Kansas City Business Owners Indicted for Defrauding Debt-Stressed Clients

KANSAS CITY, MO—Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that the owners and operators of a Kansas City, Missouri firm that promised to help financially strapped clients get out of debt have been indicted by a federal grand jury for defrauding their clients, causing some of them to lose their homes and vehicles.
John Lee Norris, 42, and Julie Tina Hatcher, 37, both of Kansas City, were charged in a 21-count indictment that was returned under seal by a federal grand jury on February 19, 2013. The indictment was unsealed and made public today upon the arrests and initial court appearances of Norris and Hatcher.
According to the indictment, Norris and Hatcher operated Reaper Investment Partners LLC; in August 2011 they formed Death Productions LP. Between August 2010 and April 2012, the indictment alleges, Norris and Hatcher participated in a conspiracy to defraud homeowners and other debtors who were in financial distress (as well as their victims’ lenders and the Federal Housing Administration).
Norris and Hatcher allegedly recruited and targeted homeowners and others who were in financial difficulties with promises that they would be rescued from their financial problems, including foreclosure. Norris and Hatcher allegedly told victims that Reaper Investment Partners (RIP) would refinance the homeowners’ existing mortgages for a lower amount and at an interest rate of three percent.
As part of their scheme, the indictment says, RIP would control title to the homeowners’ properties. The homeowners would stop making payments to their lenders and instead make their monthly payments to RIP. The homeowners gave Norris and Hatcher power of attorney. Homeowners did not communicate with their lenders, the indictment says, even when they received telephone calls, late notices, and foreclosure notices from their lenders. Instead, homeowners forwarded the notices and other documents to Norris and Hatcher. When homeowners contacted Norris and Hatcher to report that they had received notice that their homes were being foreclosed, the defendants reassured them by telling them not to worry, as that was part of the process.
Norris and Hatcher allegedly told some of their client-victims that one or both of them were lawyers, had legal experience, or were able to practice law. They allegedly said that RIP would draft, serve, file, and record legal forms, pleadings, and other documents and would conduct necessary legal processes, contact the relevant parties, and implement administrative procedures. Norris and Hatcher allegedly mailed documents to the homeowners’ lenders, demanding the lenders “cease and desist” collection activities.
Norris and Hatcher also allegedly told individuals who were in financial difficulties due to credit card debt, vehicle loans, and other debt that they would refinance the debt for a lower amount and interest rate and lower their monthly payments. These clients, likewise, would stop making payments to their lenders and instead make their monthly payments to RIP.
The federal indictment refers to victims from Lee’s Summit, Missouri; St. Joseph, Missouri; Gardner, Kansas; Paducah, Kentucky; and North Wales, Pennsylvania. Victims and lenders suffered losses as a result of the conspiracy, including the loss of homes and vehicles (a specific dollar amount of the total loss is not identified in the indictment).
In addition to the conspiracy, Norris and Hatcher are charged together with nine counts of mail fraud and 10 counts of wire fraud.
Hatcher is also charged with one count of Social Security disability fraud. Hatcher allegedly failed to report her work activities and income while she received Social Security disability insurance benefits from August 2010 through April 2012.
Dickinson cautioned that the charges contained in this indictment are simply accusations and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
This case is being prosecuted by Senior Litigation Counsel Linda Marshall and Assistant U.S. Attorney Brian P. Casey. It was investigated by the FBI, the U.S. Secret Service, the U.S. Department of Housing and Urban Development-Office of Inspector General, the Social Security Administration-Office of Inspector General, the Johnson County, Kansas District Attorney’s Office and the Kansas City, Missouri Police Department.
This news release, as well as additional information about the office of the United States Attorney for the Western District of Missouri, is available online at http://www.justice.gov/usao/mow/index.html.

Former Eden Prairie Resident Sentenced for Role in $8.9 Million Mortgage Fraud

MINNEAPOLIS—Earlier today in federal court in St. Paul, a 28-year-old North Carolina woman was sentenced for her role in a scheme that defrauded mortgage lenders out of approximately $8.9 million. United States District Court Judge Susan Richard Nelson sentenced Ashley Elizabeth Prasil, formerly of Eden Prairie, to three years of probation and ordered her to perform 150 hours of community service on one count of conspiracy to commit wire fraud. Prasil was also ordered to pay more than $2.2 million in restitution to the lenders victimized through the scheme. Prasil was charged via Information on April 21, 2011, and pleaded guilty on May 19, 2011.
Prasil admitted that from December 18, 2006 through December 2007, she conspired with others to defraud mortgage lenders who provided mortgages at the Cloud 9 Sky Flats (“Cloud 9”), a Minnetonka condominium development. The scheme involved finding buyers to apply for mortgage loans to purchase units in the development, with each buyer receiving a kickback of approximately 30 percent of the reported purchase price. The loan applications and forms submitted to the lenders did not disclose these kickbacks, resulting in buyers and others secretly getting a portion of the loan amounts back after closing. The kickbacks were returned to the buyers through an account controlled by Prasil’s co-defendant Sheri Delich, after a portion had been skimmed off for co-conspirators.
On February 15, 2013, Delich, age 47, of Apple Valley, was ordered to serve five years of probation and six months of home confinement on one count of conspiracy to commit mortgage fraud and one count of money laundering. Judge Nelson also sentenced former realtor My Dinh Lam, age 32, of Minneapolis, to three years of probation on one count of conspiracy to commit wire fraud for his role in finding buyers for the program.
More than 40 Cloud 9 units were sold through the scheme, and more than 80 percent of the loans have since defaulted.
Under the sentencing guidelines, Prasil could have been sentenced to more than two years in prison. The court noted, however, that Prasil had provided assistance to the government and that her sentence was being reduced because of her cooperation in the investigation.
This case was the result of an investigation by the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorney Robert M. Lewis.

Former Owner of Lansing-Area Chain of Coffee Stores Sentenced to Federal Prison

GRAND RAPIDS, MI—U.S. District Judge Robert Holmes Bell sentenced David Lewis Many, 42, formerly of Lansing, Michigan, to 63 months in federal prison for his fraud scheme that bilked investors in his chain of coffee stores of over $1 million. The court further ordered Many to make restitution to his victims in the amount of $1,515,896.
“Our economy depends upon investors who are willing to assume legitimate business risks after receiving honest representations. Individuals like Mr. Many, who misrepresent the truth so that they can personally gain from the hard-earned money of honest individuals, will be prosecuted to the fullest extent of the law,” said U.S. Attorney Patrick A. Miles, Jr.
Many’s scheme began in 2006 when he started his first CornerStone Coffee Store with money from relatives, promising them employment that he never delivered. Many then attracted investors in additional stores by misrepresenting his personal net worth, claiming he gained special retail computer software skills while working as an engineer for Microsoft, representing that his business was profitable, and telling investors that he would not draw a salary from the company. In reality, the stores were losing money, and Many was drawing significant funds from the company to spend on an extravagant lifestyle that included luxury cars, an executive-style home, and entertainment at local gentlemen’s clubs.
By 2007, Many began selling franchise locations in an effort to satisfy obligations to prior investors and to try to keep his stores afloat. Many represented that a franchisee’s investment would be placed into an escrow account and used solely for the costs of constructing the franchise location. In reality, Many defrauded the franchisees by obtaining hundreds of thousands of dollars up front and then using the money for his personal benefit and to operate his existing corporate locations. The last franchisee invested over $280,000 for his store location but received nothing but a building with stud-walls and a dirt floor. Many then fled to Texas.
The Lansing Resident Agency of the Federal Bureau of Investigation conducted the investigation. Assistant U.S. Attorney Ronald M. Stella conducted the prosecution.

Former Executive of Beverly Company Sentenced to Prison for Securities Fraud

BOSTON—The former CFO of Locateplus Holdings Corporation was sentenced yesterday for his role in a number of fraudulent schemes which artificially inflated his company’s assets and revenues.
James C. Fields, 45, of Brookline, was sentenced by U.S. District Judge Douglas P. Woodlock to five years in prison, followed by three years of supervised release, and was ordered to pay restitution to his victims. In November 2012, Fields was convicted by a jury, after a three-week trial, for conspiracy, securities fraud, false statements to company auditors, false statements in required SEC filings, wrongful certifications of SEC filings, aggravated identity theft, and money laundering.
Beginning in about 2002, Fields, the former chief financial officer of Locateplus Holdings Corporation and later acting chief executive officer, pursued several fraudulent schemes intended to artificially inflate Locateplus’ assets and revenues. Locateplus was a publicly traded company based in Beverly, Massachusetts, that sold access to personal data and other information. Working with Jon Latorella, the former CEO of the company, Fields engaged in a series of fraudulent activities, including:

• Creating a fake company called Andover Secure Resources, using the identity of a deceased man as the head of Andover, and then fabricating a loan transaction between Andover and Locateplus under which Andover supposedly borrowed over $1 million from Locateplus at a favorable interest rate;
• Creating another fake company called Omni Data Services and opening bank accounts and a post office box in its name and then falsifying revenue streams to make it look like Omni Data was paying Locateplus millions of dollars under the terms of a fake contract;
• Deceiving the SEC and other regulatory authorities to avoid registering securities being sold by a company called Paradigm Tactical Products, including fabricating Paradigm investors using the identities of Fields’ acquaintances, girlfriend, skydiving instructors, and two deceased men; and
• Routinely deceiving Locateplus’ independent accountants and the SEC about the nature of Locateplus’s revenues and assets in order to keep these fraudulent schemes going and to attract investment in Locateplus.

In March 2012, Latorella pleaded guilty and was sentenced in June 2012 to five years in prison, followed by three years of supervised release.
United States Attorney Carmen M. Ortiz and William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston, and Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, made the announcement today. The U.S. Attorney’s Office also acknowledges the valuable assistance it received from the Boston Office of the U.S. Securities and Exchange Commission.
The case was prosecuted by Assistant U.S. Attorneys Andrew E. Lelling and Paul G. Levenson of Ortiz’s Economic Crimes Unit.

