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FraudsWatch is а site reporting on fraud and scammers on internet, in financial services and personal. Providing a daily news service publishes articles contributed by experts; is widely reported in thе latest compliance requirements, and offers very broad coverage of thе latest online theft cases, pending investigations and threats of fraud.

Charitable Fraud: Stephen E. Stockman And Jason Posey Indicted for Multi-Year Fraud Scheme

Former Texas Congressman and Associate Indicted for Multi-Year Fraud Scheme

HOUSTON – A former U.S. Congressman and one of his associates were indicted today for their roles in orchestrating a scheme to steal hundreds of thousands of dollars from charitable foundations and the individuals who ran those foundations. Some of the funds were used to illegally finance the politician’s campaigns for public office and to pay for his personal expenses and those of his associates. Acting U.S. Attorney Abe Martinez of the Southern District of Texas and Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division made the announcement along with Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office and Special Agent in Charge D. Richard Goss of IRS – Criminal Investigation (CI), Houston Field Office.

Former U.S. Representative Stephen E. Stockman, 60, of Clear Lake, and the former director of special projects in Stockman’s congressional office, Jason Posey, 46, formerly of the Houston area, were charged in a 28-count superseding indictment with mail and wire fraud, conspiracy, making false statements to the Federal Election Commission (FEC), making excessive campaign contributions and money laundering. Stockman is also charged with filing a false tax return that concealed his receipt and personal use of the fraudulent proceeds, while Posey is charged with falsifying an affidavit in order to obstruct an FEC investigation. Thomas Dodd, a former special assistant in Stockman’s congressional office, pleaded guilty to his involvement in the scheme on March 20, 2017.

According to the superseding indictment, from May 2010 to October 2014, Stockman solicited approximately $1,250,000 in donations based on false pretenses. Specifically, the indictment alleges that in 2010, Stockman diverted a significant portion of $285,000 donated to charitable causes to pay for his and Dodd’s own personal expenses and to further Stockman’s own interests. The indictment further alleges that in 2011 and 2012, Stockman and Dodd received an additional $165,000 in charitable donations, much of which Stockman used to finance his 2012 congressional campaign.

Shortly after Stockman took office in the U.S. House of Representatives in 2013, he and Dodd allegedly used the name of a nonprofit entity to solicit and receive a $350,000 charitable donation. Stockman allegedly used this donation for a variety of personal and campaign expenses, including illegal conduit campaign contributions, a covert surveillance project targeting a perceived political opponent and payments associated with Stockman’s U.S. Senate campaign in early 2014.

The superseding indictment further alleges that in connection with Stockman’s Senate campaign, Posey used a nonprofit entity to secure a $450,571 donation in order to fund a mass-mailing project attacking Stockman’s opponent. Only approximately half of the donation was spent on the mail campaign, and Posey used a portion of the unspent balance to pay for expenses associated with Stockman’s Senate campaign and to fund personal expenses, according to the charges.

The FBI and IRS-CI conducted the investigation. Assistant U.S. Attorney Melissa Annis of the Southern District of Texas and Trial Attorneys Ryan J. Ellersick and Robert J. Heberle of the Criminal Division’s Public Integrity Section are prosecuting the case.

Original PressReleases…

Illegal Towing Practices

The following are some of the more common laws that some towing companies violate. We all know that sometimes it seems there are just to many laws, but also we are glad that most of these laws exist because they are protecting us from harm. Our intent here is to educate the general public about illegal practices by some towing companies that can be harmful to the public in general. This information is not to be taken as legal advise as laws change and vary by area. Our area of expertise is southern California. The level of harm to the public can range from wrongfully towed vehicles to uninsured tow drivers and even to crimes against customers physically. At the end of this article will be some tips that can be followed to reduce the risk of exposure to these illegal tow practices.

The most common complaint heard from the public in my experience is “my car was towed without proper cause”, followed by “something was stolen from my car while it was being towed”. Other issues that come up are disputes over damage to a towed vehicle, disputes about price fairness or changes in price after the vehicle was towed. Sometimes people will be approached by a tow driver and they think he is the driver that they called, when in fact he’s not. Storage rates are another area of common dispute. Tow drivers are sometimes not properly licensed to drive the type of tow truck that they are driving. Lets explore these individual issues one at a time and see just what is going on out in the streets.

Starting with the popular issue of vehicles being towed wrongfully we have to say there is some grey area. The laws in California allow for the impounding and removal of illegally parked vehicles on both private and public property. Most of the disputes will arise out of private property impounds such as apartment complex’s, shopping centers, business centers and similar. When parking is difficult to find people get impatient and creative. By law signs are required to notify you of the possibility of impound and towing, but they aren’t required over every space. The California laws are currently not interpreted the same by all. The area of dispute arises on parking lots for the general public.

Some areas are towing vehicles with out waiting the required 1 hour period in a public lot, while others you can get away with parking illegally for 1 hour. Not all areas have the same interpretation of what a public lot is. Many impounds in private lots such as a gated apartment complex come from people thinking they can just run in for a second while parked illegally. Beware, your car can be hooked up and leaving faster than most people can drink a soda. Towing and impound fees are steep, usually starting at around $250. if you follow your car and retrieve it right away. Most apartment complexes require people to list their car plate number on their lease and even a friend you allow to use your spot can be towed. Some companies are overly aggressive and do not follow the laws for impound towing and it can be next to impossible to prove that they violated the law.

The next issue we will discuss is theft of personal property while in the towed vehicle. Any time a vehicle that is unattended by the owner, and several other people have access to it, there stands to be possibility of property theft. The more valuable the items are and the smaller they are the more likely to be stolen. Items that would be common items to disappear might be cameras, cell phones, ipod’s, lap top’s, money, CD’s, and stereo equipment. Not all tow companies have required background and drug testing to reduce the likelihood of theft. Not all tow companies are reputable companies.

Towed vehicle damage is another area consumers can be hurt. Damages to a vehicle can occur when equipment is not properly maintained. Companies that have little regard for the laws that regulate towing equipment will buy chains, cables, and hooks that are not rated as required by law because they are cheaper. Those same type of companies are apt to hire less experienced or poorly qualified drivers and may not have any training programs in place to educate drivers on safe practices.

While there is not much for options when you don’t think the price is fair, know this, it is fraud to tell someone a cost for a service and then change the cost after the consumer is obligated, without proper grounds. Any quality company is going to want your repeat business and will rely on a good reputation and will not practice this type of deceit. Note that there are legitimate reasons for changing the price such as the client failed to inform the tow company of an important fact like the car has no tires. That being said here is the some what unique situation in the towing industry. If the client doesn’t pay for the tow, the tow company can impound the car, and to get it back you would have to pay the original tow plus towing to their impound yard and storage fees. A non reputable tow company might practice quoting low pricing then try to add extras or even flat out dispute what was quoted, then threaten impounding if the client doesn’t comply.

California laws prohibit tow companies from stopping at a stranded motorist situation for the purpose of soliciting business. It is a common practice though for some companies to stop and try to solicit, and even when the motorist advises that they have a truck on the way some will try to offer a better price to get the job. Some drivers have even just not told the motorist that they are not the company that the motorist called. California law provides for penalties against tow drivers who engage in this activity. This activity puts consumers at risk because they have no way to quickly ascertain weather this is a properly licensed, and insured company or not. It is also risky from the stand point of how many tow trucks would be stopping and then pulling back out into traffic if this practice was legal. There is also a level of safety provided to the public by not allowing just any guy in a tow truck to stop and try to sell you on his service. Imagine how intimidated your wife or daughter might be if some big dirty guy stopped and really wanted to get that tow.

Storage rates and payment options as well as hours of operation of storage facilities are mostly governed by law. Of course the laws are for consumer protection but still do allow for free enterprise and the making of a profit. Most people who have their vehicles impounded would say that the rates charged are excessive, and consumers frequently feel ripped off. There is a logic to that, and it generally goes something like this ” If I called 3 or 4 companies and asked how much it would cost to tow my car 4 miles and store it 1 day, I could get a lot better price”, however that will not help get money refunded. The only way to get money refunded is if you can prove that the towing company violated the towing laws. Companies that make a practice of abusing consumers in this way are usually good at knowing what is impossible or impractical for a consumer to prove.

Now lets look at the driver of the tow truck that will come to rescue you. In California the DMV requires a special drivers license for certain types of commercial drivers. Tow companies need some drivers with DMV commercial licenses and some drivers may not need special licenses. Furthermore some police agencies or motor clubs may have special requirements that private party towing doesn’t. This creates a tempting situation to an unethical company when they are short on commercial licensed drivers or drivers with the special qualifications to do the job properly and legally, and may have a driver available who can drive the truck but is not properly licensed to do so. An unethical company will send the unqualified driver out just to get the job.

