Tag Archives: FFETF

Las Vegas Mortgage Agent Sentenced to 15 Months in Prison for Role in Mortgage Fraud Scheme

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A Las Vegas mortgage agent was sentenced late yesterday to serve 15 months in prison for her participation in a mortgage fraud scheme that netted more than $1.2 million in fraudulent mortgage loans, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Acting Special Agent in Charge William C. Woerner of the FBI’s Las Vegas Field Office announced today.

Heidi Haischer, 44, was sentenced by U.S. District Judge Miranda M. Du in the District of Nevada.  In addition to her prison term, Haischer was sentenced to serve three years of supervised release.

In November 2012, after a four-day trial, a federal jury in Las Vegas found Haischer guilty of one count of wire fraud and one count of conspiracy to commit wire fraud for submitting fraudulent loan documents to purchase two homes.

According to court documents and evidence presented at trial, Haischer participated in a mortgage fraud scheme while employed as a mortgage broker in Nevada.  From December 2006 to January 2007, Haischer and her co-conspirators fraudulently secured loans totaling over $1 million to obtain properties with the intent to flip and sell them for profit.  Evidence at trial showed that Haischer and her co-conspirators subsequently enriched themselves by collecting brokerage commissions generated by the sales of the properties.

The court documents and trial evidence demonstrated that Haischer submitted multiple loan applications in which she overstated her income, submitted false verification of employment and misrepresented her intent to reside in one of the properties as her primary residence.  Additionally, Haischer presented inflated bank account balances supported by forged bank statements to make it appear that she had assets she did not have, in order to help qualify for mortgage loans for which she otherwise would not have been eligible.

Co-conspirator Kelly Nunes was convicted in a related case in Las Vegas on Feb. 2, 2012, of one count of bank fraud and one count of conspiracy to commit wire and bank fraud.  On July 11, 2012, Nunes was sentenced to 51 months in prison.

This case was investigated by the FBI.  Trial Attorneys Thomas B.W. Hall and Brian R. Young of the Criminal Division’s Fraud Section prosecuted the case, with assistance from the U.S. Attorney’s Office for the District of Nevada.

This case was a result of efforts 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.

Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions Investigation Has Yielded 30 Plea Agreements to Date

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Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions
Investigation Has Yielded 30 Plea Agreements to Date
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.

Felony charges were filed today in the U.S. District Court for the Northern District of California in San Francisco against Mohammed Rezaian, of Novato, Calif. Rezaian is the 30th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, Rezaian 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 . Rezaian was also charged with conspiring to use the mail to carry out schemes 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.   According to court documents, a forfeiture allegation was also included in the charges against Rezaian.

The department said Rezaian 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 July 2008 and continuing until about January 2011.

“As a result of this investigation, the Antitrust Division has thus far filed charges against 30 real estate investors in Northern California for their illegal activity at foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will vigorously pursue the perpetrators of these fraudulent and anticompetitive schemes.”

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.

 

“Not only is bid rigging at public foreclosure auctions illegal, it also severely undermines the integrity of a fair and competitive marketplace,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office. “The FBI will continue to investigate and pursue those who commit fraudulent anticompetitive practices at foreclosure auctions and work with those who have fallen victim to such selfish crimes.”

 

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 victims 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 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 office at 415-436-6660 , visit www.justice.gov/atr/contact/newcase.htm, or call the FBI tip line at 415-553-74 00.

Today’s charges were brought in connection with the President’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 .

Two Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions

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29 Individuals Have Agreed to Plead Guilty to Date

WASHINGTON – Two Northern California real estate investors have agreed to plead guilty for their role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in Oakland against Peter McDonough of Pleasanton, Calif., and Michael Renquist of Livermore, Calif.

Including today’s pleas, 29 individuals have pleaded guilty or agreed 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, for various lengths of time between November 2008 and January 2011, McDonough and Renquist conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County, Calif . McDonough and Renquist were also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held. Renquist was also charged with additional counts for his involvement in similar conduct in Contra Costa County, Calif.

