10 Tips to Avoid Being Scammed by Unscrupulous Practices in the Used Car Industry

The following post appears courtesy of Ken Jost, Deputy Director, Consumer Protection Branch, Civil Division

A man in Seattle purchased a pickup truck with 68,900 miles on the odometer.  One of the truck’s wheels fell off while his son was driving. A small business owner in Wyoming purchased a pickup truck with 101,000 miles showing on the odometer. After paying $10,000 for the truck and another $3,000 for repairs, the truck still needed a lot of work. He was stuck trying to operate his business with an unreliable vehicle and no cash for a replacement.

Were these people merely unfortunate, or were they victims of crime?  The truck the Seattle man purchased actually had more than 190,000 miles on it. An odometer rollback specialist, or “clocker,” had turned back the odometer over 100,000 miles to inflate the truck’s value.  The truck in Wyoming had over 204,000 miles, but had fallen into the hands of a clocker who rolled back the odometer and cheated the buyer.

Each year Americans buy and sell around 40 million used vehicles with a total value in the hundreds of billions of dollars.

The Civil Division’s Consumer Protection Branch brings both civil and criminal charges against wrongdoers, prosecuting a wide variety of frauds ranging from fraudulent business opportunities to mortgage frauds to these types of criminal car fraud schemes.

This multi-state odometer fraud activity makes it difficult or impossible for most local law enforcement agencies to investigate effectively. That’s why most cases are state-federal joint efforts, pairing local and state law enforcement agents with criminal investigators from the Office of Odometer Fraud Investigation of the National Highway Traffic Safety Administration in an effort to gather evidence from multiple jurisdictions.

Two common types of odometer tampering schemes are (1) Large-scale rings buy huge numbers of vehicles at wholesale, roll back the odometers, wash the titles and resell the vehicles wholesale. These cars can end up anywhere, including a used car lot of a local new car dealer; and (2) People who pretend to be selling personal vehicles through classified ads or Internet advertisements sites might tell you it’s their car, or a relative’s that they are selling. In fact, the car may be something they bought at auction or from some other commercial source and have rolled back the odometer.

Be wary of any personal sale involving someone other than the owner named on the title. Run as fast as you can from any sale where the seller won’t show you the title, where the title has any indication of alteration of names or numbers, or where the title is newly issued, especially if it is an out-of-state title.

Wherever you buy a used car, have a trusted mechanic check it out to see if the odometer reading is consistent with what the mechanic sees under the hood and in the dash. Ask the mechanic to check the dash for loose, removed or blown out light bulbs. Odometer tampering can set off warning lights and correct manufacturer codes are required to reset them. Also, ask the shop to check for any signs of a rebuilt wreck or water damage.

Here are some additional tips to guard against odometer tampering:

 1.Look for loose screws or scratch marks around the dashboard. This may signal that a mechanical odometer which has been manipulated with tools.

 2.Also on mechanical odometers, check to make sure that the digits in the odometer are lined up straight — particularly the 10,000 digit.
 3.Test drive the car and see if the speedometer sticks.
 4.Check for service stickers inside the door or under the hood that may give the actual mileage. The bad guys try to find these as well, but sometimes miss one.
 5.Look in the owner’s manual to see if maintenance was listed or if pages that might have shown high mileage were removed.
 6.Ask the dealer whether a computer warranty check has been run on the car.
 7.Use a commercially-available computer search program that checks for mileage alterations.  Some car dealers will give you one of these for free if you ask for it.
 8.Ask to see the title documents and look to see if the mileage reading on the documents has been altered.
 9.Look to see if the steering wheel was worn smooth.  Look for other signs of excessive wear on the arm-rest, the floor mats, the pedals for the brakes and gas, and the area around the ignition. If these items were recently replaced, that could also indicate efforts to hide the car’s true use and mileage.
10.Don’t assume that mileage is accurate just because the vehicle has an electronic odometer.

Most important, and worth repeating: have a mechanic you trust check out the car.

Special agents and officers seize more than $4.8 million in fake NFL merchandise and seize 307 websites during 'Operation Fake Sweep'

INDIANAPOLIS — Speaking at a National Football League (NFL) news conference on Thursday, U.S. Immigration and Customs Enforcement (ICE) Director John Morton, U.S. Customs and Border Protection (CBP) Director of Field Operations in Chicago David Murphy and NFL Vice President for Legal Affairs Anastasia Danias announced the record-breaking results of a nationwide enforcement operation targeting stores, flea markets and street vendors selling counterfeit game-related sportswear throughout the country. Special agents and officers also targeted illegal counterfeit imports into the United States, and seized hundreds of websites engaged in counterfeiting and piracy online. The initiative, dubbed Operation Fake Sweep, commenced Oct. 1, 2011.

Fake jerseys, ball caps, t-shirts, jackets and other souvenirs are among the counterfeit merchandise and clothing confiscated by teams comprised of: ICE's Homeland Security Investigations (HSI), U.S. Customs and Border Protection (CBP), U.S. Postal Inspection Service (USPIS), Indianapolis Metropolitan Police Department and the Indiana State Police – all in partnership with the NFL.

'Hard goods' seizures

Special agents from HSI and officers with CBP operated in multiple teams with the NFL and various law enforcement agencies throughout the nation to identify illegal shipments imported into the U.S., as well as stores and vendors selling counterfeit trademarked items. With three days left before Super Bowl XLVI, these teams have already seized 42,692 items of phony Super Bowl-related memorabilia along with other counterfeit items to date for a total take of more than $4.8 million – up from $3.72 million last year.

During this operation, an additional 22,570 items of counterfeit merchandise and clothing representing other sports leagues, including Major League Baseball, National Basketball Association and National Hockey League were seized by law enforcement. In total, this operation netted 65,262 counterfeit items worth $6.4 million.

"While most people are focusing on whether the Patriots or Giants will win on Sunday, we at ICE have our sights on a different type of victory: defeating the international counterfeiting rings that illegally profit off of this event, the NFL, its players and sports fans," said ICE Director Morton. "In sports, players must abide by rules of the game, and in life, individuals must follow the laws of the land. Our message is simple: abiding by intellectual property rights laws is not optional; it's the law."

