Early today in federal court, the founder of Bixby Energy Systems, Inc., a
Ramsey-based alternative energy company, was indicted for lying to investors in
an effort to induce them to commit large sums of money to the business. Robert
Allen Walker, age 69, of Ramsey, Minnesota, was charged in a superseding
indictment with nine counts of mail fraud, five counts of wire fraud, four
counts of securities fraud, and one count of conspiracy to commit mail fraud.
These charges were added to Walker’s prior charge of one count of conspiracy to
commit securities fraud. That charge was filed against him by way of indictment
on December 20, 2011.
From 2001 to 2011, Walker was the president, chief executive officer, and
chairman of the board at Bixby Energy. In that capacity, he allegedly raised
more than $43 million from at least 1,800 investors by offering company
securities based on false or misleading information about 1) the payment of
salaries and commissions to Bixby officers and directors; 2) the operational
capability of Bixby’s core product, a coal gasification machine; and 3) the
prospect of conducting an initial public stock offering. Walker also allegedly
concealed from investors that new investor money was being used to make payments
to existing investors and was being diverted to fund Walker’s lavish
lifestyle.
To further his fraud, Walker purportedly told investors that Bixby officers
and directors would not be compensated for selling company securities but then
directed payments of at least $3 million to a company officer for doing just
that. From those payments, the officer then reportedly kicked back more than
$600,000 to Walker. This “commission sharing” arrangement was not only concealed
from investors but from the company’s board of directors. Walker also made
repeated misstatements regarding the capability of the company’s coal
gasification machine, characterizing it as “proven” and “ready for market,”
when, in fact, the technology had never worked, and the machine had substantial
defects. Moreover, the indictment alleges that Walker told investors the company
was going to conduct an initial public offering of its stock in the near future,
when, in truth, he knew it could not be done because, among other things, the
company could not obtain audited financial statements.
On February 28, 2012, Gary Albert Collyard pleaded guilty to conspiring to
mislead investors in an effort to induce them into committing large sums of
money to Bixby. Specifically, he pleaded guilty to one count of conspiracy to
commit securities fraud and one count of conspiracy to commit bank fraud. From
2006 through May 2011, Collyard was a broker or finder of investors for Bixby
and was responsible for raising funds for Bixby.
In December 2011, Bixby Energy Systems admitted defrauding investors of
between $2.5 and $7 million and took responsibility for the acts of its former
officers and agents. In September 2011, Dennis Luverne Desender, who was a
consultant and the former acting chief financial officer for Bixby Energy,
pleaded guilty to securities fraud, admitting he used manipulative and deceptive
practices in an effort to sell company securities.
If convicted, Walker faces a potential maximum penalty of 20 years in prison
on each charge, except for the conspiracy to commit securities fraud count,
which has a potential maximum penalty of five years. All sentences will be
determined by a federal district court judge. This case is the result of an
investigation by the U.S. Postal Inspection Service, the Federal Bureau of
Investigation, and the Internal Revenue Service-Criminal Investigation Division.
It is being prosecuted by Assistant U.S. Attorney Christian S. Wilton.
An indictment is a determination by a grand jury that there is probable cause
to believe that offenses have been committed by a defendant. A defendant, of
course, is presumed innocent until he or she pleads guilty or is proven guilty
at trial.
Tuesday, June 19, 2012
Monday, June 18, 2012
Anchorage Woman Sentenced to Seven Years in Prison for Running Ponzi Scheme
Acting U.S. Attorney Kevin Feldis announced today that Samantha Delay-Wilson of
Anchorage was sentenced in federal court in Anchorage to 84 months in prison on
her conviction of defrauding investors and lenders of over $5 million during the
course of her more than decade-long Ponzi scheme. The 84-month sentence is to be
served in addition to the more than five years Delay-Wilson was sentenced to
serve on her separate state fraud convictions.
On June 15, 2012, Samantha Dorothy Delay-Wilson, 65, of Anchorage was sentenced by United States District Court Judge Russell Holland.
According to Assistant U.S. Attorney Aunnie Steward, who prosecuted the case, the following facts provided the basis for Delay-Wilson’s guilty plea:
Delay-Wilson carried out a Ponzi scheme for over a decade, defrauding 14 individuals by making false representations and promises and by providing false documents to victims regarding investments she would make on their behalf and regarding her assets and credentials. Delay-Wilson guaranteed investors a high-rate of return and made false claims regarding how she was going to invest the victims’ money, making different claims to different victims. She told victims she would invest their money in a global investment fund, European sub-prime loans, and an investment banking service company, when, in fact, she used the victims’ money for her personal expenses, to fund her lavish lifestyle, and to pay out earlier investors.
Acting U.S. Attorney Kevin Feldis stated, “The Department of Justice takes fraudulent investment schemes very seriously and works to deter this type of conduct through prosecution. Today’s prison sentence demonstrates that those who prey on the trust of others and defrauds investors will be caught and punished.” Investment schemes happen, even in Alaska, and we all need to be alert to such fraud.”
Mary Rook, Special Agent in Charge of the FBI in Alaska, stated, “Part of the FBI’s mission is to identify, deter, and disrupt significant financial crime targeting individuals, businesses, and industries within the United States. Financial crimes often leave the victims in financial ruin from which it may take years to recover.”
