Former Canadian MoneyGram And Western Union Agent Sentenced To 6o Months’ Imprisonment On Fraud And Money Laundering Conspiracy Charges

HARRISBURG – The United States Attorney’s Office for the Middle District of Pennsylvania announced that Alex Mgbolu, age 45, of Toronto, Canada, was sentenced February 23, 2017 to 60 months’ imprisonment by Chief United States District Court Judge Christopher C. Conner for conspiring to defraud hundreds of American citizens out of more than $2.1 million in an international mass marketing consumer fraud scheme. Chief Judge Conner also ordered Mgbolu to pay $1,372,602 in restitution.

According to United States Attorney Bruce D. Brandler, Mgbolu, a former Western Union and MoneyGram agent, pleaded guilty in August 2016, to conspiracy to commit mail fraud, wire fraud and money laundering.

Mgbolu conspired with Chima Nneji, William Nneji, and other unnamed individuals between July 2002 and May 2010, to commit the crimes. Mgbolu was extradited to the United States from Canada.

Mgbolui was the owner/operator of a Western Union agency called FA CAM Associates (FA CAM) and a MoneyGram agency also known as FA CAM. Both agencies were located in Toronto, Canada. Between July 2002 and May 2010, international mass marketing fraudsters allegedly instructed hundreds of consumer fraud victims across the United States to send Western Union and MoneyGram money transfers to Canada where the transfers were paid out by Mgbolu at FA CAM. Mgbolu concealed the fraudsters’ identity by entering false names and identification data into the Western Union and MoneyGram computer data bases. Analysts from the Toronto Police and U.S. Postal Inspection Service have determined that over 90% of the payee addresses and identification numbers entered at FA CAM were invalid. For his role in the scheme Mgbolu retained a portion of the money transfers before sending the balance of the proceeds on to the fraudsters.

As a Western Union agent, between July 2002 and April 2006, FA CAM paid out 213 money transfers totaling $453,119 that were reported by the senders as having been fraud induced. As a MoneyGram agent, FA CAM paid out 67 transfers totaling $149,723 between August 2006 and September 2007 that were reported by the senders as having been fraud induced.

After Western Union terminated FA CAM and MoneyGram restricted FA CAM’s ability to pay out money transfers, money transfer checks from other fraud-complicit MoneyGram Western Union agents in the greater Toronto area were deposited into FA CAM’s bank account. The deposit of fraudulently induced funds into what appears to be a legitimate business bank account and the subsequent reissuance of the proceeds via checks and wire transfers helps to launder the proceeds and conceal the identity of the fraudsters is known as “check pooling.”

Overall, between July 2002 and May 2010, FA CAM and the 13 complicit Western Union and MoneyGram agents paid out 907 money transfers totaling $2,127,410 that were reported by the senders as being fraud induced.

Codefendant Chima Nneji pleaded guilty to the same conspiracy charge before Judge Conner on July 21, 2016. Nneji was sentenced on December 7, 2016, to 45 months’ imprisonment and ordered to pay $381,729 in restitution.

The lower restitution amount is due in part to monies compensated to victims as part of the U.S. v. MoneyGram, deferred prosecution agreement in the Middle District of Pennsylvania which established a $100 million restitution fund in 2013 for MoneyGram customers that were victims of consumer fraud. A $586 million dollar restitution fund was also recently established for victims of consumer frauds who sent their monies through the Western Union money transfer system. Like the MoneyGram fund, the Western Union fund was established in January of this year as a result of a deferred prosecution agreement with the Middle District of Pennsylvania and the US Department of Justice.

Codefendant William Nneji remains a fugitive from justice.

The case was investigated by the Harrisburg Office of the United States Postal Inspection Service, and assisted by the Toronto Police. Assistant United States Attorney Kim Douglas Daniel prosecuted the case.

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Second Manufacturer Of Defective North Carolina Bridge Parts Sentenced to 35 Months In Federal Prison

RALEIGH -United States Attorney John Stuart Bruce announced that today in federal court before United States District Judge Terrence W. Boyle, SANTIAGO DE LA TORRE, 45, of Cicero, Illinois, was sentenced to serve 35 months in federal prison ori harges of Conspiracy to Make False Statements Concerning Highway Projects, and Perjury. The defendant was also ordered to serve a 3-year term of supervised release and to make restitution.

