Federal Jury Convicts Two Former Postal Employees in Scheme to Defraud Worker’s Compensation Program

DALLAS — Following a nearly one-week trial before U.S. District Judge Sam A. Lindsay, two former employees of the U.S. Postal Service were convicted on felony offenses stemming from their scheme to defraud the Department of Labor’s (DOL) Office of Worker’s Compensation Program (OWCP), announced U.S. Attorney John Parker of the Northern District of Texas.

McArthur Baker, 69, and Tonya Evans, 52, both of Dallas, were each convicted on one count of conspiracy to defraud the U.S. with respect to claims and one count of false statements or fraud to obtain federal employees’ compensation.   The conspiracy count carries a maximum statutory penalty of 10 years in federal prison and a $250,000 fine.  The false statements or fraud count carries a maximum statutory penalty of five years in federal prison and a $250,000 fine.  Both will remain on bond pending sentencing, which is set for March 6, 2017.

The government presented evidence at trial that Baker and Evans engaged in a scheme to receive kickbacks in exchange for their completion of falsified medical documentation that was used by co-conspirators to defraud DOL’s OWCP.  The government presented further evidence that Baker also falsified forms related to travel he purportedly made for medical services, and as a result, received funds from DOL to which he was not entitled.

Baker began working for the U.S. Postal Service in 1982; he was assigned to work as a mail handler equipment operator.  Between 1984 and 2007, Baker filed eight different claims for disability, claiming he suffered from various injuries.  As a result of these claims, Baker stopped working in approximately December 2007.  He never returned to work but continued to receive disability compensation from December 2007 until at least October 2009.   He received more than $68,000 in worker’s compensation payments.  He retired from the U.S. Postal Service in October 2009 but he continued to receive disability medical care paid for through DOL, and he continues to be eligible for disability medical care.

Evans began working for the U.S. Postal Service in November 1985; she worked as a clerk primarily with the parcel post distribution machine.  She filed disability claims in August 2001, August 2003, and August 2008 claiming that she suffered from various injuries.  As a result of these claims, Evans was placed on worker’s compensation in 2001.  She received more than $340,000 in worker’s compensation payments.  In March 2010, she applied for disability retirement that was approved in October 2011.

Convicted co-conspirator, Larry Washington, was a licensed professional counselor and ran several businesses known as AAA Mental Health, LLC, Mind Spa, Inc., Solutions Health and Rehabilitation, and Convergence Emergence Diversion.  Through these businesses, Washington purportedly provided patients with counseling, pain management, chiropractic services, physical therapy, and massage services.   His patients were former postal and Veterans Administration employees who had suffered on-the-job injuries and were eligible to receive medical services and worker’s compensation related to those injuries.  Earlier this year, Washington pleaded guilty to one count of conspiracy to commit health care fraud and was sentenced in May 2016 to 78 months in federal prison and ordered to pay $7.7 million in restitution.

To maintain and enhance his billings with OWCP, Washington asked claimants, including Baker and Evans, to falsify medical documentation, called “mood inventories,” that indicated they had received services on days they had not.  Baker and Evans completed numerous mood inventory forms that contained false information about the days on which Baker and Evans received treatment from Washington or someone working for Washington.  Baker and Evans received approximately $100 for each form they completed.

Over the course of the fraud, Baker received a total of $3,000 from Washington; Evans received $6,000.

As a result of Baker’s falsified documentation, Washington was able to fraudulently bill $105,125 from OWCP.  As a result of Evans’ falsified documentation, Washington was able to bill $202,438 from OWCP.

The government presented further evidence that Baker submitted falsified documentation related to travel he purportedly made to receive medical services from Washington and others.  He also requested reimbursement for twice the amount of mileage he would have received had he actually received the purported services.  As a result, based on fraudulent travel forms he submitted, Baker received more than $3,000.

