The Chicago Syndicate: 05/01/2014 - 06/01/2014
The Mission Impossible Backpack

Saturday, May 31, 2014

Elementary School Construction Project Subcontractor Has Reputed Chicago Syndicate Ties

A company with alleged ties to Chicago organized crime has been brought on as a subcontractor for a Park Ridge elementary school construction project.

A green dumpster belonging to D&P Construction recently appeared outside Field School, 707 Wisner St., ahead of an air conditioning, heating and ventilation project slated to occur this summer.

Scott Mackall, Director of Facility Management for Park Ridge-Niles School District 64, said he was told D&P is providing only the dumpster for the project and was subcontracted by Palatine-based Bergen Construction Corporation, which is the company performing the bulk of the work. “We’re writing [Bergen] the checks,” Mackall said.

The Better Government Association reported in 2012 that the FBI believes D&P Construction is run by two brothers with Chicago mob connections: Peter DiFronzo and John “No Nose” DiFronzo. During the 2007 “Family Secrets” mob trial in Chicago, the BGA said John DiFronzo was implicated in the murders of two mob brothers, but was not charged with a crime.

According to a 2008 report by the BGA and the Chicago Sun-Times, D&P “was the focus of a Gaming Board disciplinary case that stopped Emerald Casino Inc. from building a floating gambling barge in Rosemont in 2001.” The report also stated that the Gaming Board “linked D&P to individuals who have been identified as known members of organized crime.”

D&P Construction has been used on projects for a number of Chicago Public Schools, according to a 2011 investigation by the BGA and Fox 32.

Mackall said he was unaware of the allegations of mob ties and D&P Construction. “I’ve never heard that at all,” he said.

A representative from Bergen Construction could not be immediately reached for comment.

The Field School construction project, slated to be complete by Aug. 8, will install air conditioning in the school, in addition to heating and ventilation upgrades and asbestos abatement. Field is the last of the District 64 schools to receive air conditioning.

The project, said Mackall, came in under budget at $4.5 million. The contract awarded in February identified the total cost at $5.33 million.

“The bids came in very competitive. They were quite a bit lower than we anticipated,” Mackall said.

Other building projects slated to occur around the district this summer include security upgrades at each school building costing a total of $337,425. The upgrades consist of security cameras on school property, changes in door access and a system that will run the driver’s licenses or state IDs of building visitors through a registered sex offender database.

Thanks to Jennifer Johnson.

Friday, May 30, 2014

State Audit Director, Delrice J Augustus, Convicted of Theft

Delrice J. Augustus, age 34, of Baton Rouge, Louisiana, pled guilty before U.S. District Judge Shelly Dick to a superseding bill of information charging him with theft from a federally funded entity, in violation of Title 18, United States Code, Section 666(a)(1)(A), and forfeiture. Augustus faces up to 10 years’ imprisonment, a fine up to $250,000, forfeiture of the proceeds of the offense, and up to three years of supervised release following imprisonment. A sentencing date has not yet been set.

As required by the plea agreement, Augustus has resigned his position as the director of the Bureau of Auditing and Compliance Services for DCFS, a state agency that receives over a billion dollars in federal funding annually. As director, Augustus reported directly to the secretary of DCFS and led the office responsible for safeguarding assets against theft and unauthorized use; ensuring that transactions were properly authorized and recorded properly; and ensuring compliance with management policies, as well as federal and state laws and regulations.

Augustus admitted to using his official position to defraud DCFS out of between $120,000 and $200,000 through the following three schemes.


  • Augustus admitted to fraudulently misusing government purchasing cards to obtain items for personal use for himself and others, including an installed dishwasher, televisions, movies, cameras, wireless audio systems (such as Sonos and Jawbone), gaming devices (such as Xboxes, Wiis, and Leapsters), mobile devices (such as iPads, Kindle Fires, and an iPhone 5), Dyson vacuums, rental vehicles, hotel rooms, and fuel.
  • Augustus admitted to misusing and causing others to misuse state travel and gas cards to pay for personal travel and entertainment expenses for himself and others, including gas, rental vehicles, and hotel stays. One such occasion involved purchasing hotel suites in New Orleans for Mardi Gras and the NBA All-Star Game.
  • Augustus admitted to engaging in a scheme to create and use fraudulent documents to request and receive reimbursement from the State of Louisiana for official travel that did not occur. Augustus would sign and submit reimbursement claims for expenses he falsely claimed to have incurred as part of his official duties. Augustus would cause the signature of the secretary of the Louisiana Department of Children and Family Services to appear on his fraudulent reimbursement claims as approving such claims, when, in fact, the secretary had neither approved the claims nor authorized her signature to be used in such a manner. Augustus would also create fraudulent documents reflecting that C.P. and K.G., who were employees in the Auditor’s Office, had incurred certain expenses related to official travel. C.P. and K.G. would sign the fraudulent reimbursement requests as the requesting employees, and Augustus would sign as the approving supervisor. The state would pay the requested amount to C.P. and K.G., who would split the proceeds with Augustus.
This matter is being handled by the United States Attorney’s Office, the Louisiana State Police, the Louisiana Inspector General’s Office, and the Federal Bureau of Investigation. The matter is being prosecuted by Assistant United States Attorney Corey R. Amundson, who serves as the Chief of the Criminal Division, and Special Assistant United States Attorney J. Brad Casey.

U.S. Attorney Green stated, “This case is a great illustration of federal and state agencies successfully working together to root out public corruption. Federal funding is often distributed through state and local entities and the integrity of that distribution network and those entrusted to protect it is vitally important. Our office, together with our federal, state, and local partners, will continue to aggressively battle public corruption wherever found.”

Louisiana Inspector General Stephen Street commented, “The most disappointing thing about this case is the position of high trust held by Mr. Augustus within DCFS. He took full advantage of that trust to steal money from the taxpayers. Today’s guilty plea should send a clear message that the law enforcement community has zero tolerance for this sort of corruption, and will continue working together relentlessly to bring about criminal consequences for it. I want to again acknowledge and thank LSP Colonel Mike Edmonson, U.S. Attorney Walt Green, and FBI Special Agent in Charge Michael Anderson for the outstanding work done by their respective staffs on this case.”

Colonel Mike Edmonson, Louisiana State Police Superintendent, stated, “There are no boundaries when it comes to federal, state, and local law enforcement working together to fight corruption at any level. The public demands that people in trusted positions are kept to and held to a higher standard of integrity. Violations of the public trust must be dealt with swiftly and directly.”

Ronald Joseph Olah, Jr. Sentenced in Connection with Fraudulent Scheme to Develop Fitness Facility

Ronald Joseph Olah, Jr., age 35, of Baton Rouge, Louisiana, was sentenced by U.S. District Judge James J. Brady to serve eight months’ incarceration in a halfway house and two years of probation for his role in a fraudulent scheme to secure financing for a new fitness facility in Baton Rouge.

The sentence arises from an investigation into fraud in connection with an effort by Olah and others to develop a new gym in Baton Rouge, to be called Powerhouse Gym of Baton Rouge. On May 30, 2013, Olah and a co-defendant, Matthew Scott Bernard, were charged by a federal grand jury with bank fraud, making false statements to a bank, and wire fraud. The indictment alleged that in 2011, while attempting to secure financing for a new gym that they sought to develop, Olah and Bernard made numerous false representations to two local banks regarding their personal financial resources, their incomes, and the financial condition of an existing gym that Olah was operating at the time. The indictment alleged that the defendants obtained loans from two different banks and an out-of-state investor, based on their false statements. Bernard pled guilty to bank fraud on August 14, 2013, and Olah pled guilty to wire fraud on November 5, 2013.

Olah appeared before Judge Brady for sentencing, and was sentenced to serve eight months’ incarceration in a halfway house, two years of probation, to pay restitution in the amount of $575,242.82, and to pay a special assessment of $100. Finally, as part of his sentence, Olah has been ordered to forfeit an additional $325,343 in proceeds from the fraudulent scheme.

Olah’s co-defendant, Bernard, was previously sentenced to serve 41 months in federal prison for his role in the scheme.

The Legendary Voices Collection for Anyone who Loves the All-time Classics

Behind every great song, there's a great singer.

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Never before has one CD collection gathered together the greatest singers of our lifetime singing their biggest hits, but in this timeless set, fans of the era will hear everything from Elvis crooning "Love Me Tender" and Bobby Darin singing "Mack the Knife" to Ray Charles' "Georgia on My Mind" among many, many others. THE LEGENDARY VOICES COLLECTION, features 9 CDs, a bonus CD of instrumental favorites, and liner notes, and will be available exclusively.

Featuring 150 unforgettable songs spread over 10 CDs, THE LEGENDARY VOICES COLLECTION includes artists such as Johnny Mathis, Nat King Cole, Tony Bennett, Bobby Darin, Patsy Cline, Perry Como, Andy Williams, as well as selected vocal groups such as The Mills Brothers, The McGuire Sisters, The Righteous Brothers, The Everly Brothers and The Lettermen.

