The White Collar Defense Report® provides updates on cases, policy developments and trends in the white collar area, including federal criminal matters as well as civil cases such as qui tam cases and SEC enforcement actions.
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PPP Fraud Reaches NFL
As we’ve learned recently, anyone – from professional athletes to beauty industry entrepreneurs – can be on the DOJ’s list of priorities for PPP loan fraud prosecutions. In fact, our first item on this rundown includes an NFL player who was charged with fraud in connection to $24 million in PPP loans.
NFL Player Charged for Role in $24 Million COVID-Relief Fraud Scheme
Joshua J. Bellamy, 31, of St. Petersburg, Florida, a player in the NFL, was charged in a federal criminal complaint filed in the Southern District of Florida with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud in connection to $24 million in PPP loans. Bellamy allegedly used the money for luxury goods at Dior, Gucci, and jewelers; spent approximately $62,774 at the Seminole Hard Rock Hotel and Casino, and allegedly sought PPP loans on behalf of his family members and close associates.
Texas Woman Charged with Fraudulently Obtaining Nearly $2 Million in COVID Relief Funds
Lola Shalewa Barbara Kasali, 22, of Houston, is charged in the Southern District of Texas with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions. The criminal complaint alleges Kasali submitted at least two fraudulent PPP loan applications – one on behalf of an entity called Lola’s Level and the other in the name of Charm Hair Extensions. The charges allege that after receiving the funds, Kasali transferred the money into four additional bank accounts.
Warwick Man Admits to Conspire to Fraudulently Obtain COVID-19 Stimulus Loans
David Andrew Butziger, 52, admitted that he conspired with David Adler Staveley, a/k/a Kurt David Sanborn, a/k/a David Sanborn, 53, of Andover, MA, to seek forgivable loans guaranteed by the SBA, claiming to have dozens of employees earning wages at four different businesses, three restaurants and an electronics business, when, in fact, there were no employees working for any of the businesses.
North Carolina Man Charged with Fraudulently Seeking Over $6 Million in COVID Relief Funds
Tristan Bishop Pan, 38, of Garner, is charged with wire fraud, bank fraud, and engaging in unlawful monetary transactions. According to the allegations in the indictment, Pan submitted numerous fraudulent PPP loan applications, including on behalf of entities named Pan Insurance Agency, White Walker, Khaleesi, and The Night’s Watch. The PPP loan applications were supported by fake documents, including falsified tax filings, according to the indictment.
Could your business already be in DOJ’s crosshairs?
There is an unprecedented coordination between government agencies regarding the investigation of PPP fraud crimes. In many cases, businesses with no intent to defraud U.S. taxpayers get caught in a net of overzealous prosecutions. Business owners and executives must seek experienced counsel if they receive any indication they are being investigated.
Healthcare and Tax Fraud Updates
This is one list Ferrari probably doesn’t want to be associated with. Read on to learn more about Ferrari North America’s CEO’s guilty pleading in a tax fraud case.
Health Care
Springfield Woman Sentenced to Prison for Health Care Fraud and Tax Evasion
Saffron Gustafson, 43, was sentenced to 21 months in federal prison and three years’ supervised release for defrauding six health insurance plans of approximately $1.3 million and for evading $99,606 in federal income taxes. To defraud health insurance plans, Gustafson allegedly submitted bills requesting payment amounts inflated by 600% or more. To support these false billings, Gustafson, and employees acting at her direction, fabricated invoices from her wholesaler. Gustafson and her employees destroyed the genuine wholesaler invoices so insurance companies could not review them during audits.
West Virginia Hospital Agrees to Pay $50 Million to Settle Allegations Concerning Improper Compensation to Referring Physicians
In this case, the United States alleged that, from 2007 to 2020, under the direction and control of its prior management, R&V Associates, Ltd. and Ronald Violi, WheelingHospital, Inc. systematically violated the Stark Law and Anti-Kickback Statute by knowingly and willfully paying improper compensation to referring physicians that was based on the volume or value of the physicians’ referrals or was above fair market value.