In addition to Baker and Evans, 20 claimants, four doctors or medical providers, a senior claims examiner at DOL, a claims representative, a Postal employee detailed to the Postal Service Health Resource Management Office, and a medical provider’s employee were charged and convicted in the scheme.

In total, the defendants were able to collectively fraudulently bill the federal government through the OWCP for more than $9.5 million and receive more than $8.7 million in government payments based on their fraudulent billing.  The DOL made approximately $11.4 million in payments to these claimants for their compensation and medical services.

The investigation was led by the U.S. Postal Service Office of Inspector General, and the Department of Labor Office of Inspector General, with assistance from Internal Revenue Service Criminal Investigation, U.S. Treasury Office of Inspector General, Social Security Administration Office of Inspector General/Cooperative Disability Investigations Unit, and the U.S. Department of Veterans Affairs Office of Inspector General.

Assistant U.S. Attorney P.J. Meitl and Special Assistant U.S. Attorneys Nicole Dana and Jennifer Bray are in charge of the prosecution.

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Four Southland Residents Sentenced in Scheme to Defraud

LOS ANGELES – Four defendants were sentenced today in connection with a fraudulent Orange County, California, debt relief firm, the Justice Department and U.S. Postal Inspection Service announced.  The defendants all worked at Nelson Gamble and Associates and Jackson Hunter Morris and Knight, companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees.

“These scams take advantage of consumers already struggling with debt,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to work with its law enforcement partners to protect consumers from fraud, especially when they are targeted based on their financially vulnerable conditions.”

“Pretending to operate as a law firm, these defendants falsely promised hope to struggling debtors,” said United States Attorney Eileen M. Decker. “But the promises were empty as the ‘debt relief’ firm was nothing more than an advance fee scheme designed to line the pockets of the defendants.”

“We are gratified by today’s sentencing, on behalf of the many unsuspecting victims who sought financial relief, only to be further burdened by these criminals,” said Inspector in Charge Regina L. Faulkerson of Criminal Investigations, U.S. Postal Inspection Service. “We applaud the work of the Justice Department’s Consumer Protection Branch in bringing these fraudulent credit repair conspirators to justice.”

The sentences were imposed Monday by U.S. District Judge Dale Fischer.  The four defendants all previously pleaded guilty for their roles in the scheme.

Jeremy Nelson, 31, of Dana Point, was sentenced to serve 87 months in prison and ordered to pay $4,225,924 in restitution.  Nelson admitted to being the owner and CEO of the companies and overseeing the scheme

Elias Ponce, 30, of Santa Ana, was sentenced to serve 42 months in prison and ordered to pay $2,340,373 in restitution.  Ponce worked in the “customer service” department and handled complaints.

Christopher Harati, 33, of Long Beach, was sentenced to serve 27 months in prison and ordered to pay $408,403 in restitution.  Harati worked with Ponce in customer service at the companies.

Athena Maldonado, 32, of Lake Forest, was sentenced to serve  one month in prison and six months home confinement and ordered to pay $130,224 in restitution.  Maldonado handled complaints and held herself out as the vice president of the company’s “legal department.”

Nelson and Ponce both pleaded guilty to one count of conspiracy to commit mail and wire fraud. Harati and Maldonado pleaded guilty to a separate Information charging one count of conspiracy to commit wire fraud. A fifth defendant, John Vartanian, 57, of Newport Beach, California, pleaded guilty to conspiracy in July in connection to his role as a salesman at the companies.  He is scheduled to be sentenced on Nov. 21.

Members of the conspiracy at times portrayed Nelson Gamble and Jackson Hunter as law firms or attorney-based companies.  Clients were told the companies would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  The conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees.

The scheme ran from February 2010 to September 2012. Nelson changed the name of the company from Nelson Gamble to Jackson Hunter in 2011. Nelson and his co-conspirators told victims that Nelson Gamble had gone bankrupt and that Jackson Hunter was an unrelated company that had taken over some of the accounts. Nelson and his co-conspirators blamed past problems on Nelson Gamble and denied requests for refunds of money paid to Nelson Gamble. Some victims who previously demanded refunds accepted the explanation that Nelson Gamble was bankrupt and did not pursue complaints against Jackson Hunter.

