APS Healthcare Pays $13 Million to Settle False Claims Act Case

The United States Attorney’s Office today (February 22) announced that “INNOVATIVE RESOURCES GROUP, LLC,” doing business as “APS HEALTHCARE MIDWEST,” of White Plains, New York, has reached a $13 million settlement with the United States and the state of Georgia to resolve allegations under the False Claims Act. The United States’ share of the settlement is $5.2 million. The government alleges that APS Healthcare submitted false claims to Medicaid through the Georgia Department of Community Health (DCH) because it did not provide specialty services related to disease management and case management to members of the Georgia Medicaid Management Program (GAMMP) during the period from September 1, 2007 through February 28, 2010.

United States Attorney Sally Quillian Yates said of the settlement, “In this time of tight budgets and rising health care costs, the state of Georgia tried to improve its services to its Medicaid recipients by contracting with APS Healthcare. But instead of providing improved efficiency and effectiveness the company billed for, APS Healthcare took Medicaid’s money for itself and left some of our most vulnerable citizens without the aid they deserved.”

“Investigating Medicaid grant fraud is an important priority, because it diverts desperately needed resources from those who need it most,” said Special Agent in Charge Derrick L. Jackson, Health & Human Services, Office of Inspector General, Atlanta Region.

“This substantial recovery of taxpayer dollars is attributable to the continued strong partnership between state and federal law enforcement agencies in the fight against health care fraud and abuse,” said Scott Smeal, Georgia Senior Assistant Attorney General. “This case should send a strong message to companies such as APS Healthcare that they will be held fully accountable when they fail to provide the services they promised to provide to Medicaid patients.”

Under the GAMMP contract, APS Healthcare agreed to provide case and disease management services to Georgia Medicaid recipients and was paid a monthly fee for each member receiving such services. The government contends that APS Healthcare failed to provide the required services to a large portion of the Medicaid recipients and over-billed the Georgia Department of Community Health in its monthly invoices.

APS Healthcare has executed a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services, Office of Inspector General, which will require an aggressive compliance program. The Corporate Integrity Agreement requires, among other things, intensive training and implementation of policies and procedures designed to ensure compliance with federal health care program requirements. In addition, APS Healthcare will be subject to external review of its compliance with state Medicaid contracts. If APS Healthcare fails to comply with certain material terms of the CIA, the company is subject to monetary penalties and exclusion from federal health care programs, including Medicare and Medicaid.

The civil settlement resolves a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. The case, pending in the Northern District of Georgia, is filed under United States ex rel. Michael Claeys and State of Georgia ex rel. Michael Claeys v. APS Healthcare, Inc., APS Healthcare Bethesda, Inc., and Innovative Resource Group, LLC d/b/a/ APS Healthcare Midwest, 1:09-cv-2779-WSD.

This civil investigation was conducted by special agents of the FBI and HHS-OIG.

The civil settlement was reached by Assistant United States Attorneys Christopher J. Huber and Lena Amanti.

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Rome Man Pleads Guilty in Multi-Million-Dollar Timber Fraud Scheme

AARON WILBERT FREEMAN, 50, of Rome, Georgia, pleaded guilty before Senior United States District Judge Robert L. Vining in federal district court late yesterday (November 2) to multiple charges relating to a $4 million scheme involving timber that did not exist. A jury had been selected and FREEMAN’s trial was set to begin today when FREEMAN pleaded late yesterday.

United States Attorney Sally Quillian Yates said of yesterday’s guilty plea, “Paper is made from trees, but in this case, Freeman created trees out of paper. He did so by manipulating his employer’s computer system to create phony receipts for timber deliveries that never took place. He also recruited timber truck drivers to redeem the fake receipts for payment, then laundered the proceeds through multiple financial institutions.”

Brian D. Lamkin, Special Agent in Charge, FBI Atlanta, stated, “The level of fraud that Mr. Freeman conspired to commit against his former employer, the Temple-Inland Company, was significant. The FBI is pleased that, through its investigation and the resulting prosecution by the U.S. Attorney's Office, not only was any additional fraud stopped, but now Mr. Freeman will be held accountable for his actions.”

According to United States Attorney Yates, the charges, and other information presented in court: FREEMAN worked as a scale house operator at the Temple-Inland Co. paper mill in Floyd County, Georgia until June 2006. The scale house received and weighed approximately 350 timber trucks each day, providing a delivery receipt, known in the industry as a “scale ticket,” to each driver as proof of delivery. Between 2003 and 2006, FREEMAN worked primarily during the night shift, often alone, processing timber deliveries through the scale house computer system.

While working in the scale house during this time frame, FREEMAN manipulated the computer system to produce multiple weight readings when a single timber truck passed through the paper mill’s scale, making it appear as if there had been two or more deliveries when there had only been one. FREEMAN then caused the computer system to generate false scale tickets for the phantom loads, along with valid scale tickets for the legitimate deliveries. The Rome scale house computer system would simultaneously transmit the delivery information electronically to Temple-Inland’s headquarters in Austin, Texas, ultimately resulting in electronic funds transfers from Temple-Inland’s bank to timber suppliers’ bank accounts in Georgia and South Carolina.

After creating the false scale tickets, FREEMAN recruited multiple co-conspirators, including KEVIN A. FIELDS, 31, of Forsyth, Georgia; JASON S. JOSEPH, 32, of Macon, Georgia; ROGER G. CARTHERN, 63, and R. ANDREW CARTHERN, 40, both of Jefferson, Georgia; J. DAVID CARTHERN, 64, of Commerce, Georgia; ROBERT FRANK FERGUSON, JR., 56, of Maysville, Georgia; and GEORGE BONNER TATE, 40, of Hartwell, Georgia, to redeem the false scale tickets for payment by timber suppliers, launder the payments through multiple banks and credit unions, and return a share of the money to FREEMAN in cash.

By manipulating the scale house computer system and creating false scale tickets, FREEMAN caused Temple-Inland to pay approximately $3.35 million for phantom timber that FIELDS claimed to have delivered; $910,000 for phantom timber that JOSEPH claimed to have delivered; $313,000 to ROGER and ANDREW CARTHERN; more than $112,000 to DAVID CARTHERN and ROBERT FRANK FERGUSON; and more than $160,000 to GEORGE TATE, all of whom shared their money with FREEMAN.

On November 2, 2009, a federal grand jury returned a 20-count indictment against FREEMAN, FIELDS, JOSEPH, ROGER CARTHERN, ANDREW CARTHERN, DAVID CARTHERN, FERGUSON, TATE, and CURTIS J. HART, 52, of Macon, Georgia. JOSEPH, ROGER CARTHERN, ANDREW CARTHERN, FERGUSON, and TATE all pleaded guilty to one count of conspiracy to commit wire fraud and agreed to cooperate in the case. FIELDS pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering, and also agreed to cooperate. The government dismissed DAVID CARTHERN and HART from the case on May 20 and July 14, 2010, respectively.

