Mortgage Fraud – Loan Kickback Scheme Earns Renato Gonzalez Quiazon 3 Years in Prison!

It might have been mortgage fraud that started the crime, but in the end it was the IRS that nailed Renato Gonzales Quiazon, who was sentenced to three years in prison, followed by three years of supervised release for wire fraud and filing false tax returns. This sentence is the result of an investigation by the Internal Revenue Service – Criminal Investigation.

As evidenced by the recent prison sentence for Wesley Snipes for failure to file a tax return – the message is clear. Pay your taxes and don’t mess with the IRS!

Quiazon, age 54, of Hayward, California, acknowledged that he knowingly devised a scheme to fraudulently obtain payments of loan kickbacks, commissions and cash outs/extraneous line items from borrowers’ escrow accounts from which he received more than $500,000. Beginning about January 2000 through October 2004, the defendant was employed as a loan officer with New Century Mortgage, located in Emeryville, CA. During this time, Mr. Quiazon entered into an agreement with an independent mortgage broker to use his name and broker’s license on loans that Mr. Quiazon processed as the loan officer. By using the mortgage broker’s identity on these particular loans, Mr. Quiazon defrauded New Century Mortgage by causing it to issue a 1% commission (1% of the total loan amount) to the mortgage broker who had not earned that commission. As part of the agreement with the mortgage broker, the mortgage broker was to retain 20% of the fraudulent commissions and pay Mr. Quiazon a kickback of 80% of the commissions.

Mr. Quiazon further admitted that from about 2002 through October 2004, he violated his agreement with the mortgage broker by retrieving some of the commission checks directly from title companies, forging the mortgage broker’s signature on the back of these checks, and depositing them into his bank account. He conducted these financial transactions without the mortgage broker’s knowledge or consent.

Not only did he conduct a crime against New Century Mortgage, but he expanded the crime by conducting a crime against his co-conspirator. Note: if someone suggests participation in a crime – run like a scalded dog. If they are willing to deceive others they will deceive you. In fact, more times than not, the reason a crime is uncovered is that a co-conspirator exposes the crime. But back to Quaizon…

During this same time period, Mr. Quiazon added cash outs, ranging from approximately $1,500 to $12,300, and extraneous line items on borrowers’ escrow accounts that were shown as payments to creditors or other third parties on behalf of the borrowers in amounts ranging from approximately $200 to $14,000. Title company checks were disbursed for these amounts from borrowers’ escrow accounts without the borrowers’ knowledge or consent. The defendant forged the borrowers’ signatures and deposited these checks into his bank account.

Mr Quiazon also filed false individual income tax returns for the tax years 2001, 2002, 2003 and 2004. He did not report income relating to the aforementioned scheme to the IRS. The total amount of unreported income was approximately $430,661 for the period under investigation.

STOP: I am not proud of my past, but what gives me license to discuss these crimes in detail is that I have been convicted of them myself. I, too, went to prison for failure to pay taxes on stolen money. As a former CPA and tax partner for a CPA firm, it never occurred to me to pay taxes on stolen money. The thought never crossed my mind. Well, obviously it didn’t cross Quiazon’s either…and that’s what got him in the end. Me too!  However, I have learned that every choice has a consequence and you do reap what you sow…

Your comments are welcome…

For now, white collar crime speaker, Chuck Gallagher, signing off…

FOREX Trading “Guru” – Joel Nathan Ward – Sentenced to Nine Year in Prison for $11 Million Fraud!

Described as a financial serial killer, JOEL NATHAN WARD, 49, of Turlock, California, was sentenced to nine years in prison for masterminding a Ponzi scheme in which nearly 100 investors lost over $11 million. WARD was also ordered to pay restitution in the amount of $11,275,501.53 and to serve three years of supervised release after the completion of his prison sentence. He was remanded into custody immediately following the sentencing hearing.

Ward took in more than $15 million from investors from 2003 to 2006 and most of the money was used to promote his business interests, salary, travel and other expenses, according to the statement.

This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. The Commodity Futures Trading Commission, the federal agency that regulates commodity futures and options markets in the United States, has noted the sharp rise and increasing complexity of foreign currency exchange (“forex”) trading scams. WARD, a frequent
commentator and seminar speaker on forex trading, ran an elaborate forex trading scam through an investment fund he controlled called the Joel Nathan ForexFund.

Now as a white collar crime speaker I must admit, anyone can make wrong choices. It’s ashamed that Ward used his speaking skills to further perpertrate a fraud of this magnitude.

According to material presented at sentencing, WARD offered investors the opportunity to invest in the foreign exchange interbank “spot” market through his fund. Between early 2003 and November 2006, WARD took in over $15 million from investors. Of that, about 85% was diverted to other purposes, including promoting WARD’s business interests, salary, travel and other expenses, and purchasing a foreign exchange trading school in Sacramento called Learn:Forex. WARD also used about $3.7 million to make “Ponzi” payments back to investors who sought to withdraw funds. According to trading records, he only actually traded about $2 million, and lost virtually all of it in the foreign exchange market. WARD concealed his diversion of funds by sending false account statements to investors purporting to show trading profits. He also defrauded investors in a second scheme relating to a purported real estate investment project in Mississippi. Nearly 100 investors lost a total of over $11.3 million.

