Lawyer Sentenced to Prison for Embezzling Funds

MICHAEL SHAW, 37, of Mableton, Georgia, was sentenced January 5 by United States District Judge Willis B. Hunt on bank fraud charges relating to an embezzlement scheme.

United States Attorney Sally Quillian Yates said, “This defendant is a former lawyer who betrayed the trust that his law firm and its clients placed in him by stealing from them. The evidence showed that his fraud continued over a five-year period, and was far from a one-time accounting mistake. His crimes cost him his job, his law license and now will send him to federal prison.”

SHAW was sentenced to one year and three months in prison to be followed by three years of supervised release, and was ordered to perform 100 hours of community service. SHAW pleaded guilty to the charges on October 20, 2010.

According to United States Attorney Yates, the charges and other information presented in court: SHAW was employed as an associate attorney at a large Atlanta law firm, specializing in bankruptcy and commercial foreclosure litigation. From 2003 to 2009, he regularly performed investigative services for clients himself, but submitted invoices in the name of an investigator who also worked for the firm. These invoices totaled approximately $90,000. At the same time, SHAW performed title-examination services for clients himself, but submitted invoices to the firm in the name of a fictitious vendor. He obtained the vendor’s social security number from federal bankruptcy filings and submitted fraudulent W-9 forms in the vendor’s name. These invoices totaled approximately $425,000. For almost five years, SHAW regularly performed work for clients, submitted fraudulent invoices to the firm’s accounting department, received checks, endorsed the checks over to himself, and deposited the funds into his personal checking account. During this period, he also continued to receive his regular law firm salary as well.

In June 2009, a client’s billing review caused the law firm to discover SHAW’s misconduct, and he was terminated. SHAW, a member of the Georgia Bar from 1999 to 2010, was disbarred by the Georgia State Bar after his misconduct came to light.

This case was investigated by special agents of the Federal Bureau of Investigation.

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Emanuel County Couple Plead Guilty to Mortgage Fraud Scheme

BRIAN STEPTOE, 41, and NATASHA STEPTOE, 38, both from Emanuel County, Georgia, pleaded guilty today in federal district court to bank fraud and conspiracy to commit bank fraud, respectively.

“The U.S. Attorney’s Office will continue to work with law enforcement partners to investigate and prosecute those who engage in financial crimes,” stated United States Attorney Ed Tarver.

Evidence presented during their guilty pleas revealed that the Steptoes, with the assistance of others, knowingly submitted a false loan application and other documentation to Bank of America with regard to a $400,000 home loan. The investigation revealed that the Steptoes’ scheme was to defraud Bank of America in order to pocket sizeable sums of money for themselves and others. The property went into foreclosure soon after it was sold and remains on the market to this day.

BRIAN STEPTOE faces a maximum penalty of thirty (30) years' imprisonment, a $1,000,000 fine, and five (5) years' of supervised release. He is currently incarcerated and awaits sentencing. NATASHA STEPTOE faces a maximum penalty of five (5) years' imprisonment, a $250,000 fine, and three (3) years' of supervised release. She remains on bond pending her sentencing hearing, which has not yet been scheduled.

This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

U.S. Attorney Tarver recognized the extensive efforts of the FBI in bringing this criminal activity to light, and particularly praised the efforts of Statesboro FBI Special Agent Cornelius Harris, who investigated this case.

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Former Mortgage Broker Sentenced to 25 Years in Prison in Multiple Mortgage Fraud Schemes Worth $23 Million

EDWARD WILLIAM FARLEY, 47, of Hoschton, Georgia, was sentenced today by United States District Judge Timothy C. Batten, Sr. to serve 25 years in federal prison on charges of bank fraud and conspiracy involving mortgage fraud, a real estate investment “Ponzi” scheme with over 100 victims, a check-kiting scheme, and bankruptcy fraud. WALTER JULIUS HERMANN, 41, of Dunwoody, Georgia, was also sentenced by Judge Batten to serve over two years in federal prison on charge of bank fraud involving real estate appraisals he submitted in the FARLEY mortgage fraud scheme.

