Monthly Archives: May 2017

Former Hedge Fund Manager Pleads Guilty to $9 Million Investment Fraud

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Department of Justice U.S. Attorney’s Office

Eastern District of Virginia

FOR IMMEDIATE RELEASE

Friday, May 12, 2017

ALEXANDRIA, Va. – A Leesburg man pleaded guilty today to wire fraud in connection with his misuse of clients funds, some of which were invested through a purported hedge fund called Crescent Ridge Capital Partners.

According to the statement of facts filed with the plea agreement, Tamer Moumen, 39, defrauded over 50 clients between 2012 and 2017. Moumen falsely told investors that he was a successful trader who consistently beat the S&P500 and was overseeing tens of millions of dollars through his company, Crescent Ridge Capital Partners. Moumen encouraged dozens of clients, including many who were nearing retirement age, to liquidate their other investments and retirement accounts, and invest with him. Moumen did not tell investors that he actually had no experience managing a hedge fund, had a history of losing money in the securities market, and was relying on investor money to support his lifestyle and pay personal expenses. For example, Moumen used investor money to help finance the purchase of a $1 million personal residence in Leesburg, Virginia, a new Tesla, and to repay old investors. In nearly all instances, Moumen lost or spent his clients’ money within a matter of weeks or months of their original investment, but would conceal those facts by providing statements that showed the investment as steadily growing.

According to the statement of facts filed with the plea agreement, beginning in 2015, Moumen was involved with two fundraising efforts that solicited donations to benefit refugees, including a GoFundMe campaign and the Northern Virginia Refugee Fund. Moumen had sole control of the donated funds, some of which he transferred into accounts in his name, where the money was commingled with investor funds. Moumen used money in these accounts to pay personal expenses.

Moumen faces a maximum penalty of 20 years in prison when sentenced on July 28. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; and Andrew W. Vale, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after U.S. District Judge Anthony J. Trenga accepted the plea. Assistant U.S. Attorney Katherine L. Wong is prosecuting the case.

Former Minister Of Mines For The Republic Of Guinea Convicted Of Receiving And Laundering $8.5 Million In Bribes From Chinese Companies

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Department of Justice U.S. Attorney’s Office

Southern District of New York

FOR IMMEDIATE RELEASE

Thursday, May 4, 2017

Former Minister Of Mines For The Republic Of Guinea Convicted Of Receiving And Laundering $8.5 Million In Bribes From Chinese Companies
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Kenneth A. Blanco, the Acting Assistant Attorney General of the Department of Justice’s Criminal Division, announced that MAHMOUD THIAM was convicted in Manhattan federal court yesterday of money laundering charges stemming from his scheme to launder $8.5 million in bribes that THIAM received from senior representatives of a Chinese conglomerate. THIAM was charged with using his official position as Minister of Mines for the Republic of Guinea to facilitate the award to the Chinese conglomerate of exclusive and highly valuable investment rights in various sectors of the Guinean economy. THIAM was convicted after a seven-day trial before U.S. District Judge Denise L. Cote.

 

Acting Manhattan U.S. Attorney Joon H. Kim said: “As a New York federal jury has now found, Thiam abused his official government position to enrich himself at the expense of one of Africa’s poorest countries. Thiam laundered the proceeds of his bribery scheme into the United States to fund his lavish lifestyle, buying a multi-million dollar estate in Dutchess County, and paying for private schools for his children. Thanks to the work of the FBI, Thiam’s scheme was exposed and he was swiftly convicted.”

 

Acting Assistant Attorney General Kenneth A. Blanco said: “As a high-level Minister in Guinea, Thiam sold out his country and then used U.S. banks and real estate to hide millions in bribes paid to him by a Chinese conglomerate. Corruption is a global disease that undermines the rule of law everywhere. The Justice Department is committed to investigating and prosecuting those who commit these crimes and use the U.S. financial system and free marketplace to conceal and benefit from their crimes.”

 

According to the Indictment, other filings in Manhattan federal court, and the evidence admitted at trial:

 

THIAM, a United States citizen who was Minister of Mines and Geology of the Republic of Guinea in 2009 and 2010, engaged in a scheme to accept bribes from senior representatives of a Chinese conglomerate and to launder that money into the United States and elsewhere. In exchange for these multimillion-dollar bribe payments, THIAM used his position as Minister of Mines to facilitate the award to the Chinese conglomerate of exclusive and highly valuable investment rights in a wide range of sectors of the Guinean economy, including near-total control of Guinea’s significant mining sector.

