Business Crimes Hotline

First, Shakour allegedly hacked into a computer of Cheaptaxforms.com, a subsidiary of Pro Systems, Inc., gaining unauthorized access with the intent to obtain the credit cards and personal information, which he then used to purchase items for his personal use. The alleged fraudulent credit card purchases totaled approximately $7167. Second, Shakour allegedly made a series of unauthorized computer intrusions into a server at Eglin Air Force Base in Florida. The objective of the intrusion was allegedly to compromise the integrity of the system, obtain root-level administrator access to the system, and to deface the Web site. Shakour's alleged defacement of the Web site and unauthorized access resulted in losses preliminarily estimated to be approximately $75,000. Third, Shakour allegedly made an unauthorized computer intrusion into the computers of Accenture, a management consulting and technology services company, compromising the system and resulting in losses estimated to be approximately $15,200. Finally, Shakour allegedly made an unauthorized computer intrusion into an unclassified network computer at the Sandia National Laboratories, which compromised the system resulting in losses. Shakour's alleged unauthorized access, which compromised the system, resulted in losses preliminarily estimated to be approximately $2732.

Shakour faces a maximum sentence of 5 years' imprisonment and a fine of up to $250,000 for committing fraud and related activity in connection with computers. He faces a maximum sentence of 10 years' imprisonment and a fine of $250,000 for the credit card fraud charge. In the plea agreement, Shakour agreed to make total restitution for his conduct, which is estimated to be approximately $100,000 and will be determined precisely during the sentencing process.

FLORIDA

President of Investment Firm Charged in Securities Scheme

Salman Shariff was charged in a federal indictment with ten counts of mail fraud, seven counts of wire fraud, seven counts of securities fraud, and 19 counts of money laundering. According to the indictment, Shariff was the president of Vestron Financial Corporation, a North Carolina business that Shariff used to sell partnership interests in several entities he controlled, including Vestron Investment Club, Crescent Partners L.P., and Crescent Capital Offshore Fund (collectively referred to as the 'Vestron entities'). The partnership interests were allegedly sold to investors who were told that Shariff would invest their money in securities and commodities in return for a prearranged fee. Shariff allegedly misappropriated millions of dollars from investors for his own use and benefit by making material misrepresentations and omitting to state material facts concerning the use of investor funds and the profitability of investments made through or on behalf of the Vestron entities.

If convicted, Shariff faces a maximum penalty of 5 years' imprisonment on each mail and wire fraud count, 10 years' imprisonment on each securities fraud count, and 10 to 20 years' imprisonment on the money-laundering counts.

LOUSIANA

Companies Sentenced in Ponzi Scheme

New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., were sentenced by United States District Judge Kurt D. Englehardt to 5 years' probation and ordered to pay restitution in the following amounts: New England International Surety, Inc., $23,405,000; Omne SRL, $8,772,761; and OMNE SRL, Inc., $14,632,240 in connection with a Ponzi scheme involving the sale of $18.8 million in fraudulent promissory notes for the renovation of the Imerpiale Hotel in Taoromina, Sicily, and an additional $4.5 million in promissory notes for the financing of an Azerbaijan oilfield clean and recovery business. All three corporations also were ordered to forfeit to the United States $23,405,000 for the benefit of the victims of the fraud.

The superseding bill of information alleges that the defendants recruited financial advisors and insurance brokers and agents to sell promissory notes in a number of states by representing that the repayment was guaranteed by New England International Surety, Inc. and Omne RE S.A., when they knew these companies were insolvent and had previously failed to fulfill guarantees on earlier projects. A large portion of the money received from the sale of promissory notes for the Sicily and Azerbaijan projects was allegedly siphoned off by the defendants, used to pay sales commissions, or used to pay earlier investors.

In addition, a large portion of the proceeds generated through the sale of these promissory notes allegedly was sent out of the U.S. to foreign accounts in order to place the funds beyond the reach of claimants and policyholders. The defendants allegedly also used money to pay earlier investors in other projects in order to perpetuate and promote the scheme.

Jed Karpinski, one of the largest dealers in New England-backed promissory notes, also was sentenced to 12 months and a day imprisonment for conspiracy to commit mail fraud and ordered to make restitution to the victims of the fraud. Karpinski allegedly made false representations to his clients about the Sicily and Azerbaijan projects and the ability of New England to pay the promissory notes it was guaranteeing. Karpinski already has made restitution of $190,000 to the victims of his fraud. On November 25, 2002, New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., pleaded guilty to one count of conspiracy to commit mail fraud in violation of 18 U.S.C. ' 371. On January 18, 2002, Karpinski pleaded guilty to one count of conspiracy to commit mail fraud in violation of 17 U.S.C. ' 371.