In September 2012, the Federal Trade Commission (FTC) brought a civil case against Nelson and the companies, alleging that the defendants misrepresented debt relief services offered to consumers. (See https://www.ftc.gov/enforcement/cases-proceedings/122-3030-x120048/nelson-gamble-associates-llc-et-al). The case was settled by entry of a consent decree in August 2013.

Principal Deputy Assistant Attorney General Mizer commended the Postal Inspection Service team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts.  He thanked the U.S. Attorney’s Office for the Central District of California for their contributions to the case and expressed appreciation to the FTC for referring the case to the Consumer Protection Branch. The case is being prosecuted by trial attorneys Alan Phelps and James Harlow of the Consumer Protection Branch.

For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch.

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Former Fresno Business CFO Sentenced to over 5 Years in Prison for Embezzlement and Money Laundering

Fresno, Calif. —Anthony Lester, 53, of Fresno, was sentenced today by U.S. District Judge Dale A. Drozd to five years and four months for mail fraud and money laundering in connection with his embezzlement of $306,000 from a Fresno business, Acting U.S. Attorney Phillip A. Talbert announced.

On August 19, 2016, after a four-day trial, a jury found Lester guilty on all seven counts charged in the indictment. According to evidence at trial, between August 2010 and January 2012, Lester embezzled and stole money from his former employer. While an employee at Century Builders and Highlands Energy Services, he held supervising positions in the accounting department, including Chief Financial Officer. In those capacities, Lester had responsibilities regarding management of the companies’ finances and financial transactions and had access to and control over some of the companies’ checking accounts and credit cards. Lester used this access to defraud the companies. He also attempted to frame his predecessor and other employees of the companies by falsely associating them with the PayPal accounts.

According to court documents, Lester transferred money from one of the companies’ checking accounts into what purported to be the companies’ PayPal account. Then he transferred the money to one of his own personal PayPal accounts. Additionally, he transferred money from two of the companies’ credit cards to his personal PayPal account. Thereafter, he attempted to launder the proceeds of his fraudulent scheme and conceal his embezzlement by transferring money from his personal PayPal account to his personal bank accounts. None of these transactions were authorized by the companies, and none were for legitimate business purposes of the companies. In total, Lester embezzled approximately $306,000 from his former employer.

“Financial crimes are a concern in every type and size of business, and sadly it often involves the most trusted individuals,” said Ryan L. Spradlin, special agent in charge of HSI San Francisco. “The crimes not only rob businesses of vital revenue, but they also undermine the trust of employees and customers alike.”

In addition to prison sentence, Lester was ordered to pay $306,319 in restitution to the companies.

This case was the product of an investigation by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Fresno Police Department. Assistant United States Attorneys Patrick R. Delahunty and Patrick J. Suter prosecuted the case.

Former Autonomy CFO Charged with Wire Fraud

Defendant Allegedly Defrauded Hewlett-Packard Company in the Acquisition of Autonomy for $11 Billion
A federal grand jury indicted Sushovan Hussain, 52, a citizen and resident of the United Kingdom, with conspiracy to commit wire fraud and multiple counts of wire fraud.  According to the indictment filed last Nov. 10, Hussain allegedly engaged in a scheme to defraud purchasers and sellers of securities of Autonomy Corporation plc (Autonomy) and Hewlett-Packard Company about the true performance of Autonomy’s business, its financial condition and its prospects for growth.

According to the indictment, Hussain, was the former Chief Financial Officer (CFO) of Autonomy, a company incorporated in the United Kingdom.  Autonomy maintained dual headquarters in San Francisco and Cambridge.  In 2010, about 68 percent of Autonomy’s reported revenues came from the United States and other countries in the Americas.

