Criminal Justice News

Friday, March 30, 2012

Maryland Accountant Pleads Guilty to Fraud Scheme


ALEXANDRIA, VA—Lloyd M. Mallory, Jr., 50, formerly of Silver Spring, Maryland, pleaded guilty this week to a fraud scheme that resulted in a loss to the victim exceeding $750,000.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after the plea was accepted by United States District Judge Claude M. Hilton.

On March 28, 2012, Mallory pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of five years in prison. He will be sentenced on June 29, 2012.

According to a statement of facts filed with his plea agreement, the fraud scheme involved the sale of loans to the Southern Management Corporation Retirement Trust, a pension plan created by Southern Management Corporation for its employees. From in or about April 2006, until in or about June 2008, Mallory’s alleged co-conspirator, Robert Fulton Rood, IV, operating as a mortgage originator and/or mortgage broker and lender, sold to and serviced for the Retirement Trust approximately 31 loans that he had originated. Of these loans, only eight performed satisfactorily. In January 2008, at the insistence of the Retirement Trust, Rood hired Mallory and his company, M-Financial Services Inc., to perform a special review of files and processes associated with those loans. Rood and Mallory represented to the Retirement Trust and its agent that Mallory was an independent and disinterested CPA.

Contrary to their representations, Mallory was not an independent, disinterested CPA. He did not perform the review of the funds and processes that he had agreed to do. In fact, the report that purported to set forth the results of his review was written almost entirely by Rood and another of his employees and grossly misstated the funds held in escrow by Rood.

This case is being investigated by the FBI’s Washington Field Office and is being prosecuted by Assistant United States Attorneys Michael E. Rich and Uzo Asonye.

Calexico Port Officers Intercept Methamphetamine Load Worth $330,000


Calexico, Calif. — U.S. Customs and Border Protection officers working at the Calexico downtown port of entry arrested a 20-year-old male U.S. citizen after discovering $330,000 worth of methamphetamine hidden in the vehicle he was driving.

The incident occurred this morning, Thursday, March 29, at about 4:00 a.m. when a CBP officer conducting inspections of vehicles and travelers referred the blue 2005 Nissan Sentra for further examination.

During the inspection, a canine team screened the vehicle and the detector dog alerted to the dashboard area. An intensive search of the area led officers to the discovery of 30 wrapped packages of methamphetamine concealed within the vehicle’s dashboard. The weight of the narcotic is 30 pounds. 

The driver, a resident of Holtville, California, was turned over to the custody of U.S. Immigration and Customs Enforcement agents for further investigation. The violator was later transported to the Imperial County Jail where he currently awaits arraignment.

CBP seized both the vehicle and narcotic.

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.

Owner and Founder of Metro Dream Homes Sentenced to 150 Years in Prison in $78 Million Mortgage Fraud Scheme


Conspirators Spent Millions of Investor Funds for Their Own Purposes, Including to Employ Chauffeurs and Maintain a Fleet of Luxury Cars, Travel in Luxury to the NFL Super Bowl and NBA All-Star Game

GREENBELT, MD—U.S. District Judge Roger W. Titus sentenced Andrew Hamilton Williams, Jr., age 61, of Hollywood, Florida, today to 150 years in prison followed by three years of supervised release for his participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “dream homes,” but left them to fend for themselves. On November 10, 2011, a federal jury convicted Williams on charges of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering.

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; Acting Special Agent in Charge Eric C. Hylton of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office; Maryland Attorney General Douglas F. Gansler; and Inspector General Jon T. Rymer of the Federal Deposit Insurance Corporation.

“This case exemplifies the egregious mortgage fraud schemes that flourished in the lending free-for-all that contributed to the bubble and collapse of the housing market,” said U.S Attorney Rod J. Rosenstein. “Coordinated law enforcement is helping to hold the perpetrators accountable, but the real solution is meaningful oversight and auditing of lending decisions.”

“These individuals were responsible for shattering the dreams of countless hard working families during one of our country’s worst economic downturns,” said FBI Special Agent in Charge Richard A. McFeely. “The teamwork exhibited by all participating agencies throughout the joint investigation was exemplary.”

“Mortgage fraud is every bit as corrosive to American society as any street crime,” stated Eric Hylton, Special Agent in Charge, IRS-Criminal Investigation, Washington D.C. Field Office. “This type of fraud has far-reaching economic consequences and severely thwarts recovery from the foreclosure crisis, leaving homeowners in dire financial situations and financial institutions with uncollectible loans.”

