Tag Archives: FEMA

Former Executive Director Of The Ramapo Local Development Corporation Pleads Guilty To Securities Fraud And Conspiracy Charges

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Department of Justice
U.S. Attorney’s Office
Southern District of New York
FOR IMMEDIATE RELEASE
Tuesday, March 7, 2017

Preet Bharara, the United States Attorney for the Southern District of New York, announced that N. AARON TROODLER, the former Executive Director of the Ramapo Local Development Corporation (“RLDC”), pled guilty today before U.S. District Judge Cathy Seibel to conspiring with Ramapo Town Supervisor Christopher St. Lawrence to commit securities fraud as a result of a scheme to defraud investors in municipal bonds issued by the RLDC and the Town of Ramapo (the “Town”). This case is believed to be the first conviction for federal securities fraud in connection with municipal bond issuances.

U.S. Attorney Preet Bharara said: “As we said at the time of his arrest, N. Aaron Troodler defrauded both the citizens of Ramapo and thousands of investors around the country, helping to sell over $150 million of municipal bonds on fabricated financials. Today, Troodler has admitted to committing securities fraud. This guilty plea, in what we believe to be the first municipal bond-related criminal securities fraud prosecution, is a big step in policing and bringing accountability to the $3.7 trillion municipal bond market.”

According to the allegations contained in the Superseding Information to which TROODLER pled guilty today and the related Indictment of TROODLER’s co-conspirator, Town Supervisor Christopher St. Lawrence:

As of August 2015, the Town had more than $128 million in outstanding bonds that had been issued for various municipal purposes, while the RLDC, a corporation created and owned by the Town under state law, had issued $25 million in bonds to pay for the construction of Provident Bank Park (now Palisades Credit Union Park), a minor league baseball stadium in Ramapo.

The Indictment and Superseding Information charge that St. Lawrence and TROODLER lied to investors in the Town’s and RLDC’s bonds in order to conceal the deteriorating state of the Town’s finances and the inability of the RLDC to make scheduled payments of principal and interest to holders of its bonds from its own money.

While the fraud predated the construction of the stadium, the Town’s financial problems were caused largely by the $58 million total cost of the stadium. The Town paid more than half of that cost, despite the rejection of the Town’s guarantee of bonds to pay for construction of the stadium in a Town-wide referendum in 2010 and St. Lawrence’s public statements that no public money would be used to pay for the stadium.

The defendants lied to investors primarily by making up false assets in the Town’s General Fund. The General Fund is the Town’s primary operating fund. The accumulated difference over time between how much money the Town receives in taxes and fees and how much it spends in a year is the fund’s balance. The fund balance is a cushion that can be spent during difficult financial times. The size of the fund balance relative to the amount of the fund’s revenue and trends in a town’s General Fund balance over time are the primary indicators of the town’s financial health.

The Indictment alleges that St. Lawrence lied to the RLDC’s bond rating service in January 2013 when he told them in a telephone call that the 2012 fund balance would remain unchanged from the 2011 balance. Immediately after that call ended, St. Lawrence told Town employees “to do [an upcoming] refinancing of the short term debt as fast as possible because . . . we’re going to have to all be magicians to get to some of those numbers.”

The Indictment and the Superseding Information also allege that St. Lawrence and TROODLER told investors in the Town’s and RLDC’s bonds that the RLDC was making the payments on its bonds from its operating revenue, meaning money it was making from its ordinary business of running the baseball stadium and selling condominiums at a development it had built. That was important to investors because it led them to believe that the Town would not have to pay off the RLDC’s $25 million bonds. It also made the RLDC’s bonds look less risky. The RLDC actually made those payments from money TROODLER borrowed from the bank or money TROODLER obtained from the Town at St. Lawrence’s direction.

When the RLDC issued $25 million in bonds to build the stadium building itself in 2011, St. Lawrence inflated the size of the Town’s General Fund by including a false $3.6 million receivable in the General Fund. The Town’s financial condition was important to investors in the RLDC’s bonds because the Town guaranteed the payments of principal and interest on the bonds. Without that fake asset, the General Fund’s balance would have been negative in that year.