THE Get The Legendary Voices Collection 10-CD Set: 150 Songs + FREE Bonus CD and Collector's Box! Only 5 Easy Installments of $29.99 + FREE Shipping at TimeLife.com!LEGENDARY VOICES COLLECTION features vocalists and songs including:

  • Andy Williams/ "Moon River"
  • Ben E. King/ "Stand by Me"
  • Bobby Darin/ "Beyond the Sea"
  • Bobby Vinton/ "Blue Velvet"
  • Dean Martin/ "Volare (Nel Blu Di Pinto Di Blu)"
  • Dinah Shore with Henri RenĂ© and His Orchestra/ "Love and Marriage"
  • Dionne Warwick/ " I'll Never Fall in Love Again"
  • Elvis Presley/ "Love Me Tender"
  • Engelbert Humperdinck/ "After the Lovin'"
  • Etta James/ "At Last"
  • Frank Sinatra/ "Night and Day"
  • Frankie Valli/ "Can't Take My Eyes off You"
  • Judy Garland/ "Over the Rainbow"
  • Lena Horne with Orchestra conducted by Lennie Hayton/ "Stormy Weather"
  • Patsy Cline/ "Crazy"
  • Peggy Lee/ "Fever"
  • Perry Como with Mitchell Ayres and His Orchestra and the Ray Charles Singers/ "Papa Loves Mambo"
  • Ray Charles/ "Georgia on My Mind"
  • Roger Williams/ "Born Free"
  • The Everly Brothers/ "Bye Bye Love"
  • The Five Satins/ "In the Still of the Nite"
  • The Four Aces Featuring Al Alberts/ "Love Is a Many-Splendored Thing"
  • The Four Coins/ "Shangri-La"
  • The Lettermen/ "The Way You Look Tonight"
  • The Platters/ "Only You (And You Alone)"
  • The Righteous Brothers/ "You've Lost That Lovin' Feelin'"
  • This Ole House/ "Rosemary Clooney"
  • Tom Jones/ "It's Not Unusual"
  • Tony Bennett with Percy Faith & His Orchestra/"Rags to Riches"


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Thursday, May 29, 2014

Jordan S. Gonzalez Admits Attempting to Weaponize Deadly Toxins and Possessing Narcotics Manufacturing Equipment

A licensed pharmacist pleaded guilty in federal court to attempting to develop, produce, and possess the potentially deadly toxins ricin and abrin for use as weapons and to possessing equipment for producing illegal narcotics, New Jersey U.S. Attorney Paul J. Fishman announced.

Jordan S. Gonzalez, 34, of New York and formerly of Jersey City, New Jersey, entered his guilty plea before U.S. District Judge Mary L. Cooper in Trenton federal court.

“Jordan Gonzalez admitted today that he worked to manufacture and deploy deadly toxins, stockpiled weapons and body armor, and acquired manuals training him for violent confrontation,” said U.S. Attorney Fishman. “We all have seen the devastation possible when these behaviors go unchecked. With today’s guilty plea, Jordan Gonzalez will face justice and will not be a threat to society.”

“The overriding focus of the FBI’s WMD Directorate and the primary focus of our overall efforts is prevention,” said FBI Newark Division Special Agent in Charge Aaron T. Ford. “To make this happen, we pull together various resources from the FBI and work closely with our law enforcement partners. In this case, the FBI worked swiftly and tirelessly with our partners to prevent and neutralize all threats posed by this defendant.”

Carl J. Kotowski, Special Agent in Charge of the Drug Enforcement Administration’s New Jersey Division, said, “The men and women of DEA are dedicated to protecting the citizens of this nation. This investigation reveals how DEA and its law enforcement partners worked together to prevent Mr. Gonzalez from doing harm to the citizens of our communities.”

According documents filed in this case and statements made in court:

  • From September 18, 2011 through March 19, 2013, Gonzalez purchased thousands of seeds containing ricin and abrin and materials to extract and administer those toxins to others, including filtering equipment, respirators, glass vials, a spraying device, and projectile weapons including a crossbow pistol. Gonzalez also purchased materials for making RDX, an explosive compound used in military and commercial demolition applications. Gonzalez made the purchases through an online third-party vendor marketplace, and all the items were delivered to him at his Jersey City apartment.
  • Gonzalez learned how to extract toxins from the seeds and about deployment methods from manuals he acquired. He also kept manuals teaching how to make improvised explosive devices and synthesize explosive compounds, including RDX.
  • On November 8, 2013, while living in New York, Gonzalez purchased one kilogram of sodium azide, a toxic, gas-forming compound that can explode at high temperatures and is lethal if ingested or absorbed through the skin. Law enforcement officers intercepted the delivery during the investigation.
  • On November 14, 2013, Gonzalez was arrested in Jersey City, and search warrants were executed at three locations he used: apartments in Manhattan and Jersey City and a storage unit in Jersey City. Collectively, material collected through the searches included thousands of seeds containing ricin and abrin; explosive precursor chemicals; manuals related to toxins, explosives, and improvised explosive devices; approximately one thousand rounds of ammunition, handguns, components for assault rifles, and high-capacity magazines; a bulletproof vest; and books and documents related to the collapse of social order and techniques for surviving in a lawless environment. Gonzalez has been in custody since his arrest.


Even small doses of ricin and abrin are potentially lethal to humans if ingested, inhaled, or injected—causing death within 36 to 72 hours from the time of exposure.

During his guilty plea, Gonzalez admitted that acquiring this knowledge and these materials were substantial steps toward developing ricin and abrin as weapons and that he acquired all the materials—including the firearms, ammunition, and body armor—in anticipation of using them in confrontations with other people in the future.

Gonzalez also acquired manuals for synthesizing controlled substances, including methylenedioxyamphetamine (MDA) and methylenedioxymethamphetamine (MDMA), also known as Ecstasy. He bought and had delivered to the Jersey City apartment a three-neck round-bottom flask, gel capsules, and an encapsulating machine, as well as precursor chemicals used in the manufacture of MDA and MDMA. Possession of that type of flask is prohibited if intended for use in the manufacturing of controlled substances.

The toxin charge to which Gonzalez pleaded guilty carries a maximum potential penalty of any term of years or life in prison and a $250,000 fine. The narcotics charge carries a maximum potential penalty of four years in prison and a $250,000 fine. Sentencing is currently scheduled for September 17, 2014.

Neal Goyal of Blue Horizon Asset Management Charged with Allegedly Defrauding 41 Investors of $11.3 Million

A Chicago investment fund manager fraudulently obtained more than $11.3 million from 41 investors and misused the funds for his own benefit, as well as to repay certain investors in a Ponzi-type scheme, according to a criminal fraud case announced by federal law enforcement officials. The defendant, Neal Goyal, was the founder and sole managing member of Blue Horizon Asset Management LLC and Caldera Advisors LLC, both of which were unregistered investment advisers.

Goyal, 33, of Chicago, was charged with one count of wire fraud in a criminal information filed in U.S. District Court, where he will be ordered to appear for arraignment on a date yet to be determined.

The U.S. Securities and Exchange Commission filed a parallel civil fraud lawsuit yesterday and obtained a court order freezing the assets of Goyal and his funds. The SEC suit alleges that Goyal stole his investors’ money to fund his own lavish lifestyle, to pay business expenses, and to support a variety of personal business ventures, including a bar and two children’s clothing boutiques that his wife operates in Chicago.

According to the criminal case, between June 2006 and May 2014, Goyal obtained more than $11.3 million from investors through offering and selling limited partnerships in three Blue Horizon funds and a Caldera Equity Fund by making false representations about the intended use of the funds, the investment returns generated, and the source of the investment returns and principal paid to investors. In fact, Goyal allegedly misappropriated the investors’ funds for his own benefit and concealed the fraud scheme by creating and distributing false account statements.

Beginning in early 2006, Goyal represented that funds invested in the Blue Horizon funds would be used for long and short trading in equities, options, and other securities. By June 2006, Goyal began sending false account statements to investors that inflated the financial results from trading purportedly being done by those funds, the charging document alleges. By the first half of 2008, Goyal allegedly knew that he intended to misuse the funds for himself and to make Ponzi-type payments to certain investors. By January 2009, Goyal had stopped trading for two Blue Horizon funds and had not traded at all for the third Blue Horizon fund. In February 2009, Goyal allegedly began engaging in a similar fraud scheme with investments in the Caldera Equity Fund.

Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine or an alternate fine totaling twice the loss or twice the gain, whichever is greater, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

Robert De Niro to Join Robert Pattinson on Movie About Murdered Burglary Crew That Stole from Tony Accardo #IdolsEye

Back in 2011 actor Robert De Niro and director Olivier Assayas sat side by side on the Cannes jury. Now they’re making a movie together. Assayas has just hired De Niro to join Robert Pattinson in the film Idol’s Eye. The movie is scheduled to shoot in October in Chicago and Toronto.

The press release announcing the film doesn’t have many details, but there is speculation (via The Film Stage) that this is a retitled launch of the Assayas project Hubris. That was described in 2013 as “an action-packed crime thriller set against the backdrop of organized crime in Chicago in the 1970s.” Which would be something I’d watch the director of Carlos do in a heartbeat.

Indeed, this new film is described as a sophisticated heist action/thriller. And with that Chicago location planned, these probably are one and the same. Or at least one jumps off from the other.

Here’s a rundown. Hubris was a script by Bobby Moresco that Todd Field was going to direct back in 2011. It was based on a 2007 Playboy article called Boosting the Big Tuna, written by reporter Hillel Levin. The story was based on the murders of a crew of guys who robbed the house of Chicago mafia boss Tony Accardo’s (AKA “Big Tuna”) in 1978. After the break-in, several guys suspected of the crime were murdered with, well, let’s say extreme prejudice. Some were tortured. There’s a lot more to the story than that; it’s a hell of a gangland saga, with violence and a big multi-layered investigation. (It’s also the same material that Michael Mann was toying with shooting as Big Tuna a few years ago.)

So where does the name Idol’s Eye come from? The Idol’s Eye is a big diamond — a big famous diamond, in fact. In the ’70s it was owned by a Chicago jeweler. It was never stolen, and was not part of the Big Tuna robbery. But there’s a connection. The owner of the diamond was Harry Levinson, a mob-connected guy. And in 1977 a thief named John Mendell targeted Levinson for his diamond, and planned a huge heist of the rock that was only partially successful. John Mendell is one of the guys who broke into Big Tuna’s place a year later.

So what story is Assayas telling? We’d assume that De Niro is going to play Accardo, and Pattinson will be Mendell. But the title suggests this could be more about the attempt to steal the Idol’s Eye than the Accardo robbery. Both are big, great stories, with potential for some excellent cinematic flavor.

Regaardless, I’ll watch it. Assayas had a good year at Cannes this year, too. While his current film, The Clouds of Sils Maria — a film about film — didn’t win the Palme d’Or, it earned a lot of appreciation while playing on the Croisette. We’re looking forward to seeing that, and having Idol’s Eye on the horizon is a bonus.

Variety adds that Rachel Weisz is now also in talks to join the cast, and confirms that this is a relaunch of the old Hubris project.

Thanks to Russ Fischer.