"The NFL is committed to protecting fans and local businesses from being victimized by counterfeiters who are looking to profit illegally off of the public's enthusiasm for the NFL," said NFL Vice President Danias. "We are grateful for Homeland Security Investigations' tireless efforts in combating intellectual property theft and are pleased to be working along with them and the Indianapolis Metropolitan Police Department on this important issue."

Website seizures

Furthering HSI efforts to combat counterfeiting and piracy online, special agents seized a total of 307 websites. Sixteen of the sites illegally streamed live sporting telecasts over the Internet, including NFL games. Two hundred ninety-one website domain names were illegally selling and distributing counterfeit merchandise.

Additionally, Yonjo Quiroa, 28, of Comstock Park, Mich., was arrested Wednesday by special agents with HSI. He is charged with one count of criminal infringement of a copyright related to his operation of websites that illegally streamed live sporting event telecasts and pay-per-view events over the Internet. Quiroa operated nine of the 16 streaming websites that were seized, and he operated them from his home in Michigan until yesterday's arrest.

The website seizures during Operation Fake Sweep represent the 10th phase of Operation In Our Sites, a sustained law enforcement initiative targeting counterfeiting and piracy on the Internet. The 307 websites are in the process of being seized by law enforcement, and will soon be in the custody of the federal government. Visitors to these websites will then find a seizure banner that notifies them that the domain name has been seized by federal authorities and educates them that willful copyright infringement is a federal crime.

American business is threatened by those who pirate copyrighted material and produce counterfeit trademarked goods. Criminals are attempting to steal American ideas and products and sell them over the Internet, in flea markets, in legitimate retail outlets and elsewhere. Intellectual property (IP) thieves undermine the U.S. economy and jeopardize public safety. American jobs are being lost, American innovation is being diluted - and organized criminal enterprises are profiting from their increasing involvement in IP theft.

Since the launch of Operation In Our Sites in June 2010, the HSI-led National Intellectual Property Rights Coordination Center (IPR Center) has seized a total of 669 domain names.

Operation Fake Sweep continues

Operation Fake Sweep will continue this weekend at Super Bowl events and venues throughout the Indianapolis-area and around the nation.

HSI, CBP, USPIS and other law enforcement agencies partnered with the HSI-led IPR Center to combat intellectual property theft, including the illegal use of registered trademarks, trade names and copyrights of NFL Super Bowl XLVI merchandise. The IPR Center is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy. The IPR Center uses the expertise of its 20 member agencies to share information, develop initiatives, coordinate enforcement actions and conduct investigations related to IP theft. Through this strategic interagency partnership, the IPR Center protects the public's health and safety, the U.S. economy and the war fighters.

The operation was spearheaded by the IPR Center in coordination with the Department of Justice's Computer Crime & Intellectual Property Section (CCIPS) and seven U.S. Attorneys' Offices, including: District of Colorado, District of Maryland, District of Minnesota, Western District of Michigan, Southern District of New York, Southern District of Texas and Western District of Texas.

To report IP theft or to learn more about the IPR Center, visit IPRCenter.gov.

Anchorage Meth Dealer Receives 120-Month Sentence

ANCHORAGE—United States Attorney Karen L. Loeffler announced today, February 1, 2012, that on January 31, 2012, Son Chieng Saephan, a resident of Anchorage, Alaska, was sentenced in federal court in Anchorage to 120 months for his conviction of possession of a controlled substance with intent to distribute.

United States District Court Judge Timothy M. Burgess imposed the sentence on 21 year-old Saephan.

According to Special Assistant United States Attorney Erin White, who prosecuted the case, Saephan sold 8.8 grams of pure methamphetamine to a buyer on March 18, 2010. On April 2, 2010, Saephan sold 6.0 grams of pure methamphetamine to the same buyer. Finally, on June 10, 2010, Saephan sold 10.5 grams of pure methamphetamine to the same buyer. On June 10, 2010, law enforcement also found the defendant in possession of 436 grams of pure methamphetamine, along with a Smith and Wesson 9mm handgun, drug paraphernalia and over $5,000 in cash.

In fashioning a sentence, the court noted the serious nature of Saephan’s crimes, along with the need for community protection and deterrence of criminal behavior. Saephan will also forfeit his interest in the Smith and Wesson 9mm handgun and $3,831 in cash to the United States.

Ms. Loeffler commended the Federal Bureau of Investigations Safe Streets Task Force, comprised of FBI agents and officers from the Anchorage Police Department, for the investigation leading to the successful prosecution of Saephan. SAUSA White is a prosecutor in the U.S. Attorney’s Office who is funded by the Municipality of Anchorage for the purpose of prosecuting gang-related and violent crime cases.

New Jersey Vending Company Executive Charged with Defrauding Pepsi of $2.9 Million

NEWARK, NJ—The chief financial officer of New Jersey vending company Culinary Ventures Vending was arrested this morning in Union, N.J., by special agents of the FBI and IRS-Criminal Investigation on charges he defrauded Pepsi Bottling Group of approximately $2.9 million, U.S. Attorney Paul J. Fishman announced.

Joseph Belasco, 62, of Cedar Grove, N.J., was indicted by a federal grand jury on one count of conspiracy to commit mail fraud, five counts of mail fraud, and one count of money laundering for allegedly participating in a decade-long fraud to receive commissions for customer referrals for which he was not responsible.

Belasco is expected to appear this afternoon before U.S. Magistrate Judge Patty Shwartz in Newark federal court. He will be arraigned on the Indictment before U.S. District Judge Jose L. Linares in Newark on a date to be determined.

