White Collar Crime – A Week in Review – 1st Week April, 2008. Comments by Business Ethics Speaker Chuck Gallagher

Spring has sprung and it seems that white collar crime is in full bloom – either in the form of indictments, convictions or sentences. As a business ethics and white collar crime speaker, I say on a regular basis – Every choice has a consequence. The following demonstrate the effect of choices and consequences.

MONTGOMERY, ALABAMA: Seems that John W. Goff decided to use his license and influence to defraud others and then made false statements about his actions. A federal grand jury charged Goff with embezzlement, mail fraud and making false statements. The US Attorneys News Release states: the indictment alleges that from on or about January 1, 2002, through on or about April 30, 2003, Goff, while the sole owner of The Goff Group and the program manager and a fiduciary for XL Speciality Insurance Company (“XL Speciality”) and Greenwich Insurance Company (“Greenwich”), collected worker’s compensation insurance premiums for these insurance companies, but willfully failed to remit to XL Speciality and Greenwich their share of the premiums. Instead, Goff kept the premiums and spent the money for his own personal expenditures, including his exorbitant salary, lavish lifestyle, corporate aircraft, and real estate investments, and the expenses of The Goff Group.

The indictment alleges that Goff unlawfully and illegally withheld approximately $3,000,000 in premiums from XL Speciality and Greenwich. The indictment further provides that Goff unlawfully and illegally withheld approximately $25,000 in commissions he owed to independent agents located throughout the Southeast who Goff had used to sell worker’s compensation insurance policies issued by XL Speciality and Greenwich.

An indictment is merely an accusation of a criminal offense and the charged defendant is
presumed innocent until and unless proven guilty.

SACRAMENTO, CALIFORNIA: I guess there was just not enough profit in death, as former funeral director, Mark Davis, was indicted and arrested for 21 counts of bank fraud. Apparently, Davis formerly with Sacramento Memorial Lawn, stole a series of checks totaling more than $85,000 that had been submitted by customers and deposited them into his bank account at U.S. Bank. Keeping in mind innocence till guilt is proven, Davis plead not guilty.

PHOENIX, ARIZONA: If you’re going to prepare tax returns you need to do them right (at least to the best of your knowledge!) Guess that’s something that Maria Orona missed as a federal grand jury indicted her on charges of Aiding and Assisting in the Presentation of False and Fraudulent Individual Income Tax Returns.

The Indictment also indicates that between March 21, 2006 and April 4, 2006 the Criminal Investigation unit of IRS conducted three separate undercover operations in which IRS agents posed as clients in order to have Orona prepare their Federal Income Tax Returns for the year 2005. The Indictment states that in each undercover contact, Orona prepared tax returns in which she falsely reduced the tax due. These undercover contacts resulted in false returns being prepared that collectively claimed a total of approximately $44,853 in false expenses and a reduced tax liability of approximately $3,406. The undercover agents did not provide Orona with any indication that they had incurred any of the false deductions that were placed upon the completed income tax returns.

While Orona is innocent till proven guilty, I would suspect in this case guilt might not be hard to prove. Wonder if defrauding the government was worth an active prison sentence which could follow a guilty verdict?

MIAMI, FLORDIA: People get older and have health needs – that’s true. But, just because there are needs doesn’t mean you can get by with fraud. Every choice has a consequence and in these cases the consequences are severe. Michael Labrada, 27, of Miami was sentenced to a 97 month prison term and Miguel Castillo, 42, of Miami, to a 57 month prison term for their participation in a multi-million dollar health care fraud and money laundering scheme. OUCH!

Labrada was sentenced in connection with two criminal cases. In the first case, Labrada was convicted of conspiring with Angel Castillo, Jr. to commit health care fraud by serving as a straw owner of a medical equipment company known as JJ & D Medical Equipment, Inc. The company submitted more than $6.8 million dollars in bogus claims and received approximately $1.6 million in payments. In the second case, Labrada was convicted of money laundering charges in connection with a $2.3 million laundering scheme orchestrated by his co-defendant, Angel Castillo, Jr.

Miguel Castillo was also convicted of related health care fraud and money laundering conspiracy charges. In addition to serving as a straw owner of a medical equipment company, Miguel Castillo collected hundreds of thousands of dollars in fraud proceeds from check cashers at the direction of his cousin and co-conspirator, Angel Castillo, Jr.

Last month, Angel Castillo, Jr. was sentenced to a 235 month term in connection with his ownership of more than eight durable medical equipment companies in Miami during 2005 and 2006.

The companies collectively submitted in excess of $48,000,000 in false claims by way of two Miami based medical billing companies. WOW!