As of the writing of this article tow truck drivers in California do not need any special license or training as long as they do not tow more than one trailer and no more than 26,000 pounds total weight of all vehicles, that includes passengers and any thing else that may be in the vehicles. This means that almost every passenger car and family vehicle falls into this category. There is no legal requirement to background check or drug test tow drivers. This means companies are free to hire convicted felons, or who ever they want. Now for the good news, some police agencies and motor clubs do ask for drivers to meet some type of requirements for their tows, but enforcement is weak. Any quality tow company will drug test and background check their drivers as well as insure that the driver is well trained and properly licensed for the truck and tow job they are performing. A quality tow company will also have moral values and want their clients to be safe, thus they would not hire a person convicted of a major crime.

Now that you can see the many ways an unethical tow company can put you, your family, and the general public at risk of harm lets look at some things you can do to reduce the risk of harm.

1. Ask the phone receptionist a few questions. Do you background check all your employees and refuse to hire those convicted of major crimes? Do you do regular random drug testing on all employees? Do you require all drivers to be certified by some industry recognized training program such as CHP training or Wreckmaster before driving for you? Do you quote an accurate total price prior to doing the tow? Is your company a member of any trade associations? Does the receptionist answer your questions politely or seem aggravated by your questions. Obviously the aggravated one is the one to avoid.

2. Have you seen what this company’s trucks or employees look like? The unethical and undesirable companies will usually neglect appearance of vehicles, equipment, and employees. Another thing to make note of if you have seen the employees in action is their language, attitudes, and professionalism. These are all hints as to what type of company you are dealing with so be observant.

3. Ask the driver upon arrival and before they hook up your car what the charges will be so there is no misunderstanding of the charges. Remember once they hook up your car and there is a dispute they can impound the car if you don’t pay what they ask. Do not leave any valuables in the vehicle once you leave it.

4. When parking, always obey parking rules even on private property. When parked always hide and secure if possible any valuable personal property. Don’t take chances and park illegally even for just a minute.

5. Never accept a tow from a driver that stops to solicit, it is an illegal practice and no quality company will be out there breaking the law on purpose. Note that it is legal for a driver to stop if he is waived down, so if you are in an unsafe or dangerous place you will need to signal a driver to allow him to legally stop.

Written by David Lee Rupp, President of southern California based, 1800 Tow-Help Inc., serving Riverside and San Bernardino Counties.

Immigration Fraud: Yousif Al Mashhandani And Adil Hasan Charged With Immigration Fraud

ALEXANDRIA, Va. – Two Iraqi refugees living in Northern Virginia were arrested this morning and charged along with another individual with immigration fraud.

The defendants arrested this morning are Yousif Al Mashhandani (“Yousif”), 35, of Vienna, and Adil Hasan, 38, of Burke, who are full biological brothers. The third individual charged is Enas Ibrahim, 32, also of Burke, who is the wife of Hasan. Each is charged with attempting to obtain naturalization contrary to law. The defendants will have their initial appearance today in front of Magistrate Judge Ivan D. Davis at 2 p.m. at the federal courthouse in Alexandria.

According to the affidavit in support of the criminal complaint, on Nov. 1, 2004, a United States citizen, identified as R.H., was kidnapped in Iraq and held with other hostages for months in horrible conditions in an underground bunker. After a raid in 2005 freed the hostages, authorities detained Majid Al Mashhadani (“Majid”), who is a full biological brother of Yousif and Adil Hasan, and he admitted his complicity in the kidnapping of R.H.

According to the affidavit in support of the criminal complaint, Yousif was admitted into the United States as a refugee in 2008. In May 2013, Yousif resided in Vienna and applied for naturalization as a United States citizen. In connection with Yousif’s applications for citizenship, his fingerprints were taken. According to an FBI fingerprint specialist, analysis conducted in November 2013 determined that Yousif’s fingerprints match those found on a document at the underground bunker where forces rescued R.H. and others in Iraq in 2005.

According to the affidavit in support of the criminal complaint, Yousif, Hasan, and Ibrahim are lawful permanent residents and have applied to naturalize and become United States citizens. On various applications and forms throughout their respective immigration processes, each has provided and an extensive list of family members and information on their respective family trees; however, none ever listed any reference to Majid.

According to the affidavit in support of the criminal complaint, on March 4, 2016, FBI agents interviewed Yousif, Hasan, and Ibrahim. When FBI agents asked Yousif why he failed to include reference to Majid on the family tree form, Yousif said he omitted reference to Majid because, when he was a refugee, he was told by others applying for refugee status that he would not be allowed into the United States if any immediate family members had a criminal background. Hasan admitted to FBI agents that Majid was his brother, and Hasan and Ibrahim each admitted they discussed not including Majid’s name on their applications for refugee status because their connection to Majid might delay their ability to gain such status.

According to the affidavit in support of the criminal complaint, to justify his application for refugee status, Yousif reported that in 2006, while working as an anti-corruption investigator for the Iraqi Commission on Public Integrity in Iraq, he started receiving threats from a Shiite militia known as the “Al-Mahdi Militia,” in order to coerce Yousif to drop a particular corruption investigation. Yousif said that in May 2006 Adil was kidnapped by the Al-Mahdi Militia, and only released after Yousif arranged to drop the investigation in question and helped pay a large ransom. Yousif said that after Adil was released, he reopened the corruption investigation, only to flee to Jordon in October 2006 after his parents’ house was burned down.

According to the affidavit in support of the criminal complaint, to justify his application for refugee status, Hasan provided sworn testimony that, in 2006, he had been kidnapped and tortured by members of the Al-Mahdi Army and held for nearly a month. Hasan said he was released upon the payment of a ransom of $20,000. In an interview by FBI agents in April 2016, Hasan said he was threatened in Iraq on two occasions, but made no mention of being kidnapped, held hostage, and tortured for nearly a month. In a subsequent interview in October 2016, FBI agents confronted Hasan about the discrepancy in his stories and Hasan admitted to making false statements and creating his persecution story.

Each defendant faces a maximum penalty of 10 years in prison if convicted. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Dana J. Boente, Acting Deputy Attorney General and U.S. Attorney for the Eastern District of Virginia; Andrew W. Vale, Assistant Director in Charge of the FBI’s Washington Field Office; Patrick J. Lechleitner, Special Agent in Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Washington, D.C., made the announcement. The FBI’s Joint Terrorism Task Force, which includes ICE/HSI and U.S. Citizenship and Immigration Services, investigated the case. Assistant U.S. Attorneys Gordon D. Kromberg and Collen E. Garcia are prosecuting the case.

 

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information is located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:17-mj-143.

A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

Original PressReleases…

Cyber Crime: Ramon Batista Sentenced For a Sophisticated Global Cellphone Fraud Scheme

Owner of Florida Telecommunications Company and His Co-Conspirator Sentenced To Prison for Involvement in International Cellphone Fraud Scheme

A federal court in West Palm Beach, Florida, today sentenced the owner and operator of a Florida-based telecommunications company to 75 months in prison and his co-conspirator, a resident of Bronx, New York to 36 months in prison in connection with a sophisticated global cellphone fraud scheme that involved compromising cell phone customers’ accounts and “cloning” their phones to make fraudulent international calls.

Acting U.S. Attorney Benjamin G. Greenberg of the Southern District of Florida, Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement.

Ramon Batista, 50, the owner and operator of Arymyx Inc., earlier pleaded guilty before Senior U.S. District Judge Daniel T.K. Hurley in the Southern District of Florida to one count of conspiracy to commit wire fraud; access device fraud; the use, production or possession of modified telecommunications instruments; and the use or possession of hardware or software configured to obtain telecommunications services, as well as one count of wire fraud and one count of aggravated identity theft. Batista’s co-conspirator, Farintong Calderon, 38, pleaded guilty to the same count of conspiracy.

According to the plea agreements, Batista, Calderon and their co-conspirators participated in a scheme to steal access to and fraudulently open new cellphone accounts using the personal information of individuals around the United States. Batista and others also operated “call sites” in South Florida and elsewhere, where they would receive telecommunications identifying information associated with customers’ accounts from Calderon and additional co-conspirators, and use that data, as well as other software and hardware, to reprogram cell phones that they controlled. Batista and other co-conspirators would then transmit thousands of international calls over the internet to the call sites, where Batista and others would route them through the re-programmed cell phones to Cuba, Jamaica, the Dominican Republic and other countries with high calling rates. The calls were billed to the customers’ compromised accounts.

Batista admitted that his role in the scheme included selling fraudulent telecommunications services through Arymyx; acting as a “call site operator” which involved maintaining and re-programming cellphones through which he routed phone calls as part of the fraud scheme; and using and providing other co-conspirators with stolen or compromised telecommunications identifying information that was then employed to reprogram cell phones. Moreover, Batista admitted that he sent or received 1,132 “lines,” that is, combinations of telecommunications identifying numbers for specific devices or accounts associated with U.S. cellphone customers and that the fraudulent use of these “lines” caused almost $800,000 in losses to Sprint and Verizon.

In addition, Calderon admitted that he was a “line supplier” based in New York City, who provided stolen or compromised telecommunications identifying information to Batista and other co-conspirators in Florida and elsewhere. Among other things, Calderon admitted that he sent or received about 1,408 “lines” and was personally responsible for more than $250,000 in losses resulting from the scheme.