 

In order to receive the bribes covertly, THIAM opened a bank account in Hong Kong (the “Hong Kong Account”) and misreported his occupation to the Hong Kong bank to conceal his status as a public official in Guinea. Upon receiving the bribes, THIAM transferred millions of dollars in bribe proceeds from the Hong Kong Account to, among others, THIAM’s bank accounts in the United States; a Malaysian company that facilitated and concealed THIAM’s purchase of a $3,750,000 estate in Dutchess County, New York; private preparatory schools in Manhattan attended by THIAM’s children; and at least one other West African public official.

 

To further conceal the unlawful source of the bribery proceeds that THIAM transferred from the Hong Kong Account to banks in the United States, THIAM lied to two banks based in Manhattan and on tax returns filed with the Internal Revenue Service regarding the bribe payments, his position as a foreign public official, and the source of the funds in the Hong Kong Account. In total, THIAM received approximately $8.5 million in bribes from the Chinese conglomerate.

 

* * *

 

THIAM, 50, of Manhattan, was convicted of one count of transacting in criminally derived property, which carries a maximum sentence of 10 years in prison, and one count of money laundering, which carries a maximum sentence of 20 years in prison. THIAM is scheduled to be sentenced before Judge Cote on August 11, 2017, at 10:00 a.m.

 

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.

 

Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation. The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter. The Office is grateful to the government of Guinea for providing substantial assistance in gathering evidence during this investigation.

 

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Elisha J. Kobre and Christopher J. Dimase and Trial Attorney Lorinda I. Laryea of the Fraud Section of the Justice Department’s Criminal Division are in charge of the prosecution.

SEC Charges Mexico-Based Homebuilder in $3.3 Billion Accounting Fraud

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03/03/2017 09:55 AM EST

The Securities and Exchange Commission today announced that Mexico-based homebuilding company Desarrolladora Homex S.A.B. de C.V. has agreed to settle charges that it reported fake sales of more than 100,000 homes to boost revenues in its financial statements during a three-year period.

The SEC used satellite imagery to help uncover the accounting scheme and illustrate its allegation that Homex had not even broken ground on many of the homes for which it reported revenues.

The SEC alleges that Homex, one of the largest homebuilders in Mexico at the time, inflated the number of homes sold during the three-year period by approximately 317 percent and overstated its revenue by 355 percent (approximately $3.3 billion).  The SEC’s complaint highlights, for example, that Homex reported revenues from a project site in the Mexican state of Guanajuato where every planned home was purportedly built and sold by Dec. 31, 2011.  Satellite images of the project site on March 12, 2012, show it was still largely undeveloped and the vast majority of supposedly sold homes remained unbuilt.

According to the SEC’s complaint, Homex filed for the Mexican equivalent of bankruptcy protection in April 2014 and emerged in October 2015 under new equity ownership.  The company’s then-CEO and then-CFO have been placed on unpaid leave since May 2016.  Homex has since undertaken significant remedial efforts and cooperated with the SEC’s investigation.

“As alleged in our complaint, Homex deprived its investors of accurate and reliable financial results by reporting key numbers that were almost completely made up,” said Stephanie Avakian, Acting Director of the SEC’s Enforcement Division.  “The settlement takes into account that the fraud occurred entirely under the watch of prior ownership and management, the company’s new leaders provided critical information regarding the full scope of the fraudulent conduct, and the company continues to significantly cooperate with our ongoing investigation.”

Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, added, “We used high-resolution satellite imagery and other innovative investigative techniques to unearth that tens of thousands of purportedly built-and-sold homes were, in fact, nothing but bare soil.”

The SEC separately issued a trading suspension in the securities of Homex.

Without admitting or denying the allegations in the SEC’s complaint filed in U.S. District Court for the Southern District of California, Homex consented to the entry of a final judgment permanently enjoining the company from violating the antifraud, reporting, and books and records provisions of the federal securities laws, and the company agreed to be prohibited from offering securities in the U.S. markets for at least five years.  The settlement is subject to court approval.

The SEC’s investigation is being conducted by Alfred C. Tierney, Benjamin D. Brutlag, Andrew M. Shirley, Juan M. Migone and Richard Hong.  The case is being supervised by J. Lee Buck II.  The SEC appreciates the assistance of the Mexican Comisión Nacional Bancaria y de Valores.

Former Rutherford County Sheriff Sentenced On Federal Corruption Charges

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Department of Justice U.S. Attorney’s Office

Middle District of Tennessee

FOR IMMEDIATE RELEASE

Thursday, May 4, 2017

Former Rutherford County Sheriff Sentenced On Federal Corruption Charges
Former Rutherford County Sheriff Robert Arnold, 41, of Murfreesboro, Tenn., was sentenced today to 50 months in prison, followed by 3 years of supervised release, after pleading guilty earlier this year to fraud and corruption charges, announced Acting U.S. Attorney Jack Smith of the Middle District of Tennessee and Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division.

