New York Man Admits Role in International $200 Million Credit Card Fraud Conspiracy

TRENTON, NJ—A New York man today admitted his role in one of the largest credit card fraud schemes ever charged by the Justice Department, U.S. Attorney Paul J. Fishman announced.

Khawaja Ikram, 41, of Staten Island, New York, pleaded guilty before U.S. District Judge Anne E. Thompson in Trenton federal court to an information charging him with one count of conspiracy to commit bank fraud. Two co-defendants, Tarsem Lal, 73, of Iselin, New Jersey, and Azhar Ikram, 40, of Howard Beach, New York, pleaded guilty before Judge Thompson in Trenton on April 2, 2014, to informations charging them with conspiracy to commit bank fraud.

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

Khawaja Ikram was originally charged in February 2013 as part of a conspiracy to fabricate more than 7,000 false identities to obtain tens of thousands of credit cards. Members of the conspiracy doctored credit reports to pump up the spending and borrowing power associated with the cards. They then borrowed or spent as much as they could, based on the phony credit history, but did not repay the debts—causing more than $200 million in confirmed losses to businesses and financial institutions.

The scheme involved a three-step process in which the defendants would make up a false identity by creating fraudulent identification documents and a fraudulent credit profile with the major credit bureaus; pump up the credit of the false identity by providing false information about that identity’s creditworthiness to those credit bureaus; and finally, run up large loans.

The scope of the criminal fraud enterprise required Ikram and his conspirators to construct an elaborate network of false identities. Across the country, the conspirators maintained more than 1,800 “drop addresses,” including houses, apartments, and post office boxes, which they used as the mailing addresses of the false identities.

Ikram admitted he helped obtain credit cards in the name of third parties—many of which were fictional—and then directed the credit cards to be mailed to addresses controlled by members of the conspiracy. He also admitted he knew the cards would be used fraudulently at businesses.

The charge to which Ikram pleaded guilty carries a maximum potential penalty of 30 years in prison and a $1 million fine, or twice the gain or loss caused by the offense. Sentencing is scheduled for September 23, 2014. Azhar Ikram and Lal are scheduled to be sentenced September 17, 2014.

U.S. Attorney Fishman praised special agents of the FBI’s Cyber Division, under the direction of Special Agent in Charge Aaron T. Ford; postal inspectors, under the direction of Postal Inspector in Charge Maria L. Kelokates; and special agents of the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola, for the investigation leading to today’s guilty plea. He also thanked the U.S. Social Security Administration for its role in the investigation.

The government is represented by Assistant U.S. Attorneys Daniel V. Shapiro and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit and Barbara Ward of the office’s Asset Forfeiture and Money Laundering Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. 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.

Former Bank Officer Sentenced to 18 Months in Prison for Accepting Bribes, Bank Fraud

CAMDEN, NJ—A former bank officer was sentenced today to 18 months in prison for accepting bribes of more than $50,000 in return for his assistance in corrupt financial transactions, as well as bank fraud, U.S. Attorney Paul J. Fishman announced.

Jose Dominguez, 47, of Newark, New Jersey, previously pleaded guilty before U.S. District Judge Noel L. Hillman to an information charging him with soliciting and accepting bribes in excess of $1,000 as a bank officer. He had also pleaded guilty to a separate indictment charging him with bank fraud and conspiracy to commit bank fraud. Judge Hillman imposed the sentence today in Camden federal court.

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

From January 1988 to February 2007, Dominguez was employed as a loan officer at Spencer Savings Bank in Elmwood Park, New Jersey. From September 2004 to November 2004, Dominguez and Victor Patela, 38, a former Newark Police officer, conspired to fraudulently obtain a $1.92 million commercial loan from Spencer Savings Bank so that they could purchase apartment buildings in Elizabeth, New Jersey. In connection with this scheme, Dominguez and Patela made false representations to Spencer Savings Bank relating to Patela’s assets in order to obtain the commercial loan. Dominguez also accepted bribe payments from Patela in exchange for using his influence as a loan officer to obtain the $1.92 million loan. In June 2012, Patela was convicted at trial of bank fraud, conspiracy to commit bank fraud, two counts of loan application fraud, and bank bribery and sentenced in April 2013 to 48 months in prison.

In 2003, Dominguez was contacted by a bank customer who wanted to refinance some loans with Spencer Savings Bank and wanted to do so without paying significant prepayment penalty fees. Dominguez advised the customer that if the customer made corrupt payments to Dominguez, the customer could obtain a lower interest rate without paying a prepayment penalty to Spencer Savings Bank.

Between August 2003 and December 2003, Dominguez accepted $55,529.57 in corrupt payments from the customer to influence the requested loan modification. Dominguez also admitted to accepting additional bribes from other bank customers in the amounts of $4,500 and $5,000, respectively.

In addition to the prison term, Judge Hillman sentenced Dominguez to three years of supervised release and fined him $4,000.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, with the investigation leading to today’s sentencing.

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

Federal Jury Convicts Pittsford Father and Son on Multiple Fraud Charges

ROCHESTER, NY—U.S. Attorney William J. Hochul, Jr. announced today that a jury has convicted Michael C. Kaufman and his son, Richard A. Kaufman, both of Pittsford, New York, of conspiracy to commit bank fraud, bank fraud, and loan fraud. The charges carry a maximum penalty of 30 years in prison, a fine of $1,000,000, or both.
Assistant U.S. Attorneys Bradley E. Tyler and Craig R. Gestring, who handled the trial of the case, stated that between 2002 and November 2007, the defendants directed the controller of American Industrial Sales, d/b/a RAK Industries, to provide false financial statements to Key Bank and to the company’s outside accounting firm. The false financial statements significantly overvalued the accounts receivable and inventory, which were the two assets that Key Bank relied upon as collateral for a total loan credit of $2,000,000.
The loan proceeds were used by the defendants to fund their personal lifestyles, including expensive homes, generous salaries, and country club memberships. After the defendants defaulted on the Key Bank loan in the summer of 2007, they converted to their personal use approximately $53,000 of accounts receivable proceeds that were the property of Key Bank. As a result of the fraud scheme, Key Bank suffered an immediate loss of more than $1.5 million.
The conviction is the culmination of an investigation on the part of special agents of the Federal Bureau of Investigation.
Sentencing is scheduled for July 16, 2014, at 3:00 p.m. before Judge Geraci.