In October of 2011 a federal highway contractor discovered a defect in a grouping of elastomeric bridge bearings that had been shipped for use on bridges in North Carolina. An elastomeric bridge bearing is a slab of rubber that is reinforced with multiple layers of steel and placed underneath bridges to absorb shock. The bearings were defective because the steel plates were exposed, subjecting them to the elements and creating the potential for deterioration. The North Carolina Department of Transportation began an investigation  and found  systematic  problems  with the bearings that had been shipped, and in some instances installed, on bridge projects throughout the state. In total, 1,270 of the shipped bearings were found to be nonconforming and defective. The bearings were shipped in connection with 25 different highway projects in North Carolina between May of 2009 and October of 2011. Upon further investigation , the Department of Transportation found that many of the bridge bearings had come from a company named Delgado Elastomeric Bearings Corporation, located in the Chicago
area.

The United States Department of Transportation conducted  a criminal investigation into the creation and shipment of the defective bridge bearings. It was discovered that the North Carolina application to supply the bridge bearings to local contractors had been forged. The name of a teenager with no knowledge of how to manufactur e bridge bearings was fraudulently used on the application. This teenager was also held out by Delgado Elastomeric Bearings Corporation as the vice president of the company, when in fact, the teenager had no idea of this title. This same name and title had also been used on all certificates sent to North Carolina highway contractors certifying the conformity of the bearings with applicable state and federal regulations.

Ultimately,the investigation revealed that the  defendant, SANTIAGO DE LA TORRE, and his brother Joel De La Torre, had forged the name of the teenager on the documents described above. Inspection of the Chicago facility used to manufacture the bridge bearings revealed that the facility did not contain the required testing devices and machinery which would have revealed the defects in the bridge bearings.

SANTIAGO DE LA TORRE committed perjury in the grand jury when he was asked if he had ever seen testing certification documents. In fact, conversations recorded by the FBI showed that the defendant had seen the certifications and was knowledgeable about the use of the teenager’s name on the documents. Prior to the defendant’s arrest, the defendant also encouraged his brother to flee to Mexico rather than face prosecution.

Although not presently incurred, costs associated with the replacement of the bearings are expected over time to exceed $5 Million due to the difficulty in removing the bearings from beneath existing structures, engineering costs, and traffic control. Federal and state agencies have reported that there is no immediate threat to safety due to the faulty bearings, which will be monitored and replaced over time.

Joel De La Torre was previously sentenced on April 21, 2016, and ordered to serve 35 months in federal prison for his role in the scheme.

The investigation of this case was conducted by the United States Department  of  Transportation, Office  of  the Inspector General and the Federal Bureau of Investigation.  Assistant United States Attorney William M. Gilmore represented the United States.

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Attorney Pleads Guilty to Role in Scheme That Targeted Distressed Homeowners

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that BRADFORD BARNEYS, 51, of Odenton, Maryland, pleaded guilty today before U.S. District Judge Michael P. Shea in Hartford to conspiring with Timothy W. Burke in a long-running fraud scheme that targeted distressed homeowners throughout Connecticut. BARNEYS is an attorney licensed to practice in Connecticut and has an office in Bridgeport.

According to court documents and statements made in court, between approximately 2010 and November 2015, Timothy W. Burke, formerly of Easton, engaged in a scheme to defraud individuals, mortgage lenders and the U.S. Department of Housing and Urban Development (HUD) by falsely representing to homeowners who were in, or facing, foreclosure on their homes that he would purchase their homes and pay off their mortgages. The distressed homeowners agreed to sign various documents that Burke presented to them on the understanding that, by signing the documents, they would be able to walk away from their homes without the burdens of their mortgage or other costs associated with home ownership. Burke also told homeowners that the process of negotiating with the lenders can take time and that, in the meantime, to ignore any notices regarding foreclosure. After he gained control of these houses, Burke rented out the properties to tenants by advertising the properties on craigslist.com and other means and falsely representing to tenants that Burke owned the property.

Burke or one of his agents then collected rent from tenants, and Burke used the funds for his own benefit. He also failed to negotiate with the homeowners’ mortgage lender or pay expenses associated with the home, including the homeowner’s mortgages and property taxes, and he failed to pay any rental income he was collecting to the homeowners. Many of the properties Burke purportedly purchased were ultimately foreclosed upon by the mortgage lender.

Burke undertook extensive efforts to disguise his true identity, and hide his criminal past, from his victims through the use of multiple aliases and business entities, and to conceal the sources of and expenditures from his criminal proceeds.

Between approximately 2011 to at least 2014, BARNEYS participated in dozens of meetings with Burke and with homeowners at BARNEYS’ law offices in Bridgeport. At the meetings, Burke represented to homeowners that he would purchase their properties and presented to the homeowners quitclaim deeds, management agreements, indemnification agreements, and third party authorizations.