The case involves the acquisition by Palo Alto-based Hewlett-Packard Company and Hewlett-Packard Vision B.V., a wholly-owned subsidiary of HP (collectively HP), of Autonomy.  On Aug. 18, 2011, HP entered into an offer agreement with Autonomy and publicly announced its offer to acquire Autonomy for approximately $11 billion.  On Oct. 3, 2011, HP’s acquisition of Autonomy closed and HP acquired control of Autonomy.

According to the indictment, between 2009 and 2011, Hussain artificially inflated Autonomy’s revenues by backdating written agreements to record revenue in prior periods; recorded revenue on contracts that were subject to side letters or other contingencies that impacted revenue recognition; improperly recorded revenue for reciprocal or roundtrip transactions; and made false and misleading statements to Autonomy’s independent auditor about transactions allegedly supporting the recognition of revenue and other items in Autonomy’s financial statements.  In so doing, Hussain allegedly issued materially false and misleading quarterly and annual financial statements on behalf of Autonomy.  The indictment further alleges that defendant and others provided these financial statements to HP during the time that HP was considering whether to purchase Autonomy.

In addition, the indictment alleges that Hussain caused Autonomy to make materially false and misleading statements directly to HP regarding Autonomy’s financial condition, performance and business during the negotiations between HP and Autonomy leading up to the Aug. 18, 2011, acquisition announcement.  Allegedly, Hussain made false and misleading statements about the nature of Autonomy’s products, concealed Autonomy’s non-appliance hardware sales and made other false and misleading statements during HP’s “due diligence” of Autonomy.  In sum, the indictment charges Hussain with one count of conspiracy to commit wire fraud and 14 counts of wire fraud.

No federal court appearance has yet been scheduled for the defendant.

An indictment merely alleges that crimes have been committed and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the defendant faces a maximum sentence of 20 years in prison and a fine of $250,000, plus restitution, for each count of wire fraud and for the conspiracy count.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence.

Assistant U.S. Attorneys Robert S. Leach and Adam A. Reeves are prosecuting the case with the assistance of Phillip Villanueva and Bridget Kilkenny.  The prosecution is the result of a multi-year investigation involving the FBI and the U.S. Securities and Exchange Commission.

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Suspended Attorney William O’Brien Pleads Guilty To Wire Fraud

The United States Attorney for the District of Vermont announced that William O’Brien, 60, an attorney who lives in Winooski, pleaded guilty today in United States District Court in Burlington to a charge of wire fraud. Chief U.S. District Judge Christina Reiss released O’Brien on conditions pending sentencing, which has been set for May 31, 2017 in Brattleboro.

On October 13, the United States filed a criminal information charging O’Brien with one count of wire fraud, the charge which he admitted today. The information charges O’Brien with defrauding two former law clients. In one case, O’Brien became the trustee of a trust established by the clients. As trustee, O’Brien was to use trust funds to make charitable contributions in the memory of the clients. Between 2008 and 2013, O’Brien did make a number of contributions of trust funds in the total amount of $97,500, but also improperly diverted about $270,000 in trust funds to his law firm account. In another case, O’Brien received in his capacity as attorney more than $247,000 in client funds, which were also meant to be used for charitable purposes. Although O’Brien did make one contribution of $15,000, he again used the remaining funds for his own benefit.

In early 2016, O’Brien did repay about $472,000 to these two clients, but those payments were made only after O’Brien became aware he was under investigation by counsel for the Vermont bar. The Vermont Supreme Court suspended O’Brien’s law license in January.

O’Brien faces up to 20 years of imprisonment and a fine of up to $250,000. The actual sentence will be determined with reference to federal sentencing guidelines.

This case was investigated by the Burlington Police Department, the U.S. Postal Inspection Service and the Vermont Judiciary’s Office of Disciplinary Counsel.