Delaware County Man Sentenced for Mortgage and Bank Fraud

PHILADELPHIA—Simon H. Aouad, 35, of Garnet Valley, Pennsylgania, was sentenced today to 70 months in prison and restitution of $5,462,682 for a mortgage fraud scheme involving fraudulently obtained mortgages to purchase properties in North Wildwood, New Jersey, and Dorchester, Masschusetts, and a bank fraud scheme involving fraudulently obtained lines of credit at Wachovia Bank, now Wells Fargo Bank. Aouad pleaded guilty to conspiracy, mail fraud, and bank fraud. He was involved in three schemes. In the first, properties primarily located in North Wildwood, New Jersey, were purchased for inflated sale prices and using false borrower income and asset information so that the buyers could obtain kickbacks totaling tens of thousands of dollars, which were not disclosed to the lenders. In the second, lines of credit at Wachovia Bank were obtained using false borrower income and employment information. In the third, the conspirators arranged for sham real estate transactions involving properties located in Dorchester, Massachusetts, in which a straw buyer would purchase properties from one of the conspirators for inflated prices. The sham sales were financed with fraudulently obtained mortgages. The conspirators split the proceeds of the sham sales.
Aouad’s co-conspirators in the North Wildwood scheme included John C. Lucidi, Jr., Daniel Mumbower (who was, at the time, an employee of Wachovia Bank), Timothy Cook, Eric Maratea, and Eric Itzi, all of whom have pleaded guilty to charges stemming from the mortgage fraud scheme. Aouad brought willing buyers, such as Cook, Maratea, and Itzi, to Lucidi, in exchange for fees and kickbacks for each successful buyer. In the Massachusetts mortgage fraud scheme, Aouad identified straw buyers for his co-conspirators, which included a former mortgage broker, and Aouad shared in the proceeds of the sham sales. The mortgages Aouad facilitated in both schemes went into default and caused losses to the lenders of a little more than $5 million.
Aouad’s co-conspirators in the bank fraud scheme included a loan broker by the name of Gerald Cathie, who is charged elsewhere, as well as Daniel Mumbower, a corrupt Wachovia Bank loan officer. Similar to his role in the mortgage fraud schemes, Aouad facilitated the fraudulently obtained Wachovia Bank lines of credit by bringing borrowers to Cathie and Mumbower to apply for the lines of credit using false income and other information. When the loans were funded, the borrowers paid Cathie a fee of five to seven percent of the amount of loan proceeds, Cathie kicked money back to the loan officer, and the loan officer paid Aouad several thousand dollars from the loan proceeds for his role in identifying the borrower. The Wachovia Bank loans that Aouad facilitated went into default and caused losses to Wachovia Bank of approximately $400,000.
In addition to the prison term and restitution, U.S. District Court Judge C. Darnell Jones, II, ordered forfeiture of $3,675,468, a $400 special assessment, and five years of supervised release.
The case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service-Criminal Investigations, and the United States Secret Service. It was prosecuted by Assistant United States Attorneys Nancy E. Potts.

Attorney Sent to Prison for Her Role in Mortgage Fraud Scheme

RALEIGH—The United States Attorney’s Office announces that in federal court yesterday, Chief United States District Judge James C. Dever, III sentenced former attorney AMY ROBINSON, 36, of Rolesville, to 18 months’ imprisonment followed by three years of supervised release. The court further ordered ROBINSON to make restitution of $2,613,046.37 to various banks and other victims.
The criminal information and other evidence showed that between 2002 and 2006, James Thomas Webb (previously sentenced to 237 months in prison) was operating a company identified as Alpine Properties, LLC. Webb promised investors that he and Alpine Properties would use investor money to purchase homes at a low value, renovate the homes, and then sell them to first-time home buyers for a higher value. During that time period, ROBINSON was a licensed North Carolina attorney who closed real estate transactions for Webb and his investors.
Evidence established that ROBINSON and Webb systematically falsified the HUD-1 settlement statements associated with numerous sales of properties from Alpine Properties to Webb’s investors. The HUD-1s contained numerous false statements and misrepresentations, including the amount of money the borrower brought to closing, the payment of closing funds to secondary, prior lien holders, and the amount of money actually paid to Webb. Each HUD-1 also contained a false certification by Webb and ROBINSON that the settlement statements were true and accurate reflection of all receipts and disbursements made by or on behalf of the parties to the transactions. ROBINSON transmitted the false documents to the lenders and banks by mail and wire. The banks and lenders relied upon the statements in issuing loans for the sale of properties from Webb’s companies to his investors.
Ultimately, after the collapse of Alpine Properties, many of the loans on the properties went into default, resulting in millions in losses to various banks and lenders. At the sentencing, the court held ROBINSON accountable for $2,613,046.37 in losses and ordered ROBINSON to make restitution to the victims of the offense.
ROBINSON pleaded guilty on May 3, 2010 to conspiracy to commit wire, mail, and bank fraud, in violation of Title 18,United States Code, Section 371.
Investigation of this case was conducted by the Federal Bureau of Investigation, the United States Postal Inspection Service, the United States Department of Housing and Urban Development Office of the Inspector General, and the Federal Deposit Insurance Corporation Office of the Inspector General, with the assistance of the North Carolina State Bar. Assistant United States Attorney William M. Gilmore represented the United States.

Man Found Guilty on Bank Fraud Charges

Albert Greer, Sr., of Shelby Township, was found guilty on March 20, 2014, of conspiracy to commit bank fraud and of aiding and abetting bank fraud, United States Attorney Barbara L. McQuade announced today.
McQuade was joined in the announcement by Paul M. Abbate, Special Agent in Charge of the Detroit Division of the Federal Bureau of Investigation.
They jury deliberated for three hours before returning the guilty verdicts, concluding a trial that began on March 11, 2014, before United States District Judge Stephen J. Murphy, III.
Evidence introduced during the trial established that from 2004 through 2007, Greer devised and executed a scheme to commit bank fraud by locating residential properties in the Detroit metropolitan area, then recruiting and paying “straw buyers” to sign for mortgage loans they never intended to repay on homes they never intended to live in. Greer often made the mortgage payments on the loans for several months so the lenders would not immediately realize that the loans had been obtained by fraud, but then the loans went into default and the properties went into foreclosure.
Co-defendant and co-conspirator Carlton Davis (who pleaded guilty in 2013 to conspiring with Greer) would submit fraudulent loan applications to various financial institutions on behalf of the straw buyers. The applications were filled with material false representations that were supported by phony documents Greer created, including W-2s, earnings statements, verifications of deposit, verifications of employment, and so on. Greer attempted to insulate himself from criminal liability by acting through the straw buyers and through shell companies—including Detroit National Mortgage Associates—he established in the names of his family members. Greer also had his family members open bank accounts in their names, which he used to launder the proceeds of his crimes.
Greer not only scammed banks out of several million dollars, he also stole the sellers’ proceeds on occasion by submitting invoices for “consulting fees” owed to Detroit National Mortgage Associates; if the seller did not realize those fees were included on the HUD-1s, proceeds checks would be issued to the shell company at closing, and Greer would cash the checks. In this way, Greer stole $167,844.31 from the homeowner who sold 18630 Fairway in Detroit in 2005 and $21,948.92 from the homeowner who sold 16872 Huntington in Detroit in 2006.
Each count of conviction, conspiracy to commit bank fraud and aiding and abetting bank fraud, carries a maximum prison term of 30 years, a $1,000,000 fine, and five years of supervised release following the period of incarceration. No sentencing date has been set at this time.
“Some people rob banks with guns and masks,” McQuade said. “This defendant robbed banks with lies and false documents. White-collar criminals deserve to be seen as the robbers that they are.”
The investigation of this case was conducted by special agents of the FBI and prosecuted by Assistant U.S. Attorney Cynthia Oberg.