WEST PALM BEACH, FLORIDA: Indicted for a host of crimes related to Mortgage Fraud, it seems that Gregory Claude Brown has also been charged with failing to timely file his federal income tax returns for the 2001 through 2005 tax years, and with income tax evasion with regard to his 1998, 1999, and 2001 through 2005 taxes. According to the superseding indictment, Brown failed to pay his 1998, 1999, and 2001 through 2005 income tax liabilities, which totaled approximately $214,299, and engaged in affirmative acts of evasion, including concealing his income and assets, filing false documents with the Internal Revenue Service, and placing funds and property in the names of nominees.

Should Brown be convicted, he faces up to one year in prison on the failure to timely file federal income tax return counts, and up to five years on the tax evasion count. The conspiracy to commit wire fraud, wire fraud, and mail fraud charges each carry a maximum penalty of 20 years imprisonment.

MARIETTA, GEORGIA: There always has to be a first. In Georgia this is it for Governor’s Secure Identity Initiative. Seems that AL AMIN PATNI, 47, of Marietta, Georgia, has been indicted by a federal grand jury on charges of misuse of a social security number, aggravated identity theft, and illegal reentry. According to the indictment, PATNI, a Pakistani national who illegally reentered the United States after a previous deportation, misused the social security number of someone else to open up a checking account.

It seems that it is alway something simple that is the trigger to catch someone doing wrong. Needless to say, opening that account might have been one of the most costly mistakes of Patni’s life.

ST. TAMMANY PARISH, LOUISIANA: I guess Hurricane Katrina just posed too much of an opportunity in a state known for corruption. Joseph Anthony Impastato, for St. Tammany Parish Councilman, (Yes…a public official), age 36 entered a guilty plea to federal bribery through the illegal solicitation and receipt of payments in connection with a Hurricane Katrina debris removal contract, and making false statements in his 2001 federal income tax return.

Impastato was caught on tape related to conversations and meetings in which he gave instructions for how to disburse payments through a convicted co-conspirator to conceal his share. Likewise, he under-reported his income by 34% in 2001. Impastato is facing a two year prison sentence under a plea agreement.

NEW YORK, NEW YORK: DENNIS PILOTTI, a Certified Public Accountant (“CPA”), pleaded guilty today in White Plains federal court to evading his income taxes for the years 2001through 2004 and making false statements to Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) in connection with a $5.1 million loan.

As a result of his tax evasion scheme, PILOTTI understated his taxable income by more than $1,226,284 in total, and understated his tax liability by approximately $365,000 for the years 2001 through 2004. PILOTTI faces five years in prison and substantial fines. He is scheduled to be sentenced on July 8, 2008.

ROCKY MOUNT, NORTH CAROLINA: On April 2, 2008 a 45 count indictment was unsealed charging PAMELA D. EVANS, 33; GWENDOLYN P. EVANS, 49; TASHA BATTLE, 28; and BERTHA BATTLE, 28, all of Rocky Mount, North Carolina, with conspiracy to defraud the United States by obtaining fraudulent claims from the Internal Revenue Service.

According to the US Attorney’s news release – from January, 2004, to April 15, 2004, the defendants, while employees of Independent Tax Service located in Rocky Mount, North Carolina conspired to make, and did make, false claims for refunds from the Internal Revenue Service (“IRS”) by filing or causing others to file false 2003 federal income tax returns. It is alleged that the defendants inflated wages and/or withholdings and listed false dependants and/or false dependant information to qualify clients for the head of household filing status and earned income credit in IRS Forms 1040 and 1040A individual tax returns. It is further alleged the defendants sold fraudulent dependent information to some clients so they would qualify for a larger refund and claimed education credits their clients were not entitled to claim.

“As another year’s tax deadline rapidly approaches, please heed the lesson of this case: knowingly falsifying documents filed with the Internal Revenue Service is a criminal act, and once found, will be prosecuted,” stated United States Attorney George E.B. Holding.

As a side note – Wesley Snipes will be sentenced this month for his conviction for failure to file tax returns.

DAYTON, OHIO: Wow…this deserves a post of its own. Nicole Johnson, age 42, of Trotwood, was sentenced to a total of 100 months imprisonment for stealing millions of dollars from her employer and her employer’s company. Johnson stole millions from J.P. Morgan Bank and its customers between June 2001 and July 2005, using her position as Vice President of Operations to steal customer identity information and secure fraudulent lines of credit in their names, and then diverting the borrowed funds for her own personal use. At least 30 customers were affected by the scheme and more than $1 million was transferred into Johnson’s personal accounts during the four-year period.

Johnson’s sentence reflects the severity of the loss to J.P. Morgan Bank and the complexity of the fraud scheme,” said US Attorney Gregory Lockhart. “White collar criminals must be deterred from committing similar offenses.” Johnson was also ordered to pay restitution of more than $2.8 million to J.P. Morgan Chase Bank, pay $1.067 million in taxes to the IRS, and she must serve three years of supervised release at the conclusion of her prison term.