“Joel Nathan Ward earned every minute of the nine-year sentence the court imposed. He brazenly defrauded scores of victims out of over $11 million,” stated US Attorney Scott. Several victims spoke during the sentencing hearing, telling the judge about the financial devastation caused by WARD’s conduct, and their hopes for restitution. In sentencing WARD today, Judge Burrell stated that WARD “defrauded many people. He caused losses over $11 million, and many investors suffered devastating losses.”

The defendant had proposed that he be allowed to remain out of prison while he attempted to generate funds to repay investors. In rejecting that plan, Judge Burrell stated that the “magnitude of his crimes, the manner in which the economic crimes were committed and concealed, and the duration of the criminal activities” required a lengthy prison sentence.

Every choice has a consequence. Ward’s choices have resulted in a substantial prison sentence. And, having spent time in federal prison (not something I am proud of), the time Ward spends will be life changing. Not only will he become a number, lose his identity, and have little to no ability to earn money, he will emerge with limited opportunity to make restitution.

Today, I speak nationwide on (1) fraud in business, (2) how to avoid fraud in your company and (3) how business ethics can improve your financial performance.

One thing is for sure – You do reap what you sow! Ward has come to learn that as he is now sleeping on a prison bed.

If you know fell for Ward’s ponzi scheme and are willing to share the effect you loses have had on you…feel free to comment.

Larry Gordon May Sentenced in Massive Nursing Home Fraud! Gary Trebert and Steven Michael Ewing Sentenced in July ‘08

It was October 2007 and Larry Gordon May plead guilty to his role in a massive nursing home fraud. Today he received his sentence – 4 years in federal prison.

Larry Gordon May, a resident of Texas, became president and a controller of various nursing home entities and staffing/payroll companies without any previous experience or knowledge of licensed nursing home operations or responsibilities.

Ewing and his coconspirators, using the names of sham corporate entities, obtained control of 70 licensed nursing facilities with thousands of patient beds and thousands of employees. In order to acquire control of these facilities, Trebert, Ewing and May used false statements and false and fraudulent documents, including Applications for Nursing Facility License and Medicaid Contracts, Medicare Federal Provider Enrollment applications, ownership documents, IRS Employer Identification Number applications, Health Insurance Benefit Agreements, and Electronic Fund Transfer forms. Their falsifications included falsely identifying relatives as owners, operators, and managers of the nursing homes on the applications; failing to disclose staffing/payroll companies on nursing home applications; failing to disclose Ewing and May as the true owner/operators of nursing homes; and forging names of individuals on filed documents to divert responsibility away from the three defendants. They used the false statements and documents to hide from HHS, state licensing and Medicaid agencies, and the IRS, the true control and management of the nursing facilities, their responsibility for more than $200 million in money derived from the nursing homes, and their responsibility for the nursing facilities’ residents.

May testified at the Ewing trial that during some of the periods covered by the Indictment, he was making $10,000 to $25,000 per month for doing little more than signing documents, including tax returns, and taking tax returns to England to mail back to the IRS in the U.S. More than 150 sham staffing/payroll entities, many with foreign business addresses at drop boxes in England and Austria, were created to file Form 941 employer withholding tax returns with the IRS, preventing the IRS from assessing and attempting to collect more than $34 million of unpaid payroll tax liabilities from Trebert, Ewing and May, and creating the appearance that these sham staffing/payroll entities employed more than 4500 nursing facility employees, when they did not.

At the sentencing hearing May contended, was he merely a bag man — a pawn in a labyrinthine conspiracy conducted by more sophisticated men who wished to defraud the Internal Revenue Service and U.S. Department of Health and Human Services? But, U.S. District Judge Terry Means said, “You’re either gullible or willfully blind.”

While May received a sentence well below the 70 to 87 month range suggested by the sentencing guidelines, he was acknowledged the least of the players in this massive fraud.

Comments: Every choice has a consequence! You cannot avoid the consequences – you do reap what you sow. Larry Gordon May will report to federal prison on June 2nd for an experience that will be life changing. Some who have followed the series of blogs about May, Trebert and Ewing might infer that a sentence below the sentencing guidelines for May is an indication of what is to come for Ewing and Trebert. Wrong! I predict that both will get sentences substantially longer than May. In fact, Trebert’s has been negotiated to 8 years. Ewing elected a jury trial and was found guilty quickly and, I predict, that he’ll get the longer of the sentences for his lack of cooperation.

In February, Trebert pleaded guilty to two counts out of the 29-count indictment. He is scheduled to be sentenced July 14. In March, a jury found Ewing guilty on all 29 counts. He is scheduled to be sentenced July 21.

White collar crime speaker – Chuck Gallagher – signing off…

Mortgage Fraud – A Week in Review April 17- April 24: Comments by Chuck Gallagher

As each week passes the number of indictments and sentencing hearings seem to increase as the mortgage financial system seems to unravel. Some have claimed that the mess today will become larger and more costly than the Savings and Loan crisis of the ’80’s. Here’s a snapshot of the week.

San Franscisco: Mortgage Ponzi Scheme – Cheryl Hernandez Camus of Concord, California is alleged to have made a number of misrepresentations about a money lending investment, where she promised fixed returns and the return of the principle investment within a fixed period of time. The indictment alleges that Ms. Camus made one or more of the following material false representations and promises in order to induce the investor to give her money:

• The investor’s money would be used to help finance real estate transactions, such as payment of closing costs or down payment;
• The investor’s money would be used to pay medical costs;
• The investor would receive a fixed monthly interest payment on the investment;
• The investor would receive the return of the principle investment amount within a fixed period of time;
• The loans would involve “really no risk.”
• Ms. Camus screened the borrowers to ensure that money was only lent to borrowers who had the ability to repay;
• Ms. Camus had been conducting similar transactions for three years and the returns had been “awesome.”
• Ms. Camus would personally guarantee the investment;
• The investment would be secured by a legitimate deed of trust.

