California Man Sentenced to 15 Months in Prison For Conspiracy to Defraud USAID of $386,279 – Admitted Scheme to Embezzle Agency Funds Meant for Global Health

Posted on by

PRESS RELEASE
FOR IMMEDIATE RELEASE For Information Contact:
Tuesday, November 6, 2012 Public Affairs
(202) 252-6933

WASHINGTON – Everett Lipscomb Jr., 42, of Aliso Viejo, Calif., has been sentenced
to 15 months in prison on a charge stemming from his role in a conspiracy to embezzle more than $386,000 from a federal program meant to address global health problems.
The sentence was announced by Ronald C. Machen Jr., U.S. Attorney for the District of
Columbia, and Michael G. Carroll, Deputy Inspector General for the U.S. Agency for
International Development (USAID).
Lipscomb pled guilty in March 2012 to one count of conspiracy to commit wire and mail
fraud, a federal felony. He was sentenced on Nov. 5, 2012 by the Honorable Beryl A. Howell in the U.S. District Court for the District of Columbia. As part of his sentence, Lipscomb was ordered to pay full restitution of $386,279 to USAID. Lipscomb also consented to an order forfeiting any property he owned up to that amount. As indicated in court filings, the government has already seized about $49,000 in proceeds from the scheme from other coconspirators. Upon completion of his prison term, Lipscomb will be placed on two years of supervised release.
As part of his plea, Lipscomb admitted that he conspired together with Mark Adams, a
former deputy director at a private contractor that did business with USAID, and Adams’s wife, Latasha Bell. Lipscomb admitted that Adams used his position at the contracting company to submit and approve false and fraudulent invoices and thereby obtain money.
In Lipscomb’s case, the bogus invoices claimed amounts due for services from Octopus
Limited Audio and Visual, a company controlled by Lipscomb. However, neither Lipscomb nor Octopus – or anyone else – performed the work and services claimed on the invoices. Lipscomb admitted that between April 2008 and August 2010, he received payments from the USAID contracting company totaling $386,279. Of that amount, Lipscomb kept $157,372 for himself and passed the remainder, $228,907, back to Adams and Bell.
Lipscomb further admitted that the fraudulent bills were paid with money that should
have been used for USAID’s global health program. The program addresses major global issues, including HIV/AIDS. At sentencing, Judge Howell noted that the company that employed Adams was seriously impacted by the crime. The company lost its contract with USAID and several employees lost their jobs as a result.
Adams, 44, and Bell, 36, of Fort Washington, Md., pled guilty last month to their roles in
the conspiracy. Adams admitted that the scheme involved more than $1.084 million in
fraudulent payments through such fake invoices between 2006 and 2010. Adams and Bell used the payments to complete an extensive renovation of their home and to buy luxury automobiles.
Adams and Bell are scheduled to be sentenced on Dec. 14, 2012, also before Judge
Howell. Under federal sentencing guidelines, Adams faces a sentence of up to 51 to 63 months of incarceration. Under the plea agreement, Bell agreed to a sentence of home confinement.
In announcing the sentence, U.S. Attorney Machen and Deputy Inspector General Carroll
commended the work of the special agents from the USAID Office of Inspector General, which investigated the case. They also thanked those who worked on the case from the U.S. Attorney’s Office, including Paralegal Specialists Krishawn Graham and Nicole Wattelet, Forensic Accountant Crystal Boodoo, Assistant U.S. Attorney Anthony Saler, who handled forfeiture issues, and Assistant U.S. Attorney Jonathan Hooks, who is prosecuting the case.

GeyerGorey LLP opens Philadelphia office

Posted on by

GeyerGorey LLP Announced Today that it Opened an Office in Philadelphia.

Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Foreclosure Auctions

Posted on by

The most recent Antitrust Division case filing with the FBI suggests that extensive investigative resources are being expended to combat fraud involving foreclosure auctions.  Chief among them are “auction pooling” schemes engaged in by “auction rings” of conspirators who refrain from competing against each other inside the public auction who then have a private auction where the property “strike price” is bid higher by the conspirators.  The difference in prices between the public and private auctions is a good estimate of “loss” for Title 18 charging purposes or for calculating “commerce” for Title 15 USC Section 1 charging purposes.  Although it is never a good idea to engage in mortgage foreclosure auction fraud, it is a particularly bad idea in this enforcement environment.

