Tag Archives: fraud scheme

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.

Executives of Swiss and Las Vegas Companies Convicted in International Investment Fraud Scheme

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A federal jury in Las Vegas convicted two men of conspiracy, wire fraud and securities fraud yesterday for their roles in an approximately $10 million international investment fraud scheme involving numerous victims.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Field Office made the announcement.

Anthony Brandel, 48, of Las Vegas, and James Warras, 69, of Waterford, Wisconsin, were each convicted of one count of conspiracy, nine counts of wire fraud and eight counts of securities fraud following a five-day trial before Senior U.S. District Judge Kent J. Dawson of the District of Nevada.  The defendants are scheduled to be sentenced on March 2, 2016, by Judge Dawson.

According to evidence presented at trial, Brandel and Warras conspired with others in the United States and Switzerland to promote investments and loan instruments that they knew to be fraudulent.  The conspirators told victims that, for an up-front payment, a Swiss company known as the Malom (Make A Lot of Money) Group AG would provide access to lucrative investment opportunities and substantial cash loans.  To effectuate this scheme, the defendants fabricated bank documents purporting to show that the Malom Group had large amounts of money in several European financial institutions.  And as part of an effort to defraud an investor who held an equity stake in a corporation that had filed for bankruptcy, Warras submitted a sworn affidavit to the U.S. Bankruptcy Court in the District of New Hampshire in which he made false statements about the value of certain bonds that the defendants promoted to the investor.

Brandel and Warras were charged together with four other defendants, including Joseph Micelli, 62, a former California attorney who pleaded guilty to conspiracy to commit wire fraud and securities fraud and is set to be sentenced on Feb. 23, 2016.  The remaining defendants are either at large or awaiting extradition from other countries.

The FBI’s Las Vegas Field Office investigated the case.  Assistant Chief Brian R. Young and Trial Attorneys Melissa Aoyagi and Anna G. Kaminska of the Criminal Division’s Fraud Section are prosecuting the case with assistance from the Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office for the District of Nevada.  The Securities and Exchange Commission’s Enforcement Division, which referred the matter to the department and is conducting a parallel civil enforcement investigation, also provided valuable assistance.

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.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 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.

Thirteen U.S. Soldiers Sentenced for Roles in Fraudulent Military Recruiting Bonus Scheme

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Thirteen members of the Texas Guard have received their sentences for their roles in wide-ranging bribery and fraud schemes that caused more than $170,000 in losses to the United States.  Seven of those members were sentenced this past week in Houston.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas made the announcement.

  • Jammie Martin, 38, of Katy, Texas, and Michelle Davis, 34, of Houston, were convicted in February of this year after a five-day trial of conspiracy, bribery, wire fraud and aggravated identity theft.  Martin was sentenced to serve 102 months in prison and Davis was sentenced to serve 57 months in prison.
  • Vanessa Phillips, 37, of Houston, pleaded guilty to one count of conspiracy and one count of bribery and was sentenced to three years probation.
  • Zaunmine “Orlando” Duncan, 39, of Douglasville, Georgia, pleaded guilty to one count of conspiracy, one count of bribery and one count of aggravated identity theft.  He was sentenced to serve 70 months in prison.
  • Annika Chambers, 29, of Houston, and Lashae Hawkins, 29, of San Antonio, pleaded guilty to one count of conspiracy and one count of bribery.  Chambers was sentenced to serve six months in prison.  Hawkins received one year and one day in prison.
  • Christopher Renfro, 27, of Houston, pleaded guilty to one count of conspiracy, one count of bribery, one count of aggravated identity theft and two counts of wire fraud.  He was sentenced to serve 36 months in prison.

In June, six other members of the Texas Guard were sentenced for their roles in the scheme.

  • Michael Rambaran, 52, of Pearland, Texas, pleaded guilty to one count of conspiracy, one count of bribery and one count of aggravated identity theft.  He was sentenced to serve 60 months in prison.
  • Edia Antoine, 29, and Ernest A. Millien III, 51, both of Houston, and Melanie Moraida, 35, of Pearland, pleaded guilty to one count of conspiracy and one count of bribery.  Each received 12 months and one day in prison.

Elisha Ceja, 28, of Barboursville, West Virginia, and Kimberly Hartgraves, 30, of League City, Texas, pleaded guilty to one count of conspiracy and one count of bribery.  Ceja was sentenced to serve nine months in prison and Hartgraves received probation.

