New Orleans Man Pleads Guilty to Defrauding Gulf Coast Claims Facility

NEW ORLEANS—Dwayne Smith, age 41, a resident of New Orleans, Louisiana, pled guilty in federal court today before U.S. District Judge Carl J. Barbier to one-count of mail fraud relating to a fraudulent application he made to the Gulf Coast Claims Facility (GCCF) for financial assistance during the aftermath of the Deepwater Horizon oil spill in the Gulf of Mexico, announced U.S. Attorney Jim Letten.

According to court documents, Smith left New Orleans before Hurricane Katrina hit this area. He was a resident and businessman in the state of Georgia from 2005 to 2010. Approximately four months after the Deepwater Horizon Oil Spill, Smith returned to New Orleans and set up a business known as “D&D Designs.” In October 2010, Smith submitted a false and fraudulent application to the GCCF stating his business had lost $100,000 in business profits as a result of the disaster. To substantiate his claim, Smith submitted false and fraudulent tax returns and business documents falsely stating his business had operated in New Orleans at a profit for the years 2007, 2008, 2009, and the first part of 2010. As a result of his false and fraudulent application and documentation, Smith received an emergency advance payment in the form of a $75,000 check on December 10, 2010 and a final GCCF claim payment of $25,000 on February 3, 2011.

Upon sentencing, scheduled for September 20, 2012, Smith faces a maximum term of imprisonment of 20 years, a $250,000 fine, full restitution to the Gulf Coast Claims Facility, three years of supervised release following imprisonment, and a $100 special assessment.

This case was brought as part of this District’s partnership with the National Center for Disaster Fraud (NCDF), a nationwide initiative to protect available funds and assistance for those victims of both natural and man-made disasters such as hurricanes, floods, tornadoes, and the recent Gulf oil spill. If you have knowledge of fraud, waste, abuse, or allegations of mismanagement involving disaster relief operations, you can contact the NCDF by either calling the hotline at (866) 720-5721, faxing the hotline at (225) 334-4707, e-mailing at disaster@leo.gov, or writing to National Center for Disaster Fraud, Baton Rouge, Louisiana, 70821-4909.

The case was investigated by the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Marvin Opotowsky, Disaster Fraud Coordinator.

Airline Employee Sentenced on Federal Fraud Charges

BUFFALO—U.S. Attorney William J. Hochul, Jr. announced today that Tinisha Tucker Anthony, 28, of Charlotte, North Carolina, who was convicted of conspiracy to commit fraud in connection with identification documents, was sentenced to two years’ probation by U.S. District Court Judge Richard J. Arcara.

Assistant U.S. Attorney Mary Catherine Baumgarten, who handled the case, stated that the defendant arranged for a birth certificate card to be issued by the city of Buffalo that contained the fingerprints and photograph of Derek Frank and the name of another person, namely, her stepson. In addition, Anthony used her position as a customer service representative for U.S. Airways at the Raleigh-Durham Airport to arrange for Derek Frank to fly between Buffalo, New York and Phoenix, Arizona using the birth certificate card in the name of a her stepson.

Derek Frank was convicted of conspiracy to possess with intent to distribute, and to distribute, 100 kilograms or more of marijuana, and is scheduled to be sentenced by Judge Arcara on June 1, 2012. Former Transportation Safety Administration employee Minnetta Walker was convicted of conspiracy to defraud the United States for assisting Derek Frank in bypassing airport security and was sentenced to two years in prison. Regina McCullen was convicted of conspiracy to commit fraud in connection with identification documents for illegally producing a birth certificate card used by Derek Frank and was sentenced to two years’ probation. Miguel Guzman was convicted of conspiracy to possess with intent to distribute marijuana for conspiring with Derek Frank in his drug trafficking activities and was sentenced to three years’ probation.

The plea is a part of the ongoing investigation on the part of special agents of the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota; Transportation Safety Administration, U.S. Department of Homeland Security, under the direction of Federal Security Director, Derek DePietro; U.S. Immigration and Customs Enforcement, Homeland Security Investigations, under the direction of James C. Spero; and the U.S. Drug Enforcement Administration, under the direction of Wilbert L. Plummer, Acting Special Agent in Charge, New York Field Division.

