Money-Laundering Inquiry Said to Target U.S. Banks

The following is an excerpt from an article in:


The New York Times
Saturday, September 15, 2012

Money-Laundering Inquiry Said to Target U.S. Banks

By JESSICA SILVER-GREENBERG and BEN PROTESS

Federal and state authorities are investigating a handful of major American banks for failing to monitor cash transactions in and out of their branches, a lapse that may have enabled drug dealers and terrorists to launder tainted money, according to officials who spoke on the condition of anonymity.

These officials say they are beginning one of the most aggressive crackdowns on money-laundering in decades, intended to send a signal to the nation’s biggest banks that weak compliance is unacceptable.

Regulators, led by the Office of the Comptroller of the Currency, are close to taking action against JPMorgan Chase for insufficient safeguards, the officials said. The agency is also scrutinizing several other Wall Street giants, including Bank of America.

The comptroller’s office could issue a cease-and-desist order to JPMorgan in coming months, an action that would force the bank to plug any gaps in oversight, according to several people knowledgeable about the matter. But the agency, which oversees the nation’s biggest banks, has not yet completed its case. JPMorgan is in the spotlight partly because federal authorities accused the bank last year of transferring money in violation of United States sanctions against Cuba and Iran.

In addition to the comptroller, prosecutors from the Justice Department and the Manhattan district attorney’s office are investigating several financial institutions in the United States, according to law enforcement officials.

The surge in investigations, compliance experts say, is coming now because authorities were previously inundated with problems stemming from the 2008 financial turmoil. “These issues may have been put on hold during the financial crisis, and now regulators can go back to focus on money-laundering and other compliance problems,” said Alma M. Angotti, a director at Navigant, a consulting firm that advises banks on complying with anti-money-laundering rules.

Until now, investigators have primarily focused on financial transactions at European banks, most recently Standard Chartered. The authorities accused several foreign banks of flouting American law by transferring billions of dollars on behalf of sanctioned nations.

For more, visit www.nytimes.com.

U.S. Said to Investigate Money Laundering at HSBC

The following is an excerpt from an article in 

The New York Times
Saturday, August 25, 2012

U.S. Said to Investigate Money Laundering at HSBC

By JESSICA SILVER-GREENBERG

Prosecutors investigating the movement of money by global banks suspect HSBC of laundering money for Mexican drug cartels and moving cash for Saudi Arabian banks with ties to terrorists, according to federal authorities with direct knowledge of the investigations.

The federal and state prosecutors are also investigating whether HSBC flouted United States law by transferring money through its American subsidiary for sanctioned nations, including Iran, Sudan and North Korea.

The weight of the accusations could force HSBC, which has already set aside $700 million to cover the cost of potential fines, to pay at least $1 billion to settle the inquiry, said the authorities with knowledge of the investigation, which would make it the largest such settlement in history.

The money-laundering accusations against HSBC so far are more extensive than the potential violation of United States sanctions that is the focus of the investigations against other foreign banks, including Deutsche Bank and Commerzbank of Germany, BNP Paribas and Crédit Agricole of France and the Royal Bank of Scotland, said the law enforcement authorities, who requested anonymity because the investigations are continuing.

“This case is not about HSBC complicity in money laundering,” a spokesman for HSBC said in a statement on Friday. “Rather, it’s about lax compliance standards that fell short of regulators’ expectations and our expectations, and we are absolutely committed to remedying what went wrong and learning from it.”

The other banks either declined to comment or did not respond to requests for comment.

Anxious to resolve the investigation, HSBC reached out to federal prosecutors in July in hopes of securing a settlement by September, according to the law enforcement officials. But a settlement in the next couple of weeks is highly unlikely, the officials said. The Justice Department and the Manhattan district attorney’s office are poring over HSBC records and still need more time to gauge the full extent of the potential wrongdoing, according to the law enforcement officials. The Justice Department and the Manhattan district attorney’s office declined to comment.

For more, visit www.nytimes.com.