U.S. District Judge Lee H. Rosenthal in the Southern District of Texas imposed the prison terms and also ordered all 13 defendants to pay restitution.  One remaining defendant, Danielle Applin 29, of Harker Heights, Texas, who previously pleaded guilty to one count of conspiracy and one count of bribery, is scheduled to be sentenced on Sept. 2, 2015, in Houston.

In approximately September 2005, the National Guard Bureau entered into a contract with Document and Packaging Broker Inc. to administer the Guard Recruiting Assistance Program (G-RAP).  Through this program, a participating soldier, known as a recruiting assistant, could receive bonus payments for referring another individual to join the National Guard.  Based on certain milestones achieved by the referred soldier, a participating soldier would receive payment through direct deposit into the participating soldier’s designated bank account.  To participate in the program, recruiting assistants were required to create online accounts.

According to the evidence presented at trial and in connection with various guilty pleas, Phillips and Davis, both of whom participated in the G-RAP as recruiting assistants, conspired with Martin, a recruiter, to defraud the program by falsely claiming that they were responsible for referring potential soldiers to join the National Guard.  The trial evidence showed that Martin used his position to obtain the names and Social Security numbers of potential soldiers which he provided to recruiting assistants so that they could use the information to obtain fraudulent recruiting referral bonuses.  The evidence at trial showed that, in exchange for the information, Martin, who organized and led the scheme, personally received approximately $15,000 in payments from the recruiting assistants.  This scheme resulted in more than $30,000 in losses to the National Guard Bureau.

In a separate scheme that resulted in an additional $70,000 in losses, recruiting assistants Antoine, Millien, Moraida and Renfro admitted to paying Rambaran, a recruiter who organized and led the scheme, for the personal information of potential soldiers.  They then used that information to obtain fraudulent bonuses by falsely claiming they referred those individuals to join the National Guard.  Rambaran admitted that, in exchange for the recruit information, he personally received a total of approximately $29,000 in payments from the recruiting assistants.

In connection with his guilty plea in a scheme he organized and led, Duncan, a recruiter, admitted he personally received approximately $24,000 in payments from recruiting assistants in exchange for personal information of potential soldiers.  Those recruiting assistants – Ceja, Chambers, Hartgraves and Hawkins – admitted to paying Duncan for the information and using it to obtain fraudulent bonuses by falsely claiming they referred those individuals to join the National Guard.  This scheme resulted in another $70,000 in losses to the National Guard Bureau.

The cases were investigated by the San Antonio Fraud Resident Agency of Army Criminal Investigation Command’s Major Procurement Fraud Unit.  These cases are being prosecuted by Trial Attorneys Sean F. Mulryne, Heidi Boutros Gesch and Mark J. Cipolletti of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney John Pearson of the Southern District of Texas.

Eight Additional Individuals Charged in NFL-Related Securities Fraud Scheme Targeting the Elderly

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Eight additional individuals were indicted for participating in a securities fraud scheme that targeted the elderly.

U.S. Attorney Wifredo A. Ferrer for the Southern District of Florida, and Special Agent in Charge George L. Piro for the Federal Bureau of Investigation’s (FBI) Miami Field Office made the announcement.

David Anthony Eratostene, 53, of Miramar, Florida, Christopher J. Borgo, 41, of Boca Raton, Florida, Alan D. Messina, 54, of Sunrise, Florida, Michael T. Angeletti, 33, of Sunrise, Florida, Michael J. Calash 34, of Boca Raton, Florida, Stephen R. Reynolds, 38, of Pompano Beach, Florida, Gary X. Schultz, 55, of Miramar, Florida, Chazon Stein, 36, North Miami Beach, Florida, were charged with conspiracy to commit mail and wire fraud.

“Securities fraud schemes that target members of our community jeopardize our personal investments and security,” said U.S. Attorney Ferrer.  “Our Office, in collaboration with the FBI, strives to prevent the victimization of our elderly residents.  By combatting these invasive fraud schemes, we help to protect potential victims from losing their hard-earned money to telemarketing thieves.”