Former California Assemblyman Admits Defrauding Banks out of $193,661 by Falsely Claiming to be Identity Theft Victim

LOS ANGELES—Carl Edward Washington, a former California assemblyman who represented the state’s 52nd district, has agreed to plead guilty to federal bank fraud charges, admitting that he bilked financial institutions by falsely claiming to be the victim of identity theft.
As part of a plea agreement filed yesterday in United States District Court, Washington agreed to plead guilty to three counts of bank fraud for causing losses of $193,661 to financial institutions that include Farmers and Merchants Bank, First City Credit Union, and LA Financial Credit Union.
Washington, 47, a resident of Paramount who currently is employed as a division chief with the Los Angeles County Probation Department, admitted in the plea agreement that during a lengthy scheme that ran through the summer of 2011, he defrauded the three banks by concealing several unpaid debts—debts that he simply stopped paying—and his overall lack of creditworthiness.
Washington was able to hide his bad debts by filing a series of bogus police reports with the Los Angeles County Sheriff’s Department in which he falsely claimed to be the victim of identity theft. After filing the false police reports, Washington sent copies of the reports to the credit reporting agency Experian and demanded that the information relating to the bad debts be removed from his credit report. Once Experian removed this data from his credit report, Washington submitted applications for new credit cards to the victim banks, applications that failed to disclose all of his outstanding debts and the fact that he had negative information reported by other financial institutions removed from his credit report. Once the victim banks issued new credit cards to Washington, he purchased goods and services. But, after making several payments, Washington contacted Experian and, claiming that he was the victim of identity theft, requested that information related to the new credit cards be removed from his credit report. Washington admitted filing five false police reports with LASD.
Washington’s scheme was exposed when he attempted to refinance two auto loans through LA Financial. When the credit union examined Washington’s credit report, it discovered that the auto loans it had previously issued were not showing up on his credit report. LA Financial subsequently learned from Experian that Washington disputed he had earlier sought to refinance his auto loans and that he claimed to be a victim of identity theft. Because LA Financial knew Washington’s claims were false, it froze Washington’s credit card account and reported him to authorities.
Washington was elected to the California legislature in 1996 and he served in the assembly until 2002. Washington later went to work for the Los Angeles County Probation Department, where he ran a unit called Intergovernmental Relations and Legislative Affairs. Washington has been on administrative leave from the Probation Department since his arrest in this case in September.
Washington is scheduled to enter his guilty pleas on Monday before United States District Judge S. James Otero. Once he pleads guilty, Washington will face a statutory maximum penalty of 30 years in federal prison for each of the three bank fraud counts. However, the parties have agreed that the United States Sentencing Guidelines call for a term of imprisonment of one year to 18 months. The actual sentence will be determined by Judge Otero later this year.
The case against Washington was investigated by the Federal Bureau of Investigation’s Public Corruption Squad.
Contact:
Assistant United States Attorney Douglas M. Miller
Public Corruption and Civil Rights Section
(213) 894-2216

Corrupt Bank Employee Pleads Guilty to Role in Tax Fraud Conspiracy

ANCHORAGE—U.S. Attorney Karen L. Loeffler announced today that Hilda Josephine Hernandez-McMullen, 47, of Anchorage, Alaska, pled guilty on Thursday to eight separate felony counts based on her role assisting others in opening bank accounts and fraudulently negotiating tax refund checks using stolen identities.
Specifically, on February 21, 2013, Hernandez-McMullen pled guilty to seven counts of bank fraud for assisting others to open bank accounts in false names as well as one count of assisting an individual in negotiating a forged U.S. Treasury check. She faces a maximum sentence of 30 years in prison for each bank account she helped open as well as a maximum sentence of 10 years in prison for her role in negotiating the forged U.S. Treasury check. Sentencing is currently scheduled for June 10, 2013, before United States District Court Judge Timothy M. Burgess.
Hernandez-McMullen was indicted in July 2012, along with 10 other defendants for her role in an alleged $25 million dollar tax fraud and identity theft scheme that used stolen Puerto Rican identities to file false tax returns and obtain fraudulent income tax refunds.
According to her plea agreement, Hernandez-McMullen worked as a personal banker at Wells Fargo Bank in Anchorage between December 2008 and September 2010 and opened several bank accounts for defendants also charged in the scheme. Hernandez-McMullen opened the accounts despite knowing that the names and identifying information used to open them were false.
Court documents state that these and other bank accounts were then used to negotiate income tax refund checks that defendants in this case were not entitled to receive and which were not in their names.
Hernandez-McMullen admitted to assisting in the fraudulent negotiation of checks totaling $37,978.15. She further admitted that she negotiated these checks despite the fact that they were issued to people who were not at the bank at the time the checks were being negotiated.
Trial for the remaining defendants in the case is scheduled for May 14, 2013, at 9:00 a.m. in Anchorage.
The case is being prosecuted by Assistant U.S. Attorney James Barkeley, Thomas C. Bradley, and Stephanie C. Courter of the U.S. Attorney’s Office, District of Alaska. The case was investigated and prosecuted under the purview of the Organized Crime and Drug Enforcement Task Force, which is made up of personnel from the U.S. Attorney’s Office; Federal Bureau of Investigation; Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; ICE Homeland Security Investigations; Internal Revenue Service–Criminal Investigations; U.S. Marshals Service; U.S. Postal Inspection Service; U.S. Coast Guard; and the Anchorage Police Department.
Anyone who believes that they have been a victim of identity theft, or wants information about preventing identity theft, may obtain helpful information and complaint forms on various government websites, including the Federal Trade Commission, the Justice Department, the Social Security Administration, and the IRS.

Eastern Shoshone Man Sentenced for Assault Resulting in Serious Bodily Injury

United States Attorney Christopher A. Crofts announced today that on February 20, 2013, Russell Hill, a 19-year-old enrolled Eastern Shoshone from the Wind River Indian Reservation, appeared in Federal District Court for sentencing before United States District Judge Scott W. Skavdahl on a single count of assault resulting in serious bodily injury.
Hill received 29 months of imprisonment, to be followed by three years of supervised release, and was ordered to pay a $100 special assessment and restitution in the amount of $12,363.25.
The charge stemmed from a stabbing which occurred on June 10, 2012, on the Wind River Indian Reservation.
The case was investigated by the Fremont County Sheriff’s Office, the Wind River Police Department, the Bureau of Indian Affairs and the Federal Bureau of Investigation.

Former Head of Youth-Oriented Non-Profit Pleads Guilty to Tax Charge Involving $110,000 Grant That Funded an Inaugural Ball

WASHINGTON—Millicent D. West, the former director and chief executive officer of a non-profit organization that promotes youth opportunities, pled guilty today to a criminal tax charge for her role in channeling $110,000 in youth grant funds used to pay for an inaugural ball.
The guilty plea, which took place in the U.S. District Court for the District of Columbia, was announced by U.S. Attorney Ronald C. Machen, Jr.; Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office; and Thomas J. Kelly, Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation.
West, 43, pled guilty to a charge of attempting to interfere with the administration of the Internal Revenue Service laws. The Honorable John D. Bates scheduled sentencing for May 24, 2013. The charge carries a maximum statutory sentence of three years in prison and a fine of up to $250,000. Under federal sentencing guidelines, the parties have agreed that the likely range is six months to 12 months of incarceration and a fine of $2,000 to $20,000.
West is the fifth person to plead guilty to charges in an ongoing investigation into activities involving former District of Columbia Council Member Harry L. Thomas, Jr. Thomas pled guilty last year to charges stemming from a scheme in which he used more than $350,000 in taxpayers’ money that was earmarked for the arts, youth recreation, and summer programs for his own personal benefit, including to pay for vehicles, clothing, and trips. He resigned as a condition of his plea agreement and is now serving a 38-month prison sentence.
The others who have pled guilty include James Garvin and Marshall D. Banks, leaders of one of the non-profits used in the scheme. Both men, from the Langston in the 21st Century Foundation, pled guilty to misprision of a felony, a charge holding them accountable for failing to report and concealing the misappropriation of $392,000 in government grants. Additionally, Danita C. Doleman, the president of Youth Technology Institute, pled guilty to filing a false return in connection with her assistance in funneling public money to pay for the 51st State Inaugural Ball. Garvin, Banks, and Doleman are awaiting sentencing.
According to the government’s evidence, West’s conduct covered up the actual beneficiaries of the youth grant funds and later led to the filing of false and misleading tax forms.
“Millicent West was by all accounts a dedicated public servant who was truly committed to the mission of serving young people in the District of Columbia,” said U.S. Attorney Machen. “Unfortunately, as we have seen too many times, she agreed to break the law to appease a crooked public official who was intent on carrying out a criminal scheme. As a result, she allowed more than $100,000 intended to keep D.C. kids off drugs to be used to throw a party for adults. This prosecution underscores the importance of standing up to corruption rather than becoming complicit in it. We hope that this guilty plea allows Ms. West to put this mistake behind her and return to doing good works. We also hope that it reminds other public servants and government employees not to jeopardize their careers by facilitating politicians’ wrongdoing.”
“By concealing and failing to report the illegal use of public funds, Ms. West allowed money to be diverted away from programs that supported the youth of our city,” said Assistant Director in Charge Parlave. “Her guilty plea today demonstrates that those who commit corruption, as well as those who allow it, will be held accountable for their actions.”
“Federal grant funds entrusted to a non-profit and subsequently diverted to an ineligible entity is fraudulent,” said Special Agent in Charge Kelly. “Ms. West’s attempts to defraud the government, interfere with the administration of Internal Revenue laws, and disguise the true nature of funds earmarked for a tax exempt entity failed. Today’s plea confirms the commitment of IRS-Criminal Investigation, along with its law enforcement partners, to the American public that we are poised and prepared to investigate any financial scheme to defraud the American taxpayer.”
According to a statement of offense, signed by the defendant as well as the government, from in or about July 2008 to in or about October 2009, West was the director and chief executive officer of a non-profit public-private partnership that provided resources and developed programs to benefit children and youth in the District of Columbia. The partnership was primarily funded by the District of Columbia government through funds designated by the mayor and council for particular youth-related purposes. The partnership provided grants to organizations for programs tailored for children and youth.
Thomas, who took office in January 2007 as the Ward 5 representative, served during his first term as chair of the council’s Committee on Libraries, Parks, Recreation, and Planning, which involved oversight responsibility for the D.C. Department of Parks and Recreation. In that role, he worked with the non-profit public-private partnership. Also, an individual identified as “Staff Member 1” worked on the Thomas’s staff and served as director of the committee.
Thomas was closely involved in the planning of the 51st State Inaugural Ball, held on January 20, 2009 in the Wilson Building. It was a formal, black-tie event open to members of the public who had purchased tickets. But ticket sales and other contributions did not generate nearly enough money to cover costs of the event.
Several days after the event, West was contacted for the first time about the 51st State Inaugural Ball and told that organizers had not collected enough funds to pay for it. According to West, Thomas told her that youth had been able to attend the event to honor the historic inauguration of President Obama. West believed that the event served the partnership’s target population.
On January 29, 2009, Staff Member 1 submitted budget paperwork to the public-private partnership seeking a grant of $110,000 for a political organization that would fund a “youth/young adult inauguration celebration.” Staff Member 1 also identified a potential funding source: the Drug Prevention/Children at Risk Fund, a separate fund established to raise money for programs that prevented drug and alcohol consumption and supported youth who had direct or indirect contact with drugs. The D.C. Council agreed in 2008 to transfer the administration of this fund to the public-private partnership, but had not yet done so.
West told Staff Member 1 that the public-private partnership would move to fund the grant request for the Inaugural Ball once it got the money from the drug prevention fund. The plan hit an obstacle, however, when an employee of the public-private partnership expressed concern about the legality of granting money to a political organization.
Thomas subsequently directed Staff Member 1 to change the grant recipient to the Youth Technology Institute, another non-profit, and new paperwork was submitted. On February 5, 2009, West directed that the check be issued, with the money coming from the drug prevention fund.
In truth, after the grant was issued, the Youth Technology Institute immediately forwarded nearly the entire amount to the political organization, which paid expenses from the 51st State Inaugural Ball. West learned that this took place at a later date.
At all times, West viewed the ball as an event that was organized and sponsored by Councilmember Thomas. She failed to consider which individuals or organizations were responsible for the ball’s debts. Additionally, she caused the records maintained by the public-private partnership to inaccurately and falsely show that the $110,000 grant was given to an organization that was a tax-exempt entity. This resulted in a failure to report to the IRS that the ultimate beneficiaries of the grant funds included ineligible recipients.
West resigned from the partnership in October 2009 to become the District of Columbia’s director of homeland security and emergency management. The following year, the public-private partnership filed its tax forms with the Internal Revenue Service, listing the $110,000 grant as going to Youth Tech for “funding to provide programming for children and youth,” instead of providing the accurate accounting.
In announcing the guilty plea, U.S. Attorney Machen, Assistant Director in Charge Parlave, and Special Agent in Charge Kelly praised the work of the investigators from the FBI’s Washington Field Office and IRS-CI who worked on the case. They also acknowledged the efforts of those who worked on the case form the U.S. Attorney’s Office, including Criminal Investigators Matthew Kutz, Mark Crawford and Melissa Matthews; Paralegal Specialists Tasha Harris, Diane Hayes, Shanna Hays, Lenisse Edloe and Monica Johnson; Legal Assistant Krishawn Graham, and former Assistant U.S. Attorney Bridget Fitzpatrick. Finally, they commended the work of Assistant U.S. Attorneys Jonathan W. Haray, David Johnson, and James E. Smith, who are prosecuting the matter.