ACI Worldwide Named a Leader in IDC Marketscape: Financial Crimes Management 2012 Vendor Assessment

ACI Worldwide Named a Leader in IDC MarketScape: Financial Crimes Management 2012 Vendor Assessment

Proactive Risk Manager™ Recognized for Real-Time Pattern Recognition Abilities, Customizable Alerts, and Reporting Options

Wednesday, March 21, 2012

(New York, N.Y. - March 21, 2012) - ACI Worldwide (Nasdaq: ACIW), a leading international provider of payment systems, today announced it has been ranked in the “Leader” category for financial crimes management by leading industry analyst firm IDC Financial Insights in the recent IDC MarketScape report, Financial Crimes Management 2012 Vendor Assessment.

ACI’s ranking is based on its flagship fraud detection product, Proactive Risk Manager. IDC Financial Insights stated, “Proactive Risk Manager's greatest strength is its integration with ACI's other payment products, particularly its BASE24-eps card processing system and its MTS wire and ACH systems. This integration enables Proactive Risk Manager to operate almost entirely in real time. Real-time alerting and decisioning continues to be a primary selling point, reflecting the product's roots in the card market.”

Shesh Gorur, vice president & product line manager, ACI Worldwide, said, “We are delighted to be recognized as a Leader by IDC in this report. Our goal is to provide a product that is both flexible and powerful, supporting our customers’ current needs while allowing them to react to the evolving world of payments fraud.”

As defined by the report, financial crime management includes the IT solutions that anticipate, detect, analyze, and prevent fraudulent transactions, money laundering, and employee financial misconduct through the use of one or more of the following: decision trees, neural networks, predictive scoring models, network link analysis, scenario matching, data mining, case management, and entity and device profiling.

Proactive Risk Manager is a comprehensive enterprise fraud detection solution to help card issuers, merchants, acquirers and financial institutions combat financial crime. By monitoring account activity across all lines of business, Proactive Risk Manager enables users to see more fraudulent activity in a shorter amount of time, minimizing losses and helping to preserve the customer relationship. Proactive Risk Manager combines the power of predictive analytics and expertly defined rules for fast, accurate and flexible response to the evolving and growing nature of fraud and money laundering.

For more information on Proactive Risk Manager please visitwww.aciworldwide.com/proactiveriskmanager.

News Release from the FBI, Omaha Division

Convicted Conman Found Guilty Again

U.S. Attorney’s OfficeFebruary 23, 2012

Northern District of Iowa(319) 363-6333

A man who defrauded numerous people out of thousands of dollars while on supervised release for a prior fraud conviction was convicted by a jury on February 22, 2012, after a seven-day trial in federal court in Cedar Rapids.

Donald K. Washburn, from Linn County, was convicted of 28 counts of wire fraud, five counts of money laundering, and 13 counts of making false statements to the United States Probation Office. The verdicts were returned in the afternoon of February 22, 2012, following about 10 hours of jury deliberations.

The evidence at trial showed Washburn falsely claimed he owned three mines, iron ore, and other valuable minerals. Washburn sought people to invest in the mines or minerals and used their investments for his own personal benefit. Washburn also falsely claimed he owned a casino dice game and sold exclusive licensing rights to the dice game to his victims. Portions of both the mining and dice game schemes occurred while Washburn was on federal supervised release for a prior fraud conviction. During the period of supervised release, Washburn was required to file monthly financial report forms to the United States Probation Office. Washburn’s monthly reports were false because he failed to disclose financial transactions related to his fraudulent mining and dice game schemes.

Sentencing before United States District Court Chief Judge Linda R. Reade will be set after a presentence report is prepared. Washburn was ordered into the custody of the United States Marshal pending sentencing. Washburn faces up to 20 years’ imprisonment on each count of wire fraud, up to 10 years’ imprisonment on each count of money laundering, and up to five years’ imprisonment on each false statement count. Washburn also faces a fine of up to twice the amount of his financial gain, twice the amount of financial loss to his victims, or $250,000 per count of conviction.

The case is being prosecuted by Assistant United States Attorney Matthew J. Cole and was investigated by Federal Bureau of Investigation.