O’Brien is represented by Scott McGee of Norwich. The prosecutor is Assistant U.S. Attorney Gregory Waples.

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Utah Man Pleads Guilty In Manhattan Federal Court To Commodities Fraud In Connection With Foreign Exchange Trading

Federal Jury Finds 2 Men Guilty of Defrauding Banks and USDA Export Financing Program

Deirdre M. Daly, United States Attorney for the District of Connecticut, today announced that a federal jury in New Haven has found BRETT C. LILLEMOE, 46, of Minneapolis, Minn., and PABLO CALDERON, 61, Darien, Conn., guilty of conspiracy and fraud offenses related to a multimillion-dollar scheme to defraud banks participating in a USDA-backed export financing program.  LILLEMOE, CALDERON and a third defendant were found not guilty of additional offenses.  The trial before Chief U.S. District Judge Janet C. Hall began on October 5 and the verdicts were returned this afternoon.

According to court documents and statements made in court, LILLEMOE and CALDERON submitted fraudulent documents to two United States banks in connection with a USDA loan guarantee program by which the USDA provides credit guarantees.  The credit guarantees are part of the USDA Export Credit Guarantee Program (GSM-102), which is designed to encourage financing of commercial exports of U.S. agricultural products.  The GSM-102 program guarantees credit extended by U.S. financial institutions to approved foreign banks. As part of the program, the Commodity Credit Corporation (CCC), which is an agency and instrumentality of the USDA, enters into payment guarantees (“credit guarantees”) with the goal of encouraging exports of U.S. agricultural products, including products of American farmers and American ranchers.

The credit guarantees are designed to encourage exports to buyers in foreign countries – mainly developing countries.  The program operates in cases where credit is necessary to increase or maintain U.S. exports to a foreign market and where U.S. financial institutions might otherwise be unwilling to provide financing without the guarantee backed by the United States Government.  In providing the credit guarantee facility, the CCC seeks to expand market opportunities for U.S. agricultural exporters and assist long-term market development for U.S. agricultural commodities.

In connection with the GSM-102 program, a foreign importer that has contracted to buy U.S. agricultural products can apply for a letter of credit (“LOC”) from a foreign bank that has been approved by the USDA’s Foreign Agricultural Service (FAS).  The foreign bank then issues a letter of credit in favor of the U.S. exporter.  The U.S. exporter then, consistent with the requirements of the GSM-102 program, presents proper shipping documents to an approved U.S. financial institution, including a copy of an original bill of lading, certificate of origin, and evidence of export.  The U.S. financial institution then provides funds to the U.S. exporter which, in exchange, assigns the rights to the proceeds payable under the letter of credit from the foreign bank to the U.S. financial institution in the same dollar-denominated amount, less any fees.  If the foreign bank defaults on its payments to the U.S. financial institution, the U.S. financial institution may submit a claim to the USDA FAS under the guarantee for up to 98 percent of the payment amount owed at the time of the default.

The jury found that between September 2007 and January 2012, LILLEMOE, CALDERON and others defrauded various U.S. financial institutions, including Deutsche Bank A.G. and Colorado-based CoBank ACB, by presenting false and altered shipping documents, including altered bills of lading, in connection with securing funding on loans guaranteed by the GSM-102.  As part of the scheme, LILLEMOE and CALDERON established multiple entities with separate names for the purpose of obtaining a greater share of the allocation of guarantees from the GSM-102 program, and used multiple bank accounts in the names of the various entities in order to further create the appearance that the entities were operating as separate and unrelated entities.  The defendants then, in various ways, paid for or otherwise acquired bills of lading and other shipping documents for shipments of agricultural products that they did not physically ship and for which they did not participate in the physical movement of the products in any capacity.

