David Tresch and Nicholas Demars Indicted in $4.8 Million Billing Fraud and Kickback Scheme

The former chief information officer of a Chicago-based international law firm who was charged previously and the president of a company that provided contract technology workers who was charged for the first time and arrested were indicted for allegedly engaging in a fraudulent billing and kickback scheme that netted each of them more than $2 million. Nicholas Demars, the president of NS Mater, a defunct firm that provided contract employees and technology to assist in office automation, web and database development, and general information technology, was arrested and indicted with David Tresch, the former law firm officer who supervised the work and billing related to the contract employees.

For the first six years of the scheme that began in 2004, Demars allegedly paid Tresch a portion of the profits that NS Mater made from work its contract employees performed at the victim law firm. During the last two years and ending in June 2012, Tresch allegedly received kickbacks totaling nearly all of the false billings that the law firm paid NS Mater for work that was not performed.

Tresch, 51, and Demars, 57, both of Itasca, were each charged with 10 counts of mail fraud in an indictment that was returned by a federal grand jury and unsealed after Demars was arrested. Demars was released on bond after appearing this morning before U.S. Magistrate Judge Sidney Schenkier in U.S. District Court. Tresch, who was released on bond after he was arrested in August, will be arraigned at a later date in federal court.

The indictment also seeks forfeiture of $4,819,253 representing the combined net proceeds that both men allegedly obtained from the scheme, as well as their respective homes; Demars’ condominium in Chicago; a residence in Lake Geneva, Wisconsin; and more than $225,000 that was seized from Tresch along with his camping trailer, a van, and a luxury automobile.

The charges were announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, and Thomas R. Trautmann, Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.

According to the initial complaint, the victim law firm, which was not identified by name, reported Tresch’s alleged criminal activity and cooperated in the investigation. The firm, which has offices worldwide, hired Tresch in May 2004, and he held several positions in the information technology department before he was promoted in July 2011 to chief information officer.

The indictment alleges that between November 2004 and March 2011, the law firm issued checks totaling approximately $7.68 million to NS Mater, and Demars, in turn, kicked back $1.14 million to Tresch. In 2004 and 2005, Demars allegedly paid kickbacks directly to Tresch after paying legitimate NS Mater contract employees and payroll administrators for work they had performed for the law firm. Beginning in April 2006, allegedly to conceal the kickbacks, Demars began paying Tresch by issuing checks to Tresch’s wife and treating her as an employee of NS Mater, even though both defendants knew that she was not an employee and had not performed any work, according to the indictment. Tresch’s wife is not a defendant.

Subsequently, in late 2010, Tresch learned that that the law firm would soon stop using NS Mater contract employees, and, in February 2011, the firm directed Tresch to no longer permit NS Mater to provide personnel for the information technology department. Between November 2011 and June 2012, Demars allegedly continued submitting invoices to Tresch totaling more than $1.1 million, falsely representing that NS Mater performed work that both defendants knew was not performed. Tresch submitted the false invoices, which the firm paid, and of the $1.1 million paid during this period, Demars kicked back approximately $970,000 to Tresch, while retaining the remainder for himself, the indictment alleges.

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

The government is being represented by Assistant U.S. Attorney Terra Reynolds.

The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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Carl Brandon "Moo" Smith Pleads Guilty to Bringing Minor to Illinois for Prostitution; Admits Forced Sex Trafficking of 4 Victims

A Chicago man is facing a mandatory minimum of 10 years and a maximum sentence of life in prison after pleading guilty to transporting a minor from Wisconsin to Illinois for prostitution. The defendant, Carl Brandon Smith, also admitted that he engaged in forced sex trafficking of the victim, as well as of a second minor and two young adult women. Between 2010 and early 2012, Smith forced his victims to engage in commercial sex acts, used physical violence, and threatened to kill them if they ever left him. The guilty plea was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, and Thomas R. Trautmann, Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.

Smith, also known as “Moo,” 25, of Chicago, is scheduled to be sentenced on April 5 by U.S. District Judge Amy St. Eve. Smith has remained in federal custody since he was arrested last April last and charged with two counts of sex trafficking of a minor and by force, two counts of sex trafficking by force, and one count of transporting a minor across state lines to engage in prostitution.

