Matthew Stoen of Stone Rose, Indicted for Allegedly Cheating at Least 50 Mostly Chicago-Area Investors of $10 Million

A former Chicago-area real estate investment partner was indicted on federal charges alleging that he fraudulently obtained more than $10 million from more than 50 investors, many of whom lived in the Chicago area, and misused the funds he obtained from them as well as lenders. The defendant, MATTHEW STOEN, was a founder of Stone Rose, LP, and effectively was its managing general partner.

Stoen, 35, of Wayzata, Minnesota and formerly of St. Charles and Chicago, was charged with four counts of mail fraud and two counts of wire fraud in an indictment returned by a federal grand jury. He will be arraigned on a date to be determined in U.S. District Court in Chicago.

The indictment also seeks forfeiture of more than $10 million in alleged fraud proceeds.

According to the indictment, Stoen falsely represented to investors and lenders his personal background and financial condition, including claiming that he was the beneficiary of a trust fund, which he knew was false. He allegedly carried out a financing fraud scheme to benefit himself by fraudulently raising millions of dollars through the offer and sale of limited partnership interests and through loans. Stoen fraudulently obtained and retained these funds by making false representations regarding the intended use of the funds raised for Stone Rose, the terms of Stone Rose’s real estate transactions, Stone Rose’s financial condition, his personal financial condition, and his interest in Stone Rose real estate transactions. Stoen misappropriated Stone Rose funds for his own benefit, and concealed his scheme by creating and distributing to investors a false and misleading financial review of Stone Rose, the indictment states.

Stoen allegedly represented to investors and lenders that funds invested in Stone Rose would be used for real estate investment projects in the Kansas City area as well as certain Stone Rose fees and expenses, knowing that he intended to misappropriate a portion of the funds for other purposes, including for his own use and benefit.

Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

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2 Alleged Members of the #AlmightyImperialGangstersNation Indicted for Murder in Aid of Racketeering

Two alleged members of the Almighty Imperial Gangsters Nation have been indicted for their alleged roles in a 2007 murder in the Southern District of Florida.

Acting Assistant Attorney David A. O’Neil of the Criminal Division and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement.

The indictment returned by a federal grand jury on May 1, 2014, and unsealed in the Southern District of Florida charges Jose Herrera, aka “Spyro,” 27, and Leonel Carrera, aka “Leo,” 25, both of Miami, with murder in aid of racketeering activity.  Herrera and Carrera were both arrested this morning.

The indictment alleges that Herrera and Carrera participated in the murder of Hockynson Sanchez, aka “Jaxx,” on Nov. 20, 2007, for the purpose of maintaining and increasing their position in the Almighty Imperial Gangsters Nation.

According to the indictment, the Almighty Imperial Gangsters Nation is a nationally known organized street gang that originated in the northwest side of Chicago and spread to other regions of the United States, including South Florida. Members and associates of the Almighty Imperial Gangers Nation allegedly engaged in acts of violence, including murder, attempted murder, aggravated battery and aggravated assault, as well as narcotics distribution and other criminal activities.

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Two #AryanBrotherhood Members Plead Guilty to Federal Racketeering Charges

Two Aryan Brotherhood of Texas (ABT) gang members pleaded guilty to racketeering charges related to their membership in the ABT’s criminal enterprise, announced Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

Kelley Ray Elley, of Austin, Texas, pleaded guilty before U.S. District Judge Sim Lake in the Southern District of Texas to one count of conspiracy to participate in racketeering activity.  Jamie Grant Loveall, aka “Dutch,” of Houston, pleaded guilty to the same charge on May 1, 2014.

According to court documents, Elley, Loveall and other ABT gang members and associates agreed to commit multiple acts of murder, robbery, arson, kidnapping and narcotics trafficking on behalf of the ABT gang.  Elley, Loveall and numerous ABT gang members met on a regular basis at various locations throughout Texas to report on gang-related business, collect dues, commit disciplinary assaults against fellow gang members and discuss acts of violence against rival gang members, among other things.  

By pleading guilty to racketeering charges, Elley and Loveall admitted to being members of the ABT criminal enterprise.

According to the superseding indictment, the ABT was established in the early 1980s within the Texas prison system.  The gang modeled itself after and adopted many of the precepts and writings of the Aryan Brotherhood, a California-based prison gang that was formed in the California prison system during the 1960s.  According to the superseding indictment, the ABT was primarily concerned with the protection of white inmates and white supremacy/separatism.   Over time, the ABT expanded its criminal enterprise to include illegal activities for profit.

Court documents allege that the ABT enforced its rules and promoted discipline among its members, prospects and associates through murder, attempted murder, conspiracy to murder, arson, assault, robbery and threats against those who violated the rules or posed a threat to the enterprise.  Members, and oftentimes associates, were required to follow the orders of higher-ranking members, often referred to as “direct orders.”

