Canadian Man Sentenced to 97 months in Prison for Investment Scheme

 

Tuesday, June 13, 2017

FORT WORTH — Ryan Steve Magee, a citizen of Canada, was sentenced this morning by Senior U.S. District Judge Terry R. Means to 97 months in federal prison and ordered to pay $2,372,573 in restitution, following his guilty plea in February 2017 to one count of wire fraud, announced U.S. Attorney John Parker of the Northern District of Texas.

Magee, 34, was indicted in July 2016 on five counts of wire fraud. Magee was arrested in December 2016, and has remained in custody since his arrest.

According to plea documents filed in his case, Magee was a business man and an active day trader in the U.S. stock market. Beginning in 2011, and continuing until the end of 2013, Magee devised and operated a scheme to obtain money by means of false and fraudulent material pretense and representations. Magee solicited and obtained money from victim investors by making false representations about how their money would be invested, how much of their money would be invested, how much their investment was earning, how much money they had in their account, and by making other false statements.

Specifically, J.C. and D.C. decided to invest some of their savings with him. At Magee’s direction, D.C. wired $35,000 to Magee’s account on August 12, 2011. After Magee received the money from D.C., he immediately diverted $25,000 for his own personal expenditures. Magee then deposited the remaining $10,000 into his day-trading account located at Interactive Brokers (IB). Magee sent weekly emails to J.C. and D.C. entitled “Trading Update,” which falsely showed the beginning account principal of $35,000 and the daily gains, even though Magee had diverted $25,000 of the investors’ money to his own personal use.

In November 2011, J.C. and D.C. cashed in J.C.’s 401(k) and wired $240,000 to Magee’s account. After Magee received the $240,000, he immediately diverted approximately $160,000 to his personal accounts, transferring only $80,000 into his IB trading account. Magee again sent weekly “Trading Update” emails claiming to have deposited the entire $240,000 in the IB account. Though he lost approximately $75,000 by the end of the month and his trades for November 2011, were a negative 70 percent, Magee listed 200 percent gains in the weekly “Trading Update” emails he sent to J.C. and D.C, between November 16 2011, and November 30, 2011.

On April 10, 2013, in the final “Trading Updates” email Magee sent to J.C. and D.C., Magee claimed their account balance was over $1.3 million. However, Magee’s IB account statement for the time period ending March 31, 2013, showed that Magee’s IB account had a negative cash balance of $9,578. J.C. and D.C. suffered a total loss of approximately $275,000. Between May 2010 and September 2013, other victims of the fraudulent scheme in the United States and Canada suffered a total loss of approximately $2,097,573.

The Federal Bureau of Investigation investigated the case. Assistant U.S. Attorney Nancy Larson prosecuted.

Houston Man Faces Twenty Years in Prison for His Role in $6.5 Million Diamond Fraud Scheme

Tuesday, May 30, 2017

DALLAS — A Houston man, Christopher Arnold Jiongo, appeared this morning before U.S. Magistrate Judge Paul D Stickney and pleaded guilty to one count of wire fraud, announced U.S. Attorney John Parker of the Northern District of Texas.

Jiongo, 55, faces a maximum statutory penalty of twenty years in federal prison and a $250,000 fine. He will remain on bond pending sentencing, which is set for September 11, 2017, before U.S. District Judge David C. Godbey. Co-defendants Craig Allen Otteson, 64, of McKinney and Jay Bruce Heimburger, 58, of Dallas, are scheduled for trial July 17, 2017.

According to plea documents filed in the case, Otteson acted as the Managing Member and Chief Compliance Officer of Stonebridge Advisors, LLC, located on Belt Line road in Dallas. Stonebridge Advisors was involved as the Managing Partner of Worldwide Diamond Ventures, L.P., located at 6029 Belt Line in Dallas, and it acted as the General Partner of Worldwide Diamond. Heimburger acted as a Principal Partner of Worldwide Diamond, and he was also listed as the registered agent and Director of JBH Securities, Inc. located on San Rafael in Dallas. JBH Securities was primarily involved in the business of providing investment advice. Worldwide Diamond was primarily involved in the business of buying and reselling diamonds on the international market. On October 1, 2013, Worldwide Diamond filed for bankruptcy in the Northern District of Texas.