Instead, according to the indictment, Ms. Camus used the money she obtained from investors for personal expenses and to pay back prior investors. Camus, if convicted, faces 20+ years in prison.

South Florida: Sentencing for Mortgage Fraud: Richard Weldon Crowder, II and Gary Mark Mills were sentenced to 108 months and 46 months imprisonment respectively for their roles in a multi-million dollar mortgage scheme. Co-defendant Karen Lynn Sullivan was sentenced yesterday to 50 months’ imprisonment.

Crowder is a former licensed mortgage broker and the former owner of America’s Best Mortgage Services, Inc., located in Coconut Creek, Florida. Mills is a former title attorney and the owner of Four Star Title Inc., located in Deerfield Beach, Florida. Sullivan is a former loan officer for Wachovia Bank.

To effectuate the mortgage scheme, Crowder identified residential properties, including luxury condominiums on South Beach, that were available for purchase. He then recruited buyers for the properties, representing that he could obtain 100% financing for their purchase. After finding a purchaser, Crowder would apply for equity lines of credit on their behalf with Wachovia. To induce Wachovia to issue the equity lines of credit, Crowder and Mills prepared fraudulent HUD-1 settlement forms. The forms falsely stated the buyers already owned the properties and also significantly understated the amount of the first mortgages on the properties. The fraudulent HUD-1 settlement forms were then given to Sullivan, who used the forms to facilitate the issuance of equity lines of credit from Wachovia.

Simultaneously, or shortly after obtaining the equity lines of credit from Wachovia, Crowder applied for the first mortgages on the properties. These applications overstated the buyers’ assets and income, and also included false verification of deposit forms prepared by Sullivan. To further induce the lenders to issue the loans, Mills prepared documents falsely representing that the buyers were using their own money for the down payments and closing costs. In fact, the buyers were using funds from the fraudulently obtained Wachovia equity lines credit or funds provided by Crowder. In total, the defendants caused the fraudulent purchase of seventeen (17) different luxury condominiums at The Continuum on South Beach and at The Point in Adventura using more than $37,000,000 in fraudulently obtained mortgage loans.

Palm Beach Co, Florida: Indictments in Sophisticated Mortgage Fraud Scheme: Berry Louidort, Lauren Jasky, and Ralph Michel, Palm Beach County, Florida were charged in a Criminal Complaint filed in federal court on April 22, 2008. The defendants are charged with bank fraud.

According to the Complaint, defendants Louidort, Michel and Jasky were involved in a sophisticated sub-prime mortgage fraud scheme in South Florida through which they submitted false qualifying information regarding potential borrowers to mortgage lenders. Among the false information the defendants submitted were false verification of earnings and false verification of deposits. As a result of these false submissions, defendants Louidort and Michel received approximately $6 million in loan proceeds.

This investigation began with an audit conducted by the Florida Office of Financial Regulation into 24 sub-prime mortgage loans in the period November 2006 to June 2007. The initial audit showed that the loans included what appeared to be excessively large fees paid to defendants Berry Louidort and Ralph Michel. The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. In reality, the fees were kickbacks to defendants Louidort and Michel based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by defendant Lauren Jasky, Senior Vice President of Compass Mortgage Services, located in Boca Raton, Florida.

Atlanta, GA: 5 Sentenced to Prison for Mortgage Fraud: Virginia Rose Novrit, Hilton Head, SC; Clarence Lorenzo Davis, Hilton Head, SC; Olympia D. Ammons, St. Louis, MO; Jerome Wings, Jr., Atlanta, GA; and Ronald Denzil Martin, Lithonia, GA were sentenced to prison for conspiracy, bank fraud, wire fraud, and money laundering in a multi-million dollar mortgage fraud scheme.

NOVRIT was sentenced to 3 years, 5 months in prison and ordered to pay $839,585 in restitution.

DAVIS was sentenced to 4 years, 3 months in prison and ordered to pay $839,585 in restitution.

WINGS was sentenced to 10 years, 2 months in prison and ordered to pay $8,577,845 in restitution.

AMMONS was sentenced to 5 years, 3 months in prison and ordered to pay $7,549,044 in restitution.

MARTIN was sentenced to 1 year, 1 day in prison and ordered to pay $423,595 in restitution.

From late 2004 through early 2006, NOVRIT, DAVIS, WINGS, AMMONS, and MARTIN participated in a mortgage fraud scheme that involved millions of dollars in fraudulently inflated mortgage loans being provided to unqualified straw borrowers. The straw borrowers were paid as much as $600,000 per property from fraudulently obtained loan proceeds through shell companies. NOVRIT and DAVIS together obtained mortgage loans totaling more than $4 million within a six month period to purchase eight properties. WINGS obtained mortgage loans totaling over $1.2 million to purchase a single property by providing the lender with false qualifying information. WINGS also recruited a number of other unqualified buyers into the scheme and obtained a share of the fraudulently obtained loan proceeds from those transactions for doing so. AMMONS was a loan originator for “Ace Mortgage Funding,” a national mortgage brokerage firm. AMMONS brokered fraudulent mortgages totalling over $7 million. MARTIN was paid $75,000 to act as a straw buyer and submit a fraudulent loan application for one property.