FREEMAN pleaded guilty yesterday to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. FREEMAN could receive a maximum sentence of 20 years in federal prison and a fine of up to $250,000 for the wire fraud conspiracy, and a maximum sentence of 10 years in federal prison and a fine of up to approximately $3.6 million for the money laundering conspiracy. In determining FREEMAN’s actual sentence, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Sentencing is scheduled for January 13, 2010, at 10:30 a.m., before Senior United States District Judge Robet L. Vining in Room 303 of the United States Courthouse in Rome, Georgia. Sentencing dates for the co-defendants have not yet been set.

This case is being investigated by special agents of the FBI.

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Waycross Woman Pleads Guilty to $2 Million Embezzlement and Identity Theft Scheme

SANDRA L. COOMBS, 39, from Waycross, Georgia pleaded guilty yesterday in federal district court before Chief United States District Judge Lisa Godbey Wood to one count of bank fraud and two counts of aggravated identity theft in connection with a scheme to steal over $2 million from her former employer.

United States Attorney Edward J. Tarver said, “This defendant betrayed her employer by using her position of trust to steal over $2 million. Ms. Coombs also stole names and identities of others to commit her fraud. This defendant’s unlawful conduct will send her to federal prison for a lengthy sentence.”

According to the evidence presented during Ms. Coombs’ guilty plea hearing, from 2005 through 2009 Coombs worked as the office manager for Ace Pole Company, a Blackshear business specializing in the production and sale of wooden utility poles. Coombs used her position as office manager to systematically steal over $2 million during a more than four-year time period. To accomplish her scheme, Coombs forged the names of Ace Pole Company officers on over 200 checks written from the company’s Patterson Bank account. To hide the scheme, Coombs falsified company records to make it appear that the forged checks she made payable to herself were instead payments made to vendors of the company. Coombs’ fraudulent activities came to light during an unrelated drug trafficking investigation, when Pierce County law enforcement uncovered the suspicious money transfers in and out of Ms. Coombs’ bank account.

Coombs now faces a 30 year maximum prison sentence for bank fraud, and two-year consecutive prison terms on her aggravated identity theft convictions. A sentencing date has not been set. Coombs was again remanded to U.S. Marshal custody following her guilty plea.

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New Anti-Fraud Program Launched in Georgia

Aim is to Protect Consumers and Financial Institutions from Fake Check Scams
Today, the Georgia Governor’s Office of Consumer Affairs, Consumer Federation of America (CFA), the Georgia Bankers Association, and Georgia Credit Union Affiliates are announcing the start of a new and innovative program to protect consumers and financial institutions from fake check scams. Under the program, participating banks and credit unions will hand a brochure created by CFA, “Don’t Become a Target,” to every consumer who comes in to deposit checks or money orders of $1,000 or more or to withdraw $1,000 or more. Nearly 60 banks and credit unions in Georgia have signed up to participate. “The key is to prevent consumers from being victimized by educating them about these scams at the very point where they may be at risk,” said Susan Grant, CFA’s Director of Consumer Protection, who is coordinating the program. “We’re pleased to have such a great response from financial institutions in Georgia.”

In fake check scams, the consumer receives a genuine-looking check or money order for something and is asked to wire money somewhere in return. For instance, the check may be described as an “advance” on millions that the consumer has won in a sweepstakes or lottery. The consumer is instructed to send money to pay the taxes and claim the rest of the prize. In another popular scenario, the consumer is recruited to work at home as a “mystery shopper” or processing payments for a company and is instructed to send money somewhere as part of the job. No matter the story, the check or money order is phony, and when it bounces, the victim owes the money back to the financial institution where it was deposited or cashed. The average loss is $3,000 to $4,000. “It’s impossible to detect these counterfeits just by looking at them,” said Joseph B. Doyle, Administrator of the Governor’s Office of Consumer Affairs. “The message that we want to give consumers is that there is no legitimate reason why anyone who wants to give them money would ask them to send money anywhere in return. If that’s the deal, it’s a scam.”

Federal law gives consumers the right to access their funds quickly, usually within a day or two. But it is often difficult or impossible for the consumer’s financial institution to tell if there is a problem with a check or money order until it goes through the system to the person or company that supposedly issued it. That can take several days or weeks. “These crooks take advantage of the trust that the financial system is built on,” said Joe Brannen, president and CEO of the Georgia Bankers Association. “This campaign is a service to help consumers understand they are responsible for the checks and money orders they deposit or cash because they are in the best position to know if the people who gave them to them are trustworthy.”

“Fake check scams are a serious problem for consumers. Credit unions want to do all they can to educate their members. That’s why we’re excited to be a partner in this consumer education program,” said Cindy Connelly, senior vice president of association services for Georgia Credit Union Affiliates “Consumers and credit union personnel need to be able to recognize the warning signs of fraud in order to prevent it.”

CFA is providing the brochure to participating banks and credit unions at no cost (CFA is asking them to cover the shipping expense if they are able to do so). To help the financial institutions prepare for the project, CFA gave them training materials about fake check scams and advice about handing out the brochures. In addition to the hard-copy brochure, which is English on one half and Spanish on the other, there are two electronic versions, one in English and the other in Spanish, on CFA’s Web site at www.consumerfed.org/fakecheckscams. There visitors will also find a new PowerPoint presentation that CFA has created for consumers and other educational materials about fake check scams.

Quantities of the brochure will also be available to government agencies in Georgia such as the Governor’s Office of Consumer Affairs and nonprofit organizations that conduct consumer education in the state. CFA is not offering hard-copies of the brochure directly to consumers.

Georgia is one of several states in which CFA will be conducting this project to fight fake check scams over the next several months. Participating financial institutions in Georgia are listed below. Banks and credit unions in Georgia that have not yet signed up to participate are welcome to do so and should contact Susan Grant at CFA, 202-939-1003.

Three Defendants Plead Guilty to Their Roles in $6.5 Million Medicare Fraud Scheme

Alfredo Rasco, 51, and Niurka Rasco, 49, both from Miami, Florida, and Iris Oswald, 54, from St. Simons Island, Georgia, pleaded guilty earlier this week before United States District Court Judge William T. Moore, Jr. to their roles in a scheme to defraud Medicare of $6.5 million. Seconds before the scheduled start of the government’s evidence in the trial, the defendants pled guilty.

United States Attorney Edward J. Tarver stated, "Health care fraud is one of our most urgent and widespread national challenges. Offenders who steal from Medicare will be caught, sentenced to long prison sentences and their ill-gotten gains will be forfeited. The United States Attorney’s Office is committed to strengthening the Medicare program through the vigorous prosecution of those who defraud the American people."

