Former CEO And President Of Real Estate Investment Company Pleads Guilty To Embezzling $1.6 Million And Evading Taxes

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Tuesday, May 23, 2017

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ROCKWELL GAJWANI pled guilty today to one count of wire fraud and three counts of tax evasion in connection with embezzling over $1.6 million from the Manhattan-based real estate investment company for which he had served as chief executive officer and president. As part of his plea, GAJWANI agreed to pay $1,975,068.04 in restitution and $1,612,841 in forfeiture. GAJWANI pled guilty before United States District Judge Loretta A. Preska.

Acting U.S. Attorney Joon H. Kim said: “As he admitted today, for years Rockwell Gajwani siphoned money from his employer’s accounts, lining his own pockets with more than $1.6 million. Instead of working diligently as his company’s CEO, Gajwani put his efforts into concealing his crimes and hiding his ill-gotten gains from the IRS. Thanks to the dedicated work of the Postal Inspection Service and the IRS, Gajwani will now be held to account for his crimes.”

According to the Complaint, the Indictment, and other statements made in open court:

From October 2011 through March 2013, GAJWANI was the chief executive officer and president of a real estate investment company based in Manhattan (the “Manhattan Real Estate Company”). During this period, GAJWANI took more than $1.6 million in company funds to which he was not entitled by, among other means, making wire transfers from the company’s bank account to his personal bank account, writing company checks to himself, and making cash withdrawals from the company’s bank account.

To accomplish this scheme, among other means, GAJWANI took steps to conceal his true salary and to conceal from the Manhattan Real Estate Company’s parent company (the “Parent Company”) the amount of money he had taken from the Manhattan Real Estate Company’s bank account.

Beginning in late 2012, the director of accounting for the Manhattan Real Estate Company (the “Director of Accounting”) asked GAJWANI for details regarding GAJWANI’s compensation on more than one occasion, and GAJWANI repeatedly said he would get such details to her, but failed to do so. On another occasion, in connection with a request from the Parent Company for financial information, GAJWANI told the Director of Accounting not to provide that information to the Parent Company. To further conceal the funds he had taken from the Manhattan Real Estate Company, GAJWANI directed employees of the Manhattan Real Estate Company to lump the compensation of all employees together in accounting materials provided to the Parent Company, so that GAJWANI’s compensation would not be listed separately from the aggregate figure. GAJWANI also directed certain employees of the Manhattan Real Estate Company not to communicate with employees of the Parent Company.

Over the course of his employment, GAJWANI wrote himself over $940,000 in checks from the Manhattan Real Estate Company’s bank account, and wired over $1.7 million to his personal bank account. Although some of these funds were purportedly for expenses, by the end of his employment GAJWANI had taken over $1.6 million more from the Manhattan Real Estate Company’s bank account than he was entitled to under his employment agreement.

GAJWANI also concealed his fraud on the Manhattan Real Estate Company. Specifically, on two occasions in May 2012, wrote checks to an employee of the Manhattan Real Estate Company (“Employee-2”) from the company’s bank account. wrote “expenses” in the memo line of each check, although neither check was meant to pay company expenses, and instructed Employee-2 to write a check in return directly to GAJWANI himself. Employee-2 did so on both occasions. In this manner, was able to secure over $30,000 in payments that GAJWANI appeared to receive from Employee-2 but in reality were funds GAJWANI had taken from the Manhattan Real Estate Company.

In addition to defrauding the Manhattan Real Estate Company, GAJWANI did not file tax returns or pay taxes for his legitimate salary or for the money he had secured through fraud. Ultimately, in July 2015, after he learned of a criminal investigation, GAJWANI filed tax returns for calendar years 2011, 2012, and 2013. Each of those returns included false representations. For tax year 2011, the federal income tax return that GAJWANI filed understated GAJWANI’s actual income by more than $480,000, and included over $85,000 in false, impermissible tax deductions. For tax year 2012, the federal income tax return that GAJWANI filed included over $260,000 in false, impermissible tax deductions. For tax year 2013, the federal income tax return that GAJWANI filed underreported GAJWANI’s actual income by $270,000.

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GAJWANI, 53, of Darien, Connecticut, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison, and three counts of tax evasion, each of which carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge. As part of his plea, GAJWANI agreed to pay $1,975,068.04 in restitution and $1,612,841.04 in forfeiture.

GAJWANI is scheduled to be sentenced by Judge Preska on September 12, 2017, at 4:00 p.m.