“It can be devastating when the financial well-being of an individual falls into the wrong hands through trickery and deceit,” said Kenneth J. Hines, the IRS Special Agent in Charge of Alaska. “Victims of financial fraud schemes like this suffer emotional pain as well as a devastating financial loss.”
Judge Holland commented that the scheme lasted “an amazing length of time” because of Delay-Wilson’s ability to manipulate people. Judge Holland also noted that the offense was aggravated by the fact that the money defrauded from several of the victims was their retirement money.
Mr. Feldis commended the Internal Revenue Service Criminal Investigations, the Federal Bureau of Investigation, and the Anchorage Police Department for the investigation that led to the successful prosecution of Delay-Wilson.
On June 15, 2012, Samantha Dorothy Delay-Wilson, 65, of Anchorage was sentenced by United States District Court Judge Russell Holland.
According to Assistant U.S. Attorney Aunnie Steward, who prosecuted the case, the following facts provided the basis for Delay-Wilson’s guilty plea:
Delay-Wilson carried out a Ponzi scheme for over a decade, defrauding 14 individuals by making false representations and promises and by providing false documents to victims regarding investments she would make on their behalf and regarding her assets and credentials. Delay-Wilson guaranteed investors a high-rate of return and made false claims regarding how she was going to invest the victims’ money, making different claims to different victims. She told victims she would invest their money in a global investment fund, European sub-prime loans, and an investment banking service company, when, in fact, she used the victims’ money for her personal expenses, to fund her lavish lifestyle, and to pay out earlier investors.
Acting U.S. Attorney Kevin Feldis stated, “The Department of Justice takes fraudulent investment schemes very seriously and works to deter this type of conduct through prosecution. Today’s prison sentence demonstrates that those who prey on the trust of others and defrauds investors will be caught and punished.” Investment schemes happen, even in Alaska, and we all need to be alert to such fraud.”
Mary Rook, Special Agent in Charge of the FBI in Alaska, stated, “Part of the FBI’s mission is to identify, deter, and disrupt significant financial crime targeting individuals, businesses, and industries within the United States. Financial crimes often leave the victims in financial ruin from which it may take years to recover.”
“It can be devastating when the financial well-being of an individual falls into the wrong hands through trickery and deceit,” said Kenneth J. Hines, the IRS Special Agent in Charge of Alaska. “Victims of financial fraud schemes like this suffer emotional pain as well as a devastating financial loss.”
Judge Holland commented that the scheme lasted “an amazing length of time” because of Delay-Wilson’s ability to manipulate people. Judge Holland also noted that the offense was aggravated by the fact that the money defrauded from several of the victims was their retirement money.
Mr. Feldis commended the Internal Revenue Service Criminal Investigations, the Federal Bureau of Investigation, and the Anchorage Police Department for the investigation that led to the successful prosecution of Delay-Wilson.
Annapolis Serial Fraudster Sentenced to Five Years in Prison for Over $2.6 Million in Losses from Real Estate, Business Loan, and Social Security Fraud Schemes
U.S. District Judge Marvin J. Garbis sentenced Winnie Joanne Barefoot, a/k/a
Winnie Jo Budzina, a/k/a Winnie JoAnne Conn, a/k/a Joanne Knopsnyder, a/k/a
Olivia JoAnne Morgan, a/k/a Olivia JoAnne Barefoot Morgan, age 59, of Annapolis,
Maryland, today to five years in prison, followed by five years of supervised
release, for bank fraud, arising from her use of numerous identities to
fraudulently obtain real estate and commercial loans, while applying for and
fraudulently receiving Social Security disability benefits. Judge Garbis also
ordered Barefoot to pay restitution, with the exact amount to be determined.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Special Agent in Charge Michael McGill of the Social Security Administration-Office of Inspector General, Philadelphia Field Division; Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service-Washington Division; and Special Agent in Charge Nicholas DiGiulio, Office of Investigations, Office of Inspector General of the Department of Health and Human Services.
“Today’s sentence illustrates the commitment of Postal Inspectors to vigorously pursue individuals who use U.S. Mail as part of these complex fraud schemes,” said Peter R. Rendina, Acting Inspector in Charge, U.S. Postal Inspection Service, Washington Division. “With today’s challenging economy, it is critical we make every effort to protect our financial institutions and consumers by ensuring the integrity of the U.S. mail. Our proud tradition of working with several law enforcement agencies, as in this case, demonstrates that individuals who commit fraud and threaten the financial health of our communities will be brought to justice.”
From December 2005 to August 2009, Barefoot used the identity of Olivia JoAnne Morgan and her daughter to engage in fraudulent real estate and loan transactions, including transactions involving three properties in Annapolis and a business entity she operated.
In late 2005 and early 2006, Barefoot acquired residential property at 3528 Narragansett Avenue in Annapolis in her daughter’s name. She used a forged document in which her daughter purportedly gave Barefoot power of attorney to apply for financing in the amount of $616,250 to purchase the property. In the application to the lender, Barefoot falsely represented her daughter’s assets and ability to pay for the property. The daughter never occupied the property, the property went into foreclosure, and the lender lost $415,000.
During the summer of 2006, Barefoot also acquired property at 896 Coachway, The Downs, in Annapolis. She applied for a first and second mortgage loans in the amounts of $780,000 and $195,000, respectively, using the identity Olivia JoAnne Morgan. She falsely represented her income and assets to the lender and that she intended to use this as her primary residence. Although her daughter and granddaughter briefly occupied this residence in September-October of that year, the property likewise went into foreclosure and the lender lost $276,000.
