Tag: mail fraud

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

WASHINGTON—Eight Northern California real estate investors have agreed to plead guilty today for their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Charges were filed today in U.S. District Court for the Northern District of California in San Francisco against Gary Anderson of Saratoga, Calif.; Patrick Campion of San Francisco; James Doherty of Hillsborough, Calif.; Keith Goodman of San Francisco; Troy Kent of San Mateo, Calif.; Craig Lipton of San Francisco; Henry Pessah of Burlingame, Calif.; and Laith Salma of San Francisco.

According to the felony charges, the real estate investors participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in San Francisco County and San Mateo County. Doherty, Goodman and Lipton participated in the conspiracy in San Francisco, and Anderson, Campion, Kent, Pessah and Salma participated in the conspiracy in San Mateo.

“The collusion taking place at these auctions allowed the conspirators to line their pockets with funds that otherwise would have gone to lenders and, at times, financially distressed homeowners,” said Sharis Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The investigation into collusion at these foreclosure auction markets is ongoing, and the Antitrust Division will continue to pursue the perpetrators of these fraudulent schemes until they are brought to justice.”

“The FBI and the Antitrust Division are working closely together to ensure that those who engage in fraudulent bid-rigging and other anticompetitive activities at foreclosure auctions are brought to justice,” said FBI Special Agent in Charge Stephanie Douglas. “We will continue to hold individuals accountable for crimes that damage the real estate market and defraud unsuspecting victims of their right to a fair marketplace.”

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 County and San Mateo County public foreclosure auctions at noncompetitive 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 eight real estate investors conspired with others not to bid against one another at public real estate foreclosure auctions in Northern California, participating in a conspiracy for various lengths of time between November 2008 and January 2011. The real estate investors were also charged with conspiracies to use the mail to carry out a fraudulent scheme to make payoffs to obtain title to selected real estate at fraudulently suppressed prices, to receive payoffs and to divert money to co-conspirators and away from mortgage holders and others with a legal interest in these properties.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. 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 the $1 million statutory maximum.

The charges today are the latest cases 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. To date, as a result of the investigation, 18 individuals have agreed to plead guilty.

The ongoing investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is 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 http://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 Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit http://www.StopFraud.gov.

Top-Secret: Previously Unnamed Co-Conspirator Pleads Guilty in $135 Million Phony Lease Scheme

U.S. Attorney’s Office October 06, 2011
  • District of New Jersey (973) 645-2700

NEWARK, NJ—The owner of a purported medical equipment company based in New Jersey pleaded guilty today in connection with his role in a $135 million phony lease scheme, U.S. Attorney Paul J. Fishman announced.

Bruce Donner, 52, of Berkeley Heights, N.J., owner of Donner Medical Marketing Inc., a New Jersey corporation that purported to be a medical equipment vendor, admitted his role in assisting Charles Schwartz, 58, of Sparta, N.J., owner and president of Allied Health Care Services Inc., execute a $135 million phony lease scheme that caused losses of more than $80 million and victimized more than 50 financial institutions.

Donner pleaded guilty to one count of mail fraud before U.S. District Judge Susan D. Wigenton in Newark federal court. Sentencing is scheduled for Jan. 11, 2012.

According to documents filed in this case and statements made in Newark federal court:

From at least 2002 through July 2010, Schwartz requested medical equipment invoices from Donner. Donner would, in turn, provide invoices that falsely stated Donner Medical was providing medical equipment to Allied when no such medical equipment was ever provided by Donner Medical to Allied.

Schwartz, through Allied, then convinced financial institutions to pay more than $135 million by telling them the money would be used to lease valuable medical equipment. Schwartz used Donner Medical’s phony supplier invoices to convince the financial institutions to enter into leasing arrangements. The financial institutions purchased the medical equipment—which they immediately leased to Schwartz and Allied—and sent payment for the medical equipment to Donner Medical. Throughout the scheme, Donner and Schwartz undertook efforts to deceive bank examiners who sought at various times to inspect the non-existent medical equipment, which had been purchased by the financial institutions.

Donner admitted today that after receiving the money from the financial institutions, he forwarded 95 to 97 percent of the money to an entity created by Schwartz to facilitate the fraud. The remainder of the funds Donner kept for himself as a commission. Donner also admitted today that more than 50 victim financial institutions were harmed as a result of the scheme.

The mail fraud charge to which Donner pleaded guilty carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation that resulted in today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Joseph Mack and Jacob T. Elberg of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

Defense Counsel: Keith N. Biebelberg Esq., Millburn, N.J.

TOP-SECRET – Edward P. May Sentenced for Orchestrating $350 Million Ponzi Scheme

Edward P. May Sentenced for Orchestrating $350 Million Ponzi Scheme
Largest-Ever in Michigan

U.S. Attorney’s Office October 04, 2011
  • Eastern District of Michigan (313) 226-9100

Edward P. May, age 75, was sentenced today to 16 years in federal prison for orchestrating the largest Ponzi scheme in the Eastern District of Michigan history, United States Attorney Barbara L. McQuade announced. McQuade was joined in the announcement by Andrew G. Arena, Special Agent in Charge, Federal Bureau of Investigation, Detroit Field Division. May was sentenced by the Honorable Arthur J. Tarnow.