Batista and Calderon are the third and fourth defendants to be sentenced in the case by Senior Judge Hurley. Edwin Fana was sentenced on Dec. 22, 2016, to 48 months in prison and Jose Santana was sentenced on Jan. 4, 2017, to 52 months in prison.

The FBI investigated the case, dubbed Operation Toll-Free, which is part of the Bureau’s ongoing effort to combat large-scale telecommunications fraud. Assistant U.S. Attorney Jared M. Strauss of the Southern District of Florida and Senior Counsel Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section prosecuted the case.

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.

Original PressReleases…

Financial Fraud: Joshua Knaup – Former Fedex Driver – Sentenced For Stealing Over Half a Million Dollars

Former Fedex Driver Who Set up Fake Hedge Fund Sentenced to 33 Months

Assistant U.S. Attorney Andrew J. Galvin (619) 546-9721

NEWS RELEASE SUMMARY – March 27, 2017

SAN DIEGO – Joshua Knaup, the founder and chief investment officer of EquityPro Capital, was sentenced Friday to 33 months in prison and ordered to pay $556,629 in restitution for stealing over half a million dollars from local investors.

In addressing Knaup, U.S. District Judge Cathy Ann Bencivengo said, “You didn’t steal from a stranger, you stole as a friend, and in this court’s opinion that’s even worse. That’s a theft that goes right to the heart and soul and stays with the victim for a very long time.” Knaup was remanded into custody at the conclusion of the hearing.

After losing his job as a FedEx driver, Knaup opened up EquityPro Capital, an investment management firm based in downtown San Diego. Near the end of 2013, Knaup falsely claimed to have established a new hedge fund and began soliciting investors. Knaup gave potential investors a prospectus that provided detailed information about his purported hedge fund, which Knaup called “The F2 Fund.” According to the prospectus, The F2 Fund derived its name “from a passage in the Bible about giving of the ‘First Fruits’ of your income.” In order to attract investors, Knaup guaranteed that investors would receive a certain return on their investment and falsely claimed to have invested his own money in the hedge fund.

According to court documents, Knaup conned victims into giving him hundreds of thousands of dollars. Knaup ingratiated himself with Lois and Henry Mathews, who live in Bankers Hill, while attending their 45th wedding anniversary celebration. Knaup promised to help Ms. Mathews retire and claimed that her $240,000 investment would be safe. Instead, Ms. Mathews, a small-business owner, lost it all. As she wrote to the court, “I am 72 years old and work very hard in a very physical and stressful business and I will have to continue to work this hard for the rest of my life because of what Josh [Knaup] stole from us.”

Knaup met another victim, Lewis Barnum from Coronado, at a Rotary Club meeting. Knaup boasted about his success in the stock market and promised a substantial return. Barnum ultimately lost over $130,000 to Knaup. Yet another victim met Knaup on the side of a freeway while changing a tire. Knaup talked a lot about his investment company, and the victim, a Border Patrol agent, decided to invest $10,000. When the victim told he was about to have a child and needed his money, Knaup wrote him a $10,000 check that bounced.

With the thousands of dollars he stole from investors, Knaup rented prime office space in a building near Petco Park. Inside the office, Knaup created a wall using 30 flat screen televisions that displayed stock trading information—a fact that duped investors would later mention as an apparent sign of the business’ legitimacy. Knaup even threw a party for the investors at the Hotel Indigo with sushi, an open bar and gift bags.

Despite these outward indications of success, The F2 Fund did not exist. Knaup had not even opened a brokerage account for the investors’ funds. Investors ultimately poured over half a million dollars into the non-existent hedge fund. Knaup did not invest a single dollar of investors’ funds, and instead used the money for personal and business purchases. In the fall of 2014, Knaup’s business began to unravel as investors realized that Knaup had not invested their money. Knaup fled to Mexico shortly thereafter, without ever repaying the victims he had defrauded.

“Mr. Knaup perpetrated a scheme weaved with facades and lies to prey on trusting, hard-working people intending to make legitimate investments,” said Special Agent in Charge Eric S. Birnbaum. “Today’s sentence will prevent Mr. Knaup from victimizing investors for a long while and serve as a reminder that the FBI will continue to protect the American public by pursuing fraudsters and bringing them to justice.”

DEFENDANT:                                 Case Number 16-CR-560-CAB

Joshua Knaup                                    Age: 41 Santa Rosa, CA

SUMMARY OF CHARGES

 

Wire Fraud – Title 18, U.S.C., Section 1343

Maximum penalty: 20 years’ imprisonment and $250,000 fine

AGENCY

Federal Bureau of Investigation

Original PressReleases…

Stopping Identity Theft Against Seniors!

The Federal Trade Commission has reported identity theft as the top consumer complaint, affecting millions of Americans each year. Seniors are particularly vulnerable, and identity theft affecting seniors rose 200%. Seniors are appealing targets because they generally have higher credit lines, home equity, and more savings than young people. Seniors are also easy targets for e-mail fraud, and charity fraud. Internet scams will often instruct a senior to access their bank account online in order to “correct an error”. Most of the time, seniors will be asked to click on a link inside the e-mail, and they will be taken to a site that looks like their bank’s or credit card’s own site. They will be asked for pin numbers, account numbers and personal information. After that, the identity thief gains access to their accounts, open new credit cards, and steal funds.

Never release this type of information over the internet, unless you are absolutely sure that you are on the correct website. The best way to be sure is to log into a website directly, or call your bank’s customer service department. Most banks and credit cards have a 24-hour toll-free number for customer service and identity theft victims. If you suspect identity theft, immediately contact your bank and credit cards companies. Cancel everything-if you are wrong, then you may experience a little inconvenience while you wait for your new credit cards to arrive. If you are right, and identity theft has occurred, you can save yourself thousands of dollars and lots of headaches if you act quickly.

Seniors are instructed to carry Medicare cards at all times. Their Medicare cards, in turn, have social security numbers printed plainly on the front. If possible, always leave social security cards and Medicare cards at home. If you are going to a new doctor, take it with you, and then return it to a safe place when you come home.

If a business requests your social security number without a legitimate reason, refuse to give it. Health care providers, the social security administration, and the IRS are a few of the organizations that have a legitimate reason for requesting your social security number. Small businesses, such as your veterinarian, handyman, or grocery store clerk should not ask for your social security number.

5 Easy Tips to Help Protect Your Identity

1. Print checks with as little information as possible. Use only your first initial, last name, and address. If you have a business address, use it in lieu of your home address. That way, if your checks are ever stolen, your home address is protected. This is especially important for female seniors, who may live alone. Do not print your phone number or social security number on your checks.

2. Get a copy of your credit report every year. It’s free, and if you find errors on your report, you can continue to get free reports until the errors are corrected. All three credit reporting agencies are required to give you a free report if you have been denied credit, or you suspect fraud on your account. To get a free copy of your report, go to http://www.annualcreditreport.com. You can also request your credit report by phone. Call 1-877-322-8228 to request your credit reports by phone. Your reports will be mailed to you.

You can contact all three credit reporting agencies directly. The contact numbers for the three credit reporting agencies are: Equifax (800) 525-6285 Experian (888) 397-3742 Trans Union (800) 680-7289)

3. Protect your mail. Do not leave mail in your box overnight. Get a locking mailbox from your local hardware store. They are relatively expensive, and well worth the investment. Deposit mail in US post offices, or US mailboxes. Do not leave mail out for your postman to pick up, especially if your mail contains personal checks!

4. Shred all important documents. Use a paper shredder to destroy all important financial documents. Identity thieves often use trash bins to “troll” for personal information. This technique is called “dumpster diving”, and is one of the most common methods that thieves use to steal financial information.

5. Never give personal information over the phone unless you initiated the phone call. A common scam is for a thief to call you, and claim to be calling from your doctor’s office. They ask to “confirm” your insurance information, and social security number, which most people supply without thinking. Don’t become a victim of this scam! Call your doctor’s office directly, and ask them if they require the information. If the call was fraudulent, contact your insurer, and the police.

If you are still a victim of identity theft, don’t panic. Go to your local police station, and file a police report. Your bank and credit cards cannot make you legally responsible for crimes committed in your name by an identity thief. Contact the credit reporting agencies, and place a fraud alert on your account. If creditors begin calling, tell them that you are the victim of identity theft, and that you request to be contacted in writing. That way, you can respond with a copy of the police report and a letter. DO NOT PAY CREDITORS FOR FRAUDULENT CHARGES! Many collection agencies purposely intimidate and bully identity theft victims. This is sad, but true. After consulting multiple identity theft victims, I am constantly shocked by how many are also victims of creditor abuse. If you become a victim of creditor harassment, report the credit card company or creditor to the Federal Trade Commission.