NEW YORK

NY Periodical Distributor Pleads Guilty to Market Allocation

New York Periodical Distributors Inc. of Massena, NY, pleaded guilty and was sentenced to pay a criminal fine of $500,000 for allocating markets for the wholesale distribution of magazines, other periodicals, and books. Under the plea agreement, the defendant is cooperating in the ongoing investigation into violations of antitrust laws and other related criminal laws in the wholesale magazine distribution industry.

According to the charge, New York Periodical Distributors Inc. and another wholesale distributor and its affiliates carried out the market allocation scheme by engaging in discussions regarding the allocation of markets, agreeing in those discussions to allocate markets, and then exchanging customers for the purpose of implementing the agreed-upon market allocations for the wholesale distribution of magazines, other periodicals, and books in central New York State.

New York Periodical Distributors Inc. was charged with violating Section One of the Sherman Act, which carried a maximum fine of $10 million for a corporation. The maximum fine for the charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum amount.

If convicted, Shariff faces a maximum penalty of 5 years' imprisonment on each mail and wire fraud count, 10 years' imprisonment on each securities fraud count, and 10 to 20 years' imprisonment on the money-laundering counts.New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., were sentenced by United States District Judge Kurt D. Englehardt to 5 years' probation and ordered to pay restitution in the following amounts: New England International Surety, Inc., $23,405,000; Omne SRL, $8,772,761; and OMNE SRL, Inc., $14,632,240. The sentences were for a Ponzi scheme involving the sale of $18.8 million in fraudulent promissory notes for the renovation of the Imerpiale Hotel in Taoromina, Sicily, and an additional $4.5 million in promissory notes for the financing of an Azerbaijan oilfield cleaning and recovery business. All three corporations also were ordered to forfeit to the United States $23,405,000 for the benefit of the victims of the fraud.

The superseding bill of information alleges that the defendants recruited financial advisors and insurance brokers and agents to sell promissory notes in a number of states by representing that the repayment was guaranteed by New England International Surety, Inc. and Omne RE S.A., when they knew these companies were insolvent and had previously failed to fulfill guarantees on earlier projects. A large portion of the money received from the sale of promissory notes for the Sicily and Azerbaijan projects was allegedly siphoned off by the defendants, used to pay sales commissions, or used to pay earlier investors.

In addition, a large portion of the proceeds generated through the sale of these promissory notes allegedly was sent out of the U.S. to foreign accounts in order to place the funds beyond the reach of claimants and policyholders. The defendants allegedly also used money to pay earlier investors in other projects in order to perpetuate and promote the scheme.

Jed Karpinski, one of the largest dealers in New England-backed promissory notes, also was sentenced to 12 months and a day imprisonment for conspiracy to commit mail fraud and ordered to make restitution to the victims of the fraud. Karpinski allegedly made false representations to his clients about the Sicily and Azerbaijan projects and the ability of New England to pay the promissory notes it was guaranteeing. Karpinski already has made restitution of $190,000 to the victims of his fraud. On November 25, 2002, New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., pleaded guilty to one count of conspiracy to commit mail fraud in violation of 18 U.S.C. ' 371. On January 18, 2002, Karpinski pleaded guilty to one count of conspiracy to commit mail fraud in violation of 17 U.S.C. ' 371.New York Periodical Distributors Inc., Massena, NY, pleaded guilty and was sentenced to pay a criminal fine of $500,000 for allocating markets for the wholesale distribution of magazines, other periodicals, and books. Under the plea agreement, the defendant is cooperating in the ongoing investigation into violations of antitrust laws and other related criminal laws in the wholesale magazine distribution industry.

According to the charge, New York Periodical Distributors Inc. and another wholesale distributor and its affiliates carried out the market allocation scheme by engaging in discussions regarding the allocation of markets, agreeing in those discussions to allocate markets, and then exchanging customers for the purpose of implementing the agreed-upon market allocations for the wholesale distribution of magazines, other periodicals, and books in central New York State.

New York Periodical Distributors Inc. was charged with violating Section One of the Sherman Act, which carried a maximum fine of $10 million for a corporation. The maximum fine for the charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum amount.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, D.C., and Associate Editor of this newsletter.

CALIFORNIA

Hacker Pleads Guilty to Computer Intrusion and Credit Card Fraud

Adil Yahya Zakaria Shakour of Los Angeles pleaded guilty to committing fraud and related activity in connection with computers, as well as credit card fraud, in violation of 18 U.S.C. ” 1030(a)(4) & 1029(a)(2). According to court documents, Shakour committed a series of unauthorized computer intrusions into four separate computer systems inside and outside the state of California. Additionally, Shakour obtained credit card and personal information from one of the unauthorized computer intrusions, and used the information to commit credit card fraud concerning individuals from around the country. After pursuing investigative leads, on October 8, 2002 a federal search warrant was executed at Shakour's Los Angeles residence, which allegedly confirmed the unauthorized intrusions and credit card fraud along with other evidence.

