WASHINGTON—Lee Bentley Farkas, the former chairman of a private mortgage lending company, Taylor, Bean & Whitaker (TBW), was convicted today for his role in a more than $2.9 billion fraud scheme that contributed to the failures of Colonial Bank, one of the 25 largest banks in the United States in 2009, and TBW, one of the largest privately held mortgage lending companies in the United States in 2009.

The conviction 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; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Acting 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 Criminal Investigation (IRS-CI).

After a 10-day trial, a federal jury in the Eastern District of Virginia found Farkas guilty of one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; four counts of wire fraud; and three counts of securities fraud. At sentencing, scheduled for July 1, 2011, Farkas faces a maximum prison term of 30 years for the conspiracy charge and for each count of bank fraud, 20 years for each count of wire fraud related to TARP, 30 years for each count of wire fraud affecting a financial institution and 25 years for each securities fraud count. Farkas was remanded into custody.

According to court documents and evidence presented at trial, Farkas and his co-conspirators engaged in a scheme that misappropriated more than $1.4 billion from Colonial Bank’s Mortgage Warehouse Lending Division in Orlando, Fla., and approximately $1.5 billion from Ocala Funding, a mortgage lending facility controlled by TBW. Farkas and his co-conspirators misappropriated this money to, among other things, cover TBW’s operating expenses. The fraud scheme contributed to the failures of Colonial Bank and TBW.

Six individuals have pleaded guilty for their roles in the fraud scheme, including: Paul Allen, former chief executive officer of TBW; Raymond Bowman, former president of TBW; Desiree Brown, former treasurer of TBW; Catherine Kissick, former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD); Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD; and Sean Ragland, a former senior financial analyst at TBW.

“Lee Farkas, the former chairman of TBW, masterminded one of the largest bank fraud schemes in history,” said Assistant Attorney General Breuer. “His shockingly brazen scheme poured fuel on the fire of the financial crisis. It not only led to the downfall of TBW, one of the largest private mortgage lending companies in the United States, but also contributed to the failure of one of the country’s largest commercial banks. Mr. Farkas may have thought he could steal nearly $3 billion from investors and taxpayers and sail into the sunset. But now a jury has told him otherwise, and he must face the severe consequences.”

“Today a jury convicted Lee Farkas of orchestrating one of the longest and largest bank fraud schemes in the country,” said U.S. Attorney Neil H. MacBride. “In 2008, Lee Farkas boasted that he ‘could rob a bank with a pencil.’ And he did just that. His staggering greed led him to steal nearly $3 billion from Colonial Bank and other investors. Farkas’s mammoth fraud contributed to the toppling of a financial institution and the ripple effects were felt from Wall Street to Main Street. Now he’s being held responsible for the financial ruin he left in his wake.”

“This investigation required thousands of hours of work by investigators, forensic accountants and analysts to sort through complex mortgage and lending documents,” said Assistant Director in Charge McJunkin. “I’d like to thank the many other agencies who worked with FBI personnel to build a strong investigative team; a team still out there working today to protect federal funds and innocent victims.”

“Today’s verdict ensures that Farkas will pay for his crime—an unprecedented scheme to defraud regulators during the height of the financial crisis and to steal over $550 million from the American taxpayers through TARP,” said Acting Special Inspector General Romero for SIGTARP. “SIGTARP and its partners in the Financial Fraud Enforcement Task Force stopped the scheme dead in its tracks and will continue to bring to justice those criminals who seek to profit by exploiting TARP through fraud.”

According to court documents and evidence presented at trial, the fraud scheme began in 2002, when Farkas and his co-conspirators ran overdrafts in TBW bank accounts at Colonial Bank in order to cover TBW’s cash shortfalls. Farkas and his co-conspirators at TBW and Colonial Bank transferred money between accounts at Colonial Bank to hide the overdrafts. Evidence presented at trial showed that after the overdrafts grew to more than $100 million, Farkas and his co-conspirators covered up the overdrafts and operating losses by causing Colonial Bank to purchase from TBW over time more than $1.5 billion in what amounted to worthless mortgage loan assets, including loans that TBW had already sold to other investors and fake pools of loans supposedly being formed into mortgage-backed securities. Farkas and his co-conspirators caused Colonial Bank to report these assets on its books at face value when in fact the mortgage loan assets were worthless. By August 2009, approximately $500 million in fake pools of loans remained on Colonial Bank’s books.

According to court documents and evidence presented at trial, Farkas and his co-conspirators at TBW also misappropriated more than $1.5 billion from Ocala Funding. Ocala Funding sold asset-backed commercial paper to financial institution investors, including Deutsche Bank and BNP Paribas Bank. Ocala Funding, in turn, was required to maintain collateral in the form of cash and/or mortgage loans at least equal to the value of outstanding commercial paper.

Evidence presented at trial established that Farkas and his co-conspirators diverted cash from Ocala Funding to TBW to cover its operating losses, and as a result, created significant deficits in the amount of collateral Ocala Funding possessed to back the outstanding commercial paper. To cover up the diversions, the conspirators sent false information to Deutsche Bank, BNP Paribas Bank and other financial institution investors and led them to falsely believe that they had sufficient collateral backing the commercial paper they had purchased. When TBW failed in August 2009, the banks were unable to redeem their commercial paper for full value. Farkas and his co-conspirators also caused approximately $900 million in loans to be held on Colonial Bank’s books when in fact the loans had already been sold to Freddie Mac and other investors.

According to court documents and evidence at trial, in the fall of 2008, Colonial Bank’s holding company, Colonial BancGroup Inc., applied for $570 million in taxpayer funding through the Capital Purchase Program (CPP), a sub-program of the U.S. Treasury Department’s Troubled Asset Relief Program (TARP). In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loans and securities held by Colonial Bank as a result of the fraudulent scheme perpetrated by Farkas and his co-conspirators. Colonial BancGroup’s TARP application was conditionally approved for $553 million contingent on the bank raising $300 million in private capital.

Evidence at trial established that Farkas and his co-conspirators falsely informed Colonial BancGroup that they had identified sufficient investors to satisfy the TARP capital contingency. Farkas and his TBW co-conspirators diverted $25 million from Ocala Funding into an escrow account and falsely represented that the money was on behalf of capital raise investors. Farkas and his TBW co-conspirators caused Colonial BancGroup to issue a false and misleading financial statement to the Securities and Exchange Commission (SEC) and press release announcing the success of the capital raise. Ultimately, Colonial BancGroup did not receive any TARP funds.

Evidence at trial also established that Farkas and his co-conspirators caused Colonial BancGroup to file materially false financial data with the SEC regarding its assets in annual reports contained in Forms 10-K and quarterly filings contained in Forms 10-Q. Colonial BancGroup’s materially false financial data included overstated assets for mortgage loans that had little to no value that Farkas and his co-conspirators caused Colonial Bank to purchase. Farkas and his co-conspirators also caused TBW to submit materially false financial data to the Government National Mortgage Association (Ginnie Mae) in order to extend TBW’s authority to issue Ginnie Mae mortgage-backed securities.

According to court documents and evidence presented at trial, Farkas also personally misappropriated more than $20 million from TBW and Colonial Bank to finance his lifestyle, including purchasing multiple homes, scores of cars, a jet and sea plane, and restaurants and bars.

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.

“The successful prosecution of Farkas and his associates highlights the commitment and combined efforts of DOJ and federal law enforcement to hold those responsible from all levels of a mortgage company,” said Acting Inspector General Stephens for HUD-OIG. “Efforts to protect FHA and Ginnie Mae are strengthened by this verdict.”