According to evidence presented at the two-week trial, beginning in 2005, Williams and his conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments and pay off the homeowners’ mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements, and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, D.C.; the Marriott Marquis Hotel in New York, New York; and the Regent Beverly Wilshire Hotel in Beverly Hills, California. Metro Dream Homes had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia, and California.

According to trial testimony, Williams and his co-conspirators failed to advise investors that the ATMs, flat screen televisions, and kiosks never generated any meaningful revenue. The defendants used the funds from later investors to pay the mortgages of earlier investors. Evidence showed that MDH had not filed any federal income tax returns throughout its existence. The defendants also failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including Williams, to pay salaries of up to $200,000 a year as well as their mortgages; employ a staff of chauffeurs and maintain a fleet of luxury cars; and travel to and attend the 2007 National Basketball Association All-Star Game and the 2007 National Football League Super Bowl, staying in luxury accommodations in both instances. Nor were investors told that investor funds were used to pay off investors in a prior failed ATM investment venture called Bankcard Group; make multiple donations of up to $50,000 each to charitable organizations to give MDH the appearance of being financially successful; and transfer millions of dollars in investor funds to third-party businesses for purposes not disclosed to investors.

Trial testimony showed that Williams and his co-conspirators arranged for early Dream Homes Program investors, whose monthly mortgage payments had been paid by MDH using the funds of later Dream Homes Program investors, to attend recruitment meetings to assure potential investors that the Dream Homes Program was not a fraud. MDH used a third-party company to pay investors to advertise the Dream Homes Program to friends and family. MDH encouraged homeowners to refinance existing mortgages on their homes in order to withdraw equity and generate the funds necessary to enroll their homes in the Dream Homes Program.

On August 15, 2007, the Maryland Securities Commissioner issued a cease-and-desist order to MDH and other related companies directing them to immediately cease the offering and sale of unregistered securities in connection with their promotion of the Dream Homes Program. However, Williams thereafter called meetings in which investors were told that MDH was earning up to $10 million in one month and that the company’s legal difficulties were the result of either misunderstandings or racial animus against company leaders. In October 2007, the Circuit Court for Prince George’s County, Maryland granted the commissioner’s motion to freeze MDH assets and appointed a receiver.

As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When Williams and his co-conspirators stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.

Michael Anthony Hickson, age 49, of Commack, New York, the chief financial officer of MDH; Isaac Jerome Smith, age 49, of Spotsylvania, Virginia, the president of MDH; and Alvita Karen Gunn, age 34, of Hanover, Maryland, vice president of operations, were convicted by a federal jury of fraud conspiracy, wire fraud, and conspiracy to commit money laundering in connection with their participation in the mortgage fraud scheme. Hickson was also convicted of making a false statement in a federal court proceeding. Judge Titus sentenced Hickson to 120 months in prison, Smith to 70 months in prison, and Gunn to 60 months in prison.

Carole Nelson, age 53, of Washington, D.C., the chief financial officer of POS Dream Homes, previously pleaded guilty to money laundering, and Charlotte Melissa Josephine Hardmon, age 42, of Bowie, Maryland, pleaded guilty to conspiracy to commit wire fraud in connection with their participation in this scheme. Their sentencing dates are pending.

This prosecution is being brought jointly by the Maryland and Washington, D.C. Mortgage Fraud Task Forces, which are comprised of federal, state, and local law enforcement agencies in Maryland, Washington, D.C., and Northern Virginia. The task forces were formed to promote the early detection, identification, prevention, and prosecution of various kinds of mortgage fraud schemes. This case, as well as other cases brought by members of the task forces, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and help to ensure the integrity of the mortgage market and other credit markets. Information about mortgage fraud prosecutions is available on the Internet at http://www.usdoj.gov/usao/md/Mortgage-Fraud/index.html.

United States Attorney Rod J. Rosenstein praised the FBI, the IRS-Criminal Investigation, the Maryland Attorney General’s Office-Securities Division, and the Federal Deposit Insurance Corporation-Office of Inspector General for their investigative work. Mr. Rosenstein thanked Assistant U.S. Attorney Christen A. Sproule, who prosecuted the case.

