MacArthur Foundation Expands Investment in Juvenile Justice Reform to $165 Million, Launches Resource Centers to Advance Reform and Improve Outcomes for Youth

Building on its nearly 20-year, $150 million investment in supporting juvenile justice reform, MacArthur announced an additional commitment of $15 million to the field, in part to establish the new Models for Change Resource Center Partnership. The Partnership will provide judges, prosecutors, defenders, policymakers, advocates, probation officers, and mental health and social service agencies with much needed technical assistance, trainings, tools, and resources to help advance juvenile justice reform across the country.

“Reforms like the elimination of life without parole for juveniles and raising the age at which people are tried as juveniles are examples of progress toward a system that is fair, just, and humane in its treatment of our nation’s youth,” said Laurie Garduque, Director of Justice Reform for the MacArthur Foundation. “There has been so much progress made over the past decade toward better outcomes for kids, their families, and their communities. But there is so much more to do and juvenile justice reform must continue.”

The Partnership is based on nearly twenty years of research, practice, and reform efforts that have reached more than 35 states, much of which was made possible by the Foundation’s Models for Change: Systems Reform in Juvenile Justice initiative. MacArthur’s juvenile justice work is grounded in the seminal research funded by the Foundation that showed that adolescents are fundamentally different from adults, and that treating juvenile offenders as adults, relying on incarceration, and failing to commit resources to rehabilitation and treatment is expensive, jeopardizes public safety, and compromises future life chances for young people in contact with the law. This latest round of funding by the Foundation will also support development of the Juvenile Justice Resource Hub, a comprehensive source of information on leading-edge juvenile justice issues and reform trends, among other initiatives.

The Resource Center Partnership will further the Foundation’s goal of protecting kids while making communities safer and improving the effectiveness, performance, and outcomes of the juvenile justice system. The new Partnership consists of four Resource Centers that will be fully operational by the end of 2013. The Centers will focus on areas critical to continued change in juvenile justice:

•     response to mental health needs
•     stronger legal defense for indigent youth
•     interventions for youth charged with status offenses (activities that are criminalized for those under 18, e.g., truancy, running away, curfew violations)
•     coordination of practices and policies for youth involved in both the juvenile justice and child welfare systems, and enhancement of probation system practices  

The newly launched Resource Centers include:

    The Mental Health and Juvenile Justice Collaborative for Change: A Training, Technical Assistance and Education Center: Led by the National Center for Mental Health and Juvenile Justice at Policy Research Inc., the Center will be a training, technical assistance, and education center designed to promote and support the adoption of new resources, tools, and program models to help those in the field better respond to youth with mental health needs in the juvenile justice system.
    The National Juvenile Defender Center: The Center will improve access to counsel and quality of representation for children in the justice system and will bolster juvenile defense by replicating field-driven innovations, facilitating adoption of new juvenile justice defense standards, and developing a corps of certified juvenile indigent defense trainers.
    The Robert F. Kennedy National Resource Center for Juvenile Justice: Led by the Robert F. Kennedy Children’s Action Corps, the Center will use proven models, frameworks, tools, resources, and the best available research to serve local, state, and national leaders, practitioners, and youth-serving agencies to improve system performance and outcomes for youth involved with the juvenile justice system. The Center will focus primarily on youth with prior or current involvement in the child welfare and juvenile justice systems (known as dually-involved youth) and on the review and improvement of juvenile probation systems.
    The Status Offense Reform Center: Led by the Vera Institute of Justice, the Center will serve as a resource clearinghouse and assistance center for practitioners and policymakers in juvenile justice, with a focus on encouraging and showcasing strategies to safely and effectively divert non-delinquent youth and their families from the formal juvenile justice system.

To help further enrich the tools and trainings offered by the Centers, as well as ensure that practitioners and policymakers who may benefit from the resources receive them, the Partnership also includes a strategic alliance of national experts and organizations. These strategic allies, including the National Conference of State Legislatures, the International Association of Chiefs of Police, and the National Center for State Courts, among others, represent state leaders, local elected officials, law enforcement, prosecutors, corrections professionals, judges, court personnel, and justice reform advocates, whose willingness to coordinate and work with diverse partners on juvenile justice issues has been and will continue to be critical to advancing reforms.

“State lawmakers across the country are actively working to improve the quality of juvenile justice systems and outcomes for youth,” said Sarah Brown, Program Director of Criminal Justice for the National Conference of State Legislatures (NCSL). “The MacArthur Foundation has been a strong partner with NCSL and state lawmakers to assist in these efforts, and the new Resource Center Partnership will provide legislators and practitioners in the field with enhanced resources, research, technical assistance, and support for effective implementation of juvenile justice reforms.”