The address to report creditor abuse is Federal Trade Commission Bureau of Consumer Protection 55 East Monroe Street, #1437 Chicago, IL 60603 312-353-4423

Financial Fraud: Dean Volkes And Donna Fallon Convicted on Charges of Mail Fraud, Wire Fraud, Theft of Government Property And Money Laundering Conspiracy

CEO, CFO, and Company Convicted of a $180 Million Scheme to Defraud, Launder Money, and Obstruct Justice

PHILADELPHIA – Dean Volkes, 53, and Donna Fallon, 52, of Long Island, NY, and Devos Ltd., doing business as Guaranteed Returns, located on Long Island, were convicted Wednesday on charges of mail fraud, wire fraud, theft of government property, money laundering conspiracy, obstruction of justice, and false statements, announced Acting United States Attorney Louis Lappen. Volkes and Fallon face substantial sentences of incarceration, as well as a three-year period of supervised release. All three defendants face a possible fine and mandatory payment of full restitution. For Volkes and Guaranteed Returns, restitution is anticipated to be approximate $180 million. Additionally, the jury today ordered defendant Dean Volkes to forfeit bank accounts totaling $127 million.

Volkes was the President, Chief Executive Officer, and sole owner of Guaranteed Returns, a reverse pharmaceutical distributor located in Holbrook, New York. Fallon, who is Volkes’ sister, was the company’s Chief Financial Officer. As a reverse distributor, Guaranteed Returns managed the returns of pharmaceutical products for healthcare providers, including numerous hospitals, pharmacies, and long-term care facilities, as well as Department of Defense facilities. Pharmaceutical manufacturers often allow expired drugs to be returned for a refund. Guaranteed Returns handled this process for healthcare provider clients in exchange for a fee based on a percentage of the return value.

The evidence at trial proved that from approximately 1999 through 2014, Guaranteed Returns promised its clients that it would hold their “indate” (not yet expired) drug products until they expired, and then return them on the clients’ behalf, in exchange for a fee. Instead, Guaranteed Returns, at CEO Volkes’ direction, stole indated drug products that it received from its clients, returned the drugs to manufacturers, and kept the refund money. Volkes created a system in which he classified clients as either “managed” or “unmanaged.” The company returned the indated product that it received from all of its clients. For customers that Volkes designated “unmanaged,” however, Guaranteed Returns kept the full value of the returned product for itself. The evidence demonstrated that through this fraud, Volkes and Guaranteed Returns stole more than $180 million from over 13,000 clients, including more than $20 million from numerous medical treatment facilities operated by the U.S. Department of Defense and other government agencies.

The evidence also showed that Volkes, Fallon, and Guaranteed Returns stole clients’ refund money by diverting a percentage of the refunds into internal company accounts. In fall 2010, Volkes caused the company’s IT staff to write a computer program that allowed Guaranteed Returns to skim a portion of clients’ refund money from both expired and indated products through a computerized accounting adjustment. The CFO, Donna Fallon, then implemented this program over a dozen times, resulting in the theft of approximately $500,000 in just five months.

The jury also found that Volkes, Fallon, and Guaranteed Returns had conspired to launder the proceeds of the fraud. Specifically, the evidence showed that when the defendants returned drugs to the respective manufacturers for refunds, they intentionally combined drugs that had been stolen with drugs that had not been stolen. Consequently, as the defendants knew and intended, the payments that the manufacturers made to the wholesalers would comprise commingled funds – i.e., refunds for drugs that the defendants had stolen from clients, which refunds the defendants intended to keep and did keep for themselves, were commingled with refunds for drugs that were not stolen and that would be forwarded to clients as the defendants were required to do. Afterward, the defendants transferred millions of dollars in commingled funds through the company’s accounts to accounts controlled by Volkes.

Finally, the evidence at trial showed that the defendants obstructed justice in connection with a grand jury investigation. As part of an unrelated investigation, a grand jury subpoena had been served on Guaranteed Returns, requiring the production of various records. In March 2010, Volkes met with his IT department and instructed them to delete data called for by the subpoena and then to obtain a wiping program to ensure that deleted data could not be forensically recovered, which they did. Volkes then directed the head of the company’s IT department to falsely inform federal investigators that this deletion was part of a routine data purge, which he also did. In the same timeframe, March 2010, Fallon concealed from the investigators that in January 2010 she had received the computer hard drives of two former employees whose emails and documents were covered by the subpoena. The investigators discovered Fallon’s concealment and false statements when the hard drives were found locked in a cabinet in Fallon’s office during a judicially-authorized search of the company’s office in April 2011, during which the Federal Bureau of Investigation and Defense Criminal Investigative Service seized almost 30 servers, over 20 computers, and hundreds of boxes of documents.

“The defendants and their company betrayed the trust of their numerous clients through a complex fraud scheme that cheated these victims of $180 million,” said Lappen. “The verdict in this case, which is the culmination of years of work, makes clear that this office and its many law enforcement partners will continue to devote substantial resource to prosecute large-scale health care fraud and hold these dishonest businesses and their officers accountable.”

“This long-running scheme appears fueled by sheer greed,” said Michael Harpster, special agent in charge of the FBI’s Philadelphia Division. “The defendants’ boldness is really something to behold: doing business under the company name ‘Guaranteed Returns,’ while merrily pocketing refunds due to clients – among them, the U.S. government.”

The case was investigated by the Defense Criminal Investigative Service and the Philadelphia office of the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorneys Nancy Rue and Patrick J. Murray.

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Financial Fraud: Casey Padula Pleaded Guilty to Commit Tax and Bank Fraud

Florida Businessman Pleads Guilty To Conspiracy To Commit Tax And Bank Fraud

Concealed Approximately $2.5 Million in Secret Belize Accounts

A Florida businessman pleaded guilty today in the U.S. District Court for the Middle District of Florida to conspiracy to commit tax and bank fraud, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

According to documents filed with the court, Casey Padula, 48, of Port Charlotte, was the sole shareholder of Demandblox Inc. (Demandblox), a marketing and information technology business. Padula conspired with others to move funds from Demandblox to offshore accounts in Belize and disguised them as business expenses in Demandblox’s corporate records. Padula created two offshore companies in Belize: Intellectual Property Partners Inc. (IPPI) and Latin American Labor Outsourcing Inc. (LALO). He opened and controlled bank accounts in the names of these entities at Heritage International Bank & Trust Limited (Heritage Bank), a financial institution located in Belize. From 2012 through 2013, Padula caused periodic payments to be sent from Demandblox to his accounts at Heritage Bank and deposited approximately $2,490,688. Padula used the funds to pay for personal expenses and purchase significant personal assets. However, he falsely recorded these payments in Demandblox’s corporate books as intellectual property rights or royalty fees and deducted them as business expenses on Demandblox’s 2012 and 2013 corporate tax returns causing a tax loss of more than $728,000.

Padula also conspired with investment advisors Joshua VanDyk and Eric St-Cyr at Clover Asset Management (CAM), a Cayman Islands investment firm, to open and fund an investment account that he would control, but that would not be in his name. Heritage Bank had an account at CAM in its name and its clients could get a subaccount through Heritage Bank at CAM, which would not be in the client’s name but rather would be a numbered account. Padula transferred $1,000,080 from the IPPI bank account at Heritage Bank in Belize to CAM to fund a numbered account.

In addition to the tax fraud, Padula also conspired with others to commit bank fraud. Padula had a mortgage on his Port Charlotte, Florida home of approximately $1.5 million with Bank of America (BoA). In 2012, he sent a letter to the bank stating that he could no longer repay his loan. At the same time, Padula provided Robert Robinson, III, 43, who acted as a nominee buyer, with more than $625,000 from his IPPI bank account in Belize to fund a short sale of Padula’s home. Padula and Robinson signed a contract, which falsely represented that the property was sold through an “arms-length transaction,” and agreed that Padula would not be permitted to remain in the property after the sale. Padula in fact never moved from his home and less than two months after the closing, Robinson conveyed it back to Padula by transferring ownership to one of Padula’s Belizean entities for $1. Robinson also pleaded guilty today to signing a false Form HUD-1 in connection with his role in the scheme.

“Casey Padula employed secret offshore bank accounts and shell companies to hide millions and evade U.S. taxes,” said Acting Deputy Assistant Attorney General Goldberg. “As his guilty plea today demonstrates, there are no safe havens any more, whether in Belize, Switzerland or elsewhere around the world, for U.S. taxpayers intent on not paying their fair share of taxes.”

“Today’s plea is the result of another exercise in following the money and it sends a clear message to those who believe they can avoid taxes by hiding their money offshore,” said Chief Richard Weber of IRS Criminal Investigation (CI). “Together with our law enforcement partners, IRS-CI will continue to unravel complex financial transactions and hold those accountable who break the law. IRS-CI special agents will use their financial investigative expertise to ensure taxpayers who violate the law will be brought to justice which is necessary to foster voluntary compliance of our tax laws.”

