Texas Man Pleads Guilty to Running Fraudulent Investment Companies and Obstructing Securities and Exchange Commission Investigation

Chief Financial Officer And Manager Plead Guilty And Another Manager Sentenced In $31 Million Fraudulent Debt Collection Scheme

All 14 Defendants Have Now Pled Guilty in Largest Debt Collection Scheme Ever Prosecuted

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAURICE SESSUM, the co-owner, chief financial officer, and chief operating officer of a Buffalo, New York-based debt collection company (the “Company”), pled guilty yesterday before Judge Katherine Polk Failla to orchestrating a scheme to coerce thousands of victims across the country, through false threats and representations, into paying a total of more than $31 million to the Company to resolve debts these victims purportedly owed.  In addition, earlier today before Judge Faila, JIMMY STOKES, a Company manager, pled guilty, and TACOBY THOMAS, another Company manager, was sentenced to 70 months in prison for their respective roles in the scheme.  All 14 defendants who were charged for their participation in this fraud have now pled guilty.

U.S. Attorney Preet Bharara said:  “Now that all of the 14 defendants behind the largest debt collection scheme ever prosecuted have admitted their guilt, the process of restitution to the thousands of victims across the country can begin.  Thanks to the dedicated work of our Office’s criminal investigators and the Federal Trade Commission, this so-called ‘business’ is no longer able to victimize consumers.”

According to the allegations contained in the Indictment and statements made during the plea proceedings and THOMAS’s sentencing proceeding:

Between 2010 and February 2015, SESSUM was the co-owner, chief financial officer, and chief operating officer of the Company.  In that capacity, SESSUM, together with his co-defendant and co-owner, Travell Thomas, oversaw four debt collection offices operated by the Company in Buffalo and a team of managers and debt collectors.  As part of the scheme, SESSUM and Travell Thomas falsely inflated the balances of debts owed by consumers in the Company’s debt collection software so that debt collectors could collect more money from the victims than the victims actually owed.

SESSUM approved debt collection scripts that contained a variety of misrepresentations and instructed his collectors to make those misrepresentations to consumers over the telephone.  The Company’s debt collectors, in turn, attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats.  Among other things, STOKES misrepresented to victims that he would have a bench warrant issued for their arrest, would contact the “county” to initiate legal proceedings, and was not calling from a collection agency.  Among other things, THOMAS misrepresented to victims that he was a “process server” from “U.S. Couriers” with “legal documents” to serve on victims, that victims had committed “check fraud,” and that THOMAS was calling from an “arbitration firm.”

In total, from about January 2010 through November 2014, the Company collected over $31 million from thousands of victims across the United States.  Of the money that the Company took in from victims, approximately $1.5 million was paid in cash to SESSUM and Travell Thomas, approximately $1.4 million was withdrawn from banks and ATMs, and tens of thousands of dollars were used to pay for SESSUM’s personal expenses.

SESSUM, 40, of Buffalo, New York, and STOKES, 39, of Charlotte, North Carolina, each pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison and three years of supervised release.  The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  SESSUM is scheduled to be sentenced by Judge Failla on March 1, 2017, at 3:00 p.m.   STOKES is scheduled to be sentenced by Judge Failla on May 18, 2017.

In addition to his prison term, THOMAS, 34, of Buffalo, New York, was sentenced to three years of supervised release, and ordered to pay forfeiture in the amount of $896,605.03.

In total, 14 individuals associated with the Company have pled guilty to defrauding consumers as part of this debt collection scheme.  In addition to SESSUM, STOKES, and THOMAS, co-owner and chief executive officer Travell Thomas, former Company mangers Heather Gasta, Mark Lavin, and John Salatino, and debt collectors Jessica Mann, Charles Starks, William Clark, Anthony Caba, Columbus Simmons, Michael Calandra, and Jennifer Sherk, each pled guilty to conspiracy to commit wire fraud.