Pennsylvania Jeweler Pleads Guilty to $3 Million Ponzi Scheme

ALEXANDRIA, VA—Matthew James Addy, 34, of Lancaster, Pennsylvania, pleaded guilty today to securities fraud charges for running a $3 million Ponzi scheme that involved the fake purchase and resale of wholesale jewelry and loose precious stones.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after the plea was accepted by United States District Judge James C. Cacheris.
Addy faces a maximum penalty of 20 years in prison when he is sentenced on May 10, 2013.
According to court records, Addy owned Edward J. & Company, which operated a retail jewelry store in Lancaster called La Porte Jewelers. In 2010, Addy began recruiting individuals to invest in promissory notes purportedly linked to transactions involving wholesale jewelry and loose precious stones, which would be purchased through Addy’s businesses and resold to retail jewelers for a profit. Addy ultimately recruited more than 40 investors from throughout the United States, including within the Eastern District of Virginia, and Europe, and obtained more than $3 million in invested funds. Addy recruited many of the victim investors from within religious groups with which he was associated and used the affiliations to gain their trust.
The investment scheme was a fraud. Addy never conducted any of the contemplated wholesale jewelry transactions, and Addy used the vast majority of the invested funds on unrelated business and personal expenses. Approximately $670,000 was paid back out to investors during the course of the fraud as supposed profits on their investments and was designed to conceal the fraud and induce further investments in the scheme. Most of these payouts came directly from funds contributed by new investors, which made them Ponzi payments.
This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorney Paul J. Nathanson is prosecuting the case on behalf of the United States.

USP-Marion Inmate Sentenced for Assaulting a Correctional Officer

Henry Ingram, 34, an inmate at the United States Penitentiary at Marion, Illinois, was sentenced today in United States District Court in Benton to a term of 42 months’ imprisonment for assaulting a correctional officer at that facility, announced Stephen R. Wigginton, United States Attorney for the Southern District of Illinois. The offense occurred on August 21, 2012. Ingram pled guilty to the single-count indictment charging him with assault on November 19, 2012.
Evidence supporting the guilty plea and sentence showed that Ingram struck a correctional officer in the face with his fist after the correctional officer conducted a pat-down search of Ingram in a hallway at the prison and found that he was in possession of contraband. The officer began to escort Ingram to an office to question him about the contraband, which is when Ingram turned and struck the officer in the face. The assault was captured on the prison’s internal video recording system.
The 42-month term of imprisonment was imposed consecutively to the 20-year sentence for conspiring to distribute powder cocaine, crack cocaine, heroin, and marijuana that Ingram was serving at the time of the assault. He was also ordered to pay fines and special assessments totaling $200 and was placed on a  two-year term of supervised release to follow his incarceration.
The case was investigated by the Federal Bureau of Investigation with the assistance of the Federal Bureau of Prisons.
The case was prosecuted by Assistant United States Attorney James M. Cutchin.

Former Jefferson Parish President and Others Sentenced in Corruption Case

NEW ORLEANS—Aaron F. Broussard, age 64, a resident and former two-term president of Jefferson Parish, was sentenced today to 46 months by Senior U.S. District Court Judge Hayden Head from the Southern District of Texas, for his involvement in a conspiracy to commit bribery, wire fraud, and theft concerning programs receiving federal funds, announced U.S. Attorney Dana J. Boente, FBI Special Agent in Charge Michael Anderson, and IRS-Criminal Investigative Division Acting Special Agent in Charge Damon Rowe.
Also sentenced today were former Jefferson Parish Attorney Thomas G. Wilkinson, age 54, a resident of Gretna, and Broussard’s ex-wife, Karen Parker, age 47, a resident of Kenner. Wilkinson, who pled guilty to misprision of a felony, was sentenced to three years’ probation and ordered to pay $214,209.94 in restitution to Jefferson Parish. Parker, who also pled guilty to misprision of a felony, was sentenced to three years’ probation and ordered to pay $160,430.15 in restitution to Jefferson Parish.
Broussard was also ordered to pay $214,209.94 in restitution to Jefferson Parish and was also ordered to forfeit $280,209.94 in illegal proceeds pursuant to his plea agreement.
Broussard was sentenced for his involvement in a conspiracy with Timothy Whitmer, the former CAO of Jefferson Parish, Wilkinson, and Parker to steal taxpayer funds when he and others created a sinecure paralegal supervisor position for Parker. Broussard knowingly and illegally diverted taxpayer funds to his ex-wife in the form of her salary for over six years, when Parker did not even possess the most basic credentials or requisite experience to hold the position of paralegal supervisor and repeatedly sought to conceal the illegal nature of her employment with Jefferson Parish by having Parker transferred to the ID Management Office at the East Bank Regional Library in an effort to hide the fact that she was not working for the Parish Attorney’s Office as a paralegal supervisor and was not performing any work as a paralegal. Broussard also gave pay raises to Parish Attorney Thomas Wilkinson as a reward for private family matters and for continuing to approve annual pay raises for Parker.
In total, Broussard and Parker improperly diverted over $323,308 in salary over the period of six years.
Broussard was also sentenced for receiving numerous bribes totalling over $60,000 while parish president from William Mack in exchange for Broussard’s assistance and intervention on behalf of Mack’s company.
Speaking to today’s sentencing, United States Attorney Dana J. Boente stated, “This sad end to Aaron Broussard’s career is a self-inflicted wound resulting from his venality, corruption, and deceit. The citizens of Jefferson Parish deserved honest, effective government, and Mr. Broussard made the decision to line his own pockets. This prosecution should serve notice that this office will continue its robust and vigilant investigation of public corruption.”
Michael Anderson, Special Agent in Charge of the Federal Bureau of Investigation New Orleans Field Office added, “I am very proud of the investigative and prosecution team for always keeping their eye on the ball throughout this matter, which resulted in a fair and efficient resolution of this case.”
IRS Acting Special Agent in Charge, Damon Rowe, stated, “IRS-Criminal Investigation will continue to make fighting political corruption a top priority in our office. Elected officials must realize that they are not above the law.”
The case was investigated by agents from the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation Division. The federal agencies were assisted by the Metropolitan Crime Commission.
The case was prosecuted by Strike Force Chief and Assistant U.S. Attorney Brian Klebba and Assistant U.S. Attorneys Matt Chester, Daniel Friel, and Mimi Nguyen.