At some point after BARNEYS began representing Burke in these meetings with homeowners, BARNEYS knew that Burke had no intention of buying the properties and paying the outstanding mortgages on the properties. Nevertheless, BARNEYS continued to participate in these meetings and represented that these transactions were legitimate. When questioned by homeowners about the status of their sales, BARNEYS would assure them that their sales to Burke or one of his companies were progressing as Burke promised. BARNEYS also knew that, once Burke obtained the properties from the homeowners, he would rent them out to tenants.

BARNEYS also represented Burke and his companies in eviction proceedings against tenants.

BARNEYS pleaded guilty to one count of conspiracy to commit mail and wire a fraud, an offense that carries a maximum term of imprisonment of 20 years. Judge Shea scheduled sentencing for June 13, 2017.

On January 24, 2017, Burke pleaded guilty to one count of mail fraud and one count of tax evasion. He also awaits sentencing.

This matter has been investigated by the U.S. Department of Housing and Urban Development – Office of Inspector General, U.S. Postal Inspection Service, and Internal Revenue Service – Criminal Investigation Division, with the critical assistance of the Middletown, Plainville, Easton and Coventry Police Departments, the Connecticut State Police and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

This case is being prosecuted by Assistant U.S. Attorneys David T. Huang and Sarah P. Karwan.

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Hotel Developer Sentenced to Three Years in Prison for Exploiting U.S. Visa Program

CHICAGO — A Chicago hotel developer was sentenced today to three years in prison for exploiting a federal visa program to fraudulently raise capital from Chinese nationals who were seeking residency in the United States.

ANSHOO SETHI, the founder of A Chicago Convention Center LLC, purported in 2011 to build a hotel and convention center near O’Hare International Airport in Chicago. Sethi solicited Chinese nationals to invest $500,000 apiece in the project, plus $41,500 in administrative fees to Sethi’s company. Each Chinese national who participated in the project also applied for an EB-5 visa, which allows foreign investors to obtain a temporary two-year visa that could later be converted to a permanent visa upon success of an employment-generating investment. While soliciting investors Sethi made several false statements, including lies about funding and tax credits from the State of Illinois and the City of Chicago, none of which materialized.

The $900 million project never got off the ground, and no EB-5 visas were ever granted to investors.

Sethi, 32, of Chicago, pleaded guilty last year to one count of wire fraud. In addition to the 36-month prison term, U.S. District Judge John Z. Lee also ordered Sethi to pay $8.85 million in restitution to the victim investors.

The prosecution represents the largest EB-5 criminal fraud case in the United States to date.

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

“Defendant Anshoo Sethi abused the EB-5 visa program and blatantly lied to investors and the United States government on a massive scale,” Assistant U.S. Attorney Sunil Harjani argued in the government’s sentencing memorandum. “Overseas investors spent much time and energy making the difficult decision to invest in the Sethi project, and processing their visa applications – not knowing that the project was built on a bed of lies and forged documents.”

According to his plea agreement, Sethi’s fraud scheme began in the summer of 2011 and continued until February 2013. Sethi told investors that he planned to build the hotel and convention center on a three-acre parcel of land in the 8200 block of West Higgins Road in Chicago, just east of O’Hare. Sethi falsely told investors that his company maintained relationships with large hotel chains that purportedly were interested in the project, including Hyatt, Starwood and Intercontinental Hotel Group. To bolster an additional false statement regarding City of Chicago funding, Sethi signed a “Redevelopment Agreement TIF” document that purported to convey a relationship between the city and Sethi’s company. The document, which contained a bogus city ordinance implying that the project had been approved for TIF funding, was provided to third party brokers who used it to solicit investors.

In all, Sethi raised approximately $158 million from more than 290 investors. The U.S. Securities and Exchange Commission brought a civil lawsuit against Sethi and was able to restore approximately $147 million to Chinese investors.

The government is represented in the criminal prosecution by Mr. Harjani.

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Managing Director Of Investment Bank Sentenced To 3 Years In Prison For Insider Trading

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SEAN STEWART, a former managing director at an investment advisory firm headquartered in Manhattan, was sentenced today to 36 months in prison by U.S. District Judge Laura Taylor Swain for tipping his father and co-defendant Robert Stewart with inside information about five health care company mergers and acquisitions before they were publicly announced.  SEAN STEWART was convicted after a jury trial that ended on August 17, 2016.

Manhattan U.S. Attorney Preet Bharara said:  “As proven at trial, Sean Stewart used his position as an investment banker to feed confidential inside information about clients to his father so that he could profit illegally from well-timed trades.  Despite his various efforts to cover-up his scheme, including claiming he did not recognize his own father’s name on a FINRA list of those who had traded in advance of an acquisition, Stewart has been held to account by a jury and sentenced to three years in federal prison.  This case and today’s sentence is a victory for all who believe in a fair securities market.”