Leader of Million-Dollar Felony Lane Gang Sentenced to More Than 15 Years in Prison

The United States Attorney’s Office for the Middle District of Pennsylvania announced that the leader of the Felony Lane Gang conspiracy was sentenced to 188 months in prison.
According to the United States Attorney, on March 18, 2014, U.S. District Senior Judge William Caldwell sentenced Travis J. Russ for his leadership role in a car break-in and bank fraud crew that stole more than a million dollars in the five years it was in operation. Testimony presented at Russ’s sentencing showed that the crew stole millions of dollars from banks using stolen checks and identification. At the sentencing, Russ was identified as the leader of the group of thieves. Although they were only caught in the fall of 2012, Russ was implicated in committing this scheme over five years and victimizing over 250 people in the course of his fraud scheme, dubbed the Felony Lane Gang.
The Felony Lane Gang is a group of thieves based in Fort Lauderdale, Florida, that travels across the United States stealing identities and checkbooks from unattended cars (smash and grabs). With the stolen checkbooks and driver’s licenses, the gang cashes checks using the drive-through lane of banks. The lane farthest from video cameras and tellers has been dubbed the “felony lane” because of the ease with which false identities can be used to cash checks.
In December 2012, a grand jury returned a four-count indictment charging 10 people with conspiracy to commit fraud, bank fraud, wire fraud, and aggravated identity theft. All those who were charged entered guilty pleas, and the majority of them have been sentenced:

• Travis J. Russ, age 32, of Fort Lauderdale, Florida—identified as the leader and sentenced to 188 months in prison;
• Sylvester Joseph, age 26, of Derrfield, Florida—identified as a leader and pending sentencing;
• Jarrett Hobbs, age 31, of Fort Lauderdale, Florida—identified as a leader and pending sentencing;
• Khiante Thompson, age 20, Florida—sentenced to 14 months in prison;
• Phillip Etienne, age 31, of Margate, Florida—46 months in prison;
• Willie L. Ogiste, age 35, of Fort Lauderdale, Florida—pending sentencing;
• Teresa L. Brimhall, age 45, of Oakland Park, Florida—18 months in prison;
• April Ainsworth, age 26, of Richmond, Texas—36 months in prison;
• Colleen Shelly, age 49, of Lauderdale Lakes, Florida—11 months in prison; and
• Wendy Snyder-Lucas, age 31, of Fort Lauderdale, Florida—11 months in prison.

The 10 persons charged in this indictment struck Pennsylvania from August to October 2012. During that time, they broke into and/or stole the identities of more than 100 people. In addition, the group targeted state parks where victims left purses, wallets, and checkbooks in their cars while using the recreation facilities. The smash and grabs occurred at approximately 25 different state parks and recreation centers in and around Central Pennsylvania.
This group used stolen checks and identification to obtain funds from banks and credit unions. According to the indictment, a conspirator, disguised as the account holder, used the drive-through lane at the account holder’s bank, submitted to the teller a forged check with the stolen identification of the victim, and received the funds. Through this process, these conspirators successfully compromised numerous accounts and stole tens of thousands of dollars in funds from the victims.
This investigation was conducted by U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), HSI’s Bulk Cash Smuggling Center, the United States Secret Service, the Pennsylvania State Police, the Federal Bureau of Investigation, the Pennsylvania Department of Conservation and Natural Resources, and other state and local investigative agencies. The prosecutor assigned to the case is Assistant United States Attorney Michael A. Consiglio.

Newark Man Sentenced to 57 Months in Prison in Scheme to Steal Checks from Mail

NEWARK—A Newark man was sentenced today to 57 months in prison for his role in a scheme to steal personal checks from the U.S. mail and fraudulently endorse and deposit them into personal checking accounts, U.S. Attorney Paul J. Fishman announced.
Karron Hinton-Lovelace, 28, previously pleaded guilty before U.S. District Judge Kevin McNulty to an information charging him with one count of conspiracy to commit bank fraud. Judge McNulty imposed the sentence today in Newark federal court.
According to documents filed in this case and statements made in court:
Hinton-Lovelace and his conspirators stole blank checks that were sent via U.S. mail to 122 unsuspecting victims. The defendants fraudulently endorsed the blank checks for a certain sum and deposited those checks into legitimate bank accounts that they opened at the victim banks, which included 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 discovered the checks were stolen or the banks discovered the checks were fraudulent, Hinton-Lovelace and his co-conspirators had withdrawn the funds, either via ATMs or by entering the banks and filling out withdrawal slips. U.S. Postal Inspection Service and FBI agents obtained bank video surveillance, which captured many of the fraudulent deposits and withdrawals.
Hinton-Lovelace and his conspirators deposited $1,478,695 in fraudulent checks into 258 different bank accounts. Their conduct resulted in a $648,194 loss.
In addition to the prison term, Judge McNulty sentenced Hinton-Lovelace to five years of supervised release. As part of his plea agreement, Hinton-Lovelace agreed to pay $648,194 in restitution to the victims.
Several of Hinton-Lovelace’s conspirators have pleaded guilty to conspiracy to commit bank fraud and been sentenced to prison terms for their roles in the scheme. Four defendants were sentenced in April 2013. Constance Bowles, 23, of Newark, was sentenced to six months in prison and six months in a halfway house. Garnet Hinton, 24, Union, and Keonnah McLean, 24, Newark, were each sentenced to 23 months in prison. Martell Arline, 23, of Newark, was sentenced to 36 months in prison.
Kurtis Steele, 27, of Irvington, was sentenced to 46 months in prison on May 29, 2013, and Guy Hicks, 51, of Newark, was sentenced to 36 months in prison on October 9, 2013.
U.S. Attorney Fishman credited special agents of the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates; and special agents of the FBI under the direction of Special Agent in Charge Aaron T. Ford, for the investigation leading to today’s sentence.
The government is represented by Assistant U.S. Attorney Dara Aquila Govan of the Organized Crime/Gangs Unit in Newark.

Real Estate Professional Pleads Guilty to Federal Bank Fraud Charges for Illegally Flipping Central Coast Residential Properties

LOS ANGELES—A former San Luis Obispo real estate broker pleaded guilty today to orchestrating a property “flipping” scheme in which he purchased houses in short sales at artificially low prices and immediately resold the properties at their true market values.
Timothy William Barnes, 37, who now resides in San Francisco, pleaded guilty to one count of bank fraud, a federal offense that carries a statutory maximum penalty of 30 years in federal prison.
Barnes owned and operated Apex Properties Real Estate Brokerage Inc. in San Luis Obispo. Between January 2010 and September 2012, Barnes purchased properties after banks gave approval for short sales. In short sales, banks agree to accept less money than the outstanding balance on a mortgage, usually because the property is “under water,” meaning that the value of the property has fallen below the amount remaining on the mortgage. The lenders authorized the short sales after Barnes minimized the value of the houses and concealed higher offers he had already received. To carry out his scheme, Barnes made false statements about the fair market value of the properties in the documents he submitted to the banks.
Barnes admitted that, in many cases, he had already negotiated the resale at the higher price while he was simultaneously negotiating the short sale of the property at the lower price.
Barnes used this scheme to flip properties in San Luis Obispo, Paso Robles, Pismo Beach, and other cities on the Central Coast, earning profits of more than $500,000.
Barnes is scheduled to be sentenced by United States District Judge Stephen V. Wilson on June 16.
This case was investigated by the Federal Bureau of Investigation and the Federal Housing Finance Agency, Office of Inspector General.

