evidence collected by the FBI to support today’s indictments proves that financial crime conspiracies, particularly mortgage fraud, still threaten our economic stability,” said Robert E. Casey, Jr., Special Agent in Charge of the FBI Office in Dallas. “This investigation illustrates the North Texas law enforcement community’s commitment to root out those who perpetrate mortgage fraud. Although increased prosecutions alone will not solve the mortgage crisis, we hope these prosecutions will help deter future fraud.”

This case is being investigated by the FBI and the Internal Revenue Service and is being prosecuted by Assistant U.S. Attorney Shamoil Shipchandler.

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.

An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Failed to Make $3.9 Million in Payoffs to Mortgage Lenders Holding Liens on 13 Properties

BALTIMORE—U.S. District Judge Catherine C. Blake sentenced Anthony V. Weis, age 45, of Phoenix, Maryland, today to 78 months in prison followed by three years of supervised release for wire fraud in connection with a mortgage fraud scheme to defraud lenders of approximately $3.9 million in just eight months. Judge Blake ordered Weis to pay restitution of $4,007,705, which includes the loss to the title insurance company and the expenses of the individual victims.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Special Agent in Charge Barbara Golden of the United States Secret Service – Baltimore Field Office; and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation, Washington D.C. Field Office.

“Mortgage lenders and borrowers depend on title companies to use loan proceeds to repay outstanding mortgages and other debts,” said U.S. Attorney Rod J. Rosenstein. “Maryland’s Mortgage Fraud Task Force will pursue criminals who defraud lenders and borrowers, and we will pursue restitution of any losses.”

According to Weis’s plea agreement, Weis was the president and a shareholder of Maple Leaf Title LLC (MLT), a real estate title agency located in Towson, Maryland. Weis directed MLT employees in 13 real estate closings conducted between February and September 2009 to withhold the payoff checks from institutions that held the existing mortgage loan notes on the properties. In each instance, the settlement statement sent to the borrower’s lender falsely represented that the payoff was being made.

In an effort to conceal the fraud scheme, Weis caused monthly mortgage payments to be made to the banks holding the mortgage notes. Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. However, because Weis was unable to send checks in every case where he had misappropriated the payoffs from escrow, a number of MLT clients received delinquency notices for non-payment of the mortgage note. A few were threatened with foreclosure and were forced to hire attorneys to prevent being ejected from their homes.

Because the existing mortgages had not been paid off, the liens against the property were not removed and a title free of pre-existing liens and claims (clear title) could not be passed to the new lender and borrower. An insurance company had issued title insurance policies to the borrowers guaranteeing clear title. As a result of Weis’s criminal conduct, the title insurance company ultimately paid out $3.9 million to financial institutions that held mortgage notes.

Weis was ordered to report on May 17, 2011, to the prison which will be designated by the U.S. Bureau of Prisons.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention, and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the task force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available at http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.

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.

United States Attorney Rod J. Rosenstein commended the FBI, the U.S. Secret Service, and the IRS – Criminal Investigation for their investigative work and thanked First Assistant U.S. Attorney Stephen M. Schenning and Assistant U.S. Attorney Gregory Bockin, who prosecuted the case.

Barry Sparks, 53, of Allen Park, Michigan, pleaded guilty today to wire fraud and money laundering, announced United States Attorney Barbara L. McQuade.

McQuade was joined in the announcement by Erick Martinez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation, and FBI Special Agent in Charge Andrew Arena.

According to court records, from 2006 through 2009, Stephen Sparks, 37, of Monroe, Michigan, and his uncle, Barry Sparks, took part in a scheme that solicited over $1 million from individual investors. Stephen Sparks represented to investors that his business, Global Points, had an opportunity to purchase a warehouse full of Chinese electronic equipment and sell it in the United States at a substantial profit, returning over five times the amount invested. Stephen Sparks also represented that Global Point was in a position for a second deal to acquire CD and DVD players that had been seized in Chicago, Illinois, and were being sold for the payment of back taxes. Stephen Sparks indicated that there would be a quick turn around and the profit would be twice the original investment.

Court records further showed that Stephen Sparks knowingly failed to inform the investors that he gave most of their money to his uncle, Barry Sparks, who had past criminal convictions for fraud. In furtherance of the scheme, Barry Sparks set up email accounts and transmitted messages to himself to make it appear as if he was negotiating overseas deals, when, in fact, Barry Sparks knew that there were no such deals or partners with whom he was negotiating. Stephen Sparks continued to provide excuses for the failure of the deals to close, and continued to solicit additional funds, claiming that the closings were imminent. In 2007, Stephen Sparks, aided by Barry Sparks, withdrew $12,000 in cash from his bank account knowing that these funds had been wired from Ohio to Michigan by an investor and, therefore, derived from the proceeds of wire fraud.