Starks, Clark, Calandra, and Mann were sentenced by Judge Failla to prison terms of 37 months, 30 months, 15 months, and one year and one day, respectively.  The sentencing of the other defendants who have pled guilty is pending.

Mr. Bharara praised the efforts of the Office’s Criminal Investigators and he thanked the Federal Trade Commission for its assistance in the case.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward A. Imperatore, Jennifer L. Beidel, and Jordan L. Estes are in charge of the prosecution.

Ringleader Of Bank Fraud Organization Sentenced To 12 Years In Prison

PHILADELPHIA – Shawn Hilliard, 30, of the Bronx, New York, was sentenced today to 12 years in prison for his role as a ringleader of a nationwide bank fraud organization which stole more than $1.3 million from customers’ accounts.  In addition to the prison term, U.S. District Court Judge C. Darnell Jones, II, ordered 3 years of supervised release, $1.3 million in restitution, and an $800 special assessment.

“Hilliard and his co-conspirators created a nationwide bank fraud organization which corrupted numerous bank employees and convinced them to provide confidential customer account information, including bank account numbers, answers to security questions, and photos of signature cards. The impact of Hilliard’s crimes on his victims is profound and far reaching, as the victims may suffer long lasting consequences of this organization’s criminal activity,” said U.S. Attorney Zane David Memeger. “Today’s sentence sends a clear message to those who might commit financial fraud that it will not be tolerated, and to those in positions of trust at our financial institutions, that they must do everything in their power to protect the security of their client’s confidential information.

“HSI aggressively pursues scam artists who defraud unsuspecting victims by stealing sensitive banking information for their own financial gain.  Let this case serve as a reminder to all of the importance of closely monitoring their bank accounts and reporting any unauthorized or suspicious activity within those accounts to their banks as soon as they are detected,” said Marlon Miller, special agent in charge of HSI Philadelphia.  “HSI remains committed to investigating criminals who perpetrate financial crimes like Mr. Hilliard, who, in this case, defrauded hundreds of victims across the United States.  Today, Mr. Hilliard has been held accountable for his actions.”

Hilliard and his co-conspirators used a network of dozens of imposters to take over the compromised bank accounts and withdraw thousands of dollars in cash.  Hilliard used the information provided by the corrupt bank employees to defeat the banks’ security measures.  Hilliard and others then took road trips around the country to Chicago, Dallas, Miami, and elsewhere withdrawing funds from the compromised accounts.  Hilliard and his co-conspirators employed drivers and handlers to transport the imposters from bank to bank and collect the stolen funds.

To date, ten members of the organization including two bank employees have pleaded guilty in federal court.  Numerous other members of the organization have pleaded guilty in state court around the country.

The case was investigated jointly by the Department of Homeland Security, Homeland Security Investigations, the United States Secret Service, and the New Jersey Attorney General’s Office with assistance from the Philadelphia Police.  It is being prosecuted by Assistant United States Attorney Robert Livermore.

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Former Valeant Executive And Former Philidor Ceo Charged In Manhattan Federal Court For Illegal Fraud And Kickback Scheme

Kickbacks Paid Out of Valeant Corporate Funds Spent on Philidor Option Were Laundered Through Secret Shell Companies

Preet Bharara, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of GARY TANNER, a former executive at Valeant Pharmaceuticals International, Inc. (“Valeant”), and ANDREW DAVENPORT, the former Chief Executive Officer (“CEO”) of Philidor Rx Services LLC (“Philidor”), for engaging in a multimillion-dollar fraud and kickback scheme.  TANNER was arrested in Gilbert, Arizona, and will be presented later today before a Magistrate Judge in Phoenix.  DAVENPORT was arrested this morning in Haverford, Pennsylvania, and will be presented later today before a Magistrate Judge in Philadelphia.