In February 2007, Barefoot used a false Social Security number to apply to a bank to increase an existing home equity credit line from $1.3 million to $2.1 million on property at 1588 Eaton Way in The Downs, Annapolis, where she resided from 2002 to 2009 with a man whom she falsely represented to be her husband. Barefoot falsely represented in the loan application that she and her “husband” each had monthly income of $25,000 and that her net worth was over $10 million. Barefoot withdrew all of the credit—about $800,000—from the increased line of credit. When she and the purported husband stopped making payments on the loan, the property went into foreclosure, and the bank lost $700,000, plus attorney’s fees and foreclosure costs.
During the time of these fraudulent schemes, Barefoot sought and fraudulently obtained supplemental security income from the Social Security Administration (SSA), claiming that she was disabled beginning in 1997 due to back problems. To obtain the benefits, Barefoot falsely: stated that she lived at a PO Box address in Crownsville, Maryland; denied ever having been convicted of a felony, when, in fact, she was arrested in 1980 and convicted of federal and state felony offenses; and represented that she had no resources nor received any type of income. Barefoot was ultimately approved for disability benefits in April 2007 and fraudulently received more than $26,000 in benefits. In December 2008, Barefoot falsely represented to SSA representatives investigating her eligibility for benefit payments that she lived alone at 896 Coachway and did not own the house and that “Olivia Joanne Morgan” was her sister, who was married to the man who resided at 1588 Eaton Way. Barefoot eventually returned the $26,000 in Social Security benefits that she unlawfully obtained.
In February 2007 and September 2008, at about the same time that she applied for and received Social Security disability benefits, Barefoot obtained two commercial lines of credit loans of $250,000 and $120,000 to finance a hyperbaric oxygen chamber business. On the first application she used a false Social Security number and falsely represented that income and the combined assets for herself and her purported husband were over $12 million; and that the value of the Eaton Way property was $4 million and that it was unencumbered. In the second application, she falsely represented that her monthly income was $30,861; annual sales from the business were $1.1 million; and that she had not filed bankruptcy in the past 10 years, although in fact she filed bankruptcy in 1999.
Finally, beginning sometime in January 2008 through at least August 2010, Barefoot operated another hyperbaric oxygen chamber business, Advanced Hyperbaric Oxygen LLC. During that time period, she fraudulently billed for physician hyperbaric oxygen therapy sessions and physician evaluation and management services when no such physician services were provided. These fraudulent billings caused a loss to Medicare of $75,814; to CareFirst BlueCross BlueShield of $433,956; to Aetna of $354,736; and to Humana of $7,924, for a total of at least $872,430.
The total amount of loss resulting from all of the fraud schemes described above is over $2,659,430.
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 www.justice.gov/usao/md/Mortgage-Fraud/index.html.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
United States Attorney Rod J. Rosenstein thanked the FBI, SSA-OIG, U.S. Postal Inspection Service, and HHS-OIG for their work in the investigation. Mr. Rosenstein commended Assistant United States Attorney P. Michael Cunningham, who prosecuted the case.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Special Agent in Charge Michael McGill of the Social Security Administration-Office of Inspector General, Philadelphia Field Division; Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service-Washington Division; and Special Agent in Charge Nicholas DiGiulio, Office of Investigations, Office of Inspector General of the Department of Health and Human Services.
“Today’s sentence illustrates the commitment of Postal Inspectors to vigorously pursue individuals who use U.S. Mail as part of these complex fraud schemes,” said Peter R. Rendina, Acting Inspector in Charge, U.S. Postal Inspection Service, Washington Division. “With today’s challenging economy, it is critical we make every effort to protect our financial institutions and consumers by ensuring the integrity of the U.S. mail. Our proud tradition of working with several law enforcement agencies, as in this case, demonstrates that individuals who commit fraud and threaten the financial health of our communities will be brought to justice.”
From December 2005 to August 2009, Barefoot used the identity of Olivia JoAnne Morgan and her daughter to engage in fraudulent real estate and loan transactions, including transactions involving three properties in Annapolis and a business entity she operated.
In late 2005 and early 2006, Barefoot acquired residential property at 3528 Narragansett Avenue in Annapolis in her daughter’s name. She used a forged document in which her daughter purportedly gave Barefoot power of attorney to apply for financing in the amount of $616,250 to purchase the property. In the application to the lender, Barefoot falsely represented her daughter’s assets and ability to pay for the property. The daughter never occupied the property, the property went into foreclosure, and the lender lost $415,000.
During the summer of 2006, Barefoot also acquired property at 896 Coachway, The Downs, in Annapolis. She applied for a first and second mortgage loans in the amounts of $780,000 and $195,000, respectively, using the identity Olivia JoAnne Morgan. She falsely represented her income and assets to the lender and that she intended to use this as her primary residence. Although her daughter and granddaughter briefly occupied this residence in September-October of that year, the property likewise went into foreclosure and the lender lost $276,000.
In February 2007, Barefoot used a false Social Security number to apply to a bank to increase an existing home equity credit line from $1.3 million to $2.1 million on property at 1588 Eaton Way in The Downs, Annapolis, where she resided from 2002 to 2009 with a man whom she falsely represented to be her husband. Barefoot falsely represented in the loan application that she and her “husband” each had monthly income of $25,000 and that her net worth was over $10 million. Barefoot withdrew all of the credit—about $800,000—from the increased line of credit. When she and the purported husband stopped making payments on the loan, the property went into foreclosure, and the bank lost $700,000, plus attorney’s fees and foreclosure costs.