Kodiak Man Charged with Murders of Two Coast Guard Employees

ANCHORAGE—U.S. Attorney Karen L. Loeffler announced today that James Michael Wells, 61, of Kodiak, was indicted by a federal grand jury for the murders of U.S. Coast Guard Electrician’s Mate First Class James Hopkins and retired Chief Boatswain’s Mate Richard Belisle. Belisle, who was working as a Coast Guard civilian employee, and Hopkins were murdered at the U.S. Coast Guard Communications Station Kodiak on April 12, 2012. Wells is charged with four counts of premeditated murder and two counts of using a weapon in a crime of violence. All counts relate to the two murders.
Wells was arrested on February 15, 2013, under a federal arrest warrant based on a criminal complaint. As charged each count carries a maximum penalty of life in prison. Anyone with knowledge of the facts or information concerning these events is urged to contact the FBI.
Ms. Loeffler notes that the indictment comes after an extensive investigation led by the Federal Bureau of Investigation and the Coast Guard Investigative Service, with support from the Alaska State Troopers.
An indictment is only a charge and is not evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.

White Supremacist William White Sentenced to 42 Months in Prison for Soliciting Violence Against Hale Jury Foreman

CHICAGO—Self-proclaimed white-supremacist William A. White was sentenced today to 42 months in federal prison for soliciting violence to the foreman of a federal jury in Chicago that convicted another white supremacist, Matthew Hale, in 2004. White stood trial in Chicago in January 2011 and was convicted by a jury of one count of solicitation.
“No doubt the experience was extremely frightening for the juror,” U.S. District Judge Lynn Adelman, of Milwaukee, who imposed the sentence, said in reference to the Hale jury foreman who was the victim of White’s violent solicitation.
Judge Adelman, who was assigned to preside over the case in federal court in Chicago, ordered White to serve the sentence consecutively to all but a little more than a month remaining on a federal sentence that White is currently serving for making threats to other victims and intimidating a witness in Virginia. White’s prior sentence totaled 43 months and is scheduled to end in early April.
Initially, Judge Adelman dismissed the 2008 indictment against White, but a federal appeals court in Chicago reinstated the solicitation charge in 2010. After White’s trial in January 2011, the judge overturned the jury’s guilty verdict, but the government appealed and White’s conviction was reinstated, leading to today’s sentencing. White’s prior sentence stemmed from a December 2009 trial conviction by a federal jury in Roanoke.
“This defendant has been prolific in making threats to people,” Assistant U.S. Attorney Michael Ferrara told Judge Adelman today in arguing for a consecutive sentence instead of White’s request for time served.
The evidence at White’s Chicago trial showed that after Matthew Hale was tried, convicted, and sentenced for soliciting the murder of a federal judge in Chicago, White solicited his followers to retaliate against the foreman of that jury. White created and maintained a former website, Overthrow.com, which was publicly accessible on the Internet. The website purported to be affiliated with the American National Socialist Workers Party (ANSWP) and claimed the organization was composed of a “convergence of former [white supremacy] ‘movement’ activists who grew disgusted with the general garbage that ‘the movement’ has attracted and who formed the ANSWP under the Command of Bill White.” Members of the ANSWP were described as “National Socialists...who fight for white working people.”
Between September 11 and October 11, 2008, White used the website to solicit anyone to injure Juror A on account of Juror A’s role as the foreperson of the jury that convicted Hale, the leader of a white supremacist organization known as the World Church of the Creator. Hale was sentenced to 40 years in prison for soliciting the murder of a federal judge in Chicago.
As part of White’s solicitation of violence against Juror A, White posted derogatory comments and personal information about Juror A, including Juror A’s home address and phone numbers, on the Overthrow.com website on September 11, 2008. The solicitation occurred under circumstances strongly corroborating White’s intent that another person use, attempt to use, or threaten the use of force against Juror A.
White was aware that individuals associated with the white supremacist movement, who were the target audience of his website, at times engaged in acts of violence directed at non-whites, Jews, gays, and persons perceived by white supremacists as acting contrary to their interests. Prior to the solicitation against Juror A, White on multiple occasions caused postings to the website that disclosed what purported to be the home address and/or personal identifying information of individuals who were targets of criticism on the Internet.
The government was represented by Assistant U.S. Attorneys Michael Ferrara and William Hogan. The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.

Former Congressman Jesse L. Jackson, Jr. Pleads Guilty to Conspiring to Defraud Campaign of More Than $750,000

WASHINGTON—Former Congressman Jesse L. Jackson Jr., 47, pleaded guilty today to conspiring to defraud his re-election campaigns of more than $750,000 in funds that were used to pay for a range of personal items and expenses, including jewelry, fur capes and parkas, high-end electronics, celebrity memorabilia, furniture, kitchen appliances, and a home renovation project.
Jackson, who has residences in Chicago and Washington, D.C., also admitted taking steps to conceal seven years of illegal activities, including the filing of false and misleading reports with the Federal Election Commission (FEC) and the U.S. House of Representatives.
Jackson’s wife, Sandra Stevens Jackson, 49, a former Chicago alderman, pleaded guilty in a separate proceeding to filing false tax returns for her role in the scheme.
The guilty pleas, which took place this morning in the U.S. District Court for the District of Columbia, were announced by U.S. Attorney Ronald C. Machen, Jr.; Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office; and Richard Weber, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Jesse Jackson, Jr. pleaded guilty to one count of conspiracy to commit wire fraud, mail fraud, and false statements. The Honorable Robert L. Wilkins scheduled sentencing for June 28, 2013. The charge carries up to five years in prison, a fine of up to $250,000, and other penalties. Under federal sentencing guidelines, the parties have agreed that the applicable range for the offense is 46 to 57 months in prison and a fine between $10,000 and $100,000.
As part of the plea agreement, Jesse Jackson, Jr. will be required to pay any restitution ordered by the court and forfeit about $750,000 in proceeds and property from the scheme. Among other items, he must forfeit a mink cashmere cape; a mink reversible parka; a guitar signed by pop legend Michael Jackson; and various memorabilia associated with historic figures and various celebrities.
Sandra Stevens Jackson is to be sentenced July 1, 2013, also by Judge Wilkins. The tax charge carries up to three years in prison, a fine of up to $250,000, and other penalties. According to the government’s calculations, which may be disputed at sentencing, the applicable range for this offense under federal sentencing guidelines is 18 to 24 months in prison and a fine between $4,000 and $40,000.
Jesse Jackson, Jr. was elected to Congress in 1995 and served until November 2012 as the representative for the 2nd Congressional District of Illinois. According to the government’s evidence, Jackson and his wife carried out the fraud scheme from in or about August 2005 until in or about April 2012. Rather than using funds donated to the campaign as they were intended to be used—to pay for legitimate expenses associated with Jackson’s re-election—the Jacksons used a substantial portion of the contributed funds for personal expenditures.
According to the government’s evidence, Jesse Jackson, Jr. made direct expenditures from the campaign’s accounts for personal expenses, totaling approximately $57,792. In addition, he and his wife used credit cards issued to the campaign to make purchases for personal expenses, totaling approximately $582,773. Finally, Jackson provided his wife and a congressional staffer, known in court documents as “Person A,” approximately $112,150 solely for the purpose of engaging in transactions that benefited the Jacksons.
“Today’s guilty plea is nothing short of tragic,” said U.S. Attorney Machen. “Jesse Jackson, Jr. entered public life with unlimited potential but squandered his bright future by engaging in a self-destructive course of conduct that was staggering in both degree and scope. For seven years, Mr. Jackson betrayed the very people he inspired by stealing their campaign donations to finance his extravagant lifestyle. His fall from grace will hopefully chasten other leaders who are tempted to sacrifice their ideals and integrity to line their own pockets.”
“Today, Mr. Jackson admitted to engaging in a conspiracy to defraud his constituents by using money donated to his re-election campaign for his own personal use,” said Assistant Director in Charge Parlave of the FBI. “But Mr. Jackson’s scheme did not stop there, as he then knowingly withheld information about his campaign finances from the FEC and IRS. This investigation and these guilty pleas demonstrate that the FBI and our law enforcement partners will continue to pursue all allegations of public corruption and prove that no one in this country is above the law, to include those who make our laws.”
“Public officials hold positions of trust. While the vast majority of public officials are hard-working and dedicated, fraud and corruption at any level of public service breaches this trust,” said IRS-CI Chief Weber. “IRS-CI stands committed to investigating those officials, regardless of political status, who ignore their pledge to the American public and, instead, take a path of greed and corruption. Mr. Jackson disregarded his pledge to America by using campaign funds for his own personal expenses. Then, he attempted to conceal his spending by filing false and misleading reports with the FEC and the House of Representatives. Mrs. Jackson also took steps to conceal the income by willfully underreporting their income on their joint U.S. Individual Income Tax Returns for a six-year period. This case should serve as a strong warning to those who might consider similar behavior. No one is above the law, and everyone is accountable for their misdeeds.”
Framework of the Scheme
According to the government’s evidence, Sandra Stevens Jackson had a series of roles in Jackson’s re-election campaigns, including treasurer, from about January 2005 to about November 2006; consultant, from at least 2008 to about November 2012, and campaign manager, starting in 2011.
Person A also served different roles over the years, including: assistant treasurer for the campaign, from about January 2005 through about November 2006; treasurer, from about January 2007 through about June 2008; and staff member for Jackson’s Washington, D.C. congressional office, starting in or around June 2008.
According to the government’s evidence, money was channeled from the campaign to the Jacksons in the following ways:
Direct expenditures: Jackson made $57,792 in direct expenditures from the campaign’s bank account from January 2006 through July 2011. In July 2007, for example, he withdrew $43,350 in campaign funds to purchase an official check made payable to a jeweler for a men’s gold-plated Rolex watch. In addition, he used $14,442 in campaign funds to pay down balances on person credit cards maintained by the Jacksons.
Credit card expenditures: The campaign maintained a credit card account, “Jackson for Congress,” from at least August 2005 through August 2012. Individual credit card members on this account included Jackson and his wife. During this period, the Jacksons used the credit cards to purchase merchandise and services that were personal in nature, including high-end electronic items; a washer, a dryer, a range, and refrigerator; collector’s items; clothing, food, and supplies; movie tickets; health club dues; personal travel, including a holistic retreat; and personal dining expenses.
All told, campaign funds were used to pay $582,773 of these purchases. During the conspiracy, the Jacksons made approximately 3,100 purchases that were personal in nature. A large number of these personal expenditures fit into these categories:

• Restaurants, nightclubs, and lounges, approximately $60,857
• Airfare, approximately $31,700
• Sports clubs and lounges, including gym membership, approximately $31,700
• Tobacco shops, approximately $17,163
• Alcohol, approximately $5,814
• Dry cleaning, approximately $14,513
• Grocery stores, approximately $8,046
• Drug stores, approximately $6,095

Other expenditures: In March 2006, Jackson directed that a $36,000 check from the campaign be issued to his wife’s business for billboard expenses. Sandra Stevens Jackson transferred this money from the business account to a personal account. Jackson and his wife, who controlled the personal account, used nearly all of the money that purportedly was for billboard expenses to pay down personal debts.
Jackson paid Person A with funds from the campaign account so that Person A could pay expenses on behalf of Sandra Stevens Jackson, or, in some instances, give cash to Jackson. The campaign issued about $76,150 in checks to Person A from about October 2008 until about March 2012, even though Person A actually was entitled to only $11,409 for his work. Person A then expended nearly all of the remaining $64,741 for the personal benefit of Jackson and his wife. Examples of this scheme include:

• Person A used checks from the campaign to provide Jackson with $15,700, which Jackson deposited into personal accounts he maintained for his own use.
• Person A used checks from the campaign to pay down the credit card balance of Jackson and his wife by $4,800.
• Person A used checks from the Campaign to pay for $26,347 worth of work performed on the Jacksons’ home.

