FORMER EXECUTIVES SENTENCED IN $18 MILLION PONZI SCHEME FRAUD CASE

 FROM:  U.S. JUSTICE DEPARTMENT 

Monday, August 25, 2014

Former Investment Company Executives Sentenced for Roles in $18 Million Ponzi Scheme

The former Hanover Corporation chief financial officer and a former Hanover salesman were sentenced last week to serve 60 months in prison and 70 months in prison respectively, and ordered to pay $14,454,999.19 in restitution, for their roles in an $18 million Ponzi scheme. Hanover’s former chief executive officer was previously sentenced to 14 years in prison and ordered to pay $14,784,983.75 in restitution in this case.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney David Rivera of the Middle District of Tennessee, Special Agent in Charge Todd McCall of the FBI’s Memphis Division and Special Agent in Charge Christopher Henry of the Internal Revenue Service-Criminal Investigation (IRS-CI) in Nashville made the announcement today after the sentences were handed down by U.S. District Judge Todd J. Campbell in the Middle District of Tennessee.

According to court documents, Daryl Bornstein, 55, of Kinston Springs, Tennessee, a former Hanover salesman, and Robert Haley, 55, of Lebanon, Tennessee, the former Hanover CFO, colluded with Hanover CEO, Terry Kretz, to steal $18 million of investors’ money in a Ponzi scheme. Specifically, Kretz and Bornstein solicited investors with the promise that the monies would be invested in stock options and startup companies. More than half of the money, however, was actually used to repay earlier investors, to pay Hanover’s salaries and overhead, and to benefit the defendants personally. Such personal benefits included golf memberships and $100,000 in cash for Bornstein. Kretz and Bornstein also issued Hanover promissory notes to reimburse individuals who had previously lost money investing in ventures recommended by Bornstein before he joined Hanover. In some cases, these former investors contributed new money to Hanover, therefore unwittingly paying off their old investment losses with their new investments.

Haley furthered the fraud by sending investors checks for purported “interest,” knowing that they were simply monies recently taken in from new investors. He also prepared a false balance sheet that overstated Hanover’s financial health to be shown to investors.

The case was investigated by the FBI, IRS-CI, Tennessee Bureau of Investigation, and Tennessee Department of Commerce and Insurance. The case is being prosecuted by Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Scarlett S. Nokes of the Middle District of Tennessee.

DOJ SAYS TRANS ENERGY INC. WILL RESTORE STREAMS, WETLANDS DAMAGED BY NATURAL GAS EXTRACTION

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 2, 2014

Trans Energy Inc. to Restore Streams and Wetland Damaged by Natural Gas Extraction Activities in West Virginia

Company Will Also Pay $3 Million Civil Penalty to Resolve Alleged Clean Water Act Violations

The Department of Justice, the U.S. Environmental Protection Agency (EPA) and the West Virginia Department of Environmental Protection (WVDEP) today announced a settlement with   Trans Energy Inc., requiring the oil and gas company to restore portions of streams and wetlands at 15 sites in West Virginia that were polluted by the company’s unauthorized discharge of dredge or fill material.   Trans Energy will pay a penalty of $3 million to be divided equally between the federal government and the WVDEP.   The Clean Water Act requires a company to obtain a permit from EPA and the U.S. Army Corps of Engineers prior to discharging dredge or fill material into wetlands, rivers, streams and other waters of the United States.

“Today’s agreement requires that Trans Energy take important steps to comply with state and federal laws that are critical to protecting our nation’s waters, wetlands and streams,” said Sam Hirsch, Acting Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division.  “We will continue to ensure that the development of our nation’s domestic energy resources, including through the use of hydraulic fracturing techniques, complies with the Clean Water Act and other applicable federal laws.”

“As part of our commitment to safe development of domestic energy supplies, EPA is working to protect wetlands and local water supplies on which communities depend,” said Cynthia Giles, Assistant Administrator of EPA’s Office of Enforcement and Compliance Assurance.   “By enforcing environmental laws, we’re helping to ensure a level playing field for responsible businesses."

