Criminal Justice News

Saturday, April 28, 2012

Six Charged in Advance Pay Scheme That Bilked Entrepreneurs of Millions

PHILADELPHIA—An indictment was filed today charging six men with using an advance fee fraud scheme to defraud hundreds of victims searching for commercial financing. Charged in the 33-count indictment are Andrew Bogdanoff, 65, of Scottsdale, Arizona; Matthew McManus, 43, of Glenside, Pennsylvania; Shayne Fowler, 27, of Scottsdale, Arizona; Joel Nathanson, 25, of San Diego, California; Frank Vogel, 47, of Rochester Hills, Michigan; and Aaron Bogdanoff, 24, of Scottsdale, Arizona. The scheme defrauded more than 800 victims out of more than $10,000,000, announced United States Attorney Zane David Memeger, FBI Special Agent in charge George Venizelos, and IRS Acting Special Agent in Charge Akeia Conner.

The indictment alleges that defendant Andrew Bogdanoff was the founder and chairman of Remington Financial Group (later renamed Remington Capital) and ran the company with defendant McManus until 2008 in Arizona and Pennsylvania. After McManus left the company in 2008, defendant Fowler replaced McManus as Bogdanoff’s right-hand man. Defendant Nathanson was one of Remington’s most proficient employees and helped Remington defraud many victims. Defendant Vogel was a Michigan-based broker who referred numerous victims to Remington in exchange for large kickbacks.

According to the indictment, between 2005 and 2011, the defendants fraudulently induced hundreds of people to pay Remington fees in excess of $10,000 apiece, based on false representations that Remington had lenders and/or investors ready to provide financing for the victims’ projects. To facilitate this fraud the defendants issued each victim a “letter of interest,” commonly referred to as an LOI. Almost every LOI Remington issued stated that Remington had a lender or investor interested in financing the victim’s project. Remington issued an LOI to every victim even though no Remington employee had spoken to any funding source and Remington knew that it was unlikely to find funding for the project.

It is alleged that the LOI was written to fraudulently lead victims to believe that Remington was either a lender or had spoken to lenders that had already expressed interest in the customer’s project when neither was true. Additionally, the financing terms Remington included in the LOI were unrealistic and were used solely to induce customers to pay Remington’s advance fees. In addition to the false representations in the LOI, the defendants and other Remington employees allegedly also told victims the following lies to further induce victims to pay Remington’s fees: Remington had five investors or lenders interested in their project; Remington was the actual lender for the project; Remington funded or “closed” 80 percent of its deals; the victim would get funding for the project once the advance fee was paid; and/or Remington would provide funding through its funding source Northbridge.

“Those who engage in financial fraud strike at the very heart of our nation’s economic system,” said Memeger. “It is incumbent on federal prosecutors to root out and prosecute this illegal activity so that innocent people do not suffer traumatic financial losses at the hands of people who flagrantly lie to make money.”

After a customer paid Remington’s fee, McManus and Andrew Bogdanoff instructed Remington employees to find problems with the projects so that Remington could blame its failure to provide financing on the victim. The defendants did this to help protect Remington from civil and criminal complaints.

The indictment alleges that some of the defendants used sophisticated means to perpetuate the fraud. For instance, in 2010, defendants Fowler and Andrew Bogdanoff used Remington’s website to advertise an anti-fraud policy and stated falsely that Remington had recently provided information to the Federal Bureau of Investigation and local law enforcement authorities about a suspected e-mail scam. Remington posted this information to ensure that if potential customers used an Internet search engine to search for allegations about Remington’s fraud, they would be directed to Remington’s website rather than third-party Internet sources that contained negative information about Remington.

The indictment also alleges that after the FBI and IRS conducted search warrants in Arizona and Colorado in March 2011, defendant Matthew McManus attempted to distance himself from the fraudulent scheme by obstructing justice and lying to federal agents.

“The type of criminal activity alleged in this indictment today is significant in that it targeted those victims who were desperate for any type of financing alternatives that would help keep their businesses and their business projects solvent and their business dreams alive,” said Special Agent in Charge George C. Venizelos of the Philadelphia Division of the FBI. “The FBI is committed to aggressively pursuing those who engage in schemes designed to illegally profit from the current economic situation of many of our fellow hard-working Americans.”

Acting Special Agent in Charge Akeia Conner of the Internal Revenue Service Criminal Investigation stated, “The indictment announced today is a clear example of fraud involving the financial services industry that can result in severe economic consequences to innocent taxpayers. IRS-Criminal Investigation is committed to contributing our financial expertise and forensic accounting skills to investigating this type of white collar crime.”

All of the defendants, except Aaron Bogdanoff, are charged with conspiracy to commit mail and wire fraud and with committing mail and wire fraud. Defendants Andrew Bogdanoff, Matthew McManus, and Shayne Fowler are charged with several counts of money laundering. Defendants Andrew Bogdanoff, Shayne Fowler, and Aaron Bogdanoff are charged with conspiracy to defraud the United States and filing false tax returns. Additionally, Matthew McManus is charged with obstruction of justice and making false statements to a federal agent.

If convicted of all charges, Andrew Bogdanoff faces a statutory maximum sentence of 282 years in prison; Matthew McManus faces a statutory maximum sentence of 105 years in prison; Shayne Fowler faces a statutory maximum sentence of 220 years in prison; Joel Nathanson faces a statutory maximum sentence of 85 years in prison; Frank Vogel faces a statutory maximum sentence of 65 years in prison; and Aaron Bogdanoff faces a statutory maximum sentence of 17 years in prison. All of the defendants face lengthy prison sentences under the sentencing guidelines.

The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation Division with assistance from the Pennsylvania Securities Commission. It is being prosecuted by Assistant United States Attorney David Axelrod.

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