According to the allegations contained in the Indictment as well as the evidence presented during trial:

In early 2011, SEAN STEWART, who at the time held the position of Vice President in the Healthcare Investment Banking Group of a global bank headquartered in Manhattan (“Investment Bank A”), began tipping his father, Robert Stewart, with material nonpublic information about upcoming mergers and acquisitions, including with the names of the companies that were acquisition targets, both when the target was an Investment Bank A client and when the bank represented the acquirer, as well as with information that indicated the likely timing of an upcoming deal.

The first of these deals involved the acquisition of Kendle International Inc. by INC Research, LLC, which was announced publicly on May 4, 2011.  SEAN STEWART worked on the deal, representing Kendle.  Robert Stewart made about $7,900 in profits on purchases of Kendle stock executed in February and March of 2011.  When questioned by the Securities and Exchange Commission about his Kendle trades in May 2013, Robert Stewart reported that he used the proceeds of those trades to pay expenses related to SEAN STEWART’s June 2011 wedding.

The second deal about which SEAN STEWART tipped Robert Stewart was the acquisition of Kinetic Concepts, Inc. (“KCI”) by Apax Partners, announced on July 13, 2011.  Although Robert Stewart purchased some stock in KCI based on SEAN STEWART’s tip, he sold that stock before the acquisition was announced, around the same time that SEAN STEWART learned the Financial Industry Regulatory Authority (“FINRA”) was conducting an inquiry into Robert Stewart’s Kendle trading.

Also around this time, in the spring of 2011, Robert Stewart expressed a concern to co-conspirator Richard Cunniffe that Robert Stewart was “too close to the source” to be trading in KCI stock his own account, and asked Cunniffe to make purchases of KCI call options for Robert Stewart in Cunniffe’s brokerage account.  Cunniffe agreed to do so, and also mirrored for his own benefit the KCI trades that Robert Stewart was directing.

In connection with the FINRA inquiry, FINRA prepared a list of persons and entities that had traded in advance of the Kendle deal.  The list included Robert Stewart’s name.  When Investment Bank A asked SEAN STEWART whether he knew anyone on the list, he initially denied recognizing the name of his father; later, when confronted by lawyers from Investment Bank A, SEAN STEWART acknowledged that his father was on the list but told a series of lies designed to make it seem as if Robert Stewart had independently decided to invest in Kendle.  SEAN STEWART told these lies one day after meeting with his father to apprise his father of the FINRA inquiry and to get their stories straight.

When the KCI/Apax Partners deal was announced, Robert Stewart and Cunniffe reaped profits totaling approximately $107,790.  At around this time, Robert Stewart told Cunniffe that the source of the KCI tip and the earlier Kendle tip had been Robert’s son.  Later, around the spring of 2012, Robert Stewart clarified for Cunniffe that the son in question was SEAN STEWART, who worked on the “sell side” on Wall Street.

In October 2011, SEAN STEWART left Investment Bank A.  A few months later, he joined an investment banking advisory firm headquartered in Manhattan (“Investment Bank B”) as a managing director.

During SEAN STEWART’s tenure with Investment Bank B, based on tips concerning nonpublic acquisition-related information supplied by SEAN STEWART, Robert Stewart had Cunniffe conduct options trading in advance of the public announcements of three more deals: (1) the acquisition of Gen-Probe Inc. by Hologic, Inc., announced on April 30, 2012; (2) the acquisition, by tender offer, of Lincare Holdings Inc. by Linde AG, announced on July 1, 2012; and (3) the acquisition of CareFusion Corp. by Becton, Dickinson & Co. (“Becton”), announced on October 5, 2014.  Investment Bank B represented Hologic in connection with its acquisition of Gen-Probe; Linde in connection with its acquisition of Lincare; and CareFusion in connection with its acquisition by Becton.  The profits that Robert Stewart and Cunniffe reaped from illegal insider trading in advance of the announcements of these three deals totaled over $1 million.

During the course of the scheme, SEAN STEWART became aware that his father was having financial problems.  Rather than loan his father money, SEAN STEWART gave his father stock tips, the proceeds of which Robert Stewart used to benefit himself and his son.

In March and April of 2015, Cunniffe, who was then cooperating with the Government, recorded meetings he had with Robert Stewart.  During one such meeting, Robert Stewart accepted a payment of $2,500 cash from Cunniffe, which was the balance of the proceeds owed to Robert Stewart for profitable trading executed in Cunniffe’s account in advance of the CareFusion acquisition announcement.  Also during this meeting, Robert Stewart admitted that SEAN STEWART once chastised him for failing to make use of a tip, saying, “I can’t believe I handed you this on a silver platter and you didn’t invest in it.”