Former Lake St. Louis Businessman Indicted on Fraud Charges

ST. LOUIS—The United States Attorney’s Office announced today that James France was indicted for wire fraud in connection with an advance fee scheme.

According to the indictment, France held himself out as being in the business of commercial lending, and operated his business under various names such as AmBanc, Commercial Capital Banc and U.S. Underwriting. The indictment alleges that from around 2005 until sometime in 2010, France executed a scheme to obtain money from others by falsely representing that he had the ability to obtain financing for their commercial projects. The indictment alleges that France made numerous false representations to make himself appear to be a successful businessman, including claiming that he owned or was involved in coal mining businesses, that he once owned a bank and that he was a direct lender. According to the indictment, in order to secure his services, France persuaded clients to pay him a deposit in advance which was to be used to cover the expenses of securing funding for their projects. Instead, he allegedly used clients’ money for other purposes such as personal expenses, paying himself a salary and giving money to others.

JAMES FRANCE, currently residing in Virginia, was indicted by a federal grand jury on three felony counts of wire fraud. He appeared in federal court this morning.

If convicted, each count carries a maximum penalty of 20 years in prison and/or fines up to $250,000. In determining the actual sentences, a Judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.

This case was investigated by the Federal Bureau of Investigation and the Lake St. Louis Police Department. Assistant United States Attorney Reginald Harris is handling the case for the U.S. Attorney’s Office.

As is always the case, charges set forth in an indictment are merely accusations and do not constitute proof of guilt. Every defendant is presumed to be innocent unless and until proven guilty.

Atlanta Man Convicted by Jury for Multi-Million Dollar Fraud Schemes

Defendant Refused to Appear in Court During Trial

ATLANTA, GA—After a five-day trial, a jury in federal district court has returned a guilty verdict this morning against JEAN-DANIEL PERKINS, 37, of Atlanta, Georgia, on charges of bank fraud, credit card fraud, and aggravated identity theft. PERKINS defrauded American Express, SunTrust Bank, and hundreds of individual credit card holders of millions of dollars.

United States Attorney Sally Quillian Yates said of today’s verdict, “This defendant was a predatory fraudster of the worst sort. He bought, sold, and traded in other people’s personal information to enrich himself, indifferent to the cost to others.”

FBI Atlanta Special Agent in Charge Brian Lamkin said, “This case provides a not often seen inside look into an elaborate and broad fraud based operation such as Perkins’ and demonstrates the FBI’s willingness to dedicate its undercover resources toward exposing such operations. The FBI is pleased with its role in bringing Perkins to justice in this matter.”

According to United States Attorney Yates and the evidence and testimony at trial: From November 2008 through February 2010, PERKINS executed several different fraud schemes in Atlanta. An undercover FBI agent, posing as an employee of a company with financial data, made contact with PERKINS, offering to make the sensitive financial data available to PERKINS. The undercover agent ultimately met in person with PERKINS, who gave the agent a dozen counterfeit credit cards, and the two discussed a wide variety of criminal schemes involving financial data and credit cards. The FBI agent recorded approximately 30 telephone calls with PERKINS in which they discussed the schemes, and how the maximum amounts of money could be drawn from victim financial institutions and their customers.

The evidence at trial showed that, in one of his fraud schemes, PERKINS purchased information needed to make credit cards, such as account numbers, from a source in the Ukraine. He then encoded credit cards with the data and used the cards. The dozen credit cards PERKINS gave to the FBI agent were in fact coded with information bought from the source in the Ukraine.

The evidence at trial also showed that from February 2009 through February 2010, PERKINS engaged in another fraud scheme in which he gained internal SunTrust account information and impersonated the account holders, resulting in the transfer of money from victim accounts to accounts under his control. In one instance involving an account held by a local construction company, PERKINS impersonated the company’s president, signed up for online banking services from SunTrust, and authorized transfers of over $3,500,000 from the company’s account to approximately 100 accounts under his control. Fortunately, SunTrust was able to recover the transferred money before PERKINS spent it.