According to the indictment unsealed today:

In the spring of 1998, Belasco, along with a business associate identified in the indictment as an unindicted coconspirator, created Impact Cause Related Marketing as a subsidiary of Culinary Ventures Vending, a company that placed and stocked vending machines in private and commercial facilities such as state colleges and entertainment venues. The purpose of Impact Marketing was allegedly to provide Pepsi Bottling Group—an independent corporation that served as the largest bottler of Pepsi products in the United States—with leads for acquiring new customers to purchase its cans, bottles, and fountain products. In return, Impact Marketing and Belasco would receive commissions as long as a client remained a Pepsi customer. According to its contract, Impact Marketing would also receive quarterly rebates based on the amount of Pepsi product a customer purchased on an annual basis.

A Pepsi insider, also identified in the indictment as a coconspirator, assigned to Impact Marketing new customers that he developed in his position as a Pepsi representative. He also reassigned existing Pepsi customers to the list of new customers allegedly referred by Impact Marketing, creating additional commissions for leads that Belasco was not responsible for generating.

Between 1998 and 2008, Impact Marketing received approximately $2.9 million in commissions and rebates as a result of the scheme.

Belasco also issued checks from Impact Marketing to the Pepsi insider and his coconspiring spouse for consulting services she never performed and for fees he never earned.

Over the 10-year period of the fraud, the Pepsi insider and his spouse received approximately $1.1 million in phony fees and commissions.

All six mail fraud-related charges each carry a maximum potential penalty of 20 years in prison and a $250,000 fine. The money laundering charge carries a maximum potential penalty of 20 years in prison and a $500,000 fine.

Additionally, the indictment seeks the forfeiture of approximately $4 million from Belasco, representing the approximately $2.9 million in fraudulent payments he received and approximately $1.1 million in fraudulent payments he made from Impact Marketing to coconspirators.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward; and special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge JoAnn S. Zuniga, with the investigation leading to the Indictment.

The government is represented by V. Grady O’Malley, Senior Litigation Counsel of the U.S. Attorney’s Office Organized Crime/Gangs Unit in Newark.

The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Defense counsel: John A. Azzarello Esq., Chatham, N.J.

Principal of Offshore Brokerage Firm and Las Vegas Stock Promoter Convicted in Miami for $7 Million Stock Manipulation Scam

WASHINGTON—The principal of a Costa Rican brokerage firm and a Las Vegas stock promoter were each convicted yesterday in the Southern District of Florida of all charges for their roles in a stock manipulation scheme that defrauded investors, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Chief Postal Inspector Guy Cottrell of the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.

Jonathan Curshen, 47, the principal of Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks, was found guilty of conspiracy to commit securities fraud, wire fraud, and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering. Nathan Montgomery, 30, a Las Vegas stock promoter, was found guilty of conspiring to commit securities fraud and wire fraud.

The evidence at trial showed that in January and February 2007, Curshen, of Costa Rica and Sarasota, Fla., and Montgomery, of Las Vegas, were involved in a scheme to illegally manipulate the stock price of a company called CO2 Tech (ticker CTTD), which traded on the Pink Sheets, an inter-dealer electronic quotation and trading system.

Evidence at trial showed that Curshen’s and Montgomery’s co-conspirators controlled the outstanding shares of CO2 Tech, which were used in the stock manipulation scheme. Montgomery and his conspirators engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.

According to the evidence at trial, Montgomery and his co-conspirators, Robert Weidenbaum, Timothy Barham Jr., Ryan Reynolds and others fraudulently “pumped” the market price and demand for CO2 Tech stock through these press releases and coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors. The evidence showed that as Montgomery and his conspirators pumped the price of the stock, Curshen and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea and Sentry Global Securities by selling the shares at the direction of their conspirators to the general investing public. The evidence showed that these shares, which became virtually worthless, were purchased by unsuspecting investors, including investors in the Southern District of Florida. The evidence showed that Montgomery, Weidenbaum, Reynolds and Barham were paid approximately $1 million in cash by their conspirators to participate in sham stock trades of CO2 Tech. The cash was delivered to Miami via a private jet from an airport outside New York.

The evidence further showed that, from approximately 2003 through 2008, Curshen operated Red Sea as a money laundering hub in Costa Rica that established bank accounts and brokerage accounts in the United States and Canada under false pretenses and through nominee owners. The evidence further showed that Curshen and his co-conspirators laundered the proceeds of the stock fraud from accounts in the United States to an account in Canada, all in an effort to conceal and disguise the nature and source of the proceeds.

At sentencing, Curshen faces a sentence of up to five years in prison on the conspiracy to defraud count, and up to 20 years on each count of mail fraud and money laundering conspiracy. Montgomery faces a sentence of up to five years for the conspiracy to defraud count. The defendants are scheduled to be sentenced by Judge Richard W. Goldberg on May 11, 2012.

Stock promoters Weidenbaum, Barham, and Reynolds, who were also charged in this case, previously pleaded guilty to conspiring to commit securities fraud, wire fraud and mail fraud. They also will be sentenced by Judge Goldberg on May 9, 2012. Michael Simon Krome, a securities attorney from New York, who participated in the conspiracy and evaded federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation, also pleaded guilty to conspiring to commit securities fraud, mail fraud, and wire fraud.

The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation. The SEC has a pending parallel civil case. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.

This prosecution is part of efforts under way by the 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.

Bessemer Man Charged with Food Stamp Fraud and Filing False Immigration Documents

BIRMINGHAM—Federal prosecutors today charged a Bessemer man and former Jefferson County school teacher with food stamp fraud and falsely claiming a woman as his wife on immigration forms, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick J. Maley and ICE’s Homeland Security Investigations Special Agent in Charge Raymond R. Parmer Jr.

The U.S. Attorney’s Office charged SALEEM ABDUL RASHEED, 30, in a two-count information filed today in U.S. District Court in Birmingham.

Count one of the information charges that on April 2, Rasheed signed a Department of Homeland Security form I-751, a petition to remove conditions of residence, for a woman whom he claimed to be his wife. Rasheed was, however, legally married to another woman. Count two charges that from October 2009 until April 2010, Rasheed received Family and Food Assistance totaling $5,551 while claiming that he was unemployed, but he was, in fact, working as a teacher for the Jefferson County Board of Education. The government’s charge includes a Notice of Forfeiture seeking to recover the $5,551 Rasheed obtained through the fraud.