News Release from the FBI, Washington Field Office

Wife of Former Army Major Sentenced to 72 Months in Prison for Role in Bribery and Money Laundering Scheme Related to DoD Contracts 
To Date, 17 Individuals Have Pleaded Guilty or Been Convicted at Trial in Ongoing Corruption Investigation

U.S. Department of JusticeFebruary 23, 2012

Office of Public Affairs(202) 514-2007/ (202) 514-1888

WASHINGTON—Eurica Pressley, 39, was sentenced today in Birmingham, Ala., to 72 months in prison for her participation in a bribery and money laundering scheme related to bribes paid for contracts awarded in support of the Iraq war, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

U.S. District Court Judge Virginia Emerson Hopkins for the Northern District of Alabama also ordered Pressley to serve three years of supervised release following the prison term and to forfeit $21 million as well as real estate and several automobiles, jointly with her husband, Eddie Pressley. On Jan. 5, 2012, Eddie Pressley, was sentenced to 144 months in prison. He also was ordered to serve three years of supervised release.

“Eurica Pressley helped her husband and others facilitate a wide-ranging bribery and money laundering scheme by hiding ill-gotten gains and creating phony paperwork to help conceal the conspirators’ crimes,” said Assistant Attorney General Breuer. “Through the determined efforts of our agents and prosecutors, 17 individuals have now been brought to justice for their role in this multi-million-dollar bribery scheme.”

“While our military was working to set up government contracts to support U.S. efforts in Iraq, Eurica Pressley and her husband set up shell companies to hide illegal proceeds of a scheme that defrauded the U.S. government,” said James McJunkin, Assistant Director of the FBI’s Washington Field Office. “Today’s sentencing demonstrates that those who commit fraud, no matter where it occurs, will be held accountable for their actions.”

“The American public places special trust and confidence in our service members and those who provide them with vital supplies to carry out their mission,” said Special Agent in Charge Robert E. Craig for the Defense Criminal Investigative Service (DCIS), Mid-Atlantic Field Office. “It is an affront to our hard working military members, civilians and contractors when a member of this department and his associates allow personal gain to criminally subvert the best interests of our troops. DCIS, working with our law enforcement partners, will continue to aggressively seek out such criminal behavior and bring those responsible to justice.”

“This sentencing demonstrates our firm commitment to hold accountable those who commit fraud against our government,” said Major General David E. Quantock, Commanding General of the U.S. Army Criminal Investigation Command (CID). “Special agents from our Major Procurement Fraud Unit, along with those from other federal law enforcement agencies, are unwavering in their commitment to seek out and hold responsible all those who attempt to defraud the U.S. Army and the American taxpayer. During the last 10 years alone, Army CID special agents have been instrumental in recovering and returning $2.1 billion to the U.S. Treasury.”

“Eurica Pressley’s sentencing underscores once again that those who engage in bribery and money laundering involving Iraq reconstruction funds will face severe consequences,” said Stuart W. Bowen Jr., Special Inspector General for Iraq Reconstruction (SIGIR). “SIGIR and its investigative partners continue to pursue about 90 open cases involving allegations similar to those adjudicated in this case.”

The Pressleys were found guilty on March 1, 2011, of one count of bribery, one count of conspiracy to commit bribery, eight counts of honest services fraud, one count of money laundering conspiracy and 11 counts of engaging in monetary transactions with criminal proceeds.

The case against the Pressleys arose from a corruption probe focusing on Camp Arifjan, a U.S. military base in Kuwait. As a result of this investigation, 17 individuals, including the Pressleys, have pleaded guilty or have been found guilty at trial for their roles in the scheme.

Evidence presented at trial demonstrated that Eddie Pressley took various contracting actions to benefit certain contractors who paid him bribes, including Terry Hall. Pressley served as a U.S. Army contracting official at Camp Arifjan between 2004 and 2005. From spring 2004 through fall 2007, Hall operated and had an interest in several companies, including Freedom Consulting and Catering Co. and Total Government Allegiance. In February 2005, Eddie Pressley arranged for Hall to obtain a blanket purchase agreement (BPA)—a contract that allows the U.S. Department of Defense (DoD) to order supplies on an as-needed basis at a pre-negotiated price—to deliver goods and services to DoD and its components in Kuwait and elsewhere.

According to Hall’s testimony and other evidence presented at trial, Pressley demanded a $50,000 bribe before he would issue bottled water orders or “calls” to Hall. Hall testified that in April 2005, he and his associates arranged for Pressley to receive the money in a bank account established in the name of a shell company, EGP Business Solutions Inc.

