Category Archives: Ex Im Bank

Four People Arrested and Charged in Cross-Country Insider Trading Scheme

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The owner and operator of a stock trading operation and three of his associates were arrested today on charges arising from their alleged participation in a multi-year insider trading scheme that netted more than $3.2 million in illicit profits, announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey.

Steven Fishoff, 58, of Westlake Village, California, Ronald Chernin, 66, of Oak Park, California, Steven Costantin aka Steven Constantin, 54, of Farmingdale, New Jersey, and Paul Petrello, 53, of Boca Raton, Florida, are each charged by complaint with one count of conspiracy to commit securities fraud.  Fishoff is charged with four substantive counts of securities fraud, Chernin and Petrello are each charged with two counts of securities fraud and Costantin is charged with one count of securities fraud.

The defendants were arrested by FBI agents this morning at their respective residences.  Costantin is scheduled to appear this afternoon before U.S. Magistrate Judge Joseph A. Dickson in Newark, New Jersey, federal court.  Fishoff is scheduled to appear before U.S. Magistrate Judge Kenly Kiya Kato in Riverside, California, federal court, Chernin is scheduled to appear before U.S. Magistrate Judge Carla Woehrle in Los Angeles, Californina, federal court, and Petrello is expected to appear before U.S. Magistrate Judge Dave Lee Brannon in West Palm Beach, Florida, federal court.

“The defendants and their associates were entrusted with confidential, nonpublic information about companies and time and time again, they allegedly violated that trust by illegally trading the companies’ stock for substantial profits,” said U.S. Attorney Fishman.  “They allegedly rigged the game so they would always win, and their profits came at the expense of legitimate investors, who were not privy to this inside information.”

“Insider trading is an investigative priority of the FBI,” said Special Agent in Charge Richard M. Frankel for the FBI in Newark, New Jersey.  “The FBI is committed to stopping insider trading and will hold those who perpetrate these schemes accountable because their illegal activities undermine the integrity of the U.S. financial markets and weaken investor confidence.”

“We allege an insider trading scheme based on a short-selling business model designed to systematically profit on confidential information obtained under false pretenses,” said Senior Associate Director Sanjay Wadhwa for Enforcement in the SEC’s Regional Office in New York.  “But the defendants’ short selling proved to be short-sighted as they overlooked the fact that their trading patterns would be detected and they would be caught by law enforcement.”

According to the complaint unsealed today, Fishoff, Chernin, Costantin, Petrello and others, acting individually and through their associated trading entities, engaged in an insider trading scheme in which they netted more than $3.2 million in illicit profits over three years by executing illegal trades through trading entities that they controlled.

Fishoff is the president and sole owner of Featherwood Capital Inc. (Featherwood), a trading entity that he operates out of his home.  Featherwood maintained numerous stock trading accounts in its own name and in various additional names under which Featherwood did business (DBAs), including Gold Coast Total Return Inc. (Gold Coast), Seaside Capital Inc. (Seaside) and Data Complete Inc. (Data Complete).

Chernin, an attorney who was disbarred in California for misappropriation of client assets, is a friend and longtime business associate of Fishoff.  Corporate documents list Chernin as the president of Gold Coast and Fishoff as an officer.  Chernin is president of the trading entity Cedar Lane Enterprises Inc. (Cedar Lane) and an officer of Data Complete.

Costantin, a former pipefitter by trade, is Fishoff’s brother-in-law and a friend and business associate of Chernin.  Corporate documents list Costanstin as president of Seaside.  In brokerage account documents, Fishoff identifies himself as Seaside’s owner.  Costanstin is also the vice president and secretary of Cedar Lane.

Petrello is the president and owner of two trading entities, Brielle Properties Inc. and Oceanview Property Management LLC and a friend and longtime business associate of Fishoff.

On numerous occasions, the conspirators obtained material, nonpublic information related to publicly traded companies and traded on that information before it became public.  Between June 2010 and July 2013, Fishoff, Chernin, Costantin and a business associate referred to in the complaint as “Trader A” expressed interest in participating in at least 14 stock offerings by publicly traded companies.  Before providing these individuals with confidential information concerning the companies or the terms of the proposed sales, the investment bankers first required that Fishoff, Chernin, Costantin, Trader A and their associated trading entities, agree to be “brought over the wall,” or “wall-crossed,” standard industry terms which meant that they were required to keep the information disclosed to them confidential and could not buy or sell the stock based on the information.