FOR IMMEDIATE RELEASE
THURSDAY, NOVEMBER 1, 2012
WWW.JUSTICE.GOV		 AT
(202) 514-2007
TTY (866) 544-5309

NORTHERN CALIFORNIA REAL ESTATE INVESTOR AGREES TO PLEAD
GUILTY TO BID RIGGING AT PUBLIC FORECLOSURE AUCTIONS

Investigation Has Yielded 26 Plea Agreements to Date

WASHINGTON — A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

A four-count felony charge was filed today in the U.S. District Court for the Northern District of California, in San Francisco, against Norman Montalvo, of Concord, Calif. Montalvo is the 26th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, Montalvo conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco and San Mateo counties, Calif. Montalvo was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others.

The department said Montalvo conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in San Francisco and San Mateo counties beginning as early as June 2008 and continuing until about September 2010.

“The real estate investors involved in the conspiracy illegally restrained competition at  foreclosure auctions by falsely creating the appearance of unfettered bidding while they were secretly colluding to suppress prices,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “The Antitrust Division remains committed to holding accountable those involved in anticompetitive acts that harm lenders and distressed homeowners.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at San Francisco and San Mateo County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

“Our vigorous pursuit in enforcing fraudulent anticompetitive practices at foreclosure auctions here in northern California is evident in this guilty plea,” said Joel Moss, Acting Special Agent in Charge of the FBI San Francisco Division. “Criminals who take advantage of the real estate auction process will be brought to justice by the FBI and the Department of Justice.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

The charges today are the latest cases filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Field Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.

Today’s charges are 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 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

GeyerGorey LLP announces formation and opens a Washington D.C. office

Posted on by

GeyerGorey LLP officially announces formation and opens office in Washington D.C.

Japanese Auto Parts Manufacturer Agrees to Plead Guilty

Posted on by
FOR IMMEDIATE RELEASE
TUESDAY, OCTOBER 30, 2012
WWW.JUSTICE.GOV		 AT
(202) 514-2007
TTY (866) 544-5309

JAPANESE AUTOMOBILE PARTS MANUFACTURER AGREES TO PLEAD GUILTY
TO PRICE FIXING AND OBSTRUCTION OF JUSTICE

Company Agrees to Pay $17.7 Million Criminal Fine

WASHINGTON — Nagoya, Japan-based Tokai Rika Co. Ltd., has agreed to plead guilty and to pay a $17.7 million criminal fine for its role in a conspiracy to fix prices of heater control panels (HCPs) installed in cars sold in the United States and elsewhere, the Department of Justice announced today. Tokai Rika has also agreed to plead guilty to a charge of obstruction of justice related to the investigation of the antitrust violation.

According to a two-count felony charge filed today in U.S. District Court for the Eastern District of Michigan in Detroit, Tokai Rika engaged in a conspiracy, by agreeing during meetings and conversations, to rig bids for, and to fix, stabilize and maintain the prices of HCPs sold to Toyota in the United States and elsewhere, on a model-by-model basis. According to the court document, Tokai Rika and its co-conspirators carried out the conspiracy from at least as early as September 2003 until at least February 2010.

Tokai Rika manufactures and sells a variety of automotive parts, including HCPs. HCPs are located in the center console of an automobile and control the temperature of the interior environment of a vehicle.

“The conspirators used code names and chose meeting places and times to avoid detection,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “They knew their actions would harm American consumers, and attempted to cover it up when caught. The division will continue to hold accountable companies who engage in anticompetitive conduct and who obstruct law enforcement.”

According to the charge, in or about February 2010, after the company and its executives and employees became aware that the FBI had executed a search warrant on Tokai Rika’s U.S. subsidiary, a company executive directed employees to delete electronic data and destroy paper documents likely to contain evidence of antitrust crimes in the United States and elsewhere. The department said that as a result, electronic data was deleted and paper documents were destroyed, and some of the deleted electronic data and destroyed paper documents were non-recoverable.