During the summer of 2011 through November 2011, Jiongo drafted $50,000 diamond notes which were later used as investment vehicles to generate investment funds. Jiongo, Otteson and Heimburger represented that all investment funds would be used to buy and resell diamonds and that every dollar invested would always be fully secured by the cash and diamond inventory of Worldwide Diamond. Sometime in the summer of 2011, Jiongo, Otteson and Heimburger realized that the original business plan was not working out as planned and that the defendants therefore could not honor the original promises and representations made to investors. Jiongo, Otteson, and Heimburger then engaged in a scheme to defraud investors by fraudulently concealing from investors that investor funds were being used for unauthorized purposes unrelated to the purchase and resale of diamonds. These unauthorized purposes included making several loans totaling approximately $2.4 million to third parties and to Global Reach Industries Limited for purposes not disclosed to or authorized by the investors. Jiongo, Otteson and Heimburger also fraudulently concealed from Worldwide Diamond investors that defendants planned to make an unauthorized $1 million loan of investor funds to Global Reach Industries Limited, a company established and controlled by defendant Jiongo.

During July 2011, Jiongo, Otteson and Heimburger all agreed to fraudulently wire transfer $400,000 of investor funds into several bank accounts designated by Jiongo. In August 2011, all three defendants agreed that defendant Jiongo would cause another $600,000 of investor funds to be wire transferred directly into a trust account controlled by Jiongo.

As a result of this scheme to defraud during the period from about 2011 through 2012, documents reflect that millions of dollars were fraudulently collected from Worldwide Diamond investors.

This case is one of several felony prosecutions of bankruptcy-related crimes generated by the Bankruptcy Fraud Initiative in the Northern District of Texas. Of the 26 defendants charged as part of that initiative – 17 have been convicted, 1 resulted in a mistrial and 8 are pending trial.

The U.S. Postal Inspection Service investigated the case. Assistant U.S. Attorney David Jarvis is in charge of the prosecution.

GreenScam–SEC: Co. Misled Investors About Green Tech

 

The Securities and Exchange Commission today announced fraud charges against a Texas-based technology company and its founder accused of boosting stock sales with false claims about a supposedly revolutionary computer server and big-name customers purportedly placing orders to buy it.

Also charged in the SEC’s complaint is Texas Attorney General Ken Paxton and a former member of the company’s board of directors for allegedly recruiting investors while hiding they were being compensated to promote the company’s stock.

The SEC alleges that Servergy Inc. and William E. Mapp III sold $26 million worth of company stock in private offerings while misleading investors to believe that the Cleantech CTS-1000 server (the company’s sole product) was especially energy-efficient.  They said it could replace “power-hungry” servers found in top data centers and compete directly with top server makers like IBM, Dell, and Hewlett Packard.  However, neither Mapp nor Servergy informed investors that those companies were manufacturing high-performance servers with 64-bit processors while the CTS-1000 had a less powerful 32-bit processor that was being phased out of the industry and could not in reality compete against those companies.

The SEC further alleges that when Servergy was low on operating funds, Mapp enticed prospective investors by falsely claiming well-known companies were ordering the CTS-1000, and he specifically mentioned an order purportedly received from Amazon.  In reality, an Amazon employee had merely contacted Servergy because he wanted to test the product in his free time for personal use.

Servergy has since cut ties with Mapp, who served as CEO.  The company agreed to pay a $200,000 penalty to settle the SEC’s charges.  The litigation continues against Mapp in U.S. District Court for the Eastern District of Texas.