U.S. Attorney Preet Bharara said:  “Today, we charge corporate fraud at Valeant Pharmaceuticals.  Gary Tanner, a former Valeant executive, and Andrew Davenport, the CEO of Philidor, allegedly concocted a fraudulent scheme to illegally use Philidor as a vehicle for personal profit and self-dealing.  Their alleged kickback scheme illegally converted Valeant shareholder money into their own personal nest eggs.  As alleged, while purporting to be arms-length business counterparts, the two men were, in fact, partners in crime.”

FBI Assistant Director-in-Charge William F. Sweeney said:  “As shareholders, we should be able to put our faith in those responsible for making decisions on behalf of our investments. We should be able to rely on them for placing our best interests above their own. But as evidenced by today’s charges, our right to honest services is sometimes exploited by those who engage in kickback schemes that pose significant risks to investors.”

As alleged in the Complaint unsealed today in Manhattan federal court:

Valeant is a publicly traded pharmaceutical manufacturer headquartered in Canada, with its principal place of business in New Jersey.  Philidor was a specialty mail-order pharmacy that was formed in or about January 2013 with the assistance of Valeant, including the provision of financing, personnel, and supervision.  During the course of Philidor’s existence, at least 90 percent of the drugs dispensed by Philidor were Valeant-branded drugs.

TANNER was the Valeant executive primarily responsible for the Philidor relationship, as well as Valeant’s alternative fulfillment (“AF”) program more generally.  Valeant’s AF program attempted to cause doctors to prescribe, and patients to purchase, Valeant Pharmaceuticals instead of generic substitutes or alternatives by helping obtain insurance coverage for those drugs or providing other incentives for prescription and purchase of Valeant drugs.  As part of his work at Valeant, TANNER interacted directly with Philidor’s executives, including DAVENPORT, and senior Valeant executives.

Despite being well compensated by Valeant to represent its interests, TANNER used Valeant human and financial resources to benefit Philidor and its largest owner, DAVENPORT, in a variety of ways, including by arranging for Philidor to receive $2 million in Valeant financing, as well as the support of numerous Valeant staff, including a Valeant-paid sales force that was dedicated to promoting sales through Philidor.  DAVENPORT recognized the importance of TANNER’s support to Philidor’s success, stating in an email to TANNER concerning Philidor: “We both know that this endeavor would face a nearly insurmountable uphill struggle to succeed in the present Valeant environment without your confident support and the efforts of your team.”

Some of TANNER’s actions benefiting Philidor placed Valeant and its shareholders at risk.  Among other things, TANNER resisted efforts to diversify Valeant’s AF program to include other commercially available alternatives to Philidor, increasing Valeant’s dependence on Philidor and what is known as “payor risk,” i.e., the risk that actions by insurers and other payors concerning Philidor could adversely affect Valeant’s financial performance.  When asked directly by senior Valeant executives whether he had a financial interest in Philidor, TANNER falsely denied having any such interests.

In the fall of 2014, TANNER and DAVENPORT took advantage of Valeant’s dependence on Philidor to help orchestrate Valeant’s agreement to purchase an option to acquire Philidor (the “Option Agreement”) at a cost to Valeant shareholders of almost $300 million, including $100 million in up-front payments, a $33 million time-based milestone payment, and potential future multimillion-dollar sales-based milestone payments.

Even while TANNER was repeatedly certifying that he was in full compliance with Valeant’s Standards of Business Conduct, which prohibited any conflicts of interest without full disclosure and approval by company management, TANNER and DAVENPORT were making preparations for TANNER to receive multimillion-dollar kickbacks out of the sums paid by Valeant for the Philidor option.  Among other things, TANNER and DAVENPORT set up shell companies and shell company bank accounts to be used to launder and distribute the kickbacks.  While these preparations were underway, TANNER served as an adviser to his employer Valeant in its negotiations with DAVENPORT over the Option Agreement, even while he secretly advised DAVENPORT on his negotiations with Valeant using a secret Philidor email account that TANNER maintained in the name of “Brian Wilson.”