In addition, St. Lawrence inflated the General Fund with another fake receivable for $3.08 million from 2010 through 2015. It first went on the Town’s books when the RLDC agreed to buy property known as The Hamlets from the Town for $3.08 million. That sale never closed because the land turned out to be a habitat for rattlesnakes. Rather than take the receivable off the Town’s books – and reduce the size of the General Fund balance by $3.08 million, thereby creating a negative balance – St. Lawrence claimed the receivable had to do with the RLDC’s purchase of another property from the Town that had already taken place. To keep it on the books, St. Lawrence then caused the Town Attorney to tell the Town’s auditors over a period of years that the receivable would be paid back within a year, which was required if the receivable was going to stay in the General Fund. Without this fake receivable alone, the Town’s General Fund balance would have been negative for years.

In May 2013, the Federal Bureau of Investigation (“FBI”) searched Town Hall in connection with this investigation. Less than 10 days later, St. Lawrence inflated another receivable in the General Fund – this one for money from the Federal Emergency Management Agency (“FEMA”) to reimburse the Town for expenses from Hurricanes Irene and Sandy. St. Lawrence claimed that the Town was going to receive $3.145 million from FEMA when the Town hadn’t even submitted those claims to FEMA yet. Without St. Lawrence’s inflation of this receivable alone, the projected General Fund balance for 2012 would have been negative when the Town sold bonds in May 2013.

Finally, the Indictment alleges that St. Lawrence also inflated the General Fund balance by making more than $12 million in transfers from the Town’s Ambulance Fund to the General Fund from 2009 to 2014. The group of properties in Ramapo that pays into the Ambulance Fund is different from the group of properties that pays into the General Fund. Under state law, transfers between funds with different tax bases can only be loans. St. Lawrence told the auditors that the two funds had the same tax base to justify the transfers.

* * *

TROODLER, 42, of Bala Cynwyd, Pennsylvania, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of conspiracy, which carries a maximum sentence of five years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

TROODLER is scheduled to be sentenced by Judge Seibel on September 18, 2017, at 3:30 p.m.

The charges against Christopher St. Lawrence contained in the Indictment are merely accusations, and he is presumed innocent unless and until proven guilty.

Mr. Bharara praised the investigative work of the FBI and the Rockland County District Attorney’s Office. He also thanked the U.S. Securities and Exchange Commission for their assistance in the investigation.

This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys James McMahon, Daniel Loss, and Stephen J. Ritchin are in charge of the prosecution.

Former FEMA Executive Pleads Guilty to Federal Conflict of Interest Charge Defendant Sought Job From Company That Did Work for FEMA

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WASHINGTON—Timothy W. Cannon, 63, the former director of human resources at the Federal Emergency Management Agency (FEMA), pleaded guilty today to a charge of conflict of interest for negotiating employment with a polling and consulting services company that had a multi-million-dollar contract with FEMA, supervised by Cannon.

The plea occurred before the Honorable Amy Berman Jackson of the U.S. District Court for the District of Columbia. Sentencing is scheduled for April 9, 2013. The charge carries a statutory maximum of five years in prison.

The guilty plea was announced by Ronald C. Machen, Jr., U.S. Attorney for the District of Columbia; Assistant Attorney General Lanny A. Breuer of the U.S. Department of Justice’s Criminal Division; Debra Evans Smith, Acting Assistant Director in Charge of the FBI’s Washington Field Office; Christopher Cherry, Special Agent in Charge of the General Services Administration Office of Inspector General for the National Capital Region; and Mike Dawson, Special Agent in Charge of the U.S. Department of Homeland Security Office of Inspector General’s Washington Field Office.

According to the government’s evidence, from July 2007 through February 2009, Cannon was the director of FEMA’s Human Capital Division. In 2007, Cannon had discussions with a firm, identified in court papers as “Company A,” about FEMA hiring the firm to provide consulting services on human resources matters at FEMA. The work would be done through a project that would eventually be called the “BEST Workforce Initiative.”

In March 2008, the chief executive officer of Company A e-mailed another Company A employee, stating Cannon “said he has done everything to get a job at [Company A] because he believes so much in our products…said he wants to do a real good job at FEMA and that mabye [sic] he would try again….” On April 22, 2008, Company A’s CEO e-mailed another Company A employee that “…if [Cannon] gets us a big deal at FEMA…i [sic] think we should hire him…because he will be a ‘client’ hire…which might be good[.]” Later in the same e-mail chain, Company A’s CEO asked, “[I]s the ink dry yet on our deal with fema [sic] [?]” The Company A employee replied, “[N]o might be mid-May.” Company A’s CEO then stated, “[W]e should wait of course to see if we win a big quality deal here[.]”