Padula faces a statutory maximum sentence of five years in prison, a term of supervised release and monetary penalties. As part of his plea agreement, Padula agreed to pay restitution in the amount of $728,609 to the IRS and to BoA in the amount of $728,609. Robinson faces a statutory maximum sentence of one year in prison, a term of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg thanked special agents of IRS-CI, who conducted the investigation, and Assistant Chiefs Todd Ellinwood and Caryn Finley of the Tax Division, who are prosecuting the case. Acting Deputy Assistant Attorney General Goldberg also thanked the U.S. Attorney’s Office of the Middle District of Florida for its assistance.

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HealthCare Fraud: Gottfried Kellermann Sentenced for Intentionally Violating Clinical Laboratory Improvement Amendments Regulations

Osceola Nutritional Supplement Provider & CEO Sentenced

Madison, Wis. – Jeffrey M. Anderson, Acting United States Attorney for the Western District of Wisconsin, announced that Gottfried Kellermann, 76, Osceola, Wis., was sentenced today by U.S. District Judge James D. Peterson to a six-month period of home confinement, a $50,000 fine, and five years of probation, for intentionally violating Clinical Laboratory Improvement Amendments regulations. Kellerman’s co-defendant, NeuroScience, Inc., was sentenced to a five-year period of probation and a $140,000 fine for conspiring to defraud the United States. The defendants pleaded guilty to these charges on October 14, 2016.

Kellermann is the founder and CEO of NeuroScience and its sister company Pharmasan Labs. Pharmasan Labs conducted neurotransmitter testing, and NeuroScience recommended nutritional supplements to Pharmasan Labs patients based on the results of the testing. Pharmasan Labs’ neurotransmitter testing did not produce consistent results for patients, so Kellermann manipulated the results to normalize them, unbeknownst to federal regulators and the patients. Patients were told that their results were high or low based on an “optimal range” created by Kellerman, and this range identified 40% of patients as abnormal. NeuroScience recommended nutritional products to the patients identified as abnormal. The optimal range was not valid and was significantly narrower than the range required by federal regulators. Kellermann and his companies hid the range and that fact that it was not valid from federal regulators and from their patients.

The court admonished the defendants for their conduct. The court found that Kellermann was fundamentally unrepentant and that he had not embraced the fact that he and his companies engaged in conduct that was fundamentally wrong. Kellermann’s allocution, according to the court, showed that he was a self-deluded charlatan, and that the public needed to be protected from any potential future crimes of Kellermann and his companies. Lastly, the court commented that the root cause of NeuroScience’s conviction was Gottfried Kellermann’s actions to dissemble, lie, and conceal the un-validated testing practices. 

The court ordered several conditions of probation to protect the public and deter future conduct. Kellerman is prohibited from working at both Pharmasan and NeuroScience for five years. NeuroScience is required to notify its patients and its own employees of the conviction and the basis for the conviction. NeuroScience is also required to comply with the terms of a Corporate Integrity Agreement imposed by the U.S. Department of Health and Human Services, and is required to report periodically on its efforts to implement internal compliance controls mandated by the agreement. NeuroScience is additionally prohibited from employing Kellermann during the term of probation.

These charges were the result of an investigation conducted by the U.S. Department of Health and Human Services’ Office of Inspector General; IRS Criminal Investigation; Federal Bureau of Investigation; and the Department of Defense Office of the Inspector General – Defense Criminal Investigative Service. The prosecution of this case was handled by Assistant U.S. Attorneys Antonio M. Trillo, Daniel Hugo Fruchter, and Peter M. Jarosz.

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Financial Fraud: CHRISTOPHER CERVINO and SHEIK F. KHAN Found Guilty in a Securities Fraud Scheme Involving a Publicly Traded Over-The-Counter Company

Investment Adviser And Broker Found Guilty In Manhattan Federal Court Of Securities Fraud, Wire Fraud, Conspiracy And Aggravated Identity Theft Charges

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that CHRISTOPHER CERVINO, a/k/a “Smitty,” and SHEIK F. KHAN, a/k/a “Abida Khan,” were found guilty yesterday afternoon in Manhattan federal court after a three-week jury trial before U.S. District Judge Andrew L. Carter, Jr. for their roles in a securities fraud scheme involving a publicly traded over-the-counter company called VGTel, Inc. (“VGTL”).

Acting U.S. Attorney Joon H. Kim said:  “Yesterday, a unanimous jury found Sheik Khan, an investment adviser, and Christopher Cervino, a registered broker, guilty of securities fraud relating to a company called VGTel.  The stock fraud scheme Khan and Cervino participated in defrauded 100 investors of more than $15 million, including nearly $5 million from Khan’s clients.  For their roles in the scheme, Khan and Cervino now stand convicted of federal crimes.”

According to the Indictment, other filings in Manhattan federal court, and the evidence presented at trial:

The VGTL scheme was conceived and led by Edward Durante, a recidivist securities fraud defendant who pleaded guilty in August 2016 to various crimes related to VGTL, including conspiracy, securities fraud, money laundering and perjury.  The defendants’ efforts to artificially inflate the market for VGTL increased the stock price from approximately $.25 per share in April 2012 to as much as $1.90, and dramatically inflated the trading volume, which increased the defendants’ abilities to raise private investments in VGTL.  To compensate CERVINO for his efforts to control and manipulate the market in VGTL, Durante made at least two cash payments to CERVINO totaling $35,000, in addition to the substantial commissions Cervino received for executing trades in VGTL.  For her part, KHAN received more than $400,000 from Durante, including more than $100,000 in payments for liquidating her clients’ investments in safe annuities so that the money could then be invested into VGTL.  KHAN’s clients lost virtually the entirety of their investments in VGTL.


CERVINO, 44, of Franklin Lakes, New Jersey, and KHAN, 50, of Las Vegas, Nevada, were each convicted of one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; one count of securities fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  In addition to these charges, KHAN was also convicted of investment adviser fraud, which carries a maximum sentence of five years in prison, and aggravated identity theft crimes, which carries a mandatory sentence of two years in prison.

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

Mr. Kim praised the work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service, and thanked the Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Andrea M. Griswold, Rebecca Mermelstein, and Daniel Goldman are in charge of the prosecution.

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White-Collar Crime: Helen Renee Ballard and Robert S. Ballard Plead Guilty In Nepotism Scheme

Former GSA Official and Husband Plead Guilty In Nepotism Scheme

ALEXANDRIA, Va. – A former senior official with the General Services Administration and her husband pleaded guilty today to engaging in a nepotism scheme in which they conspired to fraudulently obtain employment from the U.S. government and private federal contractors.

According to the statement of facts filed with their plea agreements, Helen Renee Ballard, 51, and Robert S. Ballard, 56, both of Brandywine, Maryland, pleaded guilty to conspiracy to make false statements to the United States.

Helen Renee Ballard (aka Renee Ballard) was the Director of the Central Office Contracting Division of the U.S. General Services Administration (GSA) from May 2006 to May 2011 and worked for GSA until 2016. From 2010 through July 2014, Renee Ballard and her husband, Robert S. Ballard (aka Steve Ballard), engaged in a scheme to enrich themselves by obtaining employment with federal contractors and the U.S. government through false and misleading statements concerning Steve Ballard’s relation, education, and qualifications. As part of the more than $200,000 scheme, Renee and Steve Ballard fraudulently induced a federal contractor located in Arlington to hire Steve Ballard. The Arlington based contractor then placed Steve Ballard on a federal contract awarded by GSA and supervised by Renee Ballard. Later, Renee Ballard attempted to hire Steve Ballard for a position within GSA under her supervision.

According to the statement of facts, Renee and Steve Ballard caused over 139 false employment applications to be submitted to federal agencies, including the FBI, Office of the Director of National Intelligence, U.S. State Department, U.S. Transportation and Security Administration, Department of Veterans Affairs, Department of Education, Federal Communications Commission, Federal Emergency Management Agency, Department of Labor, U.S. Office of Personnel Management, and the Internal Revenue Service. These applications falsely misrepresented Steve Ballard’s education and qualifications, including that he had earned or taken classes toward a master’s degree and was certified in government contracting at Levels I, II, and III. In order to corroborate these false representations, Renee and Steve Ballard obtained and submitted fake certification documents. In addition to these fraudulent applications, the Ballards sent Steve Ballard’s false resume to the Executive Office of the President in an attempt to obtain employment there. Subsequently, Steve Ballard submitted false applications to at least six different private contractors who worked, at times on-site, with the federal agencies, including GSA and U.S. Customs and Border Protection.

The Ballards each face a maximum penalty of five years in prison sentenced on July 28. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; and Carol Fortine Ochoa, Inspector General, GSA, made the announcement after the plea was accepted by Senior U.S. District Judge Claude M. Hilton. Assistant U.S. Attorneys Uzo Asonye and Katherine Wong are prosecuting the case.

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Financial Fraud: EDWARD S. ADAMS Charged With Orchestrating an Elaborate Fraud Scheme to Embezzle Millions of Dollars of Investors

University Law Professor Charged In Multi-Million Dollar Corporate Fraud Scheme

Acting United States Attorney Gregory G. Brooker today announced a federal indictment charging EDWARD S. ADAMS, an attorney, and university law professor, with orchestrating an elaborate fraud scheme to embezzle millions of dollars of investors’ funds. ADAMS is expected to make his initial appearance in U.S. District Court in Minneapolis later this week.