“Those who engage in price fixing and obstruction of legal process will face severe consequences for their illegal acts,” said Robert D. Foley III, Special Agent in Charge of the FBI’s Detroit Division. “The FBI is committed to stopping such criminal activity.”

As part of the plea agreement, which will be subject to court approval, Tokai Rika has agreed to cooperate with the department’s ongoing investigation.

Including Tokai Rika, nine companies and 11 executives have pleaded guilty or agreed to plead guilty in the department’s ongoing investigation into price fixing and bid rigging in the auto parts industry. Furukawa Electric Co. Ltd., DENSO Corp., Yazaki Corp., G.S. Electech Inc., Fujikura Ltd., Autoliv Inc. and TRW Deutschland Holding GmbH pleaded guilty and were sentenced to pay a total of more than $790 million in criminal fines. Nippon Seiki Co. Ltd., has agreed to plead guilty and awaits arraignment and sentencing. Additionally, Junichi Funo, Hirotsugu Nagata, Tetsuya Ukai, Tsuneaki Hanamura, Ryoki Kawai, Shigeru Ogawa, Hisamitsu Takada, Norihiro Imai, Kazuhiko Kashimoto, Toshio Sudo and Makoto Hattori have pleaded guilty and been sentenced to pay criminal fines and to serve jail sentences ranging from a year and a day to two years each.

Tokai Rika is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations. The maximum fine for the company may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. The maximum fine for a company found guilty of obstruction of justice is $500,000.

Today’s prosecution arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section and the FBI’s Detroit Field Office with the assistance of the FBI headquarters’ International Corruption Unit. Anyone with information concerning the focus of this investigation is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.htm, or call the FBI’s Detroit Field Office at 313-965-2323.

IG report: Iraqi auditors point to huge money laundering ($800 million per week)

Posted on by

10/30/2012  IG report: Iraqi auditors point to huge money laundering Stars and Stripes

“Iraqi auditors believe as much as $800 million in U.S. dollars is being sent out of the country illegally each week, draining it of hard currency, according to a report by American inspectors released Tuesday.

The findings point to widespread money laundering and could focus further attention on oversight at Iraq’s central bank, which is at the heart of a probe into alleged financial wrongdoing involving its former governor and other top officials.

The U.S. Special Inspector General for Iraq Reconstruction said in a report that auditors in Baghdad fear up to 80 percent of an estimated $1 billion leaving the country weekly lacks proper documentation.

Former Employee of Army Contractor Pleads Guilty to Bribery

Posted on by
FOR IMMEDIATE RELEASE
Wednesday, October 24, 2012
Former Employee of Army Contractor Pleads Guilty to Bribery for Facilitating Theft by Trucking Contractor in Afghanistan

WASHINGTON – A Houston woman pleaded guilty today to bribery charges for her role in a scheme to fraudulently bill the U.S. Army for trucking services in Afghanistan, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

Diyana Montes, 29, pleaded guilty before U.S. District Judge James E. Boasberg in the District of Columbia to one count of bribery.

According to court documents, from approximately April 2008 through December 2008, Montes was an employee of Kellogg, Brown and Root (KBR), a private contractor with operations in Afghanistan. Montes worked at Bagram Airfield, Afghanistan, where KBR held a contract with the United States.

KBR’s contract involved providing services to the Army’s Movement Control Branch (MCB). The MCB’s mission was to contract with local Afghan trucking companies to transport U.S. military equipment, fuel and other supplies throughout Afghanistan. As part of this mission, the MCB coordinated requests from various U.S. military units for trucking services and assigned those requests to particular contractors. Each trucking request generated various specific documents, including “transportation movement requests” (TMR), which authorized the use of trucks.

According to court documents, Montes’s duties included receiving TMRs from various contractors and reconciling any discrepancies between the amount of services described in the TMRs and the amount of services the contractors claimed in their invoices. Once Montes reviewed the documents and determined they were accurate, she would pass them on to other contracting personnel, who would rely on her review in approving payments to the trucking company.

