Antitrust Division Increasing Procurement Fraud Footprint Once Again

The Antitrust Division announced that a former owner and operator of a Florida-based airline fuel supply service company was sentenced today to serve 50 months in prison for participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

This is a legacy case reassigned from the shuttered Atlanta Field Office suggesting a successful and a smooth transition of its assignment to the Washington 1 Criminal Office (formerly the National Criminal Enforcement Section).    For any tea leaf readers, AAG Bill Baer’s comments in this press release (reprinted below) suggest renewed focus by the Antitrust Division into procurement fraud and an increasing willingness to open, investigate and charge matters that involve non Title 15 U.S.C Section 1 offenses in all types of procurements.  The “tell” here is subtle, but it is very significant.

 Baer’s quote today:

 “Awarding government contracts in exchange for payoffs is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Today’s sentence reaffirms the division’s commitment to vigorously prosecute individuals who engage in this behavior.”

If you know the history of Title 18 procurement prosecutions, Baer’s commitment to bringing future procurement fraud cases is significant.  The Antitrust Division was a significant player during the Bush years’ National Procurement Fraud Task Force.  Besides domestic kickback and other Title 18 cases, the Division brought many overseas contingency operations (then “WarZone”) prosecutions for bidding corruption and grant fraud.  In fact, the Division had wide berth to investigate and prosecute cases that involved “corruption of the bidding or award process.”  This was a wider mandate than simply bringing cases of horizontal collusion among competitors.  The National Procurement Fraud Task Force was incorporated into the Financial Fraud Enforcement Task Force early in the Obama administration and resources were reallocated to new enforcement priorities in the wake of the financial crisis in 2008.  As everyone viewed their new enforcement mission through a financial crimes prism, the focus of the Antitrust Division returned to a more restrictive view of its mission, i.e., bringing Sherman Act cases under 15 U.S.C. Section 1.  At the height of this limitation, for an investigation to receive authority to be opened, it had to include evidence that on its face could be construed classic horizontal bid rigging conduct. 

It is beyond the scope of this blog entry, but there is much that goes into the press release process that provides insights into enforcement agency gestalt, resource allocation, drive to open cases, and willingness to keep cases open and to charge cases, particularly marginal ones.  A press release also can provide insight into the AAG’s mindset and, sometimes, even more importantly from an agency effectiveness perspective, what people reporting to the AAG think his mindset is.

Today’s quote from AAG Baer is instructive.  It is in an active, broad and forceful voice. In a sweeping statement it links “kickbacks” and “the Antitrust Division” in the same sentence and suggests direct Antitrust Division intervention.  Most importantly, it suggests an interest in crimes involving the payment of kickbacks to award contracts (a Title 18 offense where a Section 1 agreement between competitors is usually not present).  It then states that when offenses like these are committed they will be “tak[en] seriously…[and will be vigorously prosecut[ed]” by the Antitrust Division.

Contrast this with Baer’s statement in September 2013 regarding another case on the same investigation:

“Today’s sentence should serve as a stiff deterrent to executives who might be tempted to solicit a kickback from their supplies in exchange for their honest services,” said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. “The Antitrust Division is committed to ensuring that contracts are won based on competition and not collusion.”

The 2013 AAG quote literally suggests that deterrence is provided by the length of this sentence rather than by any threat of immediate action by the Antitrust Division.  It then links to a general principle that references the blanket requirement imposed earlier in the Administration that a horizontal agreement between competitors had to be present to justify resources.  It also should be recognized that “collusion” is a primarily a term of art within the Antitrust Division directed at collusion among competitors rather than collusion with a contract officer. 

Baer’s current statement is forward-looking and reaffirms that procurement fraud as a Division priority.   For all intents and purposes, AAG Baer has indicated to line attorneys and the outside world (most importantly, investigative agencies) that the Antitrust Division is again open for cases of “corruption of the bidding or award process.”   This strongly suggests a move away from an exclusive focus on Invitation for Bids (IFB) contracting to the massively larger pie of “everything else” including cost plus contracts, prime vendor contracts, sole source contracts and even the issuance of grants.