When the Option Agreement was signed in December 2010, Valeant sent $100 million to the bank accounts of the beneficial owners of Philidor, including DAVENPORT; that sum was followed soon thereafter by the $33 million time-based milestone payment.  Over $40 million of those sums were sent to entities that DAVENPORT controlled, including to an entity called “End Game LP.”  DAVENPORT kicked back close to $10 million of that sum to TANNER.  Those sums were laundered through shell company bank accounts, including a company TANNER had created in the name of Befrielse Consolidated, LLC (“Befrielse”).  TANNER used the kickback funds to purchase a new home, to pay for personal expenses, retire debts, and make investments, among other things.  DAVENPORT used his share of the proceeds to purchase tens of millions of dollars in securities and to purchase luxury goods and items, including the installation of a $50,000 custom wine cellar.

After the Option Agreement was executed, TANNER continued to use his position at Valeant to advance the interests of Philidor and DAVENPORT, including by expanding the number of Valeant products sold through Philidor and resisting Valeant’s efforts to collect cash from Philidor that Valeant was entitled to collect.  In communications concerning the scheme, using TANNER’s secret Brian Wilson email account, DAVENPORT discussed with TANNER how TANNER would secretly continue to promote DAVENPORT’s interests, even while he purported to represent Valeant’s interests as the Valeant executive responsible for Philidor.  Among other things, DAVENPORT stated that he pictured his and TANNER’s “butch and sundance ride into the sunset (or off the cliff as in the flick),” to which TANNER responded, using the secret Brian Wilson account: “[G]ave me a good chuckle when I just saw it. Will have to keep playing the game :).”

Neither the nature of Valeant’s relationship to Philidor nor Valeant’s increasing dependence on Philidor to achieve its sales and profitability goals, was disclosed to the public by Valeant until investor websites and news organizations revealed suspect aspects of Philidor’s operations and Valeant’s connection to Philidor in or about October 2015.  Following and in connection with these revelations, several insurers, and other payors terminated their contracts with Philidor, resulting in the realization of the payor risk that senior executives at Valeant had sought to avoid by diversifying away from Philidor, and Valeant’s stock price declined dramatically.

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TANNER, 39, of Gilbert, Arizona, and DAVENPORT, 48, of Haverford, Pennsylvania, are each charged with four counts: one count of conspiracy to commit honest services wire fraud; one count of honest services wire fraud; one count of conspiring to violate the Travel Act; and one count of conspiring to commit money laundering.  Counts One, Two, and Four each carry a maximum sentence of 20 years in prison.  Count Three carries a maximum sentence of five years in prison.

The maximum potential sentences, in this case, 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 work of the FBI.  He further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.  He added that the FBI’s investigation was ongoing.

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 is 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.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and the Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Howard Master, Robert Allen, Richard Cooper, and Ian McGinley are in charge of the prosecution.

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

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JPMorgan’s Investment Bank in Hong Kong Agrees to Pay $72 Million Penalty for Corrupt Hiring Scheme in China

JPMorgan Securities (Asia Pacific) Limited (JPMorgan APAC), a Hong Kong-based subsidiary of multinational bank JPMorgan Chase & Co. (JPMC), agreed to pay a $72 million penalty for its role in a scheme to corruptly gain advantages in winning banking deals by awarding prestigious jobs to relatives and friends of Chinese government officials.

Assistant Attorney General Leslie R. Caldwell of the Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office made the announcement.

“The so-called Sons and Daughters Program was nothing more than bribery by another name,” said Assistant Attorney General Caldwell.  “Awarding prestigious employment opportunities to unqualified individuals in order to influence government officials is corruption, plain and simple.  This case demonstrates the Criminal Division’s commitment to uncovering corruption no matter the form of the scheme.”

“U.S. businesses cannot lawfully seek to gain a business advantage by corruptly influencing foreign government officials,” said U.S. Attorney Capers.  “The common refrain that this is simply how business is done overseas is no defense.  In this case, JPMorgan employees designed a program to hire otherwise unqualified candidates for prestigious investment banking jobs solely because these candidates were referred to the bank by officials in positions to award business to the bank.  In certain instances, referred candidates were hired with the understanding that the hiring was linked to the award of specific business.  This is no longer business as usual; it is corruption.”

