Category Archives: Financial Fraud, Procurement Fraud and Grant Fraud Trends by Bradford L. Geyer, Joan E. Marshall and Phillip Zane

Defense Contractor Sentenced to 5 Years in Federal Prison for $53 Million Procurement Fraud and Illegal Gratuities Scheme

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Department of Justice U.S. Attorney’s Office

District of Maryland

FOR IMMEDIATE RELEASE

2015-05-29 11.34.57

Friday, April 28, 2017

Defense Contractor Sentenced to 5 Years in Federal Prison for $53 Million Procurement Fraud and Illegal Gratuities Scheme

Baltimore, Maryland – On April 27, 2017, U.S. District Judge Marvin J. Garbis sentenced John Wilkerson, age 51, of Moultrie, Georgia to five years in prison, followed by three years of supervised release, for a wire fraud conspiracy and for paying illegal gratuities to a government official, in connection with the award of more than $53 million in federal government contracts. Judge Garbis also ordered Wilkerson to pay forfeiture and restitution in the amount of $9,441,340.11.

 

The sentence was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning; Commander of the Air Force Office of Special Investigations (OSI); Special Agent in Charge Robert Craig, Defense Criminal Investigative Service (DCIS), Mid-Atlantic Field Office; and U.S. Small Business Administration Acting Inspector General Mike Ware.

 

According to his plea agreement, Wilkerson was a Department of Defense Account Manager for Iron Bow Technologies, LLC (Iron Bow), which provided IT consulting and other services to government and industry customers. Wilkerson was also part owner and operated an information technology company, Superior Communications Solutions, Inc. (SCSI).

 

Andrew Bennett, who was separately charged and has pled guilty, was a program manager for an information technology company, Advanced C4 Solutions, or AC4S, from 2005 until 2011. In 2011, Bennett left AC4S and went to work for Wilkerson at SCSI.

 

James T. Shank, who was separately charged and has pled guilty, was a Program Manager at the United States Navy’s Space and Naval Warfare (SPAWAR) Systems Center

 

From September 2009 through August 2012 Wilkerson, Bennett and Shank conspired to steer government contracts at Joint Base Andrews to companies affiliated with Wilkerson and Bennett. After the award of the contracts, Wilkerson offered, and Shank accepted, employment with SCSI while Shank was still a government employee and while he was taking official actions that benefited Wilkerson. In addition, Wilkerson paid Shank $86,000 in the year after Shank retired from government service, funneling the payment through two other companies in order to conceal the source of the funds. Wilkerson also hired Bennett and paid him a $500,000 bonus using proceeds from the fraud scheme.

 

For example, Shank, Wilkerson, and Bennett developed a request for proposal (RFP) for DO27, a contract to supply labor services for an Air Force technology project, including for overall project management services, so that AC4S would win the contract. On June 10, 2010, DO27 was awarded to AC4S in the amount of $18,332,738.10. Wilkerson provided Bennett with a quote for labor on behalf of SCSI that was less than the quote he had previously submitted on behalf of Iron Bow as their sales representative. After SCSI was selected as a subcontractor on DO27, it subcontracted with Iron Bow to provide most of the labor SCSI was supposed to provide under DO27. Wilkerson was able to earn income from the work Iron Bow employees were doing by having SCSI act as a middleman and charging a mark-up on Iron Bow’s work. Wilkerson and Bennett also directed an SCSI employee to create false invoices supposedly documenting the hours SCSI employees spent working on DO27, which were submitted to AC4S and paid by the United States government. SCSI received $6,794,432.98 on DO27 out of the $18 million AC4S received for providing labor for the project.

 

Shank also initiated the procurement process on more than 11 delivery orders that purchased telecommunications equipment and furniture as part of the Air Force project. Those delivery orders were issued to Iron Bow in 2010 and 2011. Wilkerson took multiple items of commercially available furniture, bundled them together and assigned them an SCSI specific number and a price that included a significant mark up over what SCSI paid the furniture manufacturer for the items. Shank then submitted to SPAWAR contracting officers a purchase order asking for authority to buy the bundle of furniture that bore the SCSI specific part number. SCSI received approximately $33 million of the $35 million paid to Iron Bow under the various furniture and equipment delivery orders. Wilkerson charged the United States a 25 percent markup on furniture purchased under these two purchase orders, resulting in a profit to him of more than $6 million.