Mr. Kim praised the outstanding investigative efforts of law enforcement personnel at U.S. Postal Inspection Service and the Internal Revenue Service, Criminal Investigation Division.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jonathan Cohen and Andrew D. Beaty are in charge of the prosecution.

Seller of “Miracle Mineral Solution” Convicted for Marketing Toxic Chemical as a Miracle Cure

A federal jury in the Eastern District of Washington returned a guilty verdict yesterday against a Spokane, Washington, man for selling industrial bleach as a miracle cure for numerous diseases and illnesses, including cancer, AIDS, malaria, hepatitis, lyme disease, asthma and the common cold, the Department of Justice announced.

Louis Daniel Smith, 45, was convicted following a seven-day trial of conspiracy, smuggling, selling misbranded drugs and defrauding the United States. Evidence at trial showed that Smith operated a business called “Project GreenLife” (PGL) from 2007 to 2011.  PGL sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of sodium chlorite and water.  Sodium chlorite is an industrial chemical used as a pesticide and for hydraulic fracking and wastewater treatment.  Sodium chlorite cannot be sold for human consumption and suppliers of the chemical include a warning sheet stating that it can cause potentially fatal side effects if swallowed.

“This verdict demonstrates that the Department of Justice will prosecute those who sell dangerous chemicals as miracle cures to sick people and their desperate loved ones,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Consumers have the right to expect that the medicines that they purchase are safe and effective.”  Mizer thanked the jury for its service and its careful consideration of the evidence.

The government presented evidence that Smith instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture to cure numerous illnesses. Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications.  Chlorine dioxide is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  According to the instructions for use that Smith provided with his product, nausea, diarrhea and vomiting were all signs that the miracle cure was working.  The instructions also stated that despite a risk of possible brain damage, the product might still be appropriate for pregnant women or infants who were seriously ill.

According to the evidence presented at trial, Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the U.S. Food and Drug Administration (FDA) or U.S. Customs and Border Protection.  The government also presented evidence that Smith hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants on his residence and business.

Before trial, three of Smith’s alleged co-conspirators, Chris Olson, Tammy Olson and Karis DeLong, Smith’s wife, pleaded guilty to introducing misbranded drugs into interstate commerce.  Chris Olson, along with alleged co-conspirators Matthew Darjanny and Joseph Lachnit, testified at trial that Smith was the leader of PGL.

In all, the jury convicted Smith of one count of conspiracy to commit multiple crimes, three counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead and one count of fraudulently smuggling merchandise into the United States.  The jury found Smith not guilty on one out of four of the misbranded drug counts. He faces a statutory maximum of 34 years in prison at his Sept. 9 sentencing.

The case was investigated by agents of the FDA’s Office of Criminal Investigations and the U.S. Postal Inspection Service.  The case was prosecuted by Christopher E. Parisi and Timothy T. Finley of the Civil Division’s Consumer Protection Branchin Washington, D.C.

Biomet Companies to Pay Over $6 Million to Resolve False Claims Act Allegations Concerning Bone Growth Stimulators

EBI LLC, doing business as Biomet Spine and Bone Healing Technologies and Biomet Inc. have agreed to pay $6.07 million to resolve allegations that EBI violated the False Claims Act by paying kickbacks to induce use of its bone growth stimulators and billing federal health care programs for refurbished stimulators, the Department of Justice announced today.  EBI is a medical device company located in Parsippany, New Jersey, that sells bone growth stimulators, which are used to repair fractures that are slow to heal.  It is a subsidiary of Biomet, which is based in Warsaw, Indiana.

“Medical device companies must not use improper financial incentives to influence the decision to use their products,” said Acting Deputy Assistant Attorney General August Flentje of the Justice Department’s Civil Division.  “This settlement demonstrates the department’s commitment to protect patients, and the taxpayers who fund their care, by ensuring that medical decisions are based on the patients’ medical needs rather than the financial interests of others.”

The United States alleged that, from 2001 to 2008, EBI paid staff at doctors’ offices to influence doctors to order its bone growth stimulators.  These payments were allegedly provided pursuant to personal service agreements with staff members. The United States concluded that these payments violated the Anti-Kickback Act and resulted in false billings to various federal health care programs, including Medicare.  The settlement also resolves EBI’s disclosure that it received federal reimbursements for bone growth stimulators that had been refurbished.

“This settlement demonstrates our resolve in ensuring that patients receive, and the government pays for, health care that is based on sound medical judgment, and not compromised by kickbacks,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.