Gifts and loans: At Jackson’s direction, two companies made payments on the balance of a personal credit card of Jackson and his wife. The owner of an Illinois consulting firm issued a check in 2009 for $3,500 from a business account to pay down the balance of a personal credit card. The owner of an Alabama-based family issued a check for $25,000 from a corporate account in 2011, also to pay down a personal credit card balance.
Filing of False and Misleading Reports
According to the government’s evidence, the Jacksons took steps from 2005 until 2012 to ensure that materially false and misleading reports were filed with government entities. These reports were filed with the FEC and the House of Representatives. These actions were critical to carrying out the conspiracy because they enabled the conduct to continue without question for a lengthy period of time and without the questions from regulators and the public that likely would have ensued had truthful, accurate reports been filed.
Campaigns are required to periodically file reports with the FEC reflecting contributions and expenditures during the reporting period. Campaigns are responsible for reviewing credit card statements and itemizing expenditures exceeding $200. They also are to itemize in cases in which a particular vendor receives more than $200 during the election cycle.
Jackson and his wife, on numerous occasions, directed Person A not to itemize the personal expenditures made on the Campaign credit cards. Additionally, they knowingly and intentionally provided Person A with false justifications for the expenditures, causing Person A, in turn, to prepare false reports for submission to the FEC.
For example, in May 2008, Person A reported that the campaign spent $1,553 in January 2008 at a Chicago museum for a fundraiser. In fact, Jackson spent these funds to purchase porcelain collector’s items. In July 2008, Person A reported that the campaign spent $387 for equipment for office repairs. Jackson actually used this money to purchase grass seed and fertilizer for the lawn at his Chicago home.
As a member of Congress, Jackson was required annually to file a financial disclosure statement with the House of Representatives. He failed to report the funds that he and his wife used in defrauding the Campaign. In addition, he failed to report that he was the beneficiary of undisclosed expenditures made by third parties.
Income Tax Returns
In her guilty plea, Sandra Stevens Jackson admitted to filing false tax returns for calendar years 2006 through 2011. According to the government’s evidence, she knowingly and willfully failed to report nearly $570,000 in taxable income for those tax years. This led to an estimated tax loss of approximately $159,000.
In announcing the guilty pleas, U.S. Attorney Machen, Assistant Director in Charge Parlave, and Chief Weber commended the work of those who investigated the case for the FBI and IRS-CI. They also expressed appreciation for the assistance provided by the U.S. Marshals Service on the asset forfeiture aspects of the case. In addition, they commended those who worked on the case from the U.S. Attorney’s Office, including Paralegal Specialists Tasha Harris, Lenisse Edloe, and Gail Price, and former Paralegal Specialist Sarah Reis.
Finally, they acknowledged the work of Assistant U.S. Attorneys Matt Graves, Michael K. Atkinson, and Jonathan W. Haray of the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia, who are investigating and prosecuting the matter, as well as Assistant U.S. Attorneys Catherine K. Connelly and Anthony Saler, of the Asset Forfeiture and Money Laundering Section.

East Haven Woman Charged with Threatening Violent Attack at Gateway Community College

David B. Fein, United States Attorney for the District of Connecticut, and Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the FBI, today announced that Amanda C. Bowden, 19, of East Haven, has been charged by federal criminal complaint with falsely threatening to carry out a violent attack at Gateway Community College in New Haven.
“As alleged, this defendant made a series of threats that described in great detail her intention to carry out a suicidal mass murder at a community college in New Haven,” stated U.S. Attorney Fein. “All threats of this nature will be viewed as serious by this office and prosecuted to the full extent of federal law. I commend the FBI’s Joint Terrorism Task Force and the New Haven and East Haven Police Departments for their swift investigation of this matter.”
“The FBI’s investigations into threats of violence will be swift and thorough,” stated FBI Special Agent in Charge Mertz. “In this day and age, the making of any threat will not and cannot be tolerated. There will be consequences. The agents and task force officers assigned to the New Haven Division’s Joint Terrorism Task Force and the U.S. Attorney’s Office did an outstanding job in addressing this threat from the time it was first reported to the FBI until the successful arrest of the subject.”
As alleged in the criminal complaint, between approximately February 4 and February 16, 2013, Bowden made numerous telephonic threats, initially through text messaging with a cooperating witness and subsequently through text messaging and verbal conversations with an undercover law enforcement agent, discussing her plans to commit a suicidal mass shooting and bombing at Gateway Community College in New Haven. In these communications, Bowden claimed to possess firearms and to have constructed at least two napalm-based bombs at her residence.
Bowden was arrested yesterday on state charges. At that time, investigating agents conducted a court-authorized search of Bowden’s East Haven residence. No firearms or explosive devices or related materials were found during the search.
Bowden appeared today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport and is detained pending a hearing that is scheduled for March 1.
Bowden is charged with one count of false information and hoaxes. The charge carries a maximum term of imprisonment of five years and a fine of up to $250,000.
U.S. Attorney Fein stressed that a complaint is only a charge and is not evidence of guilt. Charges are only allegations, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.
This matter is being investigated by the Federal Bureau of Investigation’s JTTF, the New Haven Police Department, and the East Haven Police Department. The case is being prosecuted by Assistant United States Attorney Henry K. Kopel.

Former Connecticut Resident Sentenced to 37 Months in Prison for Mortgage Fraud Offenses

David B. Fein, United States Attorney for the District of Connecticut, today announced that ERIC S. SCHERZ, 44, of Stuart, Florida, formerly of Barkhamsted, Connecticut, was sentenced yesterday by United States District Judge Vanessa L. Bryant in Hartford to 37 months of imprisonment followed by three years of supervised release for mortgage fraud offenses.
According to court documents and statements made in court, in October 2007, SCHERZ secured a $417,000 mortgage loan to finance the purchase of a property in Barkhamsted. In April 2008, SCHERZ created a fraudulent release of mortgage on the property stating that the lender, a fictitious company SCHERZ created, had received full payment of the loan. SCHERZ subsequently filed the fraudulent release of mortgage with the Town of Barkhamsted.
SCHERZ stopped making payments on his mortgage in March 2009, but in April 2009, he made three fraudulent payments via wire transfer to his mortgage lender that he knew would be and were, in fact, reversed for insufficient funds.
In May 2009, SCHERZ sold the Barkhamsted property for $299,000 to a buyer who relied on the fraudulent release of mortgage as being genuine. At the time of the sale, SCHERZ’s unpaid principal balance on his mortgage was $410,718.56. SCHERZ did not use any of the $299,000 from the fraudulent sale to his pay his outstanding mortgage debt.
On January 6, 2012, SCHERZ waived his right to indictment and pleaded guilty to three counts of wire fraud.
SCHERZ has previously served a 70-month federal term of imprisonment for his role in a mortgage fraud scheme in Florida in the 1990s.
This matter was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Michael J. Gustafson.

Two Men Arrested for Alleged Extortion of Detroit-Area Restaurant Owner

WASHINGTON—Two men were arrested today on charges of allegedly extorting a Detroit-area restaurant owner, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade for the Eastern District of Michigan, and Robert D. Foley III, Special Agent in Charge of the FBI Detroit Field Division.
Giuseppe D’Anna, aka Joe, 60, and Girolamo D’Anna, aka Mimmo, 48, were charged in an indictment unsealed today in U.S. District Court in the Eastern District of Michigan. Both defendants made their initial court appearances today in Detroit.
The defendants are charged in a three-count indictment with one count of Hobbs Act conspiracy and two counts of attempted Hobbs Act extortion, each of which carries a maximum penalty of 20 years in prison. According to the indictment, the defendants and other co-conspirators allegedly attempted to extort the owner of a Shelby Township, Michigan restaurant from approximately 2009 through approximately April 2011.
Indictments are only charges and not evidence of guilt. The defendants are presumed to be innocent until and unless proven guilty.
The investigation of this case was led by the FBI’s Detroit Field Division. Assistant U.S. Attorney Eric Straus of the Eastern District of Michigan and Principal Deputy Chief David Jaffe of the Organized Crime and Gang Section in the Justice Department’s Criminal Division are prosecuting the case on behalf of the United States.

