Saint Regis University graduates beware, your degree is from a diploma mill in Liberia (in case you didn’t know that already). Not to be confused with Regis College in Massachusetts or Regis University in Denver, Saint Regis University was a school purportedly accredited in Liberia, but it turns out that three Liberian diplomats accepted over $40,000 in bribes to have the country’s Board of Education certify the on-line school that granted credit for "life experience" — a sure sign of questionable educational practices. Richard Novak entered a guilty plea to conspiracy and Foreign Corrupt Practices Act charges for his role in making the payments to the diplomats, including at least one transaction in a Washington, D.C. hotel room that was secretly videotaped by the Secret Service. The "University" issued over $6,000 college degrees, and an AP story (here) reports that two other defendants, Dixie and Stephen Randock, allegedly were the source of the bribery funds and the organizers of the operation, which included other purported "universities" issuing diplomas. The Randocks were indicted on mail/wire fraud and conspiracy charges in October 2005. (ph)
Category: Fraud
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Despite being found not guilty of all but the tax counts, the Atlanta Journal Constitution reports here that the government seems to be trying to use something on a verdict form (not sure exacly what from the story) as a basis for increasing the sentence that former Atlanta Mayor Bill Campbell might receive at his upcoming sentencing. It seems that although the jury found him "not guilty" on the RICO count, they made an indication of a mail fraud predicate act. RICO requires two predicate acts, and also requires continuity plus relationship of the acts involved. Absent these elements there is no RICO. And in the meantime, Campbell is arguing for a reversal of his conviction.
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The former mayor of Lynwood, California received a sentence in excess of 15 years. (see LATimes here) Paul H. Richards II, who also was an attorney, was convicted of 35 charges including fraud, false statements and money laundering. (See also Newsday (AP) here) Richards was said to have awarded no-bid contracts that benefited him and his family.
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One has to give credit to the DOJ- Criminal Division for its pursuit and prosecution of Katrina Frauds. A February Report here details the many accomplishments of the office. I actually had only one problem with the report. On page four it is signed by the "Chairman" Alice Fisher. I just wondered if they could perhaps make it a gender neutral term – "chair." And with the report out, the prosecutions continue. Just this week, the US Attorney’s Office for the Eastern District of California indicted eight additional Bakersfield residents for alleged Katrina related frauds. The new cases include charges of mail and wire fraud, and false claims. (see here).
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One becomes inured to reading about corporations hiring law firms and forensic accountants to help determine the scope of a potential fraud, with senior executives being relieved of their duties pending the outcome of the internal investigation. It is quite disheartening when the press release is issued by a church, however, because the harm from financial misconduct can have such a significant effect on church members and the clergy, who often must make do with very limited resources. The Orthodox Church in American (OCA) issued a press release (here) on March 16 stating:
His Beatitude, Metropolitan Herman announced that as the Primate of the Church, he has retained the law firm of Proskauer Rose LLP to undertake an internal investigation of allegations relating to the finances of the Church. He also announced that the accounting firm of Lambrides, Lamos, Moulthrop, LLP, presently engaged to conduct an Independent Audit of all Church financial accounts for the years 2004 and 2005, has been engaged further to examine the disposition of monies collected through OCA appeals from 2001 through 2005. Metropolitan Herman also announced that he will authorize any additional engagements with the accounting firm as requested by the attorneys conducting the internal investigation. He also announced that Protopresbyter Robert S.Kondratick has been relieved of his service as Chancellor of the Orthodox Church in America.
According to the Church’s website, "the Orthodox Church in America numbers some 700 parishes, missions, communities, monasteries, and institutions throughout the United States, Canada, and Mexico." Let’s hope the damage is not significant. (ph)
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Futures and commodities dealer Refco Inc. collapsed in a little over a week after it was revealed in October 2005 that its CEO, Philip Bennett, was involved in certain debt transactions carried on the company’s books as loans. Bennett repaid over $400 million with funds from a loan made by Austrian bank Bawag P.S.K. (Bank fuer Arbeit und Wirtschaft), but the improper disclosure and suspicions about the company caused it to fall into bankruptcy just a week after the disclosure of problems on its balance sheet. Bennett was arrested before leaving for a European trip, and remains under home confinement while he awaits trial on securities fraud charges. A Bloomberg.com article (here) discusses a potentially greater fraud at Refco as over $500 million in bonds seem to have disappeared since the bankruptcy filing, and the registration numbers for the bonds do not correspond to existing debt securities. To make matters even more suspicious, the bonds were held through Refco’s Bermuda subsidiary, and the purported owners of the bonds are Bawag — which bailed out Bennett — and an off-shore hedge fund, Liquid Opportunity. They owned the through six Anguilla companies that were incorporated in 2004, a year before Refco went public with its stock offering.
