Le-Nature’s fraud “the largest in the history of the Western District of Pennsylvania” – Robert B. Lynn found guilty of Bank Fraud!

July 31, 2011

Losses hidden by false documents leads to massive collapse and huge losses.  Every choice has a consequence and this scheme left many holding the bag with financial losses.

After deliberating 16 hours, a federal jury of nine women and three men found Robert B. Lynn guilty of 10 counts of bank fraud, wire fraud and conspiracy relating to the operations of Le-Nature’s, Inc., the Latrobe, Pennsylvania water bottler that collapsed in bankruptcy in 2006, United States Attorney David J. Hickton announced.

Lynn, 67, of Westmoreland County, Pa., was tried before Senior United States District Judge Alan N. Bloch in Pittsburgh, Pennsylvania.

“The Le-Nature’s fraud was the largest financial fraud in the history of the Western District of Pennsylvania,” said U.S. Attorney Hickton. “The public interest demands effective prosecution of all crimes, and this was one of special magnitude. At the end of this lengthy investigation and trial, we are gratified by the diligent work of the jury in reaching its verdict.”

According to Assistant United States Attorneys James Y. Garrett and Robert S. Cessar, who prosecuted the case, the evidence presented at trial established that the defendant ran Le-Nature’s sales operations.  While the company was losing millions on its products during the years 2001 to 2006, Lynn and other company executives provided false information about its business activity and financial condition to investors and lenders, making it seem the company was profitable and expanding.  As a result of the false information, lenders and investors advanced funding to Le-Nature’s of more than $800 million during the scheme.  When the company collapsed, the losses were approximately $600 million.

Five other defendants charged in the scheme pleaded guilty earlier.  They were Gregory J. Podlucky, 50, of Westmoreland County, Jonathan Podlucky, 37, of Westmoreland County, Andrew J. Murin, Jr., 54, of Washington County, Donald Pollinger, 67, of Charlotte, North Carolina, and Tammy Andreycak, 43, of Westmoreland County.

Judge Bloch scheduled sentencing for Dec. 1, 2011. Based on Lynn’s convictions, the law provides for a total sentence of 220 years in prison, a fine of $2.5 million, or both.  Under the Federal Sentencing Guidelines, the actual sentence imposed is based on the seriousness of the offenses and the criminal history, if any, of the defendant.

Pending sentencing, the court allowed Lynn to remain free on bond.

The Internal Revenue Service/Criminal Investigation and the United States Postal Inspection Service conducted the investigation that led to the prosecution of Robert B. Lynn.

YOUR COMMENTS ARE WELCOME


Taking a Dead Persons Social Security and Pension Earns Rolf Groer a Conviction!

May 19, 2008

And while I’m on the subject of Social Security Fraud (that was what my last post was about) – thought some might like this strange story of choices and consequences.

United States Attorney Mary Beth Buchanan announced that Rolf Groer, age 48, a resident of Allegheny County, has been sentenced in federal court in Pittsburgh, Pennsylvania to 5 years probation, including 12 months of community confinement, and ordered to pay approximately $22,000 in restitution as well as a $5,000 fine on his conviction of theft of government property and theft from an employee pension benefit plan.

According to information presented to the court Groer, between January of 2004 and September of 2006, embezzled approximately $27,904.00 in Social Security benefits, and approximately $14,699.19 in pension benefits paid by The Boeing Company. The Social Security and pension benefits were issued in the name of a person who had died in December of 2003.

As a business ethics and white collar crime speaker, I am a bit amazed that Groer got off with what seems to be a light sentence. But make no mistake, community confinement and 5 years probation is not insignificant. Groer’s life will change and any benefit he may think he got will be erased as he is now a convicted felon – which carries with it consequences.

As I say in most of my presentations, every choice has a consequence!

Business Ethics and White Collar Crime speaker – Chuck Gallagher – signing off…


Social Security Fraud Could Earn 27 Year Old Shawn R. Johnson Prison Time!

May 19, 2008

So you think you can pull the wool over the eyes of the government? Not so fast. Every choice has a consequence and one of the things that some of us learn the hard way is – what you do in the dark will be brought to the light. In other words, if you do something that is wrong it will be discovered.

You reap what you sow! I know. I sowed bad seeds and reaped the consequences. And now it seems that the same may be true for a young 27 year old.

Shawn R. Johnson, of Fayette County, Pennsylvania, has been indicted by a federal grand jury in Pittsburgh on a charge of Social Security Fraud.

The one-count indictment named Shawn R. Johnson, age 27.