To advise clients regarding risk analysis, GeyerGorey LLP has been tracking this progression because in many hidden, but key areas, the Antitrust Division provides disproportionate value to the government’s procurement fraud mission by supporting the agency mission, helping resource investigations and by providing continuity to long investigations and program management.  This message has been received loud and clear by Antitrust Division rank and file and it is in the process of being received by the FBI, IRS-CID and 38 Inspectors General who immediately recognize that they can bring cases to Antitrust that require extensive resourcing or which have been declined.   With history as a guide, we expect procurement fraud investigation openings to increase substantially and we expect current investigations to be prolonged or rekindled as resources are reallocated with Antitrust Division resources.  


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Former airline fuel owner sentenced in fraud scheme

Executive Sentenced to Serve 50 Months in Prison

A former owner and operator of a Florida-based airline fuel supply service company was sentenced today to serve 50 months in prison for participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

Sean E. Wagner, the former owner and operator of Aviation Fuel International Inc. (AFI), was sentenced in the U.S. District Court for the Southern District of Florida in West Palm Beach to serve 50 months in prison and to pay $202,856 in restitution.  On Aug. 13, 2013, a grand jury returned an indictment against Wagner and AFI, charging them for their roles in a conspiracy to defraud Ryan. On March 6, 2014, Wagner pleaded guilty to one count of conspiracy to commit honest services wire fraud.   According to court documents, from at least as early as December 2005 through at least August 2009, Wagner and others at AFI made kickback payments to Wayne Kepple, a former vice president of ground operations for Ryan, totaling more than $200,000 in the form of checks, wire transfers, cash and gift cards in exchange for awarding business to AFI.  The charges against AFI were dismissed on Feb. 21, 2014.

Ryan provided air passenger and cargo services for corporations, private individuals and the U.S. government – including the U.S. Department of Defense and the U.S. Department of Homeland Security.

“Awarding government contracts in exchange for payoffs is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Today’s sentence reaffirms the division’s commitment to vigorously prosecute individuals who engage in this behavior.”

“This sentencing highlights the continuing commitment of the DCIS to thoroughly investigate and bring to justice any companies or individuals who engage in fraudulent and corrupt practices that undermine the integrity of Department of Defense procurement programs,” said John F. Khin, Special Agent in Charge of the Defense Criminal Investigative Service Southeast Field Office.

As a result of the ongoing investigation, five individuals, including Wagner, have pleaded guilty and have been ordered to serve sentences ranging from 16 to 87 months in prison and to pay more than $780,000 in restitution.  An additional individual has pleaded guilty to obstructing the investigation and is currently awaiting sentencing.

The investigation is being conducted by the Antitrust Division’s Washington Criminal I office and the U.S. Department of Defense’s Office of Inspector General’s Defense Criminal Investigative Service, with assistance from the U.S. Attorney’s Office for the Southern District of Florida.

MainJustice.Com: “Former Civil Division Fraud Leader Joins White Collar Firm”

MainJustice.Com: “Former Civil Division Fraud Leader Joins White Collar Firm”

Patricia Davis, former Assistant Director, Fraud Section, Civil Division, joins GeyerGorey LLP

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Patricia Davis, a twenty-year veteran of the Department of Justice, has joined GeyerGorey LLP as of counsel.  She previously served as Assistant Director, Fraud Section, Civil Division, U.S. Department of Justice, where she was responsible for investigating and prosecuting hundreds of cases involving fraud on government healthcare, procurement and grant/loan programs.  Prior to joining the Department, Ms. Davis was Deputy Counsel to the Inspector General at the General Services Administration.  She is the eleventh former DOJ prosecutor to join the boutique law firm in less than a year.