Kansas City, Kansas: Bonds Revoked in Mortgage Fraud Case: Wildor Washington, Jr. and Victoria Bennett were charged in November 2007 in an indictment alleging that Washington, Bennett and four co-defendants took part in a mortgage fraud scheme through businesses Washington owned including Heritage Financial Investments, Legacy Enterprises, B&L Custom Development and Liberty Escrow. According to the indictment, Hamilton and the conspirators prepared fraudulent loan applications and submitted them to lenders in Kansas, Texas, Ohio, Missouri and Michigan.

On Nov. 8, 2007, Washington and Bennett were released on bond subject to conditions including a prohibition against taking part in any illegal activities while on release. Subsequently, investigators obtained evidence that while on release Washington and Bennett were involved in further incidents of bank fraud and conspiracy to commit mail and wire fraud. Hence the two were taken into custody after their bonds were revoked.

Minnesota: Real Estate Owners Plead Guilty to Mortgage Fraud: Jonathan Edward Helgason, 45, Chisago City, and Thomas Joseph Balko, 37, Rogers, along with their company, TJ Waconia LLC, entered their guilty pleas to a scheme involving at least 162 properties, principally in north Minneapolis, and mortgage proceeds of approximately $35 million.

From approximately 2005 to 2007, Helgason and Balko executed a scheme to defraud and to obtain money by means of false and fraudulent pretenses. Using the TJ Group, Helgason and Balko purchased approximately 162 properties throughout the Twin Cities metropolitan area, principally in north Minneapolis. They would then resell the property within a few weeks to an “investor” who would purchase the property, sight unseen, at a price set by Helgason and Balko without negotiation, oftentimes $20,000 to $60,000 more than that the TJ Group had paid.

People were told by Helgason and Balko that the investors were simply “lending” his or her credit to TJ Waconia. In exchange for “lending” their credit, the investor would receive a kickback payment of about $2,500 and a promise of an additional payment after two years when the TJ Group was to repurchase the property from the investor.

Through the scheme, the defendants perpetrated a fraud on the lenders who were led to believe that the “investors” were the actual owners of the properties, when, in fact, the “investors’” ownership was in name only. During the two-year period during which the investor owned the property, the TJ Group was responsible for all payments and maintenance on the property. In some instances, Helgason and Balko also provided investors with funds to pay the buyer’s portion of the property purchase price and worked with others to provide lenders with false loan applications on behalf of the investors so that they would qualify for the loan.

The two men, on behalf of the investors, obtained approximately $35 million in mortgage proceeds to purchase the properties from the TJ Group. Ultimately, the scheme collapsed, and the TJ Group did not repurchase the properties or continue making payments to the investors in order to pay their mortgages. The investors were left owning properties with mortgages that exceeded their property’s market value.

Newark, New Jersey: Ex-Mayor Convicted of Flipping: As reported earlier, Sharpe James was convicted by a Newark, New Jersey, jury on all corruption charges against him in connection with a scheme that enabled his girlfriend, Tamika Riley, to fraudulently obtain steeply discounted city-owned land and resell it for hundreds of thousands of dollars in profits.

Riley was convicted with James on the same five charges: three counts of mail fraud related to the sale of the city lots to Riley, one count of fraud involving a local government receiving federal funds, and one count of conspiracy to defraud the public of James‘ honest services.

The prosecution was built around the sale to Riley of municipally-owned properties in Newark, New Jersey. The properties, according to evidence and testimony, were steered to Riley by James, who had a long-running romantic relationship with her. Riley paid only $46,000 for a total of nine properties, and then quickly resold, or “flipped” the properties for more than $600,000.

Summary and Comments:

Issues related to the mortgage crisis and melt down of the sub-prime market is all over the media. The FBI has reported that resources are being diverted to handle the up serge of complaints and abuse that seems to arise daily. The map below was provided by the FBI to show the dominate areas for mortgage fraud.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. More and more, I find that my newest presentation is in demand: MORTGAGE FRAUD: Fact from Fiction. Prison is no fun and most of those mentioned above are facing several years plus substantial restitution for mortgage fraud conviction(s). It is true, you reap what you sow and in the environment we formerly came from, it seemed that the cards were stacked in favor of mortgage fraud.

IF you feel you’ve been a victim of mortgage fraud – please share your experience so other may benefit.

Mortgage Fraud Speaker – Chuck Gallagher – signing off…

Wesley Snipes to Prison – Big Win for IRS! Comments by White Collar Crime Speaker Chuck Gallagher

This was a day that famed actor Wesley Snipes did not want to see. This day was life changing for him. Wesley Snipes will never truly be the same as time in prison will change your perspective. I know. I have been there. And while I write and speak about white collar crime and the consequences of the choices we make, I share no joy in what Snipes will be facing.

But, as I say often, Every choice has a consequence and Snipes made some mighty strong and profound choices that he will now pay the price for. Of course, there were those in attendance who supported Snipes much like there were those who attended my sentencing hearing who spoke kindly about me. The reality is – within the sentencing guidelines, regardless of family, small children, or others who feel that you are a “mighty oak” – you reap what you sow.

