Mortgage Fraud Speaker Chuck Gallagher Comments: Mortgage Fraud in California - Iftikhar Ahmad Pleads Guilty!

Like many of my readers, I lived through the Savings and Loan crisis several decades ago and it wasn’t pretty. My fear - with the magnitude of potential mortgage fraud rising to the surface, what we might see in the future could dwarf the problems that were created by the S&L crisis.

And another man pleads guilty! IFTIKHAR AHMAD, 36, of Stockton, Calif., pleaded guilty to two counts of mail fraud and one count of engaging in monetary transactions involving criminally derived property. The charges relate to a widespread mortgage fraud scheme centered in the Stockton, California area.

After an extensive investigation conducted by the Federal Bureau of Investigation and the Internal Revenue Service–Criminal Investigation (IRS-CI), Ahmad saw the light and knew that a guilty plea would be best for him considering the circumstances. investigation remains ongoing.

But how did this massive fraud get uncovered?

Rebecca Wood knew something was wrong when she got a call from Washington Mutual about a late house payment. Her response helped the FBI uncover millions of dollars in mortgage fraud.

According to property records, someone using Wood’s identity bought two houses in Stockton in 2003. When the loan for one of the homes went bad, Washington Mutual called Wood.

According to the US Attorney’s office, AHMAD admitted that from July 2003 through October 2005, he participated in a scheme to defraud Long Beach Mortgage, a wholesale lender, in connection with the sale (and in one instance resale) of 10 residential real properties primarily located in the Stockton, area. Between July 2003 and January 2005, AHMAD, through a company called I & R Investment Properties, LLC, fraudulently sold (and in one instance resold) 10 residential real properties, obtaining in excess of $1.5 million in loan proceeds. In each of the transactions, the purchaser financed the property with money borrowed from Long Beach Mortgage.

The scheme involved the use of some straw purchasers— purchasers who lent the name and credit to real estate transactions in which they in fact had no interest. The scheme also involved false statements on loan documents, including those that related to income and occupation, and undisclosed payments by AHMAD of the down payment on behalf of the purchasers.

The use of false documents is common among mortgage fraud convictions. However, based on my experience speaking about mortgage fraud to realty associations and mortgage groups, it is clear that many people somehow feel that simple “financial positioning” is acceptable. More times than not, on close examination - “financial positioning” can be construed as fraud.

In this case, AHMAD is the fourth defendant to plead guilty as a result of the investigation in the case. On December 17, 2007, JOHN NGO, 27, of San Ramon, California, a former Senior Loan Coordinator for Long Beach Mortgage, pleaded guilty to perjury for falsely stating in testimony before the grand jury that he had not received money from a mortgage broker who referred borrowers to Long Beach Mortgage, including borrowers involved in transactions with AHMAD, when in fact he had received more than $100,000 from the mortgage broker.

On March 31, 2008, MANPREET SINGH, 24, of Stockton, entered a guilty plea to a single count of mail fraud. She admitted as part of her plea that she had participated as a straw purchaser and borrower in connection with two properties that she purchased from I & R Investments in late 2004 and early 2005. She further admitted that AHMAD paid her in excess of $22,300 for her participation in the scheme. Clearly here a case of fraud for money!

On April 17, 2008, JOSE SERRANO, 44, of Stockton pleaded guilty to a single count of mail fraud. As part of his plea, SERRANO admitted that AHMAD had paid SERRANO to recruit straw purchasers, and that AHMAD and SERRANO caused several purchasers to be paid for participating in the scheme.

“This prosecution begins to bring into focus the ways that fraud occurred in the subprime lending market in the Stockton area in the 2003 to 2005 time frame,” said United States Attorney Scott. “False representations were made in loan documents; down payments were secretly made “This prosecution begins to bring into focus the ways that fraud occurred in the subprime lending market in the Stockton area in the 2003 to 2005 time frame,” said United States Attorney Scott.

