Phillip D. Murphy, Former Bank of America Executive, Pleads Guilty to Role in Conspiracy and Fraud Involving Investment Contracts for Municipal Bonds Proceeds

A former Bank of America executive pleaded guilty today to his participation in a conspiracy and scheme to defraud related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

Phillip D. Murphy, the former managing director of Bank of America’s municipal derivatives products desk from 1998 to 2002, pleaded guilty today before U.S. District Judge Max O. Cogburn, Jr. in the U.S. District Court for the Western District of North Carolina to participating in a fraud conspiracy and wire fraud scheme with employees of Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, a broker of municipal finance contracts, and others. Murphy also pleaded guilty to conspiring with others to make false entries in the reports and statements originating from his desk, which were sent to bank management.

Murphy was indicted by a grand jury on July 19, 2012. According to the indictment, Murphy participated in a wire fraud scheme and separate fraud conspiracies that began as early as 1998 and continued until 2006.

“By manipulating what was intended to be a competitive bidding process, the conspirators defrauded municipalities, public entities, and taxpayers across the country,” said Brent Snyder, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “Today’s guilty plea reaffirms the Antitrust Division’s continued efforts to hold accountable those who corrupt and subvert the competitive process in our financial markets.”

Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements and often for other municipal finance contracts.

According to the charges, Murphy conspired with CDR and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to Bank of America. Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations. As a result of the information, various providers won investment agreements and other municipal finance contracts at artificially determined prices. In exchange for this information, Murphy submitted intentionally losing bids for certain investment agreements and other contracts when requested and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.

Murphy and his co-conspirators misrepresented to municipal issuers that the bidding process was competitive and in compliance with U.S. Treasury regulations. This caused the municipal issuers to award investment agreements and other municipal finance contracts to providers that otherwise would not have been awarded the contracts if the issuers had true and accurate information regarding the bidding process. Such conduct placed the tax-exempt status of the underlying bonds in jeopardy.

“Mr. Murphy’s actions undermined the public’s trust when he conspired to manipulate a competitive bidding process,” said Richard Weber, Chief, IRS-Criminal Investigation (IRS-CI). “IRS-CI has experienced great success in unraveling significant and complex financial frauds as we work in close collaboration with our law enforcement partners.”

“Mr. Murphy ripped off hard working American taxpayers and cash-strapped municipalities all in pursuit of his own lucre,” said George Venizelos, Assistant Director in Charge of the FBI’s New York Field Office. “Let this serve as a reminder to others who are entrusted to act in the public’s best interest; your lack of candor won’t go without notice.”

Murphy pleaded guilty to two counts of conspiracy and one count of wire fraud. The fraud conspiracy carries a maximum penalty of five years in prison and a $250,000 fine. The wire fraud charge carries a maximum penalty of 30 years in prison and a $1 million fine. The false bank records conspiracy carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fines for each of these offenses may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Including Murphy, a total of 17 individuals have been convicted or pleaded guilty. Additionally, one company has pleaded guilty.

The prosecution is being handled by Steven Tugander, Richard Powers, Eric Hoffmann, Patricia Jannaco, and Stephanie Raney of the Antitrust Division. Assistant U.S. Attorneys Kurt Meyers, Michael Savage, and Mark Odulio of the U.S. Attorney’s Office for the Western District of North Carolina have also provided valuable assistance in this matter. The guilty plea announced today resulted from a wide-ranging investigation conducted by the Antitrust Division’s New York office, the FBI, and the IRS-CI. The division coordinated its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Federal Reserve Bank of New York.

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Seven Arts Entertainment CEO Indicted in Fraudulent Film Tax Credit Scheme

Peter M. Hoffman, age 63, of Los Angeles, California, and Michael P. Arata, age 47, of New Orleans, Louisiana, were charged in a six count indictment by a federal grand jury with conspiracy and wire fraud, announced United States Attorney Kenneth Allen Polite, Jr.

According to the indictment, the Louisiana Motion Picture Incentive Act (LMPIA) was enacted to provide incentives for and encourage the filming of motion pictures and television programs in Louisiana. Under the LMPIA, companies making motion pictures were eligible to receive tax credits that were calculated as a percentage of the companies’ qualified expenditures in Louisiana. Qualified expenditures upon which companies could receive tax credits included expenditures on infrastructure. Infrastructure expenditures only included the purchase, construction, and use of facilities that were directly related to and utilized for motion picture production in Louisiana. In order to qualify for infrastructure tax credits, all funds had to be actually expended, and such expenditures had to be verified by an independent Louisiana Certified Public Accountant. Businesses that applied to the state for infrastructure tax credits were entitled to receive an amount equal to 40 percent of their qualified and audited infrastructure expenditures. Once this amount was certified by the state of Louisiana, the applicants could then sell the certification to local businesses and individuals. Such sale of tax credits provided for a significant source of cash for film projects.