(See the firm’s Representative Matters by clicking here [this is not a comprehensive list and does not yet incorporate any of Ms. Davis’s experience])

 “The scope and breadth of Pat’s experience is unparalleled.  Much of the Civil Division’s enforcement program focusing on Defense Department contracts and pharmaceuticals rested squarely on her shoulders,” said Brad Geyer, one of the firm’s founding partners.  “We are delighted that Pat has decided to join us.”

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added,“ Pat Davis is an excellent addition to our corporate compliance and white collar practice.”

 “I believe that Pat brings our firm to a new level in terms of our ability to get cases placed appropriately and to enhance the chances that our qui tam (False Claims Act) cases will be adopted by the government,” said Hays Gorey, a firm co-founder.  “With Pat’s terrific background and deep legal knowledge, we are uniquely positioned to develop cases so that they are ready, when filed, to be transitioned immediately to the appropriate U.S. Attorney’s Office or the Civil Division of the Department of Justice.”

Headquartered in Washington, D.C., with offices in New York, Boston, Philadelphia and Dallas, GeyerGorey LLP specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, including violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), the procurement and grant fraud statutes, the securities laws, the Foreign Corrupt Practices Act, the False Claims Act and other whistleblower actions.  The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with antitrust, anti-bribery and other laws and regulations, in addition to advising on voluntary and mandatory disclosure issues. For further information, please call Patricia Davis at (202) 559-1456 or email [email protected].

Justice Department Announces Charges Filed Against Two Derivatives Traders in Connection with Multi-Billion Dollar Trading Loss at JPMorgan Chase & Company Defendants Hid More Than Half-a-Billion Dollars in Losses Resulting from Derivatives Trading in JPMorgan’s Chief Investment Office A Third Trader, Bruno Iksil, Entered a Non-Prosecution Cooperation Agreement

Justice Department Announces Charges Filed Against Two Derivatives Traders in Connection with Multi-Billion Dollar Trading Loss at JPMorgan Chase & Company
Defendants Hid More Than Half-a-Billion Dollars in Losses Resulting from Derivatives Trading in JPMorgan’s Chief Investment Office A Third Trader, Bruno Iksil, Entered a Non-Prosecution Cooperation Agreement

U.S. Attorney General Eric Holder, U.S. Attorney for the Southern District of New York Preet Bharara and Assistant Director-in-Charge of the FBI’s New York Field Office George Venizelos announced the unsealing of criminal complaints against Javier Martin-Artajo and Julien Grout for their alleged participation in a conspiracy to hide the true extent of losses in a credit derivatives trading portfolio maintained by the Chief Investment Office (CIO) of JPMorgan Chase & Company (JPMorgan).  Martin-Artajo served as a Managing Director and Head of Credit and Equity Trading for the CIO, and Grout was a Vice President and derivatives trader in the CIO.

“Our financial system has been hurt in recent years not just by risky bets gone bad, but also, in some cases, by criminal wrongdoing,” said Attorney General Holder.  “We will not stop pursuing those who violate the public trust and compromise the integrity of our markets. I applaud U.S. Attorney Bharara, his colleagues in the Southern District of New York, and all of our partners on the President’s Financial Fraud Enforcement Task Force for their longstanding commitment to combating all forms of financial fraud. And I pledge that we will continue to move both fairly and aggressively to bring the perpetrators of financial crimes to justice.”

“As alleged, the defendants, Javier Martin-Artajo and Julien Grout, deliberately and repeatedly lied about the fair value of billions of dollars in assets on JPMorgan’s books in order to cover up massive losses that mounted month after month at the beginning of 2012, which ultimately led JPMorgan to restate its losses by $660 million,” said U.S. Attorney Bharara.   “The defendants’ alleged lies misled investors, regulators, and the public, and they constituted federal crimes.  As has already been conceded, this was not a tempest in a teapot, but rather a perfect storm of individual misconduct and inadequate internal controls.  The difficulty inherent in precisely valuing certain kinds of financial positions does not give people a license to lie or mislead to cover up losses; it does not confer a license to create false books and records or to make false public filings.  And that goes double for handsomely-paid executives at a public company whose actions can roil markets and upend the economy.”