According to the indictment, Johnson failed to disclose to the Social Security Administration employment with and earned income from Polito Custom Carpet, located in Hopwood, Pennsylvania, and that such events affected his continued right to receive Supplemental Security Income benefits.

COMMENT: Now I can assure my readers that the minor benefit that Johnson received is not worth the cost he will pay. Facing up to 5 years in prison, a fine of $250,000, or both, Johnson will soon understand that cost of wrong choices is substantial.

Every choice has a consequence is a comment I make in most presentations. As a white collar crime speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While Johnson may have enjoyed the money for a time and avoided the consequences – they did not avoid the consequences all together. Prison is no fun and Johnson is facing several years plus substantial restitution for this conviction. Likely he will serve time and that will prove to be a dramatic change from his prior activities. You do reap what you sow.

White Collar Crime Speaker – Chuck Gallagher – signing off…


Leroy M. Bennett – Tax Protester ‘volunteered out’ – Sentenced “IN” to Federal Prison – You Can’t Beat The Tax Man!

March 16, 2008

Here’s a man who worked all his life, retiring with 30 years service to General Electric, somehow deciding that he could just “volunteer out” of the federal tax system. He did and now that choice is costing him his freedom.

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Something changed. My guess is that he somehow became influenced by all of those who claim that the federal income tax is unconstitutional – there is no law establishing it’s existence – and so on. The same “bull” that Wesley Snipes found himself caught up in. Look for my prior blogs on the subject and see the comments – I am still amazed that folks fall for that “BS”! But, alas, Bennett did. He stopped filing tax returns in 1995 although he had income from wages and pensions from GE.

His defense – Bennett believed that he had “volunteered out” of the federal tax system, and Bennett also raised various additional, and frivolous, tax protestor arguments. NOTE: These only get you a prison sentence!

OUTCOME: Bennett is sentenced to 21 months in federal prison. At age 64, this is not likely how Bennett planned on spending his retirement.

Your comments are welcome! And by the way, if you’re going to comment on the tax protestor side, have the guts to elect not to file yourself and oh, publish your name for the IRS to find – only then will you be real in your beliefs. Otherwise, it’s just hot air that takes you no where but prison. Believe me I know – I’ve been there.

White Collar Crime Speaker – Chuck Gallagher – signing off


White Collar Crime – Week In Review From South Carolina to California to Florida – Comments by Ethics Speaker Chuck Gallagher

February 3, 2008

After reviewing the verdict in the Wesley Snipes case – both guilty and innocent – it makes sense to consider what else is taking place on the white collar crime front.

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South Carolina: Christina J. Williams, age 32, of Conway, South Carolina, was sentenced in federal court for aggravated identity theft and credit card fraud.

Williams worked as the office manager in a doctor’s office in Surfside Beach, South Carolina. From August 2003 to July 2004, Williams made unauthorized charges using the doctor’s personal and business credit cards, and used his personal information to secure a card for herself. Williams also embezzled money from the doctor’s office and had her name added to his cellular phone account. Investigators determined that Williams stole more than
$104,000.00 during the course of the scheme.

Rhode Island: Cory Johnson, the former president of Mixitforme, a company that sold electronic devices over the Internet and by telephone, pleaded guilty today to fraud and money laundering. Johnson admitted that he defrauded a credit card processing firm out of about $2.2 million worth of customer orders that Mixitforme failed to fulfill.

Between November 2005 and March 2006, NOVA processed millions of dollars worth of credit card transactions on behalf of Mixitforme for orders the company received over the Internet and by telephone. In March 2006, Mixitforme ceased operations, and hundreds of customers subsequently complained to NOVA that their credit card accounts had been charged for orders to Mixitforme but the merchandise had not been delivered.

NOVA refunded customers a total of $3,178,347 in charges for unfulfilled orders. NOVA was able to recoup $954,460 from a bank, but was left with a net loss of $2,223,887.

Johnson, 29, of Morrisville, Pennsylvania, pleaded guilty to one count of conspiracy to commit wire fraud and one count of money laundering. He is free on bond pending sentencing, which Judge Smith scheduled for June 20. The maximum prison sentences are: conspiracy — five years, and money laundering — ten years. Each offense also carries a maximum fine of $250,000.

Pennsylvania: William D. Edgar, a resident of Verona, Pennsylvania, has been sentenced in federal court in Pittsburgh, Pennsylvania to 37 months of incarceration and five years supervised release on his conviction of Conspiracy, Bank Fraud, and Wire Fraud.