The maximum sentence for knowingly making a false statement on a petition to remove conditions on residence is 10 years in prison and a $250,000 fine. The maximum sentence for food stamp fraud is 20 years in prison and a $250,000 fine.

The FBI and Immigrations and Customs Enforcement’s Homeland Security Investigations investigated the case. Assistant United States Attorney Michael W. Whisonant is prosecuting the case.

Missouri Woman Pleads Guilty for Role in the Vandalism and Arson of a Mobile Home

Teresa Witthar, 43, of Independence, Mo., pleaded guilty today in U.S. District Court in Kansas City to federal hate crime charges in connection with the vandalism and arson of a bi-racial man’s mobile home in 2006.

Witthar was indicted by a federal grand jury in August 2011, on one count of conspiracy, one count of violating the Fair Housing Act, one count of using fire to commit a felony, two counts of obstruction of justice and two counts of making false statements for her role in the vandalism and fire of Nathaniel Reed’s mobile home.  Witthar entered a guilty plea to one count of conspiracy, one count of violating the Fair Housing Act and one count of obstruction of justice. 

According to the indictment, in the summer of 2006, Witthar, Charles Wilhelm and David Martin conspired to intimidate and scare Nathaniel Reed, a bi-racial man, into moving out of the Highland Manor Mobile Home Park in Independence, Mo., in part because of his race.  On or about June 6, 2006, Witthar, along with Wilhelm and Martin, entered Reed’s mobile home, without his permission, and vandalized it by writing at least fifteen racially derogatory slurs on the walls of his trailer.  Two days later, Witthar drove Martin and Wilhelm to a neighbourhood behind Reed’s mobile home so that they could set fire to Reed’s trailer without being detected.   Witthar waited in her vehicle while they set the fire and then provided them a ride back to the Highland Manor Mobile Home Park.

In the spring of 2011, Witthar unsuccessfully attempted to persuade another individual to testify falsely in front of a grand jury about her role in the vandalism and fire.  

“Every American has the right to enjoy their home free from racially-motivated violence, threats and intimidation,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division of the United States Department of Justice. “The Civil Rights Division will aggressively prosecute those who violate this right.”

 “When threats and vandalism failed to drive their victim out of the neighborhood, these conspirators escalated their racially-motivated campaign by burning down his home,” said Beth Phillips, U.S. Attorney for the Western District of Missouri. “The Constitution protects each of us from racially-motivated intimidation, and this defendant will be held accountable for violating Mr. Reed’s civil rights.”

 “Today’s guilty plea exemplifies the FBI’s continued long term commitment to aggressively pursue justice for those who are victims of racially motivated crimes,” said Brian A. Truchon, Special Agent in Charge of the Kansas City Division of the FBI.

The guilty plea was the result of a cooperative effort between the U.S. Attorney’s Office for the Western District of Missouri, the Civil Rights Division of the Department of Justice, and the Kansas City Division of the FBI.   The case is being prosecuted by First Assistant U.S. Attorney David Ketchmark for the Western District of Missouri and Trial Attorney Sheldon L. Beer of the Civil Rights Division’s Criminal Section.

Lawton Woman to Serve 20 Months in Prison and Pay Nearly $840,000 for Embezzlement and Filing a False Tax Return

OKLAHOMA CITY—SANDRA JOHNSON, of Snyder, Oklahoma, was sentenced by United States District Judge Timothy D. DeGiusti to serve 20 months in prison for embezzling from a health care benefit program and signing a false personal income tax return, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma.

From May of 2006 until the spring of 2009, Ms. Johnson worked as the office manager for a pediatrician in Lawton. Her duties included depositing checks from insurance companies that were intended to pay for medical services. At her plea hearing, Johnson admitted she cashed many of these insurance checks during 2007 and 2008 at the drive-through at Liberty National Bank in Lawton and used the cash for personal purposes. Ms. Johnson also admitted that she failed to report the cash from these diverted insurance checks as income on her 2008 personal federal income tax return.

Johnson was charged on March 21, 2011, and pled guilty on May 2, 2011.

At the sentencing hearing today, Judge DeGiusti ordered that Johnson pay restitution in the amount of $839,559.48, which includes $616,229.48 to the pediatrician, $25,000 to an insurance company, and $198,330.00 to the IRS. In addition, Johnson was ordered to serve three years of supervised release and perform 104 hours of community service following her release from prison.

These charges are the result of an investigation conducted by the Federal Bureau of Investigation and the Criminal Investigations Division of the Internal Revenue Service. The case was prosecuted by Assistant U.S. Attorneys Scott E. Williams and Chris M. Stephens.

Reference is made to court filings for further information.

Frederick Woman Sentenced for Embezzlement from Bank in Frederick

OKLAHOMA CITY—Today, KRISTAL LEANN LUCAS, 39, from Frederick, Oklahoma, was sentenced by United States District Judge Timothy D. DeGiusti to serve 12 months for embezzlement from the First National Bank (FNB) located in Frederick, Oklahoma, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma.

According to court records, Lucas was employed by FNB as a teller at their branch location in Frederick, Oklahoma. From 2007 through 2010, Lucas embezzled from the bank and created false deposit tickets to cover her criminal activity. Over this period, she embezzled $62,239.45. Lucas was charged on March 18, 2011, and pled guilty on May 23, 2011.

At the sentencing hearing today, Judge DeGiusti ordered that Lucas serve the 12 month sentence by serving six months’ incarceration and six months on house arrest. Following that term, she was ordered to serve three years of supervised release following the term of her imprisonment and perform 104 hours of community service. She was also ordered to pay $62,239.45 in restitution to the bank.

This case was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Daniel P. Lennington.

Reference is made to court filings for further information.