“Creating a barter system in which jobs are awarded to applicants in exchange for lucrative business deals is a corrupt scheme in and of itself,” said Assistant Director in Charge Sweeney.  “But when foreign officials are among those involved in the bribe, the international free market system and our national security are among the major threats we face.  Those engaging in these illegal acts abroad may think they’re out of sight and out of mind, but they’re wrong.  The FBI has recently established three dedicated international corruption squads to combat this type of quid pro quo, and we’ll use all resources at our disposal to uncover and put an end to these crimes.”

According to JPMorgan APAC’s admissions, beginning in 2006, senior Hong Kong-based investment bankers set up and used a “client referral program,” also referred to as the “Sons and Daughters Program,” to hire candidates referred by clients and government officials.  The Sons and Daughters Program was used as a means to influence those same officials to award investment deals to JPMorgan APAC.  By late 2009, JPMorgan APAC executives and senior bankers revamped the client referral program to improve its efficacy by prioritizing those hires linked to upcoming client transactions.  In order to be hired, a referred candidate had to have a “directly attributable linkage to business opportunity.”

According to admissions made in connection with the resolution, these quid pro quo arrangements were discussed internally among JPMorgan APAC bankers.  For example, in late 2009, a Chinese government official communicated to a senior JPMorgan APAC banker that hiring a referred candidate would significantly influence the role JPMorgan APAC would receive in an upcoming initial public offering (IPO) for a Chinese state-owned company.  The banker communicated this message to several senior colleagues, who then spent several months trying to place the referred candidate in an investment banking position in New York.  Despite learning from personnel in New York that this referred candidate was not qualified for an investment banking position, senior JPMorgan APAC bankers created a new position for the candidate in New York, and JPMorgan APAC thereafter obtained a leading role in the IPO.  Further, JPMorgan APAC employees misused compliance questionnaires to justify and paper over corrupt business arrangements.  Employees also used a template with pre-filled answers, including that there was “no expected benefit” from the hire, and compliance personnel drafted and modified questionnaires that failed to state the true purpose of the hire.

JPMorgan APAC further admitted that candidates hired during the scheme were typically given the same titles and paid the same amount as entry-level investment bankers, despite the fact that many of these hires performed ancillary work such as proofreading and provided little real value to any deliverable product.

The corrupt scheme netted JPMorgan APAC at least $35 million in profits from business mandates with Chinese state-owned companies.

JPMorgan APAC entered into a non-prosecution agreement and agreed to pay a criminal penalty of $72 million to resolve the matter.  As part of the agreement, JPMorgan APAC has agreed to continue to cooperate with the department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program, and to report to the department on the implementation of its enhanced compliance program.

The department reached this resolution based on a number of factors, including that JPMorgan APAC did not voluntarily and timely disclose the conduct at issue.  However, JPMorgan APAC did receive full credit for its and JPMC’s cooperation with the criminal investigation, including conducting a thorough internal investigation, making foreign-based employees available for interviews in the United States and producing documents to the government from foreign countries in ways that did not implicate foreign data privacy laws.  JPMorgan APAC also took significant employment action against six employees who participated in the misconduct resulting in their departure from the bank, and it disciplined an additional 23 employees who, although not involved in the misconduct, failed to effectively detect the misconduct or supervise those engaged in it.  JPMorgan APAC imposed more than $18.3 million in financial sanctions on former or current employees in connection with the remediation efforts.  Based on these actions and other considerations, the company received a non-prosecution agreement and an aggregate discount of 25 percent off of the bottom of the U.S. Sentencing Guidelines fine range.

