J. V. Huffman, Jr. Sentenced to 30 years – but I Want My Money!

January 31, 2010

Recently sentenced to more than 30 years in prison, J.V. Huffman Jr., 46, was a Conover, North Carolina, man who defrauded hundreds of people out of their hard-earned money for nearly 20 years.

THE SENTENCING HEARING:

Huffman addressed the judge saying, “I can tell you it was never an intent to rip off the world.”  Huffman said his own financial problems prompted the Ponzi scheme that stole from friends, neighbors and fellow church members.  “I certainly want to say that I’m sorry,” Huffman said.

The judge said he isn’t frequently at a loss for words, but in this case he was.

“These are good, honest, hard-working people who worked their entire lives,” Bell said to Huffman. “You had every opportunity. You didn’t have to work in a mill for 40 years, and there aren’t one, two or 10 (victims), there are hundreds.”

Bell said it is also not just one generation that’s affected, but up to three that could feel the effects of what Huffman’s done. After sentencing Huffman to 30 years, Bell gave him some advice for his time in prison.

“I hope that every day of those 30 years, you think of those people who had their money taken from them,” Bell said.

NOW WHAT?

Victims of Ponzi schemes generally don’t want to hear what’s coming next, but here goes.  Look back and ask yourself, what did you do to find yourself in this mess?  For a Ponzi schemer to defraud you – you had to fall into what I call the PIT.  First, “P” – you fell for the promise.  Likely, think back about it and be honest, you were PROMISED something that seemed really good – perhaps too good to be true.  You were promised a better return than anyone you knew was getting for their investments.

From 8+% to 16% – Huffman followed a tried and true method to defraud – he made a great promise.  He followed human nature – making you think that you were somehow special and that he could get you a better return than most of your friends were getting.  He hooked you right then and there.  And, if there is a lesson from this tragedy it would be DON’T FALL FOR THAT!

Now fairly, once Huffman had you hooked he solidified his position with you by creating the “I” – ILLUSION through fake statements making you feel that what you had was somehow real…and he showed you evidence of his success.  After all, in order for you to feel successful – he must be successful.  Now, I know that many of Huffman’s victims might say, “I never met the man.”  True, but you likely knew someone who did and he created the perfect reputation so that he could continue his scheme.

Lastly, he used “T” – TRUST as his foundation for attracting more victims.  Huffman did exactly the same thing that Bernie Madoff did – just on a smaller scale.  And who did he go after – friends, church members, folks who knew and trusted him.  And not knowing the victims, my guess is – many of you suggested Huffman to your friends – after all, you were getting such great returns.  Victims creating or paving the way for more victims.  And, many of you would now say that this has created painful riffs in your relationships with others.

Simple advice:  (1) If you think you’re getting a better deal than others get – your likely being scammed.  (2) Don’t do investment business with those you know and trust – they are the most likely folks to scam you.

WHAT CAN I DO TO GET MY MONEY BACK?

Perhaps nothing.  But, there are provisions in the federal tax code that might offer some relief.  And, while I hear that you’d want it all back…believe me, something is better than nothing.  For sure, Huffman can’t earn enough in prison to provide any restitution.

A post in my blog that discusses how you can gain some relief can be found here.  NOW LET ME BE CLEAR…it is easy to be defrauded twice by folks who prey on those who have been victims of schemes just like Huffmans.  BE CAREFUL.  That said, I wrote the following and stand behind the author of the blog referenced above:

Moira Souza Shiver, expert on the application of IRC Section 165, has been asked by me to write this guest blog.  The benefits of Section 165 can be substantial, yet there are few who are qualified to understand how to effectively navigate the regulatory maze to gain maximum benefit.  As a business ethics and fraud prevention speaker, I try, through this blog, to provide a useful forum for discussing issues, and there is none more important at this time than the effective use of legal methods to recover loss.

If you’ve been scammed by Huffman and, perhaps, attended the sentencing hearing…I’d welcome your comments.

Finally, regarding financial help…check out Moira and research folks who provide Section 165 help…but be careful, and don’t fall prey to someone who promises more than is reasonable.

YOUR COMMENTS WELCOME!


Montreat College takes the Ethical High Road! Business Ethics Speaker Chuck Gallagher explains

January 7, 2010

Administrators at Montreat College, according to The Asheville Citizen-Times, said this week that they would help cover student loans taken out by more than 50 master’s-degree students at the North Carolina institution who were told by outside recruiters that the federal government would forgive their loan debt up to $17,500 each.

Many of the students whom the recruiters said would be eligible for loan forgiveness were in fact ineligible because they were neither secondary-school mathematics and science teachers nor special-education teachers at elementary and secondary schools. The recruiters, who worked for a private company hired to recruit for the college’s adult-education programs, had told the students that they would receive government help if they pursued an M.A. in education at Montreat.

