Monday, December 30, 2019

Former Yellowstone Partners’ CEO Pleads Guilty

David Hansen Admits to 8-Year Wire Fraud Scheme

POCATELLO - David Hansen, 48, of Idaho Falls, pleaded guilty today to wire fraud, U.S. Attorney Bart M. Davis announced. Pursuant to a written plea agreement filed with the court, Hansen pleaded guilty to count 16 of the superseding indictment. The trial set for January 21, 2020 was vacated.

According to court records, Hansen was the Chief Executive Officer and a 90-percent partner in Yellowstone Partners, LLC, an investment management firm headquartered in Idaho Falls. Clients of Yellowstone Partners entrusted their monies to Yellowstone Partners to invest and manage on their behalf. In exchange, Yellowstone Partners earned fees for its services.  Yellowstone Partners’ fees were set forth in investment agreements between Yellowstone Partners and its clients.

According to court records, Yellowstone Partners’ clients’ monies were kept in accounts at third party custodians. Yellowstone Partners directed how the monies in client accounts were invested and how they were disbursed. This included submitting email billing requests to a third party custodian to take fees from client accounts and to deposit them into Yellowstone Partners’ own accounts.

According to court records, from 2008 through April of 2016, Hansen knowingly and intentionally devised a scheme to defraud clients of Yellowstone Partners by obtaining money or property by means of false and fraudulent pretenses, representations, and promises. Specifically, the scheme was to fraudulently bill clients for fees to which Yellowstone Partners was not entitled under the terms of the investment agreements or otherwise. Through this overbilling scheme, Hansen fraudulently obtained client funds from a third party custodian and used them to enrich himself and to fund Yellowstone Partners’ operations. For certain identified victims, Hansen personally submitted, or was carbon-copied, on 50 fraudulent overbilling requests to a custodian, which resulted in a loss of $2,675,856. For each of the overbillings, Hansen acted with the intent to deceive or cheat the victims.

As part of the plea agreement, Hansen agreed to pay full restitution to the victims of the wire fraud scheme, in an amount to be determined by the court at the time of sentencing. Further, Hansen agreed to a forfeiture judgment in the amount of restitution ordered by the court at the time of sentencing. Finally, Hansen agreed to cooperate with an Internal Revenue Service civil tax examination and assessment, and pay any unpaid tax due and owing, and accrued interest for his 2012 and 2013 Form 1040 joint income tax returns.

“Mr. Hansen was entrusted with other people’s money. He breached their trust. And his conduct over a prolonged period of time undermines the confidence of everyone who entrusts their money with others to invest,” said U.S. Attorney Davis. “By this prosecution and guilty plea, we hope to strongly deter others in Hansen’s position from engaging in the same behavior, and assure the investing public that those who do will be held fully accountable.”

“High-ranking corporate officials, such as Mr. Hansen, hold positions of trust not only in their companies, but also in the eyes of the public,” said IRS-CI Special Agent in Charge Andy Tsui. “IRS Criminal Investigation is committed to investigating individuals who abuse that trust by fraudulently using their corporations as personal piggy banks.”

For the wire fraud count, Hansen faces a statutory maximum of 20 years in prison, a $250,000 fine, and up to 3 years of supervised release.

Sentencing for Hansen is currently set for March 31, 2020, before Chief U.S. District Judge David C. Nye at the federal courthouse in Pocatello.

The case was investigated by Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation Division.

Former IT Administrator Pleads Guilty To Insider Trading Conspiracy Relating To Palo Alto Networks, Inc.

Janardhan Nellore Admits the Insider Trading Conspiracy Made More Than $7 Million in Illegal Profits

SAN JOSE – Janardhan Nellore pleaded guilty today to conspiracy to commit securities fraud, announced United States Attorney David L. Anderson and Federal Bureau of Investigation, Special Agent in Charge John F. Bennett.  The guilty plea was accepted by the Honorable Lucy H. Koh, United States District Judge.

In pleading guilty, Janardhan Nellore admitted to participating in an insider trading scheme by trading on material, nonpublic, inside information that he learned through his employment at Palo Alto Networks, Inc. (“PANW”), where Nellore worked as an IT administrator.  Nellore admitted that he obtained confidential information about PANW’s quarterly financial performance and traded on that information before PANW disclosed its financial results to the public.  Nellore admitted that he placed illegal inside trades in the brokerage accounts of other people for his own benefit and for the benefit of the account holders around PANW’s quarterly earnings announcements. 

Nellore also admitted that he tipped PANW’s nonpublic information to other people who then traded PANW securities around the company’s earnings announcements using this inside information.  Nellore admitted that the members of the conspiracy made more than $7 million as a result of their illegal insider trading. 

Nellore was indicted by a federal Grand Jury on December 12, 2019, and arraigned on December 17, 2019.  Nellore was charged with one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 1349, six counts of securities fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1348 and 2, and three counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1).   Under the plea agreement, Nellore pled guilty to Count One, conspiracy to commit securities fraud.

Nellore is currently in the custody of the United States Marshal. 

Nellore’s next appearance is scheduled for February 26, 2020, before Judge Koh for a status conference on sentencing.  The maximum statutory penalty for a violation of 18 U.S.C. § 1349 is 25 years and a fine of $250,000, plus restitution and forfeiture, if appropriate.  However, any sentence will be imposed by the court only after consideration of the United States Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Daniel Kaleba and Patrick R. Delahunty are prosecuting the case with the assistance of Susan Kreider.  The prosecution is the result of an investigation by the FBI, with the assistance of the San Francisco Regional Office of the Securities and Exchange Commission.