“The complaints tell a story of a group of traders who got in over their heads, and to get out, doubled down on a series of risky positions,” said FBI Assistant Director-in-Charge Venizelos.  “In the first quarter of 2012, boom turned to bust, as the defendants, concerned about losing control to other traders at the bank, fudged the numbers on their daily book, and in some cases completely made them up.  It brought a whole new meaning to cooking the books.”
In a separate action, the U.S. Securities and Exchange Commission (SEC) announced civil charges against Martin-Artajo and Grout.

According to the allegations in the criminal complaints unsealed today in Manhattan federal court:

JPMorgan’s CIO, is a component of the bank’s Corporate/Private Equity line of business, which, according to the bank, exists to manage the bank’s excess deposits – approximately $350 billion in 2012.  Since approximately 2007, the CIO’s investments have included a so-called Synthetic Credit Portfolio (SCP), which consists of indices and tranches of indices of credit default swaps (CDS).  A credit default swap is essentially an insurance contract on an underlying credit risk, such as corporate bonds.  CDS indices are collections of CDSs that are traded as one unit, while CDS tranches are portions of those indices, usually sliced up by riskiness.

Under U.S. Generally Accepted Accounting Principles (GAAP) and according to JPMorgan policy, CDS traders were required to value the securities in their portfolios on a daily basis.  Those values, or “marks,” became part of the bank’s daily books and records.  Because CDS indices and tranches are not traded over an exchange, traders are required to look to various data points in order to value their securities, such as actual transaction prices, price quotations from market makers, and values provided by independent services (such as Totem and MarkIT).   JPMorgan’s accounting policy, which used the same methodology employed by the independent services, provided that the “starting point for the valuation of a derivatives portfolio is mid-market,” meaning the mid-point between the price at which market-makers were willing to buy or sell a security.  Through about January 2012, CIO traders generally marked the securities in the SCP approximately to this mid-point, which they sometimes referred to as the “crude mid.”

The SCP was extremely profitable for JPMorgan – it produced approximately $2 billion in gross revenues since its inception – but in the first quarter of 2012, the SCP began to sustain consistent and considerable losses.  From at least March 2012, Martin-Artajo and Grout conspired to artificially manipulate the SCP marks to disguise those losses.  They did so, among other reasons, to avoid losing control of the SCP to other traders at JPMorgan.

Although Martin-Artajo pressured his traders, including Grout, to “defend the positions” in early 2012 by executing trades at favorable prices, the SCP lost approximately $130 million in January 2012 and approximately $88 million in February 2012.  In March 2012, when the market moved even more aggressively against the CIO’s positions, Martin-Artajo specifically instructed Grout and the head SCP trader, Bruno Iksil (who has entered a non-prosecution agreement), not to report losses in the SCP unless they were tied to some identifiable market event, such as a bankruptcy filing by a company whose bonds were in the CDS index.  Martin-Artajo explained that “New York” – meaning, among others, JPMorgan’s Chief Investment Officer – did not want to see losses attributable to market volatility.

By mid-March 2012, Grout was explicitly and admittedly “not marking at mids.”  He maintained a spreadsheet that kept track of the difference between the price that Grout recorded in JPMorgan’s books and records, on the one hand, and the “crude mids,” on the other.  By March 15, 2012, according to Grout’s spreadsheet, the difference had grown to approximately $292 million.  In a recorded on-line chat the same day, Grout explained that he was trying to keep the marks for most of the SCP’s positions “relatively realistic,” with the marks for one particular security “put aside.”  That is, Grout mispriced that one particular security, of which the SCP held billions of dollars’ worth, by the full $292 million.  The following day, Iksil told Martin-Artajo that the difference had grown to $300 million, and “I reckon we get to 400 [million] difference very soon.”  In a separate conversation, Iksil remarked to Grout that “I don’t know where he [Martin-Artajo] wants to stop, but it’s getting idiotic.”