Former CEO of Luggage Manufacturer Charged in Manhattan Federal Court for Multi-Million-Dollar Bank Fraud Scheme

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 Field Office of the Federal Bureau of Investigation (“FBI”), announced that MARVIN JEMAL, the former chief executive officer of a Manhattan-based company that designed, imported, and distributed luggage, business bags, backpacks, and accessories (the “Company”), was arrested today for a fraudulent scheme to obtain millions of dollars in loans by making false statements and providing false and fraudulent documents to a commercial bank based in New York (the “Bank”). JEMAL was arrested this afternoon at John F. Kennedy International Airport in New York and is expected to be presented later today in Manhattan federal court before United States Magistrate Judge Gabriel W. Gorenstein.
MARK BERNSTEIN, the former chief financial officer of the Company, was previously arrested in August 2013 and pled guilty in October 2013 before U.S. District Judge Robert P. Patterson for his role in the scheme.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, former CEO Marvin Jemal and another executive at his luggage company set out to fleece a bank into lending their company millions of dollars by submitting documents loaded with lies and backing them up with false statements. Those millions were then allegedly funneled to Jemal’s personal accounts and used for mortgage payments and payments on a Porsche, among other things.”
FBI Assistant Director in Charge George Venizelos said: “As alleged in the indictment, the defendant thought he could ‘beat the bank’ with lies and misrepresentations to support a lavish lifestyle. He obtained millions of dollars in loans by submitting falsified and fraudulent documents to his commercial lender, then diverted that money to his personal accounts. Bank fraud is a serious crime that weakens the economic integrity of our financial institutions. The defendant’s arrest today should send a clear message to the public that bank fraud cases such as this one are, and will continue to be, a high priority for the FBI. Individuals who try to line their pockets by engaging in financial fraud schemes should be reminded that their criminal activity will not go undetected and they will be held accountable.”
According to the allegations contained in the indictment unsealed today and other documents previously filed in Manhattan federal court:
From 2007 through October 2009, JEMAL and BERNSTEIN engaged in a scheme to fraudulently induce the Bank to lend millions of dollars to the Company. Among other things, JEMAL and BERNSTEIN knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated invoices and shipping documents. In total, the Company obtained approximately $6.9 million in loans from the Bank and defaulted on approximately $6 million of those loans.
Further, although the loans were purportedly for the benefit of the Company’s business, in fact, JEMAL diverted approximately $3.5 million of the loan proceeds to personal bank accounts and used the money to pay for various personal expenses, including mortgage payments on properties he owned, credit card bills, and payments on his Porsche.
The Factoring Agreement
The Company obtained the loans from the Bank as part of a secured credit facility, pursuant to a factoring agreement between the Company and the Bank. Under the terms of the factoring agreement, the Company would assign and sell the Company’s interest in its accounts receivable to the Bank and, in exchange, the Company could borrow from the Bank up to 85 percent of the value of those receivables. In addition, the Company could borrow up to 50 percent of the value of its inventory. In order to draw down on its secured credit facility, however, the Company was required to provide the Bank with, among other things, an accurate listing of all accounts receivable, as well as supporting documentation, including copies of (i) relevant underlying invoices and (ii) shipping documents or other proof of delivery.
The Scheme to Fraudulently Obtain Loans
To fraudulently obtain loans from the Bank under the factoring agreement, JEMAL and BERNSTEIN made false statements and submitted false and fraudulent documents to the Bank, including the following:

• JEMAL and BERNSTEIN sent duplicate and/or fabricated invoices to the Bank that purported to reflect the sale of certain products by the Company and, thus, an outstanding receivable for the Company. In truth, however, the sales reflected on those invoices were false, as those sales either had never occurred or had already been invoiced separately.
• JEMAL and BERNSTEIN provided fraudulent shipping documents to the Bank to substantiate the purported sales of products by reflecting that those products had been shipped to customers. In truth, however, those shipping documents were false and fraudulent, as the products had not, in fact, been shipped to the customers as reflected in the shipping documents.
• JEMAL and BERNSTEIN concealed material facts from the Bank, including credits that the Company had provided to certain of its customers (which thereby reduced the total accounts receivable associated with those customers) and instances in which the Company had directly collected and deposited payments from its customers on the same invoices the Company assigned to the Bank.
• JEMAL and BERNSTEIN provided inaccurate monthly inventory spreadsheets to the Bank which overstated the Company’s existing inventory.

Further, in order to conceal the scheme, JEMAL made various oral misrepresentations to certain representatives of the Bank when those representatives confronted him about irregularities and other issues that the Bank had discovered with respect to the Company’s assignment of its accounts receivable.
The Money Laundering Scheme
Between approximately May 2007 and February 2012, after fraudulently inducing the Bank to loan millions of dollars to the Company, JEMAL and BERNSTEIN arranged to divert more than $3.5 million in loan proceeds to personal bank accounts controlled by JEMAL. To conceal that the money was being diverted to JEMAL’s personal accounts, the defendants first moved the funds through bank accounts in the name of two shell corporations that JEMAL controlled. From those accounts, the money was transferred to JEMAL’s personal accounts and used to pay for personal expenses, including, among other things, mortgage payments on properties owned by JEMAL, bills from credit cards in the name of JEMAL and his wife, and payments on a Porsche driven by JEMAL.

***

JEMAL, 60, of Brooklyn, New York, is charged with one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison, and one count of money laundering, which carries a maximum sentence of 20 years in prison. U.S. District Judge Valerie E. Caproni is assigned to the case.
BERNSTEIN, 63, of Belle Harbor, New York, pled guilty to one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison. He also pled guilty to one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. BERNSTEIN awaits sentencing.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.
The charges contained in the indictment are merely accusations, and JEMAL is presumed innocent unless and until proven guilty.

Former Attorney Pleads Guilty to Securities and Bank Fraud

ANNISTON—A former Birmingham attorney pleaded guilty today in federal court to charges connected with a securities fraud scheme involving the fraudulent taking of more than $2.8 million dollars in investment funds, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Richard D. Schwein, Jr., and Alabama Securities Commission Director Joseph Borg.
Christopher Shawn Linton, 34, of Alabaster, entered his plea before U.S. District Judge Virginia Emerson Hopkins to one count each of wire fraud, mail fraud, securities fraud, and money laundering as part of the investment fraud scheme. He also pleaded guilty to one count of bank fraud arising from the submission of a fraudulent commercial loan application to Iberia Bank for a loan of $908,650.
As part of his plea agreement, Linton is required to pay $2.5 million in restitution to the investors he defrauded and to pay restitution to Iberia Bank in an amount that will be determined at sentencing. Sentencing is scheduled May 29.
“This commission is proud to be able to combine our efforts and resources with those of the U.S. Attorney’s Office, Northern District of Alabama, and the FBI to achieve a just and strong conviction against Linton,” Borg said. “Hopefully, this verdict will provide some relief to victims involved in this case who were defrauded out of their hard-earned dollars.”
According to Linton’s plea agreement, he conducted the securities fraud scheme as follows:
In 2007, Linton became an officer, partner, and part-owner of a business known as Integrity Capital Inc. by purchasing stock in the company. Integrity Capital Inc. was a factoring business located in the greater Birmingham area. Its business was to make advance payments to lawyers who had submitted payment vouchers for work performed for the state of Alabama. Integrity Capital would then receive the voucher payments from the state and keep a percentage as a fee.
In 2009, Linton formed Integrity Capital LLC. Beginning about August 2009, Linton recruited investment advisors to solicit investments in Integrity Capital LLC in order to purchase the assets and capital stock of Integrity Capital Inc. Between September 2009 and December 2011, 12 individuals invested more than $2.8 million in Integrity Capital LLC. The investors mailed, wired, or delivered money to Linton, who deposited the money into one of several bank accounts held by the law firm where he was a partner.
After receiving the investor funds, Linton fraudulently converted them for personal use by writing personal checks to himself and by using the funds for non-investment purposes. The non-investment purposes included, but were not limited to, the purchase of his personal residence, construction projects at the residence, private jet flights, vacations, recreational vehicles, furniture, luxury items, Auburn football tickets, and a donation to the Heisman Trophy Trust.
Linton committed bank fraud in January 2012 when he submitted fraudulent personal financial statements to Iberia Bank and received two commercial loans totaling $908,650, according to his plea agreement. His financial statements inflated the value of his personal residence and falsely stated that he owned the residence and other real property.
The maximum penalty for wire fraud and for mail fraud is 20 years in prison and a $250,000 fine; the maximum penalty for money laundering is 10 years in prison and a $250,000 fine; and the maximum penalty for securities fraud is five years in prison and a $250,000 fine. The maximum penalty for bank fraud is 30 years in prison and a $1 million fine.
The FBI and Alabama Securities Commission investigated the case, which Assistant U.S. Attorney Robin Beardsley Mark is prosecuting along with Assistant Attorney General Greg Biggs with the Alabama Securities Commission.