On January 25, 2011, Stephen Sparks pleaded guilty to wire fraud and money laundering charges and is expected to be sentenced on May 5, 2011 at 2:00 pm and Barry Sparks is scheduled to be sentenced on July 14, 2011 at 2:00 pm in front of United States District Court Judge Denise Page Hood.

The maximium sentence for wire fraud is 20 years’ imprisonment and a $250,000 fine and the maximum sentence for money laundering is 10 years’ imprisonment and a $250,000 fine.

“Investment fraudsters prey on trusting investors by enticing them with a can’t miss deal and then steal their hard earned money,” said Special Agent in Charge Erick Martinez. “IRS Criminal Investigation is committed to investigating investment schemes in an effort to protect the financial well being of the American investor.”

The case was investigated by special agents of the IRS Criminal Investigation and the FBI. It is being prosecuted by Assistant United States Attorney Ross I. MacKenzie.

Ordered to Pay $1.79 Million in Restitution to Victims

SPRINGFIELD, IL—U.S. District Judge Richard Mills today sentenced James U. Dodge, 72, of Springfield, Ill., to a term of 63 months (five years, three months) in federal prison for operating a Ponzi fraud scheme that defrauded more than 50 victims over a six-year period beginning in 2004. Following completion of the prison sentence, Dodge, of the 4800 block of Johanne Court, was ordered to remain under supervised release for a period of six years. Dodge was ordered to pay restitution in the amount of $1,797,328 to the victims. Dodge was allowed to self-report to begin serving his prison sentence on a date to be determined by to the federal Bureau of Prisons.

On Sept. 2, 2010, Dodge pled guilty to one count each of mail fraud and money laundering. According to court documents and statements during court appearances, from at least June 2004 through April 2010, Dodge defrauded more than 50 investors of $1,000,000 to $2,500,000. Dodge admitted that he made false statements and submitted fraudulent information to obtain money from individuals in the guise of ‘financial investments.’ Dodge represented to investors that he used an “algorithm” to trade on the stock market, a system that he represented guaranteed him at least a 6 percent return or profit per month. Dodge further represented that he would split this profit with investors and they would receive payments of 3 percent of their investment each month, for a total 36 percent return per year. Some investors opted to receive this ‘return’ monthly in the form of a check while others opted to roll over their investment ‘return.’

According to court documents, Dodge is a retired pharmaceutical sales representative and is not registered as a broker or as an investment advisor with the Illinois Secretary of State, Illinois Securities Department.

Agencies conducting the investigation include the Internal Revenue Service – Criminal Investigation; Illinois Securities Department, Illinois Secretary of State’s Office; the Federal Bureau of Investigation; and the U.S. Postal Inspection Service. The case was prosecuted by Assistant U.S. Attorney Patrick D. Hansen.

Press Releases | Springfield Home

NEWARK, NJ—A New Jersey real estate investor was sentenced today to 50 months in prison in connection with a mortgage fraud and property-flipping scheme involving rental properties in Paterson, N.J., U.S. Attorney Paul J. Fishman announced.

Frederick Ugwu, 54, of Upper Saddle River, N.J., was convicted in December 2009 after a five-week jury trial on counts of wire fraud, money laundering, and conspiracy to commit those offenses before U.S. District Judge Jose L. Linares. Judge Linares also imposed the sentence today in Newark federal court.

According to documents filed in this case and statements made in court:

Ugwu conspired with several others to sell two- and three-family rental properties to borrowers whose mortgage loans were obtained by fraud. Ugwu acquired distressed rental properties in Paterson cheaply, made basic or minimal repairs to them, and then sold them for several times more than he paid for them just weeks or months earlier. When selling these properties, he signed documents before and at the closings falsely representing that the borrowers had paid him tens of thousands in down payments and at the closings. In fact, the borrowers made no such payments. Ugwu also allowed hundreds of thousands of dollars in proceeds from some of the sales to go to his coconspirators while hiding many of those payments from the mortgage lenders.

In addition to the prison term, Judge Linares sentenced Ugwu to three years of supervised release and ordered him to pay $1,602,958.62 in restitution. Ugwu is also required to forfeit $1,753,212.06 in proceeds of the scheme, plus the contents of three different bank accounts that he used to deposit those proceeds.