New York Top Stories: Bond Manipulation

Defendants’ Alleged Conduct Contributed to More Than $2.6 Billion Dollar Write-Down in Bank’s Reported Net Income; Two Defendants Have Pled Guilty and Are Cooperating with the Government’s Investigation

Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of charges against KAREEM SERAGELDIN, DAVID HIGGS, and SALMAAN SIDDIQUI, respectively, managing director/global head of structured credit, managing director, and vice-president in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”). The defendants are charged with fraudulently inflating the prices of asset-backed bonds which comprised subprime residential mortgage backed securities (“RMBS”) and commercial mortgage backed securities (“CMBS”) in Credit Suisse’s trading book in late 2007 and early 2008. The defendants’ alleged manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial results. SERAGELDIN, HIGGS, and SIDDIQUI were able to secure significant year-end bonuses for themselves since bonus amounts were largely based on trading books’ profitability. SERAGELDIN’s 2007 bonus was over $1.7 million and his Incentive Share Unit Award was more than $5.2 million. The latter was rescinded after Credit Suisse discovered the alleged fraud. HIGGS and SIDDIQUI each pled guilty today, to one count of conspiracy to falsify books and records and commit wire fraud, for their roles in the scheme. They are cooperating with the government’s investigation.

Manhattan U.S. Attorney Preet Bharara said: “While the residential housing market was in free fall, and shock waves were reverberating throughout the economy, these defendants decided they were above the rules of the market and above the law. As alleged, they papered over more than a half billion dollars in subprime mortgage-related losses to secure for themselves a big payday at the same time that many people were losing their homes and their jobs.”

FBI Assistant Director in Charge Janice K. Fedarcyk stated: “The defendants’ overvaluation of mortgage-backed securities benefitted them in the short run, and contributed to Credit Suisse incurring a two billion-dollar-plus write-down when discovered. While the housing market was collapsing, the defendants profited, not by correctly predicting the trend, but by cooking the books.”

The following allegations are based on the Indictment filed against SERAGELDIN and the Informations to which HIGGS and SIDDIQUI pled guilty:

The Defendants’ Roles at Credit Suisse

SERAGELDIN was employed at Credit Suisse as a managing director. He held the position of global head of the Structured Credit Group in the Securities Department of Credit Suisse’s Investment Banking Division, and divided his time between the company’s New York, and London offices. The Structured Credit Group held and traded ABS (“Asset Backed Security”) cash bonds, which included RMBS and CMBS. SERAGELDIN oversaw and managed a number of trading books, including a trading book known as “ABN1.” The ABN1 book was comprised primarily of several thousand individual long and short subprime-related positions, and also included other securities. The long positions consisted of, among other things, various types of cash securities, including AAA-rated and non-AAA-rated cash bonds. Until March 2008, ABN1 had a net asset value of approximately $5.35 billion, approximately $3.71 billion of which consisted of ABS cash bonds, including RMBS and CMBS positions.

HIGGS, who reported directly to SERAGELDIN, was also employed as a managing director at Credit Suisse during the relevant time period, and was based in Credit Suisse’s London office. SIDDIQUI was employed as a trader and Vice President at Credit Suisse and was based in the New York office. Together with an unnamed co-conspirator (“CC-1”), SIDDIQUI was responsible for the day-to-day marking of the value of certain trading books overseen by SERAGELDIN.

Pricing of Mortgage-Backed Securities

Credit Suisse traders were required at all relevant times to price securities they held at their fair value, that is, on a “mark-to-market” basis, determined by reference to the current market price of the asset or liability, or the current price for a similar asset or liability. In the absence of a liquid market, Credit Suisse traders were required to look to other indicia in order to determine the fair value of the assets on their books. During this time, the ABX Index served as a benchmark for certain securities backed by home loans. It was widely understood within Credit Suisse that traders were to consult the corresponding ABX indices when pricing RMBS bonds and related products.

The Defendants’ Bond Pricing Scheme

The deterioration throughout 2007 of the real estate market in the United States, including the subprime housing market, led to significant reductions in valuations of mortgage-backed securities. As mortgage delinquencies increased across the country, the value of the securities backed by these mortgages decreased and the market for them became increasingly illiquid.

By late November 2007, SERAGELDIN was aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, SERAGELDIN told HIGGS, SIDDIQUI, and CC-1 that “the housing market [was] going down the tubes” and that they had to “find a way to sell these bonds,” i.e., mortgage-backed bonds in ABN1. As SERAGELDIN recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” The defendants did not sell the bonds because the market prices for the bonds were substantially below the inflated value at which they marked the bonds.

From August 2007 through February 2008, SERAGELDIN, HIGGS, SIDDIQUI and their co-conspirators artificially increased the price of bonds in order to create the false appearance of profitability in the ABN1 trading book. Specifically, SERAGELDIN directed HIGGS on numerous occasions to reach specific Profit & Loss (“P&L”) targets on a daily and month-end basis. HIGGS, in turn, instructed SIDDIQUI, CC-1, and another unnamed co- conspirator (“CC-2”) to mark the books so as to achieve the particular P&L targets specified by SERAGELDIN, rather than to reflect the fair value of the bonds.

In order to reach specific P&L targets, SERAGELDIN, HIGGS, SIDDIQUI, and their co-conspirators marked up bond prices without regard to fair market value; improperly offset mark-downs with gains realized in other parts of the book to avoid a P&L impact; and engaged in the practice of “reversing out,” which involved freezing marks at a favorable point in time to achieve a desired P&L result. In addition, as part of their scheme, SERAGELDIN, HIGGS, SIDDIQUI, and their co-conspirators concealed their manipulation of bond marks from internal control personnel within Credit Suisse who were charged with independently ensuring the accuracy of bond prices, and they devised other ways to avoid detection of their fraud.

Credit Suisse’s ABN1 Trading Book Was Falsely Inflated as a Result of the Scheme

As a result of the scheme, there was a growing disparity between the values ascribed to the marks in the ABN1 book and the available external benchmarks, such as the ABX Index. From August 2007 through the end of that year, as ABX Index prices fell, bond prices in ABN1 that were supposed to reflect the ABX Index remained effectively stable, thereby giving the false impression to Credit Suisse senior management that the ABN1 book was profitable. On one occasion in January 2008, SERAGELDIN expressed concern to HIGGS that the overpriced bonds were at risk of being discovered: “We should mark these down because someone is going to spot this.”