Hall’s testimony and other evidence at trial showed that soon after the $50,000 bribe was paid, Pressley and John Cockerham, another U.S. Army contracting official, increased the bribe demand to $1.6 million, which consisted of $800,000 for Pressley and $800,000 for Cockerham. After Hall and others agreed to pay the money, Pressley and Cockerham took various official acts to benefit Hall, including, among other things, issuing calls for bottled water and fencing, arranging for Hall to receive a fence contract and modifying Hall’s BPA to remove the upper limit of the money Hall could receive from the DoD under the bottled water BPA.

Evidence at trial also showed that Eddie Pressley enlisted the help of his wife, Eurica, to receive the bribes. On March 9, 2005, he sent his wife an e-mail in which he told her, among other things, “You will be getting some paperwork with your maiden name on it”; “I need you to sign it and mail to whatevery (sic) address on it”; “I am doing some consulting”; and “Of course I am not going to turn down any money, but I can’t have anyone paying me in my name because I am in the military so I had them put everything in your maiden name.”

According to evidence presented at trial, Eurica Pressley traveled to Dubai in May 2005 and to the Cayman Islands in June 2005 to open bank accounts to receive the bribe money. She also took control of the U.S.-based account in the name of EGP Business Solutions Inc. A law enforcement agent testified at the trial about various false and misleading statements Eurica Pressley made to him during a voluntary interview at her home, including her denial that she had any foreign bank accounts. In addition, the evidence presented at trial demonstrated that Eddie and Eurica Pressley, Hall and others attempted to conceal the true nature of their corrupt scheme by having Eurica Pressley execute bogus “consulting agreements.” They also prepared false invoices that were designed to justify the bribe payments as payment for non-existent “consulting services.”

Bank statements and wire transfer reports demonstrated that, in total, the Pressleys received approximately $2.9 million in bribe payments, approximately $1.6 million of which consisted of payments from other contractors that Hall facilitated for Eddie Pressley. Bank statements, wire transfer reports and other records presented at trial showed that the Pressleys used the money to purchase real estate, expensive automobiles and home decorating services, among other things.

Former U.S. Army Major James Momon also testified at trial that Pressley and Cockerham recruited him to join the bribe scheme and that he took various official acts to receive bribes from some of the same contractors who paid Pressley and Cockerham, including Hall. Additionally, he testified that Pressley told him that if they got caught they would spend “six years in jail” and that Cockerham and Pressley warned him to be careful.

On Feb. 18, 2010, Hall pleaded guilty to two counts of conspiracy—to bribe public officials and to commit money laundering—and agreed to forfeit $15.7 million to the U.S. government in connection with his payment of more than $3 million in bribes to Cockerham, Eddie Pressley, Momon and Christopher Murray. Hall is scheduled to be sentenced on March 20, 2012.

On Aug. 13, 2009, Momon pleaded guilty to receiving approximately $1.6 million in bribes and agreed to pay $5.7 million in restitution. On Jan. 8, 2009, Murray pleaded guilty to charges of bribery and making a false statement. He was sentenced on Dec. 17, 2009, to 57 months in prison and ordered to pay $245,000 in restitution. Momon’s sentencing has not yet been scheduled.

On Jan. 31, 2008, Cockerham pleaded guilty to participating in a bribery and money laundering scheme at Camp Arifjan. He was sentenced on Dec. 2, 2009, to 210 months in prison and ordered to pay $9.6 million in restitution.

The case is being prosecuted by Trial Attorneys Peter C. Sprung and Edward J. Loya Jr. of the Criminal Division’s Public Integrity Section. Assistance was also provided by the Criminal Division’s Office of International Affairs. The cases are being investigated by the Army CID, DCIS, U.S. Immigration and Customs Enforcement, FBI, Internal Revenue Service-Criminal Investigation, SIGIR and the International Contract Corruption Task Force (ICCTF). The ICCTF is a joint law enforcement agency task force that seeks to detect, investigate, and dismantle corruption and contract fraud resulting from U.S. Overseas Contingency Operations worldwide, including in Kuwait, Afghanistan and Iraq.

News Release from the FBI, Portland Division

Former Bend-Area Developer Pleads Guilty to $20 Million Bank Fraud 
Cases Relate to the Collapse of Desert Sun Development in Bend, Oregon

U.S. Attorney’s OfficeFebruary 22, 2012

Office of Public Affairs(202) 514-2007/TDD (202)514-1888

EUGENE, OR—Tyler Fitzsimons, 33, appeared before U.S. District Judge Michael R. Hogan on Tuesday, February 21, 2012 and pleaded guilty to a variety of mortgage and loan fraud charges arising out of the collapse of his company, Desert Sun Development (DSD), including conspiracy, bank fraud, and money laundering. From 2004 through 2008, DSD, a company previously headquartered in Bend, Oregon, built commercial structures and residential housing throughout Central Oregon. According to the indictments, DSD principals and other defendants caused financial institutions to lose more than $19 million.