 

In addition, from 2010 until his retirement in June 2011, Shank falsely certified that the United States government received more than $1 million worth of goods under the W91QUZ-07-D-0010 contract that the government did not in fact receive.

 

In late 2010 or early 2011, Wilkerson offered Shank employment. Shank did not disclose that fact to anyone at SPAWAR and did not recuse himself from any of the contracts that benefited Wilkerson. In February 2011, Bennett left AC4S and went to work for Wilkerson at SCSI. Bennett received a $500,000 bonus when he joined SCSI, which was paid for by profit Wilkerson had earned on the furniture contracts.

 

Shank accepted employment with SCSI in May 2011, but was still working for SPAWAR when he approved more than $1.1 million worth of invoices that benefitted SCSI and Wilkerson.

 

Between July 2011 until August 2012, Wilkerson paid Shank approximately $86,000. The funds that Wilkerson paid Shank were funneled through T&M Communications, LLC, a company owned by T.R., a senior executive at SCSI, who ultimately paid out the funds to Shank. Further, in some instances funds paid to Shank were also funneled through Decision Point Technologies, LLC, another company owned by Wilkerson. Shank did no work for Decision Point Technologies or T&M Communications in that time period.

 

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

 

Acting United States Attorney Stephen M. Schenning thanked Air Force OSI, DCIS, and the U.S. Small Business Administration Office of Inspector General for their work in the investigation. Mr. Schenning commended Assistant U.S. Attorneys Leo J. Wise and Philip A. Selden, who are prosecuting the case.

Green Grants and Grantees are now in #GFPFE crosshairs and there is no bag limit

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The Economist’s handy graph showing the breakdown of the Trump Administration’s Proposed Budget shows in stark budgetary terms what US government agencies are facing.  I have reviewed the proposed budget and have concluded that it is the strongest indicator yet that the Trump Administration intends to reinvigorate Grant Fraud and Procurement Fraud Enforcement (#GFPFE).  The graph shows a change in overall agency funding and portends an intra-agency reorientation that is likely to effect grantees or contractors that have been awarded or are currently working on Grants or Contracts awarded by Environmental Protection Agency (EPA) or Department of Energy (Energy).

Let’s review:

  • Review and Recap of Current Posture:

I have previously laid out  here out about why conditions are perfect for a renaissance in Grant Fraud and Procurement Fraud Enforcement (GFPFE). I took the Department of Energy’s enforcement temperature here, I looked at an EPA-OIG audit of laboratories here, and I noticed a NASA-OIG audit announcement of ground and ocean temperatures here. Last week there was an NPR story on case by case review of individual EPA scientists while newly minted EPA Administer Scott Pruitt made statements here questioning the connection between human activity and climate change while raising questions about the measurement of global temperatures. Then a top level EPA transition official, David Schnare, resigned, but not before acknowledging that while ” the vast majority of career staff at the EPA… are dedicated public servants,…there are a small handful “who were definitely antagonistic” to Trump and Administrator Scott Pruitt. “They’re here for some other reason. They’re here for a cause,” he was quoted as saying in The Hill.

  • Presidential Shift in Priorities Always Wins:

EPA career civil servants who think nobility of purpose protects them in the face of an overwhelming Presidential Administration shift in priorities should pay a visit to the Antitrust Division’s field offices in Atlanta, Cleveland, Dallas and Philadelphia (punch line: they no longer exist).  The Antitrust Division Criminal Program’s Senior Litigators, who woke up on 911 in the World Trade Center Marriott, eagerly supported a GFPFE initiative whose purpose was to “protect the supply chain of goods and services to the nation’s warfighter.” Their tireless work and willingness to support other components of USDOJ in GFPFE efforts became a liability when a new Presidential Administration changed the definition of success from number of cases filed to the number of cases not filed (for anyone wanting to learn about the important competition enforcement function Antitrust Division Field Offices performed can start with the dearly departed Philadelphia Field Office’s Chief Robert E Connolly’s column here). The bottom line is Presidential shift in priorities always wins over perceived nobility of purpose of career public servants.