Evidence during the guilty pleas showed that from December of 2005 through March of 2008, Alfredo Rasco, Niurka Rasco, Iris Oswald, and others operated United Therapy, a phony medical clinic located in downtown Savannah. The defendants and others lured Medicare beneficiaries to United Therapy with free food, transportation, and gift cards. Many of the Medicare beneficiaries targeted by the scheme were afflicted with HIV or AIDS and lived in local homeless shelters and Section VIII housing. Once at United Therapy, the Defendants used the patients’ Medicare information to submit $6.5 million worth of phony bills to Medicare for infusion services that were not provided to those patients. Before law enforcement put a stop to this fraud, the defendants stole over $4 million from Medicare.

For his role in the scheme, Alfredo Rasco faces a maximum statutory penalty of up to 12 years in prison, fines up to $500,000, and three years of supervised release. Niurka Rasco faces a maximum statutory penalty of up to six months in prison, a fine up to $2,000, and one year of supervised release. The Rascos also forfeited proceeds of the scheme, including $1.3 million seized from their bank accounts and a 42' powerboat they named "Thank You, God." For her role in the scheme, Iris Oswald faces a maximum statutory penalty of five years in prison, a fine up to $250,000 and three years of supervised release. Ms. Oswald also agreed to forfeit a home she purchased on St. Simons Island with proceeds of the fraud scheme.

All three defendants remain on bond pending sentence, which will be held upon the completion of a pre-sentence investigation and report.

Mr. Tarver praised the hard work and dedication of Special Agents Tony Alig and Josh Hayes of the Federal Bureau of Investigation, along with Special Agent David Graupner of the Office of Inspector General for HHS, who led the investigation of this case. Tarver noted that the indictment against these defendants arose out of Operation Redex Infuscam, a major investigation led by the Federal Bureau of Investigation (FBI) and the Office of Health and Human Services (HHS) into fraudulent infusion billings to Medicare in and around the Southern District of Georgia. Tarver also recognized the extensive efforts provided by investigator Kim Reinken and auditor Karen Hartley of the United States Attorney’s Office for their contributions to a successful prosecution.

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International Hacker Arraigned After Extradition

SERGEI TŠURIKOV, 26, of Tallinn, Estonia, has been extradited to the United States. TŠURIKOV appeared today and was arraigned before United States Magistrate Judge E. Clayton Scofield III, on federal charges of conspiracy to commit wire fraud, wire fraud, conspiracy to commit computer fraud, computer fraud, and aggravated identity theft. TŠURIKOV was indicted by a federal grand jury on these charges on November 10, 2010, along with VIKTOR PLESHCHUK, 29, of St. Petersburg, Russia; OLEG COVELIN, 29, of Chişinău, Moldova; and an unidentified individual. The indictment also charged IGOR GRUDIJEV, 32, RONALD TSOI, 32, EVELIN TSOI, 21, and MIHHAIL JEVGENOV, 34, each of Tallinn, Estonia, with access device fraud offenses.

United States Attorney Sally Quillian Yates said of the case, “In November 2008, in just one day, an American credit card processor was hacked in perhaps the most sophisticated and organized computer fraud attack ever conducted. Almost exactly one year later, the leaders of this attack were charged. With cooperation from law enforcement partners around the world, and most particularly in Estonia, we have now extradited to Atlanta one of the leaders of this ring. This success would not have been possible without the efforts of the victim, and unprecedented cooperation from various law enforcement agencies worldwide.”

“Computer hackers who steal from American financial networks must be held accountable for their crimes, whether they operate here or abroad,” said Assistant Attorney General Breuer. “The Department of Justice, working hand in hand with our international law enforcement partners, is committed to denying these criminals safe haven outside the United States and will vigorously investigate and prosecute these crimes.”

Atlanta FBI Special Agent in Charge Brian D. Lamkin stated, “Complex cyber based criminal investigations such as this are becoming all too prevalent. The advances in technology, while aiding the corporate world and the consumer, also aid the criminal in conducting well coordinated fraud or theft based schemes, often across international borders. The FBI extends its gratitude to those international partners who not only assisted with this investigation but with the extradition to the U.S. of one of its chief ring leaders in this multimillion dollar, multi-national theft ring.”

According to United States Attorney Yates, the charges and other information presented in court: During November 2008, PLESHCHUK, TŠURIKOV, and COVELIN allegedly obtained unauthorized access into the computer network of “RBS WorldPay,” the U.S. payment processing division of the Royal Bank of Scotland Group PLC, located in Atlanta. The indictment alleges that the group used sophisticated hacking techniques to compromise the data encryption that was used by RBS WorldPay to protect customer data on payroll debit cards. Payroll debit cards are used by various companies to pay their employees. By using a payroll debit card, employees are able to withdraw their regular salaries from an ATM.

Once the encryption on the card processing system was compromised, the hacking ring allegedly raised the account limits on compromised accounts, and then provided a network of “cashers” with 44 counterfeit payroll debit cards, which were used to withdraw more than $9 million from over 2,100 ATMs in at least 280 cities worldwide, including cities in the United States, Russia, Ukraine, Estonia, Italy, Hong Kong, Japan and Canada. The $9 million loss occurred within a span of less than 12 hours.

The hackers then allegedly sought to destroy data stored on the card processing network in order to conceal their hacking activity. The indictment alleges that the “cashers” were allowed to keep 30 to 50 percent of the stolen funds, but transmitted the bulk of those funds back to TŠURIKOV, PLESHCHUK, and other co-defendants, using means such as WebMoney accounts and Western Union. Upon discovering the unauthorized activity, RBS WorldPay immediately reported the breach, and has substantially assisted in the investigation.

Throughout the duration of the cashout, PLESHCHUK and TŠURIKOV allegedly monitored the fraudulent ATM withdrawals in real-time from within the computer systems of RBS WorldPay. Once the withdrawals were completed, PLESHCHUK and TŠURIKOV allegedly attempted to conceal their activities in the RBS WorldPay computer network by destroying and attempting to destroy data.

TŠURIKOV was not only an alleged hacker, but also distributed fraudulently obtained debit card account numbers and PIN codes to IGOR GRUDIJEV, who, in turn, allegedly distributed the information to Defendants RONALD TSOI, EVELIN TSOI, and MIHHAIL JEVGENOV in Estonia. Together, RONALD TSOI, EVELIN TSOI, and MIHHAIL JEVGENOV allegedly withdrew funds worth approximately $289,000 in U.S. funds from ATMs in Tallinn, Estonia.

The indictment contains 16 counts. Count One charges PLESHCHUK, TŠURIKOV, COVELIN, and a fourth unidentified individual of conspiracy to commit wire fraud. Counts Two through Ten are substantive wire fraud charges brought against PLESHCHUK and TŠURIKOV, aided and abetted by COVELIN and the unidentified hacker, based on the computer commands sent from outside the United States to the computer network of RBS WorldPay in the Northern District of Georgia. Count Eleven charges PLESHCHUK, TŠURIKOV, COVELIN, and the fourth individual with conspiracy to commit computer fraud. Counts Twelve through Fourteen are substantive charges of computer fraud against the defendants. Count Fifteen charges these defendants with aggravated identity theft based on the prepaid payroll card account numbers and associated PIN codes they transferred, possessed, and used without authorization in committing the wire fraud. Count Sixteen charges RONALD TSOI, EVELIN TSOI, and JEVGENOV, aided and abetted by GRUDIJEV, with access device fraud.