According to the superseding indictment, in order to be considered for ABT membership, a person must be sponsored by another gang member.  Once sponsored, a prospective member must serve an unspecified term, during which he is referred to as a prospect, while his conduct is observed by the members of the ABT.

Loveall and Elley are both scheduled to be sentenced on Oct. 7, 2014.  Each faces a maximum penalty of life in prison.

Loveall and Elley are two of 36 defendants charged with conducting racketeering activity through the ABT criminal enterprise, among other charges.  To date, 26 defendants have pleaded guilty.  

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Glen McInerney Sentenced to 41 Months in Prison After Pleading Guilty to Bank Fraud, Money Laundering, and Wire Fraud

GLEN MCINERNEY, age 42, a resident of Meraux, Louisiana, was sentenced by U.S. District Judge Jane Triche Milazzo to 41 months in prison, followed by three years of supervised release, announced U.S. Attorney Kenneth Polite. MCINERNEY previously pled guilty to a four-count superseding bill of information charging him with two counts of bank fraud, one count of money laundering, and one count of wire fraud. MCINERNEY was also ordered to make restitution to the three victims of his crimes in the amount of $845,083.18.

According to court documents, MCINERNEY owned and operated GM Motors and Used Cars (“GM Motors”). MCINERNEY maintained a bank account for GM Motors at Regions Bank. Between May 2, 2009, and June 20, 2009, MCINERNEY wrote checks to straw payees to cash the checks and return the cash to him so that he could deposit portions of the proceeds back into the Regions account. MCINERNEY timed the cash deposits to occur prior to account debits, which lead to the straw payees cashing checks that he knew would ultimately bounce. In total, MCINERNEY wrote 288 such checks, resulting in a loss to Regions Bank of approximately $17,000.

Separately, between December 29, 2008, and January 7, 2009, MCINERNEY also defraudedGulf Coast Bank & Trust by negotiating six checks purportedly drawn on funds from a bank account at Twin City Federal National Bank in Minneapolis, Minnesota. MCINERNEY knew that the Twin City Federal National Bank account had been closed since July 30, 2007, that the account belonged to someone other than MCINERNEY, and which MCINERNEY did not have authority or control. These actions caused a loss to Gulf Coast Bank & Trust of approximately $28,083.18.

Finally, between January 3, 2007, and December 15, 2008, MCINERNEY defrauded an individual who had provided him with collateral for a short-term business loan by falsely representing that he had purchased used trailers from the Federal Emergency Management Agency (“FEMA”) that he intended to resell, when, in fact, he did not purchase such trailers in the first place. MCINERNEY’S fraudulent misrepresentations caused the individual who loaned him the money to suffer losses of approximately $800,000.

“Glen McInerney was sentenced today after pleading guilty to using “straw” payees to cash checks, committing bank fraud and laundering money to hide his part in illegal financial transactions,” stated Gabriel L. Grchan, Special Agent in Charge, IRS Criminal Investigation, New Orleans Field Office. “Money laundering is not a victimless crime. Not only are innocent people ‘duped’ by such schemes, but the underground, untaxed economy harms the entire nation’s economic strength. Special agents of IRS Criminal Investigation are committed to lending their expertise as the world’s premiere financial investigators to all crimes of greed.”

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McHugh Construction to Pay $12 Million to Settle Contract Fraud Claims on Seven Public Works Projects

A Chicago-based construction company will pay the United States and the State of Illinois $12 million to resolve allegations of fraud on government programs designed to benefit women- and minority-owned sub-contractors under the terms of a civil settlement agreement announced. The contractor, James McHugh Construction Co., Inc., allegedly failed to abide by federal and state requirements for the participation of disadvantaged businesses in contracts to perform seven public construction projects. The work on area roads, highways, and transit lines was funded by the federal and state governments between 2004 and 2011.

The federal and state governments claimed that McHugh violated the federal and Illinois False Claims Acts by making false statements and claims for payment to government agencies regarding McHugh’s compliance with federal and state requirements to include disadvantaged businesses in the construction projects.

As a result of the $12 million settlement, the federal government will receive $7.2 million and the state government will receive $4.8 million. In a separate administrative settlement and compliance agreement, McHugh agreed to implement a corporate compliance program, appoint a compliance officer, and be subject to an independent monitor for three years, in exchange for the federal, state, and City of Chicago transportation agencies and contracting authorities’ agreement not to bar McHugh from future government contracts. This allows McHugh to continue pursuing and performing public works projects while ensuring that it remains compliant with disadvantaged business regulations.