Fishoff, Chernin, Costantin and Trader A agreed to these disclosure and trading restrictions and then flagrantly breached the agreements.  In instances where Fishoff was not personally wall-crossed in an offering, Chernin and Costantin tipped Fishoff telephonically or by email about the offering prior to the public announcement.  Even where Fishoff ostensibly was a party to the confidentiality agreement, through his affiliation with the wall-crossed trading entity, Fishoff himself breached the agreement by trading on the confidential information and by providing the information to Petrello so that Petrello could engage in parallel trading.  There were also instances where Chernin and Costantin violated the terms of the confidentiality agreements by trading themselves before the offering.  The conspirators traded through the accounts of the trading entities or through related accounts that they controlled.  The conspirators shared the proceeds of the insider trading scheme, with Fishoff wiring money to Chernin and Costantin for their services and Fishoff receiving compensation from Petrello for the offering-related tips that Fishoff provided to him.

The conspiracy count with which each defendant is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants.   Each of the substantive securities fraud charges carry a maximum penalty of 20 years in prison and a $5 million fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Frankel, for the investigation leading to today’s arrests and complaint.  He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office under the direction of Andrew Calamari.  He also thanked special agents of the FBI, Los Angeles (Ventura Resident Agency and Riverside Resident Agency) and FBI, Miami (West Palm Beach Resident Agency) for their assistance.

The government is represented by Assistant U.S. Attorneys Shirley U. Emehelu of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, New Jersey and Acting Chief Barbara Ward for the of the Office’s Asset Forfeiture and Money Laundering Unit.

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

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.stopfraud.gov

ExIm Bank seeks fugitive

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WASHINGTON, Feb. 5, 2015 /PRNewswire-USNewswire/ — The Office of Inspector General (OIG) for the Export-Import Bank of the United States (Ex-Im Bank) announced today that it is seeking information on the whereabouts of Richard M. Grinhaus, age 58, pursuant to charges that he conspired to commit wire fraud in connection with Ex-Im Bank loans resulting in loan defaults and claims paid by Ex-Im Bank of approximately $5 million.

Grinhaus and a co-conspirator, Fernando Pascual-Jimenez, were indicted on charges of 18 U.S.C. section 1349 (conspiracy to commit wire fraud). Pascual was arrested on January 30, 2015 as he arrived on an international flight in Las Vegas, NV. Grinhaus remains at large and is believed to be residing in the Queretaro or Mexico City areas of Mexico.

According to the allegations in the indictment, from in or around July 2005 through July 2010, Grinhaus conspired with Pascual and others to obtain an Ex-Im Bank guaranteed loan for exporting U.S. goods overseas. The indictment alleges that Grinhaus and others conspired to create false documents and did not use the loan proceeds for the purchase and shipment of the goods guaranteed by Ex-Im Bank.

Individuals with information concerning the location of the fugitive in question may call the Ex-Im Bank OIG Hotline at 1-888-OIG-EXIM (1-888-644-3946) or Homeland Security Investigations (HSI) Communications at 1- 407-975-1820 or 1-800- BE-ALERT (1-800-232-5378).

An indictment is merely a charge and should not be considered as evidence of guilt. The defendant is presumed innocent until proven guilty in a court of law.

Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing. Ex-Im Bank provides a variety of financing mechanisms to help foreign buyers purchase U.S. goods and services.

Ex-Im Bank OIG is an independent office within Ex-Im Bank. The OIG receives and investigates complaints and information concerning violations of law, rules or regulations, fraud against Ex-Im Bank, mismanagement, waste of funds, and abuse of authority connected with Ex-Im Bank’s programs and operations. Additional information about the OIG can be found at www.exim.gov/oig. Complaints and reports of waste, fraud, and abuse related to Ex-Im Bank programs and operations can be reported to the OIG hotline at 888-OIG-EXIM (888-644-3946) or via email at [email protected].

 

SOURCE Office of Inspector General for the Export-Import Bank of the United States

US Lender Pays $3.8 Million to Resolve Liability Relating to ExIm Bank Loans

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The Justice Department announced today that Hencorp Becstone Capital L.C. (Hencorp) has agreed to pay $3.8 million to resolve allegations under the False Claims Act that it made false statements and claims to the Export-Import Bank of the United States (Ex-Im Bank) in order to obtain loan guarantees.  Hencorp is a Miami-based lender and financial services company that provides financing and other financial services to Latin American businesses.