Two Garrett County Developers Indicted in $3.7 Million Bank Fraud Scheme

BALTIMORE—A federal grand jury has indicted Samuel R. VanSickle, a/k/a “Donald Blunt,” “Jacob Aiken,” “Allen Helms,” “Paul Walsh,” and “William Hall, Attorney,” age 49, of Accident, Maryland; and Louis W. Strosnider, III, age 47, of Oakland, Maryland, today on charges related to a $3.7 million bank fraud conspiracy.
The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Stephen E. Vogt of the Federal Bureau of Investigation.
According to the six-count indictment, Samuel R. VanSickle and Louis W. Strosnider, III owned and developed property in Garrett County, Maryland. VanSickle controlled the mailbox at an address in Accident, Maryland, and rented a post office box, also in Accident. VanSickle used a number of different business names, including Freedom Church, Gospel Church, Equity Exchange, Unity Mortgage, Impartial Lenders, Noble Forest Consultants, and used the names Donald Blunt, Allen Helms, Jacob Aiken, Paul Walsh, and William Hall (an attorney). Strosnider operated Stony Brook Development Company LLC, a Maryland corporation located in McHenry, Maryland.
The indictment alleges that from December 31, 2001 through June 30, 2004, VanSickle and Strosnider devised a scheme to fraudulently obtain money and property from financial institutions. Specifically, the indictment charges that VanSickle purchased properties, concealed the ownership and control of the properties using false names and identities, inflated the value of the properties through fraudulent loans and mortgages; entered into sales contracts with Strosnider at inflated prices with fictitious down payments; and then Strosnider obtained bank loans with fraudulent collateral to finance sales of the properties. In this way, the indictment alleges that entities controlled by VanSickle sold the properties to Strosnider, with the purchase prices actually being paid to VanSickle in the name of companies he controlled. The indictment alleges that VanSickle and Strosnider purchased two properties using these methods.
The indictment also seeks forfeiture of $3,751,000 and 40 properties held in VanSickle’s name or in the names of nominees in Maryland, West Virginia, and Pennsylvania.
The defendants face a maximum sentence of 30 years in prison for the conspiracy and for each of five counts of bank fraud. An initial appearance has been scheduled for February 28, 2014, in U.S. District Court in Baltimore.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
United States Attorney Rod J. Rosenstein praised the FBI for its work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Joyce K. McDonald, who is prosecuting the case.

Texas Woman Indicted on Wire Fraud and Obstruction Charges

NEW ORLEANS—Ebony Williams White, age 33, a resident of Katy, Texas, was charged in a seven-count wire fraud and one-count obstruction indictment for wire transferring $207,135 without authorization into her personal bank account from her employer’s bank accounts, announced U.S. Attorney Kenneth Allen Polite, Jr.
According to the indictment, White was employed by Jefferson Community Health Care Centers Inc. in Marrero, Louisiana, from February 2008 until March 2010, eventually attaining the position of chief financial officer (CFO). Once in the position of CFO, White devised a scheme to fraudulently transfer funds from her employer’s bank accounts into a separate bank account she controlled. White wire transferred the unauthorized funds to a different bank than the one she identified and used for the bi-weekly payroll checks to which she was entitled.
When White learned that federal charges against her were contemplated for the fraudulent wire transfers, she attempted to obstruct the investigation by submitting to the government a document that, if authentic, would have potentially entitled her to receive $137,000 plus bonuses for work over and above what was required of her as CFO. Other individuals allegedly authorizing the additional funds in the document provided by White denied that an agreement ever existed for White to receive any funds in addition to her bi-weekly pay check as CFO.
If convicted, White faces a maximum term of imprisonment of 160 years, a fine of $250,000 and three years of supervised release following any term of imprisonment.
U.S. Attorney Polite reiterated that the indictment is merely a charge and that the guilt of the defendant must be proven beyond a reasonable doubt.
The case was investigated by the U.S. Department of Health and Human Services, the Federal Bureau of Investigation, the Louisiana Legislative Auditor’s Office, and the United States Attorney’s Office. The case is being prosecuted by Special Assistant United States Attorney Juliana A. Etland.

Oldham County Man Sentenced to 18 Months in Prison on Bank Fraud Charges

LOUISVILLE, KY—An Oldham County, Kentucky man was sentenced to 18 months in prison and ordered to pay a $114,936.98 in restitution yesterday by U.S. District Court Judge John G. Heyburn, II for defrauding five banks located in Oldham County, announced David J. Hale, United States Attorney for the Western District of Kentucky.
James Distler, age 45, pleaded guilty to a five count federal grand jury indictment on September 20, 2013. The charges included three counts of bank fraud and two counts of wire fraud.
In court, Distler admitted to opening bank accounts, under false names, between August 2009 and November 2011, to negotiate and attempt to negotiate worthless checks totaling nearly $115,000.
According to the plea agreement, between August and December 2009, Distler opened a bank account in the name of Air Vegas at Bank of America in Oldham County, Kentucky, and then knowingly used the bank account to negotiate and attempt to negotiate worthless checks totaling $78,845. Between June and July 2010, Distler opened a bank account in the name of Express Jet at U.S. Bank in Oldham County and then knowingly used U.S. Bank’s check processing company, Elavon Inc., to negotiate and attempt to negotiate worthless checks totaling $40,778.51. During the course of the scheme he caused an interstate wire communication between Knoxville, Tennessee, and Oldham County, Kentucky. Then, between July and August 2010, Distler opened a bank account in the name of Express Jet at Capital One Bank in Oldham County and then knowingly used the bank account to negotiate and attempt to negotiate worthless checks totaling $18,302. Between July and August 2010, James Distler opened a bank account in the name of Express Jet at Old National Bank in Oldham County and then knowingly used the bank account to negotiate and attempt to negotiate worthless checks totaling $16,756. Lastly, between November 2010 and January 2011, Distler opened a bank account in the name of Ejet Solutions at PNC Bank in the name of Ejet Solutions and then used the account to negotiate payments processed by Erentpayment LLC to negotiate and attempt to negotiate worthless rent payments totaling $16,380. During the course of the scheme he caused an interstate wire communication between Denver, Colorado, and Oldham County, Kentucky.
This case was prosecuted by Assistant United States Attorney Bryan Calhoun and was investigate by the Federal Bureau of Investigation (FBI).