“False representations were made in loan documents; down payments were secretly made by the seller on behalf of borrowers; buyers and recruiters were paid to participate in the scheme; and a loan coordinator working for a wholesale subprime lender was paid by a mortgage broker handling the transactions. The investigation continues.”

Every choice has a consequence! Considering the wide spread incidences of mortgage fraud, I suspect that this case is just the tip of the iceberg when it comes to what has been done and how many are yet to be discovered. As a mortgage fraud speaker, I am finding more and more that people are just now beginning to understand how wide spread mortgage fraud is and how easy it can be to be caught up in a mortgage fraud investigation.

White Collar Crime - So You Think You Invested Your Money? Mark Wayne Jaster Sentenced to Prison for Massive Fraud Scheme!

Some people have innate gifts. In the case of MARK WAYNE JASTER it must have been the power of persuasion, as this Texarkana, Texas man was successful at persuading investors to give him over $1.1 million dollars to invest.

PROBLEM: He invested none of it. Not one red cent! His skill to persuade was used in a misguided way and now he’s set to reap the rewards of his choices. Every choice has a consequence. In the case of MARK WAYNE JASTER, United States Attorney John L. Ratcliffe announced that 48-year-old Texarkana, Texas man, JASTER, has been sentenced to 78 months in federal prison for wire fraud.

MARK WAYNE JASTER was indicted on April 3, 2007 and charged with defrauding investors through a wire fraud scheme. He pleaded guilty to that charge on August 29, 2007 and was sentenced today to 78 months in federal prison by United States District Judge David Folsom. Jaster was also ordered to pay restitution in the amount of $1,134,623.30.

According to information presented in court, between 2002 and 2005, Jaster represented to investors that he was involved in the business of personal investment services. Jaster told those investors that he actively managed money through his InvestWise account at A.G. Edwards and Sons, Inc. in Texarkana, Texas. He claimed that through investing in various investments such as real estate, stocks, mutual funds, and pension funds, he achieved significant returns for his investors.

NOTE: There are many great investments out there, but, when someone tells you that they get great returns for their clients - “here, invest you money with me! Well, beware - there’s a fair chance it’s a scam. Use your common sense and check the investor out. It’s too easy these days to do that with the internet.

Jaster had some investors deposit money directly into his Mark Jaster DBA InvestWise account at Hibernia Bank. However, instead of using the money for investments, he would use it for his own personal expenses. Jaster had other investors open accounts at A.G. Edwards for the purpose of depositing funds for investments. After gaining signatory authority over these accounts, Jaster would then transfer the funds to his InvestWise account at A.G. Edwards to be used for his personal expenses.

During this time, Jaster would speak with the investors, advising them that their investments had grown significantly, and would send e-mails to the investors with false representations as to the status of their investments and legitimacy of the investments. None of the money Jaster received from investors was ever invested.

NOTE: If you’ve invested your money with an investment representative you should be able to get your account status on-line or at a minimum verify the investment status with someone other than the person who took your money to invest.

COMMENT: As a former white collar criminal (not something I am proud of) I did essentially the same thing as JESTER. I took clients money - used it for personal purposes (lifestyle) and ended up in exactly the same spot. Had either the clients done their “due diligence” by checking me and the investment I was representing out, or had they checked with someone other than me about the status of their investment, they would have found out the truth. In fact, the fraud was uncovered when ONE client sought information about his investment from someone other than me.

Every choice has a consequence. I am living proof that you do reap what you sow. And while JESTER is headed for prison, there is hope that he might learn from this experience. Today, as a speaker, I address college kids in business schools for free - it’s my way of warning them about the law of choices and consequences. This service was recently reported on in Business Week. See the article here.

For information on my presentations to colleges and universities or business associations, contact me at www.chuckgallagher.com.

Credit Card Fraud Earns Julia N. Bell Prison and Substantial Restitution! Comments by Fraud Speaker Chuck Gallagher

Wow…every choice has a consequence.  Every presentation I make that statement is made.  And, sure enough it is true!