LILLEMOE entered into agreements with foreign banks, including International Industrial Bank (IIB) in Russia, to provide them capital that would be made available to them from a U.S. financial institution through the use of the GSM-102 program.  LILLEMOE subsequently obtained letters of credit from the foreign banks.  LILLEMOE, CALDERON and others then altered copies of certain shipping documents, including bills of lading marked “Copy non negotiable,” by whiting out portions of the documents, stamping the word “original” on the documents, and adding shading on certain sections of the bills of lading.  The defendants also prepared and executed documents termed “commercial invoices” purporting to represent sales of agricultural commodities between entities that they controlled, as well as between entities that they controlled and other entities.

The defendants then used these fraudulent documents to obtain millions of dollars from U.S. banks in connection with the GSM-102 program, and then provided the funds to the foreign banks in exchange for a percentage fee for themselves and their various entities.  As established at trial the defendants and their co-conspirators made millions of dollars of fees as part of the conspiracy.  Although the foreign banks were obligated to repay the funds to the U.S. financial institutions by virtue of the letters of credit issued to the U.S. financial institutions, in a number of instances, the foreign banks failed to do so. Nevertheless, LILLEMOE, CALDERON and their various entities retained millions of dollars of fees they had collected in connection with the GSM-102 transactions and in some instances, sent a portion of those fees to various financial backers in places such as Singapore.

Through this scheme, the foreign banks defaulted on over $25 million of loans for which the USDA’s GSM-102 program had to pay out the guarantees.

On February 20, 2015, a grand jury returned a 23-count indictment charging LILLEMOE, CALDERON, and Sarah Zirbes of Minneapolis, Minn., with conspiracy, fraud and money laundering offenses.  The jury found LILLEMOE and CALDERON guilty of one count of conspiracy to commit wire fraud and bank fraud, and LILLEMOE guilty of five counts and CALDERON guilty of one count of wire fraud.  The jury found LILLEMOE, CALDERON and Zirbes not guilty on the remaining counts of wire fraud, one count of bank fraud and one count of money laundering.  CALDERON also was found not guilty of lying to the IRS and the FBI in connection with statements he made to the federal agents from those agencies.

LILLEMOE is scheduled to be sentenced on February 1, 2017, and CALDERON is scheduled to be sentenced on February 2, 2017.  They face a maximum term of imprisonment of 20 years on each count.

This matter was investigated by the Federal Bureau of Investigation, Internal Revenue Service – Criminal Investigation Division and U.S. Department of Agriculture, Office of Inspector General.  The case is being prosecuted by Assistant U.S. Attorneys Michael S. McGarry, John H. Durham and John T. Pierpont, Jr.

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Founder of West Suburban Investment Firm Sentenced to Five Years in Federal Prison in $3.7 Million Fraud Scheme

CHICAGO — The founder of a Geneva investment firm has been sentenced to five years in federal prison for using client funds to purchase a yacht and luxury vehicle and to trade his own stocks.

STEPHEN C. BROWERE, the founder of Geneva-based Stephens Capital Management Inc., used the promise of lucrative and guaranteed returns to persuade several clients to purchase $1.66 million in promissory notes in Douglas Capital Corp., located in Lisle.  Many of the investors pledged their life savings or funds from retirement plans.  Browere did not tell investors that his relative was the president of Douglas Capital, and that Browere ran Douglas Capital’s day-to-day operations and had access to its lines of credit.  Instead of investing the funds in the promissory notes, Browere used the money to perform trades within his own investment portfolio, and to cover personal purchases such as a yacht and a BMW automobile.

Browere, 57, of Geneva, pleaded guilty in June to one count of mail fraud.  U.S. District Judge Matthew F. Kennelly on Friday sentenced Browere to 60 months in prison.  Judge Kennelly also ordered Browere to pay $3.7 million in restitution to the victims.

“Each investor thought defendant was investing his or her money in safe, stable investments that would provide income well into retirement,” Assistant U.S. Attorney Patrick Otlewski argued in the government’s sentencing memorandum.  “They did not agree to give defendant free reign to use the savings as his personal slush fund to support a lavish lifestyle.”