“The defendant’s brazen theft of millions of dollars of investor’s funds over the course of several years is compounded by the fact that he holds positions of public trust as an attorney and law school faculty member,” said FBI Special Agent in Charge for the Minneapolis Division Richard T. Thornton. “The FBI remains committed to working with our law enforcement partners to detect corporate crime in all its forms and bring those responsible to justice.”

“The U.S. Postal Inspection Service vigorously pursues prosecution of criminals who callously defraud our citizens using the U.S. Mail. Postal Inspectors are committed to ensuring public confidence in the U.S. Mail. Fraud of this magnitude is not a victimless crime. Honest, hardworking Americans pay the price when fraudsters wrongfully steal their hard-earned money.” said Postal Inspector in Charge, Craig Goldberg.

“IRS Criminal Investigation Special Agents are proud to work with our law enforcement partners and the U.S. Attorney’s Office to investigate and prosecute individuals, such as Edward Adams, who attempt to enrich themselves by fraudulent means,” stated Shea Jones, Special Agent in Charge of the St. Paul Field Office. “IRS Criminal Investigation is committed to using our financial investigative expertise to stop investment fraud schemes and other types of white-collar crime.

According to the indictment and documents filed in court, Apollo Diamond, Inc. (“Apollo Diamond”) and Apollo Diamond Gemstone Corporation (“Apollo Gemstone”) (collectively, “Apollo”) was a privately held company that produced lab-grown diamonds. ADAMS, a Minneapolis lawyer, and law professor became involved with Apollo through familial relations and held various managerial titles with the company such as CFO, Secretary, EVP, and General Counsel.

According to the indictment, in 2003, at the direction of ADAMS, Apollo retained ADAMS’ financial services firm, Equity Securities, Inc., to provide investment banking services and to raise money for Apollo. Equity Securities raised more than $25 million for Apollo, for which Equity Securities received approximately $4 million in commission. Following the fundraising efforts, ADAMS continued to handle the ongoing financial matters for Apollo with minimal oversight from the Board of Directors.

According to the indictment, from 2006 through 2009, ADAMS opened multiple bank accounts with various titles including “RL Investments,” “DL Investments,” “ADR Investments,” “Apollo Diamond, Inc.,” and “Apollo Diamond Gemstone Corporation,” none of which were authorized by Apollo or its Board of Directors. ADAMS was the sole signatory and the only person with access to the accounts and the account statements, which were mailed to his personal addresses.

According to the indictment, ADAMS told investors that they could purchase shares in Apollo by making their checks payable to the accounts he controlled. He promised that their money would be used for Apollo’s operations, including working capital, funding additional diamond growing equipment, and research and development, when, in reality, ADAMS was embezzling the money. For example, ADAMS deposited approximately $2,400,000 of investors’ funds into the RL Investments account and then surreptitiously diverted more than $1,200,000 for his own personal use, an additional $101,500 to his law firm’s bank account, and distributed the remainder of the funds to various individuals as determined by ADAMS.

According to the indictment, in 2010, due in part to ADAMS’ embezzlement, Apollo could no longer meet its financial obligations and was on the brink of insolvency. To prevent his theft from being uncovered through bankruptcy litigation, ADAMS devised a scheme to appease shareholders by convincing them to convert their worthless Apollo stock into stock in a new company, which ADAMS secretly controlled. In March 2011, ADAMS and his law partner (identified in the indictment as “M.M.”) created a privately held company called Scio Diamond Technology Corporation (“Private Scio”), of which ADAMS and his partner were the sole shareholders and board members. ADAMS and his partner then notified shareholders that Private Scio would acquire the assets of Apollo for approximately $2,000,000 and that shareholders, without expending any additional money, would receive the same number of shares in the new entity. However, Private Scio was not yet capitalized and did not have the funds to complete the asset purchase. To further this scheme, ADAMS orchestrated a “reverse merger” transaction between Private Scio and Krossbow Holding Corporation, a publicly traded shell company, which resulted in a new publicly traded company, also called Scio Diamond Technology Corporation (“Public Scio”).

According to the indictment, ADAMS used Public Scio to raise the $2,000,000 necessary to complete the Apollo asset purchase, leading the former Apollo investors to believe that their investments were safe and that they now held shares in a publicly traded, operational company. However, ADAMS used Public Scio’s acquisition of Apollo as yet another opportunity for personal profit and funneled the majority of the $2,000,000 into bank accounts controlled by ADAMS. In total, from 2006 through 2013, ADAMS stole from investors more than $4.38 million and paid to his own law firm more than $2.54 million.

This case is the result of an investigation conducted by the FBI, United States Postal Inspection Service, and the Criminal Investigation Division of the IRS.

Assistant U.S. Attorneys David M. Maria and John E. Kokkinen are prosecuting the case.

Defendant Information:

EDWARD S. ADAMS, 64,

Minneapolis, Minn.

Charges:

  • Mail fraud, 8 counts
  • Wire fraud, 6 counts

Additional news available on our website.

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Identity Theft Protection – Warning!

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For more information on Identity Theft Protection & Prevention.

Financial Fraud: Glenn R. Fischer Pleaded Guilty In Million Insurance Fraud Scheme

Ellicott City Man Pleads Guilty to Federal Charges in $4.4 Million Insurance Fraud Scheme

Sold Victim Businesses Non-Existent Insurance and Used the Premiums Collected for His Personal Benefit

Baltimore, Maryland – Glenn R. Fischer, age 70, of Ellicott City, Maryland, pleaded guilty on March 21, 2017, to wire fraud and aggravated identity theft arising from a scheme to defraud businesses seeking insurance. Fischer admitted that he fraudulently collected more than $4.4 million in insurance premiums which he did not remit to an insurance company, causing losses in that amount to the victims who thought they were insured.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation, Baltimore Field Office.

According to his plea agreement, from 2002 to about 2014, Fischer was a partner at TriArc Financial Services, Inc., (TriArc Services) which provided automotive and mortgage insurance products, including residual value insurance. Residual Value Insurance (“RVI”) helped companies leasing vehicles to consumers to manage the risk from decreases in the value of the vehicle during the term of an auto lease. RVI typically provided for payments to the owner of a leased vehicle if the value of the vehicle at the end of the lease was less than a certain amount specified in the terms of the insurance coverage when the lease began. In the early 2000s, RVI policies were widely issued by insurance companies and TriArc Services generated substantial revenue for the company and its partners, including Fischer, who served as insurance brokers for RVI products. In 2008 and 2009, in conjunction with the financial recession and changes in consumers’ desires for used automobiles, many insureds suffered substantial losses under RVI insurance policies.

Fischer admitted that from 2009 until 2014, he persuaded victim businesses to purchase RVI insurance coverage, which Fischer knew did not exist, so that Fischer could use a substantial portion of the victims’ insurance premiums for his personal benefit. Specifically, in the summer of 2009, Fischer created a Nevada corporation called TriArc Marketing Solutions (TriArc Solutions) and opened bank accounts for TriArc Solutions. During the course of the scheme, Fischer caused prospective insureds to believe that he that he was authorized to issue RVI policies on behalf of TriArc Services, a multinational property and casualty insurance company specializing in coverage for small to medium sized businesses, and one of that business’ subsidiaries. Fischer also concealed the creation and use of TriArc Solutions from his partners at TriArc Services.

Fischer created and sent false insurance coverage documents, fraudulent emails, premium invoices, lists of covered vehicles, and other documents to victim companies, causing them to falsely believe that they had purchased RVI insurance through Fischer. Fischer used the identity of an employee of a multinational property and casualty insurance company in furtherance of the fraud, including his name, title and purported signature on the declaration pages of the fake insurance policies. Fischer concealed from the employee and the company that Fischer was pretending to issue RVI insurance policies on behalf of the company.

Fischer collected more than $4.4 million in RVI insurance premiums from the victims, which he deposited into the TriArc Solutions bank accounts. Fischer and his relatives used the proceeds of the insurance premium payments for their personal benefit.

Fischer also admitted that he failed to report a significant portion of the money he obtained from the fraud on his annual tax returns for the 2009 through 2014 calendar years. The total income Fischer received but did not report to the IRS for these tax years exceeded $3.3 million, which generated a substantial tax loss to the United States.

As part of his plea agreement, Fischer will be required to forfeit all property constituting, derived from, or traceable to the proceeds of the fraud, including, but not limited to $4.4 million.

Fischer faces a maximum penalty of 20 years in prison for wire fraud, and a mandatory two years in prison, consecutive to any other sentence imposed, for aggravated identity theft. U.S. District Judge George L. Russell has scheduled sentencing for June 9, 2017, at 11:00 a.m.

Today’s announcement is part of the efforts undertaken 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. Since the 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, please visit www.StopFraud.gov.