Take, for example, Julia N. Bell.  Seems that she went shopping, took vacations, and ate in restaurants.  She did what normal people do every day.  The only difference is that she did all of these things using the credit card of the company she worked for. 

Now, most would think that when the bill came it, such a simple fraud would be caught.  But alas…no.  Seems that Bell was the office manager.  So, not only did she use the card for her personal gain, but she paid the card from the company’s funds that she controlled.

Guess she thought as long as she controlled it…no one would notice.

Now in order for most white collar crimes to exist there has to be three things: (1) need; (2) opportunity and (3) rationalization.  While I can’t speak to #1 or #3 - the clear lack of internal controls allowed for #2 to work in Bell’s favor.  As a white collar crime and fraud speaker, more times than not it is #2 that has the greatest potential to either allow or prevent white collar crime.

In Bell’s case, she was sentenced in federal court for wire fraud.    United States District Judge Cameron McGowan Currie sentenced Bell to 21 months in prison and ordered her to pay more than $140,000.00 in restitution.

If you know Julia N. Bell, feel free to comment.  My guess is that she is a nice lady who got caught up in her own illusion.  Now she will find that nothing she bought will be worth the time she will spend in prison.

White Collar Crime Speaker - Chuck Gallagher - signing off…

Celebrity Medical Information for Sale - Could Bring Lawanda Jackson 10 Years in Prison

What do Britney Spears, Farrah Fawcett and Maria Shriver have in common? Any or all could have had their medical information leaked to the media.

A Los Angeles woman has been indicted for accessing the private medical records of celebrity patients at the UCLA Medical Center and selling information obtained from those files to a national media outlet.

Lawanda Jackson, 49, was indicted under seal on April 9. That indictment, which alleges one count of illegally obtaining individually identifiable health information for commercial advantage, was unsealed this morning.

Jackson, an administrative specialist at the UCLA Medical Center from 2006 until she was terminated on May 21, 2007, allegedly received at least $4,600 from the media outlet in exchange for providing the private medical information. The media outlet paid Jackson by writing checks to her husband, the indictment alleges.

Jackson, who faces a potential sentence of 10 years in prison if she is convicted of the charge, is expected to be arraigned on the felony count on June 9 in United States District Court in Los Angeles.

According to celebnews: “The hospital has a PIN number system that shows who is looking at medical records, but doesn’t have a system in place to stop people from looking at the records. While it would be great to be able to trust all of the hospital’s employees, someone like Lawanda Jackson might just sell the information if they need the money badly enough. The LA Times reports she was $37,300 in debt in 2001, when she filed for bankruptcy.”

“We are deeply troubled that a former employee may have illegally received payments from a news organization in exchange for providing personal medical information,” Dr. David T. Feinberg, the UCLA hospital system’s chief executive, said in a recent statement.

“Meanwhile, we continue to take steps to improve our staff training and information systems to further strengthen the confidentiality of patient records.”

According to cbc.ca: Jackson quit her job as an administrative specialist at UCLA last May 21 after learning she was to be fired.

UCLA also fired several other employees for peeking at psychiatric information about Britney Spears, 10 months after Jackson left the hospital.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt. Now, that said, as a business ethics speaker and writer about white collar crime, I would predict that Jackson will get prison time if convicted.

Every choice has a consequence. Every group I address as a speaker will be presented that simple comment. The facts are, your choices will either bring you negative consequences or positive results. It seems that Jackson’s choices were at best unethical and at worst will bring her a conviction and prison.

WHAT COMMENTS DO YOU HAVE ABOUT THIS INTRUSION INTO CELEB’S PRIVACY?

For now…Business Ethics 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…

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!

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!

Refco Fraud - Former President Tone N. Grant - GUILTY! White Collar Criminals Tone N. Grant and Phillip Bennett face Prison!

In an article written by Matthew Goldstein in TheStreet.com he states:

In three short days, Phillip Bennett, the ousted CEO of embattled brokerage Refco(RFX - Cramer’s Take - Stockpickr), has gone from Master of the Universe to criminal defendant in a fraud that has stunned Wall Street and ravaged the company’s stock.