The 2008 Mark-Down

On March 20, 2008, Credit Suisse issued a press release, which announced completion of its internal review and stated that the fair value reduction, or write-down, of the ABS positions—which includes but is not limited to the ABNl book—was approximately $2.65 billion.

Approximately $540 million of this write-down was attributable to the ABN1 trading book and included ABS cash bonds for the fourth quarter 2007 that SERAGELDIN manipulated and inflated in connection with his scheme.

***

SERAGELDIN, 38, a United States citizen who currently resides in the United Kingdom, is charged with conspiracy to falsify books and records and to commit wire fraud, as well as with substantive charges of falsifying books and records and wire fraud. If convicted, SERAGELDIN faces a maximum sentence of five years in prison on the conspiracy count, a maximum sentence of 20 years in prison on each of the books and records and the wire fraud counts, a maximum fine of $5,000,000 on the books and records count, and a maximum fine of the greater of $250,000, or twice the gross gain or loss from the offense on each of the conspiracy and wire fraud counts.

HIGGS, 42, a citizen and resident of the United Kingdom, and SIDDIQUI, 36, a resident of the Washington, D.C. metropolitan area, each pled guilty to one count of conspiracy to falsify books and records and commit wire fraud. HIGGS and SIDDIQUI each face a maximum sentence of five years in prison and a fine of the greater of $250,000, or twice the gross gain or loss from the offense.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance in the investigation of this case. He said the investigation is continuing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Virginia Chavez Romano and Eugene Ingoglia are in charge of the prosecution.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. 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.

The charges contained in the Indictment are merely accusations, and SERAGELDIN is presumed innocent unless and until proven guilty.

Former Lee’s Summit Man Indicted for $3 Million Ponzi Scheme

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that a former Lee’s Summit, Mo., man has been indicted by a federal grand jury for defrauding 39 investors in a $3 million Ponzi scheme.

Ronald W. Shepard, 72, formerly of Lee’s Summit, was charged in a 15-count indictment returned by a federal grand jury in Kansas City, Mo., on Tuesday, Jan. 31, 2012.

According to the indictment, Shepard’s company, Safety Solutions USA, LLC, in Lee’s Summit, developed and marketed a trailer hitch called Tow-Safe. A patent request for the trailer hitch safety device was filed, but rejected by the U.S. Patent Office. Shepard also operated a company called The Real Estate in Lee’s Summit.

Shepard received approximately $3,188,765 from approximately 39 investors from January 2006 through December 2009. Shepard returned approximately $1,235,853 to the investors, and lost or spent the rest, resulting in a minimum loss to investors of $1,825,883. Shephard is charged with 13 counts of mail fraud and two counts of money laundering related to the scheme.

Shepard, who prepared tax returns for individuals, discussed their investments and pitched his own companies as investments. Shepard allegedly claimed that investors would make anywhere from a 15 percent to 100 percent annual return on their investment. He allegedly failed to inform potential investors that the state had issued a cease and desist order that barred him from offering or selling any unregistered security.

Shepard allegedly told investors that their money was used to purchase property in Kansas City, the Lake of the Ozarks and Hawaii. Except for purchasing his own personal residence at the Lake of the Ozarks, the indictment says, Shepard did not purchase any real estate. Instead, the indictment alleges that Shepard used investor funds for personal living expenses, to pay other investors, to pay relatives, in disbursements of cash to himself and in real estate ventures.

According to the indictment, many investors liquidated their Individual Retirement accounts or 401(k) accounts and transferred the proceeds to Shepard for investment. Shepard allegedly told investors that if they liquidated retirement funds, thereby incurring penalties, he would refund their initial investment, plus the amount of penalty, plus interest.

The indictment also contains a forfeiture allegation, which would require Shepard to forfeit to the government any property derived from the proceeds of the alleged offenses, including $1,825,883.

Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Kate Mahoney. It was investigated by the FBI and the Missouri Division of Securities.

Update on UNM Suspicious Package

Preliminary tests on the suspicious package received through the mail at the University of New Mexico were negative for harmful substances.

The FBI, U.S. Postal Service, Albuquerque Fire Department, and University of New Mexico Police Department responded to a report of a suspicious package at an undisclosed location on campus on Tuesday (1/31/2012).

The package was taken to the state Health Department lab in Albuquerque for further analysis.

The contents of the package are not being disclosed at this time.

This case is under investigation.

Further information will be released when it is available.

CBP Officers Intercept Unreported Currency

Seizure brings January total to nearly $1 million in Arizona

Douglas, Ariz. — Customs and Border Protection officers assigned to the Tucson Field Office seized nearly $72,000 in unreported U.S. currency Friday from a woman headed to Mexico with her minor child through the Douglas Port.

Officers conducting outbound inspections selected a 38-year-old Tucson woman travelling with her six-year-old daughter for additional questioning. When officers put the woman’s Chrysler sedan through a routine X-ray, they noticed an anomaly behind the back seat. Officers then found a non-factory compartment with a package inside containing $71,600. 

The vehicle and unreported funds were processed for seizure. The woman was arrested and turned over to U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. Her daughter was turned over to a family member.

During January, more than $962,000 in unreported outbound currency was seized at Arizona’s ports. That brings the year-to-date seizures for fiscal year 2012, which began Oct. 1, 2011, to almost $1.9 million as compared to the nearly $5 million seized during the same period last year. The total seizure for fiscal year 2011 was $12.2 million.

Since launching the Southwest Border Initiative in March 2009, unprecedented shifts in staffing and infrastructure at Arizona’s ports have improved the focus and intensity of operations. These shifts are resulting in more narcotics interceptions; while tougher outbound enforcement is yielding record interceptions of illicit currency, weapons and wanted felons.

Individuals arrested are charged with a criminal complaint, which raises no inference of guilt. An individual is presumed innocent 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.