According to court documents, Fitzsimons and others knowingly submitted fraudulent documents, including false financial statements, to various banks in order to obtain financing to develop and construct many of DSD’s commercial projects. Once the loans were approved, Fitzsimons and others submitted additional false documents, including fictitious contracts and invoices, to the banks to obtain loan proceeds for construction costs that were claimed to be associated with the fraudulent documents. Often, no construction had occurred.

Fitzsimons also developed a real estate flipping scheme at DSD. In court records, Fitzsimons admitted, among other things, to undermining the loan approval process for individuals participating in the scheme by “seasoning” or falsely inflating their bank accounts through temporary deposits or undisclosed, short-term loans and by submitting other fictitious documents, including letters explaining employment, large or recent deposits, and bonuses, to the banks funding the loans.

Defendants Shannon Egeland, Jeremy Kendall, Robert Brink, Teresa Ausbrooks, Michael Wilson, and Del Barber, Jr., who are charged in these and related cases previously pleaded guilty and are pending sentencing.

Conspiracy to commit bank fraud carries a maximum sentence of five years in prison and a $250,000 fine. Bank fraud carries a maximum sentence of 30 years in prison and a $1 million fine, and money laundering carries a maximum sentence of five years in prison and a $250,000 fine. Sentencing is set before U.S. District Court Judge Michael R. Hogan on October 09, 2012, at 10 a.m.

These cases were investigated by the FBI, IRS-Criminal Investigations, and the Oregon Division of Finance and Corporate Securities. Assistant U.S. Attorney Scott E. Bradford handled the prosecution of the cases.

USACE Manager Pleads Guilty to Bribery

News release from the FBI:

Former U.S. Army Corps of Engineers Manager Pleads Guilty in Alleged $20 Million Bribery and Kickback Scheme 
Scam Involved Steering of Government Contracts; Contractor Also Pleads Guilty to Charges Today

U.S. Attorney’s OfficeFebruary 13, 2012

District of Columbia(202) 514-7566

WASHINGTON—Michael A. Alexander, 55, a former program manager for the U.S. Army Corps of Engineers, pled guilty today to federal charges of bribery and conspiracy to commit money laundering in a scheme that allegedly involved more than $20 million in bribes and kickback payments and the planned steering of a $780 million government contract.

The plea was announced by U.S. Attorney Ronald C. Machen Jr.; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; Peggy E. Gustafson, Inspector General for the Small Business Administration (SBA); Robert E. Craig, Special Agent in Charge of the Mid-Atlantic Field Office of the Defense Criminal Investigative Service (DCIS); Eric Hylton, Acting Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI), and James K. Podolak, Director of the U.S. Army Criminal Investigation Command’s (CID) Major Procurement Fraud Unit (MPFU).

Alexander, of Woodbridge, Va., pled guilty before the Honorable Emmet G. Sullivan in the U.S. District Court for the District of Columbia. A sentencing date has not been set. The bribery charge carries a statutory maximum of 15 years in prison and the conspiracy charge carries up to 20 years of incarceration. The charges also carry potential fines, an order of restitution, and forfeiture of a money judgment for $1.25 million and specific property including cash, real property, bank account funds, and jewelry. As part of his plea agreement, Alexander agreed to cooperate in the government’s ongoing investigation.

At a separate and related hearing earlier today, also before Judge Sullivan, Robert L. McKinney, 51, pled guilty to bribery. McKinney was the president of Alpha Technology Group, one of the companies involved in the contracting scam. Alpha Technology Group was not one of the companies referenced in the original indictment returned against Alexander and others on September 16, 2011. A sentencing date for McKinney also has not been set.

As part of his plea agreement, McKinney agreed to forfeit about $245,000, representing the illegal proceeds he retained from the crime. He also agreed to cooperate in the government’s ongoing investigation.