In related proceedings, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against JPMC, whereby JPMC agreed to pay $130.5 million in disgorgement to the SEC, including prejudgment interest.  The Federal Reserve System’s Board of Governors also issued a consent cease-and-desist order and assessed a $61.9 million civil penalty. Thus, the combined U.S. criminal and regulatory penalties paid by JPMC and its Hong Kong subsidiary are approximately $264.4 million.

The FBI’s New York Field Office investigated the case.  Assistant Deputy Chief Leo Tsao and Trial Attorneys James P. McDonald and Derek J. Ettinger of the Criminal Division’s Fraud Section and Assistant U.S. Attorney James P. Loonam of the Eastern District of New York’s Business and Securities Fraud Section prosecuted the case.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

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Amherst Man Indicted On Multiple Charges Of Fraud, Identity Theft And Theft Of Government Money

BUFFALO, N.Y.- Acting U.S. Attorney James P. Kennedy, Jr. announced today that a grand jury has returned a 48 count indictment charging Umar Adeyola 46, of Amherst, NY, with health care fraud, conspiracy to commit health care fraud, aggravated identity theft, making false statements in a health care matter, wire fraud, and theft of government money. The charges carry a maximum penalty of 22 years in prison and a $250,000 fine.

Assistant U.S. Attorney Maura K. O’Donnell, who is handling the case, stated that according to the indictment, the defendant founded, organized, and managed the HEART Foundation, a not-for-profit organization intended to assist area youths, and Heart Community Alliance (“HCA”), a related for-profit organization, intended to provide clinical services, such as counseling and psychotherapy, to youths. Through his role with those organizations, Adeyola is accused of engaging in two major fraud schemes.

The first scheme involved attempts by the defendant, on behalf of HCA, to defraud private insurance companies Blue Cross Blue Shield, Independent Health, and Univera. Adeyola arranged for the submission of false and fraudulent bills for office visits using the names and/or provider numbers of healthcare providers who had not actually rendered the services claimed. The bills falsely represented that the services had been rendered by properly licensed and credentialed social workers when, in fact, the services had actually been provided by other individuals, including interns. The scheme included the submission to the same insurance companies of bills for services which purported to have been rendered by a social worker who was actually hospitalized and/or deceased on the dates of service claimed.

In addition, Adeyola is accused of falsifying documents in response to an audit of HCA by Independent Health. During the course of the audit, the defendant allegedly made materially false statements to representatives of Independent Health, with respect to the deceased social worker who he claimed had rendered services at HCA.

The second scheme involved Adeyola’s theft of government funds in the form a federally funded grant received by the Heart Foundation. Specifically, in April 2013, the Heart Foundation was selected to be a recipient of a Department of Labor grant, administered by the Latino Coalition, an entity in California.  Adeyola submitted in excess of 30 false and fraudulent reimbursement requests for grant funds, resulting in payment of approximately $135,000 to the Heart Foundation.

The defendant was arraigned this morning before U.S. Magistrate Judge Michael J. Roemer and released.

The indictment is the result of an investigation by the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Michael C. Mikulka, Special Agent-in-Charge of the New York Region, the Federal Bureau of Investigation, under the direction of Special Agent in Charge Adam S. Cohen, and the Department of Health and Human Services, Office of Inspector General, Office of Investigations under the direction of Special Agent in Charge Scott Lampert.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

CONTACT:      Barbara Burns
PHONE:         (716) 843-5817
FAX:            (716) 551-3051

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Federal charges filed in W.Va. Division of Highways pay-to-play scheme

WHEELING, WEST VIRGINIA – Four individuals and a corporation are facing federal charges for conspiring to steer West Virginia Division of Highways projects to a South Carolina business in exchange for bribes and kickbacks, United States Attorney William J. Ihlenfeld, II, announced.

Bruce E. Kenney, III, Andrew P. Nichols, James Travis Miller, and Mark R. Whitt have been charged in a scheme which caused $1.5 million worth of highway work to be routed to the Dennis Corporation, a Columbia, South Carolina engineering consulting firm.  Bayliss and Ramey, Inc., a Putnam County highway electrical contractor, has also been charged.