In yet another fraud scheme, PERKINS set up numerous fictitious merchant accounts with American Express. The evidence at trial showed that PERKINS set up the merchant accounts at American Express to allow him to accept American Express credit cards as payment for nonexistent goods and services. PERKINS, using stolen American Express credit card account numbers, then ran American Express credit card transactions through the merchant accounts, resulting in American Express paying millions of dollars to the fictitious merchants. The American Express credit cards used by PERKINS belonged to hundreds of individual credit card holders.

On the day of PERKINS’ arrest, law enforcement recovered dozens of counterfeit credit cards from PERKINS, as well as digital media connecting PERKINS to the fraud schemes. On the same day, law enforcement seized from PERKINS’ apartment hundreds of counterfeit credit cards, items used to make counterfeit credit cards, including a device used for encoding cards with stolen credit card information, machines used to make counterfeit identification cards, items purchased with counterfeit credit cards, and more digital evidence linking PERKINS to several of the fraud schemes.

PERKINS, who is in custody, refused to attend court during the trial. Instead, he viewed a live video and audio feed of the proceedings while remaining in a cell at the courthouse.

PERKINS could receive a maximum sentence of 30 years for each count of conspiracy to commit bank fraud, 30 years for each count of bank fraud, 2 years for aggravated identity theft, a total of 50 years for the credit card fraud counts, and a total fine of up to $33 million. Sentencing is scheduled for October 7, 2011 at 3:00 p.m. before United States District Judge Carnes. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

This case was investigated by Special Agents of the Federal Bureau of Investigation and the Duluth Police Department.

Assistant United States Attorneys Lawrence Sommerfeld, Kurt Erskine, Robert McBurney, and Nick Oldham are prosecuting the case.

For further information please contact Sally Q. Yates, United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

Federal Fraud Charges

Former CEO of KB Home Convicted of Federal Fraud Charges Related to Stock Option Backdating in Which He Awarded Himself Millions of Dollars in Compensation


April 22, 2010 - LOS ANGELES—Bruce E. Karatz, a former CEO and chairman of the board of KB Home, was convicted today of four felony counts related to a stock option backdating scheme in which he awarded himself and other KB executives millions of dollars in undisclosed stock-based compensation.

Karatz, 64, of Bel Air Estates, was found guilty of two counts of mail fraud, one count of making false statements in a quarterly report filed with the Securities and Exchange Commission, and one count of making false statements to KB’s outside accounting firm, Ernst & Young. The convictions stem from Karatz’s attempts in 2006 to cover-up the fact that he had been backdating his own and other executive’s stock options for the preceding seven years. The cover-up included failures to disclose the stock-option backdating in filings with the Securities and Exchange Commission and to KB’s outside auditors.

As a result of today’s guilty verdicts, Karatz faces a statutory maximum sentence of 80 years in federal prison. United States District Judge Otis D. Wright II, who presided over a six-week trial, is scheduled to sentence Karatz on September 8. Karatz was convicted of concealing a backdating scheme in which he participated, a scheme that hid the true nature and value of stock-based compensation KB had actually been awarding to Karatz and other KB executives through its stock-option granting practices. During the backdating scheme, Karatz caused below-market exercise prices to be selected for stock options granted to him and other KB executives by using hindsight to backdate the grant date of these options to the date with the lowest price point for KB’s stock.

After KB commenced an internal investigation into its option-granting practice in May 2006, Karatz concealed that he had backdated KB’s stock option grants during the preceding seven years. Among other things, Karatz caused a false and misleading internal report to be presented to KB’s Audit Committee and to Ernst & Young. The false report said there was “no evidence of the backdating of options or other manipulation by management.” KB’s Audit Committee and other members of KB’s management relied on this false and misleading internal report when filing a Form-10Q for the second quarter of 2006 that failed to disclose any irregularities in KB’s past option-granting practices.

After KB discovered irregularities in its reporting, KB was unable to timely file its third quarter 10Q in October 2006. When KB ultimately filed its 2006 third quarter Form-10Q and its 2006 Form-10K in February 2007, the company was forced to recognize, for the first time, more than $36 million in additional stock-based compensation expenses and a total increase of more than $70 million in accrued liabilities arising from adjustments required to address the backdated stock options. The jury that convicted Karatz acquitted him on 16 other counts.

This case was investigated by the Federal Bureau of Investigation.