Three Executives of Louisiana Compounding Pharmacy Charged with Defrauding State Health Benefits Programs and Identity Theft
Christopher Kyle Johnston, 41, of Mandeville, Louisiana; Trent Brockmeier, 58, of Pigeon Forge, Tennessee; and Christopher Casseri, 52, of Baton Rouge, Louisiana, were charged with conspiracy to commit health care fraud and wire fraud and a second conspiracy to commit identity theft by using individuals’ personal identifying information without their consent. Central Rexall Drugs was a retail pharmacy in Louisiana that prepared compounded medications. The three conspirators allegedly designed compounded medications and manipulated the ingredients in the medications in order to obtain high insurance reimbursements rather than serve the medical needs of patients. At their direction, Central Rexall sent compounded medications to patients based solely on financial gain, without any research or testing showing that the combination of ingredients was effective.
Tax
Ohio Tax Attorney Sentenced to Prison for Obstructing the IRS
Attorney Marcus “Marc” Dunn was sentenced to 18 months in federal prison. From 2007 until his client Dr. Kevin Lake died, Dunn advised and assisted Dr. Lake in legal matters relating to the operation of his clinics, including Columbus Southern Medical Clinic in Columbus, Ohio. Around 2010, the IRS audited Dr. Lake’s entities. Dunn provided false “bills of sale” purporting to support deductions, but which in fact falsely inflated the value of the equipment. In 2011, Dunn filed petitions in U.S. Tax Court challenging the IRS’s determination that some of the audited entities owed additional taxes. The case was ultimately settled with an agreement that approximately $608,583 was due. When the IRS revenue officer attempted to collect the settlement amount in 2014, Dunn frustrated the IRS’s collection efforts by falsely representing that the relevant entities were defunct with no assets. In all, Dunn caused a tax loss of $513,960 to the United States.
Former Luxury Car CEO and Luxury Watch Dealer Admit Tax Charges in Connection with Scheme to Misallocate Limited Edition Sports Cars
Former Ferrari North America CEO, Maurizio Parlato, 58, of Washington, D.C., pleaded guilty by videoconference in the District of New Jersey before U.S. District Judge Stanley R. Chesler to an information charging him with one count of subscribing to a false tax return and one count of failing to file a Report of Foreign Bank and Financial Accounts (FBAR). Luxury watch dealer, Gigi Knowle, 69, of Miami, Florida, pleaded guilty by videoconference before Judge Chesler to a separate information charging him with subscribing to a false tax return.
Las Vegas Man Indicted for Falsifying Auto Collision Centers’ Tax Returns
A federal grand jury in Las Vegas, Nevada, returned a superseding indictment chargingLance K. Bradford of Las Vegas with conspiracy to defraud the IRS. According to the superseding indictment, Bradford conspired with others to prepare tax returns on behalf of several automotive collision centers falsely claiming that the centers and their owners incurred millions in deductible expenses.
Beaumont Couple Sentenced for Falsifying Tax Returns
In February 2020, Dick Brocato, Jr., 68, and his wife, Judith L. Brocato, 65, both of Beaumont, Texas, were convicted by a jury of conspiracy to defraud the United States for purposes of impeding the government functions of the IRS in the collection of income tax and six counts of making and submitting false tax returns on both their personal and business for 2012-2014. The Brocatos were each sentenced to 33 months in federal prison in the Eastern District of Texas by U.S. District Judge Marcia Crone.
Federal Court Bars Florida Tax Preparation Businesses and Their Tax Return Preparers from Preparing Tax Returns
A federal court in Orlando, Florida, permanently enjoined Advanced Tax Services Inc.and Genson Financial Group LLC from preparing federal tax returns for others and ordered the businesses to disgorge $710,191.55, jointly and severally, representing the ill-gotten gains that they received for the preparation of tax returns. The court also entered permanent injunctions and disgorgement judgments against defendantsLenorris Lamoute and Dosuld Pierre, whom the court found prepared tax returns for compensation at Advanced Tax Services.