Three Former Rabobank Traders Charged with Manipulating Yen LIBOR

WASHINGTON—Two former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese yen derivatives traders and the trader responsible for setting Rabobank’s yen London InterBank Offered Rate (LIBOR) were charged as part of the ongoing criminal investigation into the manipulation of LIBOR.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division, and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
Earlier today, a U.S. Magistrate Judge sitting in the Southern District of New York signed a criminal complaint charging Paul Robson of the United Kingdom, Paul Thompson of Australia, and Tetsuya Motomura of Japan with conspiracy to commit wire fraud and bank fraud, as well as substantive counts of wire fraud. All are former employees of Rabobank, which on October 29, 2013, entered into a deferred prosecution agreement with the Department of Justice as part of the department’s LIBOR investigation and agreed to pay a $325 million penalty. Each defendant faces up to 30 years in prison for each count upon conviction.
“Today, less than three months after Rabobank admitted its involvement in the manipulation of LIBOR, we have charged three of its senior traders with participating in this global fraud scheme,” said Acting Assistant Attorney General Raman. “As alleged, these three traders—working from Japan, Singapore and the U.K.—deliberately submitted what they called ‘obscenely high’ or ‘silly low’ LIBOR rates in order to benefit their own trading positions. The illegal manipulation of this cornerstone benchmark rate undermines the integrity of the markets; it harms those who are relying on what they expect to be an honest benchmark; and it has ripple effects that extend far beyond the trading at issue here. The Justice Department has now charged eight individuals and reached resolutions with four multi-national banks as part of our ongoing and industry-wide LIBOR probe, and, alongside our law enforcement and regulatory partners both here and abroad, we remain committed to continuing to root out this misconduct.”
“The conspirators charged today conspired to rig the interest rates used by derivative products throughout the financial industry to benefit their own trading books,” said Deputy Assistant Attorney General Snyder. “Today’s charges demonstrate the department’s commitment to hold individuals accountable for schemes that undermine the integrity of markets that rely on competition to flourish.”
“Manipulation of benchmark rates that are routinely referenced by financial products around the world erodes the integrity of our financial markets,” said Assistant Director in Charge Parlave. “The charges against these individuals represent another step in our ongoing efforts to find and stop those who hide behind complex corporate and securities fraud schemes. I commend the special agents, forensic accountants, and analysts, as well as the prosecutors for the significant time and resources they committed to investigating this case.”
According to the complaint, LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks. LIBOR is published by the British Bankers’ Association (BBA), a trade association based in London. At the time relevant to the criminal complaint, LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year. The published LIBOR “fix” for yen LIBOR at a specific maturity is the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.
LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans, and other consumer lending products. The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.
According to allegations in the complaint, all three defendants traded in derivative products that referenced yen LIBOR. Robson worked as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in London; Thompson was Rabobank’s head of Money Market and Derivatives Trading Northeast Asia and worked in Singapore; and Motomura was a senior trader at Rabobank’s Tokyo desk who supervised money market and derivative traders employed at Rabobank’s Tokyo desk. In addition to trading derivative products that referenced yen LIBOR, Robson also served as Rabobank’s primary submitter of yen LIBOR to the BBA.
Robson, Thompson, and Motomura each entered into derivatives contracts containing yen LIBOR as a price component. The profit and loss that flowed from those contracts was directly affected by the relevant Yen LIBOR on certain dates. If the relevant Yen LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties. When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.
The complaint alleges that from about May 2006 to at least January 2011, Robson, Thompson, Motomura, and others agreed to make false and fraudulent yen LIBOR submissions for the benefit of their trading positions. According to the allegations, sometimes Robson submitted rates at a specific level requested by a co-defendant and consistent with the co-defendant’s trading positions. Other times, Robson made a higher or lower Yen LIBOR submission consistent with the direction requested by a co-defendant and consistent with the co-defendant’s trading positions. On those occasions, Robson’s manipulated yen LIBOR submissions were to the detriment of, among others, Rabobank’s counterparties to derivative contracts.
In addition to allegedly manipulating Rabobank’s yen LIBOR submissions, Robson, on occasion and on behalf of one or more co-defendants, coordinated his yen LIBOR submission with the trader responsible for making yen LIBOR submissions at another yen LIBOR panel bank. At times, Robson allegedly submitted yen LIBOR at a level requested by the other trader, and, at other times, that trader submitted yen LIBOR at a level requested by Robson.
As alleged in the complaint, Thompson, Motomura, and another Rabobank trader described in the complaint as Trader-R made requests of Robson for Yen LIBOR submissions through electronic chats and e-mail exchanges. For example, on May 19, 2006, after Thompson informed Robson that his net exposure for his three-month fixes was 125 billion yen, he requested by e-mail that Robson “sneak your 3m libor down a cheeky 1 or 2 bp” because “it will make a bit of diff for me.” On or about May 19, 2006, Robson responded, “No prob mate I mark it low.”
On September 21, 2007, Trader-R asked Robson by e-mail, “wehre do you think today’s libors are? If you can I would like 1mth higher today.” Robson responded, “bookies reckon .85,” to which Trader-R replied, “I have some fixings in 1mth so would appreciate if you can put it higher mate.” Robson answered, “no prob mate let me know your level.” After Trader-R asked for “0.90% for 1mth,” Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no worries mate...there’s bigger crooks in the market than us guys!”
As another example, on August 4, 2008, in a Bloomberg chat, Motomura asked Robson, “Please set today’s 6mth LIBOR at 0.96 I have chunky fixing.” To this, Robson responded, “no worries mate.”
The complaint alleges that Robson accommodated the requests of his co-defendants. For example, on September 21, 2007, after Robson received a request from Trader-R for a high one-month yen LIBOR, Rabobank submitted a one-month yen LIBOR rate of 0.90, which was seven basis points higher than the previous day and five basis points above where Robson said that “bookies” predicted it and which moved Rabobank’s submission from the middle to the highest of the panel.
According to court documents, the defendants were also aware that they were making false or fraudulent yen LIBOR submissions. For example, on May 10, 2006, Robson admitted in an e-mail that “it must be pretty embarrasing to set such a low libor. I was very embarrased to set my 6 mth—but wanted to help thomo [Thompson]. tomorrow it will be more like 33 from me.” At times, Robson referred to the submissions that he submitted on behalf of his co-defendants as “ridiculously high” and “obscenely high” and acknowledged that his submissions would be so out of line with the other yen LIBOR panel banks that he might receive a phone call about them from the BBA or Thomson Reuters.
A criminal complaint is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted.
The investigation is being conducted by special agents, forensic accountants, and intelligence analysts in the FBI’s Washington Field Office. The prosecution is being handled by Trial Attorneys Carol L. Sipperly, Brian Young, and Alexander H. Berlin of the Criminal Division’s Fraud Section and Trial Attorneys Ludovic C. Ghesquiere and Michael T. Koenig of the Antitrust Division. Former Deputy Chief Glenn Leon and Senior Counsel Rebecca Rohr of the Criminal Division’s Fraud Section, along with Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and Richard Powers of the Antitrust Division, have also provided valuable assistance. The Criminal Division’s Office of International Affairs has provided assistance in this matter as well.
The broader investigation relating to LIBOR and other benchmark rates has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad. The Justice Department acknowledges and expresses its deep appreciation for this assistance. In particular, the Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation. The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank. Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance. In particular, the Securities and Exchange Commission has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.

Oldham County Man Sentenced to 18 Months in Prison on Bank Fraud Charges

LOUISVILLE, KY—An Oldham County, Kentucky man was sentenced to 18 months in prison and ordered to pay a $114,936.98 in restitution yesterday by U.S. District Court Judge John G. Heyburn, II for defrauding five banks located in Oldham County, announced David J. Hale, United States Attorney for the Western District of Kentucky.
James Distler, age 45, pleaded guilty to a five count federal grand jury indictment on September 20, 2013. The charges included three counts of bank fraud and two counts of wire fraud.
In court, Distler admitted to opening bank accounts, under false names, between August 2009 and November 2011, to negotiate and attempt to negotiate worthless checks totaling nearly $115,000.
According to the plea agreement, between August and December 2009, Distler opened a bank account in the name of Air Vegas at Bank of America in Oldham County, Kentucky, and then knowingly used the bank account to negotiate and attempt to negotiate worthless checks totaling $78,845. Between June and July 2010, Distler opened a bank account in the name of Express Jet at U.S. Bank in Oldham County and then knowingly used U.S. Bank’s check processing company, Elavon Inc., to negotiate and attempt to negotiate worthless checks totaling $40,778.51. During the course of the scheme he caused an interstate wire communication between Knoxville, Tennessee, and Oldham County, Kentucky. Then, between July and August 2010, Distler opened a bank account in the name of Express Jet at Capital One Bank in Oldham County and then knowingly used the bank account to negotiate and attempt to negotiate worthless checks totaling $18,302. Between July and August 2010, James Distler opened a bank account in the name of Express Jet at Old National Bank in Oldham County and then knowingly used the bank account to negotiate and attempt to negotiate worthless checks totaling $16,756. Lastly, between November 2010 and January 2011, Distler opened a bank account in the name of Ejet Solutions at PNC Bank in the name of Ejet Solutions and then used the account to negotiate payments processed by Erentpayment LLC to negotiate and attempt to negotiate worthless rent payments totaling $16,380. During the course of the scheme he caused an interstate wire communication between Denver, Colorado, and Oldham County, Kentucky.
This case was prosecuted by Assistant United States Attorney Bryan Calhoun and was investigate by the Federal Bureau of Investigation (FBI).

