Former Human Resources Consultant Pleads Guilty in Manhattan Federal Court to Insider Trading Scheme That Netted More Than $1.1 Million in Illegal Profits

Defendant Exchanged Information About Mergers and Acquisitions of Pharmaceutical Companies for Cash Payments

NEW YORK—Scott Allen, a former consultant at a global human resources consulting firm, pleaded guilty in New York to conspiracy and securities fraud charges in connection with his participation in an insider trading scheme in which he provided material, non-public information about mergers and acquisitions involving the securities of Millennium Pharmaceuticals Inc. and Sepracor Inc., U.S. Attorney for the Southern District of New York Preet Bharara announced today. Allen gave the inside information to co-conspirator John Bennett, a film producer and former investment professional, who traded on that information and gained more than $1.1 million in illegal profits from the scheme. Allen pleaded guilty today before U.S. District Judge Deborah A. Batts.

U.S. Attorney Bharara said, “Scott Allen thought his game of subterfuge and lies would conceal his illegal conduct and save his skin, but he was wrong. His lies and deception were discovered using good, old-fashioned law enforcement techniques, and now, like his co-defendant, he will be held to account for his crimes.”

According to documents previously filed in Manhattan federal court:

In his role as a principal of the consulting firm, Allen learned inside information concerning the April 2008 acquisition of Millennium by Takeda Pharmaceutical Company Limited and the September 2009 acquisition of Sepracor by Dainippon Sumitomo Pharma Co. Ltd. Prior to the public announcements of those acquisitions, Allen disclosed the inside information to Bennett, a longtime friend, in exchange for more than $100,000 in cash payments. Bennett then used the inside information to execute securities transactions in Millennium and Sepracor that earned him over $1.1 million in illegal profits.

For example, between February 29, 2008, and April 2, 2008, Bennett purchased approximately 1,090 Millennium call options at a total cost of about $17,000. Following the public announcement of the Millennium acquisition on April 10, 2008, Millennium’s stock price rose approximately 50 percent, and Bennett sold all of his call options for approximately $619,000. Also, between May 27, 2009, and July 22, 2009, Bennett purchased approximately 1,700 Sepracor call options at a total cost of about $227,000. Following the public announcement of the Sepracor acquisition on Sept. 3, 2009, Sepracor’s stock price rose approximately 26 percent, and Bennett sold all 1,100 of his unexpired call options for approximately $682,000.

Allen and Bennett attempted to conceal the insider trading scheme from authorities and to avoid detection. In October 2010, when interviewed at his home by FBI agents, Allen falsely claimed that he had not spoken to Bennett in three or four years. Analysis of Allen’s and Bennett’s Metrocard usage showed that the two men swiped their Metrocards at the same subway station at about the same time on several occasions. In addition, phone records showed that Allen spoke with Bennett repeatedly through July 2010, contacting him using airport lounge telephones at LaGuardia Airport instead of his cell phone or another phone that was traceable to him.

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Allen, 45, of Atlanta, pleaded guilty to seven counts of securities fraud and one count of conspiracy to commit securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Allen has also agreed to forfeit the illegal proceeds obtained as a result of the offenses.

Allen is scheduled to be sentenced by Judge Batts on Aug. 20, 2012, at 11:00 a.m.

Bennett, 49, of Norwalk, Conn., pleaded guilty to two counts of securities fraud and one count of conspiracy to commit securities fraud in November 2011. He is scheduled to be sentenced at a later date.

U.S. Attorney Bharara praised the efforts of the FBI. He also thanked the SEC for its assistance in the investigation.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.stopfraud.gov.

The case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Marissa Molé Bostick, Michael A. Levy, and Richard Tarlowe are in charge of the prosecution.

Twin Brothers Exiled to Over Eight Years in Prison for a Prince George’s County Bank Robbery and Attempted Theft of an ATM

GREENBELT, MD—Today, Chief U.S. District Judge Deborah K. Chasanow sentenced twin brothers Darnell and Ronnell Davis, both age 26, of Severn, Maryland, and Washington, D.C., respectively, each to 97 months in prison, followed by three years of supervised release, for bank robbery and attempted bank larceny in connection with the attempted theft of an automated teller machine (ATM). Chief Judge Chasanow also ordered the Davises to pay restitution of $118,000 and to forfeit a 2007 Dodge Challenger and a 2007 Cadillac Escalade.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Chief Mark A. Magaw of the Prince George’s County Police Department.