New Orleans Woman Charged with Defrauding Gulf Coast Claims Facility

NEW ORLEANS—ROKEISHA BARRIOS, age 32, a resident of New Orleans, LA, was charged with wire fraud today in a one-count bill of information relating to a fraudulent application she made in her husband’s name 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 the bill of information, the GCCF made disaster assistance money available to individuals and businesses affected by the oil spill resulting from the Deepwater Horizon explosion on April 20, 2010. The GCCF required victims claiming to have suffered a loss due to the oil spill to submit a truthful application stating the reason for their loss due to the oil spill and verifying income losses. Documents would demonstrate that beginning in October 2010, the defendant submitted, electronically, an application to the GCCF in the name of her husband, ROBERTO BARRIOS, for emergency advance payments for business losses. The information in the application was false and fraudulent as to her husband’s business as a commercial fisherman and as to his employment as a hotel employee before the Deepwater Horizon oil spill. As a result of this false and fraudulent application and documentation, BARRIOS received, in a joint checking account, $22,600 in emergency advance payments on November 23, 2010. Further, BARRIOS received a final GCCF claim payment in the amount of $11,307.50 on or about March 21, 2011.

If convicted, BARRIOS faces a maximum term of imprisonment of 20 years, a $250,0000 fine, full restitution to the Gulf Coast Claims Facility, three years of supervised release following imprisonment, and $100 special assessment. U.S. Attorney Letten reiterated that the bill of information is merely a charge and that the guilt of the defendant must be proven beyond a reasonable doubt.

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.

Former Hospice Owner Sentenced for Health Care Fraud

BIRMINGHAM—A federal judge today sentenced a Muscle Shoals man to 28 months in prison for taking part in a health care fraud totaling more than $3 million in connection to a hospice care program he operated, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick Maley and Health and Human Services, Office of Inspector General, Special Agent in Charge Derrick Jackson.

U.S. District Judge Inge P. Johnson sentenced JACKIE RANDOPLH GIST, 55, for engaging in a criminal conspiracy to defraud Medicare from about March 2006 to July 2009. During that time, Gist operated Good Samaritan Hospice USA Inc., an Alabama corporation that provided hospice care in Muscle Shoals. Gist pleaded guilty in September to one count of conspiracy to commit health care fraud and three counts of health care fraud and agreed to forfeit $3,192,285 to the government as proceeds of illegal activity. Gist must report to prison April 2.

“In three years this defendant stole more than $3 million from the Medicare program, costing all U.S. taxpayers,” Vance said. “This office will not tolerate such fraud and remains committed to aggressively prosecuting individuals and companies that seek to steal from government programs.”

Medicare’s hospice benefit program allows a beneficiary with a terminal illness to forgo curative treatment for the illness and instead receive palliative care, which is the relief of pain and other uncomfortable symptoms.

Gist’s scheme involved submitting claims to Medicare for amounts greater than warranted for the services provided, according to the charges and his plea agreement. The billing code which Gist caused GSH to submit to Medicare is generally used for services provided in an inpatient facility for pain control or acute or chronic symptom management that cannot be managed in other settings and is typically provided in the short-term. However, the services GSH provided were routine services, not inpatient services.

As a result of the scheme, GSH received reimbursements from Medicare totaling $4,108,924 when, if the correct code had been used, GSH would have been reimbursed $916,639. Accordingly, the fraud resulted in a loss to the Medicare program of about $3,192,285.

This prosecution is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.

The FBI and the Department of Health and Human Services, Office of the Inspector General, investigated the case. Assistant U.S. Attorney Lloyd Peeples prosecuted the case.

New Reports on less-than-lethal use of force technologies

Through the National Criminal Justice Reference Service, NIJ has made available the following reports relative to less-than-lethal use of force technologies available.

• Establishment of Interdisciplinary Working Group for Review of Kinetic Energy Munitions (pdf, 28 pages).
• Respiratory and Cardiovascular Response During Electronic Control Device (ECD) Exposure in Law Enforcement Trainees (pdf, 33 pages).
• Test Methodologies for the Assessment of Less-Lethal Kinetic Energy Rounds (pdf, 38 pages).
• The Effect of TASER on Cardiac, Respiratory and Metabolic Physiology in Human Subjects (pdf, 29 pages).
• Development of Standard for Less-lethal Kinetic Energy Rounds (pdf, 7 pages).

U.S. Border Patrol Agents Rescue Two From All American Canal

Calexico, Calif. – On January 26, 2012, Border Patrol agents from the Calexico Station worked together to rescue two illegal aliens from the swift currents of the All American Canal.

The incident occurred at approximately 6:00 p.m., after Border Patrol agents using a remote video surveillance system (RVSS) observed five suspected illegal aliens enter the All American Canal and attempt to swim across. Agents responding observed two of the individuals being swept away by the hazardous current and having trouble staying afloat.

RVSS operators immediately notified nearby agents who responded to the crisis;: responding agents deployed rescue throw bags and assisted the victims out of the All American Canal to safety.

This incident serves as a reminder that a moving body of water, such as the All American Canal, while appearing calm can be extremely dangerous. Smugglers operate with little concern for illegal aliens as they continually place them in life threatening situations. Both individuals were found to be wearing life preserving vests, but still struggled to free themselves from the water.

All subjects were unharmed and found to be Mexican citizens illegally present in the U.S. The group was transported to the Calexico Border Patrol station for processing.

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.

Phoenix Man Indicted for Stalking a Woman in Maryland

BALTIMORE—A federal grand jury has indicted David Charles Richards, age 49, of Phoenix, Arizona today on charges of stalking a woman in Maryland.

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

The indictment alleges that from December 2006 through November 2011, Richards has been using the Internet, telephone, electronic mail, and the U.S. mail to stalk a woman in Maryland, including threatening to kill the woman. According to court documents, Richards and the victim met and began dating when the victim was 15 and Richards was 25 years old. According to court documents, the relationship was troubled and at times physically abusive. Richards and the victim were married in July 1991 and lived in Anne Arundel County. Within 10 weeks of their marriage, Richards told the victim that he had been arrested for assault and the victim told Richards to leave the residence and that she was going to seek a divorce. According to court documents, Richards did not contest the proceedings.