In the days that followed, Grout at times ignored Iksil’s instructions on how to mark the positions, and instead, followed Martin-Artajo’s mandate to continue to hide the losses.  By March 20, 2012, Iksil insisted that Grout show a significant loss: $40 million for the day.  In a recorded call, Martin-Aartajo excoriated Iksil, finally emphasizing, “I didn’t want to show the P&L [the profit and loss].”  Throughout the remainder of March 2012, while Iksil continued to try to insist that Martin-Artajo acknowledge the reality of the losses, Grout, at Martin-Artajo’s instructions, continued to hide them.  As of March 30, 2012 – the last day of the first quarter of 2012 – Grout continued to fraudulently understate the SCP’s losses.  These incorrect figures in the SCP were not only integrated into JPMorgan’s books and records, but also – as Martin-Artajo and Grout were well aware – into the bank’s quarterly financial filing for the first quarter of 2012 with the SEC.

During the course of the mis-marking scheme carried out by Martin-Artajo and Grout, the CIO’s Valuation Control Group (VCG) was supposed to serve as an independent check on the valuations assigned by traders to the securities that the traders were marking at month-end.  The VCG, however, was effectively only staffed by one person and did not perform any independent review of the valuations.  Instead, the VCG tolerated valuations outside of the bid-offer spread as presented by Martin-Artajo and other CIO traders.

In Aug. 2012, after Martin-Artajo and Grout were stripped of their responsibilities over the SCP and their scheme was discovered, JPMorgan restated its first quarter 2012 earnings, and recognized an additional loss of $660 million in net revenue attributable to the mis-marking of the SCP.  JPMorgan announced that it was restating its earnings because it had lost confidence in the “integrity” of the marks submitted by Grout, at Martin-Artajo’s direction.

Martin-Artajo, 49, a Spanish citizen, and Grout, 35, a French citizen, are charged in one count of conspiracy; one count of falsifying the books and records of JPMorgan; one count of wire fraud; and one count of causing false statements to be made in JPMorgan’s filings with the SEC.  They each face a maximum sentence of five years in prison on the conspiracy count, and 20 years in prison on each of the three remaining counts in the complaints, and a fine of the greater of $5,000,000 or twice the gross gain or gross loss as to certain of the offenses.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group.  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.

The case was investigated by the FBI.  The SEC and the Justice Department’s Office of International Affairs were also involved.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Eugene Ingoglia and Matthew L. Schwartz are in charge of the prosecutions.

The charges contained in the complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

“Upstart Start-Up” GeyerGorey LLP Opens Dallas Office

“Rocketing from two to eleven attorneys in eight months, GeyerGorey LLP sports over 200 years of cross-disciplinary prosecutorial experience involving a host of domestic and international industries where each of its attorneys has worked on internal investigations and high stakes cases for an average of more than 20 years.”

For more, click the link below:

-12191777-upstart-start-up-geyergorey-llp-opens-dallas-office

Law360: GeyerGorey Opens In Dallas With Former DOJ Antitrust Ace

Law360: GeyerGorey Opens In Dallas With Former DOJ Antitrust Ace

By Alex Lawson

Law360, New York (August 07, 2013, 3:34 PM ET) — GeyerGorey LLP established its presence in Texas with a splash this week, securing the services of a former U.S. Department of Justice antitrust prosecutor to open its Dallas office, the firm announced Tuesday.
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Marshall added that the firm has a strong Foreign Corrupt Practices Act compliance program that she hopes to be heavily involved in.

While Marshall carries experience across a wide variety of industry sectors, senior partner Hays Gorey Jr. said her work in the energy sector will be of critical importance to the firm’s Texas operations.

“We are thrilled that Joan has decided to join us,” Gorey said. “She adds deep experience with numerous enforcement agencies and complements our experience in key industries like oil and gas exploration, not to mention the fraud piece.”