According to their plea agreements, on January 11, 2011, Darnell and Ronnell Davis, Cortez Maurice Mallory, and others participated in the robbery of the Wells Fargo Bank, N.A., d/b/a Wachovia Bank, in the 7700 block of Landover Road in Landover, Maryland. On January 11, 2011, two masked persons, armed with firearms, got out of a black Dodge Charger parked in front of the bank and entered the bank. The two robbers took a bag of money containing $90,000 from a bank employee, who was also assisting in the robbery. As part of the planned robbery, the assisting bank employee was carrying the bag of currency to the ATM when it was taken by the masked robbers. The two robbers fled the bank and got back into the Charger still parked in front of the bank, and then they sped away. The Davises and Mallory were the three persons who arrived at and fled the bank in the vehicle and participated in the bank robbery, during which guns were used in furtherance of the robbery.

On February 8, 2011, Darnell and Ronnell Davis, Cortez Mallory, and others attempted to break into an ATM at the PNC Bank in the 7300 block of Hanover Parkway in Greenbelt, Maryland. The Davis brothers, Mallory, and the other persons attempted to break into the ATM, which was on the exterior of the bank, using a blow torch, saw, or other cutting tool, causing substantial damage to the ATM. PNC Bank had to replace the ATM at a cost of $28,000.

On February 28, 2012, Coretz Maurice Mallory, age 27, of Clinton, Maryland, was also sentenced to 97 months in prison and ordered to pay restitution of $118,000 and to forfeit a 2004 BMW, purchased with cash after the robbery.

United States Attorney Rod J. Rosenstein commended the FBI and the Prince George’s County Police Department for their work in this investigation and thanked Assistant United States Attorneys William D. Moomau and Christen A. Sproule, who prosecuted the case.

Robbery of a Vist Financial Branch in Philadelphia

The Philadelphia Police Department and the FBI are seeking the public’s assistance to identify and locate the subject responsible for the robbery of the Vist Financial branch at 8000 Verree Road on March 19, 2012.

At approximately 11:30 a.m., the subject entered the branch and presented a threatening demand note to a teller. After obtaining an undisclosed amount of cash, the subject fled the area of the bank, possibly in an older model, white, full-sized van with ladders on the roof.

The subject is described as a black male in his late 30s, 5’7” to 5’8” tall, stocky build, with a dark complexion and a thick beard; and he was wearing a black baseball cap with a red brim and logo on the front, a black jacket, and dark gray pants with the legs rolled up. The subject was carrying a red towel or rag in his rear pocket.

This subject is considered armed and dangerous. Anyone with information is asked to call the Philadelphia Police Department or the FBI at 215-418-4000. There may be a reward for information leading to this subject’s capture, and tipsters can remain anonymous.

Former D.C. Tax Examiner Sentenced to 30 Months in Prison in Scam Involving More Than $400,000 in Refunds

Defendant Had Refunds Sent to Herself and Others

WASHINGTON—Mary Ayers-Zander, 47, a former tax examiner for the District of Columbia Office of Tax and Revenue (OTR), was sentenced today to a 30-month prison term on a federal charge of wire fraud stemming from a scheme involving more than $400,000 in fraudulent refunds.

The sentencing in the U.S. District Court for the District of Columbia was announced by U.S. Attorney Ronald C. Machen, Jr.; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; Charles J. Willoughby, Inspector General for the District of Columbia; and Natwar M. Gandhi, Chief Financial Officer for the District of Columbia.

Ayers-Zander, of College Park, Maryland, pled guilty in October 2011 before the Honorable Richard W. Roberts. As part of the plea agreement, Ayers-Zander must forfeit the proceeds of her crimes and pay restitution of $413,651 to the District government. Upon completion of her prison term, she will be placed on three years of supervised release.

According to the government’s evidence, Ayers-Zander used her position to issue fraudulent tax refunds that went into the bank accounts of herself and others.

Her activities came under scrutiny as a result of enhanced control techniques by the Office of the Chief Financial Officer’s Office of Tax and Revenue to detect tax fraud and criminal activity. An audit uncovered abnormalities in the amount of tax credits Ayers-Zander was issuing. The findings were shared with the Chief Financial Officer’s Office of Integrity and Oversight. The Office of Integrity and Oversight reported the matter to the FBI’s Washington Field Office and the Inspector General’s Office for the District of Columbia.

A joint investigation was conducted. Ayers-Zander was placed on administrative leave and her employment was subsequently terminated in June 2011 by the Office of Tax and Revenue.