Tuesday, May 27, 2014

Juan Alberto Ortiz-Lopez, High-Ranking Guatemalan Drug Trafficker, Extradited to Face Federal Drug Charges #OperationPanamaExpress

Juan Alberto Ortiz-Lopez, a/k/a “Chamale,” a/k/a “Juanito,” (43, San Marcos, Guatemala) has been extradited to the Middle District of Florida to face federal drug trafficking charges. If convicted, he faces a maximum penalty of life in federal prison. The indictment also notifies Ortiz-Lopez that the United States intends to forfeit any and all properties, which are traceable to proceeds of the offenses. Ortiz-Lopez was indicted on February 1, 2011 and arrested on March 30, 2011, by Guatemalan authorities.

Count one of the indictment charges Ortiz-Lopez with conspiring with other persons, including persons who were on board a vessel subject to the jurisdiction of the United States and who were first brought into the United States, at a point in the Middle District of Florida, to possess with the intent to distribute and distribute five kilograms or more of cocaine. Count two charges Ortiz-Lopez with conspiring with other persons to distribute five kilograms or more of cocaine, knowing and intending that such substance would be unlawfully imported into the United States.

Ortiz-Lopez’s indictment was obtained following a long-term investigation by the Operation Panama Express Strike Force—a multi-agency task force targeting large-scale drug trafficking organizations involved in smuggling shipments of narcotics into the United States. Ortiz-Lopez was designated under the Department of Justice’s Organized Crime Drug Enforcement Task Force (OCDETF) program as a Consolidated Priority Organization Target (CPOT) and was considered by the DEA to be the highest-ranking drug trafficker currently operating in Guatemala. For over a decade, Ortiz-Lopez’s drug organization received multi-ton cocaine shipments in Guatemala, which would then be transported through Mexico to the United States, where the cocaine would be further distributed.

Patricia M. Syling Pleads Guilty to Wire Fraud

Patricia M. Syling (44, Lutz) pleaded guilty to wire fraud. She faces a maximum penalty of 20 years in federal prison. As part of her plea agreement, Syling also agreed to forfeit a residence in Lutz.

According to the plea agreement and other court documents, Syling gained employment in October 2007 with Citrus Health Care Inc. (CHC), a health maintenance organization located in Tampa. Her title was director of Compliance. To secure the position with CHC, Syling used a false name (Patricia Dunne) and other false personal information in her CHC employment application, including a false Social Security number, prior work history, and education history. Syling used the false information because at the time, she was under federal indictment in the District of Hawaii, charged with eight counts of mail fraud.

Shortly after securing employment at CHC, Syling opened a bank account at Regions Bank in the name of Health Solutions Group LLC (HSG), a company created and controlled by her. Thereafter, she created fraudulent documentation to support bogus invoices submitted by HSG and other like-sounding names to CHC, which Syling then approved for payment. For example, in July 2007, using her position at CHC and still posing as Patricia Dunne, Syling provided fraudulent information to a member of the CHC Board of Directors in order to cause that person to initiate an interstate wire transfer of $395,000 from CHC’s SunTrust bank account to the HSG bank account controlled by the Syling at Regions Bank. Syling then used a portion of the proceeds from the wire transfer to purchase a home in Lutz, Florida.

In March 2009, Syling pleaded guilty to the eight mail fraud charges in the District of Hawaii. On June 3, 2009, she was sentenced to 40 months in federal prison. She was released in June 2013. A superseding indictment was returned in the Middle District of Florida case in July 2013.

Hamadi Hassan Pleads Guilty to Crack Cocaine Conspiracy

Hamadi Hassan, 26, of Portland, pled guilty in U.S. District Court to conspiring to distribute crack cocaine.

According to court records, between November 2010 and February 2012, the defendant was the leader of a drug trafficking conspiracy that acquired cocaine in Boston and distributed crack cocaine in the greater Portland area. The defendant took orders for crack cocaine from customers and co-conspirators; transported cocaine from Boston to Maine; and prepared, packaged, and delivered crack cocaine to his customers and co-conspirators.

Hassan faces a mandatory minimum of five years and up to 40 years in prison, a $5,000,000 fine, or both. He will be sentenced after completion of a pre-sentence investigation report by the U.S. Probation Office.

Monday, May 19, 2014

Details on John Bills' Arrest on Federal Bribery Charge for Taking Cash and Personal Benefits to Steer $124 Million in City Contracts to Redflex for Red Light Camera Program

A retired City of Chicago official who managed the city’s red light camera program for nearly a decade was arrested for allegedly accepting cash and personal benefits totaling hundreds of thousands of dollars to steer $124 million in city contracts to Redflex Traffic Systems Inc. to establish, operate, and expand the program. The defendant, John Bills, allegedly received cash bribes, other forms of payment, and an Arizona condominium, all funneled from Redflex through unnamed Individual A, Bills’ one-time friend who received $2 million in salary, bonuses, and commissions as a consultant to Redflex.

Bills, 52, 10% Off Camera Batteries + Free Shippingof Chicago, was charged with one count of federal program bribery in a criminal complaint.

Between 2003, when the city awarded Phoenix-based Redflex its initial contract, and 2011, Bills allegedly received from Individual A cash and checks directly and indirectly for his benefit, including to repay loans, for his retirement party, and catering for another party. Individual A also purchased for Bills a Glendale, Arizona condominium for $177,000, which Bills, often with friends and family, visited 22 times between May 2008 and 2012.

Bills, who retired in 2011 as managing deputy commissioner of the city’s transportation department after 32 years with the city, managed the city’s red light program and served as a member of the city’s contract evaluation committee.

According to an FBI affidavit supporting the charges, in October 2003, the city awarded a contract to Redflex for the installation, maintenance, and operation of the city’s first Digital Automated Red Light Enforcement Program (DARLEP), which used cameras to automatically record and ticket drivers who ran red lights. Between 2004 and 2008, the city paid Redflex approximately $25 million under this contract, and Redflex installed and maintained 136 camera systems in Chicago intersections and assisted in reviewing and processing violations. Bills, then assistant transportation commissioner, was a voting member of the city’s request for proposal (RFP) evaluation committee that recommended awarding the contract to Redflex after a one-month trial run of competing systems by Redflex and another finalist. In February 2008, the city awarded a new, non-competitive contract to Redflex to operate and maintain the previously installed 136 camera systems and paid Redflex approximately $33 million under that contract.

Also in February 2008, following the competitive RFP process, the city awarded a new DARLEP contract to Redflex that was similar to the first. Bills was an advisory member of this RFP evaluation committee. The city paid Redflex approximately $66 million under this contract, which resulted in approximately 248 red light cameras being installed, bringing the total number of Redflex cameras to 384 and the total amount the city has paid Redflex to approximately $124 million.

By 2010, Chicago had the largest red light camera program in the United States, representing 20 percent of the total camera systems that Redflex operated nationwide. For Redflex, a subsidiary of Australian-based Redflex Holdings Ltd., the Chicago contract was its most important because of the revenue it generated and the name recognition it gave the company, according to the affidavit.

The complaint affidavit is supported by information from Confidential Source 1 (CS1), a former Redflex employee who initially provided Bills in 2002 with an unsolicited proposal to install red light cameras in Chicago. Frequent communications between CS1 and Bills led CS1 to understand that Bills was trying to determine if he could get money from Redflex in return for the company getting the red light camera contract. Shortly after a January 3, 2003 pre-bid meeting that CS1 attended with other vendors, Bills asked CS1 to get him and his friends a hotel room in Los Angeles. CS1 paid for Bills’ hotel room with the approval of CS1’s superiors, believing that it would influence Bills to help Redflex get the Chicago contract. As CS1 anticipated, Bills did not offer and did not reimburse CS1 for the hotel room and instead thanked CS1, who submitted a voucher and was reimbursed by Redflex.

Between February and May 2003, during a pilot phase with Redflex and a competing vendor, Redflex paid for drinks and meals for Bills. Upon Bills’ recommendation, Redflex hired Company A as a subcontractor. In May 2003, before the city contract was awarded, Bills made comments to remind CS1 that Bills was being courted by the competing vendor. After Bills and CS1 strategized to ensure a favorable result, on May 27, 2003, the evaluation committee and city transportation commissioner recommended that Redflex be awarded the DARLEP contract, which went into effect in October 2003.

At a celebratory dinner in June 2003, Bills allegedly told CS1 words to the effect of “It’s time to make good,” which CS1 understood to mean that Bills wanted and expected to be paid for helping Redflex win the Chicago contract. Bills allegedly floated alternative suggestions for funneling benefits to him, including suggesting that Redflex could pay him through the newly created Chicago customer liaison position. During the summer and fall of 2003, Redflex hired Individual A to fill that position and negotiated his compensation structure. In addition to salary and bonuses, Redflex payments to Individual A included commissions totaling more than $1.34 million between 2008 and 2011.

Before Bills retired, he allegedly made it known to CS1 and other Redflex employees that he wanted a job with Redflex. After it was decided that Redflex could not hire him directly, Redflex arranged for Bills to get a job with Company B, which was funded by Redflex. That job lasted through the early spring of 2012.

The affidavit alleges that between late 2003 and November 2012, Individual A and Bills used several different methods to transfer funds to Bills. In 2008, Individual A purchased the Glendale, Arizona condominium for Bills’ use. In addition, checks written on Individual A’s bank account were used to repay debts Bills had accumulated and also to pay for personal expenses of Bills and his family. Individual A also withdrew large amounts of cash, totaling more than $643,000 between 2006 and 2011, which temporally correspond to Bills’ repayment of loans as well as Bills’ payment of numerous personal expenditures, including purchasing a $12,500 used Mercedes-Benz, with cash. Although some of Bills’ cash expenditures do not correspond to specific withdrawals by Individual A, Bills’ financial records reflect no withdrawals of cash by him to support the personal expenditures. In fact, records reflect very little cash on-hand by Bills during this time period.

Federal program bribery carries a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

U.S. Charges Five Chinese Military Hackers for Cyber Espionage Against U.S. Corporations and a Labor Organization for Commercial Advantage

A grand jury in the Western District of Pennsylvania (WDPA) indicted five Chinese military hackers for computer hacking, economic espionage and other offenses directed at six American victims in the U.S. nuclear power, metals and solar products industries.