“Today’s verdict confirms that the former chairman of one of the leading mortgage lending firms in the Southeast engaged in criminal conduct during the mid-2000s,” said Inspector General Rymer of FDIC-OIG. “We are proud to work with our partners at the Justice Department’s Criminal Division and in the U.S. Attorney’s Office for the Eastern District of Virginia to bring to justice individuals whose fraud contributed significantly to the financial crisis and the failure of a major financial institution.”

“This conviction represents a victory for Freddie Mac and American taxpayers, who have invested $64.2 billion in Freddie Mac to date,” said Inspector General Linick of the FHFA-OIG. “ The fraud that Farkas perpetrated on Freddie Mac directly affected its bottom line and, in turn, American taxpayers. FHFA-OIG looks forward to future cooperative efforts with law enforcement partners to combat fraud against Freddie Mac, Fannie Mae, and the Federal Home Loan Banks.”

The case was 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 the FBI’s Washington Field Office, SIGTARP, 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. The Department of Justice would like to thank the SEC for their assistance.

This conviction is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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. For more information about the task force visit: www.stopfraud.gov.

LAS VEGAS—A Las Vegas woman who pleaded guilty to submitting six fraudulent mortgage loan applications during 2004 to 2005, was sentenced today to 27 months in prison, five years of supervised release, and was ordered to pay approximately $1 million in restitution to five federally insured financial institutions, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Gail Bilyeu, 54, was sentenced by U.S. District Judge Kent J. Dawson. Bilyeu pleaded guilty in June 2010 to one count of conspiracy to commit wire fraud and six counts of wire fraud. She was indicted in November 2009 along with co-defendant Malcolm Childress, who also pleaded guilty to conspiracy to commit wire fraud and was sentenced on September 29, 2010, to 15 months in prison, five years of supervised release, and was ordered to pay $964,250 in restitution and to forfeit $2.6 million to the government.

From about October 2004 to December 2005, Bilyeu and Childress participated in a conspiracy to submit fraudulent mortgage loan applications to financial institutions. Bilyeu recruited and paid straw buyers to purchase homes in Las Vegas. These straw buyers did not intend to occupy the homes. Bilyeu caused false information to be included on the straw buyers’ loan applications, so the straw buyers would qualify for loans for which they would not otherwise qualify. Bilyeu also caused the loan applications to be forwarded to the financial institutions for funding of the mortgages. In total, six mortgage loan applications were sent to financial institutions by Bilyeu and Childress. The loans totaled about $2.6 million, and were used to purchase six homes at the following addresses: 8163 Retriever Avenue; 8912 Martin Downs Place; 8829 Lauderhill Street; and 5487 Apron Court, in Las Vegas; and 2287 Keego Harbor Street and 3120 Kookaburra Way, in Henderson, Nevada.

The cases were investigated by the FBI and prosecuted by Assistant United States Attorney Brian Pugh.

Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

LAS VEGAS—A man who owned and operated numerous now-defunct Nevada investment companies, and two of his former employees, were indicted by the federal grand jury today on mortgage fraud charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Brett Depue, 36, a former resident of Las Vegas, but currently a resident of Gilbert, Arizona, Brian Barney, 36, of Fairfield, California, and Maria Ornelas, 32, of Las Vegas, are charged with conspiracy to commit bank fraud, mail fraud, and wire fraud, 11 counts of wire fraud, and criminal forfeiture.

Warrants have been issued for the arrests of Depue and Barney. Ornelas was summoned, and is scheduled for an initial appearance before a United States Magistrate Judge in Las Vegas on Friday, March 26, 2010, at 8:30 a.m.

The Indictment alleges that from about February 1, 2005, to May 31, 2007, in Nevada and elsewhere, the defendants participated in a mortgage fraud conspiracy in which they used “third party disbursements” and “double escrow” methods to fraudulently obtain monies from the financial institutions. A third party disbursement is the issuance of money at the closing of a mortgage loan to a person or entity that is not typically entitled to the money. A double escrow is where two sales of the same property are conducted at the same time. Typically, the property is sold to a middleman, who then sells the property to a straw buyer at a substantially inflated price. The difference between the first sale price and second price is distributed to a conspirator as seller proceeds. The paperwork on the second sale is concealed from the seller, and the paperwork on the first sale is concealed from the lender.

Brett Depue operated a number of Nevada businesses including, ABS Investments Group, LLC, Liberty Group Investments, LLC, and a number of other companies registered with the Nevada Secretary of State. Depue employed Brian Barney, Maria Ornelas, and a number of others who allegedly assisted in the mortgage fraud conspiracy. The defendants recruited home owners in the Las Vegas area and elsewhere who agreed to sell their property at a price substantially above the asking price. The home owners were told that the difference would go to Depue for improvements. The defendants then recruited straw buyers to apply for mortgage loans to purchase the homes using false and fraudulent information concerning the straw buyers’ income, assets, employment, and intent to occupy the homes. In some instances, the defendants had the straw buyers apply for mortgages for more than one house at a time and concealed from the lenders that they were purchasing more than one property.

The Indictment specifically discusses 17 homes in Las Vegas and Henderson which were purchased fraudulently between April 2005 and April 2007 at the direction of and for the benefit of the defendants.

If convicted, the defendants face up to 30 years in prison and a $1,000,000 fine on each count, and may be required to forfeit up to $8.5 million in properties or proceeds from the crimes.

This investigation is being led by the FBI, IRS Criminal Investigation, and other agencies of the Southern Nevada Mortgage Fraud Task Force, including the U.S. Postal Inspection Service, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Secret Service, the Las Vegas Metropolitan Police Department, the Nevada Attorney General’s Office, and Office of the Inspector General for the Social Security Administration. The case is being prosecuted by Assistant United States Attorney Brian Pugh.

Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

This law enforcement action is sponsored by 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.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

MADISON, WI—John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that David R. Scholfield, 84, of Wausau, Wis., pleaded guilty today in U.S. District Court in Madison to one count of conspiracy to commit bank fraud.

U.S. District Judge William M. Conley scheduled sentencing for June 14, 2011 at 1:00 p.m. Scholfield faces a maximum penalty of five years in prison, a $250,000 fine, and the entry of an appropriate restitution order.

At the plea hearing, Scholfield admitted that he submitted forged insurance premium financing notes to River Valley Bank, Wausau. In addition, in the plea agreement, Scholfield agreed that the court could consider the embezzlement of credits due Manson Insurance Agency customers and the providing of fraudulent loan notes to Acqua Finance, Wausau, as part of the criminal pattern of conduct.

The charge against Scholfield was the result of an investigation conducted by the Wausau office of the Federal Bureau of Investigation. The prosecution of the case has been handled by Assistant U.S. Attorney Grant C. Johnson.

RICHMOND, VA—Jodi D. Robinson, age 38, a Richmond realtor and owner of Citicorp Investments, a Virginia LLC, pled guilty today to a five-year mortgage loan fraud, in violation of Title 18, United States Code, Section 1341. Robinson is facing a sentence of 30 years in prison and a fine of $1 million dollars when she is sentenced by Chief United States District Judge James R. Spencer on July 31, 2011. Neil J. MacBride, United States Attorney for the Eastern District of Virginia; Kenneth R. Taylor, Special Agent in Charge of HUD’s Office of Inspector General; Keith Fixel, the Inspector in Charge of the Postal Inspection Service; and Michael Morehart, Special Agent in Charge of the FBI, announced today’s guilty plea.

Robinson admitted to obtaining 16 different fraudulent real estate loans in amounts totaling $2.4 million in a four-part scheme that defrauded Washington Mutual Bank; Sun Trust Bank; the Federal National Mortgage Association, known as Fannie Mae; the Federal Home Loan Mortgage Corporation, known as Freddie Mac; and the U.S. Department of Housing and Urban Development’s (HUD) Section 8 Rental Voucher program for needy individuals. The total loan losses were approximately $1.2 million. The total losses to HUD were approximately $105,000. Robinson is facing 30 years in prison and $1million in fines.