“We allege that Mapp deceived investors into believing that Servergy’s groundbreaking technology was generating lucrative sales to major customers when it was technologically behind its competitors and made no actual sales,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office.

While serving in the Texas House of Representatives, Paxton allegedly reached an agreement with Mapp to promote Servergy to prospective investors in return for shares of Servergy stock.  According to the SEC’s complaint, Paxton raised $840,000 in investor funds for Servergy and received 100,000 shares of stock in return, but never disclosed his commissions to prospective investors while recruiting them.  Similarly, former Servergy director Caleb White allegedly raised more than $1.4 million for Servergy and received $66,000 and 20,000 shares of Servergy stock while never disclosing these commissions to investors.  White has agreed to settle the SEC’s charges by paying $66,000 in disgorgement and returning his shares of Servergy stock to the company.  The SEC’s litigation continues against Paxton.

“People recruiting investors have a legal obligation to disclose any compensation they are receiving to promote a stock, and we allege that Paxton and White concealed the compensation they were receiving for touting Servergy’s product,” Mr. Shipchandler said.

The SEC’s complaint charges Servergy, Mapp, Paxton, and White with violating Sections 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.  Servergy, Mapp, and White also allegedly violated Sections 5(a) and (c) of the Securities Act, and Paxton and White allegedly violated Section 17(b) of the Securities Act and Section 15(a) of the Exchange Act.

Servergy and White neither admitted nor denied the SEC’s charges in their settlements.

The SEC’s investigation was conducted by Samantha S. Martin and Carol J. Hahn and supervised by Jessica B. Magee and David L. Peavler in the Fort Worth office.  The SEC’s litigation will be led by Matthew J. Gulde and Ms. Magee.

For-Profit School in Texas to Pay United States up to $2.5 Million for Allegedly Submitting False Claims for Federal Student Financial Aid

American Commercial Colleges Inc. (ACC) has agreed to pay the United States up to $2.5 million, plus interest, to resolve allegations that it violated the civil False Claims Act by falsely certifying that it complied with certain eligibility requirements of the federal student aid programs, the Justice Department announced today.

To maintain eligibility to participate in federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than ninety percent of their annual revenues from Title IV student aid programs.  At least ten percent of their revenues must come from other sources, such as payments from students using their own funds or private loans independent of Title IV.  Congress enacted this “90/10 Rule” based on the belief that quality schools should be able to attract at least a portion of their funding from private sources, and not rely solely upon the Federal Government.  The civil settlement resolves allegations that ACC violated the False Claims Act when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds to artificially inflate the amount of private funding ACC counted for purposes of the 90/10 Rule.  The short-term loans at issue in this case were not sought or obtained by students on their own; rather, the United States contends ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.

“American taxpayers have a right to expect federal student aid to be used as intended by Congress —  to help students obtain a quality education from an eligible institution,” said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division.  “The Department of Justice is committed to making sure that for-profit colleges play by the rules and that Title IV funds are used as intended.” Under the False Claims Act settlement, ACC, a privately-owned college operating several campuses in Texas, will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement.

“Misuse of taxpayers’ dollars cannot be tolerated – not only for the sake of taxpayers, but especially in the case of innocent individuals who seek to improve their lives through a quality education,” said U.S. Attorney for the Northern District of Texas Sarah R. Saldaña.

Today’s settlement resolves allegations brought by Shawn Clark and Juan Delgado, former directors of ACC campuses in Odessa and Abilene, respectively, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery.  Messrs. Clark and Delgado will receive $170,000 of the $1 million fixed portion of the government’s recovery, and would receive an additional $255,000 if ACC becomes obligated to pay the maximum $1.5 million contingent portion of the settlement.

This case was handled by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Northern District of Texas; and the Department of Education’s Office of Inspector General and Office of General Counsel.