Does any of this sound like a budding fraud case? In the Parmalat collapse, a faked fax for an account at an off-shore bank was the trigger for that company’s demise, and the use of bank secrecy havens like Anguilla certainly does not bode well for getting to the bottom of transactions, at least without a cooperating witness. Deep Throat was certainly right when he said to follow the money, the only problem being the brick walls that exist when off-shore accounts are used and transactions involve multiple layers of corporate entities. Refco had been a public company for a bit less than three months before it dove into bankruptcy, which likely means some underwriters, investment bankers, and accountants (plus a couple lawyers) will be watching these developments very closely because of their potential liability to investors under the Securities Act of 1933. (ph)
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It is always a good thing for couples to share interests, although when that common ground involves embezzlement, it could trigger a period of separation while they serve jail terms. The U.S. Attorney’s Office for the District of Maryland’s blog (here) discusses the sentencing of Ronald Stewart, who was an auditor at CitiFinancial Inc. responsible for approving expense reimbursement for the company’s Canadian employees. Stewart created records for two fictitious employees, and his wife Saratou and a friend traveled to Canada to open bank accounts into which the reimbursements would be deposited. From Sept. 2003 to Sept. 2005, Stewart had almost $600,000 Canadian, or approximately $450,000 US, deposited into the accounts. According to the blog, Stewart and his wife used the funds for, among other things, "the purchase of a 2005 Lincoln Navigator, valued at approximately $60,000; the purchase of a new home in Owings Mills, Maryland and furniture for that home; the renewal of their wedding vows; the purchase of property in Trinidad; and monetary gifts to their families." How romantic to embezzle money to pay for the pledge of undying love and fidelity. Ronald received a 27-month prison sentence, and Saratou is scheduled for sentencing on April 3. I doubt there will be a second honeymoon at an FCI. (ph)
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Things haven’t changed all that much since traveling salesmen peddled snake oil and other concoctions as cures for a variety of illnesses, although the internet makes it much easier to reach a wider audience than a wagon (or car). The same claims of a miracle cure continue to lure desperate buyers, and the salesmen continue to run into trouble with the law, as evidenced by the indictment in the Southern District of Florida of Arthur Vanmoor on conspiracy, fraud, and drug violations. According to a press release (here):
Vanmoor and his co-conspirators sold fake cures for cancer, migraines, influenza, and cramps over the Internet using approximately twenty websites with names such as http://www.breastcancercure.com and http://www.lungcancercure.org. Vanmoor and his co-conspirators used these websites to promote his products “Cancer Control,” “Migraine Miracle,” “Flu Fighter,” and “Cramps Comforter” as being “guaranteed” cures and approved by the United States Food & Drug Administration (“FDA”) for use on human beings, when, in fact, they were not.
The Indictment further alleges that Vanmoor arranged for the websites to contain “Bogus articles from bogus doctors, . . . pictures of people dressed like doctors holding the products [“Cancer Control,” “Migraine Miracle,” “Flu Fighter,” and “Cramps Comforter”], . . . [and] bogus testimonials.” Additionally, the Indictment states that Vanmoor promoted his products on his websites under the names of FDA-approved drugs such as Pfizer’s Camptosar®. In reality, his products were neither such FDA-approved drugs, nor did they contain significant amounts, if any, of the active ingredients of these FDA-approved drugs.
If it’s on the internet, it’s gotta be true . . . right? The Pierre Salinger Syndrome certainly lives on for those who peddle miracles. (ph)
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Fraud Update reports here of the five year sentence given to a woman who had been charged along with other family members to "defrauding the U.S. Department of Education of almost $1 million in student loans and grants." This case was pursued by the United States Attorney for the District of Nevada.
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One might say that everyone is attacking the press lately. (Mary Matalin, who spoke along with husband James Carville, at the Hillsborough County Bar Foundation last night, was particularly harsh on the press and press coverage.)
The Government has even had some recent indictments related to the press (see here). And the word is out (here) that the former vice president of circulation of Newsday entered a guilty plea a few weeks ago. The plea was to charges of "mail fraud and income-tax evasion" and includes cooperation on the part of the accused. One can only imagine that with cooperation there will be more to come.
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MattBray.net 