The indictment seeks forfeiture of over $9.4 million of proceeds of the crimes from the defendants.

PLESHCHUK, TŠURIKOV, COVELIN, and the unidentified defendant each face a maximum sentence of up to 20 years for conspiracy to commit wire fraud and each wire fraud count; up to five years for conspiracy to commit computer fraud; up to five or 10 years for each count of computer fraud; a two-year mandatory minimum for aggravated identity theft; and fines up to $3.5 million dollars. The charges against GRUDIJEV, the TSOI's, and JEVGENOV carry a maximum of up to 15 years’ incarceration for each count and a fine of up to $250,000. 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.

The early detection of fraudulent ATM withdrawal activities in Tallinn, Estonia led to an immediate response by the Estonian Central Criminal Police. Their investigative efforts led to the prompt identification of TŠURIKOV, GRUDIJEV, the TSOIs, and JEVGENOV. Cooperation between the Hong Kong Police Force and the FBI also led to a parallel investigation, resulting in the identification and arrest of two individuals who were responsible for withdrawing RBS WorldPay funds from ATM terminals in Hong Kong. The Netherlands Police Agency National Crime Squad High Tech Crime Unit and the Netherlands National Prosecutor’s Office provided key assistance in the investigation.

Since the United States indictment was announced in November 2009, TŠURIKOV, GRUDIJEV, the TSOI’s, and JEVGENOV have been convicted in Estonia of fraud relating to ATM withdrawals. TŠURIKOV has now been extradited from Estonia to the United States to answer to the charges in the United States’ indictment.

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

This case is being investigated by special agents of the Federal Bureau of Investigation. Assistance was provided by international law enforcement partners. The United States Secret Service also participated in the investigation. RBS World Pay immediately reported the crime and has substantially assisted in the investigation.

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Atlanta Man Sentenced to Prison for Fraud Related to Failed Omni National Bank

BRENT MERRIELL, 38, of Atlanta, Georgia, was sentenced today by United States District Judge Jack T. Camp to federal prison on charges of making false statements to the Federal Deposit Insurance Corporation (FDIC) and aggravated identity theft.

“The FDIC serves a critical role by insuring the assets of hard-working Americans. Mr. Merriell used stolen identities, created fictitious buyers, and negotiated phony short sale deals for properties, all in an effort to defraud FDIC of millions of dollars he owed on mortgages,” said United States Attorney Sally Quillian Yates. “This double fraud has landed him in federal prison.”

MERRIELL was sentenced to three years and three months in prison to be followed by five years of supervised release. MERRIELL was convicted of these charges on March 23, 2010, upon his plea of guilty.

According to United States Attorney Yates, the charges and other information presented in court: MERRIELL obtained millions of dollars in loans from Omni National Bank as mortgages on numerous properties. Omni later failed and was taken over by the FDIC. Beginning in October 2009, MERRIELL faced foreclosure on 14 different properties subject to Omni mortgages. In response, MERRIELL asked the FDIC to forgive $2.2 million in loan payments and instead allow him to “short sell” the properties to seven new purchasers at significantly reduced amounts. The seven new purchasers, however, were phony: the seven names MERRIEL presented to the FDIC were, in fact, stolen identities whose names were forged on sales contracts and counterfeit loan commitment letters. Under this scheme, if law enforcement had not intervened, Merriell would have retained control of the properties, and could then rent them for amounts in excess of the substantially reduced mortgage payment, or resell them at a profit.

A “short sale” occurs when a lender such as Omni Bank agrees to the sale of property—on which the current owner has defaulted—to a third party for less than the full amount due on the loan. Lenders are willing to accept “short sales” as a means of mitigating their losses on troubled loans. The MERRIELL “short sale” fraud was discovered through a sting operation conducted by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) with the assistance of the FDIC.

Other Omni-related prosecutions to date include:

JEFFREY L. LEVINE, 68, of Atlanta, Georgia, who pleaded guilty on January 14, 2010, to causing materially false entries that overvalued bank assets to be made in the books, reports, and statements of Omni, is scheduled to be sentenced on September 14, 2010, at 2:00 p.m., before United States District Judge Jack T. Camp.

DELROY OLIVER DAVY, 37, of Lithonia, Georgia, who pleaded guilty on May 11, 2010, to bank fraud and conspiracy to commit bank fraud, mail and wire fraud in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni and other lenders, is scheduled to be sentenced on September 14, 2010, before United States District Judge Jack T. Camp.

CHRISTOPHER BERNARD LOVING, 32, of McDonough, Georgia, who pleaded guilty on June 24, 2010, to making false statements to agents of the Office of the Special Inspector General for the Troubled Asset Relief Program and the FDIC in connection with an investigation regarding Omni construction contracts, is scheduled to be sentenced on August 24, 2010, before United States District Judge Jack T. Camp.

MARK ANTHONY MCBRIDE, 44, of East Point Georgia, was sentenced on April 1, 2010, to over 16 years in prison for obtaining fraudulent loans from many lenders, including Omni.

This investigation is part of 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.

This case was investigated by special agents of a mortgage fraud task force formed for Omni-related cases, made up of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Housing and Urban Development Office of Inspector General (HUD-OIG), the United States Postal Inspection Service, the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), and the Federal Bureau of Investigation. The task force is continuing to investigate a number of Omni-related matters.

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Disbarred Attorney Sentenced to Federal Prison for Defrauding Elderly Clients

M. DEWEY BAIN, 59, of Sugar Hill, Georgia, was sentenced today by United States District Judge Thomas W. Thrash, Jr. to serve over five years in federal prison for defrauding his clients of over $4.3 million in trust funds that he had misrepresented were in safe investments earning good returns but which in fact he had stolen.

United States Attorney Sally Quillian Yates said of the case, “This defendant, an attorney formerly licensed in Georgia and Texas, entered into trust agreements with elderly victims, told them that he was placing their money in safe investments, and then lost it all—over $4.3 million in retirement savings and inheritance money—after diverting it to his own personal and business use. His shameful abuse of trust has now landed him in federal prison.”

Reginald G. Moore, United States Secret Service Special Agent in Charge, said, “The Secret Service takes an aggressive approach to the prevention and investigation of con artists who prey upon innocent victims by promising future large financial gain for a small initial investment. This case demonstrates the wide-reaching effects of bogus financial and real estate schemes, the impact on innocent victims, and the importance of cooperation among our law enforcement partners.”

BAIN was sentenced to five years and three months in prison, to be followed by three years of supervised release, and was ordered to pay $4,354,000 in restitution to his victims. BAIN pleaded guilty to the charge of wire fraud on April 6, 2010. BAIN was disbarred in Georgia in October 2009.