There were four overlapping parts of the scheme. First, on real estate transactions where Robinson was simply the real estate agent, she and her accomplices would misrepresent the creditworthiness of the borrowers in a wide variety of ways. A frequent misrepresentation on the loan applications related to the borrowers’ employment status and involved the overstatement of the monthly employment income.

The second part of the scheme related to real estate transactions in which Robinson was not merely an agent, but was buying and selling properties that she rented out. On these, she secretly used nominees or straw parties to purchase the rental properties using mortgage loans.

The mortgage loan applications were thus fraudulent in that they did not disclose (i) Robinson as the real party in interest, (ii) Robinson’s true creditworthiness, especially in concealing all the other loans for which she was secretly liable on other nominee transactions, and (iii) the fact that the properties were not owner-occupied. In addition, the financial information on the nominee borrowers was falsified to fraudulently enhance the buyers’ creditworthiness, in the same way as in the selling agent realty transactions.

A third part of the scheme was a fraud on the U.S. Department of Housing and Urban Development’s (HUD) Section 8 Rental Voucher program for needy individuals. After the nominee purchases were completed, Robinson, the nominee, maintained the ownership interest, paying the mortgage and managing the property. With many of the properties, Robinson applied with HUD to have herself and her properties qualified to participate in HUD’s subsidized rental program, making her eligible to receive tenant referrals and direct rental payments from HUD. In this process, Robinson induced HUD to transmit the rental subsidy directly to her. She then used to the money to make the monthly mortgage payments to the banks.

The fourth part of the scheme also related to the rental properties. To make more money on these properties, Robinson would “sell” the properties at a higher price to another nominee/straw party, who would fraudulently obtain another mortgage loan in the same way previously described. Robinson thereby obtained access to the proceeds of the new loan. Thus, as part of the sham sale, Robinson would take the proceeds of the new mortgage loan, payoff the existing mortgage loan (which was less than the new loan), pay the transactional expenses, and then convert the remainder of the money to herself.

The case was investigated by HUD’s Office of the Inspector General, the United States Postal Inspection Service, and the FBI, Richmond Division. Assistant United States Attorney David T. Maguire is prosecuting the case for 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.

OKLAHOMA CITY—A jury has found DERRICK REUBEN SMITH, 46, of Midwest City, guilty of conspiracy to commit wire fraud in connection with mortgage loans, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma. The jury returned its verdict late yesterday after four days of trial.

According to an indictment returned in July of 2010, Smith recruited two individuals to buy two new homes in the Raintree Acres Addition in Edmond in mid-2006 and early 2007. The homes sold for $425,000 and $435,000. The evidence at trial showed that the builder of both homes—Dodson Custom Homes, LLC—agreed that T&T Realty, a real estate brokerage operated by Trina Tahir, would receive large commissions and bonuses totaling $51,950 and $77,950. After the closings, T&T Realty wrote checks to Michael Gipson, an agent at T&T Realty, for $27,059.86 and $58,000. Gipson then wrote checks in those same amounts to “MP Service,” a business that Smith operated. In short, Smith induced lenders to fund mortgages based on inflated real estate prices and misrepresented the distribution of excessive loan proceeds to himself as commissions and bonuses paid to T&T Realty. The houses ultimately went into foreclosure. Each sold for over $100,000 less than the inflated loans that Smith had the buyers receive.

The evidence showed that on one of the houses, Smith and Dodson Custom Homes agreed to a $21,250 seller-carry second mortgage that was released without any payments shortly after closing. The jury also heard that for the downpayment on one of the houses, Smith borrowed $28,042.42 from an acquaintance and paid the loan back immediately after closing, even though he knew that the loan application stated that none of the downpayment would be borrowed. And the evidence included altered bank statements that Smith had submitted to a lender to support income figures for one of the loan applications.

At sentencing, Smith faces a maximum punishment of 20 years in prison and a fine of $250,000. He will also owe restitution to victim lenders and be subject to forfeiture.

Two co-defendants entered guilty pleas before trial. On April 6, 2011, Trina Tahir pled guilty to money laundering in connection with a property that Gipson purchased in May of 2006. She admitted that she provided Gipson with downpayment assistance through an intermediary company and received the money back right after the closing. The transaction involved money laundering because, as Tahir acknowledged during her plea hearing, it concealed the downpayment assistance and allowed Gipson to present the downpayment at closing as if it were his own money. Tahir faces a maximum punishment of 20 years in prison and a fine of $500,000, in addition to restitution and forfeiture.

On March 30, 2011, Gipson pled guilty to conspiracy and money laundering. Both charges related to the Raintree Acres properties that were at issue in Smith’s trial. Gipson also faces a maximum punishment of 20 years in prison and a fine of $500,000, in addition to restitution and forfeiture.

Sentencings will take place in 90-120 days.

These convictions are the result of an investigation conducted by the Criminal Investigation Division of the Internal Revenue Service and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorneys Scott E. Williams and Chris M. Stephens.

Reference is made to public filings for further information.

Earlier today in Minneapolis, a federal indictment was unsealed charging a 62-year-old Minneapolis man in connection with orchestrating four different investment scams that lured investors into investing millions of dollars in ventures that were never finished. The indictment, which was filed on April 12, 2011, charges Michael Joseph Krzyzaniak with 14 counts of mail fraud, six counts of wire fraud, three counts of money laundering, three counts of income tax evasion, and four counts of failure to file income taxes. The indictment was unsealed following Krzyzaniak’s initial appearance in federal court.

The indictment alleges that from 2003 through January of 2011, Krzyzaniak, also known as Michael Joseph Crosby, conducted a scheme to defraud individuals in Minnesota and elsewhere by convincing them to invest money in prospective business projects, which, in fact, turned out to be fraudulent. In total, investors provided Krzyzaniak with more than $20 million for investment.

Krzyzaniak allegedly contacted potential investors and induced them to contribute funds by making false statements about purported investment opportunities. The business projects he claimed to be developing included Internet terminals at airports; golf courses in various states; a golf club resort in Desert Hot Springs, California;, alternative energy projects in Hartsel Springs, Colorado; and a NASCAR-type race track in Elko, Minnesota.

Krzyzaniak allegedly told investors their money would be invested in a particular project, and that they could expect a substantial investment return. He then indicated that each project was proceeding toward a successful conclusion, having secured appropriate approval from the government, regulatory agencies, and others. In addition, Krzyazniak told investors he had various financing sources available, if needed, and also had a number of celebrity endorsements.

All of those representations were false. Moreover, he failed to disclose that he had been previously convicted of a federal felony involving investment fraud.

Krzyzaniak allegedly spent large portions of the funds provided him to pay for personal expenses, fund his lavish lifestyle, and distribute lulling payments. In some instances, Krzyzaniak reportedly invested funds, but only as an effort to prevent the fraud from being discovered.

If convicted, Krzyzaniak faces a potential maximum penalty of 20 years in prison on each mail and wire fraud count, 10 years on each money laundering count, five years on each tax evasion count, and one year on each failure to file count. All sentences will be determined by a federal district court judge.

This case is the result of an investigation by the Federal Bureau of Investigation, the United States Postal Inspection Service and the Internal Revenue Service-Criminal Investigation Division. It is being prosecuted by Assistant U.S. Attorney Christian S. Wilton.

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It 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, 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.

NEWARK, NJ—A Union City, New Jersey real estate investor and property manager was sentenced today to 24 months in prison for conspiring to launder money in order to make contributions to public officials in Union City in exchange for favors, U.S. Attorney Paul J. Fishman announced.

Itzhak Friedlander, 43, previously pleaded guilty before U.S. District Judge Jose L. Linares to an information charging him with one count of conspiracy to launder money to conceal and disguise unlawful activity. Judge Linares also imposed the sentence today in Newark federal court.