United States Attorney Sally Quillian Yates said, “Not only did these different mortgage fraud schemes cause the lenders to suffer cash losses of $23 million, they contributed to the losses that many homeowners and communities have experienced because of the blight of empty houses. Homeowners think someone new is moving in, their houses will keep their value, and their community is growing. But just the opposite happens. Flipped houses turn into eyesores and the neighborhood quickly suffers. This creative mortgage fraudster is now going to federal prison.”

Brian Lamkin, Special Agent in Charge, FBI Atlanta, said, “While justice is served in the sentencing of Mr. Farley and his associates to federal prison, over a hundred victims suffering large monetary losses remain. Mr. Farley’s greed was far reaching in that he crossed over into several schemes to defraud. The mortgage fraud scheme run by Mr. Farley relied on others to pull off the scam, but he relied on the complete and ill-placed trust of the victims in an aggressive real estate Ponzi scheme offering investors high rates of returns. The FBI is pleased in the role that it played in removing from society these few individuals that preyed on so many.”

FARLEY was sentenced to 25 years in prison to be followed by five years of supervised release, and ordered to pay restitution of $24,131,857. FARLEY pleaded guilty to these charges on November 5, 2009.

HERMANN was sentenced to two years and nine months in prison to be followed by five years of supervised release, and ordered to pay restitution of $2,023,077. HERMANN was also prohibited from requesting reinstatement of his appraiser’s license during his prison sentence or during his supervised release. HERMANN pleaded guilty to this charge on December 16, 2009. There is no parole in the federal system.

According to United States Attorney Yates, the charges and other information presented in court: FARLEY, a former mortgage broker, operated through “Creative Home Search,” “Southern Land Partners,” “Georgia Land Group,” and “Global Mortgage” in Dunwoody and Norcross, Georgia, to defraud mortgage lenders through same-day “flips” of properties located in Buford, College Park, Conyers, Cumming, Dacula, Grayson, Lawrenceville, Lithonia, Norcross, Marietta, Roswell, Snellville, and Suwanee.

FARLEY paid appraiser HERMANN to fraudulently inflate the value of each property by $50,000 to $100,000, and recruited often unqualified investor/borrowers to purchase them from one of his companies. The loan applications of these investor/borrowers were often supported by false income, employment, bank deposits, bank statements, W2’s and/or leases. However, as is common with “flips,” FARLEY did not purchase the properties he was selling to the investors/borrowers until after the fraudulently obtained loan proceeds on the “second” “subsequent” purchase had been disbursed. During the “first” purchase, he purchased the properties for up to $100,000 less than the amount of the inflated mortgage loans he had arranged for the investor/borrowers in the “second” purchase. As a result of the defendant’s lies and manipulations, the lenders lost millions of dollars in this flip scheme.

In a separate real estate investment/Ponzi scheme, FARLEY operated under the name “Alliance Resource Management” (“ARM”) in Lawrenceville, Georgia, to conceal his new source of income from prior victims. He falsely represented that ARM was in the business of purchasing primarily residential properties which were being renovated and sold at a profit, when in reality ARM had insufficient equity and income to do so. Real estate investors and lenders, including private investors, corporate lenders, and banks were induced to participate through FARLEY’s false promises that their investments and loans were fully secured by a first security position in property, plus a personal guarantee, and sometimes title insurance. FARLEY also provided promissory notes falsely promising those ARM lenders an interest rate between 14 percent to 60 percent. The same property was used to “fully secure” multiple investors and lenders, causing losses in excess of $20 million. As is common in such Ponzi schemes, FARLEY made repayments to early victims from scheme proceeds generated from newer investors and lenders.

FARLEY also fraudulently obtained $1.2 million from Washington Mutual Bank in a check kiting scheme by transferring funds he did not have among several ARM bank accounts, and withdrawing scheme proceeds before the “insufficient funds” checks were returned. He then used $400,000 in investor funds solicited for property refinance loans to address his check-kiting problem. The evidence also showed that FARLEY diverted assets of ARM to himself after a bankruptcy petition was filed, and concealed that diversion from the United States Bankruptcy Court and ARM creditors.