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Robert Burton Charged with Securities Fraud in Coordination with President Obama’s Financial Fraud Enforcement Task Force

Federal charges against a man were unsealed after his arrest on securities fraud charges.

Robert Burton, 36, the managing director of Pinnacle Financial Consulting LLC, Pinnacle Strategic Investments LLC, and the Pinnacle Asset and Capital Management Group LLC, was arrested after being charged for promoting various high-yield investments through Promissory Notes and Offering Memoranda. According to the complaint, Burton represented that he would return the principal invested within approximately 30 days, along with an interest payment equal to 100 percent of the amount invested. Burton did not make the promised payments and, in some instances, provided investors with checks that ultimately bounced.

The statutory maximum penalties for the securities fraud charges are 20 years in prison, followed by five years of supervised release and a $5 million fine. Burton made an initial court appearance and will appear for a detention hearing on September 4 at 11:30 a.m.

U.S. Attorney Carmen M. Ortiz and Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement. The Massachusetts Attorney General’s Office, which has a civil case pending against Burton, cooperated with the investigation. The case is being prosecuted by Assistant U.S. Attorney Sarah E. Walters of Ortiz’s Economic Crimes Unit.

The details contained in the complaint are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

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

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10 Defendants Indicted in Alleged $74 Million Vehicle Financing Fraud Scheme Resulting in $56 Million in Losses to Lenders

A former area motorcycle and recreational vehicle dealer and his accountant, together with eight other defendants who allegedly acted as straw buyers in sham vehicle sales, were indicted on federal charges alleging a nearly $74 million fraudulent financing scheme that resulted in approximately 20 lenders losing more than $56 million. All 10 defendants were charged with at least one count of bank fraud, and eight of them were also charged with federal tax offenses in a 36-count indictment that was returned by a federal grand jury yesterday, federal law enforcement officials announced today.

The alleged bank fraud scheme involved two prongs: in one, the dealership fraudulently obtained more than $31.3 million in direct financing through five lines of credit from Fifth Third Bank, which lost more than $27.1 million; and, in the second, individual straw borrowers obtained some 200 fraudulent loans totaling nearly $42.4 million, which resulted in some 18 financial institutions losing more than $29.5 million. At least 62 of these individual loans were made to the eight defendants who allegedly acted as straw buyers.

The charges allege that all 10 defendants fraudulently obtained money for their personal uses and benefit, enabling them to maintain lavish lifestyles, operate various businesses, and/or make investments. The money they obtained created the false appearance of personal wealth and helped induce the lenders to advance funds more readily due to their misplaced confidence that the defendants had sufficient personal wealth to repay the loans. The tax offenses against eight of the defendants include one or more counts each of tax evasion, failing to file an income tax return, or filing a false federal tax return.

Lead defendant Russell S. Ott, 50, of Oswego, was the owner of Emily Inc., which did business as Pro Source Motorsports, which was last located in Morris, Illinois. Between 1995 and October 2008, Pro Source, the dealership at the center of the scheme, sold new and used motorcycles, luxury motor homes, recreational vehicles, all-terrain vehicles, boats, and jet skis. In 2007 and 2008, Ott also had ownership interests in Liberty Cycle in Libertyville and Huntley Chevrolet in Libertyville. Ott was charged with one count each of bank fraud and tax evasion.

Defendant Brian McMahon, 54, of Naperville, was Ott and Emily Inc.’s certified public accountant, who also owned Triumph Suzuki in Naperville between 2001 and 2004 when he sold it to Ott. McMahon was charged with one count of bank fraud and two counts of filing false tax returns.

All 10 defendants will be ordered to appear for arraignment on dates to be determined in U.S. District Court.

Direct Lending Fraud

According to the indictment, Ott and McMahon fabricated false personal and business tax documents and financial statements and provided them to Fifth Third Bank, which between May 2007 and October 2008 extended Pro Source approximately $31,368,457 through five different credit lines, which funded traditional “floor plan loans.” As part of the scheme, Ott faxed false flooring requests with fictitious vehicle identification numbers for non-existent recreational vehicles or real VINs for actual RVs but with dramatically inflated values. Ott sometimes “double floored” vehicles by obtaining separate financing from Fifth Third and a different lender for the same vehicle.

Straw Borrower Fraud

According to the indictment, Ott enlisted the other eight defendants as straw borrowers so they could obtain fraudulent loan proceeds to share with Ott even though they did not actually purchase the vehicles—usually very expensive RVs—for which the loans were made and the vehicles generally did not exist. The lenders who financed these loans generally deposited the funds into Emily Inc.’s bank account, and then Ott periodically disbursed the proceeds to straw borrowers to operate and support their own businesses and lifestyles, make investments, and make monthly payments on some of the loans to perpetuate the scheme.