The defendant, Peter M. Hoffman, was the chief executive officer of Seven Arts Entertainment Inc., a company that was primarily involved in the motion picture and entertainment industry in California. As chief executive officer of Seven Arts Entertainment Inc., his duties included the selection and production of major motion pictures, strategic planning, business development, operations, financial administration, and accounting. Hoffman was also an attorney and participated as a lawyer and executive in numerous financial and tax-preferred financings over a period of more than 25 years. Hoffman also owned, operated, and controlled numerous companies related to and affiliated with Seven Arts Entertainment Inc.

The co-defendant, Michael P. Arata, was a Louisiana attorney and businessman who also owned and operated companies involved in the movie and entertainment industry. Through their respective companies, Hoffman and Arata were partners in different movie-industry business ventures.

Through their respective companies, Hoffman and Arata purchased property located at 807 Esplanade in New Orleans, Louisiana. 807 Esplanade was an old mansion located in the Faubourg Marigny neighborhood on the edge of the French Quarter that had fallen into a severe state of disrepair over many years. The proposed reason for purchasing the property was to renovate the mansion and turn it into a film post-production facility.

After purchasing the property, Hoffman and Arata submitted an application and supporting documents to the state of Louisiana in order to receive film infrastructure tax credits for money the defendants fraudulently claimed had been spent on 807 Esplanade. On or about June 19, 2009, the state of Louisiana issued approximately $1,132,480.80 in tax credits to the 807 Esplanade partnership.

The Indictment charges that Hoffman and Arata fraudulently submitted materially false and misleading documents and information regarding 807 Esplanade expenditures to the auditors and to the state of Louisiana in order to receive infrastructure tax credits.

“The United States Attorney’s Office, the FBI. and the Louisiana Office of the Inspector General stand committed to protecting the economic interests of the United States and the state of Louisiana,” stated U.S. Attorney Polite. “The state of Louisiana has provided significant incentives to the film and entertainment industry in order to develop business and employment in Louisiana. Such an important effort will not be criminally exploited.”

“Those who brazenly steal from the taxpayers and abuse tax credit programs should know that we will relentlessly pursue and hold them criminally accountable wherever possible,” stated Louisiana Inspector General Stephen Street. “We remain committed to working with the FBI and United States Attorney to root out this sort of corruption wherever it may exist.”

Hoffman and Arata face a maximum term of imprisonment of five years with respect to count one and 20 years with respect to each of counts two through six. The defendants also face a maximum fine of $250,000 with respect to each count and supervised release of three years.

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Details Released on Trenton Mayor's Conviction on Federal Extortion, Bribery, and Mail and Wire Fraud Charges

A federal jury found Trenton Mayor Tony F. Mack guilty on all six federal extortion, bribery, and mail and wire fraud charges against him, U.S. Attorney Paul J. Fishman announced.

Mack’s brother, Ralphiel Mack, was also convicted on three of the charges but found not guilty on three mail and wire fraud counts, following a five-week trial before U.S. District Judge Michael A. Shipp in Trenton federal court. The Macks were charged in connection with a scheme to accept $119,000 in bribes in exchange for Mayor Mack’s official actions and influence in assisting cooperating witnesses in the development of an automated parking garage on city-owned land.

“The jury’s verdict solidly affirms what we first charged more than a year ago—that Tony Mack, with the helping hands of his brother and their cohorts, sold the mayor’s office and sold out the people of Trenton,” U.S. Attorney Fishman said. “We are very grateful to the members of the jury for their service.”

Tony F. Mack, 48, and Ralphiel Mack, 41, both of Trenton, originally were charged by complaint on September 10, 2012, with one count of conspiracy to obstruct commerce by extortion under color of official right related to the $119,000 extortion scheme. Also charged at that time was Joseph A. Giorgianni, 64, of Ewing, New Jersey. An indictment returned in December 2012 added charges against all three defendants.

