David B. Fein, United States Attorney for the District of Connecticut, today announced that a federal grand jury in Bridgeport has returned an indictment charging DOMINGOS DIAS, 41, of Trumbull, and HECTOR NATERA, 39, formerly of Bridgeport, with conspiracy, wire fraud, and bank fraud offenses stemming from their alleged involvement in a mortgage fraud scheme that has caused more than $3 million in losses to lenders. The indictment was returned on November 18, 2010, and was unsealed on May 11, 2011.

The indictment alleges that from approximately January 2006 to April 2008, DIAS, NATERA, and others conspired to obtain millions of dollars of fraudulent real estate loans from banks and real estate lenders for properties that were purchased in Bridgeport and New Haven. Working from offices located at 1944 Boston Avenue in Bridgeport, DIAS and NATERA held themselves out as real estate agents and mortgage brokers and recruited “straw buyers,” found sellers, and orchestrated and directed the creation and flow of fictitious documentation and information that were needed to obtain the fraudulent loans from lenders. After a loan for a property had been fraudulently obtained and a closing had occurred, DIAS and NATERA kept some of the fraud proceeds and distributed proceeds to other members of the conspiracy.

It is alleged that losses to mortgage lenders from this scheme total in excess of $3 million.

The indictment charges DIAS and NATERA with one count of conspiracy to commit wire fraud and bank fraud and one count of bank fraud. The indictment also charges DIAS with six counts and NATERA with four counts of wire fraud. Each of the charges carries a maximum term of imprisonment of 30 years and a fine of up to $1 million

DIAS was arrested on November 23, 2010. He had been released on bond until May 11 when U.S. Magistrate Judge Holly B. Fitzsimmons found that DIAS had violated the terms and conditions of his release and ordered the bond revoked and DIAS detained. The indictment was unsealed on that date.

NATERA is currently being sought by law enforcement. Citizens with information about this case, or any other suspected mortgage fraud activity, are encouraged to contact the Connecticut Mortgage Fraud Task Force at 203-333-3512, or by e-mail to ctmortgagefraud@ic.fbi.gov.

U.S. Attorney Fein stressed that an indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service. The case is being prosecuted by Assistant United States Attorney Ann M. Nevins.

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.

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.

John Bravata, the founder and chairman of BBC Equities, LLC, was arrested yesterday at JFK International Airport, announced U.S. Attorney Barbara L. McQuade. Bravata was arrested on an inbound flight from Italy. McQuade was joined in the announcement by Special Agent in Charge Andrew G. Arena, Federal Bureau of Investigation.

Bravata is charged in a criminal complaint with wire fraud in connection with his solicitation of investor funds for BBC, which Bravata characterized as a real estate investment fund. The complaint charges that from 2006 through 2009, Bravata knowingly participated in a scheme to defraud investors. Bravata and those working on his behalf made multiple misrepresentations to numerous prospective investors, including misrepresentations regarding how their investment funds would be utilized, the security of funds invested with BBC, and the returns that could be expected by investors of BBC.

Bravata also misled investors by telling them that managers of BBC would not earn money unless BBC was profitable. He also represented that the managers of BBC did not take fees, commissions, or a salary. In reality, Bravata and others received lucrative compensation from BBC and related entities despite that fact that BBC was never profitable. Bravata also used investor funds to pay for the construction of his roughly 18,000 square foot personal home and to pay for other personal expenses.

The charge in the complaint, wire fraud, carries a maximum penalty of 20 years’ imprisonment and a $250,000 fine.

A complaint 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.

The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Louis P. Gabel.

Two Co-Defendants, Stephen Scott Brown and Tamara E. Scott, Sentenced to 37 Months and 24 Months

INDIANAPOLIS—Robert Andrew Penn, 44, formerly of Indianapolis, was sentenced to seven years in prison late yesterday by Circuit Judge David F. Hamilton for Penn’s part in a multi-million dollar mortgage fraud scheme in the Indianapolis area. Penn had entered guilty pleas to charges of wire fraud, conspiracy to commit wire fraud, and money laundering. Co-defendant Tamara E. Scott, age 50, Indianapolis, was sentenced to 24 months in prison for conspiracy to commit wire fraud and money laundering, and co-defendant Stephen Scott Brown, age 37, Indianapolis, was sentenced to 37 months in prison for conspiracy to commit wire fraud and money laundering.

These sentencings follow a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division with assistance from the Federal Bureau of Investigation. A total of nine individuals have been charged in these schemes. Jerry Jaquess and Timothy Brown were previously sentenced to 30 months and 37 months in prison, respectively, and the remaining cases are currently pending before Circuit Judge Hamilton. The investigation is continuing as to other individuals who were involved in the mortgage fraud schemes.

Between November 2003 and August 2005, at least 136 fraudulent loans, totaling $16,613,850.00, were obtained by Penn and his numerous business entities, assisted by Scott Brown, and others. The loans were obtained from Argent Mortgage Company, The MoneyStation, and People’s Choice Mortgage / Countrywide Home Loans. Penn accepted responsibility for all 136 of these loans.