Ott allegedly made personal use of the fraudulently obtained funds to operate Pro Source, which operated at a loss from approximately 2001 through 2008; and to make the following purchases—a house in Elburn for approximately $679,491 and make subsequent improvements which increased the home’s cost to more than $1.1 million; a $258,000 vacation home in Butternut, Wisconsin; a $350,000 rental home in South Elgin; a Sky Hawk 172 Cessna airplane and hanger for approximately $200,000; and pick-up trucks and other vehicles for family members and employees of Pro Source. He also used the money to invest in and purchase other vehicle dealerships, including more than $3.6 million in Huntley Chevrolet and more than $1 million in Liberty Cycle.

The other eight defendants, who allegedly acted as straw buyers, and details of their charges and alleged personal use of the funds are as follows:

Andrew W. Stacy, 51, of Elburn, a parts manager at Pro Source between 1998 and 2000. In late 2005, with financial assistant from Ott, Stacy acquired TUF Powersports, a motorcycle dealership in DeKalb, which he operated until it closed in late 2008. Stacy acted as a straw borrower on six fraudulent loans totaling more than $2.5 million, and after making certain periodic payments, used a portion of the funds to operate TUF Powersports and for personal expenses.

Scott F. Darville, 48, of Racine, Wisconsin, who owned and operated Pro Source of Woodstock, in 1998 and 1999. In 2000, Darville became the owner of Racine MotorSports Ltd., a motorcycle dealership he operated until it closed in 2009. Darville acted as a straw borrower on nine fraudulent loans totaling nearly $2.5 million, and after making certain periodic payments, retained more than $2 million, which he used to operate Racine Motorsports and for personal expenses.

F. Peter Mignin, 63, of Geneva, who owned and operated Northwest Investment Company Inc., which formerly did business as Schaumburg Honda, a new and used motorcycle dealership. Mignin also owned RPM Management LLC, doing business as Liberty Cycle, which he agreed to sell to Ott in 2007, and Mignin held an ownership interest with Ott in 2007 and 2008 in Huntley Chevrolet. Mignin acted as a straw borrower on 10 fraudulent loans totaling more than $3.8 million, and after making certain periodic payments, retained more than $3.4 million, which he used to operate Schaumburg Honda, Liberty Cycle, and for personal investments and expenses, including $450,000 toward the construction of his home, residence, and an $863,000 investment in Huntley Chevrolet.

Kevin D. Hanson, 43, of Louisville, Kentucky, and formerly of Chicago, who owned and operated Safety First Racing LLC, of Arlington Heights, a professional motorcycle racing team that competed at events throughout the United States between 2003 and 2008. Hanson acted as a straw borrower on seven fraudulent loans totaling more than $2.8 million, and after making certain periodic payments, retained more than $2.4 million, which he used to operate Safety First Racing and for personal expenses.

Owen A. Weichel, 48, of Huntington Beach, California, a former professional motorcycle racer who owned and operated Center of Gravity LLC, which imported motorcycle parts from Japan and resold them in the United States. Weichel acted as a straw borrower on five fraudulent loans totaling more than $2.1 million, and after making certain periodic payments, retained more than $1.9 million, which he used to operate Center of Gravity and for personal expenses, including foreign investments in Costa Rica, Italy, and Canada of approximately $1,261,200.

John Materyn, 50, of Ypsilanti, Michigan, who worked for Ott at Pro Source in 1998 and later at Liberty Cycle. Materyn acted as a straw borrower on seven fraudulent loans totaling more than $2.3 million, and after making certain periodic payments, he used a portion of the funds to operate Pro Source Motorsports in Michigan and for personal expenses.

Jill A. Pluta, 55, of LaPorte, Indiana, Ott’s former sister-in-law who was formerly known as Jill Ott and who worked at Pro Source in 2005. She acted as a straw borrower on five fraudulent loans totaling nearly $1 million, and after making certain periodic payments, retained approximately $680,334, which she used for personal expenses.

Joan M. Quick, 52, of Walworth, Wisconsin, the office manager for Pro Source who was responsible for Pro Source’s day-to-day bookkeeping and accounting. Quick acted as a straw borrower on seven fraudulent loans, and she later wrote checks and directed electronic transfers from Emily Inc. accounts totaling more than $1 million, which she used for personal expenses, including her residence, automobiles for at least three of her children and college tuition for at least two of them, and credit card payments totaling approximately $550,125.

The charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

The government is being represented by Assistant U.S. Attorney William Hogan.