One reasonable question is, once someone finishing an eight year prison term, how or where would they ever get the funds to make the restitution required? You do reap what you sow.

SALEM, OREGON: Facing up to 10 years in prison, Brent Edward Crosson, 36, of Salem, Oregon admitted stealing $925,000 from the Oregon Department of Education (ODOE) between June 2006 and June 2007. The theft occurred while he was employed as Director of Accounting Services for the ODOE.

Now, as a former CPA and convicted felon, I understand now that every choice has a consequence. However, it makes you wonder what he was thinking about? He had to have known that a theft of almost $1,000,000 would go NOTICED! Then again, while in the midst of the crime you don’t think clearly – I know from experience.

PITTSBURG, PENNSYLVANIA: Mortgage Fraud is rampant these days. Five Pennsylvania individuals have pleaded guilty to mortgage fraud charges. Sharon Chamberlain, age 40, of Pittsburgh, Pennsylvania, and Ericka Stanford, age 35, of Carnegie, Pennsylvania, pleaded guilty to Wire Fraud Conspiracy. Stanford also pleaded guilty to one count of Money Laundering. Likewise, Andrea Revak, age 47, of Pittsburgh, Pennsylvania, Aaron McCarthy, age 43, of Pittsburgh, Pennsylvania, and Marlin Sprouts, Jr., age 52, of Uniontown, Pennsylvania, pleaded guilty to a Wire Fraud Conspiracy.

By pleading guilty they may minimize the overall impact of their sentence. However, the law provides for a total sentence of 20 years in prison, a fine of $250,000, or both for all of the defendants except for Stanford, who faces a maximum possible sentence of 30 years in prison, a fine of $500,000, or both.

SURFSIDE BEACH, SOUTH CAROLINA: Young and foolish, that’s how Meghan Renee Morris, age 23, could be described as she pled guilty to unauthorized use of a credit card. While working at Coastline Reporting in Conway between October 2006 and March 2007, Morris used her employer’s personal information to apply for several credit cards, and charged more than $28,000.00 in personal expenses. She then paid the resulting credit card bills by electronically transferring funds out of the employer’s bank account to the credit card companies. She faces up to 10 years in prison.

MEMPHIS, TENNESSEE: It’s tax time and a Memphis woman just got a prison sentence for her efforts to illegally reduce her taxes. Tanisha Burris, 30, pled guilty to filing false claims against the government. From January 2001 until approximately April 2002, Burris conspired with others to file false, fictitious, and fraudulent claims for payment by causing others to file false 2000 and 2001 federal income tax returns claiming refunds with the Internal Revenue Service. The indictment alleges that Burris prepared the returns that claimed larger refunds than the individuals were entitled to receive. The false returns allegedly contained either inflated or completely bogus W-2 forms, false Education Tax Credits, false Schedule C businesses, false Itemized Deductions, false Child Tax Credit, or false Earned Income Credit to boost the refund amounts.

PLANO, TEXAS: Sherman Ted Solomon, 64, pled guilty to one count of conspiracy to distribute Schedule III and IV controlled substances and one count of conspiracy to launder the illegally obtained proceeds, in relation to his operation of an Internet Facilitation Center (IFC) website.

While the crime was more complicated than we have space for here, according to the US Attorney’s news release during the pendency of the conspiracy and while Solomon was a participant in the conspiracy, the government can readily prove that Solomon could reasonably foresee the possession with intent to distribute or the distribution in excess of two million hydrocodone pills. 2,000,000 – an astonishing amount of drugs distributed which will net Solomon seven years in federal prison.

From October 2004 through September 21, 2005, Solomon’s IFC and affiliates received approximately $13,139,535 from Internet customers for the distribution of controlled substances.

So, at age 64, Solomon who should be facing a pleasant retirement will be spending the latter years of his life in federal prison. Speaking from experience, he will certainly have time to reflect on his activity and will, no doubt, come to the conclusion that the short term gain will not be worth the price.

ALEXANDRIA, VIRGINIA: Sentenced to 16 months in federal prison and $650,000+ in restitution, Khalil Salim Arbid, 35, of Washington, D.C., received his sentence for his role in a mortgage refinancing scheme.