Browere’s scheme began no later than 2007 and continued until approximately February 2014.  In addition to spending the victims’ funds on himself, Browere concealed the fraud by using principal payments from some investors to make interest payments to others in a Ponzi-like fashion.

Browere also obtained the power of attorney on behalf of an elderly client who was infirm and suffering from dementia.  The power of attorney gave Browere access to the client’s cash and property, which were valued at more than $2.1 million.  Browere misappropriated some of this money to purchase four vacant lots in Lisle and to make interest payments to other clients.  After the client died, Browere maintained control over the estate and continued to misuse the estate’s assets.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jeffrey A. Monhart, Regional Director of the Chicago Regional Office of the U.S. Department of Labor, Employee Benefits Security Administration; and E.C. Woodson, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.  The Illinois Secretary of State’s Office provided valuable assistance in the investigation.

The government is represented by Mr. Otlewski.

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Two Florida Men Sentenced To Over Ten Years In Prison For Multi-State For Biodiesel Fraud Scheme

Fort Myers, FL — Yesterday, Thomas Davanzo, of Estero, Florida, and Robert Fedyna, of Naples, Florida, were sentenced to 121 months and 135 months in prison, respectively, for their participation in a multi-state scheme to defraud biodiesel buyers and U.S. taxpayers by fraudulently selling biodiesel credits and fraudulently claiming tax credits, announced Assistant Attorney General John C. Cruden of the Justice Department’s Environment and Natural Resources Division and U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  Both defendants were also ordered to forfeit ill-gotten gains from the conspiracy of over $46 million and other items to the government, including gold coins, jewelry and Rolex watches, thoroughbred horses, vehicles and properties.

Davanzo and Fedyna operated several shell companies that were used to facilitate the scheme.  As part of the scheme, Davanzo and Fedyna operated entities that purported to purchase renewable fuel, on which credits had been claimed and which was ineligible for additional credits, produced by their co-conspirators at Gen-X Energy Group (Gen-X), headquartered in Pasco, Washington, and its subsidiary, Southern Resources and Commodities (SRC), located in Dublin, Georgia.  They then used a series of false transactions to transform the fuel back into feedstock needed for the production of renewable fuel, and sold it back to Gen-X or SRC, allowing credits to be claimed again.  This cycle was repeated multiple times.

“In their pursuit of personal gain, the defendants perpetrated a multi-state conspiracy that defrauded and undermined a federal program intended to further the energy independence of our nation,” said Assistant Attorney General Cruden.  “Today’s sentence is a just punishment for these serious crimes against the American people.”

“We are proud to work with our federal law enforcement partners to identify and investigate individuals that manipulate and utilize federal government programs to line their pockets by fraud,” said Kim Lappin, IRS Criminal Investigation, Special Agent in Charge of the Tampa Field Office. “Today’s sentencings mark the successful result of an investigation that uncovered a complicated fraudulent scheme that generated tens of millions of dollars through false biodiesel tax credits.  IRS-Criminal Investigation will continue to work with the United States Attorney’s Office to prosecute all those involved.”

In addition, both Davanzo and Fedyna laundered the proceeds of the scheme through various shell entities. Davanzo and Fedyna established bank accounts in the names of shell entities. Funds were cycled through these shell companies’ bank accounts to perpetuate the fraud scheme and conceal its proceeds.

Davanzo and Fedyna also directed and participated in the generation of false paperwork designed to create the façade that the renewable identification number (or RIN, a serial number used to track biodiesel credits) created and claimed by co-conspirators were legitimate.  The paperwork included false invoices from Gen-X or SRC to shell entities, which purported to show sales of renewable fuel, false invoices from shell entities to Gen-X and SRC, which purported to show the purchase of feedstock and false bills of lading, which purported to show the transportation of fuel and feedstock by tanker truck.