During the time of these fraudulent schemes, Barefoot sought and fraudulently obtained supplemental security income from the Social Security Administration (SSA), claiming that she was disabled beginning in 1997 due to back problems. To obtain the benefits, Barefoot falsely: stated that she lived at a PO Box address in Crownsville, Maryland; denied ever having been convicted of a felony, when, in fact, she was arrested in 1980 and convicted of federal and state felony offenses; and represented that she had no resources nor received any type of income. Barefoot was ultimately approved for disability benefits in April 2007 and fraudulently received more than $26,000 in benefits. In December 2008, Barefoot falsely represented to SSA representatives investigating her eligibility for benefit payments that she lived alone at 896 Coachway and did not own the house and that “Olivia Joanne Morgan” was her sister, who was married to the man who resided at 1588 Eaton Way. Barefoot eventually returned the $26,000 in Social Security benefits that she unlawfully obtained.
In February 2007 and September 2008, at about the same time that she applied for and received Social Security disability benefits, Barefoot obtained two commercial lines of credit loans of $250,000 and $120,000 to finance a hyperbaric oxygen chamber business. On the first application she used a false Social Security number and falsely represented that income and the combined assets for herself and her purported husband were over $12 million; and that the value of the Eaton Way property was $4 million and that it was unencumbered. In the second application, she falsely represented that her monthly income was $30,861; annual sales from the business were $1.1 million; and that she had not filed bankruptcy in the past 10 years, although in fact she filed bankruptcy in 1999.
Finally, beginning sometime in January 2008 through at least August 2010, Barefoot operated another hyperbaric oxygen chamber business, Advanced Hyperbaric Oxygen LLC. During that time period, she fraudulently billed for physician hyperbaric oxygen therapy sessions and physician evaluation and management services when no such physician services were provided. These fraudulent billings caused a loss to Medicare of $75,814; to CareFirst BlueCross BlueShield of $433,956; to Aetna of $354,736; and to Humana of $7,924, for a total of at least $872,430.
The total amount of loss resulting from all of the fraud schemes described above is over $2,659,430.
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 www.justice.gov/usao/md/Mortgage-Fraud/index.html.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
United States Attorney Rod J. Rosenstein thanked the FBI, SSA-OIG, U.S. Postal Inspection Service, and HHS-OIG for their work in the investigation. Mr. Rosenstein commended Assistant United States Attorney P. Michael Cunningham, who prosecuted the case.
Thursday, June 14, 2012
Allen Stanford Sentenced to 110 Years in Prison for Orchestrating $7 Billion Investment Fraud Scheme
R. Allen Stanford, the former board of directors chairman of Stanford International Bank (SIB), was sentenced today in Houston to a total of 110 years in prison for orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion from SIB to finance his personal businesses.
The sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; and Richard Weber, Chief of Internal Revenue Service Criminal Investigation (IRS-CI).
On March 6, 2012, Stanford, 62, was convicted on 13 of 14 counts by a federal jury following a six-week trial and approximately three days of deliberation. The jury also found that 29 financial accounts located abroad and worth approximately $330 million were proceeds of Stanford’s fraud and should be forfeited.
Stanford was sentenced by U.S. District Judge David Hittner. After considering all the evidence, including more than 350 victim impact letters that were sent to the court, Judge Hittner sentenced Stanford to 20 years for conspiracy to commit wire and mail fraud, 20 years on each of the four counts of wire fraud as well as five years for conspiring to obstruct a U.S. Securities and Exchange Commission (SEC) investigation and five years for obstruction of an SEC investigation. Those sentences will all run consecutively. He also received 20 years for each of the five counts of mail fraud and 20 years for conspiracy to commit money laundering which will run concurrent to the other sentences imposed today for a total sentence of 110 years.
As part of Stanford’s sentence, the court also imposed a personal money judgment of $5.9 billion,
which is an ongoing obligation for Stanford to pay back the criminal proceeds. The court found that it would be impracticable to issue a restitution order at this time. However, all forfeited funds recovered by the United States will be returned to the fraud victims and credited against Stanford’s money judgment.
According to court documents and evidence presented at trial, the vehicle for Stanford’s fraud was SIB, an offshore bank owned by Stanford and based in Antigua and Barbuda that sold certificates of deposit (CDs) to depositors. Stanford began operating the bank in 1985 in Montserrat, the British West Indies, under the name Guardian International Bank. He moved the bank to Antigua in 1990 and changed its name to Stanford International Bank in 1994. SIB issued CDs that typically paid a premium over interest rates on CDs issued by U.S. banks. By 2008, the bank owed its CD depositors more than $8 billion.
According to SIB’s annual reports and marketing brochures, the bank purportedly invested CD proceeds in highly conservative, marketable securities that were also highly liquid, meaning the bank could sell its assets and repay depositors very quickly. The bank also represented that all of its assets were globally diversified and overseen by money managers at top-tier financial institutions, with an additional level of oversight by SIB analysts based in Memphis, Tenn.