“Kickbacks taint medical decision-making, cause overutilization of services, and lead to increased taxpayer and patient costs,” said Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “These improper inducements have no place in government health programs relied on by millions of Americans.”

The settlement resolves in part an allegation filed in a lawsuit by Yu Yue, a former product manager for EBI, in federal court in New Jersey.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  Yu’s share has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Civil Division; the U.S. Attorney’s Office for the District of Massachusetts; HHS-OIG; the U.S. Postal Service Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Department of Veterans Affairs, Office of Inspector General and the U.S. Food and Drug Administration, Office of Criminal Investigations.

Ms. Yu’s case is captioned United States ex rel. Yu v. Biomet, Inc., Civil Action No. 09-1731 (D.N.J.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

$80 Million Judgment Entered Against BNP Paribas for False Claims to the U.S. Department of Agriculture

The Department of Justice announced today that an $80 million False Claims Act judgment was entered against BNP Paribas for submitting false claims for payment guarantees issued by the U.S. Department of Agriculture (USDA).  BNP Paribas is a global financial institution headquartered in Paris.

“We will not tolerate the misuse of taxpayer funded programs designed to help American businesses,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Companies that abuse these programs will be held accountable.”

The United States filed a lawsuit against BNP Paribas in connection with its receipt of payment guarantees under USDA’s Supplier Credit Guarantee (SCG) Program.  The program provided payment guarantees to U.S.-based exporters for their sales of grain and other agricultural commodities to importers in foreign countries.  The program encouraged American exporters to sell American agricultural commodities to foreign importers and covered part of the losses if the foreign importers failed to pay.  The SCG Program regulations provided that U.S. exporters were ineligible to participate in the SCG Program if the exporter and foreign importer were under common ownership or control.

The judgment entered by the court resolves the government’s allegations that, from 1998 to 2005, BNP Paribas participated in a sustained scheme to defraud the SCG Program.  In furtherance of the scheme, American exporters and Mexican importers who were under common control improperly obtained SCG Program export credit guarantees for transactions between the affiliated exporters and importers.  In some cases, the underlying transactions were shams and did not involve any real shipment of grain.  BNP Paribas accepted assignment of the credit guarantees from the American exporters, even though it knew that the affiliated exporters and importers were ineligible for SCG Program financing, and a BNP Paribas vice-president, Jerry Cruz, received bribes from the exporters.  Beginning in April 2005, when the Mexican importers began defaulting on their payment obligations, BNP Paribas submitted claims to the USDA for the resulting losses.

On Jan. 20, 2012, Cruz pleaded guilty to conspiracy to commit bank fraud, mail fraud and wire fraud, and conspiracy to commit money laundering.

“I would like to thank the Department of Justice and the USDA General Counsel’s office for their collaboration in recovering $80 million under this judgment,” said Administrator of USDA’s Foreign Agricultural Service Phil Karsting.  “This illustrates the importance USDA and this administration places on protecting the integrity of our programs.”

The resolution of this matter was the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the USDA, the USDA Office of Inspector General, the U.S. Postal Inspection Service and the Internal Revenue Service Criminal Investigation.

The lawsuit is captioned United States v. BNP Paribas SA, et al., No. 4:11 cv 3718 (S.D. Tex.).

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Attorney Convicted in Multimillion-Dollar Stock Fraud

Attorney Mitchell J. Stein, 53, of Hidden Hills, Calif., was convicted by a jury in the Southern District of Florida for his role in operating a five-year, multimillion-dollar market manipulation and fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.

Stein was charged in a December 2011 indictment and on May 20, 2013, he was convicted on all counts: conspiracy to commit mail and wire fraud and three counts each of mail fraud and wire fraud, each of which carries a maximum penalty of 20 years in prison; three counts of securities fraud, which each carry a maximum penalty of 25 years; three counts of money laundering, which each carry a maximum penalty of 10 years; and one count of conspiracy to obstruct justice, which carries a maximum penalty of five years in prison. Stein is being detained until sentencing, which is scheduled for Aug. 16, 2013.

According to evidence presented at trial, Stein’s wife held a controlling interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices.  Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity for Signalife.  Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the U.S. Securities and Exchange Commission (SEC) trumpeting these fictitious sales.  Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.