  • Nobility of Purpose in combatting CO2 is going to be challenged

I know it will come as a shock to many, but there are many scientists–legitimate scientists–who do not come to the same conclusions about the connection between rising CO2 levels and rising temperatures.  I have no idea what the truth is, but I recognize that when you have a President and heads of the EPA and Energy who doubt the warming narrative and view expenditures in that regard to be a waste of money. It would behoove everyone in the risk assessment business to understand what they think and read what they read.  If you restrict your news to the Washington Post and the New York Times, you are flying blind.  Worse, your clients will be flying blind. It is important to recognize that the outgoing administration saw this coming and adorned future budgets with global warming money that will be hard to cut out.  That will stimulate efforts to try.

  • Let’s Look At the Proposed Budget for Department of Energy:

The preamble states:

[The Budget] reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies and focuses resources toward early-stage research and development. It emphasizes energy technologies best positioned to enable American energy independence and domestic job-growth in the near to mid-term.

My translation: Grants for developing green technologies are drying up.  No more Solyndras.

The preamble states:

It also ensures continued progress on cleaning up sites contaminated from nuclear weapons production and energy research and includes a path forward to accelerate progress on the disposition of nuclear waste. At the same time,the Budget demonstrates the Administration’s strong support for the UnitedStates’ nuclear security enterprise and ensures that we have a nuclear force that is second to none. The President’s 2018 Budget requests $28.0 billion for DOE, a$1.7 billion or 5.6  percent decrease from the 2017 annualized CR level. The Budget would strengthen the Nation’s nuclear capability by providing a $1.4 billion increase above the 2017 annualized CR level for the National Nuclear SecurityAdministration, an 11 percent increase.

My translation: Grants for development of nuclear energy capabilities and military nuclear applications are back in vogue.  $6.5 billion in clean-up funds will be oriented towards nuclear.  The important factor to consider is that, in all likelihood, this changes the mix of responsive contractors.

  • Let’s look at EPA proposed budget:

The Compliance Assurance budget is lowered to $419 million, which is $129 million below the 2017 annualized CR level. It “better targets” EPA’s Office of Research and Development (ORD) at a level of approximately $250 million, which would result in a savings of $233 million from the 2017 annualized CR level. ORD would prioritize activities that support decision-making related to core environmental statutory requirements, as opposed to extramural activities, such as providing STAR grants.

It supports Categorical Grants with $597 million, a $482 million reduction below 2017 annualized CR levels. These lower levels are in line with the broader strategy of streamlining environmental protection. This funding level eliminates or substantially reduces Federal investment in State environmental activities that go beyond EPA’s statutory requirements.

It eliminates funding for specific regional efforts such as the Great Lakes Restoration Initiative, the Chesapeake Bay, and other geographic programs. These geographic program eliminations are $427 million lower than the 2017 annualized CR levels. The Budget returns the responsibility for funding local environmental efforts and programs to State and local entities, allowing EPA to focus on its highest national priorities.

It eliminates more than 50 EPA programs, saving an additional $347 million compared to the2017 annualized CR level.

My translation: Grants for development of green technologies and reducing CO2 emissions are slashed.  EPA is being oriented around traditional toxins to land, water and air.  Its administration of $100 million to fix Flint Michigan’s water problems and orientation around poisoning will help with the repositioning. 

So while Energy moves onto new contractors for a nuclear spend, EPA moves towards traditional environmental problems and even NASA will now move, happily for many, toward an ambitious space program, all three agencies move away from green and CO2 mitigation programs.  Current contractors and grantees in these areas have a dual problem.  First, the funding in these areas is drying up.  Second, any problems that are found in the award or administration of grants or contracts in these now shuttered programs have a lower risk of causing collateral damage to supporters of the new Administration and they undermine the case against shuttering those programs.  Within the investigative agent community and auditing community examining procurements and grants in these shuttered program areas, investigation carries even lower risk and even higher reward (imagine how an indictment early next week alleging a massive fraud scheme involving a company that had been administering a major grant would be received by the Administration that is looking to justify a shift in funding priorities).  Investigative agents, many of whom in the prior Administration felt professionally stunted because of managerial interference against developing fraud and corruption cases have now been unshackled.  Inquiries that could never blossom into full blown investigations using IG subpoenas and active grand juries can now be taken out from from the back of desk drawers or they can be reopened with the support of career mid-level management looking to take action that will be looked upon favorably when the permanent Inspector General arrives later in the year.