The indictment alleges that the defendants conspired to hack into American entities, to maintain unauthorized access to their computers and to steal information from those entities that would be useful to their competitors in China, including state-owned enterprises (SOEs).  In some cases, it alleges, the conspirators stole trade secrets that would have been particularly beneficial to Chinese companies at the time they were stolen.  In other cases, it alleges, the conspirators also stole sensitive, internal communications that would provide a competitor, or an adversary in litigation, with insight into the strategy and vulnerabilities of the American entity.

“This is a case alleging economic espionage by members of the Chinese military and represents the first ever charges against a state actor for this type of hacking,” U.S. Attorney General Eric Holder said.  “The range of trade secrets and other sensitive business information stolen in this case is significant and demands an aggressive response.  Success in the global market place should be based solely on a company’s ability to innovate and compete, not on a sponsor government’s ability to spy and steal business secrets.  This Administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market.”

“For too long, the Chinese government has blatantly sought to use cyber espionage to obtain economic advantage for its state-owned industries,” said FBI Director James B. Comey.  “The indictment announced today is an important step.  But there are many more victims, and there is much more to be done.  With our unique criminal and national security authorities, we will continue to use all legal tools at our disposal to counter cyber espionage from all sources.”

“State actors engaged in cyber espionage for economic advantage are not immune from the law just because they hack under the shadow of their country’s flag,” said John Carlin, Assistant Attorney General for National Security.  “Cyber theft is real theft and we will hold state sponsored cyber thieves accountable as we would any other transnational criminal organization that steals our goods and breaks our laws.”

“This 21st century burglary has to stop,” said David Hickton, U.S. Attorney for the Western District of Pennsylvania.  “This prosecution vindicates hard working men and women in Western Pennsylvania and around the world who play by the rules and deserve a fair shot and a level playing field.”

Summary of the Indictment

Defendants :  Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui, who were officers in Unit 61398 of the Third Department of the Chinese People’s Liberation Army (PLA).  The indictment alleges that Wang, Sun, and Wen, among others known and unknown to the grand jury, hacked or attempted to hack into U.S. entities named in the indictment, while Huang and Gu supported their conspiracy by, among other things, managing infrastructure (e.g., domain accounts) used for hacking.

Victims : Westinghouse Electric Co. (Westinghouse), U.S. subsidiaries of SolarWorld AG (SolarWorld), United States Steel Corp. (U.S. Steel), Allegheny Technologies Inc. (ATI), the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) and Alcoa Inc.

Wesnel Isaac, Suspected Murderer Captured in Haiti, Returned to Florida

Deputy U.S. marshals escorted U.S. Marshals Service 15 Most Wanted fugitive Wesnel Isaac back to Florida following his removal from Haiti. Haitian National Police arrested Isaac in Carrefour, Haiti, last Saturday, ending a seven-year fugitive investigation led by the U.S. Marshals Florida Regional Fugitive Task Force.

The Lee County Sheriff’s Office in Florida wanted Isaac, a documented gang member and alleged enforcer for the Haitian street gang Zoe Pound, for multiple violent offenses committed in 2007 including triple homicide, attempted homicide, kidnapping, home invasion and felon in possession of a firearm.

Shortly after Isaac fled from authorities in 2007, the sheriff’s office requested the assistance of the U.S. Marshals Service Florida/Caribbean Regional Fugitive Task Force to locate and apprehend him. A federal warrant for unlawful flight to avoid prosecution was issued in the Middle District of Florida. The U.S. Marshals upgraded Isaac from a major case to its 15 Most Wanted fugitive list Nov. 13, 2013.

"Isaac’s alleged crimes were horrendous and his potential for continued violence made his arrest a priority for the U.S. Marshals,” said David Harlow, Deputy Director of the U.S. Marshal Service. “His capture is both significant and rewarding, and we thank our domestic and international partners for their tireless persistence in bringing this fugitive to justice.”

A co-defendant in the 2007 triple homicide investigation was sentenced in August 2010 to three life terms by the 20th Judicial Circuit Court in Lee County, Florida.

“Everyone can rest easy now that this alleged ruthless murderer has been brought back to the U.S. and Lee County to face the fullest measure of the law,” said Lee County Sheriff Mike Scott. “We can’t thank our partners with U.S. Marshal’s Service enough for their ‘never give-up – do whatever it takes’ efforts to locate and apprehend this violent fugitive. I know the families of the victims are extremely grateful and can now bring to a close the final chapter for his senseless acts of violence and useless attempt at flight.”

Friday, May 16, 2014

Biniam Tsegai Pleads Guilty in Crack Cocaine Conspiracy

United States Attorney Thomas E. Delahanty, II announced that Biniam Tsegai, 26, of Portland, pled guilty today in United States District Court before Judge Nancy Torresen to conspiring to distribute cocaine base, also known as crack cocaine.

According to court records, in 2011 and 2012, the defendant was part a drug trafficking conspiracy that acquired cocaine in Boston and distributed crack cocaine in the greater Portland area. He prepared crack cocaine for sale and distribution after it had been brought to Maine, and he took orders for and delivered user-level quantities of crack cocaine to customers.

He faces up to 40 years in prison and a $5,000,000 fine. He will be sentenced after completion of a pre-sentence investigation report by the United States Probation Office.

David Lewisbey Sentenced to Nearly 17 Years in Prison for Illegally Trafficking Hundreds of Guns from Indiana to Chicago

A south suburban man was sentenced to nearly 17 years in federal prison for buying hundreds of high-powered firearms at guns shows in Indiana and illegally transporting them to Chicago where he sold them without a federal firearms dealer license. The defendant, David Lewisbey, was sentenced late yesterday in U.S. District Court.

After a two-week trial last September, Lewisbey, 24, of South Holland, was convicted of dealing firearms without a federal license, two counts of illegally transporting firearms across state lines, and two counts interstate travel to sell guns without a license.

“This case is a perfect example of where the guns come from...and into the hands of gangbangers who then shoot them and kill and wound people,” U.S. District Judge Ronald Guzman said before imposing a 200-month sentence.

“During one of the deadliest years in Chicago’s history, the defendant was pumping numerous unregistered and untraceable firearms into the most violent neighborhoods in Chicago. The defendant ran his business on the side streets and back alleys of Chicago’s neighborhoods. No background checks, no receipts, no written record,” Assistant U.S. Attorneys Bethany Biesenthal and Christopher Parente argued in a sentencing memo.

Evidence at the trial showed that between January 2008 and September 2012, Lewisbey, who had no criminal record that disqualified him from buying firearms, routinely traveled to various gun shows in Indiana and purchased duffel bags full of guns that he brought back to Chicago. A government witness testified that he personally observed Lewisbey buy more than 100 firearms, as well as dozens of high-capacity magazines, at Indiana gun shows.

During just one 48-hour period, on April 22-23, 2012, Lewisbey bought 43 guns in Indiana and brought them to Chicago, where he delivered them to co-defendant Levaine Tanksley, who with two other co-defendants, sold them to an individual who was cooperating with ATF agents. All those guns were recovered by law enforcement.

Last month, Judge Guzman sentenced Tanksley, 29, of Chicago, to more than 11 years in prison, and Charles Lemle, 28, of Chicago to 10 years in prison. Michael Hall, 29, of Chicago, who cooperated with the government and testified against Lewsibey, is awaiting sentencing. Tanksley, Lemle, and Hall each pleaded guilty to illegally possessing firearms as previously convicted felons.

General Motors agrees to pay maximum $35 million penalty for violating federal safety laws in Chevrolet Cobalt investigation

The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) announced that General Motors (GM) has agreed to pay a record $35 million civil penalty and to take part in unprecedented oversight requirements as a result of findings from NHTSA’s timeliness investigation regarding the Chevrolet Cobalt and the automaker’s failure to report a safety defect in the vehicle to the federal government in a timely manner. The defect resulted in the non-deployment of airbags in certain Chevrolet Cobalt and other GM models. This action represents the single highest civil penalty amount ever paid as a result of a NHTSA investigation of violations stemming from a recall.

As part of the agreement, set forth in a Consent Order signed with NHTSA, the agency also ordered GM to make significant and wide-ranging internal changes to its review of safety-related issues in the United States, and to improve its ability to take into account the possible consequences of potential safety-related defects. GM will also pay additional civil penalties for failing to respond on time to the agency’s document demands during NHTSA’s investigation.

“Safety is our top priority, and today’s announcement puts all manufacturers on notice that they will be held accountable if they fail to quickly report and address safety-related defects,” said U.S. Transportation Secretary Foxx. “While we will continue to aggressively monitor GM’s efforts in this case, we also urge Congress to support our GROW AMERICA Act, which would increase the penalties we could levy in cases like this from $35 million to $300 million, sending an even stronger message that delays will not be tolerated.”

Federal law requires all auto manufacturers to notify NHTSA within five business days of determining that a safety-related defect exists or that a vehicle is not in compliance with federal motor vehicle safety standards and to promptly conduct a recall. GM admits in the Consent Order that it did not do so.

This action is historic in that the provisions of the Consent Order will be immediately enforceable in federal court if GM does not fully comply.  The Consent Order will hold GM accountable, push the automaker to make needed institutional change, and ensure that replacement parts are produced quickly and recalled vehicles are repaired promptly.

“No excuse, process, or organizational structure will be allowed to stand in the way of any company meeting their obligation to quickly find and fix safety issues in a vehicle,” said NHTSA Acting Administrator David Friedman. “It’s critical to the safety of the driving public that manufacturers promptly report and remedy safety-related defects that have the potential to lead to deaths or injuries on our nation’s highways.”

In the Consent Order, GM agreed to provide NHTSA with full access to the results of GM’s internal investigation into this recall, to take steps to ensure its employees report safety-related concerns to management, and to speed up the process for GM to decide whether to recall vehicles.

The Consent Order also requires GM to notify NHTSA of changes to its schedule for completing production of repair parts by October 4.  GM must also take steps to maximize the number of vehicle owners who bring in their vehicles for repair, including targeted outreach to non-English speakers, maintaining up-to-date information on its website, and engaging with vehicle owners through the media.  The Consent Order requires GM to submit reports and meet with NHTSA so that the agency may monitor the progress of GM’s recall and other actions required by the consent order.