First, Shakour allegedly hacked into a computer of Cheaptaxforms.com, a subsidiary of Pro Systems, Inc., gaining unauthorized access with the intent to obtain the credit cards and personal information, which he then used to purchase items for his personal use. The alleged fraudulent credit card purchases totaled approximately $7167. Second, Shakour allegedly made a series of unauthorized computer intrusions into a server at Eglin Air Force Base in Florida. The objective of the intrusion was allegedly to compromise the integrity of the system, obtain root-level administrator access to the system, and to deface the Web site. Shakour's alleged defacement of the Web site and unauthorized access resulted in losses preliminarily estimated to be approximately $75,000. Third, Shakour allegedly made an unauthorized computer intrusion into the computers of Accenture, a management consulting and technology services company, compromising the system and resulting in losses estimated to be approximately $15,200. Finally, Shakour allegedly made an unauthorized computer intrusion into an unclassified network computer at the Sandia National Laboratories, which compromised the system resulting in losses. Shakour's alleged unauthorized access, which compromised the system, resulted in losses preliminarily estimated to be approximately $2732.

Shakour faces a maximum sentence of 5 years' imprisonment and a fine of up to $250,000 for committing fraud and related activity in connection with computers. He faces a maximum sentence of 10 years' imprisonment and a fine of $250,000 for the credit card fraud charge. In the plea agreement, Shakour agreed to make total restitution for his conduct, which is estimated to be approximately $100,000 and will be determined precisely during the sentencing process.

FLORIDA

President of Investment Firm Charged in Securities Scheme

Salman Shariff was charged in a federal indictment with ten counts of mail fraud, seven counts of wire fraud, seven counts of securities fraud, and 19 counts of money laundering. According to the indictment, Shariff was the president of Vestron Financial Corporation, a North Carolina business that Shariff used to sell partnership interests in several entities he controlled, including Vestron Investment Club, Crescent Partners L.P., and Crescent Capital Offshore Fund (collectively referred to as the 'Vestron entities'). The partnership interests were allegedly sold to investors who were told that Shariff would invest their money in securities and commodities in return for a prearranged fee. Shariff allegedly misappropriated millions of dollars from investors for his own use and benefit by making material misrepresentations and omitting to state material facts concerning the use of investor funds and the profitability of investments made through or on behalf of the Vestron entities.

If convicted, Shariff faces a maximum penalty of 5 years' imprisonment on each mail and wire fraud count, 10 years' imprisonment on each securities fraud count, and 10 to 20 years' imprisonment on the money-laundering counts.

LOUSIANA

Companies Sentenced in Ponzi Scheme

New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., were sentenced by United States District Judge Kurt D. Englehardt to 5 years' probation and ordered to pay restitution in the following amounts: New England International Surety, Inc., $23,405,000; Omne SRL, $8,772,761; and OMNE SRL, Inc., $14,632,240 in connection with a Ponzi scheme involving the sale of $18.8 million in fraudulent promissory notes for the renovation of the Imerpiale Hotel in Taoromina, Sicily, and an additional $4.5 million in promissory notes for the financing of an Azerbaijan oilfield clean and recovery business. All three corporations also were ordered to forfeit to the United States $23,405,000 for the benefit of the victims of the fraud.

The superseding bill of information alleges that the defendants recruited financial advisors and insurance brokers and agents to sell promissory notes in a number of states by representing that the repayment was guaranteed by New England International Surety, Inc. and Omne RE S.A., when they knew these companies were insolvent and had previously failed to fulfill guarantees on earlier projects. A large portion of the money received from the sale of promissory notes for the Sicily and Azerbaijan projects was allegedly siphoned off by the defendants, used to pay sales commissions, or used to pay earlier investors.

In addition, a large portion of the proceeds generated through the sale of these promissory notes allegedly was sent out of the U.S. to foreign accounts in order to place the funds beyond the reach of claimants and policyholders. The defendants allegedly also used money to pay earlier investors in other projects in order to perpetuate and promote the scheme.