“It was more costly in the long run for McHugh to avoid its obligations to hire women- and minority-owned businesses than it would have been simply to comply with the requirements and retain disadvantaged businesses to actually participate in these public construction projects,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “It’s important that McHugh and other companies realize that compliance with these requirements is both a good business decision and the right thing to do,” he added.

“Our investigation revealed that McHugh Construction falsely used subcontractors to help secure bids for major construction projects funded by and for Illinois taxpayers,” Illinois Attorney General Lisa Madigan said. “The company used women-owned businesses to submit false claims to the state and federal governments for millions of dollars when in fact, those businesses never completed the level of work required by law.”

Mr. Fardon and Attorney General Madigan announced the settlement with Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; Michelle McVicker, Special Agent in Charge of the U.S. Department of Transportation Office of Inspector General in Chicago; and James Vanderberg, Special Agent in Charge of the U.S. Department of Labor Office of Inspector General in Chicago.

The settlement arose from a lawsuit that was filed under seal in 2008 by Ryan Keiser, who was a project manager for Perdel Contracting Corp. and Accurate Steel Installers, Inc. (ASI), at three of the McHugh construction sites. The lawsuit, which was unsealed, was filed under the qui tam, or whistleblower, provisions of the federal and state False Claims Acts. United States, et al., ex rel. James McHugh Construction Co., et al., No. 08 C 2443 (N.D. Ill.).

The similar federal and state statutes permit private individuals to sue for false claims on behalf of the government and to share in any recovery. Mr. Keiser will receive 17 percent of the $12 million settlement or $2,040,000―$1,224,000 from the United States share, and $816,000 from Illinois’ portion of the settlement.

The settlement covers McHugh’s contracts on the following projects: the Washington/Monroe Viaducts over Interstate 90/94 for the Chicago Department of Transportation (CDOT) in 2005; the Red Line Howard Station for the Chicago Transit Authority in 2006; the North Avenue Bridge for CDOT in 2006; the Brown Line for the CTA in 2006; the Eastbound Interstate 88/Fox River Bridge for the Illinois State Toll Highway Authority in 2007; the Westbound Interstate 88/Fox River Bridge for the toll highway authority in 2008; and the Wacker Drive Viaduct Reconstruction from Randolph to Monroe streets for CDOT in 2010.

The federal and state governments contended that in bids for these contacts, in the final contracts, and in claims for payment, McHugh falsely stated that Perdel and ASI, which were both certified as “disadvantaged business enterprises” (DBE) owned by Elizabeth Perino, would perform or had performed work on the projects in satisfaction of federal and state DBE participation requirements in the contracts. The governments contended that contrary to McHugh’s statements, Perdel and ASI often functioned merely as “pass-throughs,” performing little, if any, work that would qualify for participation credit under federal and state DBE requirements. Perino, who owned Perdel and ASI in Lockport, was charged with federal mail fraud in 2011, and the case remains pending.

According to the settlement agreement, the governments also contended that Perdel and ASI’s contracted work for McHugh often exceeded the companies’ capacity and experience. Although their projects with McHugh were substantially greater in size and scope than they had previously performed, Perdel and ASI’s expertise to perform larger and more complex projects did not change correspondingly. Rather than Perdel and ASI performing, managing, or supervising the work that McHugh represented they would, McHugh frequently managed union workers they each hired. In some cases, McHugh directed Perdel and ASI as to which union crews to hire.

McHugh, not Perdel or ASI, also selected certain suppliers on each of the contracts, determined the quantity and quality of those materials, negotiated the price, and often drafted a purchase order for Perdel or ASI to put on their letterhead, the governments contended. That kind of conduct violates federal and state provisions that are designed to give a share of the actual work of government-funded construction projects to minority- and women-owned businesses.

The settlement is neither an admission of liability by McHugh nor a concession by the state and federal governments that their contentions are not well founded, and McHugh expressly denies the claims.

The settlement was reached on behalf of the U.S. Department of Transportation, the Illinois Department of Transportation, the Illinois State Toll Highway Authority, and the Regional Transportation Authority.

The separate three-year administrative monitoring settlement and compliance agreement was reached between McHugh and the Federal Transit Administration, the Federal Highway Administration, the U.S. and Illinois Transportation Departments and their procurement officers, and the City of Chicago. In exchange for the government entities’ agreement not to pursue any suspension or debarment action against McHugh for the covered conduct, McHugh agreed to implement a corporate compliance program and appoint a compliance officer who is knowledgeable about DBE programs. The company also agreed to retain an independent monitor to evaluate McHugh’s performance and submit periodic reports to the government agencies and officials, and to make six presentations to those agencies and officials to discuss and promote compliant policies and procedures for working with DBE firms.

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