With lightning speed, federal prosecutors arrested Bennett and charged him Wednesday with orchestrating a brazen scheme to paper over hundreds of millions of dollars in sour debts at the New York company, which sold a $583 million initial offering to the public just two months ago.

Refco was a New York-based financial services company, primarily known as a broker of commodities and futures contracts. It was founded in 1969 as “Ray E. Friedman and Co.” Prior to its collapse in October, 2005, the firm had over $4 billion in approximately 200,000 customer accounts, and it was the largest broker on the Chicago Mercantile Exchange. The firm’s balance sheet at the time of the collapse showed about $75 billion in assets and a roughly equal amount in liabilities. Though these filings have since been disowned by the company, they are probably roughly accurate in showing the firm’s level of leverage.

Refco became a public company on August 11, 2005 with the sale of 26.5 million shares to the public at $22. It closed the day over 25% higher than that, valuing the entire company at about $3.5 billion. Investors had been attracted to Refco’s history of profit growth — it had reported 33% average annual gains in earnings over the four years prior to its initial public offering.

Well, those comments were made some three years ago in 2005. On April 17, 2008 Tone N. Grant, one of the former owners of Refco, Inc., was convicted on charges relating to a massive, $2.4 billion scheme to defraud investors. Instead of pleading guilty he rolled the dice and lost.

From as early as the mid-1990s, Refco, which was then privately held and owned in part by GRANT and PHILLIP R. BENNETT, sustained hundreds of millions of dollars of losses through its own and its customers’ trading. In order to hide the existence of those losses, GRANT and BENNETT transferred many of them to appear as a debt owed to Refco by Refco Group Holdings, Inc. (RGHI), the holding company that controlled Refco and was in turn controlled in part by Bennett and GRANT.

Former CEO Phillip Bennett, of Gladstone, N.J., and former chief financial officer, Robert Trosten, of Sarasota, Fla., both pleaded guilty in February and await sentencing. Grant’s sentencing is scheduled for August 8, 2008.

Comments:

Bennett took the most logical route - he accepted responsibility and accountability for his actions. His comments are as follows:

“I knew failing to disclose these filings was wrong,” Bennett told the New York court as he cried. “I know I was wrong. I deeply regret it.”

He added: “I take full responsibility for my actions and would like to apologise to my family and all those who were harmed by my conduct.”

Now do not mistake responsibility and accountability for no consequences. As a business ethics and white collar crime speaker, I know (from personal experience) and say often: Every choice has a consequence. We cannot avoid the consequences. However, if you wish to minimize the consequences then taking responsibility for one’s actions is a great first step.

Bennett will be sentenced to federal prison and, my guess is, for a substantial period of time. But, he did make it easy for the government to get their conviction and for that ease, they will likely bargain somewhat on the prison sentence.

On the other hand, Grant took the more difficult path and went for a jury trial. Now, from time to time, I wonder what goes through someone’s head when they do that. First, if the government goes after you they intend to win and, looking at the track record, they usually do. It’s like playing the tables in Vegas with your life when you go to trial. The cards are stacked against you.

Grant played his hand and, as one could have predicted, lost! His sentence? Well, that’s to come, but I bet that it has the potential for being greater than Bennett’s - although since Bennett was former chairman and CEO - who knows.

Next step…lets see what happens at sentencing. The sentence these two receive will send a message to white collar criminals in two ways: (1) just how tough is the court on fraud of this nature, and (2) is there any actual value in pleading vs. going to trial? Time will tell…

White collar crime speaker - Chuck Gallagher - signing off…

Mortgage Fraud - FBI Expects Dramatic Rise of Unprecendented Scope! Mortgage Fraud Speaker Chuck Gallagher Comments!

Quoted as being far worse in scope than the Savings and Loan crisis of the 1980’s, the FBI is dealing with a flood of mortgage fraud cases of unprecedented scope.