According to a plea agreement, Smith met Victim B in December 2010 and began contacting her via phone, text, and social media, asking her to move to Chicago, intending that she be his “girlfriend” and also engage in prostitution. In February 2011, Smith drove from Chicago to Victim B’s residence in Wisconsin and then drove her from Wisconsin to his apartment in Chicago, acknowledging that she was under 18 at the time.

Once in Chicago, Smith “dated” Victim B for approximately a week before Victim B began working as a prostitute under his employ. Between February and July 2011, Victim B engaged in commercial sex acts at Smith’s direction. Smith acted as Victim B’s pimp, advertised her for commercial sex on Internet sites, and instructed her to have sex with customers in his apartment and in area motels. Victim B had sex with numerous men per week and gave a portion of the money she earned to Smith.

As part of the guilty plea, Smith stipulated that he acted as a pimp for Victim A, also a minor, and forced her to engage in prostitution during 2010. Smith inflicted physical violence on Victim A when she gave him “attitude” or when she indicated that she no longer wanted to work as a prostitute. On one occasion, Smith beat Victim A so severely that one eye swelled shut.

Similarly, Smith stipulated to using and threatening violence against both Victims C and D, both adults, while acting as their pimp and forcing them to engage in commercial sex acts in 2011 and early 2012.

The Cook County Human Trafficking Task Force assisted in the investigation. The government is being represented by Assistant U.S. Attorney Christopher Grohman and Felicia Manno Alesia.

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Human Trafficking Awareness Targeting Traffickers, Helping Victims

Last month, a Kentucky cardiologist and his ex-wife pled guilty to recruiting a Bolivian woman to work as their domestic servant and holding her unlawfully for nearly 15 years. The couple took her passport, threatened her with deportation, and falsely promised that her wages were being put in a bank account.

Trafficking in persons is a widespread form of modern-day slavery, and as we observe National Slavery and Human Trafficking Prevention Month, we’d like to update you on what the FBI—with its partners—is doing to go after the traffickers and help the victims.

Human trafficking is a top investigative priority of the Bureau’s civil rights program.

During fiscal year 2012, they opened 306 human trafficking investigations around the nation involving forced labor or forced household service as well as sex trafficking of international victims (young and old) and adult U.S. citizen victims.

Along the same lines, the sex trafficking of U.S. children is also a priority within their crimes against children program. During fiscal year 2012, they opened 363 investigations into the commercial sexploitation of domestic minors. Fortunately, they were also able to locate more than 500 young victims of sex traffickers.

They participate in 88 human trafficking task forces and working groups around the country. Their efforts include not only investigating cases where they find them, but also proactively using intelligence to drive and support these cases, looking at known areas of human trafficking activities, and developing liaison relationships within communities to promote awareness of these crimes.

Help for victims.

The Bureau also has a robust assistance program in place for victims of human trafficking—as well as other federal crimes investigated by the FBI. Their Office for Victim Assistance (OVA) oversees the work of victim specialists located throughout our 56 field offices.

These specialists—experienced in crisis intervention, social services, and victim assistance—work closely with agents to ensure that potential victims of trafficking are rescued, transferred to safe locations, and provided with referrals for medical, mental health, housing, legal, and other necessary services. And this past year, representatives from OVA and their civil rights program developed a protocol for human trafficking investigations that was implemented in all FBI field offices. The protocol highlights a victim-centered approach and the need for collaboration between the investigating agent, the local victim specialist, non-governmental agencies, and other law enforcement partners.

OVA oversees their child/adolescent forensic interviewers who work with Crimes Against Children task forces and provide training for agents and task force officers working human trafficking cases. These interviewers also collaborated with partner agencies to develop an interview protocol for minor victims of sexploitation for use by professionals working against human trafficking.

Their training and awareness efforts were significant.

During fiscal year 2012, they conducted training around the country focused on defining, detecting, and investigating human trafficking cases. The audiences included law enforcement—both U.S. and international—along with government employees, religious and civic organizations, ethnic advocacy groups, schools, social service agencies, medical personnel, legal aid agencies, domestic violence services, etc.—in short, anyone in a position to make a difference in the life of a trafficking victim.