Penn and his associates owned and operated numerous business entities which were created and used to illegally obtain loans on residential real estate properties in the Indianapolis area. Penn controlled and directed the activities of the other people involved in the illegal activities. Scott was married to Penn during the commission of all of the mortgage fraud crimes, and was involved in the business activities of most of the entities used to purchase, sell and manage properties in the fraudulent transactions. Brown was involved in the mortgage brokerage business and assisted in brokering many of the loans with Argent Mortgage Company and The MoneyStation.

Of the 136 fraudulent loans charged, 39 loans related to the purchase of properties from individual sellers, generally individuals who either did not have their homes listed to sell, or had them listed as “for sale by owner.” These loans totaled over $7,000,000.00 and were all issued by Argent Mortgage Company.

The remaining 97 fraudulent loan transactions charged all relate to the sale of duplexes in the Windsor Village neighborhood, located near Arlington Avenue and 21st Street, on the east side of Indianapolis. These loans totaled over $9,312,000.00 and were funded by Argent Mortgage Company, The MoneyStation and by People’s Choice Mortgage, a warehouse lender in Kentucky who had a correspondent lending agreement with Countrywide Home Loans in California. Countrywide Home Loans purchased all of these loans shortly after they were funded. All of the loans involved in the schemes went into default, and the lenders either foreclosed on the homes or took other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties.

Scott’s involvement in the business included attending closings and signing fraudulent documents, receiving checks for fraudulent loan proceeds, depositing those checks to corporate bank accounts, obtaining cashiers’ checks to pay co-conspirators, and directing others in the disbursements to be made from the corporations. As part of the Windsor Village transactions, Scott, at Penn’s direction, added the names of investors to bank accounts of numerous entities and forged their signatures on bank account signature cards, to make it appear that the investors had assets which they did not have. Scott’s sentence reflected her involvement in approximately 130 fraudulent loans (including all 97 Windsor Village loans). The total amount of those loans was $14,931,300.00. Her total fraud loss was calculated at $6,149,300.00.

Stephen Scott Brown’s participation included filling out false loan applications, obtaining false documents, obtaining inflated appraisals, and submitting the fraudulent loan packages to the lenders, knowing the documents to be false. Brown received $1,500-2,000 for each fraudulent loan which he brokered. He also assisted in funding some of the fraudulent down payments. Stephen Scott Brown’s sentence reflected his involvement in 43 fraudulent loans, including the first 11 Windsor Village loans. The total amount of those loans was $6,575,300.00. The actual loss was calculated at $2,793,412.64.

According to Assistant United States Attorney Susan Heckard Dowd, who prosecuted these cases for the government, Circuit Judge Hamilton also ordered Penn, Scott and Brown to serve three years on supervised release following their incarceration and make restitution as follows:

Penn: $11,411,722.32
Scott: $2,793,412.64
Brown: $11,122,891.82

NEWARK, NJ—A former New Jersey loan officer was sentenced today to 70 months in prison in connection with a mortgage fraud and property-flipping scheme involving rental properties in Paterson, NJ ., United States Attorney Paul J Fishman announced. Amer Mir, 42, of Jersey City, NJ ., was previously convicted in December 2009 after a five-week jury trial of wire fraud and conspiracy to commit wire fraud before United States 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: While a loan officer at Jersey City-based United Home Mortgage Co ., Mir conspired to originate fraudulent mortgage loans that were used to finance and refinance the purchase of two- and three-family rental properties in Paterson, NJ. by borrowers who could not afford those loans.

During late 2003 through early 2005, Mir routinely overstated borrowers’ assets when taking their loan applications. In addition, he directed the creation of false letters concerning the borrowers’ credit histories. He received $200,000 in commissions once the fraudulent loans closed, as well as substantial cash payments from one of the ringleaders of the scheme.

And Judge Linares found that Mir lied to law enforcement prior to being charged and then perjured himself repeatedly while testifying at trial. In addition to the prison term, Mir was sentenced to three years of supervised release, ordered to pay $2,341,937.82 in restitution, and required to forfeit $210,000 in proceeds of the scheme. Mir’s case is part of an ongoing investigation by the United States Department of Housing and Urban Development Office of Inspector General (HUD-OIG), the FBI, the United States 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 convictions of current or former New Jersey residents, including: Michael Eliasof, a former real estate agent who helped orchestrate the scheme; Gerald Carti, a former loan officer and shareholder of United States Mortgage Corp. who originated fraudulent mortgage loans during the scheme; Frederick Ugwu, a real estate investor who sold many Paterson properties during the scheme; Norman Barna, who like Ugwu sold many Paterson properties through the scheme; William Ottaviano, an appraiser who misstated the condition of many of the Paterson properties involved in the scheme; 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. Ugwu was convicted at the 2009 trial for his role in the scheme, and Judge Linares recently sentenced him to 50 months in prison and ordered him to pay more than $1.6 million in restitution and forfeit more than $1.75 million in proceeds from the scheme.

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. United States 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 United States 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 United States Attorney Mark E Coyne, Chief of the United States Attorney’s Appeals Division, and Assistant United States Attorney Matthew E Beck of the United States Attorney’s Economic Crimes Unit. Defense counsel: Gerald M Saluti, Esq ., Newark, NJ.