***

“Today’s bribery and money laundering pleas relate to one of the largest procurement fraud scandals in our nation’s history and demonstrate this office’s steadfast commitment to holding accountable unscrupulous government officials, as well as the contractors who entice them with bribes and kickbacks,” said U.S. Attorney Machen. “Protecting the American taxpayer is one of our highest priorities and we will remain vigilant in the pursuit of those both inside and outside of the government who attempt to cheat the system and loot the public treasury.”

“Bribery and kickbacks have no place in government contracting,” said Assistant Director in Charge McJunkin. “The FBI and our partner agencies will continue to pursue those who engage in such criminal activity, as we work to protect federal funds and American taxpayers. We ask anyone with information about government fraud to contact the FBI.”

“Today’s announcement demonstrates the resolve of law enforcement to aggressively identify and prosecute individuals considering defrauding the federal government by deceit and bribery,” said SBA Inspector General Gustafson. “There are severe consequences associated with this form of criminal conduct, as this case uniquely demonstrates. The SBA OIG will relentlessly pursue fraud in government contracting programs to eliminate corruption, promote fair competition, and serve the American taxpayer.”

“Corruption of this nature recklessly deprives the hard-working men and women of the Defense Department of critical resources,” said Special Agent in Charge Craig. “Moreover, it undermines the public’s trust and confidence in Government. DCIS will continue to work tirelessly with our law enforcement partners to combat fraud and corruption within the procurement process and seek to ensure that those who engage in this type of criminal behavior are brought to justice.”

“The United States Army will not tolerate fraud or corruption or tolerate those who do,” said Director Podolak. “We will continue to diligently root out anyone involved in this type of illegal activity and our commitment to working shoulder to shoulder with other law enforcement agencies and the Department of Justice in this endeavor is stronger than ever. During the last 10 years alone, Army CID Special Agents have been instrumental in recovering and returning $2.1 billion dollars to the United States Treasury and the Army from fraudulent practices involving contractors.”

***

Alexander worked for the Army Corps of Engineers from 1979 until the time of his arrest, in October 2011. According to a statement of offense signed by Alexander, he was a program manager with the Directorate of Contingency Operations. In that position, Alexander had authority, among other things, to obtain funding for Army Corps of Engineers projects, including money for projects and programs placed through federal government contracts. He also was responsible for developing requirements for projects and programs. Alexander produced and actively managed a $54 million budget.

The scheme involved the Army Corps of Engineers and two contracts: the Technology for Infrastructure, Geospatial, and Environmental Requirements (TIGER) contract and the Contingency Operations Readiness Engineering & Support (CORES) contract.

The TIGER contract was used by authorized federal government agencies and departments to purchase products and services. It is what is known as an Indefinite Delivery/Indefinite Quantity contract. Authorized agencies and departments are not required to obtain three separate bids or to compare the TIGER contract to another contract before submitting an invoice for products and services through the TIGER contract.

The CORES contract was a planned contract, envisioned as an alternative or potential replacement to the TIGER contract. As planned, the CORES contract would be a five-year contract with an award potential for all contracts placed under it of up to $780 million. The CORES contract has not been issued for solicitation to potential prime contractors.

In his guilty plea, Alexander admitted to carrying out a bribery scheme with others. They included Kerry F. Khan, a colleague, who was then a program manager with the Army Corps of Engineers; Harold F. Babb, the former director of contracts at Eyak Technology LLC (EyakTek), an Alaska Native-owned small business; Alex N. Cho, the former chief technology officer of Nova Datacom, LLC, a provider of information assurance and security services to federal agencies and commercial companies, and McKinney, the president of Alpha Technology Group, Inc., a provider of program management services.

According to the statement of offense, in or around 2006, Alexander and Khan agreed to work together to obtain government contracts for corrupt contractors who would reward them with bribes. Khan had authority, among other things, to place orders for products and services for the Army Corps of Engineers through government contracts, including the TIGER contract, and to certify that the work on the contracts had been completed.

From May 2007 through October 2008, the Army Corps of Engineers awarded contracts and sub-contracts to Alpha Technology, totaling about $1,877,000. McKinney paid Khan a portion of the money that was received, and Khan provided Alexander with $99,100.

From May 2007 through October 2011, the Army Corps of Engineers awarded contracts and sub-contracts to Nova Datacom totaling more than $45 million.