A co-defendant related to FARLEY’s Ponzi scheme, TRENT EDWARD WRIGHT, 38, of Cumming, Georgia, was a real estate closing attorney used by FARLEY in his scheme to issue title policies without paying off prior security holders. WRIGHT pleaded guilty to mail fraud on December 17, 2009, and was sentenced on March 12, 2010, by Judge Batten to serve one year and nine months in prison, to followed by three years supervised release, and ordered to pay restitution of $2,409,760.

These cases were investigated by special agents of the Federal Bureau of Investigation with the assistance of the Office of the United States Trustee.

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Defendant Sentenced on Bank Fraud Conviction

Edmund A. Booth, Jr., United States Attorney for the Southern District of Georgia, announced today that JIMMY LEE EVERETT, age 41, of Brooklet, Georgia was recently sentenced by Chief U.S. District Judge William T. Moore, Jr. for his conviction on bank fraud which involved the embezzlement of more than $200,000 from Thompson Paving Marking, Inc. (“TPM”), a paving marking business located in Chatham County, Georgia.

Booth stated that in April 2008, the federal grand jury for the Southern District of Georgia returned a 36-count Indictment against Everett, charging him with bank fraud in violation of Title 18, United States Code, Section 1344, and aggravated identity theft, in violation of Title 18, United States Code, Section 1028A. According to the Indictment, Everett was a minority shareholder in TPM. Everett fraudulently opened a checking account in the business’s name and began diverting payments from TPM customers to that checking account without the knowledge or consent of the other owners. He then drained that account of the embezzled funds in order to pay for a variety of personal expenditures, causing the company over $200,000 in loss.

Booth said that Everett pled guilty to one count of bank fraud in June 2008. On June 24, 2009, the court sentenced Everett to 110 months imprisonment, to run concurrently with the 108-month term of imprisonment that Everett received on the same day on his conviction for his involvement in an unrelated million dollar stolen car conspiracy ring. After release from imprisonment, Everett will be placed on supervised release for a term of 5 years.

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Former Accounting Manager for Historic Savannah Foundation Pleads Guilty to Fraud

Edmund A. Booth, Jr., United States Attorney for the Southern District of Georgia, announced that James Walter Boston, 53, of Savannah, Georgia, appeared in United States District Court on June 19, 2009 and pled guilty to one count of bank fraud, in violation of 18 U.S.C. § 1344.

Boston had been charged with bank fraud and access device fraud in an indictment returned by the federal grand jury in March 2009. That indictment arose out of an investigation into allegations that Boston embezzled money from the general operating account of the Historic Savannah Foundation, a local non-profit organization, while he was employed as its Accounting and Finance Manager. The indictment alleged that on over fifty separate occasions between May 2, 2008, and December 23, 2008, Boston fraudulently wrote checks and made wire transfers from the Historic Savannah Foundation’s general operating account to his own personal bank account. It was further alleged that over the course of his employment, Boston embezzled approximately $74,000.

Booth stated that the evidence presented at the guilty plea hearing showed that Boston obtained that money from the Historic Savannah Foundation by fraudulent means. In fact, Boston admitted that he had obtained the money by fraud.

Booth noted that Boston faces a maximum statutory penalty of thirty (30) years' imprisonment, a $1,000,000 fine, and five (5) years' supervised release. Boston remains on bond pending his sentencing hearing, which has not yet been scheduled.

Booth commended Special Agent Josh Hayes of the Federal Bureau of Investigation for his work on the investigation. The government is represented by Assistant United States Attorney Brian Tanner.

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A Third Former Home Depot Employee Pleads Guilty to Kickback Scheme

RONALD K. JOHNSTON, 37, of Atlanta, Georgia, has pleaded guilty to one count of conspiracy to commit wire fraud and two counts of filing a false tax return, arising out of a scheme to defraud Home Depot.