Both in 2007 and again in 2010, NHTSA reviewed data related to the non-deployment of airbags in certain Chevy Cobalt models but each time, determined that it lacked the data necessary to open a formal investigation.  However, on February 7, 2014, GM announced it would recall certain model vehicles for a defect where the vehicle’s ignition switch may unintentionally move out of the “run” position that could result in the air bag not deploying in the event of a crash.  GM had failed to advise NHTSA of this defect at the time of the agency’s earlier reviews.

After review and consultation by NHTSA, GM twice expanded the recall to include a total of 2,190,934 vehicles in the United States.  The GM recall covers the 2005-2010 Chevrolet Cobalt, 2007-2010 Pontiac G5, 2003-2007 Saturn Ion, 2006-2011 Chevrolet HHR, 2006-2010 Pontiac Solstice and 2007-2010 Saturn Sky vehicles.

Over the past ten years, NHTSA defect investigations resulted in 1,299 recalls involving more than 95 million vehicles and items of motor vehicle equipment, which has helped the agency to reduce vehicle fatalities to historic, all-time lows. Including today’s consent order, the agency has obtained record fines of $124.5 million in the last five years from automakers who have failed to promptly report defects to NHTSA.

Wednesday, May 14, 2014

Former County Sheriff’s Officer Sentenced to 15 Months in Prison for Collecting a Debt Through Extortion

A Monmouth County, New Jersey man who formerly worked as a sheriff’s officer in Essex County was sentenced to 15 months in prison for conspiring to collect a debt using extortionate means, U.S. Attorney Paul J. Fishman announced.

John Balsamo, 50, of West Long Branch, New Jersey, previously pleaded guilty before U.S. District Judge Katharine S. Hayden to an indictment charging him with using threats of violence and economic harm to collect a debt from the victim, an Ocean County, New Jersey construction contractor. Judge Hayden imposed the sentence today in Newark federal court.

According to documents filed in this case and statements made in court:

Balsamo and conspirators Timothy Kelly, 38, of Jersey City, New Jersey, and Robert C. Bantang, Jr., 45, of Oceanport, New Jersey, used extortionate means in order to collect $50,000 the contractor owed to Kelly from 2009. The conspirators made the victim believe that the money he had borrowed from Kelly was owed to the “Old Man,” a member of organized crime who would cause physical harm to the victim if the debt was not paid. Balsamo also displayed a key to a construction site where the victim was working in Brick, New Jersey, and warned that the key could be used to gain access to and cause damage to the site, due to the victim’s failure to fully repay the debt. Balsamo and Kelly sent Bantang to the construction site on three occasions to deliver threats purportedly on behalf of the Old Man.

On March 24, 2011, Balsamo and Kelly went to the Brick construction site, which was now a completed restaurant, to confront the victim. Kelly told the victim that if he had brought his “boys” that it would have gotten “done right in here, right in this place, right like this, in front of everybody...and your wife gets it too.” Kelly also told the victim that he deserved “a beatin’ just out of f-—kin’ principle.” Balsamo warned that the Old Man wanted to “beat the shit” out of the restaurant owner due to the victim’s failure to repay the debt, which Balsamo and Kelly now stated had grown to $70,000. Balsamo also advised the victim that the Old Man has been “promoted,” implying that the Old Man now possessed a higher position in organized crime.

Kelly and Bantang previously pleaded guilty in February 2012 to conspiring to collect a debt from the victim using extortionate means, before Judge Hayden. Kelly was sentenced today to three years of probation, including four months of house arrest and 40 hours of community service. Bantang was sentenced to three years of probation.

In addition to the prison term, Judge Hayden sentenced Balsamo to two years of supervised release and ordered him to pay restitution of $2,500 in cash and a Rolex watch he had taken from the victim.

Former Transit Official Admits Agreeing to Accept $8,000 Bribe

A former New Jersey Transit (NJ Transit) official admitted she agreed to accept an $8,000 bribe and power-washing services in connection with a snow removal contract, U.S. Attorney Paul J. Fishman announced.

Donna Schiereck, 56, of Jackson, New Jersey, pleaded guilty before U.S. District Judge William H. Walls in Newark federal court to an information charging her with one count of agreeing to accept a bribe.

According to documents filed in this case and statements made in court:

From September 2012 to December 2012, Schiereck was a supervisor at NJ Transit. Schiereck agreed to accept $8,000 in exchange for her assistance with maintaining snow removal work for a Lakewood, New Jersey company. She also sought and received free power washing services from the company in return for her official assistance.

The bribery count to which Schiereck pleaded guilty carries a maximum potential penalty of 10 years in prison and a $250,000 fine. Sentencing is scheduled for September 9, 2014.

Khawaja Ikram Admits Role in International $200 Million Credit Card Fraud Conspiracy

A New York man admitted his role in one of the largest credit card fraud schemes ever charged by the Justice Department, U.S. Attorney Paul J. Fishman announced.

Khawaja Ikram, 41, of Staten Island, New York, pleaded guilty before U.S. District Judge Anne E. Thompson in Trenton federal court to an information charging him with one count of conspiracy to commit bank fraud. Two co-defendants, Tarsem Lal, 73, of Iselin, New Jersey, and Azhar Ikram, 40, of Howard Beach, New York, pleaded guilty before Judge Thompson in Trenton on April 2, 2014, to informations charging them with conspiracy to commit bank fraud.

According to documents filed in this case and statements made in court:

Khawaja Ikram was originally charged in February 2013 as part of a conspiracy to fabricate more than 7,000 false identities to obtain tens of thousands of credit cards. Members of the conspiracy doctored credit reports to pump up the spending and borrowing power associated with the cards. They then borrowed or spent as much as they could, based on the phony credit history, but did not repay the debts—causing more than $200 million in confirmed losses to businesses and financial institutions.

The scheme involved a three-step process in which the defendants would make up a false identity by creating fraudulent identification documents and a fraudulent credit profile with the major credit bureaus; pump up the credit of the false identity by providing false information about that identity’s creditworthiness to those credit bureaus; and finally, run up large loans.

The scope of the criminal fraud enterprise required Ikram and his conspirators to construct an elaborate network of false identities. Across the country, the conspirators maintained more than 1,800 “drop addresses,” including houses, apartments, and post office boxes, which they used as the mailing addresses of the false identities.

Ikram admitted he helped obtain credit cards in the name of third parties—many of which were fictional—and then directed the credit cards to be mailed to addresses controlled by members of the conspiracy. He also admitted he knew the cards would be used fraudulently at businesses.

The charge to which Ikram pleaded guilty carries a maximum potential penalty of 30 years in prison and a $1 million fine, or twice the gain or loss caused by the offense. Sentencing is scheduled for September 23, 2014. Azhar Ikram and Lal are scheduled to be sentenced September 17, 2014.

Monday, May 12, 2014

Vinaya K. Jessani Pleads Guilty to Role in Bid Rigging Scheme at Municipal Tax Lien Auctions

A former New York-based tax liens company executive pleaded guilty for his role in a conspiracy to rig bids at auctions conducted by New Jersey municipalities for the sale of tax liens, the Department of Justice announced.

Vinaya K. Jessani, of New York City, entered a guilty plea in the U.S. District Court for the District of New Jersey in Newark to felony charges. Under the plea agreement, Jessani has agreed to cooperate with the department’s ongoing investigation.

According to the charge, from at least as early as 1994 until as late as February 2009, Jessani, a former senior vice president who supervised the purchasing of municipal tax liens at auctions in New Jersey for the company he worked for, participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to, and instructing others to, allocate among certain bidders which liens each would bid on. The department said that Jessani and those under his supervision submitted bids in accordance with the agreements and purchased tax liens at collusive and non-competitive interest rates.

“Today’s guilty plea demonstrates the Antitrust Division’s continuing effort to prosecute those who manipulate the competitive process in order to harm home and property owners,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “The division will continue to be vigilant in rooting out conspiracies that harm already distressed property owners.”

The department said that the primary purpose of the conspiracy was to suppress and restrain competition in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. New Jersey state law requires that investors bid on the interest rate delinquent property owners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.

According to court documents, the conspiracy permitted the conspirators to purchase tax liens with limited competition and each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition, the department said.

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the $1 million statutory maximum.

Sandip Shah and Shailesh Shah Charged as Part of Securities Kickback Scheme

Two California men were charged for their involvement in a microcap stock kickback scheme.

Sandip Shah, 40, was charged in an indictment with nine counts of wire fraud and Shailesh Shah, 47, was charged in an Information with two counts of mail fraud and two counts of wire fraud. Both are from Chino, California, and were previously arrested on February 27, 2014.

According to the charging documents, Sandip Shah was in the business of promoting penny stocks and assisting public companies in finding sources of funding. Shailesh Shah was the president and chief executive officer of two publicly traded companies, SOHM Inc. and Costas Inc. Shailesh Shah agreed to pay secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in his two publicly-traded companies. The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents.

According to the charging documents, Sandip Shah agreed to introduce the investment fund representative to executives of publicly traded companies so that those executives could enter into the kickback arrangement. In exchange for the introductions and for facilitating the kickback arrangements as they continued, Sandip Shah accepted a portion of the kickbacks paid by the executives. What the defendants did not know was that the purported investment fund representative was actually an undercover agent.

The charges follow a lengthy investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share.

If convicted, each defendant faces a statutory maximum penalty of 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gain or loss on each count.

TelexFree Owners, James M. Merrill and Carlos N. Wanzeler, Charged in $1 Billion Pyramid Scheme

James M. Merrill and Carlos N. Wanzeler, principals of TelexFree Incorporated and related entities, were charged in a federal criminal complaint, charging them with conspiracy to commit wire fraud.

Merrill, 53, of Ashland, Massachusetts, and Wanzeler, 45, of Northborough, Massachusetts, were charged in a one count criminal complaint filed in U.S. District Court in Worcester, Massachusetts. If convicted, each face up to 20 years in prison. Merrill was arrested by federal authorities and made an initial appearance in U.S. District Court in Worcester. A federal arrest warrant was issued for Wanzeler who is a fugitive.

United States Attorney Carmen Ortiz said, “The scope of this alleged fraud is breathtaking. As alleged, these defendants devised a scheme, which reaped hundreds of millions of dollars from hard working people around the globe.”