“The Ex-Im Bank provides vital support for U.S. manufacturing by enabling foreign businesses to obtain financing to purchase U.S.-made goods and equipment,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will continue to vigorously pursue those who attempt to take advantage of this important program.”

The Ex-Im Bank guarantees loans made by approved lenders to foreign businesses for the purchase of American-made products.  The lender is responsible for performing a credit review of the transaction to ensure that it meets applicable criteria.  The government alleged that Ricardo Maza, a Peruvian-based former Hencorp business agent, created false documentation to obtain Ex-Im Bank guarantees on fictitious transactions on which no products were sold or exported, and that Hencorp acted recklessly by outsourcing key credit review functions to Maza without adequate supervision or oversight.  The government alleged that Maza then diverted the proceeds of the loans to himself and to his friends and business associates in Peru, and that the transactions resulted in losses to the Ex-Im Bank when the loans were not repaid.  In 2012, Mario Mimbella, 64, of Miami, Florida, the purported U.S.-based exporter on three of the fraudulent transactions, pled guilty to making false records for his participation in the scheme and was later sentenced to prison.

“Lenders that use Ex-Im programs have an obligation to prevent and detect fraud,” said Acting Inspector General Michael T. McCarthy for the Ex-Im Bank.  “The Office of Inspector General will pursue accountability for all participants involved in schemes that defraud the Ex-Im Bank.”

This settlement resolves allegations made in a whistleblower lawsuit filed under the False Claims Act by Genaro Benites Caballero, the former owner of one of the purported purchasers who stated that he had no part in the scheme and that his signature was forged on key documents without his knowledge, and Patricia Doris Lee Dominguez, a former attorney for the purported purchaser.  Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.  The whistleblowers will receive $608,000 of the settlement.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Columbia and the Office of Inspector General for the Ex-Im Bank.

The lawsuit is captioned United States ex rel. Benites Caballero, et al. v. Hencorp Becstone Capital, L.C., et al., cv-13-168 (D.D.C.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability with respect to Hencorp.

Former ExIm Bank Officer Pleads to Accepting Over $78,000 in Bribes

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The nation’s most experienced Export Import Bank Fraud prosecutors, Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section, continue in their efforts.

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A former loan officer at the Export-Import Bank of the United States (Ex-Im Bank) pleaded guilty in federal court today for accepting more than $78,000 in bribes in return for recommending the approval of unqualified loan applications to the bank, among other misconduct.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Inspector General Michael T. McCarthy of the Export-Import Bank of the United States and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

Johnny Gutierrez, 50, of Stafford, Virginia, pleaded guilty before U.S. District Judge Gladys Kessler of the District of Columbia to one count of bribery of a public official.  A sentencing hearing is scheduled for July 20, 2015.

“Gutierrez risked both taxpayer dollars and the integrity of the Ex-Im Bank for his personal financial gain,” said Assistant Attorney General Caldwell.  “Those charged with serving the public will be held accountable when they seek personal enrichment at the public’s expense.”

“Gutierrez betrayed the trust and confidence of the hardworking Ex-Im Bank employees and the U.S. taxpayers,” said Acting Inspector General McCarthy.  “The Office of Inspector General will continue to aggressively and diligently investigate all allegations of waste, fraud, and abuse related to Ex-Im Bank programs.”

“In his role as a loan officer, Gutierrez betrayed the trust that was placed in him by fellow citizens and took bribes in exchange for providing favorable action on loan applicants,” said Assistant Director in Charge McCabe.  “The FBI, with our partners, will continue to investigate and expose fraudulent schemes that tarnish the good and ethical work of the U.S. government.”

According to his plea agreement, Gutierrez was a loan officer for the Ex-Im Bank based in Washington, D.C.  The Ex-Im Bank is the federal agency responsible for promoting the export of U.S. goods to foreign countries through the guarantee of domestic loans to foreign buyers.  As an Ex-Im Bank loan officer, Gutierrez was responsible for conducting credit underwriting reviews for companies and lenders submitting financing applications to the Ex-Im Bank.

As part of his guilty plea, Gutierrez admitted that on 19 separate occasions between June 2006 and December 2013, he accepted bribes totaling more than $78,000 in return for recommending the approval of unqualified loan applications and improperly expediting other applications.