On August 12, 2008, Company A was hired to administer the BEST Workforce Initiative at FEMA. The contract was valued at approximately $6 million over five years.

On November 18, 2008, a Company A employee advised Company A’s CEO in an e-mail, “I talked to Tim today. He asked for a job.” Company A’s CEO then stated, “What about ethics…are we okay with all of that…he is a significant client…am sure you know the rules…gee he seems like a winner to me…I don’t think these guys are as expensive as one might think…and he has a military background[.]”

In December 2008 and January 2009, Cannon requested additional funding for the BEST Workforce Initiative. On January 6, 2009, in an e-mail to a Company A employee, Cannon stated, “[A]h yes, I got another 500k put on the contract. Cool huh?”

On January 12, 2009, Cannon had an employment interview with Company A in Washington, D.C. On February 9, 2009, Company A sent an employment offer letter by e-mail to Cannon. The letter offered Cannon “the opportunity to join [Company A] as a Partner with our Government Division in Washington, D.C.” and guaranteed him a minimum annual salary of $175,000 for the first two years of employment. Cannon responded to the e-mail the same day, stating, “I am very excited about joining [Company A] and I look forward to working with you….” Following Cannon’s acceptance of Company A’s employment offer, Cannon continued to oversee and work on the BEST Workforce Initiative at FEMA.

Cannon retired from FEMA effective on February 27, 2009. On his public financial disclosure report, known as Form SF-278, Cannon indicated that he did not have any agreements or arrangements for “future employment” and he specifically did not list his future employment with Company A. On February 27, 2009, Cannon requested that Company A provide him with an offer letter dated after February 27, 2009, so that it would falsely appear that Cannon received Company A’s employment offer after he had resigned from FEMA. On March 2, 2009, Company A sent an updated version of the offer letter, with the new date of March 2, 2009, to Cannon. Cannon signed this updated version of the offer letter on March 3, 2009, and returned it to Company A.

In March 2009, a Company A employee voiced concerns internally about Cannon’s hiring. In addition, on March 25, 2009, a Company A employee stated in an e-mail to another Company A employee, “Well, I just got a call from and am getting more red flags about Tim Cannon. Apparently, word is getting around about his departure and joining [Company A]. There is speculation among is [sic] co-workers that this is improper. They are pretty mad. This may get in the way of future business with FEMA….This, plus the bankruptcy, plus appearance of ethics violations, both on [Company A] and FEMA side. This is not good….I think we are getting too many sign[s], and I do not think this will work.” On March 26, 2009, Company A informed Cannon that Company A’s offer of employment was being withdrawn. Company A told Cannon that he did not meet the background check requirements.

Later, on September 17, 2009, Cannon sent an e-mail to Company A’s CEO advising that Cannon had joined a consulting firm and asking to have lunch. Company A’s CEO forwarded that e-mail to other Company A employees stating, “This is a guy that was our sponsor at FEMA…he is so [Company A] gung ho…when he was applying we broke some of the rules of the U.S. Gov on the ‘how’ we do it…so we had to let him go….”

In announcing the guilty plea, U.S. Attorney Machen, Assistant Attorney General Breuer, Acting Assistant Director in Charge Smith, Special Agent in Charge Cherry, and Special Agent in Charge Dawson commended the outstanding investigative work of agents of the FBI’s Washington Field Office, Assistant Special Agent in Charge Floyd Martinez of the GSA OIG and agents of the DHS OIG, as well as agents and auditors of other federal investigative agencies that assisted with this case. They also praised the efforts of members of the U.S. Attorney’s Office and the Criminal Division Fraud Section, including Paralegal Specialists Diane Hayes and Nicole Wattelet; Legal Assistant Jamasee Lucas; Information Technology Specialist Joshua Ellen; forensic accountants in the Fraud and Public Corruption Section; and Assistant U.S. Attorney David Johnson, Trial Attorney Brian Young, and former Trial Attorney James Graham, who have prosecuted the case.