Local Appraiser Pleads Guilty to Conspiracy to Commit Bank Fraud Charge

BUFFALO, NY——U.S. Attorney William J. Hochul, Jr. announced today that Darryl Glasco, 54, of North Tonawanda, New York, a licensed New York State appraiser, pleaded guilty to conspiracy to commit bank fraud. The charge carries a maximum penalty of 30 years in prison, a fine of $ 1,000,000, or both.
Assistant U.S. Attorney Kathleen A. Lynch, who is handling the case, stated that the defendant conspired with James P. Vasiliou, Jr., a borrower, to submit a false appraisal to JP Morgan Chase Bank to refinance a property located at 16 Blackley Court in Lockport, New York. The false statements resulted in an inflated fair market value for the property and were used to obtain approval of the loan.
Vasiliou pleaded guilty to bank fraud and is awaiting sentencing.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Five Sentenced in $20 Million Bank Fraud

EUGENE, OR—Over the past two days, Chief U.S. District Judge Ann Aiken sentenced five defendants, including a real estate developer, a loan officer, a mortgage broker, and an escrow officer, for a variety of mortgage and loan fraud charges arising out of the collapse of Desert Sun Development (DSD), a company previously headquartered in Bend, Oregon. From 2004 through 2008, DSD built commercial buildings and residential housing throughout Central Oregon. According to the court records, DSD principals and other defendants caused financial institutions to lose more than $20 million.
Tyler Fitzsimons, 35, of Gold Hill, Oregon, was sentenced to 90 months in prison for spearheading this mortgage-fraud scheme. He was also ordered to pay more than $22 million in restitution. Fitzsimons started DSD in 2004 and was its president. Co-defendant Shannon Egeland, 39, of Kuna, Idaho, was DSD’s vice president. Fitzsimons and Egeland orchestrated a commercial and residential real estate scheme. As part of the commercial real estate fraud, Fitzsimons and Egeland submitted fraudulent documents, including false financial statements, tax returns, and leases, to various banks in order to obtain financing to develop and construct many of DSD’s commercial projects. Once the loans were approved, Fitzsimons, Egeland, and others submitted additional false documents, including fictitious contracts and invoices, to the banks to obtain loan proceeds for construction costs that were claimed to be associated with the fraudulent documents. For five commercial construction projects, Fitzsimons, Egeland and others obtained more than $4.2 million in funded draw requests and performed no construction.
Fitzsimons and Egeland committed fraud with DSD’s first commercial construction loan, using the money to buy themselves Dodge Vipers rather than to construct the building as promised.
Fitzsimons and Egeland also developed DSD’s employee house program, a real estate flipping scheme, and they recruited DSD employees, mortgage brokers, a loan officer, and a loan processor to help push through bad loans for participants of the scheme. Under the scheme, Fitzsimons and Egeland promised to build or sell homes at cost, and the participants agreed to flip or sell the homes and split any profit with DSD. Because most of the participants could not qualify for the loans, Fitzsimons and Egeland, among other things, undermined the loan approval process by “seasoning” or falsely inflating participants’ bank accounts through temporary deposits of DSD money. They also provided participants with undisclosed, short-term loans and submitted other fictitious documents, including letters explaining employment, large or recent deposits, and bonuses, to the banks funding the loans. As part of his guilty plea, Egeland admitted that he seasoned his own bank account with DSD money to obtain a $1.9 million construction loan to build a 22,000 square foot home in Powell Butte, Oregon. In the end, most of the homes involved in the flipping scheme were either only partially constructed or not constructed at all. Many of the properties were foreclosed upon or short sold.
Fitzsimons and Egeland used their ill-gotten gains to live an extravagant lifestyle. Among other things, they purchased large homes in Powell Butte, Oregon; Dodge Vipers, a Ferrari, a Hummer, BMWs, Mercedes; and a Malibu Wakesetter boat.
“The illegal actions of these defendants exemplify the conduct that wreaked havoc in the mortgage, financial, and real estate industries for the past several years,” said U.S. Attorney Amanda Marshall. “Banks were not the only losers in this case. Everyone lost. The effects of defendants’ large scale fraud were dramatic—the local housing market crashed, people lost their jobs, communities were littered with partially finished developments, and homes, lending markets constricted, and banks suffered millions in losses. Real estate, bank, and financial insiders who commit fraud will be held accountable.” Marshall thanked the Federal Bureau of Investigation, the Internal Revenue Service, and the State of Oregon-Division of Finance and Corporate Securities, for their investigative efforts.
Egeland’s sentencing hearing is set for January 29, 2014, at 11:30 a.m.
Others sentenced for their role in the scheme include Jeremy Kendall, 36, of Camano Island, Washington; Jeffrey Sprague, 50, of Bend, Oregon; Shaun Little, 44, of Bend, Oregon; and Teresa Ausbrooks, 51, of Farmington, New Mexico.
Kendall was sentenced to 18 months in prison and was ordered to pay more than $22 million in restitution for his role in the fraud. Kendall, a DSD employee and officer manager, at Fitzsimons’s and Egeland’s direction, created and submitted fraudulent documents to various financial institutions to gain financing for various DSD projects. Kendall was also involved in seasoning bank accounts, including his own, for individuals involved in DSD’s residential flipping scheme.
Sprague was sentenced to 46 months in prison and was ordered to pay $3.6 million in restitution. Sprague, a former loan officer at West Coast Bank, falsified loan applications for individuals involved in DSD’s flipping scheme by fraudulently inflating their monthly income and falsely claiming that these homes were going to be the employees’ primary residence. Sprague also knew the loan files contained forged or scanned signatures and other material misrepresentations and omissions. West Coast Bank approved and funded the loans based on the loan applications that Sprague falsified and on the other documents that Sprague submitted to the bank that he knew were false.
Shaun Little, 44, of Bend, Oregon, was sentenced to five years of probation with eight months in a halfway house for assisting participants in DSD’s flipping scheme obtain bad loans. He was also ordered to pay $191,171 in restitution. Little, a former mortgage broker, knew DSD was seasoning participants’ bank accounts and submitted a false loan application and supporting documentation to obtain a loan for a participant of DSD’s flipping scheme.
Teresa Ausbrooks, 51, of Farmington, New Mexico, was sentenced to one year and one day in prison and was ordered to pay $184,839.66. Ausbrooks, a former escrow officer, participated in DSD’s flipping scheme and executed a similar, separate scheme. She lied on home loan applications about her income and omitted liabilities, including a side agreement with Fitzsimons.
Several other defendants involved in the DSD investigation have already been sentenced. Del Barber, Jr., 44, of Spokane, Washington, and a former mortgage broker, was sentenced to 15 months in prison for creating and submitting fraudulent loan applications for participants of DSD’s flipping scheme. He was also ordered to pay $119,654 in restitution. Robert Brink, 62, of Junction City, Oregon, a former bank building inspector for Umpqua Bank, was sentenced to 12 months and one day in prison and was ordered to pay $181,276 in restitution for submitting false inspection reports to Umpqua bank for two of DSD’s commercial projects. Brink claimed construction had occurred, when, in reality, no construction had occurred, and Umpqua Bank had funded more than $700,000 in draw requests.
Michael Wilson, 61, of Merrells Inlet, South Carolina, a former DSD employee, was sentenced to five years of supervised release and community service for participating in DSD’s flipping scheme. He was also ordered to pay $303,114.95 in restitution. Garret Towne, 34, of Eugene, Oregon, a former DSD employee, and Barbara Hotchkiss, 44, of Redmond, Oregon, a former loan processor at West Coast Bank, were sentenced to probation and community service in Deschutes County Court for their roles in the DSD residential flipping scheme. They were ordered to pay $202,415 and $303,069 in restitution, respectively. Kevin Mandlin, 50, of Bend, Oregon, was sentenced to one year of probation for submitting a false document to a bank on behalf of DSD for Egeland’s home in Powell Butte, Oregon.
John Partin, a building material supplier in Bend, Oregon, is scheduled to be sentenced for his role in the fraud on March 12, 2014.
“This bold fraud scheme was born out of the housing bubble long ago, but its effects will be felt by the construction and banking businesses in Central Oregon for many years to come,” said Kevin Rickett, Acting Special Agent in Charge of the FBI in Oregon. “It’s a scam that involved losses in the tens of millions of dollars as the defendants pursued lavish lifestyles. Major mortgage fraud cases such as this one are and will continue to be a high priority for the FBI.”
Mortgage fraud weakens the economic integrity of our communities and our nation and, more significantly, hurts a broad range of people,” said Teri L. Alexander, Acting Special Agent in Charge of IRS-Criminal Investigation in the Pacific Northwest. “Criminals who try to line their own pockets through fraudulent schemes should see the prison sentences handed down in this case as proof that the harm mortgage fraud inflicts on our communities will not go unpunished. I am pleased that the IRS was part of the law-enforcement team that worked to dismantle this criminal enterprise and help bring fraudsters to justice.”
These cases were investigated by the FBI, the IRS, and the Oregon Division of Finance and Corporate Securities and are being prosecuted by Assistant U.S. Attorney Scott E. Bradford.