All told, Alexander admitted receiving directly and indirectly about $1,150,000 of money and things of value from Nova Datacom and Cho. This included nearly $300,000 in checks and cash; $750,000 in wire transfers to an associate of Alexander’s in South Korea for the purchase of, among other things, a coffee shop called Seven Monkeys in Seoul; about $27,000 for the purchase of two designer watches for a member of Alexander’s family; employment of a family member at Nova Datacom, and other miscellaneous payments. Cho also promised Alexander future employment at Nova Datacom and $320,000 in additional payments. Indeed, on the morning of October 4, 2011, the date of his arrest, Alexander was expecting Cho to deliver a $20,000 payment to him.

In addition to these activities involving the TIGER contract, according to the statement of offense, Khan, Alexander, Babb and Cho agreed to steer the award of the CORES contract to Nova Datacom. This scheme was thwarted by the arrests of Alexander and others last fall.

Khan, 54, formerly of Alexandria, Va., Khan’s son, Lee Khan, 31, formerly of Fairfax, Va., and Babb, 60, formerly of Sterling, Va., were indicted along with Alexander on one count of conspiracy to commit bribery and wire fraud and aiding and abetting and causing an illegal act to be done, as well as one count of conspiracy to commit money laundering. Khan and Alexander also were indicted on one count of receipt of a bribe by a public official, and Babb was indicted on one count of unlawful kickbacks. Khan, Khan’s son, and Babb have pleaded not guilty to all charges in the case and are awaiting trial. Khan, Lee Khan, Babb, and Alexander have been in custody since their arrests in October.

Cho, 40, of Great Falls, Va., pled guilty in September 2011 to one count of conspiracy to commit bribery, money laundering, and wire fraud, and to defraud the United States, and one count of bribery. Another former Nova Datacom employee, Theodoros Hallas, 40, of Potomac, Md., the company’s former executive vice president, pled guilty to one count of conspiracy to commit wire fraud in October 2011. No sentencing date has been set for Cho or Hallas.

As part of his guilty plea today, McKinney signed a separate statement of offense that admitted that Alpha Technology had submitted fictitious and fraudulently inflated invoices that led to more than $1.8 million of payments to the firm. Some materials and services were provided, but, McKinney admitted, more than $850,000 of the expenses were fraudulent. Of this, he said, Alpha Technology kept about $245,395, and the rest allegedly was passed on to Khan directly and through a company controlled by another one of Khan’s family members.

To date, the United States has seized for forfeiture or recovered approximately $7.2 million in bank account funds, cash, and repayments, 16 real properties, five luxury cars, and multiple pieces of fine jewelry.

***

In announcing today’s developments, U.S. Attorney Machen, Assistant Director McJunkin, Inspector General Gustafson, Special Agent in Charge Craig, Acting Special Agent in Charge Hylton, and Director Podolak thanked those who investigated the case from the FBI’s Washington Field Office; the Office of the Inspector General for the Small Business Administration; the Department of Defense’s Defense Criminal Investigative Service; the Defense Contract Audit Agency; the Washington Field Office of the Internal Revenue Service-Criminal Investigation; and the Army Criminal Investigation Command. They also expressed thanks to the U.S. Marshals Service for its assistance on the forfeiture matter.

They also praised the efforts of those who worked on the case from the U.S. Attorney’s Office, including Assistant U.S. Attorneys Michael K. Atkinson and Bryan Seeley of the Fraud and Public Corruption Section and Assistant U.S. Attorney Anthony Saler of the Asset Forfeiture and Money Laundering Section. Finally, they expressed thanks for assistance provided by former Special Assistant U.S. Attorney Christopher Dana; Forensic Accountant Maria Boodoo; Paralegal Specialists Tasha Harris, Shanna Hays, Taryn McLaughlin, Sarah Reis, Christopher Samson, and Nicole Wattelet, and Legal Assistants Jared Forney and Krishawn Graham.