Dallas Cowboys Player Victim in Financial Fraud
Another football player appears on the October report, this time as a victim in an alleged financial fraud plot. Keep reading to find out more about how a member of the Dallas Cowboys is involved in a scheme related to a clothing company.
Fraudster Pleads Guilty in $2 Million Ponzi Scheme
Jose Anibal Linares, 42, was charged in the Northern District of Texas in October with one count of mail fraud and two counts of wire fraud. He has pleaded guilty to the mail fraud charge via videoteleconference before Magistrate Judge Renee Harris Toliver. According to plea papers, Linares admitted to running a Ponzi-type scheme, luring investors into handing over “principal” that he later deposited in bank accounts at Wells Fargo, Bank of America, and Legacy Texas, then paying them “interest” from other investors’ principal payments.
Defendant Charged in $25 Million Diamond Ponzi Scheme
South Florida federal prosecutors have charged 51-year-old Jose Angel Aman, of Washington D.C., with wire fraud, for allegedly operating a fraudulent diamond investment scheme. According to the allegations of a criminal information, from May 2014 through May 2019, Aman and his partners solicited people throughout the United States and Canada to invest in diamond contracts.
Chicago Nursing Home Executives Charged With Operating Ponzi Scheme
Zvi Feiner was the owner and Chief Executive Officer of Skokie-based FNR Healthcare LLC, and Erez Baver served as FNR’s Executive Vice President and bookkeeper. From 2012 to 2017, Feiner and Baver operated a fraud scheme involving the misappropriation of funds raised through the sale of membership interests in companies that Feiner created under the FNR umbrella to purchase and sell nursing homes and assisted living facilities, according to an indictment returned in U.S. District Court in Chicago.
Six Indicted in Connection with Multi-Million Dollar Scheme to Bribe Amazon Employees and Contractors
Ephraim Rosenberg, 45, of Brooklyn, New York; Joseph Nilsen, 31, and Kristen Leccese, 32, of New York, New York; Hadis Nuhanovic, 30, of Acworth, Georgia; Rohit Kadimisetty, 27, of Northridge, California; and Nishad Kunju, 31, of Hyderabad, India, have been indicted by a Grand Jury in the Western District of Washington with conspiring to pay over $100,000 in commercial bribes to Amazon employees and contractors, in exchange for an unfair competitive advantage on the Amazon Marketplace.
Judge Sentences Lake St. Louis Man for Scheming to Defraud NFL Player
Abayomi Martin, 43, was sentenced in the Eastern District of Missouri to 15 months in prison. Martin pleaded guilty, in March, to one count of wire fraud relative to a scheme to defraud and obtain money from Dallas Cowboys player Brandon Carr. Martin was also ordered to pay restitution to the victim in the amount of $261,194.71. Martin solicited an investment from Brandon Carr for a purported part ownership in a clothing company known as Famous Nobodys.
Sham Trader Who Urged Investors to ‘Profit Off’ Pandemic Charged With Commodities Fraud
Kenzley Ramos, 27, of Lawrenceville, Georgia, has been indicted by a federal grand jury in the Northern District of Texas on one count of commodities fraud for falsely promising investors that he would trade their money on foreign currency exchange markets while pocketing their funds. As the nation’s stock markets sank in the spring of 2020 due to the threat of COVID-19 outbreak, Ramos preyed on the public’s concerns surrounding the pandemic, telling prospective investors that the “stock market is crumbling” and inviting them to “profit off the coronavirus with forex.”
Additional Prosecution Priorities
From embezzlement to a major consumer protection case involving a popular Texas ice cream company, here are some other fraud cases to know about.
Embezzlement
Three Santa Clarita Valley Residents Charged in Indictment Alleging $1.7 Million Embezzlement via Sham Diversity Recruitment Companies
Two Santa Clarity Valley residents — Judith Fernandez-Adelugba, 43, of Stevenson Ranch, and Alex Lawrence Wilkison, 47, a.k.a. “Alex Wilkerson,” of Canyon Country —were arrested on a federal indictment accusing them of scheming to defraud a company out of more than $1.7 million earmarked for diversity recruitment by using two fake businesses that billed for services that were never performed.