“The conspirators suppressed competition and lined their pockets through fraudulent and collusive conduct at the expense of lenders and distressed homeowners,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division and its law enforcement partners at the FBI will continue to hold accountable individuals who subvert the competitive process at foreclosure auctions around the country.”

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 Alameda and Contra Costa 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, the 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.

“The FBI and the Antitrust Division continue to bring to justice those individuals who engage in fraudulent anticompetitive practices at foreclosure actions,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.   “The foundation of our real estate market depends on fairness and transparency of all participants, and we are committed to working with our local and federal partners to ensure that conspirators are held accountable.”

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 victims 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 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 frau d 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 case was done in connection with the President’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 .

North Carolina Commodities Firm Owner Sentenced to 36 Months in Prison for Multimillion-dollar Fraud

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The principal and co-owner of North Carolina-based Integra Capital Management LLC, was sentenced today to serve 36 months in prison for his role in a scheme to defraud commodities trading investors of more than $3.2 million, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney of the Western District of North Carolina Anne M. Tompkins.

 Nicholas Cox, 35, of Lexington, N.C., was sentenced by U.S. District Judge Max O. Cogburn Jr., in the Western District of North Carolina. In addition to his prison term, Cox was sentenced to serve three years of supervised release and ordered to pay $1,981,477 in restitution.

On Dec. 22, 2012, Cox pleaded guilty in the Western District of North Carolina to one count of conspiracy to commit mail fraud, five counts of mail fraud and one count of conspiracy to commit money laundering.

According to court documents, between September 2006 and January 2009, Cox and his co-conspirator, Rodney Whitney, 50, of Archdale, N.C., the co-owner of Integra, engaged in a scheme to defraud investors in commodity trading pools operated by the firm.  Integra was established purportedly for the purpose of pooling investors’ funds in commodity pools, and investing in commodity futures and foreign currency exchange trading.  According to court documents, Cox and Whitney obtained and misappropriated more than $3.2 million in investor funds and fabricated account statements and tax forms to conceal their fraud.

According to court documents, Cox and Whitney falsely represented, among other things, that Integra’s managers had more than 30 years of combined market experience; that Integra paid dividends of two to five percent of the investor’s initial investment, which was derived from Integra’s trading profits; and investors could remove their principal investments within five days upon giving notice to Integra.  According to court documents, Cox and Whitney used the money invested by later investors to pay the monthly investment returns they had promised to earlier investors, to purchase real estate, to fund other business ventures and to purchase automobiles and other personal goods and services.

On March 21, 2011, Whitney pleaded guilty to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to commit money laundering.  He was sentenced on Jan. 7, 2013, to 60 months in prison for his role in the scheme.

The case was prosecuted by Trial Attorney Luke Marsh of the Criminal Division’ s Fraud Section and Benjamin Bain-Creed and Kenny Smith of the U.S. Attorney’s Office for the Western District of North Carolina. The case was investigated by the U.S. Postal Inspection Service.

 

This prosecution was done in coordination with the President’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 .

GeyerGorey LLP Opens New York Office

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FOR IMMEDIATE RELEASE

PRLog (Press Release) – Feb. 18, 2013 – WASHINGTON — GeyerGorey LLP today announced the opening of a new office in New York. This is the firm’s fourth office.  The New York office now joins with the firm’s Washington, D.C., Philadelphia and Boston offices in providing international and inside-the-beltway experience to individuals and companies that have become — or wish to avoid becoming — the subject of federal criminal law enforcement agency interest. Partner Robert J. Zastrow, resident in the Boston office, will oversee client matters in New York.
GeyerGorey LLP aims to meet the needs of companies for advice and training in compliance with federal criminal laws and in the detection of wrongdoing by corporate employees. The firm also specializes in the defense of white-collar criminal cases. The firm’s Web site may be found at www.GeyerGorey.com.

The New York office is located at 112 W. 34th Street, 17th Floor, New York, NY  10120.  The office telephone number is (212) 920-0676.  For further information, please call Robert Zastrow at (212) 920-0676 or send an email to [email protected].