As shown at trial, this purported investment strategy and management of the bank’s assets was followed for only about 10-15 percent of the bank’s assets. Stanford diverted billions in depositor funds into various companies that he owned personally, in the form of undisclosed “loans.” Stanford was thus able to continue the operations of his personal businesses, which ran at a net loss each year totaling hundreds of millions of dollars, at the expense of depositors. These businesses were concentrated primarily in the Caribbean and included restaurants, a cricket tournament and various real estate projects. Evidence at trial established Stanford also used the misappropriated CD money to finance a lavish lifestyle, which included a 112-foot yacht and support vessels, six private planes and gambling trips to Las Vegas.
According to evidence presented at trial, Stanford continued the scheme by using sales from new CDs to pay existing depositors who redeemed their CDs. In 2008, when the financial crisis caused a slump in new CD sales and record redemptions, Stanford lied about personally investing $741 million in additional funds into the bank to strengthen its capital base. To support that false announcement, Stanford’s internal accountants inflated on paper the value of a piece of real estate SIB had purchased for $63.5 million earlier in 2008 by 5,000 percent to $3.1 billion, despite the fact there were no independent appraisals or improvements to the property.
The trial evidence also showed that Stanford perpetuated his fraud by paying bribes from a Swiss slush fund at Societe Generale to C.A.S. Hewlett, SIB’s auditor (now deceased), and Leroy King, the then-head of the Antiguan Financial Services Regulatory Commission.
In addition to Stanford, a grand jury in the Southern District of Texas previously indicted several of his alleged co-conspirators, including: James Davis, the former chief financial officer; Laura Holt, the former chief investment officer; Gil Lopez, the former chief accounting officer; Mark Kuhrt, the former controller; and King. Davis has pleaded guilty and faces up to 30 years in prison under the terms of his plea agreement. The trial of Holt, Kuhrt and Lopez, which was severed from Stanford’s trial, is scheduled to begin before Judge Hittner on Sept. 10, 2012. They are presumed innocent unless and until convicted through due process of law.
The investigation was conducted by the FBI’s Houston Field Office, the U.S. Postal Inspection Service, IRS-CI and the U.S. Department of Labor, Employee Benefits Security Administration. The case was prosecuted by Deputy Chief William Stellmach and Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section and former Assistant U.S. Attorney (AUSA) Gregg Costa of the Southern District of Texas. AUSA Kristine Rollinson of the Southern District of Texas and Trial Attorney Kondi Kleinman of the Asset Forfeiture and Money Laundering Section in the Justice Department’s Criminal Division assisted with the forfeiture proceeding, and AUSA Jason Varnado and Fraud Section Deputy Chief Jeffrey Goldberg assisted with the sentencing proceeding.
The sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; and Richard Weber, Chief of Internal Revenue Service Criminal Investigation (IRS-CI).
On March 6, 2012, Stanford, 62, was convicted on 13 of 14 counts by a federal jury following a six-week trial and approximately three days of deliberation. The jury also found that 29 financial accounts located abroad and worth approximately $330 million were proceeds of Stanford’s fraud and should be forfeited.
Stanford was sentenced by U.S. District Judge David Hittner. After considering all the evidence, including more than 350 victim impact letters that were sent to the court, Judge Hittner sentenced Stanford to 20 years for conspiracy to commit wire and mail fraud, 20 years on each of the four counts of wire fraud as well as five years for conspiring to obstruct a U.S. Securities and Exchange Commission (SEC) investigation and five years for obstruction of an SEC investigation. Those sentences will all run consecutively. He also received 20 years for each of the five counts of mail fraud and 20 years for conspiracy to commit money laundering which will run concurrent to the other sentences imposed today for a total sentence of 110 years.
As part of Stanford’s sentence, the court also imposed a personal money judgment of $5.9 billion,
which is an ongoing obligation for Stanford to pay back the criminal proceeds. The court found that it would be impracticable to issue a restitution order at this time. However, all forfeited funds recovered by the United States will be returned to the fraud victims and credited against Stanford’s money judgment.
According to court documents and evidence presented at trial, the vehicle for Stanford’s fraud was SIB, an offshore bank owned by Stanford and based in Antigua and Barbuda that sold certificates of deposit (CDs) to depositors. Stanford began operating the bank in 1985 in Montserrat, the British West Indies, under the name Guardian International Bank. He moved the bank to Antigua in 1990 and changed its name to Stanford International Bank in 1994. SIB issued CDs that typically paid a premium over interest rates on CDs issued by U.S. banks. By 2008, the bank owed its CD depositors more than $8 billion.
According to SIB’s annual reports and marketing brochures, the bank purportedly invested CD proceeds in highly conservative, marketable securities that were also highly liquid, meaning the bank could sell its assets and repay depositors very quickly. The bank also represented that all of its assets were globally diversified and overseen by money managers at top-tier financial institutions, with an additional level of oversight by SIB analysts based in Memphis, Tenn.
As shown at trial, this purported investment strategy and management of the bank’s assets was followed for only about 10-15 percent of the bank’s assets. Stanford diverted billions in depositor funds into various companies that he owned personally, in the form of undisclosed “loans.” Stanford was thus able to continue the operations of his personal businesses, which ran at a net loss each year totaling hundreds of millions of dollars, at the expense of depositors. These businesses were concentrated primarily in the Caribbean and included restaurants, a cricket tournament and various real estate projects. Evidence at trial established Stanford also used the misappropriated CD money to finance a lavish lifestyle, which included a 112-foot yacht and support vessels, six private planes and gambling trips to Las Vegas.