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

Friedlander admitted that from June 2007 to August 2008, he conspired with government cooperating witness Solomon Dwek and co-conspirators Michael Altman and Shimon Haber to launder money from Dwek through Friedlander’s account at a purported charitable entity called Gmach Shefa Chaim. Dwek said the funds were proceeds of unlawful activities—namely, bank fraud, trafficking in counterfeit goods, and concealment of property from a federal bankruptcy court and trustee. The conspirators planned to funnel the money through Gmach Shefa Chaim to public officials in Union City in exchange for approvals to develop a Union City property. Friedlander admitted that the value of funds that he conspired to launder was approximately $175,000.

In addition to the prison term, Judge Linares sentenced Friedlander to two years of supervised release.

Altman was sentenced on March 31, 2011, to 41 months in prison, and Haber was sentenced on May 25, 2010, to five months in prison and five months of home confinement for their respective roles in the conspiracy.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and IRS – Criminal Investigation, under the direction of Victor W. Lessoff, with the investigation that led to today’s sentence.

The government is represented by Assistant U.S. Attorney Dustin Chao of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

Defense counsel: Stacy Ann Biancamano, Esq; Timothy M. Donohue, Esq., West Orange, N.J.

PITTSBURGH—A resident of New Kensington, Pennsylvania has been indicted by a federal grand jury in Pittsburgh on charges of wire fraud, aggravated identity theft, filing a false tax return, and failing to file income tax returns, United States Attorney David J. Hickton announced today.

The 17-count superseding indictment named Lisa Gerideau-Williams, 44.

According to the superseding indictment presented to the court, Gerideau-Williams was an attorney who operated a mortgage brokerage company called Genesis Home Solutions and two closing companies, Millennium Settlement Services and Professional Settlement Solutions. The superseding indictment alleges that Gerideau-Williams, using these three companies, devised and executed a mortgage fraud scheme that involved the following: submission of loan applications without the authorization of the borrowers; submission of fraudulent loan applications that overstated the borrowers’ incomes and assets; the preparation of fraudulent closing documents that falsely represented that she has paid liabilities associated with the collateral; the diversion of funds that were supposed to pay liabilities associated with the collateral to her own personal use; the issuance of title insurance policies when she was not authorized by the title company to issue those title insurance policies; and the failure to record mortgages and provide other services to secure the lenders’ interest in the properties serving as collateral for the loans. In addition, the superseding indictment alleges that the Gerideau-Williams filed a false tax return for the 2004 calendar year, and that she failed to file income tax returns for the 2005 and 2006 calendar years.

The law provides for a maximum total sentence of 302 years in prison, a fine of $3,950,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed would be based upon the seriousness of the offenses and the prior criminal history, if any, of the defendant.

Assistant United States Attorney Brendan T. Conway is prosecuting this case on behalf of the government.

The Mortgage Fraud Task Force conducted the investigation leading to the indictment in this case. The Mortgage Fraud Task Force is comprised of investigators from federal, state, and local law enforcement agencies and others involved in the mortgage industry. Federal law enforcement agencies participating in the Mortgage Task Force include the Federal Bureau of Investigation; the Internal Revenue Service – Criminal Investigation; the United States Department of Housing and Urban Development, Office of Inspector General; the United States Postal Inspection Service; and the United States Secret Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff’s Office; the Pennsylvania Attorney General’s Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee’s Office.

Mortgage industry members with knowledge of fraudulent activity are encouraged to call the Mortgage Fraud Task Force at (412) 894-7550. Consumers are encouraged to report suspected mortgage fraud by calling the Pennsylvania Attorney General’s Consumer Protection Hotline at (800) 441-2555.

An indictment or information is an accusation. A defendant is presumed innocent unless and until proven guilty.

More Than $3.2 Million Stolen From Lenders; Total of 13 Defendants Now Guilty

David B. Fein, United States Attorney for the District of Connecticut; Kimberly K. Mertz, Special Agent in Charge of the Federal Bureau of Investigation; and Michael P. Stephens, Acting Inspector General, U.S. Department of Housing and Urban Development, Office of Inspector General, today announced that a jury in Hartford has found four individuals guilty of multiple federal offenses related to their participation in an extensive mortgage fraud conspiracy that defrauded lenders of more than $3.2 million. The jury returned the verdicts this afternoon.

MORRIS OLMER, 82, of New Haven, was found guilty of one count of conspiracy to defraud the United States, eight counts of wire fraud, and four counts of making false statements.

RAB NAWAZ, 47, of Waterford, was found guilty of one count of conspiracy to defraud the United States, eight counts of wire fraud, and one count of obstruction of justice.

WENDY WERNER, 46, of Sarasota, Florida, was found guilty of one count of conspiracy to commit mail fraud and wire fraud, and one count of mail fraud,

MARSHALL ASMAR, 40, of Milford, was found guilty of one count of conspiracy to defraud the United States, three counts of wire fraud, and three counts of making false statements.

The jury could not reach a verdict on any counts against a fifth defendant, David Avigdor, 57, of New Haven. A sixth defendant, THOMAS GALLAGHER, 68, of West Haven, pleaded guilty during the trial. Eight other individuals involved in the scheme pleaded guilty prior to the commencement of the trial.

“This case demonstrates the commitment of the U.S. Attorney’s Office and our federal and state law enforcement partners to investigate and prosecute those individuals whose illegal activity contributed to our nation’s banking crisis,” stated U.S. Attorney Fein. “I want to thank the FBI, HUD-OIG, and all the participants in the Connecticut Mortgage Fraud Task Force who are investigating these crimes, protecting the public, and helping to restore confidence in our housing and financial markets.”

According to court documents, statements made in court and the evidence disclosed during the trial, between approximately August 2006 and May 2010, Syed Babar of New London led a mortgage fraud scheme during which participants obtained approximately $10 million in residential real estate loans, including loans insured by the FHA, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. As part of the scheme, Babar arranged for straw buyers to purchase houses they did not intend to occupy at fraudulently inflated prices and to apply for loans in the amount of the fraudulently inflated prices. The loans were supported by fraudulent appraisals and a variety of fraudulent information about the buyer, including information about his or her occupation, income, assets, liabilities, and intention to occupy the house as a primary residence. Babar and his co-conspirators also created a fictitious construction company called “Sheda Telle Construction, LLC”—which trial testimony revealed means “ring the bell and run” in Babar’s native language—in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. Babar and his co-conspirators then split the fraud proceeds generated from the scheme.

Thomas Gallagher, who operated Autumn Appraisals, LLC, in West Haven, created fraudulently inflated appraisals of residential real estate in exchange for payments, often in cash, of thousands of dollars per home. The payments were well beyond the basic appraisal fee of about $375 that was disclosed in appraisals and on federal mortgage documents.

Morris Olmer, a former attorney, conducted many of the closings for the fraudulent real estate transactions at his New Haven office, which resulted in hundreds of thousands of dollars in fraudulent proceeds being sent by wire and check to Sheda Telle Construction, LLC.

Wendy Werner and Marshall Asmar made hundreds of thousands of dollars selling properties at fraudulently inflated prices to straw purchasers. In August 2006, Werner, through her company, Marbo Restorations, LLC, sold three houses on Lake Street in Norwich to a straw purchaser working with Babar. The fraudulently inflated sales prices for the three properties were $260,000, $270,000 and $270,000, respectively. Werner provided Babar with approximately $283,000 of the proceeds generated from the sale of the three houses, and Babar then wrote 10 checks totaling approximately $179,000 to the straw purchaser.

Asmar, working with Olmer, rented out houses that had purportedly been “sold” to straw buyers in FHA-insured loan transactions. The straw buyers never received the keys to the properties, never intended to live in the properties, and never made any mortgage payments.