Edgar, who was a mortgage broker licensed by the Pennsylvania Department of Banking, operated a mortgage brokerage business known as America’s Mortgage Outlet in Monroeville, Pennsylvania. Between May 2001, and October 2003, Edgar participated with loan officers at America’s Mortgage Outlet in a scheme to defraud banks and private lenders by making false representations in more than seventy mortgage loan applications submitted on behalf of his customers.

Two types of fraudulent schemes were used. One form was to falsely represent to the lenders that mortgage loan applications presented to the lenders were for refinance loans, when in actuality the applications were for purchase loans. The refinance scheme deceived the lenders into approving and funding loans on terms and conditions they would not have otherwise approved or funded.

Another form of the scheme was to accurately represent loans as purchase loans, but to falsely inflate the sale prices and values of real properties being purchased in order to cause the lenders to approve larger loans than they would have otherwise approved. This scheme deceived lenders into financing down payments and other cash disbursements from mortgage loan proceeds. In total, more than $3,000,000 worth of loans were issued in connection with this scheme.

California: BARRY HOLLAND, age 60, of Carmichael, entered a guilty plea to accepting unlawful bribes while serving as Superintendent for the City of Sacramento’s Water Distribution Branch. HOLLAND pled guilty to a one count information charging him with bribery in connection with a municipality that receives federal funds.

From at least 1999 through 2005, one Sheldon M. had an oral agreement with the Water Distribution Branch under which he would retrieve used meters from the Water Distribution Branch, transport the same to a recycler, and sell the same for profit. Sheldon M. would then keep a portion of the meter sale proceeds for himself as a fee and would maintain a separate portion of the meter sale proceeds in a “slush fund” which he later would disburse to certain employees of the Water Distribution Branch, including HOLLAND, or utilize to make purchases for the benefit of the Water Distribution Branch. Between October, 1999 and November, 2005, defendant HOLLAND accepted approximately 16 checks and cash totaling approximately $10,371 as rewards from Sheldon M. for allowing Sheldon M. to sell the water meters. HOLLAND also accepted various machinery (then retained by the Water Distribution Branch), including two air motors with a combined value of approximately $7,200, and a tapping machine with an approximate value of $8,000 to $9,000 from Sheldon M., also as rewards from Sheldon M. for allowing Sheldon M. to sell the water meters.

Florida: It was announced that owners of nine separate Miami-based health care corporations have been sentenced to prison terms within the past two weeks. Collectively, the nine defendants filed fraudulent claims with Medicare for $56,599,832 worth of unnecessary durable medical equipment (DME) and infusion therapy.

The nine defendants sentenced in Miami are: (1) Luis Soto, 41, sentenced to 87 months in prison; (2) Noel Rodriguez, 50, sentenced to 51 months in prison; (3) Rosabel Gonzalez, 32, sentenced to 30 months in prison; (4) Christian Vasquez, 22, sentenced to 41 months in prison; (5) Maria De La Serna, 55, sentenced to 19 months in prison; (6) Ariel Betancourt, 35, sentenced to 24 months in prison; (7) Jose Prieto, 58, sentenced to 41 months in prison; (8) Armando Jorge Herrera, 27, sentenced to 36 months in prison; and (9) Reinaldo Lopez, 40, sentenced to 46 months in prison.

Comments: First, as a business ethics speaker (www.chuckgallagher.com) I often speak to groups about the Truth About Consequences. My workshops on white collar crime and fraud are well attended as it appears that anyone can get caught up in criminal activity – and I speak from experience – the consequences can be devastating.

The Florida issue clearly is one of pure greed and seemingly opportunity. Time after time people (especially in dealing with the government) think that the customer – US Government – is too big and would never catch their “slick” illegal scheme. And, more times than not – they do and the consequences are less than pleasant. Prison terms no matter their length are unpleasant.

In California we see an example of someone being found guilty for participating in a scheme. I would be that this person would have felt that it must be O.K., someone else is making the choice – he was just a recipient. Wrong! Illegal is illegal.

Pennsylvania, Rhode Island and South Carolina – well that was just fraud pure and simple. Most of the time when a fraud is committed there are three components: (1) Need; (2) Opportunity and (3) Rationalization. While I don’t know how the three came together in there cases…you can bet they did.

But, this week has past – Snipes has been found innocent and guilty – and we face another week. Perhaps, it would help if people understood two simple facts:

Every choice has a consequence! and You reap what you sow!

Your thoughts and comments are welcome!