Giorgianni pleaded guilty on December 13, 2013, to one count of conspiring with the Macks and others to obstruct interstate commerce by extorting individuals under color of official right, in addition to a separate extortion scheme, a narcotics charge, and illegal weapons possession, all charges unrelated to the Macks.

Mayor Mack was convicted of the six counts charged in the indictment:

• Conspiracy to obstruct and affect interstate commerce by extorition under color of official right
• Attempted obstruction of commerce by extortion under the color of official right
• Accepting and agreeing to accept bribes
• Two counts of wire fraud
• Mail fraud

Ralphiel Mack was convicted on the same first three counts and found not guilty of the mail and wire fraud charges. The jury members deliberated for seven hours before returning their verdicts.

According to documents filed in this case and the evidence presented at trial:

Mayor Mack, Giorgianni, and Ralphiel Mack conspired to accept approximately $119,000 in cash and other valuables, of which $54,000 was accepted and another $65,000 that the defendants planned to accept, from two cooperating witnesses (CW-1 and CW-2). In exchange for the payments, Mayor Mack agreed to and did assist CW-1 and CW-2 in their efforts to acquire a city-owned lot (the East State Street lot) to develop an automated parking garage (the parking garage project). The scheme included a plan to divert $100,000 of the purchase amount that CW-2 had indicated a willingness to pay to the city of Trenton for the lot as a bribe and kickback payment to Giorgianni and Mayor Mack. The mayor authorized and directed a Trenton official responsible for disposition of city-owned land to offer the East State Street lot to CW-2 for $100,000, significantly less than the amount originally proposed by CW-2.

The defendants went to great lengths to conceal their corrupt activity and keep Mayor Mack “safe” from law enforcement. For example, Giorgianni and Ralphiel Mack acted as intermediaries, or “buffers,” who accepted cash payments for Mayor Mack’s benefit. Mayor Mack also used another city of Trenton employee involved in the scheme, Charles Hall, III, 49, of Trenton, to contact other Trenton officials to facilitate the parking garage project and to inform the mayor when Giorgianni had received corrupt cash payments. Hall pleaded guilty before Judge Shipp in February 2013 to an information charging him with one count of conspiracy to obstruct commerce by extortion under color of official right and one count of conspiring to distribute narcotics with others, including Giorgianni.

To conceal the corrupt arrangement, the defendants avoided discussing matters related to the scheme over the telephone. When those matters were discussed, they used code words and aliases. One such code word was “Uncle Remus,” which both Giorgianni and Hall regularly used to communicate to Mayor Mack that a corrupt payment had been received. For example, on October 29, 2011, Giorgianni telephoned Hall and informed him that Giorgianni had to “see” Mayor Mack and that “I got Uncle Remus for him,” meaning a corrupt cash payment that Giorgianni had received from CW-1 two days earlier. Giorgianni directed Hall to bring Mayor Mack to a meeting location controlled by Giorgianni (Giorgianni’s Clubhouse), stating “we gotta talk” because “I got something that might be good for him” and that “they’ve already come with Uncle Remus,” meaning a corrupt cash payment. On June 13, 2012, Giorgianni telephoned Mayor Mack and informed him that “Uncle Remus,” meaning a corrupt cash payment, “was there.” Mayor Mack replied, “I’ll call you, J. Okay?” In text messages to Mayor Mack related to the scheme, Giorgianni would refer to himself as “Mr. Baker.”

The defendants also concealed their activities by holding meetings concerning the corrupt activity away from Trenton City Hall, including at Giorgianni’s residence, an eatery maintained by Giorgianni known as JoJo’s Steakhouse, Giorgianni’s Clubhouse, and Atlantic City restaurants. At one Atlantic City meeting among Mayor Mack, Giorgianni, Hall, and CW-2, Mayor Mack instructed Giorgianni to ensure that no photographs were taken in order to conceal the corrupt arrangement.

The extortion conspiracy and attempted extortion charges are each punishable by a maximum potential penalty of 20 years in prison. The bribery charge is punishable by a maximum potential penalty of 10 years in prison. The mail and wire fraud charges are each punishable by a maximum potential penalty of 20 years in prison. All the counts also carry a potential fine of $250,000 or twice the gain or loss from the offense. Sentencing is scheduled for May 14, 2014

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Code Name: Johnny Walker The Extraordinary Story of the Iraqi Who Risked Everything to Fight with the U.S. Navy SEALs

This is the unforgettable story of how an ordinary Iraqi became a hero to America's elite warriors—and how that debt was repaid with the gift of freedom.