Rab Nawaz also profited by acting as seller on several fraudulent property transactions. In addition, Nawaz had a phone number subscribed to his home address that was also identified with “Global Home Painting,” which was listed on certain loan applications as the fictitious employer of the straw buyer of a property. The number was used by co-conspirators to receive calls from lenders seeking to verify an applicant’s employment information.

During the trial, which began on March 16, the government called 20 witnesses, played numerous recorded conversations and presented hundreds of exhibits. On March 21, at the conclusion of the fourth day of trial, Thomas Gallagher pleaded guilty to one count of making a false statement to the government in connection with an FHA-insured loan.

On February 1, 2011, Babar pleaded guilty to multiple federal charges related to his leadership of this extensive mortgage fraud scheme. Seven other individuals have also previously pleaded guilty to various charges related to their involvement in this scheme. All await sentencing.

The charge of conspiracy to commit wire fraud carries a maximum term of imprisonment of five years. Wire fraud and mail fraud carry a maximum term of imprisonment of 20 years on each count. The charge of making a false statement carries a maximum term of imprisonment of five years on each count. And the charge of obstruction of justice carries a maximum term of imprisonment of 10 years.

This matter has been investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development – Office of Inspector General. The case is being prosecuted by Assistant United States Attorneys Eric J. Glover and Susan Wines and Special Assistant United States Attorney Liam Brennan.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the task force is focusing on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.

This case was brought in coordination with the President’s Financial Fraud Enforcement Task Force, which was established to wage an aggressive and coordinated 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.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

David B. Fein, United States Attorney for the District of Connecticut, announced that KEVIN J. O’KEEFE, 51, of Simsbury, was sentenced today by Chief United States District Judge Alvin W. Thompson in Hartford to one day of imprisonment, time served, and three years of supervised release, for his role in two fraud schemes.

According to court documents and statements made in court, O’KEEFE was a vice president at Fleet Bank (and Bank of America after it acquired Fleet Bank) in Hartford. From approximately October 2001 to February 2007, O’KEEFE conspired with Paul Aparo, an attorney, and Richard R. Girouard, a real estate developer, to enrich themselves through the use of O’KEEFE’s position at the bank and by corrupting the bidding process on distressed loans that Fleet Bank was selling. As part of the scheme, O’KEEFE, Aparo, and Girouard created shell companies through which to submit bids on distressed loans being sold by Fleet Bank and with which to receive and distribute proceeds from the scheme. O’KEEFE had access to and obtained confidential information belonging to Fleet Bank and provided that information to Aparo and Girouard so that it could be used to submit winning bids on distressed loans. O’KEEFE also intentionally provided outdated information to other bidders involved in the bidding process in order to cause those bidders to submit artificially low bids. O’KEEFE provided Aparo and Girouard with access to the most up-to-date information. O’KEEFE also excluded bidders who he, Aparo, and Girouard believed would submit competitive bids for a distressed loan on which O’KEEFE, Aparo, and Girouard sought to bid.

Girouard paid O’KEEFE and Aparo approximately $100,000 on one loan that Girouard obtained through the corrupt assistance of O’KEEFE and Aparo. In addition, Girouard agreed to pay a shell company, called “Lexington Associates,” 15 percent of the profits on another distressed loan on which Girouard, with O’KEEFE and Aparo’s corrupt assistance, had submitted a winning bid. The 15 percent of the profits on the loan that Girouard (through his own shell company) paid to Lexington Associates amounted to more than $1.4 million, which O’KEEFE and APARO essentially split evenly.

Between December 2005 and January 2006, as part of a second scheme, O’KEEFE and Aparo defrauded Bank of America and Aparo’s client out of money. In that scheme, a client contacted Aparo about getting a mortgage release from Bank of America for an old mortgage. Aparo contacted O’KEEFE about it, and O’KEEFE checked Bank of America’s internal records for the mortgage. O’KEEFE found that no record of the mortgage existed within the bank. However, Aparo and O’KEEFE conspired to defraud the client and the bank by telling the client that the bank would release the mortgage for $55,000, which the client paid to Aparo through his law firm’s trust account. Aparo then paid the $55,000 to O’KEEFE, and a mortgage release on behalf of Bank of America was provided to the client.

On June 11, 2008, O’KEEFE pleaded guilty to one count of conspiracy to commit financial institution bribery and one count of bank fraud.

On November 24, 2009, Girouard pleaded guilty to one count of conspiracy to commit financial institution bribery. On April 30, 2010, he was sentenced to 30 months of imprisonment and was ordered to pay a fine in the amount of $15,000.

On July 24, 2008, Aparo pleaded guilty to one count of conspiracy to commit financial institution bribery and one count of bank fraud. On March 8, 2011, he was sentenced to 24 months of imprisonment and was ordered to pay a fine of $20,000.

This case was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Eric J. Glover.

NEWARK, NJ—Michael Kaufman, the CEO and founder of purported real estate investment firm Home Start America, Inc. (“HSA”), and loan officer David Wynn admitted yesterday and today to directing a long-running, large-scale wire fraud conspiracy through Kaufman’s company, U.S. Attorney Paul J. Fishman announced.

Kaufman, 43, of Reading, Pa., pleaded guilty Monday, April 11, 2011, to a superseding indictment charging both men with conspiracy to commit wire fraud. Wynn, 45, of Englewood, N.J., pleaded guilty today to the same charge. Both defendants entered their guilty pleas before U.S. District Judge Dennis M. Cavanaugh in Newark federal court.

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

Kaufman founded HSA in Bloomfield, N.J., and at one time employed more than 30 people. Kaufman, through HSA, purchased and sold residential real estate properties. As part of the scheme, Kaufman and others recruited people—often first-time home buyers—to purchase properties quickly, with promises of no money down, no closing costs, and repairs paid for by HSA. Kaufman would then steer the purchasers to loan officers, including Wynn.

Many of the properties sold by HSA had actually been bought by HSA shortly before, and then “flipped” to the unsuspecting buyers for far more than HSA paid. Kaufman, Wynn, and others falsely inflated the buyers’ income and assets on loan documents to make it appear that the buyers could afford the properties HSA was selling, when the purchasers did not have the means to buy the properties.

Victim financial institutions—relying on the false figures in the loan documents—then issued the mortgage loans, unaware of the purchasers’ true financial conditions. HSA and Kaufman received illicit profits when the transactions closed, and Wynn and other loan officers received commissions for their fraudulent work. After the closings, the buyers could not make the payments on the properties, and nearly always lost the properties to foreclosure.

The fraud, which began as early as 2002 and lasted through June 2005, caused over $1.5 million in loss to the banks, and earned hundreds of thousands of dollars in profits for Kaufman and HSA.

At sentencing, Kaufman and Wynn each face a maximum of 20 years in jail and a fine of $250,000, or twice the gain or loss derived from their offenses.

U.S. Attorney Fishman praised the Department of Housing and Urban Development’s Office of Inspector General, under the direction of Joseph W. Clarke, Special Agent in Charge for the Mid-Atlantic Region; and the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation of this case.

The government is represented by Assistant U.S. Attorneys Bohdan Vitvitsky and Zach Intrater of the U.S. Attorney’s Office Criminal Division in Newark.

Defense counsel:
Kaufman: Robert De Groot, Esq., Newark, N.J.
Wynn: Stephen N. Dratch, Esq., Livingston, N.J.

BALTIMORE—Richard Wayne Hope, age 53, of Denham, Louisiana, formerly of Hagerstown, Maryland, pleaded guilty today to conspiracy to commit bank fraud in connection with a $1.75 million loan he obtained on behalf of a company.

The plea agreement 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; and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office.