Kenney, age 60, of Norfolk, Virginia, is alleged to have used his position in the Traffic Engineering Division of the Division of Highways to bypass normal state procedures and funnel structure inspection work to the Dennis Corporation in exchange for covert payments totaling nearly $200,000.  Kenney was charged by Information today with honest services wire fraud conspiracy and conspiracy to impede the Internal Revenue Service.

Nichols, age 38, of Lesage, West Virginia, formerly served as the manager of the West Virginia Division of the Dennis Corporation while also working as an engineering professor.  He is alleged to have managed the financial relationships of his co-conspirators, to have ensured that payments were made, and to have lied to federal agents about his involvement in the scheme.  Nichols was indicted earlier this month on charges of conspiracy to commit honest services wire fraud and money laundering, along with obstructing justice and making false statements. The indictment was unsealed this morning.

Miller, age 40, of Hurricane, West Virginia, also worked for the Division of Highways before leaving to work for the Dennis Corporation.  He is alleged to have delivered covert payments to Kenney in exchange for official actions that were done in favor of Dennis Corporation.  Miller was charged by Information today with money laundering conspiracy.
Whitt, 52, of Winfield, West Virginia, was the president and owner of Bayliss and Ramey, Inc., which was awarded the statewide signal maintenance contract in 2009.  Whitt allegedly used the
contract to funnel construction work to Dennis Corporation.  He benefitted financially for helping to conceal the illegal flow of funds from the Division of Highways to Dennis Corporation.  Whitt was charged by Information today with wire fraud conspiracy.

Bayliss and Ramey, Inc. submitted invoices with a twenty percent mark-up to ensure that it would be compensated for its role in the scheme.  This mark-up by Bayliss and Ramey caused the State of West Virginia to pay a higher price than it should have for engineering services. The corporation was charged by Information today with wire fraud conspiracy.

The criminal conduct in this matter occurred from 2008 until 2014.  The investigation began in September 2015 when information about the scheme was provided to the U.S. Attorney’s Office.

Each individual defendant faces the possibility of incarceration.  Under the Federal Sentencing Guidelines, the actual sentence imposed will be based upon the seriousness of the offense and the criminal history, if any, of each defendant.  Each defendant is presumed innocent unless and until proven guilty.

Assistant U.S. Attorneys Jarod J. Douglas and Sarah W. Montoro are prosecuting the case on behalf of the government.  The case is being investigated by the U.S. Attorney’s Public Corruption Unit, which includes the Federal Bureau of Investigation, the West Virginia Commission on Special Investigations, IRS-Criminal Investigation, and the West Virginia State Police.  The investigation is ongoing.

Ihlenfeld commended the efforts of all of the investigators, and encouraged citizens with information regarding public corruption in their community to call the West Virginia Public Corruption Hotline at 855-WVA-FEDS (855-982-3337), or to send an email to wvafeds@usdoj.gov

Two Tennessee Residents Indicted for Conspiracy and Employment Tax Fraud

Impeded IRS Efforts to Collect and Failed to Pay Over $2.8 Million in Payroll Taxes
A federal grand jury sitting in Memphis, Tennessee returned an indictment on Nov. 10, which was unsealed yesterday, charging two Tennessee residents with conspiring to defraud the United States and failing to account for and pay over employment tax, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Edward L. Stanton III for the Western District of Tennessee.

Mark and Jayton Stinson were each arrested Tuesday and charged with one count of conspiring to defraud the United States and five counts of failing to truthfully account for and pay over payroll taxes.  Mark Stinson was also charged with five counts of filing false tax returns, one count of theft of government funds, and one count of aggravated identity theft.

According to the indictment, from 2005 through 2015, the Stinsons operated a temporary staffing company that provided services to businesses in Tennessee and elsewhere.  The staffing company’s standard contract with its customers provided that the staffing company was responsible for withholding employment tax from its employees’ wages and paying over the amounts withheld to the Internal Revenue Service (IRS).