United States Attorney David E. Nahmias said, "This is the third former Home Depot employee who has now admitted accepting bribes from the company's foreign suppliers and then not reporting or paying taxes on that illegal income. This type of conduct corrupts the honest operation of American businesses, and those who pay, receive, or solicit such payoffs risk federal prosecution."

"Kickback schemes undermine the competitive process," said Deborah A. Garza, Acting Assistant Attorney General in charge of the Department's Antitrust Division. "Today's plea underscores the importance of holding accountable individuals who participate in such conspiracies."

IRS Criminal Investigation Special Agent In Charge Reginael D. McDaniel said, "The prosecution of individuals who conceal their income from the IRS, even if obtained from illegal activity, is a vital element in maintaining public confidence in our tax system. We should not expect the honest taxpayer to foot the bill for those who choose not to pay their fair share."

According to United States Attorney Nahmias and information presented in court: Between 2005 and 2007, JOHNSTON, a former Merchant for Flooring, participated in a conspiracy to defraud Home Depot by taking kickbacks from foreign suppliers seeking to do business with Home Depot. JOHNSTON arranged for Home Depot to purchase items for resale on less than the most advantageous terms to the company. Another former Home Depot employee, ANTHONY TESVICH, who pleaded guilty last June to similar offenses, received millions of dollars in bribes from foreign suppliers and passed on to JOHNSTON through kickbacks hundreds of thousands of dollars and also made payments to a home improvement company for work on JOHNSTON'S residence. In July 2008, another former Home Depot employee, JAMES P. ROBINSON, also pleaded guilty to similar charges arising out of his participation in this scheme to defraud Home Depot.

JOHNSTON also pleaded guilty to filing a false tax return by underreporting his income for tax years 2005 ($60,108 in unreported income); and 2006 ($125,893 in unreported income).

JOHNSTON could receive a maximum sentence of 20 years in prison on the conspiracy to commit wire fraud charge, and a maximum sentence of 3 years in prison on each tax charge. JOHNSTON also could be fined up to $250,000 on each count. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders. JOHNSTON is scheduled to be sentenced on April 1, 2009, at 3:30 p.m., before United States Judge Richard W. Story.

This case is being investigated by the Internal Revenue Service-Criminal Investigation, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, and the Federal Bureau of Investigation. Home Depot has cooperated in the federal investigation.

This case is being prosecuted by John R. Fitzpatrick and Barbara W. Cash, Trial Attorneys for the United States Department of Justice Antitrust Division, Atlanta Field Office, and Assistant United States Attorney Russell Phillips, with assistance from Assistant United States Attorney Sally Molloy.

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Former Investment Advisor Arraigned on Securities Fraud Charges

FREDERICK J. BARTON, 48, of Atlanta , Georgia , was arraigned today before United States Magistrate Judge C. Christopher Hagy on federal charges of wire fraud, mail fraud, and securities fraud. BARTON was indicted by a federal grand jury on December 2, 2008 .

“This indictment charges a former stockbroker and investment advisor with diverting client money to himself, including $1 million from an elderly woman suffering from Alzheimer’s disease,” said United States Attorney David E. Nahmias. “Today’s arraignment marks the beginning of the process by which the defendant and his alleged frauds will be brought to the bar of justice.”

According to Nahmias and the documents and information presented in court: The 13-count indictment alleges that BARTON, a former investment manager, defrauded several clients and investors of approximately $3 million, including almost the entire life savings of an elderly woman suffering from Alzheimer’s disease. From at least 1995 through 2002, BARTON was a manager at an Atlanta branch of the national brokerage firm A.G. Edwards & Sons, Inc., based in St. Louis , Missouri . After he was terminated from A.G. Edwards in 2002, he began his own investment advisory firms, Barton Asset Management, LLC and Twinspan Capital, LLC, both based in Atlanta . The indictment alleges that on numerous occasions from at least 2001 through 2007 – before and after leaving A.G. Edwards – BARTON fraudulently diverted to himself client funds that he was entrusted with investing.