According to evidence presented at trial, Stanford continued the scheme by using sales from new CDs to pay existing depositors who redeemed their CDs. In 2008, when the financial crisis caused a slump in new CD sales and record redemptions, Stanford lied about personally investing $741 million in additional funds into the bank to strengthen its capital base. To support that false announcement, Stanford’s internal accountants inflated on paper the value of a piece of real estate SIB had purchased for $63.5 million earlier in 2008 by 5,000 percent to $3.1 billion, despite the fact there were no independent appraisals or improvements to the property.
The trial evidence also showed that Stanford perpetuated his fraud by paying bribes from a Swiss slush fund at Societe Generale to C.A.S. Hewlett, SIB’s auditor (now deceased), and Leroy King, the then-head of the Antiguan Financial Services Regulatory Commission.
In addition to Stanford, a grand jury in the Southern District of Texas previously indicted several of his alleged co-conspirators, including: James Davis, the former chief financial officer; Laura Holt, the former chief investment officer; Gil Lopez, the former chief accounting officer; Mark Kuhrt, the former controller; and King. Davis has pleaded guilty and faces up to 30 years in prison under the terms of his plea agreement. The trial of Holt, Kuhrt and Lopez, which was severed from Stanford’s trial, is scheduled to begin before Judge Hittner on Sept. 10, 2012. They are presumed innocent unless and until convicted through due process of law.
The investigation was conducted by the FBI’s Houston Field Office, the U.S. Postal Inspection Service, IRS-CI and the U.S. Department of Labor, Employee Benefits Security Administration. The case was prosecuted by Deputy Chief William Stellmach and Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section and former Assistant U.S. Attorney (AUSA) Gregg Costa of the Southern District of Texas. AUSA Kristine Rollinson of the Southern District of Texas and Trial Attorney Kondi Kleinman of the Asset Forfeiture and Money Laundering Section in the Justice Department’s Criminal Division assisted with the forfeiture proceeding, and AUSA Jason Varnado and Fraud Section Deputy Chief Jeffrey Goldberg assisted with the sentencing proceeding.
Wednesday, June 13, 2012
Tecumseh Man Ordered to Serve 51 Months in Prison and Pay Over $4.6 Million in Restitution for Health Care Fraud in Sales of Prosthetics
Lance E. Faulkner, 46, from Tecumseh, Oklahoma, was sentenced by United States
District Judge Timothy D. DeGiusti to serve 51 months in prison for health care
fraud in connection with sales of prosthetic limbs and components, announced
Sanford C. Coats, United States Attorney for the Western District of Oklahoma.
In addition, Judge DeGiusti ordered Faulkner to serve two years of supervised
release upon his release from prison, serve 104 hours of community service, and
pay $4,667,076.27 in restitution.
Faulkner owned and operated Heartland Orthotic Prosthetic Lab Inc., d/b/a Faulkner Prosthetic Designs of Oklahoma LLC (“Heartland”), located in Shawnee, Oklahoma. Heartland was in the business of providing durable medical equipment (DME), specifically, prosthetic limbs and related components. It was alleged that Faulkner billed Medicare and Medicaid for beneficiaries who did not have a prescription for the prosthetics from a licensed physician or other qualified health care provider. Instead, Faulkner submitted physician names and identification numbers to Medicare and Medicaid even though many of those physicians had never treated the patients or prescribed the prosthetic limbs. It was also alleged that Faulkner submitted claims to Medicare and Medicaid for expensive, computerized prosthetic limbs, when the beneficiaries actually received less sophisticated prosthetics or none at all.
Faulkner pled guilty to committing health care fraud on September 9, 2011. The sentencing hearing began on May 17, 2012, where Faulkner received the sentence of 51 months in prison, followed by two years of supervised release, and was ordered to perform 104 hours of community service. The hearing regarding the determination of restitution was continued until yesterday, where the court ordered Faulkner to pay $4,667,076.27 in restitution.
This case was the result of an investigation conducted by the Federal Bureau of Investigation and the Office of Inspector General for the United States Department of Health and Human Services. The case was prosecuted by Assistant U.S. Attorney Amanda Maxfield Green.
Faulkner owned and operated Heartland Orthotic Prosthetic Lab Inc., d/b/a Faulkner Prosthetic Designs of Oklahoma LLC (“Heartland”), located in Shawnee, Oklahoma. Heartland was in the business of providing durable medical equipment (DME), specifically, prosthetic limbs and related components. It was alleged that Faulkner billed Medicare and Medicaid for beneficiaries who did not have a prescription for the prosthetics from a licensed physician or other qualified health care provider. Instead, Faulkner submitted physician names and identification numbers to Medicare and Medicaid even though many of those physicians had never treated the patients or prescribed the prosthetic limbs. It was also alleged that Faulkner submitted claims to Medicare and Medicaid for expensive, computerized prosthetic limbs, when the beneficiaries actually received less sophisticated prosthetics or none at all.
Faulkner pled guilty to committing health care fraud on September 9, 2011. The sentencing hearing began on May 17, 2012, where Faulkner received the sentence of 51 months in prison, followed by two years of supervised release, and was ordered to perform 104 hours of community service. The hearing regarding the determination of restitution was continued until yesterday, where the court ordered Faulkner to pay $4,667,076.27 in restitution.