On numerous occasions, according to court documents, Montes received and reviewed TMRs and invoices for services allegedly provided by Afghanistan Trade Transportation (ATT), a trucking company contracted by the U.S. Army, that fraudulently represented that ATT provided services that Montes knew were not in fact performed. According to Montes’s plea agreement, she knew the invoices from ATT contained service claims that were not accurate, and she passed them along for payment with the knowledge that the billings were fraudulent.

According to her plea agreement, from approximately May 2008 through December 2008, in return for her knowingly handling the fraudulent TMRs and invoices, Montes received from ATT approximately $50,000, consisting of $35,000 wired to her personal bank account in the United States and another $15,000 in cash paid to her on several occasions in Afghanistan.

This case is being prosecuted by Special Trial Attorney Mark H. Dubester of the Criminal Division’s Fraud Section and former Fraud Section Trial Attorney Mark Pletcher, currently of the U.S. Attorney’s Office for the Southern District of California. The case was investigated by the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service, the U.S. Army Criminal Investigation Division and the FBI.

Japanese Freight Forwarder Agrees to Pay a $2.3 Million Criminal Fine

Posted on by
FOR IMMEDIATE RELEASE
WEDNESDAY, SEPTEMBER 19, 2012
WWW.JUSTICE.GOV		  

 

 

 

 

 

 

 
JAPANESE FREIGHT FORWARDER AGREES TO PLEAD GUILTY TO CRIMINAL 

PRICE-FIXING CHARGES

Company Agrees to Pay a $2.3 Million Criminal Fine

WASHINGTON — A Japanese freight forwarding company has agreed to plead guilty and to pay a $2.3 million criminal fine for its role in a conspiracy to fix certain fees in connection with the provision of freight forwarding services for air cargo shipments from Japan to the United States, the Department of Justice announced today.

Including today’s charge, as a result of this investigation, 14 companies have either pleaded guilty or agreed to plead guilty and to pay more than $100 million in criminal fines.

According to the one count felony charge filed today in the U.S. District Court for the District of Columbia, Yamato Global Logistics Japan Co. Ltd. engaged in a conspiracy to fix and to impose certain freight forwarding service fees, including fuel surcharges and various security fees, charged to customers for services provided in connection with freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.

As part of the plea agreement, which will be subject to court approval, Yamato Global Logistics Japan Co. Ltd. has agreed to pay a criminal fine of $2,326,774 and to cooperate with the department’s ongoing antitrust investigation.

“Consumers ultimately were forced to pay higher prices on the goods they buy every day as a result of the noncompetitive and collusive service fees charged by these companies,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Prosecuting these kinds of global price-fixing conspiracies continues to be a high priority of the Antitrust Division.”

According to the charges, the company carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate and impose certain freight forwarding service fees and charges on customers purchasing freight forwarding services for cargo shipped by air from Japan to the United States.  The department said the company levied freight forwarding service fees in accordance with the agreements reached and engaged in meetings and discussions for the purpose of monitoring and enforcing adherence to the agreed-upon freight forwarding service fees.

Freight forwarders manage the domestic and international delivery of cargo for customers by receiving, packaging, preparing and warehousing cargo freight, arranging for cargo shipment through transportation providers such as air carriers, preparing shipment documentation and providing related ancillary services.


The company is charged with price fixing in violation of the Sherman Act, which carries a maximum $100 million fine for corporations.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s charges are the result of a joint investigation into the freight forwarding industry being conducted by the Antitrust Division’s National Criminal Enforcement Section, the FBI’s Washington Field Office and the Department of Commerce’s Office of Inspector General.  Anyone with information concerning price fixing or other anticompetitive conduct in the freight forwarding industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit www.justice.gov/atr/contract/newcase.htm or call the FBI’s Washington Field Office at 202-278-2000.