Jed Karpinski, one of the largest dealers in New England-backed promissory notes, also was sentenced to 12 months and a day imprisonment for conspiracy to commit mail fraud and ordered to make restitution to the victims of the fraud. Karpinski allegedly made false representations to his clients about the Sicily and Azerbaijan projects and the ability of New England to pay the promissory notes it was guaranteeing. Karpinski already has made restitution of $190,000 to the victims of his fraud. On November 25, 2002, New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., pleaded guilty to one count of conspiracy to commit mail fraud in violation of 18 U.S.C. ' 371. On January 18, 2002, Karpinski pleaded guilty to one count of conspiracy to commit mail fraud in violation of 17 U.S.C. ' 371.

NEW YORK

NY Periodical Distributor Pleads Guilty to Market Allocation

New York Periodical Distributors Inc. of Massena, NY, pleaded guilty and was sentenced to pay a criminal fine of $500,000 for allocating markets for the wholesale distribution of magazines, other periodicals, and books. Under the plea agreement, the defendant is cooperating in the ongoing investigation into violations of antitrust laws and other related criminal laws in the wholesale magazine distribution industry.

According to the charge, New York Periodical Distributors Inc. and another wholesale distributor and its affiliates carried out the market allocation scheme by engaging in discussions regarding the allocation of markets, agreeing in those discussions to allocate markets, and then exchanging customers for the purpose of implementing the agreed-upon market allocations for the wholesale distribution of magazines, other periodicals, and books in central New York State.

New York Periodical Distributors Inc. was charged with violating Section One of the Sherman Act, which carried a maximum fine of $10 million for a corporation. The maximum fine for the charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum amount.

If convicted, Shariff faces a maximum penalty of 5 years' imprisonment on each mail and wire fraud count, 10 years' imprisonment on each securities fraud count, and 10 to 20 years' imprisonment on the money-laundering counts.New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., were sentenced by United States District Judge Kurt D. Englehardt to 5 years' probation and ordered to pay restitution in the following amounts: New England International Surety, Inc., $23,405,000; Omne SRL, $8,772,761; and OMNE SRL, Inc., $14,632,240. The sentences were for a Ponzi scheme involving the sale of $18.8 million in fraudulent promissory notes for the renovation of the Imerpiale Hotel in Taoromina, Sicily, and an additional $4.5 million in promissory notes for the financing of an Azerbaijan oilfield cleaning and recovery business. All three corporations also were ordered to forfeit to the United States $23,405,000 for the benefit of the victims of the fraud.

The superseding bill of information alleges that the defendants recruited financial advisors and insurance brokers and agents to sell promissory notes in a number of states by representing that the repayment was guaranteed by New England International Surety, Inc. and Omne RE S.A., when they knew these companies were insolvent and had previously failed to fulfill guarantees on earlier projects. A large portion of the money received from the sale of promissory notes for the Sicily and Azerbaijan projects was allegedly siphoned off by the defendants, used to pay sales commissions, or used to pay earlier investors.

In addition, a large portion of the proceeds generated through the sale of these promissory notes allegedly was sent out of the U.S. to foreign accounts in order to place the funds beyond the reach of claimants and policyholders. The defendants allegedly also used money to pay earlier investors in other projects in order to perpetuate and promote the scheme.

Jed Karpinski, one of the largest dealers in New England-backed promissory notes, also was sentenced to 12 months and a day imprisonment for conspiracy to commit mail fraud and ordered to make restitution to the victims of the fraud. Karpinski allegedly made false representations to his clients about the Sicily and Azerbaijan projects and the ability of New England to pay the promissory notes it was guaranteeing. Karpinski already has made restitution of $190,000 to the victims of his fraud. On November 25, 2002, New England International Surety, Inc., Omne SRL, and OMNE SRL, Inc., pleaded guilty to one count of conspiracy to commit mail fraud in violation of 18 U.S.C. ' 371. On January 18, 2002, Karpinski pleaded guilty to one count of conspiracy to commit mail fraud in violation of 17 U.S.C. ' 371.New York Periodical Distributors Inc., Massena, NY, pleaded guilty and was sentenced to pay a criminal fine of $500,000 for allocating markets for the wholesale distribution of magazines, other periodicals, and books. Under the plea agreement, the defendant is cooperating in the ongoing investigation into violations of antitrust laws and other related criminal laws in the wholesale magazine distribution industry.

According to the charge, New York Periodical Distributors Inc. and another wholesale distributor and its affiliates carried out the market allocation scheme by engaging in discussions regarding the allocation of markets, agreeing in those discussions to allocate markets, and then exchanging customers for the purpose of implementing the agreed-upon market allocations for the wholesale distribution of magazines, other periodicals, and books in central New York State.

New York Periodical Distributors Inc. was charged with violating Section One of the Sherman Act, which carried a maximum fine of $10 million for a corporation. The maximum fine for the charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum amount.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, D.C., and Associate Editor of this newsletter.