Ugwu’s case is part of an ongoing investigation by the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG), the FBI, the U.S. Postal Inspection Service, and IRS-Criminal Investigation into fraudulent Federal Housing Administration-insured and conventional mortgage loans originated by various New Jersey mortgage companies. The investigation has resulted in more than a dozen guilty pleas from current or former New Jersey residents, including:

* Michael Eliasof, a former Paramus, N.J., real estate agent;
* Gerald Carti, a former loan officer and shareholder of U.S. Mortgage Corp.;
* Amer Mir, a former loan officer of United Home Mortgage Co.;
* Norman Barna, who, like Ugwu, sold numerous Paterson properties through the scheme;
* William Ottaviano, an appraiser;
* Renford Davis and Hopeton Bradley (now deceased), who jointly managed many of the Paterson properties involved in the scheme;
* Claribel Morrobel, a recruiter for the scheme; and
* Melanie Gebbia, the former legal assistant of William Colacino (now deceased), a former Garfield attorney and municipal court judge.

Mir was convicted at the 2009 trial for his role in the mortgage fraud scheme; his sentencing is scheduled for April 20, 2011. In addition, Judge Linares recently sentenced Corallo, Eliasof, Carti, and Ottaviano to 51 months, 40 months, 27 months, 15 months, and six months in prison, respectively, for their roles in the scheme, while Barna, Gebbia, and Morrobel each received probation.

U.S. Attorney Fishman credited special agents of HUD-OIG, under the direction of Special Agent in Charge Joseph W. Clarke for the Mid-Atlantic region; special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark; inspectors of the U.S. Postal Inspection Service, under the direction of Acting Postal Inspector In Charge Thomas E. Boyle; and special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, for the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorney Mark E. Coyne, Chief of the U.S. Attorney’s Office Appeals Division, and Assistant U.S. Attorney Matthew E. Beck of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

Defense counsel: Henry E. Klingeman, Esq., Newark, N.J.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that IGOR POTEROBA, a former investment banker in the Healthcare Group of UBS Securities LLC (“UBS”), was sentenced today to 22 months in prison for his participation in an insider trading scheme in which he passed material, non-public information regarding six mergers and acquisitions that certain UBS clients were contemplating to a co-conspirator, ALEXEI P. KOVAL, who then traded on this information, generating hundreds of thousands of dollars in illicit profits. POTEROBA, 37, was sentenced in Manhattan federal court by U.S. District Judge PAUL A. CROTTY.

Manhattan U.S. Attorney PREET BHARARA said: “The message of today’s sentence of Igor Poteroba should be crystal clear—this office, along with our law enforcement partners, will not abide corrupt insiders who use their privileged positions to steal their companies’ valuable secrets and cash in on them. Professionals who engage in insider trading will be punished to the full extent of the law.”

According to documents previously filed in Manhattan federal court:

Since 2006, POTEROBA served as an executive director at UBS where he obtained material, non-public information (the “UBS Inside Information”) regarding certain mergers and acquisitions involving the following six publicly traded health care companies: Guilford Pharmaceuticals, Inc., Molecular Devices Corporation, PharmaNet Development Group, Inc., Via Cell, Inc., Millennium Pharmaceuticals, Inc., and Indevus Pharmaceuticals, Inc. (collectively, the “Health Care Companies”). In violation of his duties of trust and confidence, he then disclosed the UBS Inside Information to KOVAL, who in turn disclosed the UBS Inside Information to another co-conspirator (“CC-1”).

As part of the scheme, POTEROBA typically tipped KOVAL by telephone in advance of a public announcement that one of the Health Care Companies was to be acquired. Shortly after receiving such a call, KOVAL and CC-1 purchased securities in the company. Following the public announcement of the acquisition, KOVAL and CC-1 quickly sold the securities they had purchased. KOVAL and CC-1 executed dozens of securities transactions based on UBS Inside Information provided by POTEROBA. POTEROBA then received a portion of the profits from KOVAL.

In addition to his prison term, Judge CROTTY sentenced POTEROBA, of Darien, Connecticut, to three years of supervised release and ordered him to forfeit $465,095.21, representing the amount of foreseeable proceeds obtained as a result of the securities fraud offenses. Judge CROTTY also ordered POTEROBA to pay a $25,000 fine and will determine the amount of restitution at a later date.

POTEROBA’s co-defendant, ALEXEI KOVAL, 37, of Chicago, Illinois and Pasadena, California, pled guilty to related charges on January 7, 2011, and is scheduled to be sentenced on May 24, 2011, at 4:00 p.m., before Judge CROTTY.

Mr. BHARARA praised the investigative work of the FBI. Mr. BHARARA also thanked the U.S. Securities and Exchange Commission for its assistance in the investigation.

This case was brought in coordination with President BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a co-chair of the Securities and Commodities Fraud Working Group. 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.

This case is being handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney MARISSA MOLÉ is in charge of the prosecution.