According to allegations contained in the indictment, the defendants pressured investors into purchasing stock in two companies, Thought Development Inc. (TDI) and Virgin Gaming.  TDI was a Miami Beach-based company that claimed its signature invention generated a green laser line on the football field visible in the stadium to players, fans as well as on television.  TDI represented that use of its technology would decrease the time used by officials to determine first downs, freeing up broadcast time that could then be sold to television advertisers.  The defendants raised approximately $2.4 million through the use of call rooms that targeted more than 200 investors throughout the nation, who were told that an initial public offering (IPO) in TDI was imminent and that their money would be safe and used to develop the ground-breaking technology.  Instead, the indictment alleges that the IPO was not forthcoming as promised and at least 50 percent of the offering proceeds were retained by the defendants or paid to sales agents through undisclosed, exorbitant commissions and fees.  The defendants also lured investors by misrepresenting that TDI’s technology was about to be used by the NFL.  The defendants also neglected to tell investors the TDI laser technology posed a potential risk of blindness to players on the football field.

The indictment alleges that the second fraudulently sold stock, for Virgin Gaming, a subsidiary of Virgin Media Inc., provided a fee-based service that facilitated online tournaments, fantasy sports leagues and competitive online gaming.  The Virgin Gaming scheme took one of two forms.  In some instances, sales agents told investors they would be investing in a company that had obtained the right to purchase shares of Virgin Gaming stock.  The defendants told investors those shares would be converted into shares of Virgin Gaming just prior to an IPO.  However, this was not a true representation as no such option to buy Virgin Gaming stock, in fact existed.  On other occasions, sales agents told investors that they were directly purchasing Virgin Gaming stock when in fact they were not.  The defendants’ sales agents also lied about guaranteed returns on investments and the timing of the purported IPO.  Over the course of the scheme, the defendants caused approximately 35 individuals to purchase the non-existent Virgin Gaming stock and thereby made approximately $325,000 in fraudulent sales.  Nearly all of the monies were misappropriated as undisclosed commissions and fees.

This indictment relates to a case filed a year ago, United States v. Kirschner.  All four defendants in that matter, the leader/organizers of the TDI fraud scheme discussed above, pleaded guilty and have been sentenced.

U.S. Attorney Ferrer commended the investigative efforts of the FBI.  This case is being prosecuted by Assistant U.S. Attorney Roger Cruz and Trial Attorney Kevin B. Hart from the Antitrust Division of the Department of Justice.

An indictment is only an accusation and a defendant is presumed innocent unless and until proven guilty.

A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Southern District of Florida atwww.usdoj.gov/usao/fls.  Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

Two New York Salesmen Sentenced to Prison in Business Opportunity Fraud Scheme

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Scheme Defrauded More than 330 Victims Across the Country

A federal judge in the Eastern District of New York sentenced two sales representatives to prison today for their roles in a vending machine business opportunity fraud scheme, the Department of Justice announced today.

Howard S. Strauss, 66, of Jericho, New York, was sentenced to serve 28 months in prison by U.S. District Court Judge Joan M. Azrack, who also ordered him to pay $2,291,844 in restitution to 230 victims.  Mark Benowitz, 68, of Midlothian, Virginia, was sentenced to serve 24 months in prison and ordered to pay $997,210 in restitution to 103 victims.

Both Strauss and Benowitz pleaded guilty last year to fraud charges in connection with Multivend LLC, doing business as Vendstar, a company based in Deer Park, New York, that sold vending machine business opportunities to consumers throughout the United States until 2010.  Strauss and Benowitz were Vendstar sales representatives who misrepresented the business opportunity’s likely profits, the amount of money that Vendstar’s prior customers were earning, how quickly customers were likely to recover their investment, the quality of locations that were available for the vending machines, and the level of location assistance that customers would receive from locating companies recommended by Vendstar.  Both Strauss and Benowitz also falsely told potential customers that they operated profitable candy vending machine routes themselves.

“These defendants promised the American dream, but knew that what they in fact were offering was a worthless business opportunity,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to prosecute those who seek to scam out of everyday Americans the hard-earned money in their retirement accounts and life savings.”

Twenty-two individuals have been charged with fraud in connection with Vendstar, including Vendstar managers and sales representatives, and the operators of locating companies recommended by Vendstar.  Three of those defendants have now been sentenced; 13 defendants are awaiting sentencing; and six defendants are scheduled to stand trial in September.

Principal Deputy Assistant Attorney General Mizer commended the U.S. Postal Inspection Service for its thorough investigation.  The case is being prosecuted by Trial Attorneys Patrick Jasperse and Alan Phelps of the Civil Division’s Consumer Protection Branch.