Snipes obviously came to his senses almost a year ago when he made an offer to plead guilty to one count of failure to file, pay all the taxes due in exchange for not going to prison. The government said NO! The Justice Department must have felt that the Snipes case was a high profile enough case to pursue. But then, they lost the prize they sought – a conviction for tax fraud – which would have guaranteed Snipes time behind bars (not literally, he’ll likely go to a minimum security facility with no bars). Licking their wounds, the government came back with a sentencing request of 36 months in federal prison. They got that! IRS = WIN.

According to published reports in the Orlando Sentinel:

Snipes was not taken into custody today. He most likely will serve his time at a federal prison near his home in New Jersey.

Snipes made a $5 million payment to the treasury on Thursday, but prosecutors called it a grandstanding move.

“it”ll be a fraction of what he owes,” said Assistant U.S. Attorney M. Scotland Morris, who made the argument for the government.

Morris said a rough estimate of Snipes’ outstanding tax liability, with penalties and interest, will exceed $20 million.

“The law is very clear: people must pay their taxes,” Internal Revenue Service Commissioner Douglas Shulman said in a statement released by the U.S. Attorney’s office just moments after the sentence was handed down.”There is no secret formula that eliminates a person’s tax obligations, nor are there any special exceptions. The majority of Americans pay their taxes timely and accurately. Those who willfully violate the law must be held accountable.”

The IRS must be overjoyed at the message that has been sent to the tax protester movement nationwide. Snipes prison sentence makes it clear that something as simple as failure to file can result in dire consequences. Now I must admit that the sentence for most working people would likely have been less had it not been for Snipes forthright stance on protesting the federal tax system.

Kahn, who refused to defend himself in court, was sentenced to 10 years, (what an idiot) while Rosile received 54 months. Both will serve three years of supervised release. Snipes will serve one year of supervised release.

I have said in past blogs and will say again, I don’t care whether you think it is legal or not. If you don’t comply with the tax laws, the consequences will be less than pleasant. Having spent time in federal prison and knowing people who were there for exactly the same reason as Snipes - each one emerge changed. One thing they do is file and pay their taxes. The cost to Snipes is far greater than he could have ever imagined when he started this foolishness.

Costs:

• Payment of taxes
• Payment of Interest
• Payment of Penalties
• Payment of Lawyers (to fight a losing battle) and
• Loss of freedom

The loss of freedom alone is enough. Again, I know, I’ve been there and there is nothing – I MEAN NOTHING – worth losing your freedom. When it’s all said and done, it would be interesting to ask Snipes is the short term monetary savings was worth the cost. I think I know the answer.

Your thoughts are welcome!

Wesley Snipes Sentenced – 36 Months in PRISON – for Failure to File Tax Returns!

On February 1st Wesley Snipes was found not guilty of federal tax fraud and conspiracy charges. However, he was convicted on three counts of failing to file tax returns. Seems like it’s no big deal – huh? Not according to the government. They may has missed a criminal tax fraud conviction, but they did want a piece of Wesley Snipes for the attitude he took in the whole scheme

In their sentencing documentation the government stated the following as they requested Snipes be sentenced to three years in prison and fined $5 million:

For nearly a decade, Snipes has engaged in a campaign of criminal tax conduct combining brazen defiance with insidious concealment. By these means, Snipes has escaped paying more than $15 million in income tax to the Internal Revenue Service (IRS), and has pursued an intended fraudulent harm to the United States Treasury of more than $41 million.

Well, today the government got at least a part of what they were asking for. Wesley Snipes has been sentenced to federal prison.

In the sentencing trial today recently added co-counsel Carmen Hernandez revealed that Snipes, 45, star of more than 50 films, including the Blade vampire trilogy, had offered in August 2007 to plead guilty to one misdemeanor count and to pay his tax debt as long as he was promised no prison time. Seems that the federal government felt that Snipes was a high profile target and they (IRS and Federal prosecutors) felt that they could win this case. In part they did. However, failing to gain a felony conviction for Snipes was a major disappointment. Likely, for that reason, the government sought the maximum sentence possible for Snipes.

Snipes has a star studded cast of characters there to support his plea for no prison. The Orlando Sentinel reports:

Denzel Washington called him a “mighty oak.”

Woody Harrelson declared that he was honored to call the Orlando-born actor “my brother.”

In addition to Brown, another TV judge, Greg Mathis, chimed in with his opinion that Snipes should not go to prison.

All the exhibits that were presented at the sentencing trial are shown here courtesy of the white collar crime blog.

Snipes’ co-defendants, who were convicted on the felony fraud and conspiracy charges, will also be sentenced. Eddie Ray Kahn faces up to 10 years behind bars, while Douglas P. Rosile could be jailed five to six years.

In the end, when the gavel fell, Judge Hodges ruled that Snipes must serve 36 months in federal prison for his conviction for failure to file!

For some six months now I’ve been reporting on the Wesley Snipes case and long ago predicted the outcome that Wesley Snipes would go to jail. Snipes was not your ordinary taxpayer who was misguided and misinformed. Snipes somehow became convinced that he and others were not required to file and pay. While the federal government missed a conviction on tax fraud charges…they got a big win today with a maximum prison sentence for Snipes.

Looks like Snipes missed the Get Out Of Jail Free card!