Securities, Commodities and Investment Fraud
California Man Admits to Securities and Tax Offenses Related to $722 Million Bitclub Network Fraud Scheme
Joseph Frank Abel, 50, of Camarillo, California, admitted to conspiring to offer and sell unregistered securities and to subscribing to a false tax return in connection with his role in the BitClub Network, a cryptocurrency mining scheme worth at least $722 million. Abel pleaded guilty by videoconference before U.S. District Judge Claire C. Cecchi in the District of New Jersey to count two of the indictment, charging him with conspiracy to offer and sell unregistered securities.
International Fugitive and Disbarred Attorney Charged in Over $5 Million Cryptocurrency Fraud
Randy Craig Levine, a/k/a “Viktor Lapin,” a/k/a “Andre Santiago Santos Galindo,” a/k/a “Alexander Martinez Lavrov,” a/k/a “Alexander Kozlov,” a/k/a “Hristo Danielov Marinov,” and Philip Reichenthal were charged with commodities fraud, wire fraud, and money laundering offenses. As alleged, Levine induced others to send millions of dollars to Reichenthal, who was at the time a licensed attorney, to fund the purchase of Bitcoin after falsely representing that he intended to sell large quantities of Bitcoin to buyers.
JPMorgan Chase & Co. Agrees to Pay $920 Million in Connection with Schemes to Defraud Precious Metals and U.S. Treasuries Markets
JPMorgan entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed in the District of Connecticut charging the company with two counts of wire fraud. Under the terms of the DPA, JPMorgan will pay over $920 million in a criminal monetary penalty, criminal disgorgement, and victim compensation, with the criminal monetary penalty credited against payments made to the Commodity Futures Trading Commission (CFTC) under a separate agreement with the CFTC and with part of the criminal disgorgement credited against payments made to the Securities Exchange Commission (SEC) under a separate agreement with the SEC.
Public Corruption
Nine Boston Police Officers Arrested for Overtime Fraud Scheme
Lieutenant Timothy Torigian, 54, of Walpole; Sergeant Gerard O’Brien (retired), 62, of Braintree; Sergeant Robert Twitchell (retired), 58, of Norton; Officer Henry Doherty (retired), 61, of Dorchester; Officer Diana Lopez (retired), 58, of Milton; Officer James Carnes (retired), 57, of Canton; Officer Michael Murphy, 60, of Hyde Park; Officer Ronald Nelson (retired), 60, of Jamaica Plain; and Officer Kendra Conway, 49, of Boston, were arrested and charged in connection with committing over $200,000 in overtime fraud at the Boston Police Department’s evidence warehouse.
Obstruction of Justice
New York Hedge Fund Founder Arrested and Charged with Fraud, Extortion and Obstruction of Justice in Connection with Neiman Marcus Bankruptcy
Daniel Kamensky, the founder and manager of New York-based hedge fund Marble Ridge Capital (“Marble Ridge”), was charged in a Complaint in Manhattan federal court with securities fraud, wire fraud, extortion, and obstruction of justice. Kamensky’s alleged criminal acts occurred in connection with his scheme to pressure a rival bidder to abandon its higher bid for assets in connection with Neiman Marcus’s bankruptcy proceedings so that Marble Ridge could obtain those assets for a lower price. Kamensky then attempted to persuade the rival bidder to cover up the scheme.
Consumer Protection
Blue Bell Creameries Ordered to Pay $17.25 Million in Criminal Penalties in Connection with 2015 Listeria Contamination
A federal court in Texas sentenced ice cream manufacturer Blue Bell Creameries L.P.to pay $17.25 million in criminal penalties for shipments of contaminated products linked to a 2015 listeriosis outbreak. Blue Bell pleaded guilty in May 2020 to two misdemeanor counts of distributing adulterated ice cream products. The sentence, imposed by U.S. District Judge Robert Pitman in Austin, Texas, was consistent with the terms of a plea agreement previously filed in the case. The $17.25 million fine and forfeiture amount is the largest-ever criminal penalty following a conviction in a food safety case.