According to United States Attorney Yates, the charges and other information presented in court: Between May 2006 and March 2009, BAIN, an attorney formerly licensed in Georgia and Texas, stole over $4.3 million of his clients’ money based on a fraudulent trust scheme. He entered into trust agreements with the defrauded clients, many of whom were elderly, and agreed to act as their financial advisor and invest their retirement savings and inheritances in safe accounts, such as certificates of deposit and loans to third parties that were allegedly secured by real estate and other valuable property. During the scheme, however, BAIN diverted their money to pay for his own personal expenses and, without their permission, used it to support his business interests. His business, “DnC Multimedia Corp.,” formerly known as “PlanetLink Communications, Inc.,” later filed for bankruptcy. Through early 2009, BAIN falsely assured his victims that their trust accounts were earning good interest based on the investments, when in fact the accounts had no value by at least February 2009.

As an example, under one of the trust agreements, BAIN originally invested the money of an elderly victim in certificates of deposit and paid her personal expenses out of the trust. He later liquidated the certificates based on false pretenses and moved the money to a bank account in his name. He then used the money in his business, even though she had specifically refused to permit such an investment because it was too risky. He also wrote checks off of her credit card account without her authorization. As the result of BAIN’s fraud, this victim lost nearly $1 million and was no longer able to pay for her assisted living residence. She traveled from another state with family and addressed the court at today’s sentencing.

This case was investigated by special agents of the Federal Bureau of Investigation and the United States Secret Service and by detectives with the Topeka, Kansas Police Department, with the assistance of the Attorney General’s Office for the State of Kansas. The case was referred for criminal prosecution by the Office of the U.S. Trustee in Atlanta, Georgia, as well as by the Atlanta Division Office of the Securities and Exchange Commission.

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Former Officers of Failed Atlanta Bank Plead Guilty to Fraud

Douglas Ballard, 40, pleaded guilty July 6 in federal district court to one count of conspiracy to commit bank fraud and to receive bribes, and to one count of tax evasion; and Joseph Todd Foster, 42, pleaded guilty to securities fraud. Ballard and Foster, both of Atlanta, were senior vice presidents of Integrity Bank, a $1 billion financial institution that failed and was taken over by the Federal Deposit Insurance Corporation (FDIC) in August 2008.

“Among the roots of our nation’s financial crisis were criminal acts by bank insiders and major borrowers that contributed to the failures or bailouts of financial institutions previously believed to be secure,” said U.S. Attorney Sally Quillian Yates. “Today we announce that two of these corrupt insiders here in Atlanta will be trading in their corporate offices for federal prison.”

“Those who line their pockets with profits of bank fraud schemes should know they will not go undetected and they will be held accountable,” said Internal Revenue Service (IRS)-Criminal Investigation Special Agent in Charge Reginael McDaniel. “IRS-Criminal Investigation is proud to be part of the law enforcement dragnet bringing these individuals to justice.”

According to U.S. Attorney Yates, the charges and other information presented in court: Ballard, Integrity Bank’s former executive vice president in charge of lending, admitted that he conspired with the bank’s major customer, co-defendant Guy Mitchell, to receive bribes from Mitchell and to assist Mitchell in receiving millions in loan draws under false pretenses. Ballard admitted in court to receiving over $200,000 in cash and other corrupt payments from Mitchell in exchange for Ballard’s assistance in distributing millions of loan draws. During this same time, Ballard caused Integrity Bank to distribute nearly $20 million in loan proceeds to Mitchell’s personal account, much of which was allegedly used for Mitchell’s personal consumption (including the purchase of a private island in the Bahamas). Mitchell requested and Ballard paid nearly $7 million of these draws out of a construction loan relating specifically to supposed construction and renovation at the “Casa Madrona,” a luxury hotel owned by Mitchell in Sausalito, Calif. The indictment alleges that none of this money was used for construction, and in fact no renovations had occurred.

Foster, Integrity’s former vice president in charge of risk management, pleaded guilty to charges that he committed securities fraud by way of what is commonly referred to as “insider trading.” Specifically, he admitted to having sold nearly all his shares of Integrity’s stock on the basis of material adverse information about the company of which Foster was aware by virtue of his inside position, but of which the public was generally unaware. Specifically, Foster dumped his shares of Integrity stock based on his knowledge that the bank was facing an increasingly substantial but undisclosed risk that its major customer, Mitchell, would default on over $80 million in outstanding loans.

Ballard was indicted in April 2010 on more than 20 counts of bank fraud, receipt of bribes, securities fraud, evasion of currency reporting requirements, and conspiracy. He pleaded guilty to conspiracy and one additional new count of tax evasion. He could receive a maximum sentence of up to 10 years in prison and a fine of up to $500,000. Foster, also indicted in April 2010, was indicted on two counts of securities fraud and today pleaded guilty to one count. He could receive up to 20 years in prison and a fine of up to $5 million. A date for sentencing has not yet been set before U.S. District Judge Julie E. Carnes.

This case is being investigated by Special Agents of the FBI, FDIC-Office of the Inspector General, and the IRS as part of President Barack Obama’s Financial Fraud Enforcement Task Force. The investigation remains ongoing as to other potential misconduct relating to the failure of this major Atlanta bank. Both defendants have agreed to cooperate in that ongoing investigation.

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.

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Former Dodge County Sheriff and Deputy Sentenced for 2004 Election Fraud

MICHAEL LAWTON DOUGLAS, JR., 38, the former Sheriff of Dodge County, and OLIN NORMAN GIBSON, 44, a former Dodge County Deputy Sheriff, were sentenced June 28 before The Honorable Dudley H. Bowen, Jr., United States District Judge, at the federal courthouse in Dublin, Georgia.

At an earlier change-of-plea hearing, Douglas pled guilty to conspiring to buy votes and to vote more than once in connection with his election in 2004 as Dodge County Sheriff. Gibson pled guilty to buying votes for Douglas during that election. Evidence at the hearing established that Douglas provided money to various supporters, including Gibson, to be used to pay hundreds of voters to vote for him in the election. Douglas’s supporters also paid voters for absentee ballots, and in particular blank absentee ballots, in order to fill those ballots out for Douglas and cast them improperly in the election. Douglas was elected as Dodge County Sheriff in 2004 and served as Sheriff until his re-election campaign was defeated in 2008.

Judge Bowen today sentenced Douglas to 18 months in prison to be followed by a three year term of supervised release. Douglas was additionally ordered to pay a $2,000 fine and complete 150 hours of community service. Gibson received four months in prison, a three year term of supervised release, a $1,000 fine, and 150 hours of community service.

United States Attorney Edward J. Tarver said, “Election fraud strikes at the very heart of our democracy. This office and our law enforcement partners will exercise zero tolerance in our efforts to apprehend and prosecute those who seek to steal or dilute the constitutional rights of citizens in the electoral process.”