Failed Stockbridge Bank Allegedly Fleeced Before Being Seized By Feds

ATLANTA—An indictment unsealed today charges two former top officers of FirstCity Bank of Stockbridge, Georgia—MARK A. CONNER, 44, formerly of Canton, Georgia, and CLAYTON A. COE, 44, of McDonough, Georgia—with a variety of offenses, including conspiracy to commit bank fraud and bank fraud in connection with misconduct at FirstCity Bank in the years before the bank’s seizure by state and federal authorities on March 20, 2009. In addition to the conspiracy and bank fraud charges, the indictment charges CONNER with conducting a continuing financial crimes enterprise at the bank between February 2006 and February 2008, during which CONNER’s and his co-conspirators’ crimes allegedly generated over $5 million in unlawful gross proceeds.

A federal grand jury in Atlanta returned the sealed indictment against CONNER and COE on March 16, 2011. CONNER was arrested on the charges and taken into custody by federal agents at Miami International Airport yesterday morning, the two-year anniversary of FirstCity Bank’s failure, upon his arrival in Miami from the Turks and Caicos Islands in the West Indies. CONNER made his initial appearance today before a federal magistrate judge in Miami, who preliminarily ordered CONNER to be detained as a flight risk pending his transfer by Deputy U.S. Marshals from Miami to Atlanta for trial. A formal detention hearing will take place in Miami on Thursday, March 24, 2011, at 1:30 p.m. COE’s initial appearance on the indictment in the Northern District of Georgia has not yet been scheduled.

United States Attorney Sally Quillian Yates said, “The entire country has felt the deep economic impact of failed banks. At the heart of this indictment is an abuse of power by key insiders, who are charged with tricking their own colleagues into approving millions of dollars in commercial loans to fund the defendants’ own personal business activities, and to enrich themselves at the bank’s expense. Along the way, these defendants also allegedly defrauded state and federal bank regulators and examiners, and at least 10 other federally insured banks in Florida and Georgia that invested in the fraudulent multi-million-dollar loans.”

FDIC Inspector General Jon Rymer said, “The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General (OIG) is pleased to join the United States Attorney’s Office for the Northern District of Georgia and our law enforcement colleagues in announcing this indictment. We are particularly concerned when former senior bank officials, who have held positions of trust within their institutions, are alleged to have been involved in criminal activity. We will continue to aggressively pursue bank officials and others who victimize financial institutions.”

Neil Barofsky, SIGTARP Special Inspector General for the Troubled Asset Relief Program said, “Today’s indictment marks yet another occasion where bank executives are alleged to have turned to criminal fraud in the midst of the financial crisis, including an attempt to obtain millions of dollars from the American taxpayer through the Troubled Asset Relief Program. SIGTARP will continue to work with our law enforcement partners to bring those who engage in such crimes to justice.”

IRS-Criminal Investigation Special Agent in Charge Reginael McDaniel said of the case, “Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with other people’s money. Those individuals who engage in this type of financial fraud should know they will not go undetected and will be held accountable.”

According to United States Attorney Yates, the charges, and other information presented in court: CONNER served in a variety of top positions at FirstCity Bank between 2004 and 2009, including as vice-chairman of the board of directors, as a member of the banks’ loan committee, as president, and later as acting chairman and chief executive officer. COE served as a vice-president and as FirstCity Bank’s senior commercial loan officer. While serving in these positions, CONNER, COE, and their co-conspirators allegedly conspired to defraud FirstCity Bank’s loan committee and board of directors into approving multiple multi-million-dollar commercial loans to borrowers who, unbeknownst to FirstCity Bank, were actually purchasing property owned by CONNER or COE personally.

The indictment charges that CONNER, COE, and their co-conspirators misrepresented the essential nature, terms, and underlying purpose of the loans and falsified documents and information presented to the loan committee and the Board of Directors. CONNER, COE, and their co-conspirators then allegedly caused at least 10 other federally insured banks to invest in, or “participate in” the fraudulent loans based on these and other fraudulent misrepresentations, shifting all or part of the risk of default to the other banks. COE’s bonus compensation was tied to the origination of FirstCity Bank loans, including the fraudulent loans with which he and CONNER allegedly assisted each other.

In the process of defrauding FirstCity Bank and the “participating” banks, CONNER, COE, and their co-conspirators allegedly routinely misled federal and state bank regulators and examiners to conceal their unlawful scheme. They also unsuccessfully sought federal government assistance through the U.S. Treasury Department’s Troubled Asset Relief Program (“TARP”) and engaged in other misconduct in an attempt to avoid seizure by regulators and prevent the discovery of their fraud.

The charge against CONNER for conducting a continuing financial crimes enterprise carries a mandatory minimum sentence of 10 years in federal prison, a maximum sentence of life in prison, and a potential fine of up to $10 million. The conspiracy and bank fraud charges against CONNER and COE, and a remaining charge against COE for fraudulently influencing the actions of a federally insured bank, carry a maximum sentence of 30 years in prison and a potential fine of up to $1 million on each count. In determining the actual sentences for each defendant, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Members of the public are reminded that the indictment only contains charges. The defendant is presumed innocent of the charges and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.