QUESTIONS:

• DO YOU THINK SNIPES SENTENCE IS FAIR?
• DOES THIS SENTENCE SERVE AS A DETERRENT TO FUTURE TAX PROTESTERS

YOUR COMMENTS ARE WELCOME!

IRS Agents and White Collar Crime – What’s Up? Former Revenue Agent George Tannous Charged With Securities Fraud!

Let me help you states a former IRS agent. Problems with the IRS – I’m there for you!

George Tannous was the man, so thought hundreds of people from around the country. Apparently so did the government, as George Tannous, 51, of Tujunga, was charged in a two-count information that accuses him of conspiracy to commit securities fraud and subscribing to a false tax return. In a plea agreement Tannous agreed to plead guilty to the two felony counts

A former revenue agent with the Internal Revenue Service was charged in relation to a securities fraud scheme that took more than $10 million from hundreds of victims across the country. According to the news release from the US Attorney’s office:

Tannous and three co-conspirators solicited victims to purchase unregistered stock in Bidbay.com, Inc. (also known as Auctiondiner.com, Inc.) and several related shell companies. Tannous was the president of Bidbay. The information alleges that victims were lured by false statements that Bidbay.com and/or the shell companies would soon be acquired by Ebay, Inc. for $20 per share. Ebay never had any intention of acquiring Bidbay.com and, in fact, had filed a trademark infringement lawsuit against Bidbay.com over the use of “bay” in its name.

In an article in auction bytes Ina Steiner reported the following:

BidBay decided to settle with eBay after eBay filed a trademark infringement lawsuit against the smaller auction site last summer. The lawsuit had charged BidBay with copying eBay’s look and feel in the design of its logo and for using the letters “bay” in the BidBay name. Ironically, BidBay owner George Tannous had purchased the domain name “BidBay.com” from an eBay auction. Last month, BidBay redesigned its logo, but apparently that was not enough.

“We can’t fight eBay – it would cost us half a million dollars,” George Tannous, BidBay’s CEO, told AuctionBytes. Tannous said his company has already spent thousands of dollars in legal fees relating to the suit.

Tannous failed to disclose that Bidbay.com and the related shell companies paid sales commissions of more than 50 percent to telemarketers who solicited investors, according to court papers. In 2001, Tannous personally received nearly $3 million in investor funds that he failed to disclose to the IRS, which resulted in more than $800,000 in unpaid taxes.

Wow… George Tannous, former IRS agent who clearly knew better, decided to play with fire and not report income. Now he had to know that would get him in trouble. Big trouble.

According to the information, Tannous failed to disclose to investors that one of his co-conspirators was a convicted felon awaiting sentencing on unrelated fraud charges. That co-conspirator, De Elroy Beeler Jr., was indicted last December by a grand jury (see: http://www.usdoj.gov/usao/cac/pressroom/pr2007/157.html), and he is scheduled to go on trial on May 20.

Every choice has a consequence. Tannous choices will result in a prison sentence. Fortunately for him, he elected to work out a plea agreement which usually results in a shorter prison sentence. Having spent time in federal prison (not something I am proud of), many who cooperate with the government find that an early guilty plea and cooperation will substantially reduce their time behind bars. Today, I speak nationwide on (1) fraud in business, (2) how to avoid fraud in your company and (3) how business ethics can improve your financial performance.

One thing is for sure – You do reap what you sow! Tannous and others will come to learn that soon.

If you know George Tannous and have any comments feel free to jump in! Your comments are welcome!

Wesley Snipes Big Day – Sentencing – He Asks For a Slap on the Wrist!

Even as this is being written, Wesley Snipes is likely in court finding out his sentence for his conviction for failure to file income taxes.

The following are excerpts from his defense team:

• For these misdemeanor convictions, Mr. Snipes respectfully requests that this Court impose a sentence of probation that does not include imprisonment. Such a sentence reasonably provides just punishment, protects the public, promotes respect for the law, affords adequate deterrence and promotes rehabilitation.
• He is contrite, promises that he will never again break the law, and respectfully asks the Court
  to consider not just the jury verdict but also all the good that he has done in his life.
• The Court has a mandate in this case to impose a sentence that is “sufficient, but not greater than necessary” and to be just in its punishment, protect the public, deter others, and provide any needed rehabilitation. A prison sentence which I have predicted is what will deter others. Anything less sends a message that Snipes like behavior is acceptable.
• Imprisoning Mr. Snipes, while his children are at such a critical developmental stage where a father’s love, guidance and nurturance are essential to their development will cause the children irreparable harm. The youngest ones will cry themselves to sleep, not understanding why their father is no longer there to love them. The older ones will internalize the pain and feelings of abandonment, often developing medical problems and doing badly in school. Of all people, I am interested in the effect that incarceration has on families. Yet, when sentenced, I had young children and have found that it is not the responsibility of the court to weigh heavily their sentencing decisions on the effects that one’s behavior has on them when you reap the consequences. If Mr. Snipes was such a family man, he should have obeyed the law and not put his children at risk for his absence.
• In early 2007, singer/actor Marc Anthony agreed to pay approximately $2.5 million in back taxes owed to the federal and state governments after failing to file returns on nearly $15.5 million in income over a five-year period. No criminal charges were ever brought against him.
  