Specifically, Gutierrez admitted that he intentionally ignored the fact that one company had previously defaulted in 10 previous transactions guaranteed by the bank, causing the Ex-Im Bank to lose almost $20 million.  Despite these defaults, Gutierrez accepted bribes to continue to recommend the approval of the company’s loan applications.  Additionally, Gutierrez admitted that he accepted bribes from a financing broker to expedite applications submitted by the broker, and that he privately assisted the broker to improve its applications before submission to the bank.  In exchange, Gutierrez was to receive half of the broker’s profit on the transactions financed by the bank.  Further, Gutierrez disclosed to the broker inside information about financing applications submitted to the Ex-Im Bank, so that the broker could solicit the applicants as clients.

The case was investigated by the Inspector General of the Export-Import Bank of the United States and the FBI, with significant assistance provided by the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Washington Field Office.  The case is being prosecuted by Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section.

Mexican Businessman Arrested

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WASHINGTON, Feb. 3, 2015 /PRNewswire-USNewswire/ — The Office of Inspector General (OIG) for the Export-Import Bank of the United States (Ex-Im Bank) announced today that Fernando Pascual-Jimenez, age 44, was arrested on January 30, 2015, on charges that he conspired to commit wire fraud in connection with Ex-Im Bank loans resulting in loan defaults and claims paid by ExIm Bank of approximately $5 million.

On January 30, 2015, U.S. Customs and Border Protection and Homeland Security Investigations (HSI) agents in Las Vegas, Nevada, arrested Pascual as he arrived on an international flight from Mexico. Pascual was arrested based on an indictment and arrest warrant obtained by Special Agents from the Ex-Im Bank OIG charging him with violations of 18 U.S.C. § 1349 (conspiracy to commit wire fraud).

According to the indictment, Pascual owned and operated CEMEC Commercial, S.A. de C.V. (CEMEC), a company located inQueretaro, Mexico. According to the allegations in the indictment, from in or around July 2005 through July 2010, Pascual conspired with others to obtain an Ex-Im Bank guaranteed loan for exporting U.S. goods overseas. The indictment alleges that Pascual and others conspired to create false documents and did not use the loan proceeds for the purchase and shipment of the goods guaranteed by Ex-Im Bank.

This case is being prosecuted by the U.S. Attorney’s Office, Southern District of Florida. The case is being investigated by Ex-Im Bank OIG, Homeland Security Investigations – El Paso, TX; and the FBI – Washington, D.C.

An arrest based on an indictment is merely a charge and should not be considered as evidence of guilt. The defendant is presumed innocent until proven guilty in a court of law.

Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing. Ex-Im Bank provides a variety of financing mechanisms to help foreign buyers purchase U.S. goods and services.

Ex-Im Bank OIG is an independent office within Ex-Im Bank. The OIG receives and investigates complaints and information concerning violations of law, rules or regulations, fraud against Ex-Im Bank, mismanagement, waste of funds, and abuse of authority connected with Ex-Im Bank’s programs and operations. Additional information about the OIG can be found at www.exim.gov/oig. Complaints and reports of waste, fraud, and abuse related to Ex-Im Bank programs and operations can be reported to the OIG hotline at 888-OIG-EXIM (888-644-3946) or via email at [email protected].

SOURCE Office of Inspector General for the Export-Import Bank of the United States

Phillip Zane’s Game Theory: Ten Years On

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Ten years ago this spring, Zane published his definitive work on game theory which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, when, and how corporations and executive management teams should disclose white collar criminal conduct.

Phillip Zane be the only attorney whose colleagues and clients might expect to see an open book on games and strategy on his desk.

Ten years ago this spring, Zane published The Price Fixer’s Dilemma:  Applying Game Theory to the Decision of Whether to Plead Guilty to Antitrust Crimes, 48 Antitrust Bull. 1 (2003), which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, and when, to settle high-stakes antitrust cases.

Zane’s article strongly suggested that in a number of common situations, pleading guilty (or even seeking the protections of the corporate leniency program) is not always justified.  Zane’s article used a repeated, or iterative, version of the prisoner’s dilemma to demonstrate that pleading guilty was not always the best strategy for antitrust defendants facing criminal prosecution and civil liability in multiple proceedings or jurisdictions.

At the time, a few of the brainier Antitrust Division prosecutors breathed a sigh of relief when the defense bar did not seem to notice and they failed to incorporate Zane’s research into their negotiating strategies.

In 2007, Zane published “An Introduction to Game Theory for Antitrust Lawyers,” which he used in a unit of an antitrust class he taught at George Mason University School of Law. That paper was another milestone on the way to making game theory concepts accessible and useful to the antitrust defense bar.

Zane’s work, which now used game theory to criticize the settlement of the second Microsoft case and the Government’s approach to conscious parallelism, as well as the leniency program, was met with official grumblings within the Antitrust Division.