 

Latest GrantFraud.Com post involves a $200 million credit card fraud scheme

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Bradford L. Geyer is reading enforcement agency tea leaves and he is seeing signs of enhanced enforcement involving grant fraud and procurement fraud at grantfraud.com.  His latest note regarding an extensive credit card fraud scheme can be found here.

Liberty Reserve Exec Gets 20 Years For Laundering

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Arthur Budovsky, 42, was sentenced today in the Southern District of New York to 20 years imprisonment for running a massive money laundering enterprise through his company Liberty Reserve S.A. (“Liberty Reserve”), a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity.

Assistant Attorney General Leslie R. Caldwell for the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara for the Southern District of New York made the announcement.

In January, Budovsky pleaded guilty to one count of conspiring to commit money laundering.  In imposing sentence, the court noted that Budovsky ran an “extraordinarily successful” and “large-scale international money laundering operation.”  U.S. District Judge Denise L. Cote also ordered Budovsky to pay a $500,000 fine.

“The significant sentence handed down today shows that money laundering through the use of virtual currencies is still money laundering, and that online crime is still crime,” said Assistant Attorney General Caldwell.  “Together with our American and international law enforcement partners, we will protect the public even when criminals use modern technology to break the law.”

“Liberty Reserve founder Arthur Budovsky ran a digital currency empire built expressly to facilitate money laundering on a massive scale for criminals around the globe,” said Manhattan U.S. Attorney Bharara.  “Despite all his efforts to evade prosecution, including taking his operations offshore and renouncing his citizenship, Budovsky has now been held to account for his brazen violations of U.S. criminal laws.”

According to the indictment, Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system” and allowed people all over the world to send and receive payments using virtual currency.  At all relevant times, Budovsky directed and supervised Liberty Reserve’s operations, finances, and business strategy and was aware that digital currencies were used by other online criminals, such as credit card traffickers and identity thieves.

Liberty Reserve grew into a financial hub for cybercriminals around the world, trafficking the criminal proceeds of Ponzi schemes, credit card trafficking, stolen identity information and computer hacking.  By May 2013, when the government shut it down, Liberty Reserve had more than 5.5 million user accounts worldwide and had processed more than 78 million financial transactions with a combined value of more than $8 billion.  United States users accounted for the largest segment of Liberty Reserve’s total transactional volume – between $1 billion and $1.8 billion – and the largest number of user accounts – over 600,000.

Four co-defendants, Vladimir Kats, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev, have already pleaded guilty.  Marmilev and Chukharev were sentenced to five years and three years in prison, respectively.  Judge Cote is expected to sentence Kats and El Amine May 13. Charges remain pending against Liberty Reserve and two individual defendants who are fugitives.

The U.S. Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations investigated this case as part of the Global Illicit Financial Team.  The U.S. Secret Service’s New York Electronic Crimes Task Force assisted with the investigation.  The Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police’s Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation and the Swiss Federal Prosecutor’s Office also provided assistance.

Trial Attorney Kevin Mosley of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys Christian Everdell, Christine Magdo and Andrew Goldstein of the Southern District of New York are prosecuting the case.  The Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section provided substantial assistance.

CCC: Recommended Blog: “Grand Jury Target”

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Recommended Blog: “Grand Jury Target”

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I’ve been following a blog for a while that I find informative and interesting: Grand Jury Target: Tracking Federal Prosecutions of Corporate Executives.  The blog is by Sara Kropf, a trial lawyer in Washington, D.C.  A March 8th post was titled:  “Why Are we Falling for the Department of Justice’s Sales Pitch?  The blog recounted Ms. Kropf’s experience at the recent White Collar Crime seminar, including the constant pitches by DOJ officials to rush in to confess.