Each count of bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. Tax evasion carries a maximum penalty of five years in prison and filing a false tax return carries a maximum of three years in prison, and both carry a maximum fine of $250,000, while failure to file a tax return carries a maximum of a year in prison and a $100,000 fine. In addition, defendants convicted of tax offenses face mandatory costs of prosecution and remain civilly liable to the government for any and all back taxes, as well as a potential civil fraud penalty of up to 75 percent of the underpayment plus interest. If convicted, the court must determine a reasonable sentence to be imposed under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and 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 against each defendant.

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Kathleen Niew, Suburban Attorney, Arrested by FBI for Allegedly Stealing $2.34 Million in Clients’ Funds from Her Escrow Account

A suburban attorney whose law license was suspended in May was arrested on federal fraud charges for allegedly misappropriating approximately $2.34 million from a husband and wife who were her clients. The defendant, Kathleen Niew, was charged with 10 counts of wire fraud in a federal grand jury indictment that was returned on Tuesday and unsealed today following her arrest. FBI agents took Niew into custody without incident at her office in Oak Brook.

Niew, 57, of Burr Ridge, operated Niew Legal Partners LLC in Oak Brook. She was scheduled to be arraigned at 3 p.m. yesterday before U.S. Magistrate Judge Young B. Kim in U.S. District Court.

According to the indictment, Victims A and B, a husband and wife who were Niew’s clients, transferred approximately $2.34 million into Niew’s attorney escrow account to be used for closings on commercial real estate transactions. Between January 2010 and December 2012, Niew allegedly used the funds for her own benefit, contrary to the false representations she made to the couple and others.

Without the couple’s knowledge, Niew used their funds to finance the purchases of various mining operations and not to purchase any commercial property for the victims, the charges allege. As part of the fraud scheme, Niew arranged to receive a 20 percent finder’s fee for herself from a mining operation in exchange for providing it approximately $1.5 million in funds that belonged to her clients. She falsely told the couple that their funds were available in her escrow account and were to be used for closings when they were not. She further concealed her fraudulent conversion of funds by telling her clients that the bank had erroneously sent the funds intended for closings to the wrong bank accounts, even though she had not directed any such wire transfer of the clients’ funds to the title companies to purchase real estate, the indictment alleges.

The arrest and charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent in Charge of the Chicago office of the Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorney Sunil Harjani.

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

An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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David Wilder, Former Chicago White Sox Executive, Sentenced to Federal Prison for Taking Kickbacks from Latin American Players’ Signing Bonuses

A former Chicago White Sox scouting executive was sentenced to two years in federal prison for accepting approximately $440,000 in kickbacks from the signing bonuses and contract buyouts that two of the team’s Latin American scouts paid to secure 23 prospective players between December 2004 and February 2008. The defendant, David S. Wilder, the White Sox farm system director from late 2003 to 2006 when he became the team’s senior director of player personnel until May 2008, had pleaded guilty to mail fraud in February 2011.

Wilder, 52, of San Francisco, was ordered to begin serving his sentence on October 31 by U.S. District Judge Charles Norgle. Wilder was also ordered to pay $440,781 in restitution to the White Sox.

Wilder admitted that he defrauded the White Sox of money and his honest services while concealing the kickbacks from the team and its more senior executives. He later cooperated with the investigation, leading the government to ask for a reduced sentence.

Two former White Sox scouts, Jorge L. Oquendo Rivera, 52, of Puerto Rico, the team’s Latin American scout between November 2004 and October 2007, and Victor Mateo, 42, of the Dominican Republic, a Sox scout in the Dominican Republic between November 2006 and May 2008, were also charged and pleaded guilty to mail fraud. Oquendo Rivera is scheduled to report to prison this Friday to begin serving a sentence of a year and a day that Judge Norgle imposed in June. Mateo is scheduled to be sentenced on September 18.

According to court documents, the White Sox relied on Wilder, as well as Oquendo Rivera and Mateo, to recommend and approve signing bonus and related payments, depending on a player’s talent, necessary to induce a player to sign with the White Sox or to induce another team to release the player to the White Sox, without being inflated for kickbacks. Instead, Wilder and the other defendants facilitated, solicited, or obtained more than $440,000 in kickbacks from at least 23 Latin American players signed by the White Sox.

The White Sox reported findings of an internal investigation to Major League Baseball and baseball officials referred the matter to federal authorities. Both the team and Major League Baseball were instrumental in launching the investigation and provided continuing cooperation.

The government is being represented by Assistant U.S. Attorneys Christopher K. Veatch and Michelle Nasser.

The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert G. Shields, Jr., Acting Special Agent in Charge of the Federal Bureau of Investigation.

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