GeyerGorey LLP was founded on the principle that the chances for achieving the best possible outcome are maximized by having access to multiple, top-notch, cross-disciplinary legal minds that are synced together by an organizational and compensation structure that encourages sharing of ideas and information in client relationships.

As international enforcement agencies sprouted and developed criminal capabilities and as more hybrid matters included prosecutors from US enforcement agency components with sometimes overlapping jurisdictions, such as the Antitrust, Criminal, Civil and Tax Divisions of the Department of Justice, and the alphabet soup of regulatory agencies, particularly the Securities and Exchange Commission, it became apparent that Zane’s game-theoretic approach has application in almost every significant decision we could be called upon to make.  Since Zane has joined us we have been working to factor in the increased risks associated with what we call hybrid conduct (conduct that violates more than a single statute).  Our tools of analysis for identifying risks for violations of competition laws, anti-corruption laws, anti-money-laundering laws, and other prohibitions, include sophisticated game-theoretic techniques, as well as, of course, the noses of former seasoned prosecutors, taking into account, each particular client’s tolerance for risk.

To take one example, an internal investigation might show both possible price fixing and bribery of foreign government officials.  How, given the potential for multiple prosecutions, should decisions to defend or cooperate be assessed?  And how might such decisions trigger interest by the Tax Division, the SEC, the Commodities Futures Trading Commission, the Federal Energy Regulatory Commission or other regulators.  When should a corporation launch an internal investigation?  When should it make a mandatory disclosure?  What should it disclose and to which agency, in what order?  When should it seek leniency and when should it instead stand silent?  These tools are valuable in the civil context as well:  When should it abandon a proposed merger or instead oppose an enforcement agency’s challenge to a proposed deal?

These are truly the most difficult questions a lawyer advising large corporations is required to address.  We are well positioned to help answer these questions.

Financial Consultant Extradited to the United States for Alleged Scheme to Defraud the U.S. Export-import Ban

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Manuel Ernesto Ortiz-Barraza, an independent financial consultant, was extradited to the United States today for his alleged role in a scheme to defraud the Export-Import Bank of the United States (Ex-Im Bank) of over $2.5 million, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the Western District of Texas Robert Pitman and Osvaldo L. Gratacos, Inspector General of the Ex-Im Bank.

Ortiz-Barraza, 56, was charged in an indictment unsealed on Oct. 19, 2011, in the Western District of Texas with one count of conspiracy to commit wire and bank fraud, three counts of wire fraud and one count of bank fraud for his alleged role in a scheme with several others to defraud the Ex-Im Bank.  Based on a provisional arrest warrant, Mexican authorities arrested Ortiz-Barraza in Mexico on Feb. 13, 2012, and he has been awaiting extradition to the United States, a process which was recently finalized by the Mexican courts.

According to the U.S. indictment and court documents, Ortiz-Barraza and his co-conspirators allegedly conspired to obtain Ex-Im Bank guaranteed loans through banks by creating false loan applications, false financial statements and other documents purportedly for the purchase and export of U.S. goods into Mexico.  Ortiz-Barraza and his co-conspirators allegedly falsified shipping records to support their claims of doing legitimate business and did not ship the goods that were guaranteed by the Ex-Im Bank.  After the loan proceeds were received, Ortiz-Barraza and his co-conspirators allegedly split the loan proceeds among themselves.  As a result of the alleged fraud, the conspirators’ loans defaulted, causing the Ex-Im Bank to pay claims to lending banks on a loss of over $2.5 million.

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

The Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing.  The Ex-Im Bank provides a variety of financing mechanisms to help foreign buyers purchase U.S. goods and services.

The case is being prosecuted by Senior Litigation Counsel Patrick Donley and Trial Attorney William Bowne of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Steven Spitzer of the Western District of Texas, El Paso Division.  The case was investigated by the Ex-Im Bank Office of Inspector General, Homeland Security Investigations in El Paso, under the leadership of Acting Special Agent in Charge Dennis Ulrich; Internal Revenue Service-Criminal Investigation in Washington, D.C., under the leadership of Special Agent in Charge Rick A. Raven; and the U.S. Postal Inspection Service in Washington, D.C., under the leadership of Inspector in Charge Daniel S. Cortez.  Substantial assistance was provided by the U.S. Marshals Service and the Criminal Division’s Office of International Affairs in Washington, D.C.  The Department of Justice is particularly grateful to the government of Mexico for their assistance in this matter.