Former FBI Agent and Alleged Co-Conspirators Indicted for Scheme to Obstruct Federal Fraud Investigation

Posted on by
FOR IMMEDIATE RELEASE
Thursday, October 18, 2012
Former FBI Agent and Alleged Co-Conspirators Indicted for Scheme to Obstruct Federal Fraud Investigation

WASHINGTON – A federal grand jury in Salt Lake City today returned an 11-count indictment charging a former FBI special agent and two alleged accomplices with a scheme to use the agent’s official position to derail a federal investigation into the conduct of one of the alleged conspirators.  The charges were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the District of Utah David B. Barlow and Department of Justice Inspector General Michael E. Horowitz.

The indictment charges former FBI special agent Robert G. Lustyik Jr., 50, of Sleepy Hollow, N.Y.; Michael L. Taylor, 51, of Harvard, Mass., the principal of Boston-based American International Security Corporation (AISC); and Johannes W. Thaler, 49, of New Fairfield, Conn., each with one count of conspiracy, eight counts of honest services wire fraud, one count of obstructing justice and one count of obstructing an agency proceeding.

“According to the indictment, while active in the FBI, former Special Agent Lustyik used his position in an attempt to stave off the criminal investigation of a business partner with whom he was pursuing lucrative security and energy contracts,” said Assistant Attorney General Breuer.  “He allegedly acted through a childhood friend to secure promises of cash, purported medical expenses and business proceeds in exchange for abusing his position as an FBI agent.  The alleged conduct is outrageous, and we will do everything we can to ensure that justice is done in this case.”

DOJ Inspector General Horowitz stated:  “Law enforcement officers are sworn to uphold the law.  Agents who would sell their badges and impede the administration of justice will be vigorously pursued.”

According to the indictment, Robert Lustyik was an FBI special agent until September 2012, assigned to counterintelligence work in White Plains, N.Y.  The indictment also states that from at least June 2011, the three alleged conspirators had a business relationship involving the pursuit of contracts for security services, electric power and energy development, among other things, in the Middle East, Africa and elsewhere.

The indictment alleges that in September 2011, Taylor learned of a federal criminal investigation, begun in Utah in 2010, into whether Taylor, his business and others committed fraud in the award and performance of a contract with the U.S. Department of Defense.

Soon thereafter, Taylor allegedly began to give and offer things of value to Lustyik in exchange for Lustyik’s agreement to use his official position to impair and impede the Utah investigation.  The indictment also alleges that Thaler, a childhood friend of Lustyik’s, served as a conduit between Taylor and Lustyik, passing information and things of value.

Specifically, the indictment charges that Taylor offered Lustyik a $200,000 cash payment; money purportedly for the medical expenses of Lustyik’s minor child; and a share in the proceeds of several anticipated contracts worth millions of dollars.

According to the indictment, Lustyik used his official FBI position to impede the Utah investigation by, among other things, designating Taylor as an FBI confidential source, texting and calling the Utah investigators and prosecutors to dissuade them from charging Taylor and attempting to interview potential witnesses and targets in the Utah investigation.  As alleged in the indictment, Lustyik wrote to Taylor that he was going to interview one of Taylor’s co-defendants and “blow the doors off this thing.”  Referring to the Utah investigation, Lustyik also allegedly assured Taylor that he would not stop in his “attempt to sway this your way.”

According to the indictment, Lustyik, Taylor and Thaler attempted to conceal the full extent of Lustyik’s relationship with Taylor from the Utah prosecutors and agents, including by making and planning to make material misrepresentations and omissions to federal law enforcement involved in the investigation of Taylor.

For example, the indictment alleges that on Sept. 8, 2012, after Taylor was searched at the border and his computer seized, Lustyik sent a text message to Thaler, stating: “You might have to save me and testify that only you r doing business.”  Nine days later, according to the indictment, Thaler told federal law enforcement agents – in a voluntary, recorded interview – that Lustyik was not involved in Taylor’s and Thaler’s business.

The pair also allegedly used an email “dead drop” to avoid leaving a record of their interactions and used the names of football teams and nicknames as part of their coded communications.

Taylor and Lustyik were both previously arrested on prior criminal complaints in this case.  Taylor has been detained pending trial and Lustyik received a $2 million bond.  Thaler is expected to surrender to authorities tomorrow.