Florida-Based Lender Processing Services Inc. to Pay $35 Million in Agreement to Resolve Criminal Fraud Violations Following Guilty Plea from Subsidiary CEO Agreement Also Follows Closure of Subsidiary DocX Operations

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Lender Processing Services Inc. (LPS), a publicly traded mortgage servicing company based in Jacksonville, Fla., has agreed to pay $35 million in criminal penalties and forfeiture to address its participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States.  The settlement, which follows a felony guilty plea from the chief executive officer of wholly owned LPS subsidiary DocX LLC, was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney for the Middle District of Florida Robert E. O’Neill.

 The non-prosecution agreement, which LPS entered into today with the U.S. Department of Justice and the U.S. Attorney’s Office for the Middle District of Florida, requires the company to make the payment and meet a series of other conditions.

 

Lorraine Brown, the former CEO of DocX LLC, pleaded guilty on Nov. 20, 2012, in federal court in Jacksonville to conspiracy to commit mail and wire fraud.   During her guilty plea, Brown admitted to her leadership role in the scheme.

 

LPS has taken a number of remedial actions to address the misconduct at DocX.   Among other things, LPS has wound down all of DocX’s operations, re-executed and re-filed mortgage assignments as appropriate and terminated Brown and others.   LPS has also demonstrated changes in its compliance, training and overall approach to ensuring its adherence to the law, and has retained an independent consultant to review and report on LPS’s document execution practices; assess related operational, compliance, legal and reputational risks; and establish a plan for reimbursing any financial injuries to mortgage servicers or borrowers.

 

According to the statement of facts accompanying the agreement, before its wind-down, DocX was in the business of assisting residential mortgage servicers with creating and executing mortgage-related documents to be filed with property recorders’ offices throughout the United States.   Employees of DocX, at the direction of Brown and others, falsified signatures on the documents.   Through this scheme and unbeknownst to the clients, Brown and subordinates at DocX directed authorized signers to allow other, unauthorized personnel to sign and to have documents notarized as if they were executed by authorized signers.   These signing practices were used at DocX from at least March 2003 until late 2009, and were implemented to increase profits.

 

Also to increase profits, Brown hired temporary workers to sign as authorized signers.     These temporary employees would sign mortgage-related documents at a much lower cost and without the quality controls represented to clients.   These documents were then falsely notarized by employees at DocX, allowing the fraud scheme to remain undetected.

 

After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country.   Many of these documents – particularly mortgage assignments, lost note affidavits and lost assignment affidavits – were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions.

 

In entering into the non-prosecution agreement with LPS, the Justice Department took several factors into consideration.   Soon after discovering the misconduct at DocX, LPS conducted a thorough internal investigation, reported all of its findings to the government, cooperated with the government’s investigation and effectively remediated any problems it discovered.   The government’s investigation also revealed that Brown and others at DocX took various steps to actively conceal the misconduct from detection, including from LPS senior management and auditors.

 

Brown, 51, of Alpharetta, Ga., faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense.   She is scheduled to be sentenced on April 23, 2013, before U.S. District Judge Henry Lee Adams Jr. in Jacksonville.

 

This case is being handled by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Justice Department’s Criminal Division Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida.   The case is being investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.

 

Today’s disposition is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF).   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.

Former Title Agent and Broker Convicted in Miami for Role in Reverse Mortgage Scheme

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A Miami title agent and former mortgage broker was found guilty late yesterday, Feb. 4, 2013, for her role in a “reverse mortgage” fraud scheme in connection with a loan worth more than $400,000, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

After a six-day jury trial before the Honorable Richard W. Goldberg, sitting by designation in the Southern District of Florida, a federal jury convicted Yesenia Pouparina (aka Yesenia Campos), 40, of four counts of wire fraud and one count of mail fraud for her role in securing a fraudulent Home Equity Conversion Mortgage (HECM), commonly referred to as a reverse mortgage loan, and making false representations related to the occupancy of the property and its subsequent “short sale.”  A HECM is a federally insured loan that enables older Americans to withdraw equity from a home so they can remain independent and financially secure.  The jury also found that three bank accounts controlled by the defendant, which were seized by the government during the course of the investigation, should be forfeited.