New York City Man Sentenced for Entering an Aircraft in Violation of Security Requirements

BUFFALO, NY—U.S. Attorney William J. Hochul, Jr. announced today that Elvir Ardolic, 35, of New York, New York, who was convicted of entering an aircraft in violation of security requirements, was sentenced by U.S. Magistrate Judge H. Kenneth Schroeder, Jr. to one year probation with the condition that the defendant does not use drugs or alcohol.
Assistant U.S. Attorney Aaron J. Mango, who handled the case, stated that on June 23, 2012, the defendant was a passenger on a JetBlue flight that originated at John F. Kennedy International Airport in New York, New York, and was destined for Chicago. Ardolic had consumed an excessive amount of alcohol prior to boarding the flight and was intoxicated when he entered the aircraft. During the flight, the defendant demanded to be served alcoholic beverages, and when the flight crew refused, Ardolic became disruptive. Because of the defendant’s behavior, the flight was diverted to the Buffalo International Airport so that Ardolic could be removed. As part of the plea, the defendant made restitution to JetBlue for the cost of making an emergency landing in Buffalo.
The sentencing is the culmination of an investigation on the part of special agents of the Federal Bureau of Investigation, under the direction of Christopher M. Piehota, Special Agent in Charge; officers with the Niagara Frontier Transportation Authority, under the direction of George W. Gast, Chief of Police; and officers with the Transportation Security Administration, under the direction of Derek (Rick) DiPietro, Federal Security Director.

Newark Man Admits Role in Scheme to Steal Checks from U.S. Mail

NEWARK, NJ—A Newark man today admitted his role in a scheme to gain access to personal checks from the U.S. mail, fraudulently endorse them, and deposit them into personal checking accounts, U.S. Paul J. Fishman announced.
Kurtis Steele, 26, pleaded guilty before U.S. District Judge Kevin McNulty in Newark federal court to an information charging him with one count of conspiracy to commit bank fraud.
According to the documents filed in this case and statements made in court:
Steele and his conspirators gained access to blank checks that were sent via U.S. mail and stolen from unsuspecting victims. Steele and his co-conspirators then fraudulently endorsed the blank checks for a certain sum and deposited those checks into legitimate bank accounts that defendants and unnamed conspirators opened at the banks, including TD Bank, Bank of America, Capital One Bank, Garden State Community Bank, Hudson City Savings Bank, PNC Bank, and Valley National Bank. Before the victims and banks discovered the checks were fraudulent, Steele and his conspirators had withdrawn the funds either via automated teller machine (ATM) or by entering the banks and filling out a withdrawal slip. During the investigation, U.S. Postal Inspection Service and FBI agents were able to obtain bank video surveillance which captured Steele making fraudulent deposits of the stolen checks and withdrawals of the proceeds of those checks.
Steele and his conspirators deposited $1.5 million in fraudulent checks stolen from 122 victims, which were deposited into 258 different banks. Steele and his conspirators’ conduct resulted in approximately $625,000 in losses.
Steele faces a maximum potential penalty of 30 years in prison on the conspiracy charge and a maximum fine of $1 million or twice the gross gain or loss resulting from the offense. Sentencing is scheduled for May 29, 2013.
U.S. Attorney Fishman credited special agents of the U.S. Postal Inspection Service, under the direction of Philip Bartlett; and special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez.
The government is represented by Assistant U.S. Attorney Dara Aquila Govan of the Organized Crime/Gangs Unit in Newark.
Defense Counsel: Stephen A. Turano Esq., Newark

Three Automotive Parts Suppliers Charged in Manhattan Federal Court with Selling Counterfeit Replacement Parts

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced today the unsealing of indictments charging three automotive parts suppliers with selling counterfeit replacement parts. The three men—Shashi Malhotra, Fadi Kilani, and Richard Dininni—were arrested at their homes earlier this morning. Malhotra and Kilani will be presented in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein this afternoon. Dininni will be presented in federal court in Allentown, Pennsylvania.
Manhattan U.S. Attorney Preet Bharara said, “As alleged, these defendants sold the automobile replacement parts equivalent of designer knock-offs but represented to their unsuspecting customers that they were buying the ‘name brand.’ And while their replacement parts may have been no different from many other generic parts sold every day in the aftermarket, they were able to command the same higher prices charged by the automobile manufacturers’ whose names they stole. We encourage those who think they may have purchased counterfeit parts from these defendants or from anyone else to call the numbers listed at the end of this release.”
FBI Assistant Director in Charge George Venizelos said,  “While it is not generally against the law to sell replicas or imitations, it is illegal to try to pass them off as authentic or original. Likewise, there is a legitimate market for aftermarket auto parts, but these defendants allegedly packaged parts to appear to be original manufacturer equipment and sold them as such. That isn’t legitimate; it’s fraud.”
According to the allegations in the indictments unsealed in Manhattan federal court earlier today:
Background
New automobiles sold to consumers are equipped with automotive parts that are manufactured or provided by the automobile’s manufacturer (“Original Equipment Manufacturer” or “OEM”). When a consumer needs to replace a part in an automobile, he or she can purchase either parts made by OEMs, which are sold under the OEMs’ brand names; or generic parts made by other manufacturers that are commonly referred to as “aftermarket” parts. Generic parts are regularly bought and sold lawfully as aftermarket parts, typically at lower prices than OEM parts. Many types of aftermarket parts—including those sold and falsely packaged as OEM parts by Malhotra, Kilani, and Dininni—do not have to meet independent federal safety standards.
Malhotra and Kilani
From October 2011 through February 2013, Malhotra, who operated Worldwide Auto Parts and S&S International Products and Manufacturing in Paterson, New Jersey, and Kilani, who operated Cypros Trading and Shipping in Paterson, New Jersey, conspired to sell counterfeit OEM parts. Specifically, the defendants and their co-conspirators deceptively packaged and caused to be packaged certain aftermarket automotive parts—including brakes, brake pads, brake shoes, ignition coils, water pumps, window regulators, suspension sway bar links, wheel hubs, anti-lock braking sensors, control arm bushings, transmission filters, pitman arms, tie rod ends, and suspension air springs—to falsely make it appear as though these parts had been manufactured by OEMs such as Ford Motor Company, General Motors, and Federal Mogul (the “manufacturers”). They sold these parts to individuals and entities that they understood would re-sell them to the general public and to certain automotive repair shops,
including repair shops that service New York City’s taxis and limousines, which are subject to separate and regularly scheduled safety testing by the New York City Taxi and Limousine Commission. Malhotra obtained some of these counterfeit parts from China, and Kilani exported some of these counterfeit parts to Saudi Arabia.
Dininni
Similarly, from November 2011 through June 2012, Dininni, who operated Professional Parts USA in Easton, Pennsylvania, also conspired to sell counterfeit OEM parts. Along with his co-conspirators, Dininni also deceptively packaged and caused to be packaged certain aftermarket automotive parts, including brake pads and water pumps to falsely make it appear as though these parts had been manufactured by OEMs. Dininni and his co-conspirators then sold these parts to individuals and entities that they understood would re-sell them to the general public and to certain automotive repair shops, including repair shops that service New York City’s taxis and limousines.

* * *

Malhotra, 67, of Norwood, New Jersey; Kilani, 28, of Englewood, New Jersey; and Dininni, 57, of Easton, Pennsylvania, are each charged with one count of conspiracy to traffic in counterfeit goods, which carries a maximum sentence of five years in prison, and one count of trafficking in counterfeit goods, which carries a maximum sentence of 10 years in prison.
As the U.S. Attorney’s Office and the FBI identify individuals and entities that may have purchased counterfeit automotive parts from these defendants, both will make appropriate notifications. If you believe you may have purchased any counterfeit automotive parts from these defendants or anyone else, you may wish to have your car inspected at an authorized and qualified vehicle inspection facility to determine whether the parts in question are counterfeit.
Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked U.S. Customs and Border Protection, Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Department of Commerce for their assistance with this investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Joseph Facciponti and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture aspects of the case.
If you have questions, you may call the victim witness hotline for the U.S. Attorney’s Office at (866) 874-8900 or the FBI at (212) 384-2135. Several original equipment manufacturers have also established numbers, which you may call with questions. You may call Ford Motor Company at (313) 337-3663, Federal Mogul at (877) 489-6659, and Chrysler at (855) 818-7612.
The charges contained in the ndictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Erie Man Charged with Using Another’s Social Security Number to Get Loans, Credit Cards

ERIE, PA—A resident of Erie, Pennsylvania has been indicted by a federal grand jury in Erie on charges of using a Social Security number assigned to another and aggravated identity theft, United States Attorney David J. Hickton announced today.
The 17-count indictment named Edward Phillips, 58, of Erie, Pennsylvania, as the sole defendant.
According to the indictment presented to the court, Phillips obtained and used a Social Security number that was not assigned to him to obtain various credit cards and loans.
The law provides for a maximum total sentence of 82 years in prison, a fine of $4,250,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed would be based upon the seriousness of the offenses and the prior criminal history, if any, of the defendant.
Assistant United States Attorney Christian A. Trabold is prosecuting this case on behalf of the government.
The Federal Bureau of Investigation and the Social Security Administration-Office of Inspector General conducted the investigation leading to the indictment in this case.
An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.

Dalton Gardens Man Sentenced for Illegally Possessing Firearm

COEUR D’ALENE—Cody James Freer, 26, of Dalton Gardens, was sentenced today to 30 months in prison for unlawfully possessing a firearm, U.S. Attorney Wendy J. Olson announced. Chief U.S. District Judge B. Lynn Winmill also ordered Freer to serve three years of supervised release following his prison term. He pleaded guilty to the charge on October 17, 2012.
According to court statements, in June 2012, an individual contacted Coeur d’Alene Police to verify the Glock handgun he was planning to purchase from a private seller was not stolen. Police advised the caller the gun was stolen and determined that the seller—Freer—was prohibited from possessing firearms due to a prior felony conviction. The individual arranged to meet Freer at a Coeur d’Alene parking lot to complete the transaction. Police arrested Freer at the parking lot after determining that he possessed the Glock handgun. Freer has been in custody since his arrest in June 2012.
The case was investigated by the Coeur d’Alene Police Department with the assistance of the North Idaho Violent Crimes Task Force (NIVCTF). The NIVCTF members include the Federal Bureau of Investigation, the Idaho State Police, Kootenai County Sheriff’s Office, Shoshone County Sheriff’s Office, Bonner County Sheriff’s Office, Coeur d’Alene Police Department, Post Falls Police Department, and the Coeur d’Alene Tribal Police Department. The NIVCTF investigates a myriad of violent crimes, including armed robbery, kidnapping, felonious assault, and drug trafficking.
The case was prosecuted as part of Idaho’s Project Safe Neighborhoods Program, which seeks to reduce gun violence in Idaho.