This approach—to quickly rush to DOJ to win cooperation credit—seems to be the sad reality of current white collar practice when you represent large companies. (Don’t even get me started in the antitrust amnesty program and the problematic incentives that program creates.)

Check out the blog.  I think you’ll be well rewarded for your time.

Thanks for reading this one too!

American Metals Market Report on Hong Kong Unsealing by FormerFedsGroup of 13 Metric Tons of Mutilated Clad Coins Processed by Wealthy Max

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2015-05-29 11.34.57

The country’s oldest and most respected metals market trade publication, AMM, attended the Hong Kong unsealing of 13 metric tons of US clad coins on February 23rd that were processed in Foshan, China by the Wealthy Max quality assurance line in September, 2014, immediately following its processing of four shipments of mutilated clad coins that were seized by the government as being counterfeit.  Now, the US Attorney’s Office of the Eastern District of Pennsylvania, which played no role in creating this mess, has, sensibly, reasonably and in good faith, has started referring to the coins as not meeting Mint specifications rather than in the preposterous terms used by the US Attorney’s Office of New Jersey and the Department of Homeland Security who, preposterously, continue to allege counterfeiting in one of the most slipshod, ramshackle and careless investigations in recent memory.  Linked here is the carefully researched article.

New Jersey Pipe Supply Company Owner Sentenced to 32 Months in Prison for Role in Fraud and Bribery Conspiracy in Power Generation Industry

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Company Sentenced to Pay a Total of Over $1.7 Million in Fines and Restitution

A New Jersey industrial pipe supply company and its owner were sentenced today for conspiring to commit fraud and pay bribes to a purchasing manager at Consolidated Edison of New York in return for the manager’s efforts to steer contracts to the company, the Department of Justice announced.

Andrew Martingano, of Staten Island, New York, was sentenced by U.S. District Judge Deborah A. Batts of the Southern District of New York to 32 months and a day in prison.  American Pipe Bending and Fabrication Co. Inc. of Edison, New Jersey, was sentenced to pay a $150,000 criminal fine.  Martingano and American Pipe were also sentenced to pay over $1.6 million in restitution, jointly and severally with their co-conspirators, to the victim, Con Ed.  The company and its owner pleaded guilty to committing wire fraud and conspiring to defraud Con Ed on Aug. 15, 2012.

According to court documents, Martingano and others agreed to pay approximately $510,000 in cash bribes to James M. Woodason, a department manager of the purchasing department at Con Ed.  In exchange for the bribes, Woodason steered Con Ed industrial pipe supply contracts to American Pipe by secretly providing Martingano with confidential competitor bid information, thereby causing Con Ed to pay higher, non-competitive prices for materials.  At the time of Woodason’s arrest in August 2010, Woodason had already received approximately $45,000 in cash bribes from Martingano and American Pipe.

The department said the conspiracy took place from approximately January 2009 to August 2010.  In addition, Martingano and American Pipe defrauded Con Ed by requesting a 14 percent price increase and basing that request on a fake email purporting to document a “Steel Mill” price increase that American Pipe was passing on to Con Ed.  These false and fraudulent price increase requests caused actual losses to Con Ed in the amount of approximately $1.4 million and intended losses of approximately $9.4 million.

Con Ed is a regulated utility headquartered in Manhattan.  It provides electric service to approximately 3.2 million customers, and gas service to approximately 1.1 million customers in New York City and Westchester County, New York.  Con Ed received more than $10,000 in federal funding each year between 2003 through 2010, and cooperated with the department’s investigation.

Including Martingano and American Pipe, a total of five individuals and two companies have been charged as part of this investigation and have been ordered to serve a total of more than 16 years in prison and to pay criminal fines and restitution of more than $3 million.

The charges arose from an ongoing federal antitrust investigation of bid rigging, bribery, fraud and tax-related offenses in the power generation industry.  The investigation is being conducted by the Antitrust Division’s New York Office, with assistance from the FBI and the Internal Revenue Service-Criminal Investigation.  Anyone with information concerning bid rigging, bribery, tax offenses or fraud in the power generation industry should contact the FBI’s New York Division at 212-384-3720 or the Antitrust Division’s New York Office at 212-335-8000, or visit www.justice.gov/atr/contact/newcase.htm.