From March 2013 to March 2014, the co-conspirators generated at least 60 million RINs that were based on fuel that was either never produced or was merely re-processed at the Gen-X or SRC facilities.  The co-conspirators received at least $42 million from the sale of these fraudulent RINs to third parties.  In addition, Gen-X received approximately $4,360,724.50 in false tax credits for this fuel.

This case was investigated by the U.S. Secret Service, the Environmental Protection Agency -Criminal Investigation Division, and the Internal Revenue Service-Criminal Investigation. It was prosecuted by Assistant United States Attorneys Sara C. Sweeney and Megan Kistler and Trial Attorney Adam Cullman of the Environment and Natural Resources Division of the Department of Justice.

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Former Finance Executive Andrew Caspersen Sentenced To Four Years In Prison For Defrauding Investors Of Over $38 Million And Misappropriating Over $8 Million From His Former Employer

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ANDREW CASPERSEN was sentenced in Manhattan federal court to four years in prison for defrauding investors of over $38 million and misappropriating over $8 million from his former employer.  CASPERSEN pled guilty on July 6, 2016, to one count of securities fraud and one count of wire fraud before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara stated:  “Using his Wall Street pedigree, Andrew Caspersen deceived and defrauded investors – including his own family and friends and a charity – out of tens of millions of dollars.  Caspersen duped his unwitting victims through an elaborate scheme involving made-up private equity ventures, fake mail addresses, and fictional financiers.  Caspersen has admitted to his crimes and has now been sentenced to time in federal prison.”

According the Information and other filings in Manhattan federal court, and statements made in today’s proceedings:

The Scheme to Defraud Investors

Beginning in November 2014 and continuing until his arrest in March 2016, CASPERSEN engaged in a Ponzi-like scheme to defraud investors, including close friends, family members, and college classmates, by falsely claiming that their funds would be used to make secured loans to private equity firms and would thereby earn an annual rate of return of 15 to 20 percent.  In total, CASPERSEN attempted to defraud more than a dozen investors of nearly $150 million.  As a result of the false and fraudulent representations made by CASPERSEN, investors wired a total of approximately $38.5 million to shell company bank accounts controlled by CASPERSEN.  Among those defrauded was a charitable organization, which made a $25 million purported investment with CASPERSEN, and which CASPERSEN solicited for an additional $20 million shortly before his arrest.  CASPERSEN never used investor funds to make the secured loans that had been promised.  Instead, CASPESEN used investor funds for purposes that investors had not authorized, including to make securities trades in his own brokerage account and to make periodic interest payments to earlier investors.  CASPERSEN went to great lengths to execute and conceal his criminal conduct: he fabricated promissory notes and other legal documents, set up fake entities with names resembling those of real private equity funds, opened bank accounts in the names of those shell companies, registered a domain name and email address purportedly associated with a legitimate private equity firm, and used the identities of two individuals without their authorization.

The Scheme to Divert Funds from the Park Hill Group

From January 2013 through March 2016, CASPERSEN was employed in the secondary advisory group at Park Hill Group.  In July 2015, CASPERSEN opened a bank account under the name “PHG Operating LLC,” which was controlled by CASPERSEN for his own benefit and was unknown to Park Hill Group (the “Fake PHG Account”).  In the fall of 2015, CASPERSEN directed clients of Park Hill Group to wire a total of approximately $8.9 million, representing payment for legitimate work that Park Hill Group had done, to the Fake PHG Account.  CASPERSEN then transferred those funds to his brokerage account, in order to execute trades in securities for his own benefit.  CASPERSEN later repaid Park Hill Group using the proceeds of his securities fraud scheme.

In addition to his prison term, CASPERSEN, 40, of Manhattan, was sentenced to three years of supervised release.  Judge Rakoff will order restitution at a later date.

Mr. Bharara praised the work of the Office’s criminal investigators, and thanked the Securities and Exchange Commission for its assistance.

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 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. Attorney Christine I. Magdo is in charge of the prosecution.

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