According to court documents, after not having any contact with the victim for almost 15 years, in June 2006, Richards contacted the victim’s sister telling her that he will stay connected to the victim and he will never stop as, “he has reclaimed his wife as of today.” Beginning in July 2006, and during each subsequent year, the victim has sought and been granted protective orders forbidding Richards to contact her. On December 11, 2006, the victim discovered that a website had been created in her name, which included a countdown clock to the expiration of the protective order the victim had taken out against Richards and other threatening material. In December 2009, Richards allegedly tore up one of the protective orders that was served upon him and mailed the torn pieces to the victim’s home. Court documents also detail repeated threats that Richards has posted on websites directed at the victim, including threats as recently at November 2011. The indictment alleges that Richards threatened and harassed the victim over a period of five years through telephone messages, e-mails, packages sent through the U.S. mail, as well as through the posting of messages and recordings on websites Richards created in the name of the victim.

Richards faces a maximum sentence of five years in prison for stalking. An initial appearance was held this afternoon in U.S. District Court in Baltimore. Richards is detained.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Rod J. Rosenstein praised the FBI agents in Baltimore and Phoenix for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Kristi N. O’Malley, who is prosecuting the case.

U.S. Marshals Arrest Megan's Law Violator in Fairview Township, York County

Harrisburg, PA – U.S. Marshal Martin J. Pane announced today that the United States Marshals Service (USMS) arrested Gregory Colt, a 31-year old man, in Fairview Township, York County. Colt was sought for failing to register as a previously convicted sex offender and faces possible prosecution for violating the Adam Walsh Child Protection and Safety Act of 2006.

On February 11, 2009, Colt was convicted of Sexual Assault in Sebastian County, Arkansas – an offense that required Colt to register as a convicted sex offender.

In July of 2011, Colt registered his home address in Charlotte County, Florida. But early in January of 2012, members of the Charlotte County Sheriff Department discovered that he no longer lived there and - on January 12, 2012 - obtained a warrant for his arrest.

Shortly after that, Deputy U. S. Marshals in Florida began searching for Colt. They discovered that he fled to Pennsylvania and passed that information to the USMS office in Harrisburg.

This morning, Deputy U. S. Marshals placed the home of one of Colt’s family members under surveillance. Shortly after 11 AM, Colt exited the home and was taken into custody without incident. The Fairview Township Police Department charged Colt as a fugitive from justice and turned him over to York County Central Booking to await arraignment.

The USMS continues to investigate Colt to determine if he violated the Adam Walsh Child Protection and Safety Act of 2006 - which made it a federal offense for a convicted sex offender to flee from state to state to avoid his registration requirements. It also designated the United States Marshals Service as the federal agency responsible for locating and investigating these offenders.

United States Marshal Martin J. Pane stated, “As the lead federal agency responsible for the arrest of non-compliant sex offenders, we’re committed to investigating Megan’s Law violators and Adam Walsh Act fugitive cases and bringing those violators to justice.”

Additional information about the U.S. Marshals Service can be found at USmarshals.gov.

Oceanside Woman Indicted for Operating Ponzi Schemes

Defendant Allegedly Defrauded Investors of More Than $4 Million

Laurie Schneider, of Oceanside, New York, has been indicted for operating Ponzi schemes that defrauded investors of more than $4 million.1 The defendant was arraigned earlier today before United States Magistrate Judge A. Kathleen Tomlinson at the United States Courthouse, 100 Federal Plaza, Central Islip, New York.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director in Charge of the Federal Bureau of Investigation, New York Field Office.

As alleged in the indictment, Schneider began accepting money in September 2006 from individuals seeking a return on their investment. In one scheme, operating a shell company incorporated as Janitorial Close-Out City Corp., Schneider falsely informed potential investors that Janitorial Close-Out invested in industrial equipment and machinery manufactured by companies in China. To induce investments, Schneider, among other things, (1) personally guaranteed specified positive rates of return as high as 60 percent, (2) represented that she had a business contact who had strong relationships with companies in China, and (3) represented that she would be able to buy the industrial equipment and machinery at wholesale prices which Janitorial Close-Out would resell in the United States at a 15 to 60 percent profit over a nine to 18-month period. In fact, the indictment charges that Schneider actually was running a Ponzi scheme, paying returns to Janitorial Close-Out investors not from any profits earned on the purchase and resale of industrial equipment and machinery, but rather from existing investors’ deposits or money paid by new investors. Schneider never produced or earned the rates of return that she promised. Rather, the positive rates of return were simply pre-determined rates made up by Schneider based upon fictitious profits.

The government estimates that Schneider defrauded over 25 investors in Janitorial Close-Out of more than $4 million, and more than $5 million through related schemes.

“In these difficult economic times, it’s all the more troubling that, as alleged in the indictment, someone would take advantage of the trust of investors for personal financial gain,” stated United States Attorney Lynch. “As alleged, this defendant falsely represented herself as having international business connections that would benefit her investors, when in reality she was engaged in purely homegrown fraud and deception. This indictment serves as a warning that we will vigorously investigate and prosecute those who, by deceit and false promises, would steal from those who believed they were investing in a legitimate enterprise.” Ms. Lynch added that the government’s investigation is continuing.

FBI Assistant Director-in-Charge Fedarcyk stated, “Ponzi schemes have been around for so long because, unfortunately, they are such an effective means of swindling people out of their hard-earned money. Investors need to be wary of ‘investment opportunities’ that ‘guarantee’ inordinately high rates of return, and should perform due diligence. But it is the perpetrators of these fraudulent schemes, not their victims, who are to blame. The FBI remains committed to protecting the investing public from them.”

If convicted, Schneider faces a maximum sentence of 20 years’ imprisonment on each of three counts of wire fraud count.

The government’s case is being prosecuted by Assistant United States Attorneys Richard T. Lunger and Lara Treinis Gatz.

The Defendant:

LAURIE SCHNEIDER Age: 37

1 The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.