 


Mortgage Fraud – FBI Announces 14 Companies Under Investigation – No Great Surprise Says Ethics Speaker Chuck Gallagher

January 29, 2008

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In a CNN report it was announced that the FBI has opened criminal investigations of 14 companies related to sub-prime mortgage loans. The following is quoted from the CNN report:

Neil Power, chief of the FBI economic crimes unit, attributed the increase “to good old-fashioned greed.”

“On insider trading, we’re looking in some cases at whether executives were aware that the value of their holdings would be going down and the executives traded on that information,” said Power.

“On accounting fraud, we’re looking at housing developers who may have reported cash reserve accounts to reflect falsely inflated values.”

Over the past several months, I have been reporting multiple instances of mortgage fraud – convictions and sentences that followed. With the flow of free (or at least it seemed that way) money – it was inevitable the “greed” as Neil Power put it, would kick in. And, kick-in it did.

According to senior officials the number of suspicious activity reports jumped from 35,000 in 2006 to 48,000 in 2007 and for 2008 is on track to exceed 60,000. According to FBI reports (per CNN) 56% of the cases had losses of more than $1 million.

Officials identified the states that are the “top 10 mortgage fraud hot spots” as California, New York, Texas, Florida, Georgia, Utah, Illinois, Indiana, Ohio and Michigan.

Surprise NO! Considering that just this past week a Pennsylvania mortgage broker was sentenced to 3 years for a fraud scheme and a Texas Broker/Real Estate Developer plead guilty to bank fraud for his real estate activities, it is going to be a long time before the issues related to mortgage fraud completely surface.

I would not be surprised if there are multiple restrictions and controls put in place so that this type of greed and the consequences that follow can be avoided in the future.

As a business ethics and white collar crime speaker (www.chuckgallagher.com) , I address groups routinely about the Truth About Consequences. Every choice has a consequence and, today, we are just exposing the tip of the iceberg when it comes to mortgage fraud.


MySpace Agrees To “Safer Space” Measures! Great Move Says Teen Ethics Speaker Chuck Gallagher

January 15, 2008

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MySpace, the huge social networking site that attracts millions of users announced Monday (January 14, 2008) that it will make changes designed to help prevent sexual predators from misusing the site. This was done with the agreement of more than 45 states.

According to an article from the Associated Press, the agreement was announced by various attorney generals from New York, North Carolina, Pennsylvania, Ohio and others. The article states:

Several states’ attorneys general said in a statement that the huge social networking Web site has agreed to add several protections and participate in a working group to develop new technologies, including a way to verify the ages of users. Other social networking sites will be invited to participate.

There have been well publicised issues with fraud, fake identification and a variety of inappropriate uses by those who would prey on our children. A clear example of issues that our youth can face was the 2006 web suicide reported in an earlier blog.

“The Internet can be a dangerous place for children and young adults, with sexual predators surfing social networking sites in search of potential victims and cyber bullies sending threatening and anonymous messages,” said New Jersey Attorney General Anne Milgram.

“We thank the attorneys general for a thoughtful and constructive conversation on Internet safety,” MySpace Chief Security Officer Hemanshu Nigam said in a written statement. “This is an industrywide challenge, and we must all work together to create a safer Internet.”

MySpace, which is owned by Rupert Murdoch’s News Corp., will also accept independent monitoring and changes the structure of its site.

MySpace agreed to the following changes (to name a few):

  • Parents can submit their children’s e-mail addresses to MySpace to prevent anyone from misusing the e-mail address to set up fake profiles
  • The default setting for 16 and 17 year olds will be marked “private”
  • Strengthen the software to identify underage users
  • Add more staff and resources to classify photos and discussion groups
  • Respond to complaints about inappropriate content within 72 hours
  • Create a high school section for users under 18 years of age

Social networking sites like MySpace and Facebook have come under intense scrutiny as it has almost become a playground for sexual predators. It has been reported that New York officials created (fake) profiles as 12 to 14 year olds and were quickly contacted by others who were seeking sex. This type of behavior has created the furor over making “cyberspace” a safer place to truly social network.

As a teen ethics speaker, I often find kids who will share interesting stories about the solicitations they have received from Facebook and MySpace. And, if they will share with me, then I know that I’ve only touched the tip of the iceberg. Teens are often open and venera

ble to attack as they have yet to develop the defense in knowing what is safe. I applaud MySpace on their actions thus far…

What do you think of the actions taken my MySpace thus far? What would you suggest as additional measures that MySpace could take to improve safety?