“I am very proud of the tireless efforts of my special agents. Investigating the flow of illicit money across U.S. borders and the criminal enterprises behind that money is one of our top priorities,” said Bruce Foucart, Special Agent in Charge of Homeland Security Investigations. “While pyramid schemes are nothing new, the potential scope of this case will hopefully serve as an educational lesson for all. The main point is clear—if it sounds too good to be true, it probably is.”

According to the complaint affidavit, TelexFree Inc. and TelexFree LLC (collectively, TelexFree) provided voice-over Internet protocol (“VoIP”) telephone services, for which customers can sign up via a website maintained by TelexFree. It is alleged that TelexFree was actually a pyramid scheme and that between January 2012 and March 2014, TelexFree purported to aggressively market its VoIP service by recruiting thousands of “promoters” to post ads for the product on the Internet. Each promoter was required to “buy in” to TelexFree at a certain price, after which they were compensated by TelexFree, under a complex compensation structure, on a weekly basis so long as they posted ads for TelexFree’s VoIP service on the Internet.

It is alleged that the ad-posting requirements were a meaningless exercise in which promoters cut and pasted ads into various classified ad sites provided by TelexFree that were already saturated with ads posted by earlier participants. According to the affidavit, TelexFree derived only a fraction of its revenue from sales of VoIP service—less than one percent of TelexFree’s hundreds of millions of dollars in revenue over the last two years. The overwhelming majority of its revenue—the other roughly 99 percent—came from new people buying into the scheme. TelexFree was allegedly only able to pay the returns it had promised to its existing promoters by bringing in money from newly recruited promoters.

On or about March 8, 2014, TelexFree announced changes to its compensation system. On April 14, 2014, Telexfree filed for bankruptcy. In its filings with the bankruptcy court, Telexfree stated, among other things, that it changed its compensation plan “because questions were raised” about the prior plan and that, after changing the plan, the “discretionary payments...quickly became a substantial drain on the company’s liquidity.”

On April 16, 2014, the Securities and Exchange Commission obtained a restraining order to freeze assets of Telexfree and eight related individuals. Since then, the U.S. Attorney’s Office has executed 37 seizure warrants for assets in the tens of millions of dollars.

It is further alleged that in 2013, TelexFree reported sales of $1.016 billion, while known sales of the TelexFree VoIP product represented less than 0.1 percent of TelexFree’s total revenues.

United States Attorney Ortiz, SAC Foucart and Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Cory Flashner and Andrew Lelling of Ortiz’s Worcester Branch Office and Economic Crimes Unit, respectively.

If you believe that you are a victim of the alleged TelexFree Inc. scheme, please send your contact information to the following address: USAMA.VictimAssistance@usdoj.gov.

Ann Elizabeth Ursiny, a/k/a Ann Stone, and Robert E. O’Connor Indicted for Operating Advance Fee Loan Scheme

A Florida woman and a man who previously resided in Beverly were charged in an indictment unsealed today in connection with an advance fee scheme involving approximately 100 victims throughout the United States, including many in Massachusetts.

Ann Elizabeth Ursiny, a/k/a Ann Stone, 50, and Robert E. O’Connor, 63, were indicted on 19 counts of mail fraud and 17 counts of wire fraud.

The indictment alleges that between early 2010 and 2011, Ursiny recruited agents, including O’Connor, in several states to solicit individuals to apply for loans through her entity Trace Financial Group Inc. (Trace) and to pay the advance fees. The agents, including O’Connor, were paid a portion of those advance fees. O’Connor and Ursiny told prospective applicants that Trace had successfully processed and disbursed many loans, when in fact none were ever disbursed. Ursiny and O’Connor focused their scheme on prospective applicants who had poor credit or whose homes were underwater and represented that Trace could replace their mortgage with a new, smaller mortgage with lower mortgage interest payments. The indictment alleges that Trace never funded any of the loans and failed to pay refunds as promised. Victims’ funds were used primarily for Ursiny’s personal and family expenses, as well as to pay “commissions” to agents.

If convicted, Ursiny and O’Connor each face a statutory maximum sentence of 20 years in prison, three years of supervised release, and a $250,000 fine on each count.

Sunday, May 11, 2014

Bilal Ahmed Charged with Attempting to Illegally Export Thermal Imaging Camera to Pakistan

A Bolingbrook man was indicted on federal charges alleging that he violated U.S. export laws by attempting to ship a thermal imaging camera from his company in Schaumburg to a company in Pakistan without obtaining a license from the U.S. Commerce Department.

The case involves a FLIR HRC-U thermal imaging camera, which was on a Commerce Department list of controlled export goods for reasons of national security and regional stability. As a controlled material, a license was required from the Commerce Department’s Bureau of Industry and Security to export the camera to certain countries, including Pakistan.

The defendant, Bilal Ahmed, 33, was charged with one count of violating the International Emergency Economic Powers Act (IEEPA) and one count of attempted smuggling of goods in violation of U.S. export regulations in a two-count indictment returned by a federal grand jury yesterday. Ahmed was initially charged in a criminal complaint and arrested on March 14, and he was subsequently released on a $100,000 secured bond. No date has been set yet for Ahmed to be arraigned in U.S. District Court in Chicago.

According to the complaint affidavit and the indictment, Ahmed was the owner, president, and registered agent of Trexim Corp., which used the address of a virtual office in Schaumburg. Between November 2013 and February of this year, Ahmed corresponded via e-mail with a company in California and negotiated the purchase of a FLIR HRC-U camera for approximately $102,000, which he paid with two checks in February. Ahmed took delivery of the camera on February 27 at a commercial shipping store in Bolingbrook.

On March 7, Ahmed allegedly took the camera, packaged in two boxes, to a different commercial shipper located in Elk Grove Village and left the packages to be shipped to a company in Pakistan. The waybill included a handwritten note containing the letters “NLR,” meaning “no license required.” A search of U.S. State and Commerce Department databases showed there were no licenses applied for or obtained by Ahmed, Trexim, or any other related individual or company names for the export of a FLIR HRC-U camera from the U.S. to Pakistan, the indictment alleges.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and Ronald B. Orzel, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office. The Justice Department’s National Security Division is providing assistance in the case.

Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine, while attempted smuggling of goods carries a maximum penalty of 10 years in prison and a $250,000 fine.

Friday, May 09, 2014

New Book Chronicles the Provocative Odyssey of Jack Reed, Adventurer, Drug Smuggler and Pilot Extraordinaire

Strategic Media Books announced the publication of Buccaneer: The Provocative Odyssey of Jack Reed, Adventurer, Drug Smuggler and Pilot Extraordinaire. Buccaneer is the exciting, true crime tale of the life and times of Jack Carlton Reed, an All-American boy turned drug smuggler, turned Robinson Crusoe, and then infamous prison inmate. Buccaneer: The Provocative Odyssey of Jack Reed, Adventurer, Drug Smuggler and Pilot ExtraordinaireFor the first time, Jack Reed discloses his extraordinary tabooed journey as a high flying international cocaine smuggler and personal pilot for Carlos Lehder, partner to Pablo Escobar, the drug kingpin founder of the Medellin Cartel.

Reed flew drug runs for Lehder’s cocaine transport empire based at Norman's Cay, a tiny out island in the Bahamas. Having gained notoriety in the late 70s as a staging point for drug smuggling, Norman's Cay was immortalized in Blow, a motion picture starring Johnny Depp. Reed lands in court as Lehder’s co-defendant in the longest running drug trial in U.S. history.  Despite the tempting opportunity offered by the prosecution, Reed refused to snitch on Lehder. As Reed explained, “I’m no G*d d***n rat! I’m a player. I’m a pirate. I’m a hedonist; and one hell of good smuggler, but I’m no rat!

The self-proclaimed hedonist co-authored this book with pilot/journalist MayCay Beeler, who would not only help record his life story, but would become a character in Reed's twist of fate ending. The book is the stunning account of Reed’s erotic and provocative life with an unforeseen storybook ending that will make readers believe in destiny.

Thursday, May 08, 2014

Elliot Goldenberg, Author of The Spy of David (the Jonathan Pollard Spy Case) is Tonight's Guest on Crime Beat Radio

Tonight, Spy of David: The Strange Case of Jonathan Pollard and the Two Decade Battle to Win his FreedomElliot Goldenberg, author of Spy of David: The Strange Case of Jonathan Pollard and the Two Decade Battle to Win his Freedom, appears on on Crime Beat Radio.

Crime Beat is a weekly hour-long radio program that airs every Thursday at 8 p.m. EST. Crime Beat presents fascinating topics that bring listeners closer to the dynamic underbelly of the world of crime. Guests have included ex-mobsters, undercover law enforcement agents, sports officials, informants, prisoners, drug dealers and investigative journalists, who have provided insights and fresh information about the world’s most fascinating subject: crime.

Former Sheriff’s Deputy Pleads Guilty to Conspiring to Unlawfully Detain and Take Money from Motorists

The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Middle District of Georgia announced that Jason Stacks, a former Lowndes County Sheriff’s Office (LCSO) Deputy, pleaded guilty to conspiring to use his law enforcement authority to unlawfully detain and take money from motorists.
   
In connection with his plea, Stacks admitted that he conspired with two civilians to subject Hispanic motorists to unlawful traffic stops so that the conspirators could demand the motorists pay money in order to avoid arrest and/or deportation. On Aug. 16, 2013, Stacks, while acting as a LCSO Deputy, unlawfully detained at least four motorists. One of the motorists, identified in the plea documents by the initials T.C., was unlawfully detained by Stacks and then approached by Stacks’s two Spanish-speaking co-conspirators, who explained to T.C. that he would be sent to jail or deported if he did not pay $500. When T.C. responded that he did not have $500 in his car, the co-conspirators drove T.C. to his residence and took $300 in cash from him. Stacks and the two co-conspirators divided the $300 among them.

“Mr. Stacks admitted that he conspired to use his badge to unlawfully detain and take money from motorists,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division. “The Justice Department will continue to vigorously prosecute officers who seek to profit from the violation of civil rights.”

“Today’s guilty plea is another example of the zero tolerance the Department of Justice has for law enforcement officers who violate individuals’ civil rights,” said U.S. Attorney Michael J. Moore for the Middle District of Georgia.