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.

This case is being investigated by special agents of the FDIC, Office of Inspector General; the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), the Federal Bureau of Investigation, and Internal Revenue Service-Criminal Investigation.

Assistant United States Attorneys Douglas W. Gilfillan and David M. Chaiken are prosecuting the case.

For further information please contact Sally Q. Yates, United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

NORFOLK, VA—James C. Alberts, 45, of Point Pleasant, N.J., was sentenced in Norfolk federal court today to four and one-half years in prison for conspiring to commit bank fraud, and was ordered to pay over $1.7 million in restitution. Alberts previously pled guilty to the charge on December 6, 2010.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after Alberts was sentenced by United States District Judge Raymond A. Jackson.

According to court documents, Alberts was involved in a conspiracy to commit mortgage fraud on various properties located in the Cape Charles area of the Eastern Shore of Virginia. The court records indicate Alberts was a co-owner of Creative Property Development, a company involved in the purchase, development, and sale of real estate property in Northampton County, Virginia. Alberts sold real estate developed by Creative Property Developments to his fellow co-conspirators. To affect the sales, Alberts provided the co-conspirators with the necessary funds to make the down payments and qualify for mortgage loans, but did not disclose this arrangement on the mortgage loan applications. As a result of these sales, Creative Property Developments earned hundreds of thousands of dollars of profit on these properties. Because of his actions, Alberts’ co-conspirators fraudulently obtained mortgage loans valued in excess of $2.8 million.

This case was investigated by the Federal Bureau of Investigation, the United States Secret Service, and Virginia State Police. Assistant United States Attorneys Robert J. Seidel, Jr. and Joseph L. Kosky prosecuted the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

NEWARK, NJ—Federal agents arrested the alleged organizer of an international securities fraud ring employing hackers, botnet operators, and e-mail spam distributors today for conspiring to artificially inflate the value of stocks through the scheme, U.S. Attorney Paul J. Fishman announced.

Christopher Rad, 42, of Cedar Park, Texas, was arrested this afternoon by FBI special agents on a federal Indictment charging him with one count of conspiracy to commit securities fraud and transmit multiple commercial e-mail messages with fraudulent information. The defendant is scheduled for an initial appearance and bail hearing this afternoon before U.S. Magistrate Judge Robert L. Pitman in Austin, Texas federal court.

James Bragg, 42, of Chandler, Ariz., pleaded guilty on October 20, 2010, before U.S. District Judge Joel A. Pisano in Trenton, N.J., federal court for his role in hiring botnet operators and engaging in mass e-mail campaigns to pump up the value of stock prior to dumping shares.

According to the indictment unsealed today, other documents filed in this case, and statements made in Newark and Trenton federal court:

Rad conspired with stock promoters in a scheme to manipulate the price and volume of particular stocks, including stocks with ticker symbols RSUV and VSHE (the “Manipulated Stocks”), in order to later sell them at an artificially inflated price—a practice known as a “pump and dump” scheme. The scheme began as early as November 2007 and continued through February 2009. After conspiring with the stock promoters, Rad organized others to manipulate the stock price.

During his plea hearing, Bragg admitted that as part of his conspiracy with Rad he hired hackers and spammers, including an individual in Russia referred to in the information as “B.T.” The hackers distributed computer viruses to infect computers around the world and create a virtual army of computers, or “botnet.” The hackers then caused the botnets to distribute spam to promote the Manipulated Stocks. Some of the targeted victim-investors were residents of New Jersey.

In addition to relying on unsuspecting investors to buy into the spam promotions, the hackers also hacked into the brokerage accounts of third parties, liquidated the stocks in those accounts, and then used those accounts to purchase shares of the Manipulated Stocks. This created trading activity in the Manipulated Stocks and increased the volume of shares being traded, further creating an impression that the Manipulated Stocks were worth purchasing.

Rad also agreed with others to trade the Manipulated Stocks between themselves, creating the impression that the stocks were active. In some instances this was done prior to the spam campaigns so that recipients of the spam would perceive active trading in the promoted stocks.

A stock promoter who was also part of the conspiracy falsified documents submitted to attorneys in order to obtain opinion letters to secure millions of freely trading shares in those stocks. Those letters certified that trading restrictions on shares of the Manipulated Stocks could be lifted because certain conditions set forth in securities regulations were met.

The conspiracy count with which Rad was charged carries a maximum potential penalty of five years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigation leading to the charges. He also thanked the U.S. Securities and Exchange Commission’s Division of Enforcement.

The government is represented by Assistant U.S. Attorneys Christopher Kelly of the U.S. Attorney’s Office Economic Crimes Unit and Erez Liebermann, Deputy Chief of the Economic Crimes Unit and Chief of the Computer Hacking and Intellectual Property Section.