Seventeen-Year Fugitives Voluntarily Surrender and Plead Guilty to Bank Fraud

SAN JOSE, CA—Zahid and Riffat Ali, who have been wanted by federal authorities on bank fraud charges since 1996, surrendered to agents of the FBI at San Francisco International Airport yesterday when their flight from Pakistan arrived. This morning, they pleaded guilty in federal court in San Jose to bank fraud, United States Attorney Melinda Haag announced.
The Alis, husband and wife, were indicted by a federal grand jury in 1996 for bank fraud in violation of 18 U.S.C. § 1344. Before they could be arrested, they departed for their native Pakistan. Efforts to extradite them failed. Recently, in a deal worked out with prosecutors ahead of time, they agreed to voluntarily return.
According to the indictment, the Alis defrauded Home Savings of America of $438,866 by submitting a loan application that contained false statements and by submitting false back up documents in support of the application. They submitted the application in the name of a third party, or “straw borrower,” to a relative, Mujeebullah Mujahid Khan, who was a loan officer at Home Savings. Khan pleaded guilty to bank fraud in 1997.
Today, the Alis pleaded guilty to bank fraud in front of the Honorable Lucy H. Koh, United States District Court Judge in San Jose. Both defendants were released after they each posted $50,000 bail.
In pleading guilty, both defendants admitted that during the summer of 1994, they owned a residence located at 1560 Bird Avenue in San Jose, California. Between approximately July 2, 1994 and September 9, 1994, they convinced a younger man who was living with them rent-free to apply for a loan to purchase the 1560 Bird Avenue house from them. They admitted that they knew that his income and assets would not qualify him for a loan if the loan application had contained a truthful explanation of his circumstances. So, they filled out a draft of the loan application that contained several falsehoods, including the following:

• They falsely claimed that Mr. Bhatt was earning $13,000 per month.
• They falsely claimed that he was employed by a company named Reffko, a company created by Mr. Ali.
• They also falsely claimed that Mr. Bhatt had $85,000 worth of stock.

Finally, in order to corroborate the Mr. Bhatt’s alleged income, they deposited $60,000 to $80,000 of their own funds into his bank account and falsely confirmed his employment and income when Home Savings called to verify his employment at Reffko.
The sentencing hearing is scheduled for March 26, 2014, before the Honorable Lucy H. Koh, United States District Court Judge, in San Jose. The maximum statutory penalty for bank fraud, in violation of 18 U.S.C. § 1344, is 30 years in prison and a fine of $1 million, plus restitution. However, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Gary G. Fry is the Assistant U.S. Attorney who is prosecuting this case with the assistance of Laurie Worthen. The prosecution is the result of an investigation by the by the Federal Bureau of Investigation.

New Jersey Man Pleads Guilty in Conspiracy to Steal Checks from Mail

CAMDEN, NJ—A Camden man today admitted his role in a scheme in which he and others stole business checks from the U.S. Mail in New Jersey, Pennsylvania, and Delaware; altered them; and cashed them at banks using a series of conspirators, U.S. Attorney Paul J. Fishman announced.
Derrick Warner, 29, pleaded guilty before U.S. District Judge Jerome B. Simandle in Camden federal court to an information charging him with one count of conspiracy to commit bank fraud and one count of possession of a firearm by a previously convicted felon. Warner admitted to illegally possessing the weapon (a Smith and Wesson .44 Magnum handgun) after purchasing it for a conspirator.
According to documents filed in this case and statements made in court:
Warner and others stole checks from curbside U.S. mailboxes in business industrial parks in Burlington and Camden Counties in New Jersey and in Pennsylvania and Delaware. Warner and his conspirators would then recruit a conspirator to cash the stolen checks. Once they identified a person to cash the check, Warner and others would alter the stolen checks so that the name of the “payee” of the check would match the name of the recruited check casher. Warner, the check casher, and often a conspirator would then travel to a bank where the check casher would cash the check.
Warner and his conspirators cashed or attempted to cash more than 45 stolen and altered business checks worth more than $200,000. The scheme resulted in a total loss of more than $100,000 to the victim banks.
Warner is also charged with being a felon in possession of a handgun in late March 2013. He admitted that he purchased the firearm in Camden on behalf of one of his conspirators.
The conspiracy to commit bank fraud to which Warner pleaded guilty is punishable by a maximum potential penalty of 30 years in prison and a fine of $1 million, or twice the gross gain or loss resulting from the offense. The felon in possession of a firearm count is punishable by a maximum potential penalty of 10 years in prison and a fine of $250,000. Sentencing is scheduled for April 4, 2014.
U.S. Attorney Fishman credited special agents from the U.S. Postal Inspection Service, under the direction of Inspector in Charge David Bosch; and the FBI, under the direction of Special Agent in Charge Edward J. Hanko in Philadelphia, for the investigation leading to today’s guilty plea.
The government is represented by Assistant U.S. Attorney Matthew T. Smith of the U.S. Attorney’s Office Criminal Division in Camden.