This case was the result of an investigation conducted by the Federal Bureau of Investigation and the Office of Inspector General for the United States Department of Health and Human Services. The case was prosecuted by Assistant U.S. Attorney Amanda Maxfield Green.
Repeat Fraudster Sentenced to Prison, Ordered to Pay More Than $2.6 Million for Scamming Morgan Stanley, Hotel Development Companies in Separate Frauds
A Teaneck, New Jersey man was sentenced today to 63 months in prison for two
separate fraud schemes—swindling Morgan Stanley Smith Barney LLC and two
individuals out of more than $200,000 while he was free on bail for the separate
$2.25 million fraud, U.S. Attorney for the District of New Jersey Paul J.
Fishman announced.
Moshe Butler, 33, previously pleaded guilty to an information charging him with committing bank fraud while he was on pre-trial release after pleading guilty to an information charging him with wire fraud. Butler entered his guilty pleas before U.S. District Judge William H. Walls, who also imposed the sentence today in Newark, N.J., federal court.
According to documents filed in this case and statements made in court:
Butler admitted that in summer 2011 he defrauded Morgan Stanley Smith Barney LLC (MSSB) out of approximately $37,417. In July 2011, Butler opened an investment account with Morgan Stanley in New York and was the sole signatory. The account allowed him to have immediate access to funds deposited by check. On August 12, 2011, Butler funded his MSSB account by depositing a $50,000 check and used the entire amount to cover the purchases of various securities and commodities option contracts. The purchases were largely unsuccessful and within five days, Butler lost his entire $50,000 investment as well as an additional $18,921.
On August 19, 2011, Butler deposited a $100,000 check into his MSSB account to cover the negative balance in the account. The $100,000 check Butler deposited was drawn against a bank account that Butler solely controlled, but which had been closed by the issuing bank more than two months earlier because Butler had written checks returned for insufficient funds. Butler took advantage of the fact that the funds were immediately available by withdrawing $7,000 in cash and purchasing numerous securities and commodities option contracts in his account. Those purchases were also unsuccessful and resulted in additional losses of $11,496. In October 2011, Butler deposited a $30,000 check to cover the losses in his MSSB account, but that check was also returned for insufficient funds.
Butler also admitted that, between November 2011 and March 2012, he fraudulently obtained $170,755 in money and legal services from two individuals, D.B. and C.W., and wrote them a series of bad checks.
Butler committed these acts while on pretrial release in connection with a scheme he committed between approximately 2008 and June 2009, defrauding multiple hotel and motel development companies out of more than $2.25 million. At the start of the scheme, Butler worked at a New Jersey-based company that sold mirrors and artwork to hotel and motel development companies. In this position, Butler was in regular contact with the purchasing agents at various development companies and was familiar with their purchasing procedures. Butler contacted many of these purchasing agents claiming to be working for one of two shell companies he controlled—SB Purchasing Group LLC and NI Group—and offering to sell flat panel televisions at a low cost with extended warranties, saying that his companies had been in business for years and had delivered thousands of televisions. At times, Butler claimed to be “John Savoy” and would often follow up with a call from his real persona, suggesting the customer buy from Savoy.
More often than not, customers received only a portion or none of the televisions they purchased. And when they requested a refund of the money they had paid him, Butler often sent the customers checks that were returned for insufficient funds.
In addition to the prison term, Judge Walls sentenced Butler to serve three years of supervised release and to pay restitution of $2,259,311.35 in the TV scheme and $207,375.25 in the check scheme. He was also ordered to forfeit an additional $208,172.21.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigation leading to today’s sentence.
The government is represented by Assistant U.S. Attorney Matthew E. Beck, deputy chief of the U.S. Attorney’s Office General Crimes Unit in Newark.
This law enforcement action is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF 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 on the task force, visit www.stopfraud.gov.
Moshe Butler, 33, previously pleaded guilty to an information charging him with committing bank fraud while he was on pre-trial release after pleading guilty to an information charging him with wire fraud. Butler entered his guilty pleas before U.S. District Judge William H. Walls, who also imposed the sentence today in Newark, N.J., federal court.
According to documents filed in this case and statements made in court:
Butler admitted that in summer 2011 he defrauded Morgan Stanley Smith Barney LLC (MSSB) out of approximately $37,417. In July 2011, Butler opened an investment account with Morgan Stanley in New York and was the sole signatory. The account allowed him to have immediate access to funds deposited by check. On August 12, 2011, Butler funded his MSSB account by depositing a $50,000 check and used the entire amount to cover the purchases of various securities and commodities option contracts. The purchases were largely unsuccessful and within five days, Butler lost his entire $50,000 investment as well as an additional $18,921.
On August 19, 2011, Butler deposited a $100,000 check into his MSSB account to cover the negative balance in the account. The $100,000 check Butler deposited was drawn against a bank account that Butler solely controlled, but which had been closed by the issuing bank more than two months earlier because Butler had written checks returned for insufficient funds. Butler took advantage of the fact that the funds were immediately available by withdrawing $7,000 in cash and purchasing numerous securities and commodities option contracts in his account. Those purchases were also unsuccessful and resulted in additional losses of $11,496. In October 2011, Butler deposited a $30,000 check to cover the losses in his MSSB account, but that check was also returned for insufficient funds.