President Dan Struble, Montreats leader, met with teachers Monday night telling them the college would aid them with the costs they’ve incurred in the program.  “Clearly, this is a challenge to our reputation,” Struble said. “We want to be who we say we are and that means meeting every student’s situation.”

According to the Asheville report:

Montreat contracted with Arizona-based Institute for Professional Development in 1994 to build its adult education program.

IPD recruiters representing Montreat have visited numerous schools in Western North Carolina in recent years advertising a masters program in K-6 education.

Many teachers who enrolled said recruiters told them they were eligible for loan forgivenes because they were highly qualified math, science or special education teachers at Title I schools.

Neither Struble nor officials at IPD’s parent company, the Apollo Group, have said why recruiters distributed material suggesting students in the K-6 program qualified for loan forgiveness.Sara Jones, a spokeswoman for the Phoenix-based Apollo Group, said her company would work to resolve the students’ complaints and review the recruitment issues.

While the final loan forgiveness assistance help is not fully finalized, positive moves are being put in place to hear the students concerns and take appropriate action.  This is ethics in action…and as a business ethics speaker to colleges and universities I find joy in reporting on positive applications of ethics vs. reporting on ethical breaches.

COMMENTS WELCOME!


Dr. Janet Johnson Hunter Pleads Guilty to Medicare Fraud…what was she thinking?

January 5, 2010

For more than three years, Janet Johnson-Hunter, a licensed medical doctor and former owner/manager of a private ambulance transportation company, committed fraud.  Johnson-Hunter, late this past year, pled guilty to conspiring to conceal material facts in connection with the delivery of payment for health care benefit, items and services according to a news release from the US Attorney’s office.

Johnson-Hunter changed medical records and ordered employees to change records to indicate patients’ needs to ride in an ambulance, when they did not, in order to be reimbursed by Medicare or Medicaid, according to a federal criminal information complaint was filed Nov. 30.   According to numerous EMT’s and billing staff, Johnson-Hunter, directly and through subordinates, directed employees to re-write medical records which indicated that patient-beneficiaries could sit upright, stand, walk or ride in a wheelchair.  The loss to Medicare/Medicaid = $400,000.

WHAT WAS SHE THINKING?

First I should say, it is not for me to point the finger.  I am not here to pass judgment, that is not mine to pass.  Rather, I’d like to explore the WHY this would or did happen.  As a business ethics speaker, I know that EVERY CHOICE HAS A CONSEQUENCE!  I have lived those words and spent time in federal prison as a result of my past misdeeds.  While I am not proud of that fact, it is a fact nonetheless.  The one thing I am able to do, as a result, is look at choices from a unique perspective.

NEED:  I can’t identify the need directly.  One would assume that to change records in order to increase billing or reimbursement from Medicare would driven by a need for money.  Seems obvious, but Bernie Madoff surely did not need the money, yet he effected one of the largest frauds in US history.  So what’s the need here?  Perhaps those who know Dr. Johnson-Hunter could help with that piece of the puzzle.  FEEL FREE TO COMMENT.

OPPORTUNITY:  It is of little doubt that any system can be manipulated.  If one person can take advantage of a system, one might say that there is a material weakness.  In this case, Janet Johnson-Hunter did not do this alone.  Rather, she used her power and influence to cause others to change records and thus deceive Medicare.  Now…a fair question is: will the Federal Government go after those who admitted to changing records or have they been given immunity from prosecution.

RATIONALIZATION:  This area is most troublesome.  Here’s a reality check…a 50 year old female medical doctor knows better.  You can’t live for half a century and earn a medical degree without having some clue that choices have consequences.  This is especially true when you involve others in the fraud.  You have to know that someone somewhere is going to reveal the truth.

Why would Dr. Janet do this..?  Perhaps that will come out as people comment.  For now, let me restate the obvious:  EVERY CHOICE HAS A CONSEQUENCE.  When you hear the words, “You will reap what you sow” let me state from experience – THEY ARE VERY TRUE.

Likely, Dr. Janet will spend time in federal prison (as did I some 15 years ago for a similar crime).  Prison is no fun as Dr. Janet will soon find out.  But, the question she has to face now, especially now since her misdeeds are brought to light, is what choices will she make now that prove redemptive in the future.

A wise man once said to me:  “You’ve made a big mistake, BUT YOU ARE NOT A MISTAKE!  The choices you make today will define your life in the future and the legacy you leave for your two sons.  MAKE THOSE CHOICES WISELY!”