Developer Convicted of Operating a Ponzi Scheme

From the FBI, New York:

Jury Finds Staten Island, New York Real Estate Developer Guilty of Operating Multi-Million-Dollar Ponzi Scheme

U.S. Attorney’s Office February 09, 2012

Eastern District of New York (718) 254-7000

— filed under: Breaking News, Press Release, White-Collar Crime

BROOKLYN, NY—Following two weeks of trial, a federal jury in Brooklyn, N.Y., today returned guilty verdicts against Joseph Mazella, the founder and president of the Great Atlantic Group Inc., a Staten-Island based real estate and financial consulting company, on charges of securities fraud, wire fraud, and money laundering. These charges arose out of the defendant’s operation of a Ponzi scheme that led to more than $14 million in losses. When sentenced by U.S. District Judge Carol B. Amon, the defendant faces a maximum sentence of 25 years in prison on the most serious charge.

The verdicts were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York.
The evidence at trial proved that Mazella solicited money from prospective investors by telling them that he would invest their money in real estate projects, including projects in Trenton, N.J., a warehouse in Utica, N.Y., and a golf course in Greene County, N.Y. Mazella told his victims that their money would be safe and that he would pay them a fixed rate of return. Mazella encouraged several investors, typically senior citizens, to apply for reverse mortgages on their residences and to invest the proceeds with him. From approximately January 2007 until approximately December 2010, investors gave Mazella more than $14 million. By January 2007, though, the evidence showed that Mazella was operating Great Atlantic as a Ponzi scheme in which he paid returns to investors from existing investors’ deposits or money paid by new investors. Mazella also used investors’ money to pay his personal expenses, including payments for a Porsche, a mortgage on his personal residence and family expenses.

“The evidence at trial showed that the defendant callously and systematically defrauded his victims of their lives’ savings. Mazella’s victims, many of whom are senior citizens on a fixed income, turned to him to ensure their security in their golden years. Instead, their security was raided to fund his fraud, and they will feel the impact of Mazella’s crimes for the rest of their lives,” said U.S. Attorney Lynch.

Ms. Lynch extended her grateful appreciation to the FBI, which led the government’s criminal investigation.
The government’s case is being prosecuted by Assistant U.S. Attorneys John Nowak, Winston Paes and Mary M. Dickman.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.

Man Indicted for $3 Million Ponzi Scheme

News release from the FBI, Kansas City:

Former Lee’s Summit Man Indicted for $3 Million Ponzi Scheme

U.S. Attorney’s Office February 01, 2012

Western District of Missouri (816) 426-3122

— filed under: Breaking News, Press Release, White-Collar Crime

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that a former Lee’s Summit, Mo., man has been indicted by a federal grand jury for defrauding 39 investors in a $3 million Ponzi scheme.

Ronald W. Shepard, 72, formerly of Lee’s Summit, was charged in a 15-count indictment returned by a federal grand jury in Kansas City, Mo., on Tuesday, Jan. 31, 2012.

According to the indictment, Shepard’s company, Safety Solutions USA, LLC, in Lee’s Summit, developed and marketed a trailer hitch called Tow-Safe. A patent request for the trailer hitch safety device was filed, but rejected by the U.S. Patent Office. Shepard also operated a company called The Real Estate in Lee’s Summit.

Shepard received approximately $3,188,765 from approximately 39 investors from January 2006 through December 2009. Shepard returned approximately $1,235,853 to the investors, and lost or spent the rest, resulting in a minimum loss to investors of $1,825,883. Shephard is charged with 13 counts of mail fraud and two counts of money laundering related to the scheme.

Shepard, who prepared tax returns for individuals, discussed their investments and pitched his own companies as investments. Shepard allegedly claimed that investors would make anywhere from a 15 percent to 100 percent annual return on their investment. He allegedly failed to inform potential investors that the state had issued a cease and desist order that barred him from offering or selling any unregistered security.

Shepard allegedly told investors that their money was used to purchase property in Kansas City, the Lake of the Ozarks and Hawaii. Except for purchasing his own personal residence at the Lake of the Ozarks, the indictment says, Shepard did not purchase any real estate. Instead, the indictment alleges that Shepard used investor funds for personal living expenses, to pay other investors, to pay relatives, in disbursements of cash to himself and in real estate ventures.

According to the indictment, many investors liquidated their Individual Retirement accounts or 401(k) accounts and transferred the proceeds to Shepard for investment. Shepard allegedly told investors that if they liquidated retirement funds, thereby incurring penalties, he would refund their initial investment, plus the amount of penalty, plus interest.

The indictment also contains a forfeiture allegation, which would require Shepard to forfeit to the government any property derived from the proceeds of the alleged offenses, including $1,825,883.

Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.