Evidence at trial further proved that Stein disguised his selling of stock during the conspiracy by placing shares in purportedly blind trusts, and that he had a co-conspirator sell shares of Signalife stock after Stein caused false information to be disseminated to the public.  Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds of those sales to Stein.  From one co-conspirator alone, Stein received illicit gains of over $1.8 million.     In addition, evidence at trial proved that Stein conspired to obstruct the SEC’s investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the scheme described above.

This case was investigated by the U.S. Postal Inspection Service and the Office of the Special Inspector General for the Troubled Asset Relief Program.

This matter was referred to the Department by the SEC, which conducted a parallel investigation and in December 2011 announced the filing of a civil enforcement action against Stein and others.  The Department thanks the SEC for its substantial assistance in this matter.  The Department also acknowledges the substantial assistance of FINRA’s Criminal Prosecution Assistance Group.     This case is being prosecuted by Assistant Chief Albert B. Stieglitz, Jr. and Trial Attorneys Kevin B. Muhlendorf and Andrew H. Warren of the Criminal Division’s Fraud Section.

Eighth Individual Sentenced in Connection with Costa Rica-Based Business Opportunity Fraud Ventures

Sean Rosales, a dual United States and Costa Rican citizen, was sentenced today in connection with a series of business opportunity fraud ventures based in Costa Rica, the Justice Department and the U.S. Postal Inspection Service announced today.  Rosales was sentenced by U.S. District Court Judge Ursula M. Ungaro in Miami to 97 months in prison and 5 years supervised release.  Rosales was also ordered to pay more than $7.3 million in restitution.

On March 20, Rosales pled guilty to one count of an indictment pending against him, charging conspiracy to commit mail and wire fraud.  Rosales was arrested in Chicago, Illinois late last year following his indictment by a federal grand jury in Miami on Nov. 29, 2011.   The indictment alleged that Rosales and his co-conspirators purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses.  The charges form part of the government’s continued nationwide crackdown on business opportunity fraud.

Prior to Rosales’ sentencing today, eleven other individuals were charged in connection with business opportunity fraud ventures based in Costa Rica.  Rosales is the eighth of those individuals to be convicted and sentenced in the United States.

“Many Americans dream of owning and operating their own small business, but fraud schemes such as the one perpetrated by this defendant can turn that dream into a nightmare,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice will continue to be aggressive in prosecuting those who take advantage of innocent, hardworking Americans through business opportunity fraud.”

Beginning in May 2005, Rosales and his coconspirators fraudulently induced purchasers in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc., and Powerbrands Distributing Company.  The business opportunities cost thousands of dollars each, and most purchasers paid at least $10,000.  Each company operated for several months, and after one company closed, the next opened.  The various companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere.

Rosales, using aliases, participated in a conspiracy that used various means to make it appear to potential purchasers that the businesses were located entirely in the United States.  In reality, Rosales operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities.

The companies made numerous false statements to potential purchasers of the business opportunities, including that purchasers would likely earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands.  Potential purchasers also were falsely told that the profits of some of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.

The companies employed various types of sales representatives, including fronters, closers and references.  A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement.  A closer subsequently spoke to potential purchasers to finalize deals.  References spoke to potential purchasers about the financial success they purportedly had experienced since purchasing one of the business opportunities.  The companies also employed locators, who were typically characterized by the sales representatives as third parties who worked with the companies to find high-traffic locations for the prospective purchaser’s merchandise display racks.

Rosales, using aliases, was a fronter for USA Beverages, a fronter and reference for Twin Peaks, a fronter and reference for Cards-R-Us, a fronter, locator and reference for Premier Cards, a locator for Coffee Man, and a locator for Powerbrands.

Each of the companies was registered as a corporation and rented office space to make it appear to potential purchasers that its operations were fully in the United States.  USA Beverages was registered as a Florida and New Mexico corporation and rented office space in Las Cruces, N.M.  Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colo., and Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nev.  Premier Cards was registered as a Colorado and Pennsylvania corporation and rented office space in Philadelphia, and The Coffee Man was registered as a Colorado corporation and rented office space in Denver.  Powerbrands was registered as a Wisconsin corporation and rented office space in Glendale, Wisconsin and Palm Beach Gardens, Fla.  “Fraudulent business opportunity sellers must realize that financial fraud victimizing Americans will be prosecuted vigorously, even if the fraudsters conduct their operations from abroad,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida.  “Increased international law enforcement cooperation eliminates safe havens for those who seek to cheat Americans from overseas.”