At DOJ, Marshall gained notoriety for her work in the wake of Hurricane Katrina, when she led the Antitrust Division’s bribery prosecutions centering on the construction of the levees surrounding New Orleans. She also served on the agency’s Hurricane Katrina Fraud Task Force, which was eventually rolled into the broader-reaching Disaster Fraud Task Force.

Firm co-founder Brad Geyer said Marshall’s work in the disaster fraud arena would dovetail nicely with the firm’s existing portfolio.

“We are very involved in servicing the government contractor and the nonprofit and nongovernmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings,” Geyer said. “It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds.”

Marshall received her law degree from Southern Methodist University and a Bachelor of Business Administration from the University of North Texas.

–Editing by Katherine Rautenberg.

MainJustice.Com “Former Prosecutor from Shuttered Antitrust Division Office Joins White Collar Firm”

Click Link Below:

Former Prosecutor from Shuttered Antitrust Division Office Joins White Collar Firm

Noted Antitrust and Disaster Fraud Prosecutor Joan E. Marshall Joins GeyerGorey LLP

Joan Marshall who prosecuted the worldwide vitamins cartel and brought a series of fraud cases in the aftermath of Hurricane Katrina, has joined the firm as a partner. Previously, Ms. Marshall was with the US DOJ Antitrust Division in the Dallas Field Office. She is the tenth former DOJ prosecutor to join the new boutique law firm in less than a year.Joan Marshall_4small

FOR IMMEDIATE RELEASE

 

PRLog (Press Release) – Aug. 6, 2013 – WASHINGTON, D.C. — GeyerGorey LLP is pleased to announce that Joan E. Marshall, a former Department of Justice prosecutor, has joined the firm as partner. Ms. Marshall will open a new office for the firm, in Dallas, where she will be resident.

Ms. Marshall comes to GeyerGorey from the Antitrust Division of the Department of Justice, where she also served as a prosecutor on the Department’s Disaster Fraud Task Force and its predecessor, the Hurricane Katrina Fraud Task Force. While with the Department of Justice, Ms. Marshall supervised numerous multi-agency investigations of bid rigging, price fixing, mail fraud, wire fraud, bank fraud, bribery, perjury and obstruction of justice.

Ms. Marshall had the distinction of breaking the Dallas Field Office’s acclaimed vitamins cartel case and helped to devise, structure and carry out what became one of the most comprehensive international investigations and prosecutions of all time, resulting in more than $1 billion in collected criminal fines. She led the Antitrust Division’s bribery prosecutions involving construction of the levees surrounding New Orleans after the devastation of Hurricane Katrina. Her experience spans investigations and prosecutions involving numerous industries including wholesale groceries, milk, seafood, medical equipment, oilfield supplies, military moving and storage, road and building construction, and municipal finance.

“We are thrilled that Joan has decided to join us,” said Hays Gorey. “She adds deep experience with numerous enforcement agencies and compliments our experience in key industries like oil and gas exploration, not to mention the fraud piece. Our corporate compliance and competition expertise is a perfect fit in the Dallas-Ft. Worth market, which has the largest concentration of corporate headquarters in the United States.”

Ms. Marshall is a frequent speaker on antitrust enforcement and fraud prevention and detection and has developed numerous training programs. She is a recipient of the United States Department of Justice, Assistant Attorney General’s Award and certificates of appreciation from the United States Department of Homeland Security, Office of Inspector General, and the United States Army Criminal Investigation Command, Major Procurement Fraud Unit.

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Joan’s extensive background and expertise nicely complements our firm’s unique philosophy and enriches our solid bench in the White Collar world.” Co-founder, Brad Geyer added: “We are very involved in servicing the government contractor and the non-profit and non-governmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings. It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds. Joan will give us a strategic presence in the Dallas market, which is home to companies in the airline, technology, energy, banking, medical and defense contracting sectors.”