According to his plea agreement, Richard Hope and his brother, Otis Hope, the senior pastor for Montrose Baptist Church located in Rockville, Maryland, formed a “religious company” called Shiloh Ministries of Hagerstown, Inc. (Shiloh). The company operated the Shiloh Conference and Retreat Center in a building that Shiloh owned at 149 North Potomac Street in Hagerstown. The company renovated and maintained the building and leased the space to groups for conferences and retreats.

On June 21, 2006 the building was significantly damaged by a fire. The fire marshal and building inspector advised the Hopes that no one could occupy the building until numerous code violations were corrected and an occupancy certificate from the fire marshal was obtained. According to former employees of Shiloh and other witnesses, Shiloh stopped conducting business and no more conferences or retreats were ever held after that date. Insurance proceeds went directly to a fire remediation company and to Kabel Company, a construction company associated with the Hopes, which had been incorporated about a month after the fire, for repairs allegedly made to the building.

In September 2006, the Hopes applied to a bank for a commercial loan in the amount of $1.75 million to refinance the mortgage and to release approximately $175,000 being held in escrow by the previous lender for renovations made to the building prior to the fire. The brothers engaged a mortgage broker to assist with the refinancing. Richard Hope falsely represented to the broker that Kabel Company repaired the damage caused by the fire, and that Shiloh was open for business and holding conferences and retreats again. In fact, Shiloh never reopened for business after the fire. A city inspection revealed numerous code violations and found wires that were unattached to new electrical outlets or to an inoperable sprinkler system. Additionally, beginning in October 2006, the monthly utility payments were not paid. A sole occupant of the building was ejected a few months later because the building was deemed uninhabitable. The Hopes never asked the city to inspect the renovation work purportedly performed by Kabel Company so that Shiloh could obtain an occupancy permit, nor did they ever bring the building up to code.

Based on the misinformation provided by the Hopes, the bank mailed Otis Hope an initial commitment letter to fund the loan and asked for Shiloh’s past and current financial statements before making a final commitment. Richard Hope submitted fraudulent financial statements to the bank overstating the company’s assets and monthly cash flow, and falsely reflecting five months of operations during which time the business was in fact not operating. Richard Hope submitted a phony letter from a certified public accountant purporting to attest that the accountant had compiled the financial statements, when in fact Richard Hope had created the statements. Richard Hope also supplied the bank with a bogus corporate resolution giving him authority to borrow $1.75 million. The resolution purported to be signed by an individual identified as “secretary,” who in fact was not a company officer and had not signed the document.

Relying on the misrepresentations, on February 28, 2007 the bank loaned $1.75 million to Shiloh. Neither the Hopes nor anyone else from Shiloh ever made a monthly loan payment to the bank. The Hopes refused to respond to the bank’s correspondence and phone calls. Thereafter, the Shiloh building was abandoned and went into foreclosure.

Richard Hope faces a maximum sentence of 30 years in prison. As part of his plea agreement, Richard Hope agrees to the entry of an order to pay restitution to the bank of $1.5 million, the amount of loss remaining after the bank sold the building at an auction. U.S. District Judge William M. Nickerson has scheduled sentencing for June 28, 2011 at 10:00 a.m.

Otis Ray Hope, age 55, of Aiken, South Carolina, formerly of Hagerstown, Maryland, pleaded guilty to tax evasion, subscribing to a false document in connection with the filing of a federal tax exemption for Shiloh Company, and to conspiracy to commit bank fraud in connection with the $1.75 million bank loan obtained on behalf of Shiloh Ministries. Otis Hope was sentenced to 37 months in prison and ordered to pay restitution of $2,422,320.

United States Attorney Rod J. Rosenstein thanked the FBI and the IRS – Criminal Investigation for their investigative work. Mr. Rosenstein commended Assistant United States Attorneys Martin J. Clarke and Sujit Raman, who are prosecuting the case.

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that STEVEN BYERS, the former president and chief executive officer of the private equity firm WexTrust Capital, LLC (“WexTrust Capital”), was sentenced today to 160 months in prison on charges stemming from a fraud that raised more than $9 million from investors in private placement real estate offerings. BYERS, 48, was sentenced in Manhattan federal court by U.S. Court of Appeals Judge DENNY CHIN.

Manhattan U.S. Attorney PREET BHARARA said: “Steven Byers used smoke and mirrors to defraud his investors out of millions of dollars. But his scheme was ultimately exposed for the sham that it was, and now he will be punished severely for his crimes.”

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

From 2003 to 2008, WexTrust Capital was a globally diversified private equity company specializing in investments in real estate and specialty finance opportunities. It was affiliated with several companies of a similar name, including WexTrust Securities, LLC, a broker-dealer registered with the United States Securities and Exchange Commission (“SEC”).

Beginning in 2003, BYERS, along with co-defendant JOSEPH SHERESHEVSKY and others, raised money from investors pursuant to private placement offerings, and then used material amounts of that money for other purposes without disclosing the diversion of funds to investors. In one such private placement, BYERS and others raised approximately $9.2 million in investor funds by representing that the funds would be used to purchase and operate seven commercial properties that were leased to the United States General Services Administration (“GSA”). According to the GSA private placement memorandum issued to investors by WexTrust Capital, the $9.2 million raised from investors, together with a mortgage of approximately $21 million, would be used to purchase the seven GSA properties and cover related acquisition expenses. The seven GSA properties, however, were never purchased. Instead, funds raised from investors were diverted for other purposes, none of which was disclosed to investors. BYERS and others later agreed to make up a story that they would then tell the GSA investors regarding what happened to their investment.

* * *

BYERS, of Oakbrook, Illinois, previously pled guilty to conspiracy to commit securities fraud and securities fraud. In addition to his prison term, Judge CHIN sentenced BYERS to three years of supervised release and ordered him to pay $7,700,630.35 in restitution and to forfeit $9.2 million in proceeds from his crimes.

BYERS’ co-defendant, JOSEPH SHERESHEVSKY, 54, of Brooklyn, New York, and Norfolk, Virginia, pled guilty to similar charges on February 3, 2011, and is scheduled to be sentenced on May 13, 2011, at 10:30 a.m., before Judge CHIN.

Mr. BHARARA praised the work of the Federal Bureau of Investigation in this case. 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.

Assistant United States Attorneys VIRGINIA CHAVEZ ROMANO and JILLIAN B. BERMAN are in charge of the prosecution.

Admitted Laundering Millions of Dollars in Proceeds of Stolen Over-the-Counter Medicines, Health and Beauty Aid Products, Gift Cards, DVDs, Tools, and Other Items

BALTIMORE—U.S. District Judge Benson E. Legg sentenced Louis Leitch, Sr., age 62, of Baltimore, today to 33 months in prison followed by three years of supervised release for conspiring to commit money laundering and attempting to evade taxes.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service – Washington Division; Chief James W. Johnson of the Baltimore County Police Department; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Baltimore Police Commissioner Frederick H. Bealefeld III; and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation.

According to his plea agreement, from 2007 to March 2010, Leitch conspired with others to launder the proceeds of the sale of mass quantities of stolen over-the-counter medications, health and beauty aid products, gift cards, DVDs, tools, and other merchandise. Shoplifters, also known as “boosters,” stole products from Target, Safeway, Wal-Mart, Kohl’s and other retailers in Maryland and other states. Pawn shops bought large amounts of stolen items from the boosters. Louis Leitch, Sr. and others were owners of E-Z Money Pawn Shop and 2Brothers Liquidators, Inc. Leitch and others would receive stolen products at E-Z Money. The stolen items were “cleaned,” meaning that the security labels and retail tags from the stolen product were removed. Sometimes a heat gun and lighter fluid would be used to peel away the plastic security labels. In addition, Leitch worked with co-defendants to purchase and transport stolen material. Leitch knew that many of his co-defendants and others participated in the scheme. Some of the defendants also used on-line auctions sites, such as eBay and Amazon.com, to sell the stolen products far below normal retail value. The stolen products were then delivered to unsuspecting customers via the United States mail. The defendants received payment by interstate wire transfers using PayPal accounts and through various financial institutions in Maryland.