“The success of this investigation shows that the U.S. Postal Inspection Service is committed to working with the Department of Justice and our law enforcement partners, both foreign and domestically, to protect Americans from the predatory nature of business opportunity frauds,” said Ronald Verrochio, U.S. Postal Inspector in Charge, Miami Division.

Acting Assistant Attorney General Delery commended the investigative efforts of the Postal Inspection Service.  The case was being prosecuted by Assistant Director Jeffrey Steger and trial attorney Alan Phelps with the U.S. Department of Justice Consumer Protection Branch.

Massachusetts Man Convicted of Mortgage Fraud

BOSTON – A Milton man was convicted today of bank and wire fraud charges in connection with a property flipping scheme.

Edward Johnson, 52, pleaded guilty before U.S. District Judge Denise J. Casper to bank fraud and six counts of wire fraud.

From May through July 2006, Johnson recruited two financially unqualified individuals to buy multiple properties in Dorchester and Mattapan. To secure their participation in the scheme, Johnson, or others acting with him, promised these individuals that they would have no responsibility for any expenses or payments on the property. Johnson promised that the individuals would hold the titles in their name for a few months until the property was improved and sold, and in exchange, they would receive a payment for each property purchased. The individuals acted under the assumption that this would improve their credit so they could eventually buy their own homes. Johnson, and others, submitted false mortgage applications on behalf of these individuals that misrepresented their income, employment, prior indebtedness, and intention to reside in the purchased properties. The mortgages were not paid as promised and all of the properties went into foreclosure.

Sentencing is scheduled for June 27, 2013. On the charge of bank fraud, the sentence under the statute is a maximum of 30 years in prison, followed by five years of supervised release and a $1 million fine. For wire fraud, the sentence under the statute is a maximum of 20 years in prison, followed by three years of supervised release and a $250,000 fine.

United States Attorney Carmen M. Ortiz; Cary Rubenstein, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of the Inspector General, New York Regional Office; Kevin Niland, Inspector in Charge of the U.S. Postal Inspection Service; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Boston Police Commissioner Edward Davis, made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Lori J. Holik and Sandra S. Bower of Ortiz’s Economic Crimes Unit.

North Carolina Commodities Firm Owner Sentenced to 36 Months in Prison for Multimillion-dollar Fraud

The principal and co-owner of North Carolina-based Integra Capital Management LLC, was sentenced today to serve 36 months in prison for his role in a scheme to defraud commodities trading investors of more than $3.2 million, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney of the Western District of North Carolina Anne M. Tompkins.

 Nicholas Cox, 35, of Lexington, N.C., was sentenced by U.S. District Judge Max O. Cogburn Jr., in the Western District of North Carolina. In addition to his prison term, Cox was sentenced to serve three years of supervised release and ordered to pay $1,981,477 in restitution.

On Dec. 22, 2012, Cox pleaded guilty in the Western District of North Carolina to one count of conspiracy to commit mail fraud, five counts of mail fraud and one count of conspiracy to commit money laundering.

According to court documents, between September 2006 and January 2009, Cox and his co-conspirator, Rodney Whitney, 50, of Archdale, N.C., the co-owner of Integra, engaged in a scheme to defraud investors in commodity trading pools operated by the firm.  Integra was established purportedly for the purpose of pooling investors’ funds in commodity pools, and investing in commodity futures and foreign currency exchange trading.  According to court documents, Cox and Whitney obtained and misappropriated more than $3.2 million in investor funds and fabricated account statements and tax forms to conceal their fraud.

According to court documents, Cox and Whitney falsely represented, among other things, that Integra’s managers had more than 30 years of combined market experience; that Integra paid dividends of two to five percent of the investor’s initial investment, which was derived from Integra’s trading profits; and investors could remove their principal investments within five days upon giving notice to Integra.  According to court documents, Cox and Whitney used the money invested by later investors to pay the monthly investment returns they had promised to earlier investors, to purchase real estate, to fund other business ventures and to purchase automobiles and other personal goods and services.

On March 21, 2011, Whitney pleaded guilty to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to commit money laundering.  He was sentenced on Jan. 7, 2013, to 60 months in prison for his role in the scheme.

The case was prosecuted by Trial Attorney Luke Marsh of the Criminal Division’ s Fraud Section and Benjamin Bain-Creed and Kenny Smith of the U.S. Attorney’s Office for the Western District of North Carolina. The case was investigated by the U.S. Postal Inspection Service.

 

This prosecution was done in coordination with the President’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’s 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 .