He was the seals' most trusted interpreter . . . and more

Night after night, while his homeland was being destroyed around him, he guided the U.S. Navy SEALs through Iraq's most dangerous regions. Operating under the code name "Johnny Walker," he risked his life on more than a thousand missions and became a legend in the U.S. special-ops community, many of whose members credit him with saving their lives. But in the eyes of Iraq's terrorists and insurgents, he and his family were marked for death because he worked with the Americans. . . . Then the SEALs stood up to protect the man who had watched their backs through the entire war.

Over the course of eight years, the Iraqi native traveled around the country with nearly every SEAL and special-operations unit deployed there. Using his wits to outthink the insurgency, Johnny Walker unmasked countless terrorists and helped foil an untold number of plots against Americans and their allies. He went on hundreds of missions, saved dozens of American lives—both SEAL and civilian—and risked his own life daily. He and his family lived in constant jeopardy, surviving multiple assassination attempts and a host of threats in Mosul, until a desperate escape through the desert late in the war took them to the relative safety of Baghdad.

Fearing for Johnny's long-term safety after the war, the SEALs—now as close as brothers to Johnny—took it upon themselves to bring him to the United States, where today he and his family live their version of the American Dream. He remains in the fight by helping train the next generation of American special-operations warriors.

For the first time ever, a "terp" tells what it was like in Iraq during the American invasion and the brutal insurgency that followed. With inside details on SEAL operations and a humane understanding of the tragic price paid by ordinary Iraqis, Code Name: Johnny Walker reveals a side of the war that has never been told before.

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Seven Defendants Indicted in Six Armed Robberies of Cell Phone Stores

Seven defendants were indicted on federal charges for their alleged roles in a series of at least six armed robberies of cellular telephone stores last year that extended from suburban Chicago to Indiana and downstate Illinois. Two defendants, Eric Rogers and Eric Curtis, who allegedly directed a robbery conspiracy, were arrested on federal charges in December following the robbery of a cell phone store in suburban Woodridge. The other five defendants, all of whom are in state custody, were charged federally for the first time in this district in a nine-count indictment returned by a federal grand jury yesterday and announced today.

Rogers, 39, of Hazel Crest, and Curtis, 29, of Park Forest, allegedly selected the stores that were robbed, recruited their co-defendants to participate in the robberies, provided them with firearms and other equipment, and paid them to commit armed robbery at their direction. They were each charged with one count of robbery conspiracy, three counts of robbery, and two counts of brandishing firearms; Curtis alone was charged with being a felon-in-possession of a firearm. Both remain in federal custody without bond.

Also indicted were: Marcus Harris, 20, of Chicago; Daniel Wright, 28, of Chicago; Andre Wadlington-Anthony, 27, of Harvey; Tony Johnson, 20, of Harvey; and Lavell Hughes, 41, of Gary, Indiana. Four of the five were charged with one count each of robbery and brandishing a firearm, while Wadlington-Anthony was charged with two counts of each of those crimes.

All seven will be arraigned on dates yet to be determined in U.S. District Court.

According to the indictment, the defendants in various combinations, committed the following armed robberies in 2013:

• January 31—Sprint store, 1323 West Lake St., Addison
• February 4—AT&T store, LaPorte, Indiana
• March 19—AT&T store, 41551⁄2 North Harlem, Norridge. Court documents allege the loss of approximately 100 phones and tablet computers valued at approximately $54,000 in this robbery
• April 4—Sprint store, East Peoria, Illinois
• April 8—T-Mobile, 110 South Waukegan Rd., Deerfield
• December 14—T-Mobile, 1001 West 75th St., Woodridge.

The indictment alleges that Rogers and Curtis also conspired with Rogers’ deceased cousin, Ryan Rogers, who, following the March 19 Norridge robbery, drove toward a Chicago police officer attempting to stop his vehicle and was shot and killed.

Each count of robbery carries a maximum penalty of 20 years in prison and a $250,000 fine, and each count of brandishing a firearm carries a consecutive, mandatory minimum of seven years in prison and a maximum of life. Curtis also faces a maximum 10-years sentence on the felon-in-possession charge. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The case was investigated by the FBI’s Safe Streets Task Force, which is composed of the FBI and the Chicago Police Department. The police departments in Addison, Deerfield, Homewood, Norridge, Woodridge, LaPorte, Indiana, and East Peoria, Ilinois, also assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Christopher Parente.

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.

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