On March 25, 2010, agents from the U.S. Postal Inspection Service, Baltimore County

Police Department and the Federal Bureau of Investigation executed search warrants at E-Z Money and the other pawn shops in this case. Agents recovered well over $1 million in stolen merchandise, approximately $1 million in bank accounts and over $140,000 in cash, and 44 firearms. Although the entire conspiracy involved approximately $20 million in stolen merchandise, $2.5 million in stolen product was reasonably foreseeable to Leitch.

Thirteen defendants have pleaded guilty to the money laundering conspiracy to date.

In addition, Leitch failed to file income tax returns for tax years 2005 and 2006, although he received substantial income through his pawn shop and other business. During 2005 through 2006, Leitch withdrew from his bank accounts more than $2.5 million of his gross income, with each withdrawal being less than $10,000. During 2007, Leitch made cash deposits of more than $200,000 of his gross income into bank accounts, with each deposit being less than $10,000. By making deposits and withdrawals in amounts less than $10,000, Leitch was able to avoid bank reporting requirements and conceal from the Internal Revenue Service substantial income on which he knowingly failed to pay taxes. The amount of unpaid taxes as a result of this conduct is $401,600.

United States Attorney Rod J. Rosenstein thanked the U.S. Postal Inspection Service; Baltimore County Police Department; Federal Bureau of Investigation; Baltimore Police Department; and Internal Revenue Service – Criminal Investigation for their work in this investigation and commended Assistant United States Attorneys Kwame J. Manley and Richard Kay, who prosecuted the case.

LOS ANGELES—The promoter of a bogus investment scheme that promised quick returns through the resale of office equipment was sentenced today to 108 months in federal prison for orchestrating a Ponzi scheme that caused victims across the United States to lose more than $8 million.

Peter Jerald Frommer, 35, of Santa Barbara, was sentenced by United States District Judge George H. Wu. In addition to the prison term, Judge Wu ordered Frommer to pay $8.1 million in restitution.

Frommer pleaded guilty in November to wire fraud, money laundering, and three counts of failing to file federal income tax returns for the tax years 2004 through 2006.

Frommer operated a bogus investment scheme under the names “Cap Exchange” and “Cap X,” companies that he falsely claimed traded in surplus property of defunct companies. Frommer told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices.

>From early 2004 through August 2006, Frommer solicited more than $13 million from more than five dozen victims by promising “guaranteed” returns of up to 15 percent in as little as six weeks. Frommer obtained money from 64 investors throughout the United States. Frommer claimed that he would use victims’ money to buy the distressed assets for Cap X, and then would share profits from the subsequent sales. Instead, Frommer used the victims’ money to make Ponzi payments and to maintain a lavish personal lifestyle, which included a $20 million Malibu mansion, parties that featured celebrity performers, and luxurious personal travel and automobiles.

Additionally, Frommer convinced many investors to put money into other bogus ventures that he pitched, including a wireless Internet company, a high-end automobile parts venture, real estate deals, and other investments beyond Cap-X.

In a series of filings made in relation to today’s sentencing hearing, prosecutors focused on the impact Frommer had on his victims. “Plainly put, Frommer’s greed led to pain, distress, and a terrible disruption of the lives of his victims,” according to one of the government’s briefs.

In one of the filings, prosecutors quoted extensively from a series of letters sent by victims who urged Judge Wu to impose a stiff sentence. Those comments included:

“The effects of Peter Frommer’s crimes have been devastating for me. The only event in my lifetime that was worse was the death of my child.”

“He is the West Coast version of Bernie Madoff.”

“I am sorry to admit my family was victimized by Peter Frommer. A close relative of ours introduced us when my family and I were in California seeking cancer treatment for our youngest son. In a moment of weakness, when we were struggling with the cost of his cancer treatment, we were duped and convinced ourselves, our adult children, and a sister that this was a smart and safe investment. We made a terrible mistake.”

“My son values his education and was very intent on attending a prestigious California university. Unfortunately, he has not been able to attend that college because of the change in financial circumstances caused by Peter Frommer’s actions. What value do you put on the quashing of a teen’s dreams?”

Judge Wu ordered Frommer to begin serving his sentence on May 31.

The investigation into Frommer was conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation.

Was a Fugitive for Almost a Year

BALTIMORE—Daniel E. Fink Jr., age 44, of Baltimore, who operated Homemaxx Title & Escrow LLC (Homemaxx), a title company that conducted residential real estate closings with offices in Middle River and Parkville, Maryland, pleaded guilty today to wire fraud in connection with a scheme to defraud lenders and homeowners of more than $2.2 million.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

According to Fink’s plea agreement, from February 2003 to July 2004, Fink defrauded lenders, a title insurance company, and homeowners to obtain more than $2.2 million. Fink made arrangements for Homemaxx to act as the title company for real estate settlements and refinancing transactions. Lenders deposited funds in Homemaxx escrow accounts that Fink controlled. As part of the scheme, Fink caused title insurance to be issued to individuals purchasing or refinancing real estate, but concealed facts that negatively affected the buyers’ title in the real estate transactions. Fink also made misrepresentations to lenders in connection with transactions in which Fink acted as a party to the real estate transaction and handling the settlement on behalf of Homemaxx. For example, in a number of transactions, Fink represented to lenders that he was purchasing property and obtained a loan for that purpose. In fact, Fink purchased only the ground rent connected to that address and used the remainder of the loan for his personal benefit.

In addition, despite Fink’s representations to lenders that escrow funds were properly distributed after settlement, Homemaxx to failed to pay outstanding first mortgages on real estate transactions or to properly record deeds. Fink also improperly transferred substantial amounts of money from a Homemaxx escrow account into other accounts, and used the money intended to be disbursed pursuant to real estate closing documents for personal expenditures unrelated to real estate transactions.

Among other personal expenditures, Fink used the money to buy personal gifts for women, including over $200,000 of escrow money to purchase a property in Florida for a female acquaintance, and $59,728 to purchase a new 2004 Mercedes CLK 500 for a woman Fink knew from the Gentlemen’s Gold Club. Fink also used $61,965 to buy a 2003 Hummer H2, repeatedly spent the proceeds of his scheme at the Gentlemen’s Gold Club, on gambling, and on trips to Paradise Island, Bahamas.

In April 2004, Fink was confronted by representatives of the title insurance company about substantial amounts of money missing from the Homemaxx escrow account. Fink later fled the Baltimore area and used aliases to engage in real estate transactions in Florida. On March 26, 2009, a federal grand jury in Baltimore returned an indictment charging Fink with wire fraud and money laundering in connection with the scheme. Fink was arrested in Florida on February 15, 2010.

As part of his plea agreement, Fink is required to pay restitution in the full amount of the victims losses, estimated to be at least $2.2 million.

Fink faces a maximum sentence of 20 years in prison and a $250,000 fine for wire fraud, although if the court accepts the plea, Fink is expected to be sentenced to four years in prison. U.S. District Judge J. Frederick Motz has scheduled sentencing for June 17, 2011 at 11:00 a.m.

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.usdoj.gov/usao/md/Mortgage-Fraud/index.html.

United States Attorney Rod J. Rosenstein commended the FBI and the United States Attorney’s Office, Southern District of Florida for their assistance in the investigation and prosecution, and thanked Assistant United States Attorney Harry Gruber, who is prosecuting the case.