The charge and allegations contained in the indictment are merely accusations, and the defendant is considered innocent unless and until proven guilty.

This case was brought in coordination with 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.

Fraud Involved Roughly 600 Victims and More Than $50 Million

DALLAS—Jeffrey Charles Bruteyn, 40, of Dallas, was sentenced today by U.S. District Judge Barbara M. G. Lynn to 25 years in prison, following his conviction in April 2010 on nine counts of securities fraud, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Bruteyn is the former managing director of the now-defunct Dallas-based AmeriFirst Funding Corp. and AmeriFirst Acceptance Corp. (together “AmeriFirst”). Both companies have been under the control of a court-appointed receiver since the Securities and Exchange Commission brought an emergency action to halt the fraud in July 2007.

According to evidence presented at trial, Bruteyn orchestrated offerings of promissory notes called Secured Debt Obligations (“SDOs”) that raised more than $50 million from approximately 600 investors living in Texas and Florida, many of whom were retired and all of whom were looking for safe and secure investments. Bruteyn personally met with investors, and he also arranged for brokers to sell the securities. In connection with the sale of securities, Bruteyn misled, deceived, and defrauded investors by misrepresenting and by failing to disclose material facts concerning the safety of the securities. Among other things, Bruteyn falsely represented to investors that their investment was insured by Lloyd’s of London or Allianz, and that it was guaranteed by a commercial bank. Neither was true. Bruteyn also deceived investors about his own qualifications and trustworthiness, by claiming to hold an MBA from the prestigious Wharton School at the University of Pennsylvania, and claiming to hold securities licenses when in fact he had been barred from the brokerage business by the NASD.

One of those brokers who sold the SDOs, Vincent John Bazemore, Jr., 36, of Denton, Texas, was prosecuted in the Northern District of Texas, pleaded guilty in October 2007 to his role in the scheme, and is currently serving a 60-month federal prison sentence. Bazemore was also ordered to pay nearly $16 million in restitution.

In other related cases in the Northern District of Texas:

Gerald Kingston, of Dallas, pleaded guilty in December 2007 to one count of conspiracy to commit securities fraud, stemming from his role in helping Bruteyn to manipulate the stock price of Interfinancial Holdings Corporation (ticker: IFCH). Acting at the direction of Bruteyn, Kingston bought and sold hundreds of thousands of shares of IFCH and effected matched trades to create the false impression of widespread interest in the stock. Kingston admitted that he derived more than $1.6 million in proceeds from his fraudulent sales of IFCH in the course of the conspiracy.

Eric Hall, of Fort Myers, Florida, pleaded guilty in June 2008 to one count of securities fraud, based on his role in a scheme to defraud investors in an entity called Secured Capital Trust.

John Porter Priest, of Ocala, Florida, pleaded guilty in September 2010 to one count of securities fraud based on his role in the Secured Capital Trust scheme.

Dennis Woods Bowden, of Dallas, the former chief operations officer of AmeriFirst Funding Corp. and AmeriFirst Acceptance Corp. was indicted in May 2010 by a federal grand jury in Dallas on nine counts of securities fraud and six counts of mail fraud.

Sentencing dates have not yet been set for Kingston and Hall. Priest’s sentencing is set for April 4, 2011. Bowden’s trial date is set for June 6, 2011.

Securities fraud is a major focus 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.

U.S. Attorney Jacks praised the investigative work of the FBI, the Federal Deposit Insurance Corporation – Office of Inspector General, the Texas State Securities Board, and the SEC.

Assistant U.S. Attorneys Alan Buie and Christopher Stokes, and Special Assistant U.S. Attorney Stephanie Tourk are prosecuting.

Earlier today in federal court in Minneapolis, local auto-mogul Dennis Earl Hecker, age 58, of Medina, was sentenced to 120 months in prison for crimes committed in connection with his scheme to defraud financial lenders and others out of millions of dollars. United States District Court Judge Joan N. Ericksen specifically sentenced Hecker on one count of conspiracy to commit wire fraud and one count of bankruptcy fraud. He was originally indicted on February 10, 2010, and pleaded guilty on September 7, 2010. In addition, Hecker was ordered to pay more than $31 million in restitution. He will remain in custody.

In imposing the sentence, Judge Ericksen said, “The actions you’ve taken are not consistent with someone who can be trusted, and you have not been as truthful as you could have been in the court system. Therefore, you do not get a break. You’re going to get the full 10 years, which is appropriate and necessary. Behaving like a scoundrel is not tolerated in the court system.”

U.S. Attorney B. Todd Jones added, “We are very pleased with today’s sentence. It brings closure to a difficult investigation and prosecution. Although the victims in this case were primarily corporate entities and not individuals, and the losses resulting from the scheme were far less than what we have seen in other recent fraud cases, the severity of the sentence should serve notice that we will aggressively pursue those who lie, cheat, and steal and then seek refuge in the bankruptcy court.”