In addition to the penalty, the company will reconstruct impacted aquatic resources or otherwise address impacts at each of the 15 sites, provide appropriate compensatory mitigation for impacts to streams and wetlands, and implement a comprehensive compliance program to ensure future compliance with Section 404 of the Clean Water Act and applicable state law.   Among other requirements, the company will work to ensure that all aquatic resources are identified prior to starting work on any future projects in West Virginia, and that appropriate consideration is given at the design stage to avoid and minimize impacts to aquatic resources.   It is estimated that Trans Energy will spend more than $13 million to complete the restoration and mitigation work required by the consent decree.

The federal government and the WVDEP allege that the company impounded streams and discharged sand, dirt, rocks and other materials into streams and wetlands without a federal permit in order to construct well pads, impoundments, road crossings and other facilities related to natural gas extraction.   The government alleges that the violations impacted approximately 13,000 linear feet of stream and more than an acre of wetlands.

Filling wetlands illegally and damming streams can result in serious environmental consequences.   Streams, rivers and wetlands benefit the environment by reducing flood risks, filtering pollutants, recharging groundwater and drinking water supplies, and providing food and habitat for aquatic species.

EPA discovered the violations in 2011 and 2012 through information provided by WVDEP and the public, and through routine field inspections.   In summer 2014, the company conducted an internal audit and ultimately disclosed to EPA alleged violations at eight additional locations, which are also being resolved through this Consent Decree.

The settlement also resolves alleged violations of state law brought by the WVDEP.

EPA CRIMINAL ENFORCEMENT: PROTECTING PEOPLE AND THE ENVIRONMENT

FTC APPROVES FINAL ORDER REGARDING DECEPTIVE, UNFAIR SECURITY PRACTICES ALLEGATIONS OF GMR TRANSPORTATION SERVICES

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Approves Final Order in Case Against GMR Transcription Services
Following a public comment period, the Federal Trade Commission has approved a final order resolving FTC allegations that GMR Transcription Services, Inc., engaged in deceptive and unfair information security practices that exposed the personal information of thousands of consumers online, in some instances including consumers’ medical histories and examination notes. The settlement was first announced by the Commission in January.

In its complaint, the agency alleged that GMR’s data security practices were inadequate and resulted in transcriptions of audio files provided by GMR’s customers being indexed by a major search engine and made publicly available to anyone using the search engine.

Under the settlement, GMR and its owners are prohibited from misrepresenting the extent to which they maintain the privacy and security of consumers’ personal information.  They also must establish a comprehensive information security program that will protect consumers’ sensitive personal information, including information the company provided to independent service providers.  In addition, the company must have the program evaluated both initially and every two years by a certified third party. The settlement will be in force for the next 20 years.

The Commission vote approving the final order and letters to members of the public who commented on it was 5-0. (FTC File No. 122-3095, the staff contacts in the Bureau of Consumer Protection are Alain Sheer,

Correcting Some of the Flaws in the ABS Market

Correcting Some of the Flaws in the ABS Market

DOJ ATTEMPTS TO STOP CHICAGO BUSINESSES FROM PREPARING TAX RETURNS,

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, August 26, 2014

Justice Department Sues to Stop Chicago-Area Woman and Her Businesses from Preparing Tax Returns

Tax Services Provider Allegedly Prepared Fraudulent Amended and Original Returns in Chicago-Area Hotel Rooms

The United States filed a complaint in federal court in Chicago to bar Laurie G. Helfer, aka Laurie G. Powell, individually and through her businesses Laurie’s Freelance & Tax Preparation Services and Tax Lady Laurie Inc., from preparing federal tax returns for others, the Justice Department announced today.