Sentences in the United States Attorney’s Office


Dustan Gooden, 40, of Cheyenne, Wyoming, was sentenced by Federal District Court Judge Alan B. Johnson on March 26, 2012 for mail fraud. Gooden voluntary surrendered in Cheyenne. He received 21 months of imprisonment, to be followed by three years of supervised release, and was ordered to pay a $100 special assessment. A restitution determination will be made within 60 days. This case was investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service.

Jeannie Tonette Mata, 38, of Cheyenne, Wyoming, was sentenced by Chief Federal District Court Judge Nancy D. Freudenthal on March 23, 2012 for conspiracy to possess with intent to distribute and to distribute 500 grams to 200 kilograms of cocaine. Mata was arrested in Cheyenne. She received 60 months of imprisonment, to be followed by four years of supervised release and was ordered to pay a $100 special assessment and a $250 fine. This case was investigated by the Wyoming Division of Criminal and the U.S. Drug Enforcement Administration.

Janet Rae Hauer, 44, of Cheyenne, Wyoming, was sentenced by Chief Federal District Court Judge Nancy D. Freudenthal on March 23, 2012 for conspiracy to possess with intent to distribute and to distribute 500 grams to 200 kilograms of cocaine. Hauer was arrested in Cheyenne. She received 60 months of imprisonment, to be followed by four years of supervised release, and was ordered to pay a $100 special assessment and a $200 fine. This case was investigated by the Wyoming Division of Criminal and the U.S. Drug Enforcement Administration.

Christopher Dennis Bascus, 44, of Cheyenne, Wyoming, was sentenced by Chief Federal District Court Judge Nancy D. Freudenthal on March 22, 2012 on one count of conspiracy to possess with intent to distribute and to distribute five to 15 kilograms of cocaine and one count of distribution of cocaine within 1,000 feet of a school. Bascus was arrested in Cheyenne. He received 216 months of imprisonment, to be followed by eight years of supervised release, and was ordered to pay a $200 special assessment and a $4,800 fine. This case was investigated by the Wyoming Division of Criminal and the U.S. Drug Enforcement Administration.

Cory Joe Havner, 39, of Cheyenne, Wyoming, was sentenced by Chief Federal District Court Judge Nancy D. Freudenthal on March 22, 2012 for possession with intent to distribute 50 to 200 grams of methamphetamine. Havner was arrested in Cheyenne. He received 60 months of imprisonment, to be followed by four years of supervised release, and was ordered to pay a $100 special assessment. This case was investigated by the U.S. Drug Enforcement Administration.

Federal Jury Convicts California Man of Cheating Las Vegas Casinos out of $1 Million in Line of Credit Scheme


LAS VEGAS—Following a two-week jury trial, a southern California man has been convicted of defrauding several local casinos of about $1 million by using recruits to obtain casino credit markers that were not paid back, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

De Rong Shang, aka Jason Shang, 50, of San Gabriel, California, was convicted on Tuesday, March 27, 2012 of one count of conspiracy to commit mail fraud and 17 counts of mail fraud. Shang faces up to 360 years in prison and $4.5 million in fines and is scheduled to be sentenced by U.S. District Judge Roger L. Hunt on July 16, 2012.

From about December 2006 to April 2007, Shang conducted a conspiracy and scheme to defraud casinos in Las Vegas. Shang and co-defendant Yuli Eaton, 47, of Redlands, California, who pleaded guilty to conspiracy before trial, recruited persons to open bank accounts that were funded by Shang. Shang then helped the recruits apply for lines of credit at several Las Vegas casinos. Once the lines of credit were approved, the recruits transferred the money from their accounts to Shang’s account. The recruits then withdrew chips from their lines of credit (“markers”) and played baccarat at the casinos. The recruits were instructed to use a process known as rolling the chips to make it look like they were actually losing money, when they were actually just hiding chips and transferring them to other co-conspirators. The recruits then applied for higher lines of credit and played baccarat, again using the rolling process to make it look like they had lost. In actuality, they gave the chips to Shang, who cashed them in. The recruits then left Nevada or the country and were paid a small percentage of the total amount of credit under their name, generally $300 per $10,000 line of credit. The casinos attempted to collect the unpaid markers, but by that time, the accounts had been drained or closed. Using this scheme, Shang and Eaton defrauded three local casinos of $1,011,400.

The investigation was conducted by the FBI, and the case was prosecuted by Assistant U.S. Attorneys Andrew W. Duncan and Brandon C. Jaroch.

This law enforcement action is sponsored by President Barack Obama’s Financial Fraud Enforcement Task Force. 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.