Following sentencing, Col. Mark Dunaski of the Minnesota State Patrol, which initiated the investigation into this matter, said, “The sentencing of Mr. Hecker marks the end of a long and complicated investigation involving several law enforcement agencies. Complaints from Minnesotans are what prompted the investigation, and we hope there is a sense of justice for the victims impacted by Mr. Hecker and his criminal associates.” The initial complaints were concerning tax, title, and licensing fees that Heckers’ dealerships failed to pay when people purchased vehicles, although those complaints quickly led to the fraud investigation that resulted in federal charges being filed against Hecker and several of his business associates.

For many years, Hecker owned and operated numerous Minnesota auto dealerships and businesses that provided fleet vehicles to car rental companies. Those businesses operated under different corporate names but, collectively, were known as the “Hecker organization.” In his plea agreement, Hecker admitted that from November of 2006 through June of 2009, he conspired with others to defraud Chrysler Financial Services and other commercial lenders from which he and the Hecker organization borrowed money for business operations.

In particular, in the fall of 2007, he conspired with Steve Leach and others to present fraudulent documents to Chrysler Financial in an effort to obtain $80 million in financing for the purchase of 5,000 vehicles from Hyundai Motor America. Among the documents submitted to Chrysler Financial was a letter from Hyundai Motor America that had been altered to benefit Hecker and the Hecker organization. The altered letter was transmitted via interstate wire transfer to Hecker himself, who then provided it to Chrysler Financial, knowing it was fraudulent.

Documents provided to Chrysler Financial also failed to specify the true nature and value of the collateral acquired by Hecker and the Hecker organization to secure the financing requested. Specifically, Hecker omitted details of the incentive payments he and the Hecker organization received from Hyundai Motor America, even though those payments totaled more than approximately $17.2 million and were material to the lender, Chrysler Financial. As a result of those false statements and misrepresentations, Chrysler Financial loaned Hecker and the Hecker organization more than $80 million and ultimately lost more than $10 million.

Ralph S. Boelter, Special Agent in Charge of the Federal Bureau of Investigation’s Minneapolis Field Office, which also worked on the investigation of this case, said, “The FBI works diligently to investigate individuals and businesses that are not truthful with the representations they make to financial institutions. Fraudulent representations are taken seriously by the FBI because the damage that type of criminal activity causes. As in this case, it negatively impacts those individuals and businesses that legitimately seek financing.”

According to Hecker’s plea agreement, he also misled Chrysler Financial into financing Suzuki vehicles. Again, Hecker failed to inform the lender that the Hecker organization had received significant incentives from American Suzuki Motor Corporation. This particular fraudulent conduct was accomplished by removing material portions of Suzuki purchase contracts before providing them to Chrysler Financial.

When Chrysler Financial learned about the missing contract addendums, it insisted on receiving the incentive money. Hecker agreed to turn it over but, instead, continued the fraud scheme by providing the altered Suzuki contract to other lenders, including U.S. Bank, in an effort to obtain financing from them. As a result of those actions, the other lenders suffered a collective financial loss of more than $10 million.

Speaking of the efforts of the IRS agents on worked on this case, Kelly R. Jackson, Special Agent in Charge of the IRS Criminal Investigation Division, St. Paul Field Office, said, “High-ranking corporate officials hold positions of trust not only in their companies but also in the eyes of the public. That trust is broken when such officials abuse their power and commit crimes. With both law enforcement and financial investigation expertise, our agents are uniquely qualified to work with state and federal law enforcement agencies on these types of cases by ‘following the money.’ And we are very pleased with the successful resolution of this investigation due to the cooperative efforts of our law enforcement partners at the FBI and the Minnesota State Patrol.”

The purpose of this fraud scheme, at least in part, was to fund Hecker’s extravagant lifestyle. In an effort to maintain that fraud, Hecker carried out a cover-up and engaged in communications meant to lull creditors. Moreover, in an effort to avoid paying his debts, Hecker filed personal bankruptcy in June of 2009, seeking to discharge, among other amounts owed, the $10 million debt to Chrysler Financial.

After filing bankruptcy, however, Hecker admittedly concealed assets from the bankruptcy trustee. For example, he transferred $33,057 into someone else’s bank account, over which he exercised control. He also transferred approximately $80,000 to that same individual, arranging for that individual to deposit the money, with instructions to return it to him later.

“Criminal bankruptcy fraud threatens the integrity of the bankruptcy system as well as public confidence in that system,” said Habbo G. Fokkena, U.S. Trustee for Minnesota, Iowa, North Dakota, and South Dakota (Region 12). The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. Fokkena added, “We deeply appreciate U.S. Attorney B. Todd Jones’s strong commitment to combating fraud and abuse in the bankruptcy system, as demonstrated by this successful prosecution.”