• On October 29, 2005, former Washington, D.C. Mayor Marion Barry pleaded guilty to two misdemeanor tax charges for failing to file tax returns from 1999 through 2004. Despite having a criminal history, he was sentenced to three years of supervised probation and ordered to negotiate a plan to settle his tax debt.
• On July 18, 2005, Norman Whitfield, the co-writer of such songs as Papa Was a Rolling Stone and I Heard it Through the Grapevine, was sentenced to six months home confinement and ordered to pay a $25,000 fine after pleading guilty to one count of felony tax evasion. He had been charged with five counts of willful failure to file and multiple counts of tax evasion. The government had alleged that he owed $956 thousand in back taxes.
  
• Perhaps in one of the most celebrated tax deficiency cases, the Tax Court approved a settlement of a tax debt owed by Willie Nelson, the famed singer. The IRS alleged that Mr. Nelson owed approximately $17 million in back taxes involving deficiencies dating back to 1972. Mr. Nelson settled the debt for $6.5 million.
  
• Concluding comments – A sentence of probation with whatever conditions the Court deems just and proper is “sufficient, but not greater than necessary” to impose just punishment on Wesley Snipes.
  
  As a business ethics and white collar crime speaker, I guess I just learned something. Of all of the reports I’ve done about choices and consequences, it really does seem that the rich and famous get off easier for their inappropriate behavior – as evidenced above. Today, will be a test for the government to see if they can make Snipes an example. Otherwise, he will be another statistic in another defense motion for some other person who feels they, too, should not have to file and pay taxes.

More to come!

IRS Revenue Agent – Harry Willner – Sentenced to Prison for Tax Fraud Scheme!

Just seven days before Wesley Snipes finds out his sentence for failure to file his tax returns, it seems that the government is busy sentencing others, including one of their own. Now, seldom do you find an IRS agent facing the Justice Department, but in this case his actions not only cost him his job, but also his freedom.

HARRY WILLNER – a former Internal Revenue Service (“IRS”) Revenue Agent – was sentenced to a year in jail for carrying out a scheme to obstruct the IRS by fraudulently attempting to sell to other taxpayers, and fraudulently using on his own personal income tax returns, tax losses belonging to a separate company he controlled. You’ve got to know that WILLNER clearly knew better. Surely, he didn’t think that he would get by with such actions?

WILLNER was employed by the IRS as a Revenue Agent assigned to the Large and Mid-Size Business (“LMSB”) Unit of the IRS in the Southern District of New York. WILLNER was also an officer of a corporation known as NIA Advertising, Inc. (“NIA”), which was purportedly in the advertising business. According to certain NIA records, NIA’s address was the same as WILLNER’s home address in New Jersey. WILLNER did not request approval from the IRS to serve as an officer of NIA, as was required by IRS regulations.

This would be a code of business conduct issue. As a point of clarification, I serve as a Senior Sales Executive for a public company. Likewise, I am a speaker – speaking on white collar crime and business ethics nationwide. That is fully disclosed to the company that I work for. I feel that if you have an interest outside of your full time work assignment, it should be fully disclosed.

WILLNER attempted in two principal ways to make fraudulent use of the NOLs purportedly generated by NIA in 2002. First, between 2003 and 2004, WILLNER attempted to, in effect, sell NIA’s NOLs to other taxpayers, which would enable those other taxpayers to use the NOLs to offset the income on their own tax returns and
thereby to fraudulently reduce their tax liabilities. WILLNER proposed to accomplish this fraud by having other taxpayers, who were owed income, direct the fee payment to NIA, which would report it as income. NIA would not pay tax on the payment because the income would be offset by the NOL. WILLNER would then remit the money, less a fee for himself, to the other taxpayer disguised as a loan repayment.

The second aspect of the scheme occurred between March 2002 and March 2006, when WILLNER used NIA’s NOLs to offset his own individual income tax liability by having fee income, earned by WILLNER in his individual capacity as an instructor at two Manhattan-based schools, paid or assigned to NIA. WILLNER
directed the two schools at which he earned off-duty teaching income to issue Form 1099s to NIA. WILLNER thereafter fraudulently reported the fee income on NIA’s corporate income tax returns as receipts of NIA. Because NIA carried the sizeable NOL deduction from 2002 through 2005, the taxability of the
teaching income was offset. As a consequence of this latter scheme, WILLNER evaded a total of approximately $20,957 in United States income taxes.

“I screwed up,” he said. “You can’t imagine how sorry I am. I caused pain and suffering for my family, myself and the organization I worked with for 35 years.”

Well now, Every choice has a consequence. It would appear that WILLNER might have thought he was the smartest guy in the room. But you reap what you sow. I know. I spent time in federal prison for bad choices which included tax fraud. It is not worth it. In WILLNER’S case he has been sentenced to one year in prison, one year of supervised release, a $10,000 fine and is required to pay any taxes, interest and penalties to the IRS.

I suspect as this is written on April 23, 2008 – Wesley Snipes will find himself facing a prison sentence tomorrow. One thing’s for sure, we’ll know in 24 hours.

White Collar Crime Speaker – Chuck Gallagher – signing off…

Dennis Gerwing – Embezzlement – Suicide – The Dark Side of White Collar Crime

I remember the day – a fateful day – when it all began to unravel. As soon as the first words were spoken in that phone conversation, I knew that my life was about to change and change for good. For me, all this took place in November of 1990. As I talked to one of my partners on a break from business out of town, I was innocently confronted by a fact that I had kept hidden – the fact that I had embezzled money.