Florida Woman Sentenced to Prison for Obstruction of Justice in Relation to Her Husband’s Disappearance

WASHINGTON—A Gainesville, Florida woman was sentenced today to serve one year and one day in prison for her role in the obstruction of a multi-national investigation into the disappearance of her husband, then an employee in the U.S. Consulate in Curacao, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Pamela C. Marsh for the Northern District of Florida, Director of the U.S. State Department’s Diplomatic Security Service (DSS) Gregory B. Starr, and Special Agent in Charge of the FBI’s Miami Field Office Michael B. Steinbach.
Abby Beard Hogan, 50, was sentenced by U.S. District Judge M. Casey Rodgers in the Northern District of Florida. In addition to her prison term, Hogan was sentenced to two years of supervised release. On March 29, 2012, Hogan pleaded guilty before U.S. Magistrate Judge Gary R. Jones to one count of obstruction of justice.
According to court documents, on the night of September 24, 2009, Abby Hogan’s husband, James Hogan, an employee at the U.S. Consulate in Curacao, a Caribbean island that was part of the Netherlands Antilles, left his home on foot and subsequently disappeared. In the early hours of September 25, 2009, James Hogan called his wife and spoke for approximately three minutes. The next day, when James Hogan failed to report to work, the U.S. government and Dutch and Antillean law enforcement launched an island-wide search and opened an investigation into Hogan’s disappearance. On September 25, 2009, a diver located James Hogan’s blood-stained clothing on a local beach.
According to evidence submitted in Abby Hogan’s sentencing hearing, she repeatedly provided false information to U.S. law enforcement about the time period before James Hogan’s disappearance and withheld relevant information. Abby Hogan initially told investigators that, before his disappearance, she and her husband had an argument. She subsequently modified that statement and claimed that there had been no argument, just a minor disagreement over her husband’s next assignment for the State Department. Abby Hogan further told U.S. law enforcement agents that James Hogan had been in a “good mood” prior to leaving for his walk on the evening of his disappearance. She repeatedly denied that there had been any marital problems or that her husband had been upset or depressed in any way. Abby Hogan further stated that she could not remember the full three-minute conversation before her husband disappeared because she was sound asleep when her husband called. She claimed she fell back asleep after the call and did not awake until the following morning. In fact, all of these statements were false, as established by the deleted e-mails and other computer forensic evidence, which was submitted to the court.
According to court documents, after law enforcement interviews, between September 30, 2009 and January 15, 2010, Abby Hogan deleted more than 300 e-mails from her e-mail account. These e-mails contained information that Abby Hogan knew was relevant to specific questions she had been asked by U.S. law enforcement. The e-mails also contained information that she had either previously misrepresented or knowingly omitted during her interviews with law enforcement, including that she was engaged in an extramarital affair; the night James Hogan disappeared, the couple had argued, and he left the house angry and upset; and that she did not want law enforcement to know what had happened that evening.
The case was prosecuted by Senior Trial Attorney Teresa Wallbaum of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Frank Williams for the Northern District of Florida. The Criminal Division’s Office of International Affairs provided assistance. The case was investigated by DSS and the FBI’s Miami Field Office and Legal Attaché Office in Bridgetown, Barbados. Assistance was also provided by Curacao law enforcement authorities.

Florida-Based Lender Processing Services Inc. to Pay $35 Million in Agreement to Resolve Criminal Fraud Violations Following Guilty Plea from Subsidiary CEO

WASHINGTON—Lender Processing Services Inc. (LPS), a publicly traded mortgage servicing company based in Jacksonville, Florida, has agreed to pay $35 million in criminal penalties and forfeiture to address its participation in a six-year scheme to prepare and file more than one million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States. The settlement, which follows a felony guilty plea from the chief executive officer of wholly owned LPS subsidiary DocX LLC, was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Middle District of Florida Robert E. O’Neill.
The non-prosecution agreement, which LPS entered into today with the U.S. Department of Justice and the U.S. Attorney’s Office for the Middle District of Florida, requires the company to make the payment and meet a series of other conditions.
Lorraine Brown, the former CEO of DocX LLC, pleaded guilty on November 20, 2012, in federal court in Jacksonville to conspiracy to commit mail and wire fraud. During her guilty plea, Brown admitted to her leadership role in the scheme.
LPS has taken a number of remedial actions to address the misconduct at DocX. Among other things, LPS has wound down all of DocX’s operations, re-executed and re-filed mortgage assignments as appropriate, and terminated Brown and others. LPS has also demonstrated changes in its compliance, training, and overall approach to ensuring its adherence to the law, and has retained an independent consultant to review and report on LPS’s document execution practices; assess related operational, compliance, legal, and reputational risks; and establish a plan for reimbursing any financial injuries to mortgage servicers or borrowers.
According to the statement of facts accompanying the agreement, before its wind-down, DocX was in the business of assisting residential mortgage servicers with creating and executing mortgage-related documents to be filed with property recorders’ offices throughout the United States. Employees of DocX, at the direction of Brown and others, falsified signatures on the documents. Through this scheme and unbeknownst to the clients, Brown and subordinates at DocX directed authorized signers to allow other, unauthorized personnel to sign and to have documents notarized as if they were executed by authorized signers. These signing practices were used at DocX from at least March 2003 until late 2009 and were implemented to increase profits.
Also to increase profits, Brown hired temporary workers to sign as authorized signers. These temporary employees would sign mortgage-related documents at a much lower cost and without the quality controls represented to clients. These documents were then falsely notarized by employees at DocX, allowing the fraud scheme to remain undetected.
After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country. Many of these documents—particularly mortgage assignments, lost note affidavits, and lost assignment affidavits—were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions.
In entering into the non-prosecution agreement with LPS, the Justice Department took several factors into consideration. Soon after discovering the misconduct at DocX, LPS conducted a thorough internal investigation, reported all of its findings to the government, cooperated with the government’s investigation, and effectively remediated any problems it discovered. The government’s investigation also revealed that Brown and others at DocX took various steps to actively conceal the misconduct from detection, including from LPS senior management and auditors.
Brown, 51, of Alpharetta, Georgia, faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. She is scheduled to be sentenced on April 23, 2013, before U.S. District Judge Henry Lee Adams Jr. in Jacksonville.
This case is being handled by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Justice Department’s Criminal Division Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida. The case is being investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.
Today’s disposition is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

Final Defendant in San Diego Federal Courthouse Bombing Sentenced

SAN DIEGO—B. Donny Love Sr., 44, was sentenced today to serve 55 years in federal prison and pay $325,000 in restitution to the General Services Administration, based on his conviction for the use of a weapon of mass destruction and other charges, arising from the bombing of the Edward J. Schwartz Federal Courthouse in San Diego on May 4, 2008, U.S. Attorney Laura E. Duffy announced. Love was found guilty by a federal jury on June 6, 2011, following a two-week trial before the Honorable M. Margaret McKeown.
U.S. Attorney Duffy praised the perseverance and coordinated effort of the FBI; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and other federal, state, and local law enforcement agencies that participated in the Joint Terrorism Task Force in the investigation and prosecution of this case. U.S. Attorney Duffy also expressed satisfaction as to the sentence imposed by the court.
“Over 21 months ago, a federal jury held defendant Donny Love, Sr. accountable for masterminding the May 4, 2008 bombing of the Edward J. Schwartz Federal Courthouse. The sentence imposed by the court today recognizes the extreme act of violence committed by Love. It is only by blind luck that no one, including Love’s co-conspirator, Rachelle Carlock, was killed or injured by Love’s actions. The device detonated at the doors of the federal courthouse in the early morning hours of May 4, 2008, contained over two pounds of explosive powder jammed into three galvanized steel pipes with end caps, along with over 100 roofing nails. The subsequent explosion not only blew out the doors to the federal courthouse, causing substantial property damage, but also sent shrapnel and nails flying in all directions—over a block away and at least six stories into the air. Defendant’s actions showed a callous disregard for the lives of those individuals who were still working in the federal courthouse in those early morning hours, as well as the lives of pedestrians passing by. Today’s sentence ensures that the defendant will never again be able to endanger the lives of the citizens of our community.”
According to evidence presented at trial, Love was the person who instructed Rachelle Lynette Carlock and Ella Louise Sanders to purchase explosive powder and to steal bomb making materials. Love and others constructed pipe bombs at Love’s residence in Menifee, California, and then Love directed others to test pipe bombs by detonating them at various locations leading up to the courthouse bombing. According to testimony presented at trial, on the night of the courthouse bombing, Carlock and Eric Reginald Robinson drove from Love’s residence to San Diego with a backpack containing three pipe bombs, and Carlock then detonated the bombs at the front doors of the federal courthouse.
The evidence further showed that Love was the mastermind and driving force behind the federal courthouse bombing. At the time of the bombing, he was in dire financial straits and faced significant jail time arising from two pending California state criminal cases. The evidence showed that he directed the May 4, 2008 bombing for the purpose of obtaining reward money and consideration on his state charges by providing information about the bombing to law enforcement. The success of this fraudulent scheme required that he provide false and misleading information about the bombing and induce others to do the same in order to conceal his own involvement.
Judge McKeown previously sentenced co-defendants Carlock and Sanders to serve 10 years, and Robinson to serve 11 years, in federal prison for their roles in the bombing.
This investigation was coordinated by special agents from the FBI; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and the Joint Terrorism Task Force and prosecuted in the Southern District of California by Assistant U.S. Attorneys Shane P. Harrigan and Fred A. Sheppard.