Big Brothers Big Sisters of America to Pay $1.6 Million to Resolve Allegations of False Claims For Federal Grants

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– Big Brothers Big Sisters of America Corporation (Big Brothers) has agreed to pay the United States $1.6 million to resolve allegations of false claims for funds under Department of Justice grants awarded to help children at risk, announced United States Attorney Zane David Memeger and Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. Big Brothers is a not-for-profit organization that provides mentoring services to boys and girls throughout the United States. The organization, originally based in Philadelphia, Pennsylvania, now is headquartered in Tampa, Florida.
Big Brothers is a national organization that acts through approximately 300 independent affiliate agencies across the United States. Since 2004, Big Brothers has received millions of dollars in grants from the Justice Department to support initiatives on behalf of children at risk. As a condition of those grants, Big Brothers was required to maintain sound accounting and financial management systems in accordance with federal regulations and guidelines designed to ensure that grant funds would be properly accounted for and used only for appropriate purposes.
The United States alleges that Big Brothers violated these regulations and guidelines with respect to three grants awarded by the Justice Department from 2009 to 2011, by commingling the grant funds with general operating funds, failing to segregate expenditures to ensure that the funds for each grant were used as intended, and failing to maintain internal financial controls to safeguard the proper use of grant funds. These allegations were documented in a 2013 audit of the three grants performed by the Department of Justice Office of the Inspector General. Since 2013, Big Brothers has replaced its management team and begun implementing policies aimed at correcting deficiencies in its management and accounting of federal grant funds.
“The US Attorney’s office is committed to protecting federal grants and ensuring that the funds are appropriately spent,” said Memeger. “Federal grant recipients must administer these grants with transparency and diligence, and the compliance measures implemented pursuant to this settlement agreement will help to achieve those goals.”

“Organizations such as Big Brothers have an obligation to the populations they serve as well as to the taxpayer to ensure that government grant funds are used for their intended purpose,” said Mizer. “The settlement announced today exemplifies the Department’s commitment to hold those who mishandle such funds accountable.”
“We appreciate the support of the U.S. Attorney for the Eastern District of Pennsylvania and the Civil Division in working with us on these kinds of cases,” said Department of Justice Inspector General Michael E. Horowitz. “The OIG’s auditors and investigators will continue to work with each other closely to uncover misuses of grant funds, and with our law enforcement partners to ensure that justice is served.”
In addition to paying the United States $1.6 million, Big Brothers has agreed to institute a strict compliance program that requires the organization to engage in regular audits, both internally and by independent auditors; establish a compliance team, an employee code of conduct, whistleblower policies, and a disciplinary policy for employees who engage in or fail to disclose abuses of federal grant funds; provide regular employee training on these policies; and employ risk assessment tools to detect abuses that might otherwise go undetected.

The investigation was conducted by the Department of Justice Office of the Inspector General. The settlement was handled by Assistant U.S. Attorneys Joel M. Sweet and Scott W. Reid in coordination with Trial Attorney David W. Tyler of the Justice Department’s Civil Division, Commercial Litigation Branch. The claims resolved by this settlement are allegations only; there has been no determination of liability.

Former Idaho Construction Company President Sentenced to Prison for Fraud Scheme

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The former president and majority stockholder of a construction company was sentenced to five years in prison today following her plea of guilty to filing a false tax return and her conviction by a jury of conspiracy to defraud the United States, wire fraud, mail fraud, false statements, interstate transportation of property taken by fraud, conspiracy to obstruct justice and obstruction of justice, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Wendy J. Olson for the District of Idaho.