Defendants Allegedly Fraudulently Obtained Nearly $22 Million in Loan Proceeds

DALLAS—A 29-count indictment, returned last week by a federal grand jury in Dallas and unsealed this week, charges five individuals with various felony offenses related to a mortgage fraud scheme they ran for nearly three years in the Dallas-Fort Worth area, announced U.S. Attorney James T. Jacks of the Northern District of Texas (NDTX).

The indictment charges Michael Anthony Baker, 31, presently of Houston, Texas; Monique Untae Stallworth, 37, of Garland, Texas; Sterling Wesley Harris, 29, of Dallas; Koreem Dujuan Baker, 34, of Dallas; and Folami Dayo Baker, 36, of Desoto, Texas; each with one count of conspiracy to commit wire fraud. Michael Baker was a Dallas resident at the time of the alleged fraud. Michael and Koreem Bakers are brothers.

Harris appeared earlier this week before U.S. Magistrate Judge Irma C. Ramirez for his initial appearance and was released on personal recognizance bond. Michael Baker, Stallworth, and Folami Baker are expected to surrender within a few days. Koreem Baker is currently in state custody and is expected to be transported to the NDTX within the next few weeks.

The indictment alleges that the defendants operated a mortgage fraud conspiracy from December 2004 until at least October 2007 to defraud and obtain money from lending institutions by, among other things, using straw buyers to purchase homes by submitting false and fraudulent documents and statements to lenders. In total, the indictment alleges that the defendants obtained nearly $22 million in fraudulently obtained loan proceeds.

In addition, all of the defendants are charged with multiple substantive counts of wire fraud. Michael Baker is charged with one count of money laundering, and Koreem Baker is charged with 16 counts of engaging in a monetary transaction with criminally derived property.

The indictment alleges that the defendants profited from loans to purchase residences in the Dallas area; fraudulently obtained mortgages in others’ names; fraudulently obtained mortgages for more than the sales price; fraudulently found individuals with sufficient credit to qualify for the loans; fraudulently made each borrower appear to be a qualified, bona fide purchaser who intended to reside in the property, when the borrower had no intention of doing so; fraudulently created surplus loan proceeds by creating bogus invoices for repairs/upgrades which were never done; fraudulently allowed the residences to go into foreclosure after no, or just a few, payments were made on the loan; and fraudulently shared in the surplus loan proceeds.

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. For more information about the task force visit: www.stopfraud.gov.

An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. If convicted, however, the conspiracy to commit wire fraud count and each of the substantive wire fraud counts carries a maximum statutory sentence of 20 years in prison and a $250,000 fine. The money laundering count carries a maximum statutory sentence of 20 years in prison and a $500,000 fine, upon conviction. Each of the counts charging engaging in a monetary transaction with criminally derived property carries a maximum statutory sentence of 10 years in prison and a $250,000 fine, upon conviction. The indictment also includes a forfeiture allegation which would require any convicted defendant to forfeit to the U.S. proceeds or property traceable to their offenses.

The case is being investigated by the Internal Revenue Service – Criminal Investigation and the FBI. Assistant U.S. Attorney J. Nicholas Bunch is in charge of the prosecution.

Defendant Apprehended on a Shrimp Boat in Caribbean Sea

DALLAS—James Ragnauth, a defendant charged in a mortgage fraud case, who was on the lam for about six weeks and apprehended on a shrimp boat in the Caribbean Sea by the U.S. Coast Guard in March 2009, was sentenced today by U.S. District Judge Sidney Fitzwater to 37 months in federal prison, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Judge Fitzwater also ordered Ragnauth to pay approximately $205,000 in restitution.

Ragnauth pleaded guilty in September 2009 to one count of causing false entries to deceive the U.S. Department of Housing and Urban Development (HUD). According to the indictment, Ragnauth incorporated J.R. Mortgage, located in Dallas, and was in charge of the company’s day-to-day loan operations and supervised several loan officers, including co-defendant Rosa Irene Galvan and Ignacio Juan Jasso, charged in a related case.

Ragnauth admitted in documents filed in court that in 1997 and 1998, he and loan officer Jasso knowingly and willfully made false entries in HUD statements in connection with several residential loans. As part of their scheme to defraud HUD, Ragnauth and Jasso created, and caused others to create and later submit to HUD, several false and fraudulent documents, such as a Uniform Residential Loan Application which contained false information, a fraudulent W-2 form and a fraudulent credit report. At the sentencing hearing today, Ragnauth was found to be the organizer leader of a mortgage fraud scheme that caused the fraudulent funding of 30 residential loans, totaling more than $1.8 million.

Both Galvan and Jasso have pleaded guilty to their roles and are scheduled to be sentenced on February 26, 2010.

While Ragnauth was a fugitive in the Beaumont, Texas area, the U.S. Marshals Service in Beaumont featured Ragnauth’s photo on local newscasts along with information that he might be leaving the U.S. on a boat from Port Arthur, Texas. Ragnauth, a naturalized citizen, was captured by the U.S. Coast Guard when he was attempting to flee to his native Guyana. Guyana is located just east of Venezuela on the northern coast of South America. Ragnauth made it about half way to Guyana, being arrested in international waters between Cuba and Haiti.

The case was investigated by the FBI and HUD-Office of Inspector General. Assistant U.S. Attorney David Jarvis was in charge of the prosecution.

TRENTON, NJ—Mordchai Fish, the principal rabbi of Congregation Sheves Achim in Brooklyn, N.Y., admitted today to conspiring to launder approximately $900,000 he believed was criminal proceeds, U.S. Attorney Paul J. Fishman announced.

Fish, 58, of Brooklyn, N.Y., pleaded guilty before U.S. District Judge Joel A. Pisano to an Information charging him with money laundering conspiracy.

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

Fish admitted that beginning in early 2008, he met with Solomon Dwek, an individual he now knows was a cooperating witness with the United States. For a fee of approximately 10 percent, Fish agreed to launder and conceal Dwek’s funds through a series of purported charities, also known as “gemachs,” which Fish controlled or to which he had access. Fish admitted that prior to laundering Dwek’s funds, Dwek repeatedly told him the money was the proceeds of illegal activity—including bank fraud, trafficking in counterfeit goods, and bankruptcy fraud.

In order to hide the source of the money, Fish directed Dwek to make the checks payable to several gemachs—including Boyoner Gemilas Chesed, Beth Pinchas, CNE and Levovous—which were purportedly dedicated to providing charitable donations to needy individuals. Once Dwek gave him the checks, Fish passed them to a coconspirator who deposited them into bank accounts held in the names of the purported charities. Fish would then arrange to make cash available through an underground money transfer network. Other individuals, including David S. Golhirsh, Naftoly Weber, Avrohom Y. Polack, Binyamin Spira, and Yoely Gertner, would provide Fish and Dwek with the cash.

Fish admitted that he engaged in approximately 15 money laundering transactions with Dwek, helping to convert approximately $900,000 in checks into more than $800,000 in cash, keeping a cut.

At the time of his arrest, Fish was charged in three separate criminal complaints along with his brother, Rabbi Lavel Schwartz. Weber, Polack, and Spira each pleaded guilty in November 2010 to operating illegal money transmitting businesses, admitting that they transferred thousands of dollars in cash to Fish and Dwek. The charges against Gertner, Schwartz, and Goldhirsh remain pending; Schwartz and Goldhirsh were indicted last week for money laundering conspiracy and related offenses.

The charge to which Fish pleaded guilty carries a maximum statutory penalty of 20 years in prison and a $250,000 fine. In addition, Fish agreed to forfeit approximately $90,000 by the date of sentencing, scheduled for July 28, 2011.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, with the investigation leading to today’s plea.

The government is represented by Assistant U.S. Attorney Mark McCarren of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

As for the complaint and Indictment charging Gertner, Schwartz, and Goldhirsh, the charges and allegations are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Defense counsel: Michael Bachner, Esq., New York