In addition to his prison sentence, SEAN STEWART, 35, of New York, New York, was sentenced to three years of supervised release, which includes one year of home detention.  Judge Swain will set a restitution amount at a future proceeding.

Robert Stewart pled guilty on August 12, 2015, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer and was sentenced to four years’ probation, with the first year to be served in home detention, and $150,000 in forfeiture.

Richard Cunniffe pled guilty on May 12, 2015, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer, one count of conspiracy to commit wire fraud, three counts of securities fraud, and one count of fraud in connection with a tender offer.

Mr. Bharara praised the investigative work of the FBI and also thanked the Securities and Exchange Commission.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Sarah K. Eddy and Brooke E. Cucinella are in charge of the prosecution.

Los Angeles Man Pleads Guilty To Federal Fraud and Identity Theft Charges Related to Lottery Scam that Targeted Elderly Victims

LOS ANGELES – A South Los Angeles man was arrested today on federal fraud charges for participating in a lottery scam that allegedly targeted elderly victims with promises of cash prizes and cars – as long as they paid taxes and fees.

Carl Dean Bullock, 65, was arrested at his residence this morning without incident by inspectors with the United States Postal Inspection Service. Bullock is expected to be arraigned on a 20-count indictment this afternoon in United States District Court.

A federal grand jury on June 3 returned an indictment that charges Bullock with 13 counts of mail fraud, three counts of wire fraud and four counts of aggravated identity theft.

Bullock allegedly participated in a scheme to defraud mostly elderly victims in the United States. Using false promises that the victims had won large lottery or sweepstakes prizes, members of the scheme fraudulently told victims that, in order to obtain their “winnings,” they would need to send money to pay for taxes, fees and other expenses. Hoping to collect the winnings, victims sent money to members of the scheme via wire transfer, money orders and cash. The money was sent through the United States mail, as well as through the Western Union and MoneyGram systems.

Bullock allegedly received some of the fraudulently obtained money, and then sent a portion of it to his co-schemers, most of whom were in Jamaica.

The investigation, so far, has uncovered 25 victims – one of whom was 88 years old – who sent nearly $200,000 to obtain their non-existent prizes.

“Fraud schemes like the one charged in this indictment, which promise large rewards in exchange for ‘fees’ and ‘taxes,’ harm vulnerable members of our communities and potentially jeopardize the victims’ ability to make ends meet in retirement,” said United States Attorney Eileen M. Decker. “This defendant’s conduct was particularly egregious because he assisted criminals outside of the United States target elderly victims here.”

“Foreign lottery and sweepstakes fraud cost Americans millions every year,” stated Los Angeles Postal Inspector in Charge Robert Wemyss. “When one family member is harmed, the impact can be felt by all. Losses can be monumental, and entire fortunes, inheritances and retirement security can be wiped-out. This arrest demonstrates the commitment of Postal Inspectors to protect our seniors from these unscrupulous scam artists.”

An indictment contains allegations that a defendant has committed a crime.  Every defendant is presumed innocent until and unless proven guilty.

The wire fraud and mail fraud charges each carry a statutory maximum penalty of 20 years in federal prison. The aggravated identity theft charges carry a mandatory consecutive sentence of two years in prison.

The investigation in this case is being conducted by the United States Postal Inspection Service, which received substantial assistance from the Glendale Police Department.

Carl Dean Bullock Pleads Guilty On February 15, 2017

LOS ANGELES – A South Los Angeles man has pleaded guilty to federal mail fraud and wire fraud charges for his role in a lottery scam that targeted elderly victims with false promises of large cash prizes and cars that would be delivered when victims paid taxes, fees or insurance.

Carl Dean Bullock, 65, entered his guilty pleas to the two felony counts on Monday before United States District George H. Wu.

According to a plea agreement filed in the case, the lottery scam defrauded victims who were falsely told they had won the Publishers Clearing House sweepstakes or other lottery prizes, but they needed to pay some sort of fee or tax to collect the winnings.

“This defendant’s fraud scheme targeted elderly victims with false promises of cars and cash prizes,” said United States Attorney Eileen M. Decker. “All those who receive telephone calls from people promising prizes in exchange for money must be very wary and should take steps to confirm the reliability of the source of the call prior to sending anything.”

In his plea agreement, Bullock admitted participating in a lottery scam in which he and other members of the scheme collected money via Western Union and MoneyGram wire transfers, money orders sent through the U.S. Mail and direct cash payments. Bullock personally received at least $45,000, some of which he shared with his co-schemers, most of whom were in Jamaica.