U.S. Attorney Tarver recognized the efforts of the Georgia Bureau of Investigation and Federal Bureau of Investigation, and particularly GBI Special Agent Eve Rodgers and FBI Special Agent Ed Sutcliff.

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Man Pleads Guilty to Conspiracy for Participation in Fraudulent Driver's License Ring

GUO XING SONG, a/k/a “Andi Chen,” 43, of Charlotte, North Carolina, pleaded guilty today in federal district court to two charges in connection with his participation in a fraudulent driver's license ring and to a charge of aggravated identity theft in connection with the sale of a Social Security card issued to another individual by the Social Security Administration.

United States Attorney Sally Quillian Yates said, “This defendant, along with his coconspirator who worked for Georgia Driver's Services, arranged for illegal Chinese nationals to obtain Georgia driver's licenses without documentation and without even taking the driver's exam. The customers paid $2000 to $3000 for real driver's licenses. Now the defendants face real time.”

According to United States Attorney Yates, the charges and other information presented in court: SONG, who lived in Atlanta between 2001 and 2006, placed ads in a Atlanta area Chinese language newspaper, claiming he could assist persons who did not have documentation to obtain driver’s licenses in Georgia and other states. Persons responding to the ads were instructed to meet SONG or a co-conspirator at a designated location, usually a gas station or shopping center parking lot. They were then driven from the Atlanta area to Georgia Driver’s Service locations in either Colquitt or Thomasville, Georgia. The alleged co-conspirators in that part of the scheme, ZHONG LIANG LI, 34, and his brother, ZHONG HUA LI, 31, formerly of Colquitt, Georgia, were indicted by a federal grand jury on January 19, 2010, and are awaiting trial.

A co-defendant in the case who has already pleaded guilty, CLEVELAND SPENCER, 47, of Thomasville, Georgia, is a former Georgia Driver’s examiner who worked at those Driver’s Service locations. He admitted issuing driver’s licenses to SONG’s customers without requiring any documentation showing legal residence in the United States or the state of Georgia. SPENCER also did not issue the required written and road test examinations to SONG’s customers. SONG or his alleged co-conspirators paid SPENCER for fraudulently issuing the licenses. SPENCER reportedly received $250 to $400 per license. SONG’s customers paid SONG approximately $2,000 to $3,000 for the licenses. Georgia Driver’s records indicate that approximately 300 licenses were fraudulently issued.

In December 2006, SONG sold a genuine Social Security card to a confidential informant, who was purportedly buying it for a Chinese national who was illegally in the United States. The Social Security card actually belonged to an individual who had previously been in the United States on a temporary work visa and returned to China.

SPENCER pleaded guilty to the conspiracy on April 27, 2010, and is scheduled to be sentenced on July 14, 2010, at 10:30 a.m.

SONG was indicted on the charges on January 19, 2010. Today he pleaded guilty to one count of conspiracy and one count of aggravated identity theft. He could receive a maximum possible sentence of up five years in prison on the conspiracy count, and faces a minimum mandatory sentence of two years for the aggravated identity theft. He also faces a fine of up to $250,000 on each count. In determining the actual sentence on the conspiracy count, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Sentencing is scheduled for September 2, 2010, at 10:30 a.m., before United States District Judge Timothy C. Batten, Sr.

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Augusta Financial Advisor Pleads Guilty to Stealing More Than $400,000 from Client

ALVIN CHARLES RAMSEY, 44, a financial advisor from Martinez, Georgia pleaded guilty before United States District Court Judge J. Randal Hall to defrauding a client out of more than $400,000.

United States Attorney Edward J. Tarver said, “The United States Attorney's Office will continue to aggressively prosecute those within the financial services industry who abuse the trust placed in them by stealing their clients’ money.”

Evidence presented during the guilty plea hearing revealed that Ramsey obtained a power of attorney over his client’s investments and then, without that client’s knowledge or permission, stole more than $400,000 out of her investments for his personal use.

Ramsey faces a maximum penalty of 20 years' imprisonment, a $250,000 fine, and three years of supervised release. He remains on bond pending his sentencing hearing, which has not yet been scheduled.

U.S. Attorney Tarver applauded the efforts of the FBI, and particularly FBI Special Agent Paul Kubala, in investigating this case.

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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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Conspirators Sentenced to Prison in Construction Escrow Fraud Scheme

EDGAR J. BEAUDREAULT, JR., 61, of Alpharetta, Georgia, and HOWARD A. SPERLING, 45, of San Diego, California, were sentenced today by United States District Judge Clarence Cooper to federal prison on charges of conspiracy to commit wire fraud for their part in a scheme to defraud a California corrections facility operator of nearly $13 million.

United State Attorney Sally Quillian Yates said, “These defendants were part of an elaborate fraud scheme that ironically involved the construction of a prison. They will now experience how business is conducted inside a real prison.”

BEAUDREAULT was sentenced to three years, five months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,417,500. BEAUDREAULT pleaded guilty to the charges on December 17, 2008.

SPERLING was sentenced to five years, 10 months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,417,500. SPERLING pleaded guilty to the charges on February 2, 2009.

Both BEAUDREAULT and SPERLING cooperated with the government, and in February 2010, testified in the trial of co-defendant ROBERT B. SURLES, which resulted in guilty verdicts on 16 counts of conspiracy and wire fraud. SURLES is scheduled to be sentenced by Judge Cooper on June 22, 2010.

According to United States Attorney Yates, the charges and other information presented in court: From August 2003 through January 2004, BEAUDREAULT, SPERLING and SURLES conspired to defraud “Cornell Corrections of California, Inc.,” a private company that operates corrections facilities for various governmental units. In June 2003, Cornell Corrections contracted to have a corrections facility built in Canon City, Colorado for $13 million. The $13 million purchase price was to be held in an escrow account until the facility was completed.

In August 2003, the defendants induced Cornell Corrections to transfer its $13 million to an account in Atlanta, which they controlled, by falsely representing to Cornell that the account was an escrow account that was administered by a reputable bank. Upon receipt of Cornell Corrections’ $13 million, the defendants wire transferred the majority of Cornell’s $13 million to other accounts, to be used for their own purposes. Under the terms of their contract, the defendants were also to obtain a construction loan on behalf of “Western Comfort, Inc.” the general contractor who began construction of the facility. No loan was secured, making Western Comfort another victim of this scheme.

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

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Defendants Sentenced for Telemarketing Stock Fraud Scheme

JOHN A. REECE, 57, of St. Augustine, Florida, and PATRICK J. SOLTIS, 47, of Hoschton, Georgia were sentenced today by United States District Judge Clarence Cooper to federal prison for operating a telemarketing scheme in Marietta, Georgia, that defrauded dozens of foreign individuals into investing hundreds of thousands of dollars in fraudulent companies.

United States Attorney Sally Quillian Yates said of the case, “These defendants ran an investment boiler room operation using telemarketers to pressure their unsuspecting victims into investing thousands of dollars in a variety of phony ventures. The defendants have now been sentenced to federal prison and ordered to pay restitution to their innocent victims.”