If convicted, the defendants each face a maximum potential penalty of five years in prison on the conspiracy charge, 20 years in prison on each of the wire fraud charges, 10 years in prison on the obstruction of justice charge and five years in prison on the obstruction of an agency proceeding charge.  Each charge also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense.  The indictment also seeks forfeiture of any proceeds traceable to the conspiracy, wire fraud and obstruction of justice offenses.

The case is being investigated by the Department of Justice Office of the Inspector General and prosecuted by Trial Attorneys Kevin Driscoll and Maria Lerner of the Criminal Division’s Public Integrity Section; Acting Deputy Chief Pamela Hicks, Acting Assistant Deputy Chief Jeannette Gunderson and Trial Attorney Ann Marie Blaylock of the Criminal Division’s Asset Forfeiture and Money Laundering Section; and Assistant U.S. Attorney Carlos Esqueda.

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

Three former financial services executives sentenced in Municipal Bonds Prosecution

Posted on by
FOR IMMEDIATE RELEASE
THURSDAY, OCTOBER 18, 2012
WWW.JUSTICE.GOV		 AT
(202) 514-2007
TTY (866) 544-5309

THREE FORMER FINANCIAL SERVICES EXECUTIVES SENTENCED TO SERVE
TIME IN PRISON FOR ROLES IN CONSPIRACIES INVOLVING INVESTMENT
CONTRACTS FOR THE PROCEEDS OF MUNICIPAL BONDS

WASHINGTON — Three former financial services executives were sentenced today in U.S. District Court for the Southern District of New York, for their participation in conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced. The three former executives were convicted after a three week trial on May 11, 2012.

Dominick P. Carollo, Steven E. Goldberg and Peter S. Grimm, all former executives of General Electric Co. (GE) affiliates, were sentenced by District Court Judge Harold Baer Jr. for their roles in the conspiracies. Carollo was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine. Goldberg was sentenced to serve 48 months in prison and to pay a $90,000 criminal fine. Grimm was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine.

“By manipulating the competitive bidding process, the conspirators cheated cities and towns out of money for important public works projects,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “The division and its law enforcement partners remain committed to rooting out such corruption.”

According to evidence presented at trial, while employed at GE affiliates, Carollo, Goldberg and Grimm participated in separate fraud conspiracies with various financial institutions and insurance companies and their representatives from as early as 1999 until 2006. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Goldberg also participated in the conspiracies while employed at Financial Security Assurance Capital Management Services LLC.

At trial, the Department of Justice asserted that Carollo, Goldberg, Grimm and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to the provider companies where they were employed. Carollo, Goldberg and Grimm deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country millions of dollars.

“Today’s sentencing of Carollo, Goldberg and Grimm for their involvement manipulating a competitive bidding process of public contracts is the final step in a case that demonstrates the FBI’s commitment to investigate and prosecute those who illegally influence the financial markets for their own profit,” said Mary E. Galligan, Acting Assistant Special Agent Charge of the FBI in New York. “The co-conspirators scheme over many years deprived municipalities across the country of competitive interest rates on bonds, a yield that most cities would say they greatly need. The FBI will continue to work with our law enforcement partners to enforce the laws that protect our financial markets.”

“The sentences handed down today send a clear message that crime motivated by outright greed will land you in jail,” said Richard Weber, Chief, Internal Revenue Service – Criminal Investigation (IRS-CI). “Quite simply, the defendants stole money from taxpayers and conspired to manipulate the competitive bidding system to benefit themselves instead of the towns and cities that needed this money for important public works projects. IRS Criminal Investigation is committed to working with our law enforcement partners to uncover this kind of corruption and secure justice for American taxpayers.”

Carollo was found guilty on two counts of conspiracy to commit wire fraud and defraud the United States, Goldberg was found guilty on four counts of conspiracy to commit wire fraud and defraud the United States and Grimm was found guilty on three counts of conspiracy to commit wire fraud and defraud the United States.

A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation. Including today’s convictions, a total of 19 individuals have been convicted or pleaded guilty, and one awaits trial. Additionally, one company has pleaded guilty.

The sentences announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York Office, the FBI and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

Today’s convictions are 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 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.