Los Angeles Postal Inspector in Charge Robert Wemyss stated, “This investigation was an excellent example of a partnership between local and federal law enforcement agencies, working together to ensure that the nation’s mail system is not used as a tool for fraud. I fully commend the hard work and countless hours put forth by all of the law enforcement agencies involved, which resulted in bringing this individual to justice.”

Judge Wu is scheduled to sentence Bullock on April 17. The wire fraud and mail fraud charges each carry a statutory maximum penalty of 20 years in federal prison.

The investigation in this case is being conducted by the United States Postal Inspection Service, which received substantial assistance from the Glendale Police Department. The prosecution is being handled by Assistant United States Attorney Michael G. Freedman of the General Crimes section.

Former Baruch College Basketball Coach And Athletics Official Charged With Embezzlement

Preet Bharara, the United States Attorney for the Southern District of New York, Catherine Leahy Scott, New York State Inspector General, and Brian M. Hickey, the Special Agent-in-Charge of the Northeast Regional Office of the U.S. Department of Education Office of Inspector General (“ED-OIG”), announced today that MACHLI JOSEPH was arrested this morning and charged in Manhattan federal court with embezzling more than half a million dollars in funds intended for Baruch College for the rental of their athletic facilities. JOSEPH was arrested by ED-OIG agents in New Jersey. He will be presented before Magistrate Judge Gabriel Gorenstein in Manhattan this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “Machli Joseph, Baruch College’s former basketball coach, allegedly drew up his own game plan for fraud, stealing more than half a million dollars meant for the college that he instead spent on himself. Embezzling money from a public college is no game, and for allegedly taking criminal advantage of his control over Baruch’s basketball courts, Joseph will now face federal charges in a court of law. We thank the New York State Inspector General and Department of Education Office of Inspector General for their excellent investigative work in this case.”

New York State Inspector General Catherine Leahy Scott said: “This once-trusted college athletic official allegedly abused his position and the facilities he was entrusted with to steal more than a half million dollars in public funds to use for his own personal benefit. These crimes, as alleged, were clearly symptoms of the problematic policies and oversight throughout CUNY facilities that I am currently investigating as a separate matter. I truly believe critical criminal cases like this one today come together only through effective law enforcement partnerships, and I thank U.S. Attorney Bharara and Agent-in-Charge Hickey and their offices for their work on this case.”

ED-OIG Special Agent-in-Charge Brian M. Hickey said: “Today’s action alleges that Mr. Joseph knowingly abused his position of trust to steal funds from the very ones he promised to serve – Baruch College students. That is unacceptable. As the law enforcement arm of the U.S. Department of Education, we will continue to aggressively pursue those who misappropriate education funds for their own purposes. America’s students and taxpayers deserve nothing less.”

According to the allegations in the Complaint filed yesterday in Manhattan federal court:

MACHLI JOSEPH served as an athletic department official at Baruch College between 2002 and 2016. He served as Baruch’s women’s basketball head coach between 2004 and 2014, its men’s basketball coach in 2002, as assistant athletic director from 2003 to 2011 and as associate athletic director from 2011 until August 2016. At times when the Baruch College gym was not being used by the school’s athletic teams, it could be rented out to outside parties. In his administrative capacity, JOSEPH had sole control over those gym rentals and their scheduling.

On numerous occasions between 2010 and 2016, JOSEPH rented the gym to outside parties, ostensibly on behalf of Baruch College. In instructing the renting parties on how to provide payment, however, JOSEPH directed that payment be made to entities that were not, in fact, connected to Baruch College. Instead, they were entities with bank accounts over which JOSEPH had personal control, some of which merely sounded like Baruch-affiliated entities. On several occasions, JOSEPH simply directed that payment be made directly to himself or individual associates of his. Many of these funds were ultimately spent on personal expenses and items for JOSEPH and his family, including renovations to his home in New Jersey. All told, and as alleged in the Complaint, the scheme improperly diverted approximately $600,000 of payments intended for Baruch College.

JOSEPH, 42, of Elizabeth, New Jersey, has been charged with one count of embezzlement and misapplication concerning a program receiving federal funds. The charge carries a maximum term of 10 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the investigative work of ED-OIG and the New York State Inspector General’s Office, and noted that the investigation is continuing.

This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Martin S. Bell and Catherine E. Geddes are in charge of the prosecution.

The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.

