Tag Archives: Financial Fraud Enforcement Task Force (FFETF)

SIX INVESTORS INDICTED FOR THEIR ROLES IN BID RIGGING SCHEME AT MUNICIPAL TAX LIEN AUCTIONS IN NEW JERSEY

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Investigation Has Yielded 20 Charges to Date

WASHINGTON — A federal grand jury in Newark,  N.J., returned an indictment against six investors for their roles in a  conspiracy to rig bids at auctions conducted by New Jersey municipalities for  the sale of tax liens, the Department of Justice announced.

The indictment, filed today in U.S.  District Court for the District of New Jersey in Newark, charges four  individuals, Joseph Wolfson, Gregg Gehring, James Jeffers Jr. and Robert Jeffrey, and two entities, Betty Simon Trustee LLC and Richard Simon Trustee, with participating in a conspiracy to rig bids at tax lien auctions in New  Jersey.  According to the indictment, from at least as early as 1998 and continuing until as late as February 2009,  the investors participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain  bidders which liens each would bid on.  The  indictment alleges that the investors proceeded to submit bids in accordance with the agreements and purchased tax liens at collusive and non-competitive interest rates.

Joseph Wolfson, of Margate, N.J., was  a part-owner of two entities that invested in municipal tax liens, Betty Simon  Trustee and Richard Simon Trustee, both of Northfield, N.J.  Gregg Gehring, of Newton, N.J., was employed  by a major tax lien investment company as a vice president.  James Jeffers Jr., of Burlington, N.J., was a  bidder for Crusader Servicing Corp., which pleaded guilty to its role in the  conspiracy in September 2012, and also a bidder for Crusader’s successor  corporation. Robert Jeffrey, of  Bradenton, Fla., was a bidder for both Crusader and its successor corporation.

“The individuals and entities  charged today demonstrated a blatant disregard for the competitive process by  allocating the purchase of certain municipal tax liens by, from time to time,  flipping a coin, drawing numbers out of a hat or drawing from a deck of cards,”  said Leslie C. Overton, Deputy Assistant Attorney General for the Antitrust  Division.  “The Antitrust Division  remains committed to prosecuting those who thwart the competitive bidding  process.”

The department said that the  primary purpose of the conspiracy was to suppress and restrain competition in  order to obtain selected municipal tax liens offered at public auctions at  non-competitive interest rates.  When the  owner of real property fails to pay taxes on that property, the municipality in  which the property is located may attach a lien for the amount of the unpaid  taxes.  If the taxes remain unpaid after  a waiting period, the lien may be sold at auction.  State law requires that investors bid on the interest  rate delinquent property owners will pay upon redemption.  By law, the bid opens at 18 percent interest  and, through a competitive bidding process, can be driven down to zero percent.   If a lien remains unpaid after a certain  period of time, the investor who purchased the lien may begin foreclosure  proceedings against the property to which the lien is attached.  Since the conspiracy permitted the  conspirators to purchase tax liens with limited competition, each conspirator  was able to obtain liens which earned a higher interest rate.  Property owners were therefore made to pay  higher interest on their tax debts than they would have paid had their liens  been purchased in open and honest competition, the department said.

The indictment alleges, among other  things, that from at least as early as 1998 and continuing until as late as  February 2009, prior to the commencement of certain tax lien auctions in New  Jersey, the investors and their co-conspirators agreed not to compete for the  purchase of certain municipal tax liens.

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 a  Sherman Act violation 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 the  $1 million statutory maximum.

Including today’s charges, 20  individuals and entities have been charged as part of an ongoing investigation  into bid rigging or fraud related to municipal tax lien auctions in New Jersey.   To date, 11 individuals – Isadore H.  May, Richard J. Pisciotta Jr., William A. Collins, Robert W. Stein, David M.  Farber, Robert E. Rothman, Stephen E. Hruby, David Butler, Norman T. Remick,  Robert U. Del Vecchio Sr., and Michael Mastellone – and three companies, DSBD  LLC, Crusader Servicing Corp., and Mercer S.M.E. Inc., have pleaded guilty aspart of this investigation.

Today’s charge 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.