The lawsuit is captioned United States ex rel. Clark, et al., v. American Commercial Colleges, Inc., No. 5:10-cv-00129 (N.D. Tex.).  The claims settled by this agreement are allegations only, and there has been no determination of liability.

Owner of Texas Durable Medical Equipment Companies Convicted in Fraud Scheme

A Texas federal judge convicted the owner of two Texas-based durable medical equipment companies today on multiple health care fraud charges following a five-day bench trial, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.
Hugh Marion Willet, 69, of Fort Worth, Texas, was found guilty by U.S. District Judge Jane J. Boyle in the Northern District of Texas on all seven counts of the June 2012 second superseding indictment: one count of conspiracy to commit health care fraud and six counts of health care fraud stemming from a durable medical equipment (DME) fraud scheme.  Willett?s wife, Jean Willett, previously pleaded guilty to the same charges and was sentenced in September 2012 to serve 50 months in prison.

The evidence at trial showed that between 2006 and 2010, the Willets co-owned and operated JS&H Orthopedic Supply LLC and Texas Orthotic and Prosthetic Systems Inc., which claimed to provide orthotics and other DME to beneficiaries of Medicare and private insurance benefit programs including Aetna, Blue Cross Blue Shield and CIGNA.

Evidence presented in court proved that both of these companies intentionally submitted claims to Medicare and other insurers for products that were materially different from and more expensive than what was actually provided, and that Hugh Marion Willett was a knowing and willing participant in the fraud.

At sentencing, currently scheduled for April 18, 2013, Hugh Marion Willett faces a maximum potential penalty of 10 years in prison and a $250,000 fine on each count.

The case is being prosecuted by Fraud Section Trial Attorney Ben O’Neil and Deputy Chief Sam Sheldon of the Justice Department?s Criminal Division.  The case was investigated by the FBI and the Department of Health and Human Services Office of Inspector General (HHS-OIG) and brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section.

Since their inception in March 2007, strike force operations in nine locations have charged more than 1,480 defendants who collectively have falsely billed the Medicare program for more than $4.8 billion.  In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Baylor University Medical Center to Pay More Than $900,000 for False Medicare Claims for Radiation Oncology Services

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, November 27, 2012
Baylor University Medical Center to Pay More Than $900,000 for False Medicare Claims for Radiation Oncology Services

 

Baylor University Medical Center, Baylor Health Care System and HealthTexas Provider Network (collectively, Baylor) have agreed to pay the United States $907,355 to settle allegations that Baylor submitted false claims to Medicare, the Civilian Health and Medical Program of the Uniformed Services (TRICARE) and the Federal Employees Health Benefit Program (FEHBP) for various radiation oncology services, including intensity modulated radiation therapy, the Justice Department announced today. Intensity modulated radiation therapy is a sophisticated radiation treatment indicated for specific types of cancer where extreme precision is required to spare patients’ surrounding organs or healthy tissue.

The government alleges that Baylor submitted improper claims to Medicare from 2006 through May 2010 in which Baylor double billed Medicare for several procedures affiliated with radiation treatment plans, billed for certain high reimbursement radiation oncology services when a different, less expensive service should have been billed, billed for procedures without supporting documentation in the medical record, and improperly billed for radiation treatment delivery without corroboration of physician supervision.

“Physicians who participate in Medicare must bill for their services accurately and honestly,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that federal health care funds are spent appropriately.”

Principal Deputy Assistant Attorney General Delery also noted that the settlement with Baylor was the result of a coordinated effort among the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Texas, the Department of Health and Human Services’ Office of Inspector General, FBI and Defense Criminal Investigative Services.

 

U.S. Attorney for the Northern District of Texas Sarah R. Saldaña praised these investigative efforts and said, “this civil recovery is a testament to the efforts of the Department of Justice to hold all parties, regardless of position, accountable for the submission of improper claims to federal health care programs.”

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover $10.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $13.8 billion.

The claims settled by this a gre ement are alle gations onl y, and the re has b een no det ermination of liability.