The complaint alleges that Helfer prepares and files amended tax returns for individuals claiming refunds that they are not legally entitled to receive.  According to the complaint, Helfer has prepared hundreds of amended tax returns for customers in the Chicago area and the tax loss to the U.S. Treasury as a result of her fraudulent conduct could exceed $3 million.

According to the civil injunction complaint, Helfer promises her customers that she can obtain tax refunds for them by amending their tax returns from prior years.  To do this, Helfer allegedly fabricates expenses from businesses that do not exist and enters those expenses on a Schedule C-Profit or Loss From Business that she files with her customers’ amended tax returns.  The complaint alleges that the expenses offset her customers’ income from prior years and illegally generates a refund.  The complaint further alleges that Helfer also prepares original returns for customers during tax-filing season using this same scheme to generate a refund.  In an attempt to avoid detection by the Internal Revenue Service (IRS), Helfer stopped signing the tax returns that she prepares and also frequently changes the locations in which she prepares customers’ tax returns, including various Chicago-area hotel rooms, the complaint alleges.

Return preparer fraud is one of the IRS'   Dirty Dozen Tax Scams for 2014 .  The IRS has some tips   on their website   for choosing a tax preparer.  In the past decade, the department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the department’s   website .  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on   this page .  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the   Tax Division   with details.

SAMSUNG ELECTRONICS AMERICA TO PAY $2.3 MILLION TO SETTLE FALSE CLAIMS ACT ALLEGATIONS

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, August 19, 2014

Samsung Electronics America Agrees to Pay $2.3 Million to Resolve False Claims Act Allegations

Samsung Electronics America Inc. (Samsung) has agreed to pay $2.3 million to resolve allegations that it caused the submission of false claims for products sold on General Service Administration (GSA) Multiple Award Schedule (MAS) contracts in violation of the Trade Agreements Act of 1979 (TAA), the Justice Department announced today.  Samsung is an electronics distributor and marketer headquartered in Ridgefield Park, New Jersey.

“The Department of Justice is committed to protecting public funds and guarding against abuse of federal procurement programs,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division.  “This settlement upholds important trade priorities by ensuring that the United States only uses its buying power to purchase from countries that trade fairly with us.”

MAS contracts are contracts awarded by GSA to multiple companies supplying comparable products and services.  Once GSA negotiates and awards the contract, any federal agency may purchase under it.  Like many other federal procurement contracts, GSA MAS contracts require the vendor to certify that all products it offers for sale comply with the TAA.  The TAA generally requires the United States to purchase products made in the United States, or another designated country with which the United States has a trade agreement.

Samsung has authorized resellers who hold GSA MAS contracts.  Samsung certifies to the authorized resellers that Samsung will provide TAA compliant products and the resellers in turn list those products on the resellers’ GSA MAS contracts.  The settlement resolves allegations that, from January 2005 through August 2013, Samsung caused resellers of its products to sell items on their GSA MAS contracts in violation of the TAA by knowingly providing inaccurate information to the resellers regarding the country of origin of the goods.  The United States alleges that Samsung represented to the resellers, who in turn represented to federal agencies, that the specified products were made in TAA designated countries, generally Korea or Mexico, when the specified products were in fact manufactured in China, which is not a TAA designated country.

“It is unacceptable to sell unauthorized foreign electronics to the United States,” said GSA Acting Inspector General Robert C. Erickson.  “We expect all companies doing business with the federal government to comply with contracting laws.”

The allegations resolved by the settlement were originally brought in a lawsuit filed by Robert Simmons, a former Samsung employee, under the False Claims Act’s whistleblower provisions, which permit private parties to sue for false claims on behalf of the United States and to share in any recovery.  Mr. Simmons’ share of the settlement has not yet been determined.

The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the District of Maryland, the Commercial Litigation Branch of the Justice Department’s Civil Division and the GSA’s Office of Inspector General.
         
The case is United States ex rel. Simmons v. Samsung Electronics America, Inc. et al., No. AW-11-2971 (D. Md.).  The claims resolved by the settlement are allegations only and there has been no determination of liability.