Reported by: FBI

TRENTON, NJ—A Marlboro, N.J., real estate developer admitted today to his role in an investment fraud conspiracy which embezzled nearly $1 million raised in connection with purported commercial real estate developments in New Jersey, U.S. Attorney Paul J. Fishman announced.

Allen Weiss, 60, of Marlboro, pleaded guilty to an information charging him with one count of conspiracy to commit wire fraud. Weiss entered his guilty plea before U.S. District Judge Anne E. Thompson in Trenton federal court.

According to the information to which the defendant pleaded guilty and statements made in court:

Weiss admitted that he conspired with others from January 2009 to February 2010 in a scheme to embezzle investment funds he raised in connection with purported commercial real estate developments. Weiss and his co-conspirators founded a series of holding corporations to solicit investments to develop commercial real estate, including professional services locations for physicians in Holdmel, Hazlet, and Neptune, N.J. Weiss admitted that he and his coconspirators embezzled nearly $1 million in investments funds contributed by victims toward the projects. He also admitted that he lied to those and other victims to raise additional funds, which Weiss and his co-conspirators spent on personal expenses. Weiss pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of 20 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, for the investigation leading to the guilty plea.

The government is represented by Assistant U.S. Attorney André M. Espinosa of the U.S. Attorney’s Office Economic Crimes 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.

Defense counsel: Robert A. Honecker, Jr., Esq., Ocean, N.J.

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.

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.

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.

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.

LAS VEGAS—A former Lake Las Vegas resident who convinced persons in the United States and Japan to invest over $26 million in mining projects in South America, Nevada, and California and a real estate project in Arizona was sentenced today to six-and-a-half years in federal prison and ordered to pay $23.5 million in restitution to the victims, announced Daniel G. Bogden, United States Attorney for Nevada.

Alberto DoCouto, 68, a former resident of Lake Las Vegas in Henderson, Nevada, was sentenced by U.S. District Judge James C. Mahan. DoCouto pleaded guilty in June 2010 to securities fraud.

“The defendant willfully and knowingly made false promises and representations regarding mining and real estate projects and induced persons to provide him with money which he used for his personal enrichment,” said U.S. Attorney Bogden. The sentencing judge found today that Mr. DoCouto was delusional and not generally remorseful.

From about 2001 to 2007, DoCouto created numerous limited liability companies and corporations, and told investors that he and his companies were engaged in exploring and developing a series of lucrative mining claims in Peru, Guyana, California, and Nevada. DoCouto told investors that the mines held valuable precious metals such as gold and diamonds worth billions of dollars, and persuaded them to invest millions of dollars in the alleged projects in exchange for shares of stock, promissory notes and investment contracts in the companies. DoCouto repeatedly represented to the investors that their monies were needed to bring the projects to fruition. In fact, DoCouto’s companies and projects were a façade; the shares of stock that the investors thought they owned in DoCouto’s companies were worthless; and none of the mining projects were developed. DoCouto instead diverted and converted the investors’ funds for his own personal enrichment, including for the purchase of an opulent 6,000 square foot home at Lake Las Vegas and several luxury automobiles, all of which were seized and forfeited by authorities. After the purported mining projects failed, DoCouto solicited funds from investors in Canada, Kuwait, and elsewhere for a real estate development project in Arizona. DoCouto obtained hundreds of thousands of dollars from investors to run water to the property and to develop the project, but again, he converted much of the money for his own personal purposes, including to pay the mortgage on his home, to pay for lavish home improvements, to make payments to a riding stable, and for various cash expenditures.
The case was investigated by the FBI, with assistance from the United States Bureau of Land Management, and prosecuted by Assistant United States Attorneys Timothy S. Vasquez and Nicholas Dickinson.

Real Estate Investor Indicted for Mail Fraud

LITTLE ROCK—Jane W. Duke, United States Attorney for the Eastern District of Arkansas, announced that Mark Madison, age 37, a licensed agent for a stock broker, was indicted today by a federal grand jury. The indictment charges Madison with 23 counts of wire fraud and 17 counts of mail fraud. Each count carries a statutory penalty of no more than 20 years incarceration and/or a fine of $250,000.

According to the indictment, Madison solicited funds from his clients for several different investments. However, instead of investing the funds as promised Madison used $1,129,457 of the funds for his own personal benefit, including payment of the mortgage on his personal residence, country club dues and expenses, personal tax obligations, credit card payments, and repayment of personal and business loans.

The indictment details five different investments Madison promised to make for his clients, including the capital funding for a healthcare company; loans to a businessman in Utah; bond investments; investment in establishing a trading platform; and investment in an oil well in Australia.

The investigation was conducted by the Little Rock Field Office of the Federal Bureau of Investigation. The Arkansas Securities Department assisted the FBI and the United States Attorney’s Office during the investigation. This case is being prosecuted by Senior Legal Advisor Michael D. Johnson.

An indictment contains only allegations and is not evidence of guilt. The defendant is presumed innocent until and unless proven guilty.

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

Sherman, Texas – 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.