Multi-agency investigations, intelligence, victim assistance, training - the FBI's putting their tools and capabilities to work to help combat the scourge of human trafficking.

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The Dollar Cost of a Single Gun Death

Gun violence takes an economic toll as well as an emotional one. The Pacific Institute for Research and Evaluation used 2010 data from the U.S. Centers for Disease Control and Prevention to estimate the dollar cost of a single gun death. The amount exceeded $5.1 Million dollars!

• $3,100,000 in relatives pain and suffering
• $1,600,000 in lost wages
• $395,000 in criminal justice expenses
• $29,000 in medical care for the victim
• $11,000 in mental health treatment for relatives
• $9,000 in losses to the victim's employers

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Mob Kingpin Mickey Cohen Played by Sean Penn in Gangster Squad

Public enemy number one, Mickey Cohen, is brought to life on the big screen by two-time Oscar-winner Sean Penn in Warner Bros.’ epic, action-thriller, “Gangster Squad.”

“I thought it would be a fun old-school gangster picture with a cast I have great admiration for,” Penn says on what drew him to the film. “And upon meeting director Ruben Fleischer, I was sold.”

Set in Los Angeles, 1949, “Gangster Squad” revolves around ruthless, Brooklyn-born mob king Mickey Cohen who runs the show in this town, reaping the ill-gotten gains from the drugs, the guns, the prostitutes and—if he has his way—every wire bet placed west of Chicago. And he does it all with the protection of not only his own paid goons, but also the police and the politicians he has under his thumb. It’s enough to intimidate even the bravest, street-hardened cop…except, perhaps, for the small, secret crew of LAPD outsiders led by Sgt. John O’Mara (Josh Brolin) and Sgt. Jerry Wooters (Ryan Gosling), who come together to try to tear Cohen’s world apart.

Mickey Cohen may be an underworld figure, but his very public image and commanding presence make him a man not to be crossed…in business or pleasure. He goes beyond merciless; any breach is a betrayal for which one pays the ultimate price. But he also has the undeniable charisma that comes with great power.

According to producer Dan Lin, “Cohen, in real life, was over the top. He was a gangster, but a Hollywood gangster. He was funny, he loved talking to reporters and, in public, he really wanted to entertain people, as if he were one of the movie stars he was always trying to woo. Of course, in private, he was doing dark, evil things.”

Fleischer cites, “When I imagined bringing the movie to the screen, the one character that everything seemed to hinge on was Cohen, the villain, this larger-than-life personality. I immediately thought of Sean Penn, so having him in the role was huge. Mickey is such a dynamic, memorable, menacing character and Sean has the gravitas, the intensity and the humor to pull it off.”

Though only remotely familiar with the real man, Penn says that for his interpretation of the character, “I tried to ignore the literal. The real Mickey Cohen so resembled Al Capone, who I thought De Niro had done so indelibly in ‘The Untouchables,’ that I felt, for a wide audience who largely would not have been aware of Mickey Cohen, mimicking Cohen in looks or behavior would have been unnecessarily burdened with baggage. I thought it was interesting to approach it and let it grow from just a few pieces of Cohen’s background. He was a prize fighter, but the style of fighting was more primitive than today, and Cohen was more primitive in many ways.”

“Sean really brought to life this guy who, in reality and in our somewhat fictionalized account of him, has a huge ego and is very colorful,” producer Kevin McCormick relates. “Cohen had his own publicists, spreads in Life Magazine, owned his own haberdashery and never wore the same suit twice, and had a collection of beautiful, statuesque ladies on his arm all the time. Sean’s interpretation of the man is fascinating. In the heyday of gangster movies, those guys were always such seductive characters, and I think Sean has that same ability to mesmerize us.”

“There’s something very appealing about the way Sean plays Mickey Cohen,” co-star Josh Brolin echoes. “Watching him during a scene, I couldn’t help but like him, even though my character despises him and everything he stands for. Sean really brought out the charm in him, even when he was doing something deadly.”

“Gangster Squad” is distributed by Warner Bros. Pictures, a Warner Bros. Entertainment Company.

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