This ongoing investigation is being conducted by the Antitrust  Division’s New York Field Office and the FBI’s Atlantic City, N.J., office.  Anyone with information concerning bid rigging  or fraud related to municipal tax lien auctions should contact the  Antitrust Division’s New York Field Office at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm  or contact the Atlantic City Resident Agency of the FBI at 609-677-6400.

Former Investment Banker and His Associate Sentenced for Insider Trading Scheme

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A former San Francisco investment banker and his college friend were sentenced yesterday to 16 months in prison for their roles in an insider trading scheme involving two impending corporate mergers, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Melinda Haag of the Northern District of California.
Jauyo Lee, or “Jason Lee,” 29, of Palo Alto, Calif., and Victor Chen, 29, of Sunnyvale, Calif., both pleaded guilty on April 16, 2013, to one count of conspiracy to commit securities fraud and one count of securities fraud.
According to the plea agreements, Lee, who worked as an investment banker in the San Francisco office of Leerink Swann LLC, disclosed inside information to Chen, a friend from college, about two impending mergers involving Leerink clients.  Between Aug. 26, 2009, and Sept. 5, 2009, Lee disclosed inside information to Chen about the merger of Leerink’s client, Syneron Medical Ltd., and Candela Corporation, a medical device company publicly traded on the NASDAQ stock market.  Chen used the inside information to buy shares of Candela.  After the merger was announced, Candela’s stock price increased more than 40 percent and Chen sold his shares for a gain of approximately $62,589.
Between June 1 and June 13 of 2010, Lee also provided Chen with inside information about the impending merger of Somanetics Corporation and a subsidiary of Covidien plc.  Leerink was the lead financial advisor to Somanetics, which also was publicly traded on the NASDAQ.  Chen used the inside information to buy shares and options of Somanetics.  Following the merger announcement, the price of Somanetics stock increased more than 30 percent and Chen ultimately realized a profit of approximately $547,510.
Lee and Chen were charged in a criminal information on March 21, 2013.
The sentence was handed down by U.S. District Judge Richard G. Seeborg of the Northern District of California.  Judge Seeborg also sentenced Lee and Chen each to a two-year period of supervised release and ordered that restitution and forfeiture be considered at a subsequent hearing.  Chen paid $610,099 in forfeiture prior to sentencing.
This case was investigated by the FBI with substantial assistance from the Chicago Regional Office of the U.S. Securities and Exchange Commission. It is being prosecuted by Assistant U.S. Attorney Robert S. Leach and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section with the assistance of Rayneisha Booth and Mary Mallory.
This prosecution 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.

Las Vegas Agent Convicted in Mortgage Fraud Scheme

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A Las Vegas mortgage agent has been convicted for his role in a “cash back at closing” mortgage fraud scheme that netted $1.43 million in fraudulent mortgage loans, announced 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.
After a three-day trial before U.S. District Judge Larry Hicks in the District of Nevada, a federal jury convicted Jawad “Joe” Quassani, 42, on July 10, 2013, of one count of conspiracy to commit wire fraud and mail fraud, two counts of wire fraud, and two counts of mail fraud.
According to court documents and evidence presented at trial, Quassani participated in a scheme in which the prices of two homes were falsely inflated, mortgage loans were obtained through the submission of loan applications containing false and fraudulent information about the buyer’s income and intent to occupy the homes as primary residences, a portion of the loan proceeds was diverted at the close of escrow to the defendant’s co-conspirators, and commissions on the fraudulent loans were paid to Quassani and his co-conspirator.  Evidence at trial established that Quassani, a licensed mortgage agent at Rapid Funding Group, conceived the scheme together with two of his co-conspirators, prepared one of the loan applications and arranged for the preparation of the other, and shared in the commissions generated by transactions that had no purpose other than to generate profits for the co-conspirators.
Co-conspirators Anita Mathur and Shirjil “Sean” Qureshi previously pleaded guilty in related cases in Las Vegas to one count of conspiracy to commit bank fraud, wire fraud and mail fraud.  Both are awaiting sentencing.
This case was investigated by the FBI.  Trial Attorneys Stephen J. Spiegelhalter and Gary A. Winters of the Criminal Division’s Fraud Section are prosecuting the case.
Today’s 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.