Hecker co-defendants Steven Joseph Leach and James Carl Gustafson were recently sentenced, but Christi Rowan’s sentencing date has not yet been scheduled.

This case was the result of an investigation by the Minnesota State Patrol, the Internal Revenue Service-Criminal Investigation Division, and the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorneys Nicole A. Engisch, Nancy E. Brasel, and David M. Genrich.

A one-count information was filed charging Jonathon M. Tepper, age 21, of Youngstown, Ohio, with wire fraud, Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, announced today.

The information charges that from on or about June 23, 2007, through on or about January 4, 2009, Jonathon M. Tepper devised a scheme to defraud and obtain money and property by false means.

“This defendant is accused of running a scheme that defrauded a company out of $235,000,” Dettelbach said. “This is fraud on a major scale.”

Tepper called Asurion, Inc., a company that provides replacement cellular telephones to people who buy insurance through their cellular telephone service provider. In so doing, Tepper posed as a legitimate subscriber to cellular service and fraudulently claimed that a phone had been lost or stolen. Tepper then requested a replacement phone from Asurion. Based upon Tepper’s fraudulent representations, Asurion sent hundreds of phones, worth approximately $235,220.69, from a facility in Smyrna, Tennessee, to addresses located within the Northern District of Ohio.

Once he obtained the phones, Tepper used the Internet to sell the telephones obtained from Asurion. Specifically, Tepper used eBay, an Internet-based public auction site. He posted pictures and descriptions of the telephones he had for sale that were transmitted by wire through interstate commerce. At no time did Tepper represent that these telephones had been obtained through fraudulent means.

When a person decided to buy one of these telephones, they transmitted a payment by wire to PayPal, an Internet-based account managing service located in the state of California. PayPal then transmitted the funds by wire from computer servers located outside of the State of Ohio to bank accounts maintained in the Northern District of Ohio that were owned by Tepper. Tepper obtained approximately $235,220.69.

If convicted, the defendant’s sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense, and the characteristics of the violations. In all cases, the sentences will not exceed the statutory maximum and, in most cases, it will be less than the maximum.

The investigation preceding the indictment was conducted by the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorney David M. Toepfer.

An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

WASHINGTON—Terry Davis, 43, the former elected National Treasurer of Phi Beta Sigma, an international fraternal organization headquartered in Washington, D.C., has been sentenced to time served of 31 months in prison for committing bank fraud stemming from his theft of more than $50,000 from the fraternity’s bank accounts, announced U.S. Attorney Ronald C. Machen Jr. and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.

Davis, formerly of Memphis, Tenn. and Herndon, Va., was sentenced on March 14, 2011 in the U.S. District Court for the District of Columbia by the Honorable Reggie B. Walton. In addition to the sentence of 31 months, Judge Walton ordered that the defendant pay restitution of $50,000 to Phi Beta Sigma and be placed on five years of supervised release. The parties had agreed upon the period of incarceration and restitution amount as part of the plea agreement, which Judge Walton accepted as part of the sentence.

A federal jury sitting in the District of Columbia had convicted Davis of bank fraud and other charges on May 3, 2007. The District of Columbia Circuit Court of Appeals reversed those convictions on February 26, 2010. Davis had been imprisoned as part of the earlier convictions from May 3, 2007 through December 5, 2009.

On November 30, 2010, Davis pled guilty to a one-count Information charging bank fraud. As part of an agreed statement of offense filed in connection with the plea agreement, Davis admitted that between January 2001 and June 2003, while he was the elected, National Treasurer of Phi Beta Sigma, he stole money from the fraternity’s bank accounts by writing checks to cash, which he would then negotiate by means of his personal bank account. In order to circumvent the requirement of a second signature of another fraternity officer on the checks, Davis presented checks containing the forged signature of the fraternity’s National President or simply negotiated the checks without the required second signature.

As part of the scheme to defraud, Davis admitted that he falsely represented on the memo line of some of the checks and to responsible officials at the fraternity that the checks to cash were written to fund legitimate fraternity activities, whereas, as Davis well knew, the checks were used for his own personal benefit. Davis admitted that he used at least $50,000 of the proceeds obtained through the scheme for his personal benefit.

In announcing the sentence, U.S. Attorney Machen and Assistant Director McJunkin praised the investigative efforts of agents of the FBI’s Washington Field Office. They also commended those who worked on the case from the U.S. Attorney’s Office, including Paralegal Specialist Tasha Harris, Legal Assistant Jared Forney, and Assistant U.S. Attorneys Vasu B. Muthyala and Michael K. Atkinson, who prosecuted the case.