It is alleged that the Stinsons failed to pay over $2.8 million in employment tax to the IRS, failed to timely file employment tax returns and filed false employment tax returns.  The indictment further alleges that despite having the same line of business and substantially the same customers, the Stinsons changed the name and structure of the company multiple times after accumulating employment tax liabilities, operating as Jayton Stinson Connex Staffing & Janitorial Service, Connexx Staffing Services LLC, Connexx Staffing Services Inc. and Complete Employment Agency.

The Stinsons are also alleged to have conspired to impede IRS collection efforts of the company’s payroll tax liabilities. For example, the Stinsons are alleged to have made false representations to the IRS about their control of the staffing company and their knowledge of their responsibility to truthfully account for and pay over the employment taxes, placed the staffing company in the names of nominees who did not have control over the business operations, and established payment arrangements intended to impede an IRS levy placed on their customer payments.  It is further alleged that the Stinsons used the withheld funds to pay for personal expenses, including a Mercedes-Benz, a Cadillac Escalade, mortgage payments and private school tuition for their children.

If convicted, the Stinsons face a statutory maximum sentence of five years in prison for the conspiracy count and for each count of failing to pay over employment taxes.  Mark Stinson also faces a statutory maximum sentence of three years in prison for each false return count, 10 years in prison for theft of government funds and a mandatory sentence of two years in prison for the aggravated identity theft charge, which will be in addition to any other term of imprisonment he receives.  Both defendants also face a period of supervised release and monetary penalties.

Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Stanton commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney Damon Griffin and Trial Attorney Nathan Brooks of the Tax Division, who are prosecuting the case.

An indictment merely alleges that crimes have been committed.  Defendants are presumed innocent until proven guilty beyond a reasonable doubt.

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

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Woman Sentenced To Three Years In Prison For Bank Fraud

SAN JUAN, Puerto Rico– Miosotis Ribot-Figueroa (Ribot) was sentenced before US District Court Judge Gustavo Gelpí to 36 months in prison, three years of supervised release, an order to forfeit her home in the Municipality of Gurabo, and an order to pay a restitution of $451,950.77 for bank fraud and aggravated identity theft charges, announced Rosa Emilia Rodríguez-Vélez, United States Attorney for the District of Puerto Rico. José F. González-Guzmán (González) was sentenced to five years of probation, was ordered to forfeit a Vessel, a 2002 Doral International Model 360SE named Cizañas, and was ordered to pay a restitution of $4,134.35 for one charge of monetary transaction in property derived from specified unlawful activity. Both defendants had plead guilty on April 26, 2016.

On December 9, 2015, a Federal grand jury returned a seventy-nine count indictment with multiple counts of bank fraud, wire fraud, aggravated identity theft, and four counts of monetary transactions in property derived from specified unlawful activity. The Federal Bureau of Investigation (FBI) was in charge of the investigation.

According to the indictment, which was filed on December 9, 2015, these charges stem from a scheme utilized by Ribot from approximately May to October 2014 to make thirty-four unauthorized bank transfers from the bank account of her employer to bank accounts controlled by Ribot and/or González totaling approximately $490,165.42. Ribot was employed as an assistant controller for a Puerto Rico company that sold, distributed, and provided service for medical equipment.

As a part of the scheme, Ribot logged into her employer’s computer network and accessed their bank’s system for processing payments and bank transfers to vendors and customers. Ribot then processed thirty-four unauthorized bank transfers to herself and González. Ribot submitted false and fraudulent invoices to correspond to the fraudulent bank transfers. Ribot also submitted false information into a journal voucher system to reflect that the bank transfer had been authorized by a supervisor. In doing so, Ribot utilized the names and signature of others to further the scheme to defraud, which constituted the aggravated identity count.

The case was prosecuted by Assistant U.S. Attorney Seth Erbe.