According to court documents and evidence presented at trial, Pouparina, a licensed title agent in the state of Florida, devised a scheme to obtain a reverse mortgage loan on her own property in the name of her mother, an individual who failed to meet the requirements of the HECM program.  Pouparina submitted to a lending institution a false loan application and doctored records in support of that application, misrepresenting her mother’s eligibility to participate in the HECM program.  Pouparina acted as the title agent for the loan and disbursed the loan proceeds directly to her own personal bank accounts.  Pouparina also enriched herself by collecting fees generated by the loan, and also profited by using the loan proceeds in connection with her business as a “hard money lender” in other mortgage deals.

Judge Goldberg ordered Pouparina to surrender to the U.S. Marshals on Feb. 20, 2013.  At sentencing, currently scheduled for May 9, 2013, Pouparina faces a maximum potential penalty per count of 20 years in prison and a $250,000 fine, or twice the net gain or loss from the offense.

This case was investigated by the Office of Inspector General, U.S. Department of Housing and Urban Development.  Trial Attorneys Sandra L. Moser and Mary Ann McCarthy of the Justice Department Criminal Division’s Fraud Section prosecuted the case, with assistance from the U.S. Attorney’s Office for the Southern District of Florida.

This conviction 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.

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

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Investigation Has Yielded 27 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.

Felony charges were filed today in the U.S. District Court for the Northern District of California in San Francisco against Gilbert Chung of Burlingame, Calif. Chung is the 27th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, Chung 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. Chung was also charged with conspiring to use the mail to carry out schemes 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 Chung 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 January 2010 and continuing until about December 2010.

“The conspirators went to great lengths to suppress competition and prices at these foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to vigorously enforce the antitrust laws and to prosecute those who violate them at the expense of 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.

“Today’s charges are another example of our resolve to bring to justice those who engaged in fraudulent bid rigging and anticompetitive practices at foreclosure auctions,” said FBI Special Agent in Charge David J. Johnson of the San Francisco Field Office. “We continue our partnership with the Antitrust Division in aggressively pursuing individuals who participate in these criminal acts.”

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 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.

Former Xpress Flex, Inc. And Payroll America, Inc. Owner Sentenced To 51 Months For Fraud And Filing A False Tax Return

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FOR IMMEDIATE RELEASE
January 10, 2013

Ordered to Pay Restitution of Nearly $1 Million to Victims

BOISE – Michael Wayne Davis, II, 46, of Raleigh, North Carolina, formerly of Eagle, Idaho, was sentenced yesterday to 51 months in prison for wire fraud and filing a false tax return, U.S. Attorney Wendy J. Olson and Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally announced. Chief U.S. District Judge B. Lynn Winmill also ordered Davis to serve three years of supervised release following his prison term and pay $999,930.90 in restitution – $954,640.90 to Xpress Flex victims and $45,290 to the IRS for the tax loss. Davis pleaded guilty to the charges on September 10, 2012.

According to court documents, in 2009 and 2010, Davis owned and operated Xpress Flex, Inc., a Boise, Idaho, company that administered, on behalf of employer-clients, flexible benefits plans for tax-free, qualified benefits, such as health care and dependent care. Pursuant to those plans, Xpress Flex received monetary contributions from its employer-clients of pre-tax withholdings from their employees’ paychecks. These funds were deposited into Xpress Flex bank accounts and set aside to pay the claims of employee-participants when they came due. According to court documents, Davis misappropriated $954,640.90 of Xpress Flex client funds and used them to pay personal credit card charges and the business expenses of his other company, Payroll America, Inc. He did so without the knowledge or authorization of the employer-clients and their employees, and contrary to representations in plan documents and contracts that he would safeguard the deposits and use them only to pay employee claims.