The picture below is from the FBI’s web site - which show an actual property used in a Mortgage Fraud Scheme. No wonder the problem is what it is today…

An Associated Press report stated the following:

FBI Director Robert Mueller says there has been a “tremendous surge” in mortgage fraud investigations, and he expects it to keep growing.

At a Senate hearing Wednesday, Mueller estimated that the FBI has 1,300 investigations underway, 19 of them involving sub-prime lending practices by U.S. financial institutions.

That’s up from three months ago, when FBI officials said they were investigating 14 companies for possible fraud or insider trading violations.

Mueller says the number of inquiries has increased to a level that required shifting agents from other projects onto mortgage fraud.

The New York Times reported that losses from fraud are surging. “It’s looking like a record-breaking year already,” said Stephen Kodak, a spokesman for the FBI. Kodak said that in first half of the 2008 fiscal year, which ended last month, the FBI received nearly 30,000 “suspicious activity reports.” The 2007 fiscal year ended with 46,000 reports and 260 convictions.

The biggest surge in federal law enforcement activity has focused on “fraud for profit” schemes, in which mortgage insiders - appraisers, real estate agents, loan officers, and lawyers - often work in teams. They falsely inflate a home’s value, get a huge mortgage to buy it (usually using false identities), split the profits, and then disappear.

In an article for GC California Magazine, author David Bayless stated, “To put this situation into historical perspective, the savings-and-loan crisis of the late 1980s and early 1990s ultimately cost an estimated $160 billion and affected more than 1,600 U.S. banks insured by the Federal Deposit Insurance Corp. It was one of the worst financial scandals in history. But the S&L crisis, while costly, was limited to only a section of U.S. financial institutions. In contrast, the breadth and the depth of the subprime mortgage crisis will likely far exceed that of the S&L crisis. Standard & Poor’s has estimated that losses from securities linked to subprime mortgages will exceed $265 billion as financial institutions worldwide write down the value of their holdings. And the breadth and depth of regulatory investigations and private litigation, as discussed in this column, is unprecedented.”

Bayless stated further, “The current wave of government investigations and litigation surrounding the subprime crisis will not be short-lived. Companies should brace themselves and prepare for a prolonged wave of attacks and actively seek legal advice. More lawsuits can be expected, particularly against deep-pocket underwriters and financial institutions (and their officers and directors) involved in the securitization of subprime loans. More regulatory and criminal investigations are guaranteed. Many laws firms have set up subprime task forces or have coordinated their internal expertise in various practice areas to address issues affecting clients caught up in the crisis.”

Along with these reports, CNN reports today (April 22, 2008 full report here) that among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor’s recently placed an estimated price tag on this worst case scenario — $420 billion to $1.1 trillion of taxpayer’s money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980’s and early 1990’s. That cost taxpayers about $250 billion in today’s dollars.

As a speaker on business ethics and mortgage fraud, I hate to say, but this is just the tip of the iceberg of what is moving our way. Sadly, few voices were heard when it came to the ethics ramifications of making loans to people who obviously could not afford to pay for their purchase. Years before, no one would have considered making such a loan. Yet, as the market flourished the tide of easy money and greed took hold. Today, we are beginning to see the first phase of the dramatic cost of the choices made.

In every presentation I state boldly: Every choice has a consequence! The unfortunate cost here will affect many people in ways they never considered. It is easy to talk about the obvious, but the less obvious secondary costs will be staggering.

Here are some of todays headlines and links to the stories. If this won’t get your attention, I don’t know what will. And this is just the beginning.

Bank of America profit plunges 77%

National City to raise $7 Billion

Bad Quarter? Time to Swing the Job Ax?

With headlines like these - we can only assume that from every indicator possible, we might be in for a long ride. Perhaps, the reason I see inquiries for ethics presentations increase is due to the realization that we need something to get us back on the right track.

Business Ethics and Mortgage Fraud speaker - Chuck Gallagher - signing off…