United States Attorney Rod J. Rosenstein commended the FBI for its work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorneys Harry M. Gruber and David Metcalf, who are prosecuting the case.

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Tax Fraud: Dr. Warren Gregory Belcher Indicted For Filing False Tax Returns And Obstructing The IRS

Maryland Chiropractor Indicted For Filing False Tax Returns And Obstructing The IRS

A grand jury in Baltimore, Maryland returned an indictment on March 9, which was unsealed yesterday, charging a chiropractor with one count of corruptly endeavoring to impede the Internal Revenue Service (IRS) and six counts of filing false tax returns, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Rod J. Rosenstein for the District of Maryland.

According to the indictment, Dr. Warren Gregory Belcher, a resident of Salisbury, Maryland, operated a chiropractic business for nearly 20 years. During that time, he received income for chiropractic services from insurance companies, patients and other third parties, including another chiropractor in Baltimore. The indictment alleges that for the years 2009 through 2015, Belcher filed false individual income tax returns on which he failed to report that he operated a chiropractic business and falsely claimed that he had earned $0 in business income.

The indictment further alleges that between 2008 and 2015, Belcher submitted approximately 79 letters to insurance companies and other third parties in which he threatened that the companies could be subject to civil and criminal penalties for reporting his income to the IRS on a Form 1099-MISC. A Form 1099-MISC is a tax form that is used to report certain types of income to the IRS, including payments for services performed by someone who is not an employee and medical and health care payments. Belcher also made threatening statements to an accountant to prevent the accountant from reporting his income to the government. In addition, Belcher is alleged to have submitted approximately 68 fraudulent Forms 1099-MISC to the IRS on which he falsely claimed that the companies who reported his income to the IRS on Forms 1099-MISC for those years had paid him $0 in income. Finally, Belcher is alleged to have responded to notices from the IRS regarding additional taxes he owed for the years 2009 and 2011 and a penalty that the IRS assessed against him for filing a frivolous income tax return by sending letters to the IRS in which he falsely claimed that the IRS was violating the law by assessing and collecting his taxes.

An indictment is not a finding of guilt. It merely alleges that crimes have been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.

If convicted, Belcher faces a statutory maximum sentence of three years in prison on each count of the indictment, as well as a term of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Rosenstein commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Trial Attorney Melissa S. Siskind of the Tax Division and Assistant U.S. Attorney Sean R. Delaney of the District of Maryland, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

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Financial Fraud: WILLIAM COSME Guilty in Connection With a Scheme to Defraud a Christian Missionary School

Long Island Man Found Guilty Of Defrauding South Korean School Of Over $5 Million

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that WILLIAM COSME, a/k/a “William Cosmo,” was found guilty today in Manhattan federal court in connection with a scheme to defraud a Christian missionary school in South Korea of $5.5 million dollars. The jury convicted COSME on both counts with which he was charged following a one-week trial before U.S. District Judge Loretta A. Preska.

Acting Manhattan U.S. Attorney Joon H. Kim said: “As a unanimous jury swiftly concluded after trial, William Cosme duped and defrauded a South Korean international school out of $5.5 million, money the school needed to carry out its mission of educating children. Cosme then took this stolen money and spent it lavishly on himself, including on a Lamborghini, a Ferrari, and a Cadillac Escalade, not to mention a 110-day gambling spree in Las Vegas. Cosme now faces time in a federal prison for his brazen crimes.”

According to the Indictment, other filings in Manhattan federal court, and evidence admitted at trial:

COSME purported to operate a “Privately Held, Global, Private Equity family practice with a concentration on it’s [sic] own Family’s Private Wealth Management, Commercial [real estate], physical gold trade and Business Consulting.” COSME further claimed that the entity through which he did business “manage[d] family assets with a Net Asset Value in excess of USD $11b on a global basis” and that his clientele included royalty and the families of royalty. None of those claims was true.

In about January 2011, COSME, acting through his company Cosmo Dabi International Trading Group Inc. (“Cosmo Dabi”), entered into an agreement with a Christian missionary school located in South Korea (the “International School”) whereby Cosmo Dabi would lend the International School approximately $55 million and the International School would make a deposit of approximately $5.5 million (the “Equity Deposit”), which COSME would invest in order to generate funds to loan the International School. The International School sought to use the proceeds of the loan to expand its operations in South Korea.

In January 2011, the International School sent by wire transfer approximately $5.5 million to an account maintained by COSME at a bank.

Thereafter, COSME transferred the funds that the International School had entrusted to him into other accounts, including accounts in his own name rather than that of his company. From the other accounts, COSME began a run of unauthorized personal spending, including purchasing a Lamborghini costing nearly $314,000 (which itself was meant to secure COSME a preferred spot on a waiting list to purchase an even more expensive Lamborghini); a Ferrari costing nearly $287,000; a Cadillac Escalade; a sport utility vehicle for a family member of COSME’s; a 110-day gambling trip to Las Vegas; gaming losses while on that trip in excess of $200,000; paying for his girlfriend’s rent; and otherwise funding a lavish lifestyle. All the while, COSME failed to invest the $5.5 million as he had promised, and made a series of misrepresentations to the leadership of the International School as to why they had not been issued their promised loan payments. COSME also devised and executed a sham audit process in order to convince the International School that they were in default of their agreement and that COSME could keep the school’s deposit for himself. In connection with his fraud on the International School, COSME also used, without authorization, the identities of two individuals by falsely representing to the International School that these individuals were officers of Cosmo Dabi.


 

COSME, 51, resides in Jericho, New York. He faces a minimum sentence of two years in prison for his conviction for aggravated identity theft, and a maximum sentence of 20 years in prison for his wire fraud conviction. COSME also faces a maximum term of three years of supervised release and a fine of the greatest of $250,000, or twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to the victim. COSME’s sentencing is set for June 21, 2017, before the Honorable Loretta A. Preska.

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

Mr. Kim praised the outstanding efforts of Federal Bureau of Investigation in the investigation.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Noah D. Solowiejczyk and Martin S. Bell are in charge of the prosecution.

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Financial Fraud: Travis Lee Sentenced For Credit Card Fraud Scheme

Charles County Man Sentenced to Over Six Years in Federal Prison for Credit Card Fraud Scheme

Also Violated his Supervised Release on a Previous West Virginia Federal Credit Card Fraud Conviction

Greenbelt, Maryland – U.S. District Judge Peter J. Messitte sentenced Travis Lee, age 31, of La Plata, Maryland, today to 75 months in prison, followed by three years of supervised release, for possession of unauthorized access devices and aggravated identity theft, as well as violating his supervised release in a previous credit card fraud case.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Brian J. Ebert of the United States Secret Service – Washington Field Office; and Chief J. Thomas Manger of the Montgomery County Police Department.

According to his plea agreement on August 31, 2015, Lee traveled with Kenneth Clifton Williamson to a shopping mall area in Chevy Chase, Maryland, and taught Williamson how to make fraudulent purchases at department stores using the unauthorized debit, credit and gift cards Lee manufactured using stolen credit and debit information obtained from illegal online carding forums. Lee reprogrammed the credit and gift cards with alternate data, which provided access to individuals’ bank accounts for fraudulent, unauthorized purchases.

Williamson purchased approximately $1,155 in merchandise at a high-end department store in Chevy Chase using two Visa gift card, which Lee had encoded with stolen account information. Lee and Williamson then proceeded to a high-end department store in Washington D.C. and repeated the process, again purchasing approximately $1,155 in merchandise using similar fraudulent gift cards.

Law enforcement arrested Lee a few months later and recovered at least 185 gift cards from Lee. A search of the vehicle, which was the same one used by Lee and Williamson to travel to the department stores in August, revealed gift cards, sales receipts, clothing and other merchandise, a laptop computer portable wi-fi device, as well as items used to create gift and credit cards encoded with stolen account information, including an embosser and electronic encoder.

On October 31, 2015, law enforcement conducted a traffic stop of the vehicle Lee was driving and recovered at least 150 credit and gift cards, an embosser and other materials indicative of the manufacture of fraudulent credit cards and gift cards, including a laptop with a magnetic strip reader/writer.

On September 15, 2010, Lee was sentenced to five months in prison, followed by three years of supervised release, after being convicted of possession of counterfeit access devices in U.S. District Court for the Northern District of West Virginia. In December 2014, Lee’s supervised release was revoked and he was sentenced to 14 months in prison, followed by 22 months of supervised release. Lee was serving this term of supervised release when he committed the offenses in Maryland.

Kenneth Clifton Williamson, age 21, of Washington, D.C. previously pleaded guilty to his role in the scheme as was sentenced to four months in prison.

United States Attorney Rod J. Rosenstein commended the U.S. Secret Service and Montgomery County Police Department, Electronic Crimes Unit for their work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorneys Jennifer R. Sykes and Thomas P. Windom, who prosecuted the case.