Court documents also showed that from 1994 through 2009, Davis owned and operated Payroll America in Boise, Idaho. Payroll America provided payroll administration and payroll tax filing services to its employer-clients. Pursuant to contract documents, employer-clients would deposit sufficient funds with Payroll America to meet their payroll and payroll tax obligations, which Payroll America would pay when they came due. According to court documents, in March and April of 2007, Davis misappropriated $2 million of Payroll America employer-client funds, wired them into his E*Trade brokerage account, and then invested the funds in the stock market. Davis did so without the knowledge or authorization of the employer-clients of Payroll America, contrary to representations in contract documents that he would safeguard the funds and use them only to pay payroll and payroll taxes.

Davis’ E*Trade investments generated approximately $192,436 in capital gains income. According to court documents, Davis wired this money into his and his wife’s personal checking account. The wire transfer was annotated “E-Trade Gains.” However, Davis intentionally failed to report capital gains income from E*Trade investments on his 2007 or 2008 tax returns, causing a tax loss of $45,290. For this conduct, Davis pleaded guilty to one count of filing a false tax return.

“I’m very pleased that my office, with the assistance of the Justice Department’s Tax Division, and federal law enforcement partners were able to bring Mr. Davis to justice,” said Olson. “Those who are entrusted to manage others’ money must ensure that it is safe and available for its intended purpose, not diverted for personal gain.”

“This sentencing sends a clear message, businesses owners who misuse their positions of trust and divert funds for their own personal use will be held accountable,” said Lilia E. Ruiz, IRS Criminal Investigation Acting Special Agent in Charge for the State of Idaho.

The case was investigated by the Federal Bureau of Investigation, the U.S. Department of Labor, Employee Benefits Security Administration, and Internal Revenue Service-Criminal Investigation.

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.

Former Financial Services Broker Sentenced to 10 months in MuniBonds Investigation

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WASHINGTON — A former financial services broker was sentenced today in U.S. District Court for the Southern District of New York, for his 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.

Adrian Scott-Jones, of Morriston, Fla. , a former broker for Tradition N.A. , was sentenced by District Court Judge Harold Baer Jr. for his role in the conspiracies. Scott-Jones was sentenced to serve 18 months in prison and to pay a $12,500 criminal fine.

“From soliciting intentionally losing bids for investment agreements to paying out kickbacks to manipulate the competitive bidding process, the conspirators went to great lengths to defraud municipalities across the country,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Today’s sentence sends a clear message that the division will continue to hold executives accountable for their anticompetitive conduct. ”

On Sept. 8, 2010, Scott-Jones pleaded guilty to participating in multiple conspiracies with executives of General Electric Co. (GE) affiliates, from as early as 1999 until 2006. According to the charges, GE and other financial institutions and insurance companies (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 hired brokers like Scott-Jones and Tradition to conduct bidding for contracts to invest money from a variety of sources, primarily the proceeds of municipal bonds issued to raise money for, among other things, public projects. Scott-Jones also participated in a conspiracy with representatives of a second provider located in New York City.

According to court documents, in each conspiracy, Scott-Jones gave co-conspirators information about the prices, price levels or conditions in competitors’ bids, a practice known as a “last look,” which is explicitly prohibited by U.S. Treasury regulations. Scott-Jones also solicited and received intentionally losing bids for certain investment agreements and other municipal finance contracts. As a result of Scott-Jones’ role in corrupting the bidding process for investment agreements, he and his co-conspirators deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds used by municipalities for various public works projects, such as water pollution abatement projects and low-cost housing. The department said that the conspiracies cost municipalities around the country millions of dollars.

“Today’s sentencing reaffirms the ongoing success of our efforts to weed out corruption in the municipal bond market,” said George Venizelos, Acting Director in Charge of the FBI in New York. “The FBI will continue to work closely with our partners from the Antitrust Division to protect the integrity of the competitive bidding process in public finance. ”

“Individuals who manipulate the competitive bidding system to benefit themselves will be held accountable for their criminal activity,” said Richard Weber, Chief, Internal Revenue Service Criminal Investigation (IRS-CI). “Quite simply, Mr. Scott-Jones profited at the expense of the towns and cities that needed the 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. ”

A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation, 19 of whom have been convicted at trial or pleaded guilty; one is currently awaiting 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 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.