NOAH Contractor Richard Hall Sentenced for Conspiracy and Theft from a Program Receiving Federal Funds

Richard Hall, age 47, a resident of Harvey, Louisiana, was sentenced today in federal court by U.S. District Court Judge Jay C. Zainey, to 24 months’ imprisonment after pleading guilty to one count of conspiracy and one count of theft from a program receiving federal funds, the New Orleans Affordable Homeownership (NOAH) program, announced U.S. Attorney Dana J. Boente. The court, in sentencing Hall, granted the government’s motion for an upward variance from the sentencing guidelines. In addition to the term of imprisonment, Judge Zainey imposed three years of supervised release following the term of imprisonment, during which time the defendant will be under federal supervision and risks an additional term of imprisonment should he violate any terms of his supervised release. The defendant was ordered to pay restitution in excess of $116,000 and fined $30,000.
According to court documents, Hall, a contractor for New Orleans Affordable Homeownership (NOAH), engaged in conspiracy to steal and theft from a program receiving federal funds provided by the U.S. Department of Housing and Urban Development to the City of New Orleans in the form of annual Community Development Block Grants (CDBG), designed to support home remediation work on residences located in New Orleans, Louisiana, following Hurricane Katrina. Hall admitted to conspiring to steal such funds and being paid for multiple home remediations he did not perform. Hall received tens of thousands of dollars in funds that he was not entitled to because either he did not perform remediation work such as gutting, boarding, and grass cutting; he had already been paid for work performed on residences and subsequently received and accepted payment again for the same work; or he collected double payments for work which he did not perform.
The case was investigated by the Federal Bureau of Investigation, the U.S. Department of Housing and Urban Development-Office of Inspector General, the U.S. Department of Homeland Security-Office of Inspector General, and the Internal Revenue Service. The case was prosecuted by First Assistant United States Attorney Fred P. Harper, Jr.

Former Employee Pleads Guilty to Defrauding Raley’s of More Than $2.5 Million

SACRAMENTO—Auburn-area resident David John Magana, 46, pleaded guilty today to a conspiracy to commit mail and wire fraud and a money laundering conspiracy, United States Attorney Benjamin B. Wagner announced.
According to court documents, Magana, the former director of advertising for Raley’s Family of Fine Stores, conspired with others to defraud Raley’s of more than $2.5 million using a number of schemes. The investigation is ongoing.
“The magnitude of Mr. Magana’s misconduct is unacceptable,” said Sacramento Division FBI Special Agent in Charge Herbert M. Brown. “The FBI is dedicated to identifying and pursuing cases where an employee intentionally takes advantage of an employer for financial gain.”
“Mr. Magana abused his position to take control of millions of dollars of company money for personal profit,” said IRS-Criminal Investigation Special Agent in Charge Jose M. Martinez. “Not only did he defraud his employer, but the everyday customer. IRS-CI is committed to identifying and investigating those who take advantage and impact the financial well-being of others for their own benefit.”
According to court documents, Magana demanded that a company that provided printing services to Raley’s, Vertis Inc., and a company that provided paper supplies, Graphic Communication Holding Inc., pay a co-conspirator unnecessary commissions in order for them to keep doing business with Raley’s. Given Magana’s position as director of advertising, both Vertis and Graphic agreed to pay Magana’s co-conspirator, so long as Magana made sure that Raley’s reimbursed them. Magana reimbursed the unnecessary commissions to the companies by disguising them as additional charges within their regular invoices. Magana approved for payment all of the inflated invoices from both Vertis and Graphic. Magana’s co-conspirator paid Magana a kickback after he received money from Vertis or Graphic.
Magana and others also worked together to sell significant quantities of Raley’s paper inventory to third parties at a discounted rate. Much of that paper was stored in a warehouse managed by a logistics company. As Raley’s director of advertising, Magana had access to the paper in the warehouse. Magana and his co-conspirators advertised the discounted paper by word of mouth and through the Internet and kept most of the proceeds. They falsely reported to Raley’s that the paper had been used in the normal course of business.
Magana and a co-conspirator used a company known as Seven Sisters Media Inc. as a shell corporation through which they laundered the proceeds of their fraud against Raley’s. Magana and another one of his co-conspirators used a company known as Advantage Paper Inc. to receive a portion of the proceeds from the fraud scheme. They also used Advantage Paper to supply paper to Raley’s at an inflated price. They met from time to time to determine the ultimate amount Raley’s would pay for paper. In each instance, part of the inflated price included the money paid to Magana by Advantage Paper as a kickback.
This case is the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation. Assistant United States Attorney Michael M. Beckwith is prosecuting the case.
Magana is scheduled to be sentenced by United States District Judge John A. Mendez on June 4, 2013. He faces a maximum sentence for the mail fraud charge of 20 years in prison; a fine of $250,000 or twice the gross gain or loss, whichever is greater; and a three-year term of supervised release. The maximum sentence for the money laundering charge is 20 years in prison; a fine of $500,000 or twice the value of the laundered property, whichever is greater; and a three-year term of supervised release. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Former Owner and CEO of SK Foods Sentenced to Six Years in Prison for Racketeering and Price Fixing

SACRAMENTO—United States District Judge Lawrence K. Karlton sentenced Frederick Scott Salyer, 57, of Pebble Beach, California, today to six years in prison, to be followed three years of supervised release, for racketeering and price fixing, United States Attorney Benjamin B. Wagner announced. Judge Karlton also ordered a forfeiture of $3.45 million. A restitution hearing is set for March 9, 2013. Salyer is scheduled to self-surrender on April 9, 2013.
According to court documents, between 1990 and 2009, Salyer was the CEO and owner of SK Foods LP, a grower, processor, and international seller of tomato paste and other processed agricultural products with facilities in Monterey, Lemoore, Williams, and Ripon, California. In his plea, Salyer admitted that he operated SK Foods as a racketeering organization. From January 2004 to April 2008, Salyer encouraged food broker Randall Rahal to pay bribes and kickbacks to purchasing officers employed by SK Foods’ customers Kraft Foods, Frito-Lay, and B&G Foods. The intent was to induce Kraft’s Robert Watson, Frito-Lay’s Richard Wahl, and B&G’s Robert Turner to promote the interests of SK Foods over their employers’ interests.
At Salyer’s direction, SK Foods routinely falsified the lab test results for its tomato paste. Salyer ordered former employees Alan Huey and Jennifer Dahlman to falsify tomato paste grading factors, and SK Foods lied about its product’s percentage of natural tomato soluble solids, mold count, production date, and whether the tomato paste qualified as organic. Salyer discussed an illegal target price agreement with other sellers of tomato paste and, when another co-conspirator offered a lower price, Salyer got the co-conspirator to agree to withdraw that offer to a customer.
U.S. Attorney Wagner said: “Scott Salyer used bribery and fraud to deceive his customers about SK Foods’ products in order to maximize his profits. Over a period of years, he turned his company into a machine of corruption and economic crime. This case is ending, but our efforts to ensure the integrity of the agriculture and food processing industry in this region will continue.”
“This case is a prime example where public trust was breeched by corporate greed,” said Herbert M. Brown, Special Agent in Charge of the Sacramento Division of the FBI. “Salyer’s business practices knowingly defrauded consumers for financial gain and he attempted to use the cloak of an agribusiness giant to insulate himself. The FBI is dedicated to combating such egregious corporate fraud by identifying and investigating cases that directly affect unsuspecting Americans.”
“Mr. Salyer and his co-conspirators ripped off consumers and reaped big profits by manipulating prices on millions of pounds of processed tomatoes,” said Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Jose M. Martinez. “These crimes touched the lives of many unsuspecting citizens and the public should know that we will hold accountable those individuals who put personal financial gain above the safety and well-being of the general public.”
“Protecting the health and safety of the public is the Office of Criminal Investigations top priority. OCI supports the prosecution of those who threaten the public’s health and safety and commends the U.S. Attorney’s Office in the Eastern District of California for their diligence,” said Lisa Malinowski, Special Agent in Charge, U.S. Food and Drug Administration’s Office of Criminal Investigations, Los Angeles Field Office.
According to court documents, the investigation began in August 2006, when federal agents executed a search warrant at the home of Anthony Manuel, an SK Foods employee. Manuel had embezzled approximately $1 million from his former employer, a competitor of SK Foods. Manuel promptly confessed to the embezzlement and later told agents about the crimes to which Salyer and others have now pleaded guilty. In 2007 and 2008, Manuel recorded conversations with SK Foods executives (including Salyer) and provided documents corroborating his account of the crimes being committed at SK Foods. Wiretaps of Rahal’s telephones revealed that Rahal was discussing bribery and food mislabeling with Salyer and other senior officers of SK Foods. The wiretap also confirmed that Rahal was bribing Watson, Wahl, Turner, and Safeway employee Michael Chavez. On April 18, 2008, agents of the FBI, IRS-CI, and FDA Office of Criminal Investigations executed search warrants at the offices of SK Foods and at Salyer’s residence in Pebble Beach, seizing documents and copying SK Foods’s computer servers.
In 2009, the bribe recipients and many of Salyer’s subordinates at SK Foods pleaded guilty before Judge Karlton. Also that year, creditors forced SK Foods into bankruptcy. According to court documents, in late 2009, Salyer moved more than $3 million to Andorra and made a $50,000 deposit on a condominium there. Andorra is a small principality in the Pyrenees Mountains between France and Spain and has no extradition treaty with the United States. When agents learned of Salyer’s plans, they obtained an arrest warrant for him, which was executed on February 4, 2010 when Salyer made what was to have been a short visit back to the United States. Salyer was jailed as a flight risk until September 3, 2010 when he was released to house arrest after posting a $6 million bond.
Salyer was indicted by a federal grand jury on February 18, 2010 with a superseding indictment brought against him on April 29, 2010. According to court documents, several issues have been litigated, such as whether the evidence against Salyer had been obtained lawfully. Judge Karlton ultimately rejected Salyer’s efforts to suppress the evidence gathered by Manuel. Judge Karlton also upheld the wiretap and search warrant applications.
Salyer pleaded guilty on March 23, 2012. Ten other defendants have pleaded guilty, two have been sentenced, and the remaining eight are scheduled to be sentenced on February 26, 2013.
This case is the product of an investigation by the FBI, IRS-CI, FDA Office of Criminal Investigations, and the Antitrust Division of the U.S. Department of Justice. The case is currently being prosecuted by Assistant United States Attorneys Matthew D. Segal, R. Steven Lapham, Jared C. Dolan, and Kevin Khasigian and Antitrust Division Trial Attorneys Anna T. Pletcher and Tai Milder.