Albany Attorney Sentenced to 54 Months on Money Laundering, False Tax Filing Convictions

ALBANY, NEW YORK – Richard J. Sherwood, age 59, of Guilderland, New York, was sentenced today to 54 months in federal prison for conspiring to steal approximately $11.8 million from estates for which he served as an attorney and fiduciary.

The announcement was made by:

    United States Attorney Grant C. Jaquith;
    New York Attorney General Letitia James;
    James N. Hendricks, Special Agent in Charge of the Albany Field Office of the Federal Bureau of Investigation (FBI); and
    Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of IRS-Criminal Investigation.

Senior United States District Judge Lawrence E. Kahn also ordered Sherwood to serve a 1-year term of supervised release, to pay $5,560,505 in restitution, and to forfeit the following as proceeds of his crimes: 12 bank and brokerage accounts, and a house overlooking Galway Lake in Saratoga County.

In a related case prosecuted by the New York Attorney General’s Office, Sherwood pled guilty, in Albany County Court, to grand larceny in the first degree, and was sentenced this afternoon to a concurrent term of 3 to 9 years in state prison.

Sherwood’s co-conspirator, Thomas K. Lagan of Cooperstown, New York, was sentenced on December 11 to 78 months in federal prison, to run concurrent with a state sentence of 4 to 12 years in prison.

United States Attorney Grant C. Jaquith stated: “Our society depends on attorneys to be honest and ethical.  Richard Sherwood desecrated that trust when he stole millions of dollars from clients who relied on him to transfer their money to churches and other beneficiaries after they died.  His seven-year criminal conspiracy is all the more disturbing because Sherwood was also Guilderland Town Justice at the time.  Today’s sentence punishes Sherwood for his despicable conduct and requires him to repay every last dime that he stole.”

FBI Special Agent in Charge James N. Hendricks stated: “Richard Sherwood stole millions of dollars from estates meant for charities, churches, and civic organizations, while at the same time serving as an elected judge. Today’s sentencing affirms that the FBI has zero tolerance for attorneys who exploit their clients, and we will continue to work with our partners to make sure these criminals are brought to face justice.”

IRS-CI Special Agent in Charge Jonathan D. Larsen stated: “As demonstrated by the sentencing of co-conspirator Thomas Lagan last week and now Mr. Sherwood’s sentence today, IRS-Criminal Investigation continues to make tax law enforcement a key priority. Protecting victims is also one of our most important objectives. The sentences imposed in these cases illustrate the consequences of lying and stealing from the federal government and innocent taxpayers. They also underscore the government’s commitment to prosecuting tax fraud. Today’s sentence should serve as a warning and deterrent to others.”

Sherwood practiced primarily in the area of trusts and estates.  Starting in about 2006, he provided estate planning and related legal services to Capital Region philanthropists Warren and Pauline Bruggeman, and to Pauline’s sister, Anne Urban, all of Niskayuna, New York.  Sherwood was advising the Bruggemans when, in 2006, they signed wills directing that all their assets go to charities, churches and civic organizations, aside from bequests to Anne Urban and Julia Rentz, Pauline’s other sister.

Warren Bruggeman died in April 2009, and Pauline died in August 2011.  At the time of her death, Pauline had personal and trust assets valued at approximately $20 million.

In pleading guilty to charges of money laundering conspiracy and filing a false tax return, Sherwood admitted that after Pauline Bruggeman’s death, he and Lagan conspired to steal millions of dollars from her estate as well as from Anne Urban, who died in 2013.  Their conspiracy came to include the diversion and transfer to themselves of several million dollars belonging to Julia Rentz, a resident of Ohio, who was suffering from dementia at the time of the thefts and died in 2013.

Sherwood admitted that he and Lagan stole $11,831,563, and that nearly $3.6 million was transferred outright to him, with an additional $1.96 million transferred to an entity, Empire Capital Trust, LLC, that he and Lagan controlled.  Sherwood also admitted that he transferred to himself the Bruggeman family camp located on Galway Lake.

Sherwood admitted that he and Lagan induced Anne Urban to create a trust whose purpose, unknown to her, was to allow him and Lagan to transfer Bruggeman/Urban assets to themselves.  Sherwood and Lagan also set up more than 10 bank accounts, and created a limited liability company (Empire Capital Trust, LLC), to first conceal the theft of the money and then transfer the money to themselves.

Sherwood pled guilty to filing false federal tax returns in 2013 and 2015.  These returns were false because he did not report, as other income, about $4.7 million that he received from the fraudulent scheme.

Sherwood served as Guilderland Town Justice from 2014 until his arrest on February 23, 2018.  He resigned his position on March 5, 2018. He was disbarred on September 13, 2018.

The federal case was investigated by the FBI and IRS-CI, and was prosecuted by Assistant U.S. Attorney Michael Barnett.  Assistant U.S. Attorneys Adam J. Katz and Alicia G. Suarez prosecuted the asset forfeiture aspects of the case.

The state case was prosecuted by Assistant Attorneys General Christopher Baynes and Matthew Peluso of the Attorney General’s Public Integrity Bureau, under the supervision of Bureau Chief Travis Hill.  The Criminal Justice Division is led by Chief Deputy Attorney General Jose Maldonado.  The investigation was led by Investigator Mark Spencer of the Attorney General’s Investigations Bureau, under the supervision of Deputy Chief Investigator Antoine Karam.  The Investigations Bureau is led by Acting Chief John Reidy.  Financial analysis was provided by Principal Auditor Investigator Meaghan Scotellaro of the Forensic Audit Section under the supervision of Deputy Chief Auditor Sandy Bizzarro and Chief Auditor Edward J. Keegan, Jr.  Senior Analyst Sara Pogorzelski assisted in the investigation.