Elaine Martin, 69, of Meridian, Idaho, was the president of MarCon Inc., a construction company based in Meridian.  In September 2013, after a 26-day jury trial, Martin was convicted of tax and fraud charges and sentenced to 84 months in prison.  In August 2015, the U.S. Court of Appeals for the Ninth Circuit vacated Martin’s sentence and her tax conviction and remanded for resentencing and further proceedings on the tax charge.  Today, Martin pleaded guilty to filing a false tax return and U.S. District Judge B. Lynn Winmill of the District of Idaho sentenced her to 60 months in prison on both the tax and fraud charges.  In addition to the prison term, Judge Winmill ordered Martin to pay restitution to the Internal Revenue Service (IRS) and Idaho Department of Transportation in the amount of $131,400.48, costs of prosecution in the amount of $22,859.60 and a forfeiture money judgment of $3,084,038.05, amounts Martin previously paid.

In the plea agreement, Martin admitted that she willfully signed false and fraudulent corporate income tax returns for Marcon Inc. for tax years 2005 and 2006.  Martin also admitted that she caused these tax returns to be false and fraudulent by keeping the unreported income off of the books and that she falsely told an IRS revenue agent, who was conducting a civil audit of Marcon, that all of Marcon’s gross receipts were deposited into its Wells Fargo operating account, when in fact, Martin was diverting and depositing gross receipts into Marcon’s Bank of Cascades account.  Martin withheld the records for Marcon’s Bank of Cascades from the individual who prepared her and Marcon’s tax returns for tax years 2005 and 2006.  Martin admitted that the total tax loss was $73,678.

Martin also admitted to conspiring to defraud the SBA 8(a) Program and the U.S. Department of Transportation, Disadvantaged Business Enterprise (DBE) Program, by submitting fraudulent tax returns and making false statements concerning her finances that caused Marcon to qualify and/or remain eligible for these programs.  Martin further admitted that her behavior affected the award of contracts pursuant to the 8(a) Program and DBE Programs.  For example, Marcon’s status as an Idaho DBE affected how and what DBE goals were set for particular construction projects and helped Marcon maintain a virtual monopoly in its geographic region between 2000 and 2006.  Marcon participated in the SBA 8(a) Program pursuant to direct negotiations with the awarding agency, rather than through fair and open competition.  Martin admitted that during the relevant time period, she would not have been awarded the 33 contracts at issue in the case but for the fraud.

As part of the plea agreement that Martin entered into today, she waived her right to further appeal.

Assistant Attorney General Ciraolo and U.S. Attorney Olson thanked special agents of IRS-Criminal Investigation, the FBI, the Office of Inspector General for the U.S. Small Business Administration and the Office of Inspector General for the U.S. Department of Transportation, who investigated the case and Trial Attorney Gregory Bernstein and former Trial Attorney Katherine Wong of the Tax Division and Assistant U.S. Attorney Raymond Patrico of the District of Idaho, who prosecuted the case.

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

Florida Investment Advisor Sentenced to 18 Months in Prison for Orchestrating $9 Million Investment Fraud Scheme

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A Tampa, Florida, area investment advisor was sentenced to 18 months in prison today for perpetrating a $9 million investment fraud scheme involving Facebook stock.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida, Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office and Inspector in Charge Ronald J. Verrochio of the U.S. Postal Inspection Service (USPIS) Miami Division made the announcement.

Gignesh Movalia, 40, a registered investment advisor, was also ordered by Chief U.S. District Judge Steven D. Merryday of the Middle District of Florida to pay $5,394,419 in restitution and to three years of supervised release following his prison sentence.  Movalia pleaded guilty on Aug. 13, 2015, to one count of investment advisor fraud.

In connection with his guilty plea, Movalia admitted that he founded OM Global Investment Fund LLC in 2009 and subsequently used the fund to defraud investors.  Specifically, in 2011 and 2012, Movalia raised more than $9 million from 130 investors by falsely claiming to have access to pre-initial public offering shares of Facebook Inc.  Rather than using this money to buy Facebook shares as promised, however, Movalia invested the money in other securities and concealed that fact from investors.  By September 2013 when it went into receivership, the OM Global Fund lost approximately $9 million, with $6 million of those losses as a result of the fraud scheme.

The case was investigated by the FBI and USPIS, with assistance provided by the U.S. Securities and Exchange Commission’s Miami Regional Office.  The case was prosecuted by Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section.