Roberto Alvarado, Former Fugitive of More Than 23 Years, Sentenced to More Than Six Years in Prison for Drug Trafficking

A former Freeport, Illinois man was sentenced in federal court by U.S. District Judge Frederick J. Kapala on a federal drug trafficking charge. The defendant, Roberto Alvarado, 61, was sentenced to 78 months in federal prison, to be followed by five years of supervised release. Judge Kapala ordered that at the end of his prison tenn, Alvarado, a citizen of Mexico, surrender to officials with Immigration and Customs Enforcement for deportation.

Alvarado had been arrested on December 1, 1989, on a drug trafficking charge by FBI special agents. On December 15, 1989, he was released on a $20,000 bond pending trial. However, Alvarado failed to appear for a court appearance on Sept 18, 1990, and fled from Illinois. His bond was forfeited and the assets he had posted for bond were turned over to the United States. An arrest warrant was also issued for him. On June 28, 2013, Alvarado was a passenger in a car that was stopped in Montana by a State Police trooper for speeding. The trooper was able to identify Alvarado as being wanted by the FBI and took him into custody. Alvarado appeared before a federal magistrate, who ordered that Alvarado be detained and transported to Rockford.

Once in Rockford, Magistrate Judge P. Michael Mahoney ordered that Alvarado be detained pending trial. Alvarado pled guilty to the drug trafficking charge on December 4, 2013. In his plea agreement, Alvarado admitted that on December 1, 1989, in Rock Falls, he had attempted to possess with the intent to distribute 1,414 grams of cocaine. At sentencing today, Judge Kapala noted the amount of time that Alvarado had spent as a fugitive and found it to be an aggravating factor in imposing the sentence.

Richard Altomare, Former CEO of Universal Express, Sentenced in Securities Fraud Scheme

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, announce that Richard Altomare, 65, of Palm Beach County, was sentenced yesterday for his participation in a securities fraud “pump and dump” scheme. Altomare was sentenced to 37 months in prison, to be followed by three years of supervised release.

On February 21, 2014, a federal jury in Fort Lauderdale convicted Altomare on four counts, including one count of mail fraud and three counts of securities fraud.

According to the indictment and evidence presented during the trial, Altomare was the former CEO of Universal Express Inc. Between 2000 and 2003, Altomare and other company insiders sold 500 million unregistered shares of Universal stock to the public and then issued a series of false press releases in order to offset the resultant negative pressure on the stock price. On March 8, 2007, a final judgment in a civil action brought by the Securities and Exchange Commission was entered against Altomare. Among other things, the order prohibited Altomare from “participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for the purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock.”

Despite the order, Altomare persuaded a start-up financial services firm based in Jacksonville called Sunset Brands Inc. (SSBN), whose shares traded on the over the counter penny stock market, to bring him in as a consultant to attract investors and help write their press releases. Instead, Altomare used his access to the company to carry out a pump and dump scheme to defraud investors. In early 2013, Altomare met with a former business associate and conceived a scheme to artificially inflate the share price and trading volume of SSBN stock to enrich himself and his associate. Unbeknownst to Altomare, his former associate had become an informant for the FBI. During recorded conversations and meetings with the informant, Altomare promised to compensate him with SSBN stock to induce his cooperation in the scheme. Altomare’s plan was to have his former associate purchase shares of SSBN stock to mislead investors into believing that SSBN’s share price was rising and that there was a public market for SSBN stock. Altomare also used his access to SSBN’s press releases to further the scheme. Altomare agreed to cause SSBN, which was unaware of his plans, to issue positive press releases about the company to follow and coincide with the illegally induced purchasing by the informant. The purpose of the press releases was to make it appear that SSBN’s stock price was rising because of the positive news and to conceal the market manipulation scheme from regulatory authorities. Altomare’s plan was to sell, or dump, the stock he and the informant controlled after the share price had been artificially inflated and then split the proceeds with the informant.

Smith Advertising Company Executives Arrested for Fraud

United States Attorney A. Lee Bentley, III announces the filing of a criminal complaint charging Gary Todd Smith (45), a/k/a Todd, and Gary Truman Smith (69), a/k/a Gary, both of Fayetteville, North Carolina, with wire fraud affecting a financial institution. If convicted, each faces a maximum penalty of 30 years in federal prison.

According to the complaint, Gary and Todd Smith ran Smith Advertising. The pair was allegedly involved in a fraud scheme that involved borrowing money (called bridge loans) for Smith Advertising to purportedly pre-purchase advertising space. They also borrowed money on outstanding invoices (called factoring) for Smith Advertising. Each loan, to the extent that it was repaid, was repaid by new loans. The underlying collateral for the loans was, where produced, fake invoices. Smith Advertising maintained a real and a false set of record books. On the date the company ceased operations, the total assets for the corporation were, according to their real books, valued at -$63,723,391.55, and the total equity was -$103,140,084.68.

Wednesday, May 07, 2014

Columbian Vinston Boxton-Moises Pleads Guilty to Cocaine Conspiracy Charge

United States Attorney A. Lee Bentley, III announces that Vinston Boxton-Moises (48, San Andres Island, Colombia, South America) pleaded guilty to conspiring with others to distribute five kilograms or more of cocaine, knowing that the cocaine would be unlawfully imported into the United States. Boxton faces a mandatory minimum penalty of 10 years in federal prison and up to a maximum term of life imprisonment.

According to the plea agreement, between 2010 and 2013, Boxton was a knowing and willing participant in an ongoing plan to smuggle cocaine by sea. The cocaine was ultimately destined for unlawful importation into the United States. Boxton’s roles in the conspiracy included recruiting and paying mariners and mechanics, contracting for the use of smuggling and lookout/logistics vessels, and dispatching cocaine-laden go-fast vessels (GFVs).

Boxton is accountable for the GFV TAUPLY that was interdicted by the United States in the Caribbean Sea on May 31, 2012, approximately 85 nautical miles southeast of Nicaragua. The TAUPLY interdiction resulted in the seizure of approximately 1,000 kilograms of cocaine. Boxton arranged for the recruitment and payment of the mariners who ultimately operated TAUPLY and attempted to smuggle the cocaine. The government of Colombia consented to the enforcement of United States law over the TAUPLY, its illicit cargo (cocaine), and crew. The five mariners embarked in TAUPLY were successfully prosecuted in the United States for violations of the Maritime Drug Law Enforcement Act, first arriving at a place in the Middle District of Florida.

Boxton was arrested on San Andres Island, Colombia, in August 2013 and subsequently extradited to the United States for prosecution. As a direct result of his participation in the conspiracy, Boxton obtained at least $1 million in proceeds.

HUGE NATIONWIDE SYNTHETIC DRUG TAKEDOWN #ProjectSynergyPhaseII continues attack on drug networks, sources of supply, global money flow

The Drug Enforcement Administration (DEA), Customs and Border Protection (CBP), Immigration and Customs Enforcement Homeland Security Investigations (HSI), Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS) and other federal, state, and local partners announced the culmination of Project Synergy Phase II, an ongoing effort targeting every level of the dangerous global synthetic designer drug market. Since January and leading up to early this morning, nationwide enforcement operations have taken place targeting these drug trafficking organizations that have operated in communities across the country.

The second phase of the Project Synergy, which began January 2014, culminated this morning in 29 states, involves more than 45 DEA offices serving nearly 200 search warrants.  As of today, more than 150 individuals have been arrested and federal, state and local law enforcement authorities have seized hundreds of thousands of individually packaged, ready-to-sell synthetic drugs as well as hundreds of kilograms of raw synthetic products to make thousands more.  Additionally, more than $20 million in cash and assets were seized.  These numbers are expected to grow as investigations continue.

The Special Operations Division-coordinated Project Synergy initiative is aimed at bringing together federal, state, local, and international law enforcement resources to target the dangerous global synthetic designer drug industry through coordinated, united strategies.

In addition to targeting retailers, wholesalers, and manufacturers, many of these investigations continued to uncover the massive flow of drug-related proceeds to countries in the Middle East, including Yemen, Jordan, Syria, and Lebanon, and as well as other countries.  Investigations also targeted many trade implements such as organic leaves and packaging material used in preparation for drug re-sale and distribution. These facilitators are key players in this ever-changing designer drug industry.

Communities, families, and individuals across the United States have experienced the scourge of designer synthetic drugs, which are often marketed as herbal incense, bath salts, jewelry cleaner, or plant food. These dangerous drugs have caused significant abuse, addiction, overdoses, and emergency room visits. Those who have abused synthetic drugs have suffered vomiting, anxiety, agitation, irritability, seizures, hallucinations, tachycardia, elevated blood pressure, and loss of consciousness. They have caused significant organ damage as well as overdose deaths. Over the past five years, DEA has identified between 200 and 300 new designers drugs from eight different structural classes, the vast majority of which are manufactured in China.

“Many who manufacture, distribute and sell these dangerous synthetic drugs found out first hand today that DEA will target, find and prosecute those who have committed these crimes,” said DEA Administrator Michele M. Leonhart. “The success of Project Synergy II could not have been possible without the assistance of our state, local and foreign law enforcement partners.  We stand united in our commitment to aggressively pursue criminals who are all too willing to experiment on our children and young adults.”

“Tragically, people die every day at the hands of illegal designer drugs," said ICE Deputy Director Daniel Ragsdale, “Through operations like this, we strike a blow to drug dealers and continue an important national conversation about the dangers associated with drug use.”

“This is another example of the partnership between CBP, HSI, and DEA to share information and participate in joint efforts to keep synthetic drugs out of the country, off the streets, and out of our communities,” said CBP Commissioner R. Gil Kerlikowske. “The specialized expertise of our CBP officers as well as the unique capabilities of CBP scientists play a vital role in contributing to the seizure and identification of these potentially deadly substances at the border.”

The first phase of Project Synergy began in December of 2012, and resulted in more than 227 arrests and 416 search warrants served in 35 states, 49 cities and five countries, along with more than $60 million in cash and assets seized.   Altogether, 9,445 kilograms of individually packaged, ready-to-sell synthetic drugs, 299 kilograms of cathinone drugs (the falsely labeled “bath salts”), 1,252 kilograms of synthetic cannabinoid drugs (used to make the so-called “fake pot” or herbal incense products), and 783 kilograms of treated plant material were seized.