Comments are welcome


Madoff Ponzi Scheme – Fraud Prevention Expert Chuck Gallagher Comments – Stay Out of the PIT

December 19, 2008

Splashed all over the media in every form one can imagine is the news of the massive Ponzi scheme that Bernard Madoff was able to perpetrate over the scope of decades.  A staggering $50 billion is being reported and the numbers seem to always rise as first estimates (for some reason) seem to be conservative.  Perhaps it’s just we don’t want to believe it can be that bad!

madoff

From the Wall Street Journal to Bloomberg to Time – all are reporting about what happen and now asking how?  Of course, it is becoming a field day for lawyers (trying to protect their client’s interests) as well as politicians (attempting to fix lax regulatory blame).  And the reporters – well they have questions (as they should).

How could it have happened?  How could we have known?  And, most importantly – how could it have been prevented?

Those are all good questions.  But the best question is – how best to find the answer?

In order to unravel this massive financial and legal mess one needs to understand the components and pattern of fraud in order to prevent it in the future.

Fraud consists of three primary components: (1) Need; (2) Opportunity and (3) Rationalization.  All three must exist for a fraud of this magnitude to take place, live and grow over time.   Without doubt…all three existed with Madoff.  The trouble is we may not know the exact details of “why” for some time to come – if ever.

However, the most important of the three is the OPPORTUNITY SEGMENT.  Without “opportunity” the three legged stool wouldn’t support the weight of the fraud or crime.  That’s where falling into the PIT comes in. Of course, the question is – what is the PIT and what does it stand for?

The OPPORTUNITY segment of the fraud goes like this:  The fraudster (Madoff) makes a PROMISE (P) to an unsuspecting investor, creating an ILLUSION (I) – generally something the investor truly desires – which is supported by TRUST (T) – most of the time something the fraudster already has with the unsuspecting investor.  That is the “PIT” and once one falls in it, it becomes easier for others to join.  In Madoff’s case the PIT had become so large that the slippery slope in was easy and the company impressive.  My guess is that folks wanted in.

O.K. – great, so there’s a PIT.  But the real question is how to avoid the trap?

I must say that there is no shortage of people from all walks of life who are easily, quickly and willing to call Madoff all manner of names and express outrage.  The fact is – getting caught in the PIT is easy and simple.  Avoidiance is unnatural for most. Think about it, most frauds take place with people you know and/or trust.  Trust is the key factor.  So how does one avoid the PIT?

Simple Avoidance Steps:

(1) Understand – especially in a down economy when temptation for financial performance is on the rise – anything this is proposed which seems too good to be true – isn’t.

(2) Know what you’re investing in.  If you don’t understand the investment or it is an area that is foreign (in other words you could easily be manipulated) avoid the investment.

(3) Check out the investment through reliable means.  In other words approach the investment with a healthy skepticism.  Trust no one completely and due your due diligence.

Fraudsters abuse the trust others have in them in order to effect their fraud.  I did and so did Madoff.


For more information about my programs and consulting on business ethics and fraud prevention, contact me at www.chuckgallagher.com or call me at 828.244.1400.  My commitment to my clients: To evaluate and identify areas for fraud and help weed them out.  Fraud can be prevented!


Twenty Million Dollar Mortgage Fraud Scheme – Osmond Decoteau Indicted Faces Prison – Business Ethics Speaker Chuck Gallagher Comments…

October 27, 2008

Well over a year ago, I along with others were writing profusely about mortgage fraud and the severe lack of business ethics that seemed rampant in the industry. It almost seemed like “money for nothing” and the house was free. Now, as we approach the time for our general election, things could not be worse. There is no doubt that this will be a disaster for the GOP when the election results come in.

October 23, 2008, an indictment was handed down in Brooklyn federal court charging OSMOND DECOTEAU with wire fraud for masterminding a scheme to defraud mortgage lenders and banks of more than $20 million in connection with the sale of several properties located in Brooklyn and Florida.

According to the indictment: DECOTEAU recruited straw purchasers for properties located in Brooklyn and Florida, and ensured that their mortgage applications would be approved by lenders by fraudulently misrepresenting the purchasers’ financial condition. Subsequently, at the closings on these properties, DECOTEAU presented phony payoff letters which indicated that three companies he controlled were the loan servicers for the properties. The closing attorneys then issued payoff checks to the DECOTEAU-controlled entities, instead of the actual loan servicers for the holders of the pre-existing mortgages. To conceal the fraud, DECOTEAU caused monthly payments to be made on the underlying mortgages so that those mortgages would not be declared delinquent. As a result of the defendant’s scheme, between April 2005 and January 2007, multiple fraudulent closings occurred resulting in a fraud exceeding $20 million, and each of the properties is now encumbered by two first-lien mortgages.