Headquartered in Washington, D.C., GeyerGorey LLP specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and other whistleblower actions. The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust, anti-bribery and other laws.

 

 

 

 

 

   

DLA Piper’s Robert Connolly pens MLEX article regarding “The DOJ Antitrust Division’s policy on independent compliance monitors: is it misguided?”

Friend of the Firm, Robert Connolly, former Chief of the Philadelphia Field Office of the Antitrust Division of the US Department of Justice, now resident in DLA Piper’s Philadelphia Office last week penned an important contribution for MLEX regarding DOJ’s evolving policy regarding compliance monitors:  “The DOJ Antitrust Divsion’s policy on independent compliance monitors: is it misguided?”

 

Former Executive at Florida-Based Lender Processing Services Inc. Sentenced to Five Years in Prison for Role in Mortgage-Related Document Fraud Scheme

A former executive of Lender Processing Services Inc. (LPS) – a publicly traded company based in Jacksonville, Fla. – was sentenced today to serve five years in prison for her participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the Middle District of Florida Robert E. O’Neill, and Special Agent in Charge Michelle S. Klimt of the FBI Jacksonville Division.

Lorraine Brown, 56, of Alpharetta, Ga., was sentenced by Senior U.S. District Judge Henry Lee Adams Jr. in the Middle District of Florida. In addition to her prison term, Brown was sentenced to serve two years of supervised release and ordered to pay a fine of $15,000.   On Nov. 20, 2012, Brown pleaded guilty to conspiracy to commit mail and wire fraud.   

“Lorraine Brown will spend five years in prison for her central role in a scheme to fraudulently execute thousands of mortgage-related documents while our nation’s housing market was at its most vulnerable point in generations,” said Acting Assistant Attorney General Raman.  “The documents that were fraudulently produced under Brown’s direction were relied upon in court proceedings, including a significant number of foreclosure and bankruptcy matters. Today’s sentencing represents appropriate punishment for someone who sought to capitalize on the nation’s housing crisis.”

“Floridians were hard hit by the downturn in the real estate market,” said U.S. Attorney O’Neill.  “We will continue to pursue individuals like Brown who took advantage of consumers for personal gain and contributed to the financial crisis.  Prosecuting financial crimes remains a priority for our office.”

“The investigation of sophisticated mortgage and corporate fraud schemes continues to be a priority for the Federal Bureau of Investigation as such criminal activities have a significant economic impact on our community,” said Special Agent in Charge Klimt.

Brown was an executive at LPS and the chief executive of DocX LLC, which was a wholly-owned subsidiary of LPS, until it was closed down in early 2010.    DocX’s main clients were residential mortgage servicers, which typically undertake certain actions for the owners of mortgage-backed promissory notes.    Servicers hired DocX to, among other things, assist in creating and executing mortgage-related documents filed with recorders’ offices.

According to Brown’s plea agreement, employees of DocX, at the direction of Brown and others, began forging and falsifying signatures of authorized personnel on the mortgage-related documents that they had been hired to prepare and file with property recorders’ offices.    Only specific personnel at DocX were authorized by clients to sign the documents, but the documents were fraudulently notarized as if actually executed by authorized DocX employees.

According to plea documents, Brown implemented these signing practices at DocX to enable DocX and Brown to generate greater profit.   Specifically, DocX was able to create, execute and file larger volumes of documents using these signing and notarization practices.    To further increase profits, DocX also hired temporary workers to act as authorized signers.    These temporary employees worked for much lower costs and without the quality control represented by Brown to DocX’s clients.   Some of these temporary workers were able to sign thousands of mortgage-related instruments a day.   Between 2003 and 2009, DocX generated approximately $60 million in gross revenue.

After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country.   Many of these documents were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions.   Brown admitted she understood that property recorders, courts, title insurers and homeowners relied upon the documents as genuine.

This case is being prosecuted by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida.    This case was investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.

This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 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 more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.