As was the case in the June 2013 culmination of the first phase of Project Synergy, CBP’s National Targeting Center played a significant role in the continued success of this initiative. As part of this effort, CBP was responsible for identifying and targeting high-risk express consignment shipments suspected of containing synthetic drugs. One of the keys to the success of Project Synergy is the cooperation between CBP and DEA, who routinely share information and intelligence with each other and other partners such as DHS-HSI to strengthen and further these investigations. (see B-roll video link below)

Chemists and other scientists from DEA’s Office of Forensic Science, as well as CBP scientists across the country, were instrumental in identifying synthetic drugs and compounds designed to circumvent U.S. controlled substance classifications.  The identifying of these compounds allowed investigators and prosecutors to quickly act during the course of these investigations. As a result of these cooperative efforts between DEA and CBP through the Special Operations Division, CBP has seized over 3,000 kilograms of illicit designer drugs.  Intelligence has also been shared with other nations such as Australia and other international partners, who have in turn seized hundreds of kilograms of illicit designer substances such as cannabinoids, cathinones and GHB.

Details of Nancy Dobrowski, Former Burnham Village Clerk, Charged with Stealing at Least $650,000 from Revenue Payments and Filing False Tax Return

The former longtime elected clerk for the Village of Burnham was charged today with stealing more than $650,862 from her office at the south suburb’s village hall and using most of the cash to gamble at casinos. The defendant, Nancy Dobrowski, was charged with one count each of wire fraud and filing a false federal income tax return in a criminal information filed in U.S. District Court.

Dobrowski, 70, of Burnham, served as Burnham’s elected clerk from 1980 until she resigned on May 29, 2013, when FBI agents executed a federal search warrant at the clerk’s village hall office. Through her attorney, Dobrowski authorized the government to disclose that she will plead guilty to the charges. No date has been set yet for Dobrowski to be arraigned in federal court.

As clerk, Dobrowski was responsible for managing Burnham’s finances and depositing cash and checks collected by the clerk’s office into the village’s bank accounts.

Between at least 2004 and May 2013, Dobrowski allegedly took cash the village received as payment for fees and fines from the public. She then used most of the cash to gamble at casinos in Indiana and elsewhere either by taking cash to casinos or by depositing the money into her personal bank account and then withdrawing it from automated teller machines at casinos. She falsely represented the village’s finances to auditors and covered up her fraud scheme by causing false entries in village books, according to the charges.

As part of the fraud scheme, Dobrowski allegedly took cash from both the village cash register and the collection of money received as tow bonds. She recorded false amounts of tow bond money that had been received to make it appear that the village collected less cash than it had actually received, and sometimes she used tow bond money to balance the cash register, the charges allege.

To conceal her misappropriation of cash from the village cash register, Dobrowski waited a week to deposit cash into the village’s bank accounts instead of making daily deposits. By delaying deposits, Dobrowski could use funds received by the village in the later week to make up for funds she had taken during the prior week, making the deposit appear to match the revenues despite having taken cash from the register, the information alleges.

Dobrowski allegedly further concealed the scheme by failing to record checks received from the public as payment for village fees and services. She would place the unrecorded checks into the register to compensate for an equal amount of cash she had taken, making the register appear balanced. She provided false information to the village’s outside audit firm regarding the village’s revenues and regularly disposed of the cash register tape to conceal that the village’s revenues often did not match the deposits into village bank accounts.

Dobrowski was also charged with filing a false federal income tax return for 2012, when she reported total income of $309,181, knowing that her total income was substantially greater than that because she failed to report the cash she misappropriated from the village in 2012 as income.

Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine or an alternate fine totaling twice the gross loss or gain, whichever is greater. Filing a false federal income tax return carries a maximum penalty of three years in prison, a $250,000 fine, and mandatory costs of prosecution. Restitution is mandatory and defendants convicted of tax offenses remain liable for back taxes, interest, and a civil penalty of up to 75 percent of the amount owed.

David Wax Admits Role in Conspiracy to Kidnap Jewish Husband to Force Him to Give Wife a Religious Divorce

A Lakewood, New Jersey, man admitted conspiring to kidnap a Jewish man to force him to give his wife a religious divorce, known as a get, U.S. Attorney Paul J. Fishman announced.

David Wax, 51, pleaded guilty before U.S. District Judge Freda L. Wolfson to an information charging him with conspiracy to commit kidnapping. According to documents filed in this case and statements made in court:

In October 2010, Wax and his conspirators agreed to force a Jewish man (Victim One) to give his wife a get, a document which, according to Jewish law, must be presented by a husband to his wife to effect their divorce. Wax then lured Victim One from Brooklyn, New York, to Wax’s home in Lakewood on October 17, 2010, under the pretense that Victim One would work on Talmudic books that Wax was publishing. When the victim arrived, he was brought upstairs, blindfolded, handcuffed, and bound. Victim One was then assaulted by Wax and his conspirators until he provided the get.

Victim One’s wife’s family paid Wax approximately $100,000 to obtain the forced get. Wax’s conspirators received approximately $50,000.

The conspiracy to commit kidnapping charge carries a maximum potential penalty of life in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for August 19, 2014.

HTFC Mortgage Banker and Five Others Indicted in $30 Million Bank Fraud Conspiracy

An indictment was unsealed charging six men with carrying out a $30 million bank fraud conspiracy by fraudulently inflating the prices of homes for sale and then obtaining mortgages that far exceeded the true collateral value of properties in Nassau and Suffolk Counties. Through his mortgage banking company, defendant Aaron Wider and his co-conspirators allegedly then re-sold these “toxic” mortgages to banks and other investors in the secondary mortgage market, causing millions in losses when the loans went into foreclosure. Four of the defendants were arrested and will be presented for arraignment at the United States Courthouse in Central Islip, New York, before United State Magistrate Judge Gary R. Brown. Of the remaining two defendants, one was taken into custody in Florida, while another is scheduled to surrender to federal agents in Central Islip.

The indictment and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.

“The conduct charged in the indictment is a prime example of the type of corrupt mortgage-lending practices that preceded the bursting of the real estate bubble, the loss of faith in securitized mortgage obligations, and the financial collapse of 2007 and 2008,” stated United States Attorney Lynch. “Instead of using their skills in banking, the law, and investing to assist individuals pursuing the American Dream, the defendants cooked up a sophisticated scheme that defrauded lenders and then fed toxic debt to the investigating public at large in the secondary mortgage market. I would like to thank the investigators at the Nassau County District Attorney’s Office and New York State Department of Financial Services for their invaluable assistance in this investigation.”

FBI Assistant Director in Charge Venizelos said, “As alleged in the indictment, during the height of the real estate boom, these defendants devised a scheme to turn a profit at the expense of unsuspecting lenders, investors, and members of the public. Mortgage fraud poses a threat to our financial systems and to our economy. This case should send a clear message to all individuals who try to game our financial market: you will be identified and held accountable for your criminal acts. The FBI, along with our law enforcement partners, will continue to investigate those who orchestrate and participate in various mortgage fraud schemes in order to protect the public against those who seek to damage our economy.”

According to the indictment and other court filings, between 2003 and 2008, defendant Aaron Wider operated a New York State licensed mortgage bank in Garden City, New York, called HTFC Corp., which issued residential mortgages to borrowers. HTFC did not possess assets to fund these loans but relied on funding from other banks and financial institutions, commonly known as “warehouse lenders.” The warehouse lenders relied on Wider and HTFC to ensure that home buyers were able to pay the mortgages and that the market value of the homes fully collateralized the loans.

Instead, Wider and the co-defendants allegedly engineered a complex series of same-day sham transactions, or “flips,” to artificially inflate the prices of homes. Then, they lied to the warehouse lenders to obtain mortgage funding that was 80 percent more than the actual value of the homes. Wider and co-defendants Manjeet Bawa, John Petiton, and Joseph Ferrara contracted to buy homes in Nassau and Suffolk Counties from innocent sellers at market prices. The defendants then submitted fraudulent loan applications to the warehouse lenders that nearly doubled the true sales prices of the homes. The defendants also inflated their personal assets and concealed significant liabilities to get loan approval.

At each closing, Petiton, an attorney admitted to practice in New York State, oversaw the actual sales to innocent sellers and simultaneously created sham trusts into which title to the properties was transferred for no money. He and the co-conspirators then immediately transferred title back to the co-defendants at nearly double the price to create a false paper trail documenting the artificially inflated prices. Meanwhile, real estate appraiser Joseph Mirando prepared false appraisal reports to justify the inflated prices, while HTFC closing attorney Eric Finger concealed the far lower, true sales price for properties by lying on federal-mandated settlement forms. Finger received wire transfers of funds from the warehouse lenders and, after paying the innocent third-party sellers, disbursed the surplus money fraudulently obtained in the mortgages to his fellow co-conspirators.

HTFC sold each of its mortgages in the secondary market. On paper, the loans appeared to be attractive investments because HTFC’s mortgages carried high rates of return that were supposedly fully collateralized by the market value of homes and the assets and incomes of the borrowers or mortgagors. Upon buying mortgages from HTFC, the secondary market bank paid off the warehouse lenders and then either collected the principal and interest or bundled them into mortgage-backed securities that were sold to pension funds, hedge funds, and other investors seeking relatively secure, high-yield investments. When HTFCs mortgages went into foreclosure beginning in 2007 and 2008, the secondary market investors discovered that the actual value of the collateral was 80 percent less than the amount borrowed for each home.

The charges in the indictment are merely allegations, and the defendants presumed innocent unless and until proven guilty. If convicted, the defendants face up to 30 years’ imprisonment. The indictment unsealed today also seeks to forfeit 19 residential properties traced to the bank fraud or up to $30 million in a money judgment.

The case is being prosecuted by Assistant U.S. Attorney James Miskiewicz.

Defendants:

MANJEET BAWA, age 46, Dix Hills, New York

JOSEPH FERRARA, age 70, Long Beach, New York

ERIC FINGER, age 48, Miami, Florida

JOSEPH MIRANDO, age 54, Centereach, NY

JOHN PETITON age 68, Garden City, New York

AARON WIDER age 50, Copiague, New York

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