Mortgage Fraud has been rampant. It will take years for the majority of the crimes to be uncovered. No doubt Decoteau, if found guilty, is just one of thousands who will prosecuted for taking advantage of a system without substantial controls.

“In May of this year we announced the formation of a task force comprised of federal, state, and local law-enforcement agents and investigators to address the burgeoning problem of mortgage fraud,” stated United States Attorney Campbell. “This prosecution is one example of the results of that cooperative initiative, which includes the investigation and prosecution of mortgage fraud that has harmed investors, lenders, and homeowners across the country.” FBI Assistant Director-in-Charge Mershon stated, “Combating mortgage fraud is a priority because mortgage lending and the housing market have a significant overall effect on the nation’s economy. The FBI is committed to investigating and prosecuting criminals who exploit vulnerabilities and devise new methods or schemes to defraud.”

As a business ethics and white collar crime speaker, I understand first hand the effects of the choices we make. I served time in federal prison for poor choices I made 25 years ago and the consequences still follow to this day. If it takes three components to create a fraud: (1) need; (2) opportunity and (3) rationalization…then Decoteau had plenty of opportunity considering the lax state of oversight when it came to mortgages in the past five to eight years.

If you know Decoteau…perhaps you’ll comment on his motivation.

Your comments are welcome…


Business Ethics and White Collar Crime Speaker – Chuck Gallagher – To Speak at 2008 Fraud Conference

October 26, 2008

PRESS RELEASE:

In the economic climate we live in today, the probability of increased pressure for unethical practices and internal fraud is increasing. Unraveling fraud schemes can sometimes feel like trying to figure out a magician’s tricks. The North Carolina Association of CPA’s is sponsoring the 2008 Fraud Conference entitled: “Don’t Be Fooled.”

Chuck Gallagher, Business Ethics Speaker, is the keynote speaker for the 2008 Fraud Conference speaking on: CHOICES: Negative Consequences – Positive Results. This award winning presentation has received rave reviews nationwide. Gallagher, former CPA and convicted felon, brings home the consequences of the unethical decisions he made in his attempts to build the great American dream.

Have you ever been caught up in the vicious cycle of wanting more, believing success is measured by what you have? If you have ever thought what you have is not good enough, this presentation will stop you in your tracks and could change you life forever. Learn how the three components of most any white collar crime fraud; how it could have been prevented; and the consequences that followed.

Chuck Gallagher is a successful business ethics and white collar crime speaker who has been a sales executive in a public company. Raised in humble beginnings, Gallagher was reared by a single parent in “the projects.” He has led a $40+ million sales region with 125 representatives and started his own training business with projects in 30 states. Every choice has a consequence! “Through my own choices I learned this lesson the hard way. Today I help corporate employees and association members realize the ramifications of their ethical choices.”

For information about this presentation or how your organization can reap the benefits of Gallagher’s presentation: CHOICES: Negative Consequences – Positive results, contact me at chuck@ chuckgallagher.com or call me at 828.244.1400.


Dan LaMarch Payroll Tax Fraud – Plea Agreement – Prison and Restitution in the Future!

October 16, 2008

Some one following this case, which I reported on back in February 2008, provided me with a copy of the plea agreement.  If you would like a complete copy e-mail me at chuck@chuckgallagher.com.

As a business ethics and fraud prevention speaker, I have had several folks ask just what the punishment would be for such a crime.  Below are reprints from the plea agreement.  Keep in mind, the judge is not bound by the agreement, so he/she would have the authority to make a decision other than what the US Attorney and LaMarch have agreed to.

The relevant provision are as follows:

The parties understand and agree that the offenses to which the defendant will enter a plea of guilty carry the following maximum term of imprisonment and fine: Count 6 (failing to pay over payroll taxes), five (5) years and $250,000; Count 17 (filing a false tax return), three (3) years and $250,000; and Information (wire fraud), twenty (20) years and $250,000. Each count also carries a mandatory special assessment of$100 and a maximum term of supervised release to follow any term of confinement of up to three years. The parties further recognize that a restitution order may be entered by the court.

A total of 28 years according to the agreement is possible, with the likely hood that LaMarch will serve the terms concurrently – meaning that he will likely get 20 years in federal prison plus restitution.

According to the Green Bay Press Gazette:

Daniel LaMarch, 55, who, along with his wife, Kay, owns Title Service of Green Bay, was initially indicted in U.S. District Court on 20 counts of failing to pay payroll taxes and filing false tax returns.

Federal prosecutors alleged that LaMarch withheld from his business’ employees’ wages more than $500,000 that he was supposed to pay the Internal Revenue Service from January 2002 to December 2005.

Initial charges could have had LaMarch facing up to 92 years in prison.  28 is less, but not insubstantial.  he faces sentencing on January 14, 2009.

Your comments are welcome!