REECE was sentenced to six years and six months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $582,639. SOLTIS, who cooperated with the government and received a sentence reduction as a result, was sentenced to three years and five months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $301,601. REECE was convicted of these charges after pleading guilty on January 11, 2010. SOLTIS was convicted after pleading guilty on October 15, 2008.

According to United States Attorney Yates, the charges and other information presented in court: REECE and SOLTIS lied to investors in 2002 to entice them to invest in a shell company, Wolf & Soltis Holdings, LLC. Through telemarketers they hired to sell the stock in unsolicited transactions, the defendants falsely claimed that Wolf & Soltis had substantial business operations and plans to expand in a number of areas. In fact the company was bogus, had no operations, assets, revenues, or even employees, other than the hired telemarketers.

As part of the scheme, the defendants claimed that they owned a private bottled water company, were involved with the University of Minnesota to develop a tree species that grew more quickly, and owned a cosmetics company for which entertainment personality Raquel Welch was the spokesperson. All of these claims were false. In truth, the defendants pocketed the lion’s share of the money they received from investors and used the rest to pay their telemarketers, telephone bills, and related expenses. After a disagreement with SOLTIS, REECE began to operate a second fraudulent telemarketing scheme through an entity he operated known as “Wellington Group,” purportedly selling shares in “Australian Biofund Investments, Ltd.” (ABIL), based on material misrepresentations and omissions. REECE retained the vast majority of the money invested in Wellington, but failed to disclose that fact and even falsely informed investors that there was no commission associated with their investments.

To execute their fraud, REECE and SOLTIS ran a boiler room with high-pressure telemarketers they hired to call hundreds of potentially vulnerable victims each day from call lists they had purchased. In addition to providing call lists to the telemarketers, REECE developed scripts for them to use in selling the fraudulent investments. The call lists targeted foreign investors in English speaking countries. The defendants intentionally targeted foreign investors in part to avoid, or at least delay, the scrutiny of U.S. law enforcement. As a result, the overwhelming majority of the victims live in foreign countries, primarily Australia and Canada. The defendants’ schemes resulted in a loss of over $600,000 to the victims.

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

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Disbarred Attorney Pleads Guilty to Defrauding Elderly Clients

M. DEWEY BAIN, 59, of Cumming, Georgia, pleaded guilty today in federal district court to defrauding his clients of over $4.5 million in trust funds that he had misrepresented were in investments earning good returns.

United States Attorney Sally Quillian Yates said of the case, “This defendant, an attorney formerly licensed in Georgia and Texas, entered into trust agreements with elderly victims, told them that he was placing their money in safe investments, and then lost it all after diverting it to his own personal and business use. His egregious abuse of trust defrauded clients out of more than $4.5 million in retirement savings and inheritance money.”

“The Secret Service takes an aggressive approach to the prevention and investigation of con artists who prey upon innocent victims by promising future large financial gain for a small initial investment,” said Jeffrey T. Gilbert, Special Agent in Charge of the United States Secret Service, Atlanta Field Office. “This case demonstrates the wide-reaching effects of bogus financial and real estate schemes, the impact on innocent victims, and the importance of cooperation among our law enforcement partners.”

According to United States Attorney Yates, the charges and other information presented in court: Between May 2006 and March 2009, BAIN, an attorney formerly licensed in Georgia and Texas, stole over $4.5 million of his clients’ money based on a fraudulent trust scheme. He entered into trust agreements with the defrauded clients, many of whom were elderly, and agreed to act as their financial advisor and invest their retirement savings and inheritances in safe accounts, such as certificates of deposit and loans to third parties that were allegedly secured by real estate and other valuable property. During the scheme, however, BAIN diverted their money to pay for his own personal expenses and, without their permission, used it to support his business interests. His business, DnC Multimedia Corp., formerly known as PlanetLink Communications, Inc., later filed for bankruptcy. Through early 2009, BAIN falsely assured his victims that their trust accounts were earning good interest based on the investments, when in fact the accounts had no value by at least February 2009.

Under one of the trust agreements, BAIN originally invested the money of a 97-year-old client in certificates of deposit and paid her personal expenses out of the trust. He later liquidated the certificates based on false pretenses and moved the money to a bank account in his name. He then used the money in his business, even though she had specifically refused to permit such an investment because it was too risky. He also wrote checks off of her credit card account without her authorization. As a result of BAIN’s fraud, this victim lost nearly $1 million and was no longer able to pay for her assisted living residence. BAIN was disbarred in Georgia in October 2009.

BAIN was charged in a criminal information in March 2010. Today he pleaded guilty to one count of wire fraud. He could receive a maximum sentence of 20 years in prison and a fine of up to $250,000. 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.

Sentencing is scheduled for July 7, 2010, at 10:00 a.m., before United States District Judge Thomas W. Thrash, Jr.

This case is being investigated by special agents of the Federal Bureau of Investigation and the United States Secret Service.

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Former Georgia Closing Attorney Sentenced to Prison in Multimillion Dollar Mortgage Fraud

/PRNewswire/ -- Trent Edward Wright, 38, of Cumming, Ga., was sentenced today by U.S. District Judge Timothy C. Batten, Sr. to serve one year, nine months in federal prison on a mail fraud charge involving a mortgage fraud scheme which victimized lenders and title insurance companies.

Acting U.S. Attorney Sally Quillian Yates said of today's sentencing, "Lenders and title companies relied on this defendant as their closing attorney and agent and he was in a position of trust. He was supposed to pay off all prior encumbrances on properties to secure loans, and pass clear title as warranted by the title insurance. He didn't. Now he is going to federal prison."

Wright was sentenced to one year, nine months in prison to be followed by 3 years of supervised release, and ordered to pay $2,409,760 in restitution to the victims of the scheme. There is no parole in the federal system. Wright pleaded guilty to the mail fraud charge in a criminal information on Dec. 17, 2009.

According to Acting U.S. Attorney Yates and the information presented in court: In September, October and November 2006, Wright, then a real estate closing attorney operating from an office in Sugar Hill, Ga., closed approximately 17 loans in which lenders were falsely assured that all prior loans encumbering the properties securing their loans had been paid off. Those lenders then believed that they would be in first position to recoup their loan amounts from the sale of the properties should they go into foreclosure. Wright also wrote title insurance for these loans although he failed to pay off numerous prior recorded liens which encumbered the properties. Rather than ordering title searches and requesting pay off amounts from all prior lenders as required before the new loan closings, Wright either failed to order title searches or disregarded recorded prior encumbrances, causing over $2.4 million in losses. Wright closed his law practice in January 2007, and surrendered his license to practice law in December 2009.