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Long-time Manager of Hoquiam Wood Shavings Business Sentenced to Prison for Mail Fraud, Tax Evasion, Money Laundering and Interstate Transportation of Stolen Property

Stole more than $1.3 Million from Family Business and then Started Competing Company after being Fired for Theft

The long-time manager of a Hoquiam wood shavings business was sentenced today in U.S. District Court in Tacoma to three years in prison and three years of supervised release for thirteen federal felonies related to his theft of $1.3 million from a family business, announced U.S. Attorney Annette L. Hayes. WILLIS D. “BILL” LONN, JR., 68, of Aberdeen was convicted in October 2016 of nine counts of mail fraud, two counts of income tax evasion, one count of money laundering conspiracy and one count of interstate transportation of stolen property following a six-day trial. At the sentencing hearing U.S. District Judge Benjamin H. Settle said LONN “profoundly abused the trust of his employer [and] callously betrayed family members and took what belonged to the company.”

“This defendant did not commit just a single act of embezzlement, rather, over the course of years, he stole from the company almost every day,” said U.S. Attorney Annette L. Hayes. “He betrayed the trust of his family members to satisfy his greed and then used the stolen money to start his competing business harming his victims even further.”

According to records filed in the case and testimony at trial, LONN was a long time manager for Long Beach Shavings Company (LBS). The company was owned by LONN’s uncle and cousins and was based in California. The company had one plant in Hoquiam, Washington where it processed wood shavings for use on farms, at horse shows or in pet stores. LONN had worked at the Hoquiam plant for about a decade when he launched a scheme in the 2000s to steal and sell the wood shavings products for his own enrichment. LONN did this by selling the shavings directly to customers in Washington and Oregon without turning the proceeds over to the company. Later in the scheme, LONN arranged to get wood chips for free from a Montesano lumber mill, but he informed the parent company that an entity named M & R Lumber needed to be paid for the wood shavings. LONN posed as M & R Lumber and created phony invoices that he mailed to LBS to bill them for the shavings. LONN then kept the money. Between the two schemes LONN obtained more than $1.3 million from LBS. He was terminated by the company in 2011 when the full scope of the scheme came to light.

Testimony at trial revealed that LONN never paid income taxes on the ill-gotten gain in tax years 2009 and 2010. Had LONN reported the income his tax bill for those years would have increased by more than $80,000.

“At this time of year most Americans are busy fulfilling their obligations as citizens of our country by preparing and filing honest and accurate tax returns. However, a small percentage of the population selfishly shuns their civic duty by dodging the tax laws that the majority of us observe,” stated Special Agent in Charge Darrell Waldon of IRS Criminal Investigation. “When this happens, IRS Special Agents stand ready to defend our nation’s tax system by bringing scofflaws to justice and ensuring a level playing field for all of us.”

Anthony Galetti, Inspector in Charge of Seattle Division of the U.S. Postal Inspection Service, stated, “Today’s sentencing confirms that anyone who uses the U.S. Mail to operate a fraud scheme will be held accountable. I’m pleased to see justice in a case which had such an impact on the community of Hoquiam.”

The case was investigated by the U.S. Postal Inspection Service (USPIS) and the Internal Revenue Service Criminal Investigation (IRS-CI).

The case was prosecuted by Assistant United States Attorneys Brian D. Werner and Nicholas Manheim.

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Donnie Marks Sentenced for Role in Fortune Telling Scheme

Donnie and Sandra Marks Ran ‘Readings By Catherine’ in Charlottesville

Charlottesville, VIRGINIA – The former business manager of a fortune-teller business located on Seminole Trail in Charlottesville was sentenced today in Federal court on charges that he committed mail fraud and laundered more than $1 million in money stolen from victims by his wife and co-defendant, Acting United States Attorney Rick A. Mountcastle announced.

Donny Stephen Marks, 43, of Charlottesville, previously pled guilty to one count of mail fraud and one count of money laundering. Today in U.S. District Court in Charlottesville, Donny Marks was sentenced to 33 months in federal prison and four years of supervised releases thereafter. His wife, Sandra Stephenson Marks, a.k.a. “Catherine Marks,” 42, also of Charlottesville, previously pled guilty to one count of mail fraud and one count of money laundering. In November 2016 she was sentenced to 30 months in federal prison. The two have been ordered to repay over $5.4 million in restitution to the victims of their scheme.

According to evidence presented at previous hearings by Assistant United States Attorney Ronald M. Huber, Sandra Marks and Donnie Marks operated the business “Readings by Catherine” on Seminole Trail in Charlottesville, which offered services such as palm readings, candle readings, tarot card readings, astrological readings and spiritual readings to clients. Sandra Marks provided direct customer services while Donnie Marks managed the affairs of the business.