Arbid fraudulently attempted to obtain approximately $1,996,131.02, and successfully obtained $670,132.02, through the refinancing scheme. To carry out the scheme, Arbid took ownership of a residential property located in Vienna, Virginia by deed of gift. When Arbid obtained the property, it was encumbered by a pre-existing mortgage loan. Then, on three occasions, he attempted to obtain additional mortgage loans on the property, using the property as collateral. In applying for the loans, he provided the would-be lenders with false documentation. For example, Arbid provided false loan-payoff statements purporting to be from current mortgagees, and false Certificates and Affidavits of Satisfaction purporting to be from prior mortgagees. On one occasion, he successfully refinanced the property and obtained a loan in the amount of $670,132.02. He then arranged for $376,191.87 of the loan proceeds to be misdirected to himself by causing the title company closing the loan to send a check for the proceeds, which were ostensibly to be used to pay off the pre-existing mortgage on the property, to a false address. In reality, the address was a commercial mail drop located in the District of Columbia. The check was endorsed and deposited into a bank account that Arbid had previously opened.

FINALLY – SEATTLE, WASHINGTON: Now this is priceless. How many times have you flown and due to various reasons you felt you would not make your connections? Weather, a mechanical, a delay in one place causes your flight to be delayed – all have happened to those of us who are road warriors. But this story is a fitting end to a week in review.

Seems that KOU WEI CHIU, 32, of Nashville, Tennessee, was sentenced in Seattle to three years of probation, 500 hours of community service, and $81,249 in restitution for the felony offense of False Information and Threats. On July 25, 2007, CHIU, a physician, (yes a medical doctor) arrived at Sea-Tac airport and was late for his flight home to Memphis, Tennessee. The flight was Northwest Airlines flight 980. CHIU made three calls to 9-1-1 from a payphone near the gate. On each call CHIU falsely reported that there was a bomb on Flight 980. During his first call CHIU told the 9-1-1 operator “Flight 980 Memphis. There may be a bomb on board.” After the first call CHIU saw that the call had “no effect” so he made a second call. When that call too had no effect, CHIU made a third call. At that point, the plane returned to the gate. CHIU admits that he made the calls thinking that the plane would be held in Seattle for a few hours while it was searched, which would allow him to get on the plane.

Hum…guess he had never heard of the three strike and you’re out rule. Northwest Flight 980 was grounded for several hours. CHIU was arrested at the airport after passengers who had been nearby identified him to police as the person who was heard calling in bomb threats from the payphone.

At the sentencing hearing Dr. David L. Dunner, the former Director of the University of Washington Center for Anxiety and Depression, told the court that CHIU had stopped taking an anti-depressant in the days before the incident, and that CHIU entered a manic phase that “impaired his judgement.” CHIU told the court he realized “depression is not the common cold,” and vowed he “will be taking medication for the rest of his life. This will never happen again,” CHIU told the court.

Assistant United States Attorney Mike Lang agreed to recommend a probationary sentence after reviewing CHIU’s mental health history, and his history of service to his community. “Dr. Chiu has a true sense of wrongdoing and a desire to make it right,” Lang said. “This defendant can do a lot more good outside of jail than inside.”

WEEK IN REVIEW:

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. Many have tried to avoid consequences for a time but none avoided the consequences all together. Prison is no fun. Serving time will prove to be a dramatic change from the fraudsters prior activities. You do reap what you sow.

COMMENTS ARE WELCOME!

White Collar Crime Speaker – Chuck Gallagher – signing off…

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2 Responses to White Collar Crime – A Week in Review – 1st Week April, 2008. Comments by Business Ethics Speaker Chuck Gallagher

  1. This reply was left in the wrong area, therefore has been transferred here:

    Mr. Gallagher,

    i would like to take issue with your story on Brent Crosson. I do not
    disagree with the fact he is guilty of the crime he committed. But a
    huge amount of the facts and information have been totally left out to
    make the State of Oregon seem totally innocent. Firstly Susan Castillo is
    currently missing about 6 million dollars from the budget of the
    Oregon Department of Education that she cannot account for and refuses to
    answer questions on this. Also in question was where this money which
    Brent Crosson embezzled came from. Hmm this was inactive money that the
    State of Oregon was holding making huge amounts of interest from. I
    personally know Brent Cosson and he is damn smart! He was very good at his
    job and found in excess of 50 million dollars that the State of Oregon
    is currently holding. This is federal money and was given over a period
    of 30 years from the federal government in grants to the State of
    Oregon. Under federal law Oregon was required to give this money back and it
    is illegal to gain profits through interest from this money. Who is the
    bigger criminal here. The state of Oregon is a criminal enterprise and
    Micheal Frankie died because he tried to expose criminal activity being
    conducted by the Oregon Prison System. Yes Mr Crosson is afraid he
    would dissappear if he pushed too hard! I think before you try and convict
    Mr. Crosson and send him up the river, Examine all these facts that I
    have presented to you okay.

    Daniel Sanders

  2. eCorp says:

    I am a relative of Mrs. Johnson of Dayton, Ohio and honestly I have no sympathy for what she did and the shame she has caused her family. My opinion, the judge should have given her more time!! However, hopefully God will find it in his heart to forgive her for her sins!!

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