On April 29, 2011, May pleaded guilty to all 59 counts of mail fraud alleged in a federal indictment charging him with orchestrating a decade-long investment fraud scheme. Specifically, the 59-count indictment alleged, in part, the following:

In 1997, EDWARD P. MAY formed E-M Management Co. LLC, which was located in rented office space in Lake Orion, Michigan. After forming E-M Management, MAY then formed more than 150 limited liability corporations (“LLCs”). MAY told hundreds of individuals in the Detroit metropolitan area and elsewhere across the country that the LLCs acquired telecommunications equipment and then provided telecommunications services to various hotels in Nevada, New York, New Jersey, California, elsewhere in the United States, and in foreign countries. MAY induced numerous people to invest large amounts of money in the LLCs, for what proved to be ficticious investments in “contracts” or “agreements” providing telecommunications equipment and services to various hotels.

MAY also caused fraudulent “private offering memoranda,” “subscription agreements,” and “investment recaps” for the LLCs to be drafted and distributed to potential investors. The offering memoranda fraudulently stated that E-M Management Co. had entered into agreements with various hotel corporations to “provide all of the telecommunication services to the hotel properties” and to “install new equipment where needed, to purchase existing equipment where practicable and to cut over the services from present providers,” and fraudulently promised investors that the funds raised “will be used solely for the purpose of purchasing telephone, high-speed Internet, low-speed Internet, [and] DVD equipment.”

The offering memorandums guaranteed a minimum monthly income to each investment LLC ranging from $30,000 to more than $100,000 per month. MAY deceived victim investors into believing that their funds were being invested as represented, and concealed from victim investors and others the fact that these “investments” were actually being used to support a pyramid or “Ponzi” scheme. May operated the pyramid scheme by paying purported investment returns to some investors with funds actually obtained from other investors.

MAY diverted and misappropriated the funds invested in the LLCs to his own personal use and to the benefit of his company, E-M Management. MAY spent some of the funds on travel to Las Vegas and gambling. Over the course of the scheme, MAY induced over 1,200 individuals to invest more than $350,000,000 in over 250 LLCs.

MAY’s scheme resulted in a total loss of over $49 million to the individuals who invested in the fraudulent LLCs.

United States Attorney Barbara L. McQuade stated, “Complex fraud schemes like this one rob investors of their savings and erode public confidence in legitimate investments. This loss of public confidence in investment opportunities, in turn, depresses our economy. By prosecuting those who commit fraud, we hope to deter others from committing similar crimes.”

Special Agent in Charge Andrew G. Arena stated, “The public should be aware that even though the FBI continues to vigilantly pursue these types of criminal violations, we live in a ’buyer beware’ investment environment. Investors should vigorously investigate the background information of all investment vehicles, and stick to the old adage that if it seems too good to be true, it probably is.”

U.S. Attorney McQuade congratulated the hard work of the FBI for its efforts in pursuing this case. The case was prosecuted by Assistant U.S. Attorneys Sarah Resnick Cohen, Craig Weier, and Stephen Hiyama.

Colorado Couple Charged with Operating $17 Million Ponzi Scheme

U.S. Attorney’s Office September 30, 2011
  • District of Kansas (316) 269-6481
— filed under: ,

TOPEKA, KS—A Colorado couple is charged in a federal criminal complaint unsealed today with operating a $17 million Ponzi scheme that lulled investors in 13 states with claims of big potential returns on investments in diamonds and trading international notes, U.S. Attorney Barry Grissom said today. The couple has been arrested in Atlanta and will be returned to face the charges in U.S. District Court in Denver.

Prosecutors from U.S. Attorney Barry Grissom’s office have been appointed as special counsel in the case.

Richard Dalton, 65, and Marie Dalton, 60, both of Golden, Colo., are charged with one count of conspiracy to commit mail fraud, wire fraud and interstate transportation of stolen funds. The complaint alleges the couple operated a company called Universal Consulting Resources LLC that defrauded investors with claims of guaranteed investment returns of 48 to 120 percent. In fact, the company operated as a Ponzi scheme in which investor moneys were commingled and used to pay out profits to early investors to create the false appearance to new investors that the investments were performing as promised.

The indictment alleges the Daltons used investor funds to pay $936,000 for their home in Golden, Colo., as well as to purchase a $35,000 Toyota Highlander and to make a $5,000 deposit for their daughter’s wedding.

The indictment alleges that when the Daltons learned they were under investigation by the Securities Exchange Commission they discontinued making payments to investors and falsely represented to investors that they could expect payments soon. They also misled investors with false claims that the company’s European trader was switching banks, that the company was liquidating a cache of diamonds to pay investors back, that a plane carrying diamonds had been forced to land in Amsterdam because three engines had gone out and that the company had discovered it was holding 18,000 fake diamonds.

“This investigation is not over as we are committed to following the money trail,” said Sean P. Sowards, IRS Criminal Investigation Special Agent in Charge. “We will continue to pursue the evidence wherever it leads.”

If convicted, they face a maximum penalty of 20 years in federal prison and a fine up to $250,000. The FBI, IRS-Criminal Investigations, and the Securities Exchange Commission investigated. Assistant U.S. Attorney Richard Hathaway and Assistant U.S. Attorney Christine Kenney are serving as Special Attorneys to prosecute the case.

In all cases, defendants are presumed innocent until and unless proven guilty. The indictments merely contain allegations of criminal conduct.