Sandra Marks has admitted, through a statement of facts submitted to the court and signed by the defendant, that she enriched herself by telling her clients she was clairvoyant and able to see into the past and the future. Marks also said she told her clients she had a “gift from god” and was able to communicate with spirits and guides from god, including the “Prince of Illusion,” who relayed information to her about clients.

Sandra Marks further admitted that she would tell clients that she had learned from the spirits and guides that the client, and/or the client’s family, was suffering from a “curse” and a “dark cloud” that occurred in the past. Marks would tell clients they would need to make a sacrifice of large amounts of money and valuables, whereby she would bury the money and items in a box to be “cleansed.” Marks explained to her clients that the money and property would be returned once the “work” was complete. Additionally, Marks would tell the clients that the money and property would not be used for Marks’ own personal benefit.

Donny Marks role in the scheme was one of a business manager, both of his wife and the proceeds from the scheme. Donny Marks admitted through a signed statement of facts submitted to the court that he managed Sandra Marks’ work, opened business bank accounts and transferred funds between business and personal bank accounts.

Contrary to her representations to clients, Donnie Marks and Sandra Marks kept and used money and other valuables provided by their clients for their own personal use and enjoyment and that of their family. When Sandra and Donnie Marks had used all of a client’s money, Sandra and Donnie Marks would find new clients to fund the scheme, or tell old clients that additional money was required to continue her “work.”

The investigation of the case was conducted by U.S. Immigration and Custom Enforcement’s Homeland Security Investigations, the United States Postal Inspection Service, the United States Secret Service, the Virginia Attorney General’s Office and the Albemarle County Police Department. Assistant United States Attorney Ronald M. Huber prosecuted the case for the United States.

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Leawood Attorney Pleads Guilty to Fraud Conspiracy

Law Partner Sentenced for $1.2 Million Fraud Scheme

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a Leawood, Kan., attorney pleaded guilty in federal court today to his role in a fraud conspiracy, while his former law partner was sentenced for stealing more than $1.2 million from St. Luke’s Health System, a client of their former law firm.

Mark J. Schultz, 57, of Leawood, waived his right to a grand jury and pleaded guilty before U.S. District Judge Beth Phillips to a federal information that charges him with participating in a wire fraud and mail fraud conspiracy.

Alan B. Gallas, 65, of Kansas City, Mo., was sentenced by U.S. District Judge Beth Phillips to one year and one day in federal prison without parole. The court also ordered Gallas to pay $1,224,264 in restitution to St. Luke’s. Gallas must report to the Bureau of Prisons by April 10, 2017, to begin serving his sentence.

Schultz and Gallas were attorneys and partners in the law firm of Gallas & Shultz in Kansas City, Mo., which specialized in collection work for corporations. Gallas surrendered his license to practice law in Missouri and Kansas in November 2015.

On April 13, 2016, Gallas pleaded guilty to mail fraud. Gallas admitted that he engaged in a scheme from 2009 through July 2015 to defraud a client, St. Luke’s Health System, of monies collected by his law firm totaling $1,224,264.

By pleading guilty today, in a separate but related case, Schultz admitted that he participated in the conspiracy from January 2014 through July 2015. Under the terms of his plea agreement, Schultz must forfeit to the government any property he derived from the proceeds of the wire fraud and wire fraud conspiracy.

Gallas was the attorney responsible for the St. Luke’s account at the law firm. After attempting to collect on patient accounts for a period of time, St. Luke’s would transfer its larger outstanding patient accounts to Gallas & Shultz for collection. As payments on patient accounts were received, the payments were logged into the case management system for the appropriate patient account. The monies were then deposited into the law firm’s trust account. On a periodic basis, often monthly, the firm would remit the patient payments collected to St. Luke’s.

Gallas admitted that he caused personnel at the law firm to withhold money from payments made to St. Luke’s by placing thousands of payments on “hold” status, then directing those funds be transferred from the trust account to the firm’s operating account. The pattern of not remitting some payments to St. Luke’s escalated significantly from 2012 to 2015. According to court documents, Gallas withheld 601 payments totaling $211,391 in 2012. Gallas withheld 699 payments totaling $266,696 in 2013. Gallas withheld 625 payments totaling $227,892 in 2014. Through the month of July 2015, Gallas withheld 625 payments totaling $216,845.

Schultz admitted today that he agreed with Gallas and others to transfer funds from the trust account into the law firm’s operating account. The amount of funds diverted by Schultz, and the amount of restitution Schultz must pay to St. Luke’s for the total amount of its loss, will be determined by the court at Schultz’s sentencing hearing.

Under federal statutes, Schultz is subject to a sentence of up to five years in federal prison without parole. 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. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

These cases are being prosecuted by Assistant U.S. Attorney Paul S. Becker. They were investigated by the FBI.

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