Butler also admitted that, between November 2011 and March 2012, he fraudulently obtained $170,755 in money and legal services from two individuals, D.B. and C.W., and wrote them a series of bad checks.
Butler committed these acts while on pretrial release in connection with a scheme he committed between approximately 2008 and June 2009, defrauding multiple hotel and motel development companies out of more than $2.25 million. At the start of the scheme, Butler worked at a New Jersey-based company that sold mirrors and artwork to hotel and motel development companies. In this position, Butler was in regular contact with the purchasing agents at various development companies and was familiar with their purchasing procedures. Butler contacted many of these purchasing agents claiming to be working for one of two shell companies he controlled—SB Purchasing Group LLC and NI Group—and offering to sell flat panel televisions at a low cost with extended warranties, saying that his companies had been in business for years and had delivered thousands of televisions. At times, Butler claimed to be “John Savoy” and would often follow up with a call from his real persona, suggesting the customer buy from Savoy.
More often than not, customers received only a portion or none of the televisions they purchased. And when they requested a refund of the money they had paid him, Butler often sent the customers checks that were returned for insufficient funds.
In addition to the prison term, Judge Walls sentenced Butler to serve three years of supervised release and to pay restitution of $2,259,311.35 in the TV scheme and $207,375.25 in the check scheme. He was also ordered to forfeit an additional $208,172.21.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigation leading to today’s sentence.
The government is represented by Assistant U.S. Attorney Matthew E. Beck, deputy chief of the U.S. Attorney’s Office General Crimes Unit in Newark.
This law enforcement action is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF 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 on the task force, visit www.stopfraud.gov.
Co-Owner of Houston-Area Home Health Care Agency Sentenced to 108 Months in Prison for Role in $5 Million Medicare Fraud
The former co-owner of a Houston-area home health care company was sentenced
today in Houston to 108 months in prison for his participation in a $5.2 million
Medicare fraud scheme, announced the Department of Justice, the FBI, and the
Department of Health and Human Services (HHS).
Clifford Ubani, a former co-owner and chief financial officer at Family Healthcare Group, was sentenced by U.S. District Judge Nancy Atlas in the Southern District of Texas. In addition to his prison term, Ubani was sentenced to three years of supervised release and was ordered to pay $4.2 million in restitution jointly and severally with his co-defendants. In January 2011, Ubani pleaded guilty to one count of conspiracy to commit health care fraud, one count of conspiracy to pay illegal kickbacks to patient recruiters, and 16 counts of paying such illegal kickbacks.
According to court documents and other evidence presented to the court, Family Healthcare Group, a Houston home health care company, purported to provide skilled nursing to Medicare beneficiaries. According to court documents and other evidence, Clifford Ubani paid co-conspirators to recruit Medicare beneficiaries for the purpose of Family Healthcare Group filing claims with Medicare for skilled nursing that was medically unnecessary or not provided. Ubani’s co-conspirators would then falsify documents to support the fraudulent payments from Medicare. Ubani also paid co-conspirators to sign fraudulent plans of care stating that the beneficiaries needed home health care when, in fact, they knew the beneficiaries were not home-bound and not in need of skilled nursing.
Ubani is the eighth defendant sentenced in connection with this scheme. Two other defendants, co-owner Princewill Njoku and patient recruiter Cynthia Garza Williams, await sentencing.
The sentences were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office; Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of the Inspector General (HHS-OIG); and the Texas Attorney General’s Medicaid Fraud Control Unit (OAG-MFCU).
This case is being prosecuted by Trial Attorney Charles D. Reed and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG, Texas OAG-MFCU, and the Federal Railroad Retirement Board-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.
Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,330 defendants who collectively have falsely billed the Medicare program for more than $4 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.
Clifford Ubani, a former co-owner and chief financial officer at Family Healthcare Group, was sentenced by U.S. District Judge Nancy Atlas in the Southern District of Texas. In addition to his prison term, Ubani was sentenced to three years of supervised release and was ordered to pay $4.2 million in restitution jointly and severally with his co-defendants. In January 2011, Ubani pleaded guilty to one count of conspiracy to commit health care fraud, one count of conspiracy to pay illegal kickbacks to patient recruiters, and 16 counts of paying such illegal kickbacks.
According to court documents and other evidence presented to the court, Family Healthcare Group, a Houston home health care company, purported to provide skilled nursing to Medicare beneficiaries. According to court documents and other evidence, Clifford Ubani paid co-conspirators to recruit Medicare beneficiaries for the purpose of Family Healthcare Group filing claims with Medicare for skilled nursing that was medically unnecessary or not provided. Ubani’s co-conspirators would then falsify documents to support the fraudulent payments from Medicare. Ubani also paid co-conspirators to sign fraudulent plans of care stating that the beneficiaries needed home health care when, in fact, they knew the beneficiaries were not home-bound and not in need of skilled nursing.
Ubani is the eighth defendant sentenced in connection with this scheme. Two other defendants, co-owner Princewill Njoku and patient recruiter Cynthia Garza Williams, await sentencing.
The sentences were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office; Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of the Inspector General (HHS-OIG); and the Texas Attorney General’s Medicaid Fraud Control Unit (OAG-MFCU).
This case is being prosecuted by Trial Attorney Charles D. Reed and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG, Texas OAG-MFCU, and the Federal Railroad Retirement Board-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.
Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,330 defendants who collectively have falsely billed the Medicare program for more than $4 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.
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