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Guidance to Proper Credit Card Use

Almost everyone has at least one credit card these days. It has been becoming a need rather than merely a lifestyle. However, do they really know how to use their cards wisely? This is still in doubt. They will surely know how to spend the cards until reaching the limit. They also know how to use it for shipping and the payment made afterward. Most people commonly understand this knowledge already. Unfortunately, most people still do not know how to have sufficient protection over their cards.

Before you use any of your cards, you need to understand that you are going to borrow some amount of money from the credit card supplier. Once you make a payment with your card, you will need to pay the amount back within a particular period. Otherwise, you will need to pay the interest of the borrowed amount as well as some other fees. Therefore, you must be aware on how much you afford for the payment. It is a crucial thing that you need to pay attention, because it is related to your credit rating.

You should avoid any bad credit rating because it can give impact to other field. If your credit rating is bad, you might experience a mortgage application rejection, loan rejection and even job application rejection. Therefore, you need to be wise in using your cards so that your rating is good. One tip here is to avoid over 75% debt on your card limit. It is to protect you from over debt as well as to maintain a good credit rating.

There are so many credit cards fraud currently that you really need to have a good protection over your cards. You can follow some basic precautions here. You may start from the given PIN provided by the card companies. You will receive this PIN soon after you get the card. You can change the PIN afterward and keep it safe for yourself. It is also important to put your signature on the back part of your card so that other people will not claim it as theirs.

Further to following the instruction on the security procedures, it is also important to know all other instructions so that you can get all benefits available from your cards. The benefits will generally include discounts on particular purchases, car rentals, travel and so many others. Moreover, there is also a cash back option for the reward program. If you travel frequently, you can get benefits from the cards, such as travel insurance and protection over you baggage. Besides that, it is also possible to get some joining benefits from the suppliers of your cards. Most often, you will get some discount vouchers.

You also need to have a clear picture of your cards’ fees and commission charges. Mostly, the cards will include the annual fees and interest rate. You can find some credit card suppliers who will free you from any annual fees under certain requirements. Furthermore, your credit cards may also offer some services in which they will charge some amount of commission, for example cash withdrawal and foreign exchange transaction. You can get complete information in the instruction booklet that is sent along with the credit card.

The suppliers of credit cards generally develop various offers from year to year. They will inform these new products to their cardholders through e-mail or monthly billing statement. Therefore, you need to keep posted on the offers. It is possible that you might find something interesting.

Every time you use your credit cards, you will generally earn some points. You can accumulate these points as your rewards. When you have enough points, you are able to exchange your earned points for some gifts. Different credit card suppliers might offer different rewards program. They will state all the requirements as well as the rewards gifts in the catalogue. You will receive this catalogue as a reference when you become the cardholder.

You need to study all the requirements and terms of your credit cards applications carefully. By doing so, you are able to get all the possible benefits from you credit cards.

Mirsad Hasic is the owner of the best credit card offers, where you will learn more about credit card debt elimination, plus how to consolidate your credit cards as well.

Bonded Employees – Why They Are Beneficial

Bonding an employee is an insurance agreement guaranteeing repayment for financial loss caused to the covered organization by the act or failure to act of an employee. Bonding is used to protect the financial operations of companies and unions. This insurance policy is intended to protect businesses from losses caused by acts of fraud or dishonesty by officers, employees, or other representatives.

Why should I bond my employees?

Purchasing a bond plan keeps your employees honest. But more important than maintaining employee honesty, a bond plan protects your business. Statistics have shown that more than one-third of bankruptcies are caused by internal theft.

When should I bond my employees?

Most insurance companies have a policy of bonding employees as soon as they enter the company, hoping to prevent future theft. It is more likely that internal theft would be committed by a long-time employee, someone that has been with the company for at least 10-15 years, rather than a new employee. Seasoned employees know the ins and outs of the company’s accounting system. They know how to slowly move money without anyone noticing, and by the time the theft is noticed, it is too late to stop it from causing damage.

What kind of insurance plan can I buy?

There are three different types of bond plans :

oName Schedule or Position Schedule Fidelity Bond : In this plan, coverage is placed on specific employees or positions based on a list that you provide. If you decide to have other people covered, you need to contact your insurance company to add them to the list. In order to receive compensation, you need extensive proof that your employee committed a thievery.

oBlanket Bond : This type of bond covers all employees, and new employees are added automatically. Coverage is individual, and compensation will be provided up the maximum number determined for the individual. It is not required to prove that a certain individual is responsible for the theft.

oPrimary Commercial Blanket Bond : This bond also covers all people in the company. Employees are not singled out; they are treated as one unit. Regardless of how many people are involved in a theft, you will be compensated the same amount.

How do I buy a bond policy?

To start using a bond plan, simply contact your insurance policy. You can have bonding added to your general business policy and your broker can help you decide which type of policy is best for you.

MicroShred : Florida’s Confidential Document Shredding Service

MicroShred, a high security shredding and recycling service in Southern Florida. Our secure shredding service insures that all sensitive materials will be destroyed beyond recognition. We provide a secure, convenient, cost-effective and environmentally friendly method to dispose of highly sensitive, confidential documents and other materials. Our mobile shredding units can come to you and shred all sensitive material at your location, under your supervision.

Discover What You Need to Do to Win Your Medical Malpractice Suit

Medical malpractice suits are becoming an increasingly common occurrence these days. When a doctor or other health care provider does not do something within the accepted standards of practice for the community, and that negligence causes injury to the patient, that doctor or health care professional can be sued.

In these cases, the plaintiff is the patient that was harmed, and the defendant is the health care professional and sometimes the medical organization involved in a particular incident.

In most cases, medical malpractice is caused by negligence, omission, mistake, et cetera. In other words, although preventable, most malpractice suits are brought because some occurrence accidentally did not happen that should have or vice versa. In some cases, however, what appears to be medical malpractice is actually a deliberate act of either murder or injury. For example, there have been several cases in which health care providers were convicted of murder only after the fact because so many patients died on their watch that officials became suspicious.

For a plaintiff to establish that medical malpractice has occurred, the following elements must be present:

* The oversight, carelessness, negligence, etc., must have caused injury.

* A specific duty must have been overlooked, such as that the provider didn’t conform to the established standard of care. The standard of care itself is proved by expert testimony or by obvious errors that absolutely show an adequate job was not done.

* The health care provider had a duty to provide the medical care, etc., that it did not and was legally obligated to.

* The damage or loss must be specified and quantified. The damage can be emotional, physical, or both, but without damage established, there’s no basis for a claim even if the medical provider was indeed negligent.

In most cases, medical malpractice, once established, moves on to the next phase of the legal system. In this case, the plaintiff’s attorney or the plaintiff himself or herself files a lawsuit in a court within the appropriate jurisdiction. Thereafter, a trial is set to occur. During the process between the filing of the suit and the onset of the trial, both parties (plaintiff and defendant) share information (usually via their attorneys) in a process that is known as discovery. During this phase of development, depositions, requests for documents, and interrogatories may be performed. If a settlement is offered and both parties agree to it, the case may settle and not go to trial. If this does not happen, however, the case is brought to trial.

In a medical malpractice lawsuit, the plaintiff (the party saying that he or she has been injured) is the one with the burden of proof. In this case, the burden of proof has to be by a preponderance or majority of evidence, specifically 51%. If the case goes to trial, both parties present evidence and experts to support their particular claim of guilt or innocence. After the trial ends, the factfinder (jury or judge) is left to deliberate and weigh all of the evidence. At that point, the factfinder decides which side is most credible and renders a verdict.

Once the verdict is rendered, the defendant is found to be guilty or not guilty. If found guilty, the medical malpractice moves to being part of the record and compensatory and punitive damages are awarded to the plaintiff as rendered applicable by the factfinder. If found not guilty, the defendant is absolved of all wrongdoing. In some cases, the losing party on either side may move to have a new trial. The plaintiff can also ask to have an exceptionally small award be increased, while the defendant can also ask to have an exceptionally large award be reduced, in some jurisdictions. In addition, either side may move to appeal the judgment.

One of the things currently fueling medical malpractice suits is the “cheapness” being dictated by many health insurance providers. Many times a patient will not receive specific treatment because it is not authorized by their health insurance provider, or there is a long delay in getting that approval, where the end result for the patient causes them pain, severe illness, and can even be fatal.

Although medical malpractice laws are meant to protect patients, many parties have begun to feel that in fact, health-care providers are unfairly targeted for malpractice. This is in part because there are some plaintiffs who falsely file claims in hopes that they’ll receive a large monetary award if they win, not because any negligence has actually occurred. Therefore, in some cases, award amounts may be limited depending on the jurisdiction. It is important for all parties to remember is that if medical malpractice is to work as it should, only medical personnel who are truly guilty of malpractice should be targeted for it, and not simply because a plaintiff hopes to receive an exceptional monetary award.

It should also be noted that fraudulent claims of malpractice are damaging in and of themselves. They damage the medical community, and they damage the legal system because they tie up resources that could better be used elsewhere. They also artificially inflate premium amounts for malpractice insurance, which is another detriment to the medical community.