My partner was unaware that there was anything wrong. He was just trying to help me by meeting a clients needs. But by doing so, I knew that my shadow side was soon to be exposed. I was a thief – a white collar criminal – and the time had now come for me to face the consequences of my actions.

Why state that here and what does it have to do with Dennis Gerwing? Well, like Gerwing, I had embezzled money (not the magnitude that he embezzled, but then money is money no matter the amount). The other more significant connection – I, too, considered suicide!

But, let’s look at Dennis Gerwing. Who he was and what happened – as best as it has been reported.

The Island Packet reported in mid March the following:

Dennis Gerwing’s business career on Hilton Head Island goes back to the 1980s. In August 1985, he was named head of the finance and administration division of Ginn Holdings Corp., then the island’s largest resort and development company. Ginn Holdings, led by developer Bobby Ginn, was the company resulting from a leveraged buyout that combined the old Sea Pines Co. and the Hilton Head Co. Gerwing had been vice president and controller for the Sea Pines Co.

The newly formed company controlled developer operations in the Sea Pines, Shipyard, Wexford, Port Royal and Indigo Run communities. But Ginn Holdings unraveled quickly. The company was sold in March 1986, a year after the Ginn purchase, and its name changed to Hilton Head Holdings Corp. Nine months later, it was in bankruptcy. The Hilton Head Holdings bankruptcy was a $100 million affair, with about 2,000 unsecured creditors — many of them local businesses — that were owed about $10 million. The rest of the debt was held in mortgages on prime property in Hilton Head.

After the demise of Ginn Holdings, a company called The Club Group was formed by Mark King, who had been director of sports for Ginn Holdings. The Club Group was a golf and amenity management company. Gerwing joined King at The Club Group by at least 1987, according to Island Packet stories. King is currently president of The Club Group and Gerwing was its chief financial officer.

The story begins an odd twist when John and Elizabeth Calvert, who split their time between their home in Atlanta, GA and a yacht on Hilton Head Island. The couple was last seen in March and effort to find them have been fruitless. Gerwing was the last person to have seen the Calverts. After being questioned by the authorities related to the disappearance of John and Elizabeth Calvert, Gerwing committed suicide on March 11th.

Now, the rest of the story as it is known thus far. Dennis Gerwing, the former chief financial officer of The Club Group, a property management company, handled bookkeeping for John and Elizabeth Calverts’ four island businesses through December, when the couple sought to move those duties in-house. He funneled money from clients into a secret checking account using hand-written checks, bank teller transactions and wire transfers, the audit found. Gerwing, according to a Club Group audit, embezzled a total of $2.1 million from the pair and seven other clients over the past four years, according to the results of a financial audit announced Tuesday.

The Island Packet reported, “In the wake of Gerwing’s apparent suicide, Club Group president Mark King hired Baltimore-based FTI Consulting to examine the company’s books. King, in a statement released after Gerwing died, said he had discovered possible financial irregularities and brought in the crisis management forensic accounting firm.”

CNN reports: Mark King, president of The Club Group, said he met last week with the clients who lost money and promised to repay them using money from his own assets as well as Gerwing’s estate and insurance settlements.

“I am still in shock over the betrayal of trust and the death of my partner of 21 years. I have no idea what might have prompted Dennis to engage in this behavior, but as chief executive, I want to apologize on behalf of our company to all who were adversely affected,” King said in a statement.

Comments: First, I can sympathize with what Mark King is going through. Betrayed trust is hard to deal with and understand. King is finding himself in a situation that I doubt he ever expected to be in – right in the middle of an investigation that likely involves murder. King’s life has been turned upside down and it will not resolve anytime soon.

Again CNN reported, The FBI will review the audit as part of its own investigation into the finances of Gerwing, the Calverts and The Club Group, Beaufort County Sheriff P.J. Tanner told The (Hilton Head) Island Packet.

“I can’t support anything they put in there,” he said of the private audit. “It could be self-serving on their part or it could be what we find in the end. We’re too far from this investigation being over to make that determination.”

Investigators continue to pore over thousands of e-mails and check computers and cell phones in their search for the couple, Tanner said.

So, King finds himself embroiled in a murder investigation, dealing with the death of his partner and now finding that he (Gerwing) had embezzled a substantial sum of money. King is now, in fact, under suspicion considering when funds are missing, any and all associated with the accountability of the funds are considered suspects – of sorts.

As I look back, now some 18 years, I have empathy for my former partners and what they had to deal with in the wake of my misdealings. They knew nothing and had nothing to do with my crime, yet, in many ways that, too, paid the price for the choices I made.

Suicide. Yes, sad to say, I gave that serious consideration. It was an easy escape from the consequences that I knew were before me. But, thankful to God, someone – a stranger – made a statement that I will never forget – a statement that changed my thought process and my life.

He said, “You have made a terrible mistake! YOU, however, are not a mistake. The choices you make tonight will define the legacy you will leave for your children.”

Every choice has a consequence. I know that to be true as I had to experience the consequences of my actions – which took me to federal prison. Today, some 18 years later, my youngest son is graduating from High School and preparing to enter college. What I was told so many years ago was accurate. Today as I speak around the country on business ethics and fraud avoidance, I know so well the fact that you reap what you sow. Likewise, the consequences one faces from choices made, serve only to make the person stronger.

My heart goes out to the family of Dennis Gerwing. He made a terrible mistake! Apparently, he was unprepared to face the consequences. How sad!

Comments are welcome!