A co-conspirator in a related case, Edward William Farley, 47, of Hoschton, Ga., operated through a company called Alliance Resource Management (ARM) located in Lawrenceville, Ga., as the borrower who received the proceeds from the 17 mortgage loans closed by Wright. In seeking funds for other loans, Farley told real estate investors, lenders, and banks, that they would get returns of 14% to 60%. Farley also promised them that they, too, would be first position to recoup their loan amounts from the sale of the properties should they go into foreclosure. Farley in fact used the same property to falsely "fully secure" multiple lenders on that same property. This fraud caused losses in excess of $25 million.

Farley pleaded guilty to bank fraud and conspiracy on Nov. 5, 2009, and is scheduled for sentencing before Judge Batten on April 14, 2010. Farley could receive a maximum sentence of 30 years in prison and a fine of up to $1,000,000 on each of the two counts, plus full restitution to all victims who have not been repaid. In determining the actual sentence, the court will consider the U.S. Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

These cases are part of 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.

These cases were investigated by Special Agents of the FBI, assisted by the Office of the U.S. Bankruptcy Trustee.

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Three Members of a “Reverse” Mortgage Fraud Ring Charged

JONATHAN ALFRED KIMPSON, 27, of Lithonia, Georgia, and GIA HARRIS, 26, of Atlanta, Georgia, have been indicted by a federal grand jury on charges of conspiracy to commit financial institution fraud involving so-called "reverse" mortgages. KIMPSON was also charged with aggravated identity theft and wire fraud. KELSEY TORREY HULL, 38, of Lithonia, Georgia, was charged on February 25, 2010, in a Criminal Information related to the same scheme, on a charge of financial institution fraud and conspiracy.

Acting United States Attorney Sally Quillian Yates said, “These defendants are charged with profiting from the corruption of an FHA-insured program designed to assist seniors with either cash for equity in their home or with funds toward the purchase of a home. These defendants allegedly altered real estate records, used fake documents, and posed as realtors. This abuse of the system took money away from qualified senior citizens who need these funds. With these charges, we have taken the first steps to stop this crime and to reverse the damage these crimes have caused.”

Inspector General Kenneth Donahue, U.S. Department of Housing and Urban Development (HUD) said, “HUD's Home Equity Conversion Mortgages Program was created to help senior citizens find greater financial security through FHA-insured reverse mortgages loans. The HUD Office of Inspector General will aggressively investigate those who would prey on America's senior citizens through reverse mortgage fraud, and encourages anyone having knowledge of such schemes to contact our HUD hotline at 1-800-347-3735.”

KIMPSON and HARRIS were indicted separately on February 24, 2010, and HULL was charged in a Criminal Information the next day. The indictments and information were unsealed upon the arrest of KIMPSON and HARRIS when they appeared before United States Magistrate Judge Linda T. Walker today and entered not guilty pleas to the charges.

According to Acting United States Attorney Yates, the charges and other information presented in court: Reverse mortgages were designed to assist with the financial security of seniors, ages 62 or older. There are two types of reverse mortgages. In a “refi-reverse,” the senior homeowner receives money from the lender for a portion of their equity in the home they own. In a “purchase money reverse,” the senior homeowner receives money from the lender toward the purchase of a new home. Under both types of reverse mortgages, the senior does not have to repay the lender for as long as the senior lives in the home. However, refi-reverse mortgages fund only a percentage of the property value, requiring significant equity to remain in the property, and purchase money reverse mortgages require a significant down payment from senior borrowers, to establish equity in the property.

The indictment charges that KIMPSON, HARRIS, and HULL, in an attempt to take advantage of the system, allegedly faked the required down payments by the senior citizen to establish the equity needed in the home to qualify for the FHA-insured reverse mortgages. The defendants did this through bogus “gift” letters in amounts between $50,000 and $105,000. They used fake “HUD-1" Settlement Statements reflecting the sale of non-existent assets closed by fictitious law firms to show the source of the required down payments. All down payments were actually supplied by the defendants, not the senior citizens, to be returned to the defendants upon the reverse loan closings, along with profits far in excess of the true sales prices of the properties. The return of such payments to the defendants was disguised as seller proceeds or lien payoffs. All such reverse mortgages included fraudulently inflated appraisals.

KIMPSON’s charge of aggravated identity theft and wire fraud relates to a scheme to use stolen identities of realtors. KIMPSON allegedly used realtor passwords obtained in his and relatives' names, and in the stolen identities of other realtors. With that information, he allegedly falsified Georgia MLS records to create fake property sales at inflated amounts to support many of the properties' fraudulent appraisals.

The KIMPSON indictment charges a conspiracy count which carries a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000, a wire fraud count with a maximum sentence of up to 30 years in prison and a fine of up to $250,000, and three aggravated identity theft counts which each carry a maximum sentence of up to two years in prison and a fine of $250,000 with at leas two years required to be imposed consecutive to the sentence on the other counts. The HARRIS indictment charges a conspiracy count which carries a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000. The HULL Criminal Information charges a bank fraud count which carries a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000, and a conspiracy count which carries a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000. In determining the actual sentence upon any convictions in these cases, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Members of the public are reminded that the indictments and information contain only allegations. A defendant is presumed innocent of the charges and it will be the government's burden to prove a defendant's guilt beyond a reasonable doubt at trial.

These cases are being investigated by Special Agents of the HUD-Office of Inspector General and the Federal Bureau of Investigation (FBI). Assistance in this case is also being provided by the U.S. Department of Treasury Financial Crimes Enforcement Network (FINCEN) and the Georgia Multiple Listing Service.

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Waynesboro Woman Charged with Conspiring to Defraud the United States with False Tax Returns

Edward J. Tarver, United States Attorney for the Southern District of Georgia, announced February 9 that Charlene Hughes of Waynesboro, Georgia was indicted last week by a federal grand jury sitting in Savannah and charged with Conspiracy to Defraud the United States in violation of Title 18, United States Code, Section 286. At her initial court appearance yesterday in the federal courthouse in Augusta, U.S. Magistrate Judge W. Leon Barfield stated the defendant would be released from custody once she deposited with the Court ten percent of her $10,000 bond.

The Indictment arises out of a joint investigation by the Internal Revenue Service - Criminal Investigations (IRS-CI) and the Federal Bureau of Investigation (FBI) into Hughes’ alleged involvement with more than twenty-five fraudulent tax returns which falsely claimed more than $90,000 in refunds between April 2006 and August 2007. The Indictment alleges that these fraudulent tax returns contained false Form W-2 information, including false employers and wages. United States Attorney Tarver stated, “As we near the height of this year's tax filing season, those who might consider preparing false tax returns should be aware of the severe consequences of doing so. This indictment emphasizes that the IRS, the FBI and the United States Attorney's Office will aggressively pursue anyone who attempts to defraud America's tax system.”

Tarver emphasized that an indictment is only an accusation and is not evidence of guilt. The defendant is entitled to a fair trial, during which it will be the Government’s burden to prove guilt beyond a reasonable doubt. If convicted, the defendant faces a maximum statutory penalty of ten (10) years imprisonment and a $250,000 fine.

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