David Burkholder Indicted – Swindling Money from Family and Friends – $1.8 Million?

Who do you turn to when you need help the most? Most of us would say family and friends. However, in this case it seems that David E. Burkholder, age 54, from San Francisco, CA took that a bit too far. Indicted on 24 counts of wire fraud, Burkholder was arrested on federal charges of swindling his family and friends in Kansas.

According to the indictment, in 2002, Burkholder fraudulently told his parents in Kansas that he needed money to settle a personal injury claim against him as a result of a car accident, and to pay legal expenses associated with forming a new business. He said he would repay the money within a few weeks. As a result, his parents loaned him approximately $950,000.

In July 2003, instead of repaying the money, Burkholder convinced his parents to solicit additional money from family members, which he said was a loan and would be repaid within a few weeks. As a result, other family members loaned him an additional $926,142. In the fall of 2003, Burkholder asked his parents to solicit more money from friends of the family. Again, he claimed to need the money to settle a personal injury claim and to set up a new business. In addition, he falsely claimed he needed to make a payment to Barbara Streisand as part of a contract with the singer and actress.

As a result, from October 2003 through April 2005 Burkholder received 24 wire transfers from his parents ranging in amount from $1,000 to $80,000 each.

Every choice has a consequence. As a white collar crime and business ethics speaker, it is often that I find people swindling folks they don’t know. Rarely, however, do I find a crime prosecuted when the folks harmed are friends and family. But, you do reap what you sow – so perhaps in this situation it is appropriate to understand that one can be prosecuted for crimes – even when the crime is committed against one’s parents.

Keep in mind, an indictment is only an allegation that a crime has been committed. Burkholder is innocent until proven guilty.

More information to come. Your comments welcome!

White collar crime speaker – Chuck Gallagher – signing off for now!

Mortgage Fraud – Real Estate Flipping Earns Gary Knox 235 Months and Frank Ciota 97 Months in Federal Prison!

It isn’t surprising that with the down turn in the housing market, the formerly free money for real estate deals and the vast number of people promoting wealth through real estate, that now we see what was expected fall out – mortgage fraud.

Frank Kelly Ciota, age 47, was recently sentenced to 97 months in federal prison for his involvement in a real estate “flipping” scheme involving properties in Illinois. Now, if you feel that 97 months is a lot – just look at what his co-defendant got. Gary Knox, age 61, for his role was sentenced to 235 months in federal prison – that’s 19 years and 7 months! For a 61 one year old man…that very well might be a life sentence!

Knox was ordered to pay $1.9 million after his conviction in 1992 on similar charges. No wonder he got the maximum sentence. In fact, Judge McCuskey recited Knox’s criminal history, starting in 1971, when Knox pleaded guilty to exposing himself to a waitress at Elam’s, a former root beer stand in Decatur, when she brought an order to his car. He said Knox underwent treatment and made the system believe he would not reoffend, but committed indecent exposure twice more in 1975 in Bloomington.

From April 1975 to April 1976, Knox embezzled $9,000 from Decatur Memorial Hospital while working as a patient accounts clerk, McCuskey said. At age 30, Knox had found the “beginning of the easy way, the dishonest way, of getting money,” he said.

Knox was convicted of federal mail fraud in a real estate pyramid scheme that began in 1988 in Pekin and bilked people of $1.9 million, for which he received 60 months in prison, McCuskey said. He noted that as a state judge, he had sentenced repeat retail theft offenders to that long a term.
Dennis Wiese, Jr., age 39, also a co-defendant who performed real estate appraisals has not been sentenced yet. After these two sentences, I can’t imagine what is going through his mind.

According to the US Attorney’s office, the three defendants each pled guilty to their respective roles in the scheme which involved more than 150 fraudulent real estate sales and financing transactions of more than $8 million from 1999 to 2005 in Springfield and Decatur, Illinois. Knox represented himself and his business, Central Illinois Management and Development Company, as being in the business of buying, selling and managing real estate; however, he was not a licensed real estate broker or salesperson. Knox and Ciota obtained more than $3 million for their personal use and to promote the ongoing scheme while Wiese received fees of $350 to $450 per appraisal.

$3,000,000 for personal use earned 8 to 19+ years in federal prison. Seems to be that, considering restitution would be required, the cost in loss of freedom was far greater than any short term gain that might have been enjoyed.

According to reports, the three men admitted engaging in a practice known as “flipping,” which involved making false representations, including fraudulently inflated real estate appraisals by Wiese which were used by Knox and Ciota to entice owners to sell, buyers to purchase, and lenders to finance rental properties that were sold at substantially higher prices than their reasonable value.

Every choice has a consequence. As a white collar crime speaker, I know first hand the effect of choice and the consequences that follow. It is clear from the record that Knox didn’t learn from his earlier fraudulent activities – other than perhaps how to do them more effectively and longer. That isn’t the lesson to be learned. There is a universal law that we are governed by – You reap what you sow. In this case Knox has reaped the rest of his life in prison. Sad!

Do your employees make the best choices for your company—or for themselves? Are you ready for some straight talk about success, choices, and ethics from a business executive who lost it all…and gained more than he could ever imagine?
In an unusually vulnerable style, Chuck Gallagher explores the decisions we make through the veil of honesty, integrity, and ethics. Your audience will be touched by his personal stories and poignant lessons.

For information about my presentations, visit my website – www.chuckgallagher.com