“Mary Ayers-Zander treated the D.C. treasury like her personal piggy bank,” said U.S. Attorney Machen. “Over four years, on dozens of occasions, she sent thousands of tax dollars to her own bank accounts. Today’s sentence reflects the seriousness of our determination to protect the citizens of the District of Columbia from fraud.”

“Ms. Ayers-Zander stole from the very system that she was entrusted to support,” said Assistant Director in Charge McJunkin. “Along with our partner agencies, the FBI will continue to vigorously pursue those who breach the public trust for their own private gain. We ask anyone with information about fraud and corruption to contact the FBI.”

“The sentencing today is further evidence of not only how the Office of the Inspector General partners with local and federal entities to safeguard the interests of the citizens of the District and maintain the integrity of the District government, but also how the Office of the Inspector General strives to protect the District fisc, a task that is all the more important, particularly in these economic times,” said Inspector General Willoughby.

According to a statement of offense, signed by the defendant, Ayers-Zander was hired by OTR in August 2001 as a tax examining assistant. She was promoted to the position of tax examining technician in June 2007. Her duties included discussing tax situations with taxpayers, researching and analyzing current and historical tax cases, interpreting and applying guidelines and policies of the District of Columbia code, and making adjustments to existing tax filings.

As a tax examining technician, Ayers-Zander had the ability to access a taxpayer’s account to make adjustments, including issuing refunds without contacting the taxpayer. If the amount was below $10,000, she could do this without supervisory approval. In addition, she could make electronic payments by entering a financial institution’s routing information and account number.

On 48 occasions, from February 2007 through January 2011, Ayers-Zander accessed taxpayer accounts of four individuals and credited them with fraudulent withholding credit adjustments. This caused a total of $365,281 in electronic fund transfers to be sent from OTR’s bank account to two personal accounts that Ayers-Zander maintained.

In addition to those payments, Ayers-Zander accessed the accounts of five other individuals 10 times, likewise crediting them with fraudulent withholding credits. This caused a total of $46,175 in fraudulent refunds to be issued directly to those individuals. Ayers-Zander also eliminated a $1,147 tax liability for one of these individuals.

Ayers-Zander also prepared and filed fraudulent income tax returns for individuals, including one that caused a $2,195 refund to be sent.

In announcing the sentence, U.S. Attorney Machen, Assistant Director McJunkin, Inspector General Willoughby, and Chief Financial Officer Gandhi praised the work of those who investigated the case from the various agencies. They also praised those who worked on the case from the U.S. Attorney’s Office, including the Asset Forfeiture and Money Laundering Section, Paralegal Specialist Tasha Harris, and Legal Assistant Jared Forney. Finally, they commended the efforts of Assistant U.S. Attorney Susan Menzer, who prosecuted the case.

Douglas CBP Officers Seize Unreported Currency

Douglas woman arrested for $50,000 smuggling attempt

Douglas, Ariz. — Customs and Border Protection officers assigned to the Tucson Field Office seized $50,000 of unreported U.S. currency Thursday from a female U.S. citizen headed for Mexico through the Douglas Port.

Officers conducting outbound inspections referred a 2001 Chevy Tahoe driven by 25-year-old Jeanette Paola Hernandez, of Douglas, for additional questioning and a closer examination of her sport utility vehicle. A subsequent search of the SUV turned up six small packages wrapped in black tape, concealing the currency. 

CBP officers at the Douglas Port of Entry seized $50,000 in undeclared currency hidden in a sport utility vehicle.

The unreported funds and vehicle were processed for seizure. The subject was arrested and turned over to U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

Since launching the Southwest Border Initiative in March 2009, unprecedented shifts in staffing and infrastructure at the Ports of Arizona have brought a higher level of focus and intensity to their operations. These shifts have resulted in higher narcotics interceptions and tougher outbound enforcement operations yielding record illicit currency, weapons, and wanted felon interceptions. 

Individuals arrested may be charged by complaint, the method by which a person is charged with criminal activity, which raises no inference of guilt. An individual is presumed innocent unless and until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

CBP's Office of Field Operations is the primary organization within Homeland Security tasked with an anti-terrorism mission at our nation’s ports. CBP officers screen all people, vehicles and goods entering the United States while facilitating the flow of legitimate trade and travel. Their mission also includes carrying out border-related duties, including narcotics interdiction, enforcing immigration and trade laws, and protecting the nation's food supply and agriculture industry from pests and diseases.

U.S. Customs and Border Protection is the unified border agency within the Department of Homeland Security charged with the management, control and protection of our nation's borders at and between the official ports of entry. CBP is charged with keeping terrorists and terrorist weapons out of the country while enforcing hundreds of U.S. laws.