In particular, the indictment alleges that BARTON defrauded a 90-year old Alzheimer’s patient, identified in the indictment by her initials, RF. After having learned of RF’s diagnosis in 2001, BARTON allegedly fraudulently diverted over $1 million of RF’s assets to his own checking account, which he spent on personal lifestyle expenses and to fund the development of Twinspan Capital. As a result, the balance in RF’s investment and bank accounts fell from approximately $1.3 million in 1999 to less than $100 in 2004.

In addition to diverting client money from RF and others, the indictment alleges that BARTON committed securities fraud by selling shares in his new company, Twinspan, based on false pretenses. Specifically, he raised over $1 million in investments in Twinspan by claiming that he would use the proceeds to operate and grow the business. However, the indictment alleges that he instead diverted at least half of these supposed investments to himself, which he used to satisfy personal debts and pay personal lifestyle expenses.

On June 3, 2008 , the United States Securities and Exchange Commission (SEC) filed a civil enforcement action against BARTON, alleging violations of the anti-fraud provisions of the securities laws, in U.S. District Court in Atlanta . That case is currently pending before U.S. District Judge Richard W. Story.

Members of the public are reminded that the indictment only contains charges. The defendant is presumed innocent of the charges and it will be the government's burden to prove the defendant's guilt beyond a reasonable doubt at trial.

This case is being investigated by Special Agents of the Federal Bureau of Investigation.

Assistant United States Attorney Justin S. Anand is prosecuting the case.

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Former Georgia Real Estate Agent Sentenced to 14 Years in Federal Prison for Mortgage Fraud

Joseph Sterling Jetton, 61, of Woodstock, Ga., was sentenced October 10, 2008, to 14 years in federal prison to be followed by five years of supervised release and ordered to pay $11,194,300 in restitution on charges of conspiracy, bank fraud, wire fraud and money laundering related to a multi-million dollar mortgage fraud scheme. Jetton was convicted by a jury on Nov. 26, 2007, after a three week trial, and was sentenced today by U.S. District Judge Beverly B. Martin.

According to U.S. Attorney David E. Nahmias and the information presented in court, Jetton orchestrated a mortgage fraud scheme that involved millions of dollars in fraudulently inflated mortgage loans being provided to unqualified straw borrowers from late 2004 through early 2006. The straw borrowers were paid through shell companies as much as $600,000 per property from the fraudulently obtained loan proceeds. Jetton wrote sales contracts that failed to disclose that the sales prices of the residences had been inflated and that hundreds of thousands of dollars out of the loan proceeds were going to the buyers and others. Jetton personally derived more than a $1 million in commissions from the mortgage fraud scheme.

"This defendant was a licensed real estate agent. Using his specialized knowledge of real estate and residential mortgage financing, he orchestrated a mortgage fraud scheme that has caused millions of dollars in losses to lenders and untold damage to neighborhoods," said U.S. Attorney Nahmias. "Nearly a dozen people have been sentenced to federal prison for their involvement in this defendant's scheme. The long prison sentence handed down today accounts for his leadership role in the scheme and the misuse of his position as a real estate agent to commit the fraud. We will continue to work with federal, state and local law enforcement agencies to vigorously investigate and prosecute mortgage fraud schemes, especially those perpetrated by professionals in the real estate industry."

Eleven other defendants have already been sentenced to prison terms in related cases, with sentences ranging from eight months to more than ten years in federal prison. Raymond Joseph Costanzo Jr., 63, of Clayton, Ga. -- a closing attorney in the scheme -- was sentenced to three years and five months in federal prison. A loan broker in the scheme, Olympia D. Ammons, 31, of St. Louis, Mo., was sentenced to five years and three months in prison to be followed by four years of supervised release, and was ordered to pay $7,549,044 in restitution.

Assistant U.S. Attorneys Gale McKenzie, William L. McKinnon Jr. and Douglas Gilfillan prosecuted the case. This case was investigated by Special Agents of the FBI.

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