 

Arnold was indicted in May 2016 and in January 2017, he pleaded guilty to wire fraud, honest services fraud and extortion under color of official right. These charges resulted from an investigation into his role in the formation and operation of the electronic cigarette company, JailCigs, LLC. In his plea, Arnold admitted to using his official position as Sheriff of Rutherford County to benefit JailCigs by allowing the company’s electronic cigarettes to come into the Rutherford County jail as non-contraband and be distributed by county employees; taking steps to disguise his involvement in the company; and misrepresenting the benefits that Rutherford County was supposedly receiving from JailCigs. Additionally, Arnold admitted that he personally received over $66,000 from the company, and that he lied about his income from, and knowledge of, JailCigs when he was confronted by local media in April 2015.

 

In addition to his prison sentence, Senior U.S. District Judge Marvin E. Aspen of the Northern District of Illinois (sitting by designation in the Middle District of Tennessee) ordered Arnold to pay $52,500 in restitution to Rutherford County and to forfeit $66,790, an amount equal to the commission payments he received from sales at the Rutherford County jail, plus the additional payments Arnold obtained that should have been paid to the county general fund. Judge Aspen also ordered Arnold to serve a three-year term of supervised release following his prison sentence.

 

Co-defendants, former Chief Administrative Deputy Joe L. Russell II, of Rutherford County, Tennessee, and John Vanderveer, of Marietta, Georgia, pleaded guilty on Jan. 20 and Jan. 30, respectively. Vanderveer is set to be sentenced on September 6, 2017 and Russell is set to be sentenced on September 8, 2017.

 

 

This case was prosecuted by Assistant U.S. Attorney Cecil W. VanDevender, of the Middle District of Tennessee and Trial Attorney Mark J. Cipolletti of the Criminal Division’s Public Integrity Section. The case was investigated by special agents from the FBI and Tennessee Bureau of Investigation.

Labuda on Fake News and Trade

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Former CBP Official, Janet Labuda at FormerFedsGroup.Com, provides us with her take on the importance of verifying the accuracy of news information in an emerging world news can longer be taken at face value.

 [email protected]

Over the last few months the fake news dilemma has featured prominently in the media. Day in and day out we receive bits and bytes of information through social media and other electronic sources that many read and take to be the truth, the whole truth, and nothing but the truth, regardless of how outlandish the claim or the source.

Such bits of information are rarely vetted either through our own personal “common sense” filters or through other reliable filters . This usually happens because we are pressed for time and simply can’t find the few minutes needed to verify and validate the information presented to us. What is even more problematic is that many of us pass on such unfiltered misinformation through broad electronic social networks thus perpetuating and exacerbating the problem.

The same holds true for the data we collect in the area of international trade. Customs uses data to drive every element of its trade facilitation and enforcement programs. Data collection and its subsequent crunching, dicing and slicing is the bedrock of their risk management processes. Decisions by Customs to focus on certain areas of potential non-compliance, on shifting resources to contain  perceived risk, and on pinpointing companies and their transactions for audit, and further scrutiny are made on what data is reported.

The key questions for companies are: how reliable is the data that is reported, and who is responsible to ensure that the data is accurate and reliable? In addition, what internal controls are followed to vet information. Compliance means reporting accurate information on the transaction to substantiate adherence to legal and regulatory requirements. U.S. Customs and Border Protection enforces strict record keeping requirements, which state “the accuracy of import (and export) information is important not only because it affects the revenue, but because accurate trade information and statistics are important in determining trade policy, the future eligibility of certain goods or goods from certain countries for special programs, the impact of imports on domestic industries, and the effectiveness of various trade agreements and programs.”

Companies need to established sound practices of filtering data received as well as   self-generated. If data is not regularly tested and validated it leaves your company in a vulnerable position. By reporting incorrect data to regulatory agencies, whether you yourself file, or you use a broker to file on your behalf, your company may be subject to unnecessary enforcement reviews, and penalties.

When it comes to data reporting, garbage in, garbage out is not acceptable anywhere in the supply chain. Only accurate and reliable data can help to keep your company insulated from risk.

Recommended Amicus Brief on Section One Summary Judgment Standard

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Here is a link to a brief filed by a number of professors asking the Supreme Court to clarify the standard to be applied by districts courts to a defendant’s motion for summary judgment in a Section One antitrust case,  evergreen – petition for certiorari – amicus brief – filed copy – 4.21.17 – evergreen partnering group v. pactiv corp.  The petition notes:

“[C]ircuit courts are mired in an abiding difference of opinion concerning the appropriate interpretation of the summary judgment paradigm in cases brought under Section 1 of the Sherman Act as applied to circumstantial evidence.”

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