Business Crimes Hotline

CALIFORNIA

Wireless Company Employee Guilty of Fraudulently Selling PINs

A former employee of a major wireless services provider pled guilty in federal court to two counts of fraud. The former customer services representative admitted that he gained unauthorized access to prepaid cellular personal identification numbers (PINs), which are designed to allow customers to add minutes to their prepaid cellular telephones, and that he sold the PINs to retailers across the country. The PINs had a face value of over $21 million. (Case No. 04-00308, E.D. Ca.).

President of Investment Company Sentenced on
Fraud Charges

The president and sole shareholder of a California-based investment company was sentenced to 3 years and 10 months in prison in connection with charges stemming from what was described by federal prosecutors as one of the largest fraud schemes in the Southern District of California. The scheme involved funneling investors' funds from the defendant's company to an affiliated company, purportedly for use in originating mortgage loans. Despite his awareness that his company was in default and unable to make good on its promises, the defendant concealed the company's problems and continued to solicit at least $20 million from investors. (Case No. 03-275, S.D. Ca.).

CONNECTICUT

Hedge Fund COO Gets Probation for Aiding and Abetting False SEC Statements

The former Chief Operating Officer of an investment company that advises and manages hedge funds pled guilty to aiding and abetting the filing of false SEC statements and was sentenced to a year of probation and ordered to pay a $10,000 fine, according to the U.S. Attorney for the District of Connecticut. In his position at the company, the defendant shared responsibility for making filings with the SEC, including making required disclosures of securities holdings. He admitted that he and others filed SEC statements for the company that understated the company's holdings in certain stocks. According to the DOJ, the defendant had previously agreed to disgorge $110,000 and pay a $65,000 fine to settle related civil allegations by the SEC. (Case No. 05-00263, D. Conn.)

GEORGIA

CEO of Biotechnology Company Receives over 6 Years for Securities Fraud

The former President and CEO of a publicly-held Georgia-based biotechnology company was sentenced to 6 years and 6 months in prison following his conviction on charges of securities fraud and perjury, according to the U.S. Attorney for the Northern District of Georgia. He was accused of a 'pump and dump' scheme in which he issued press releases falsely suggesting the FBI was interested in procuring the firm's products to combat anthrax in the wake of the anthrax mailings. The releases led to a short-lived but dramatic increase in the company's stock price, during which the defendant sold his own shares in the company. (Case No. 04-00508, N.D. Ga.).

Bank VP Indicted for Insider Trading

A former Vice President of an Atlanta area bank was indicted on 34 counts of securities fraud through insider trading, according the DOJ. The insider trading charges stem from his alleged trading on insider information about an upcoming merger between the company that owns the bank and another company. (Case No. 06-00091, N.D. Ga.).

VIRGINIA

Three Virginians Indicted in 'Bust-Out' Scheme

Three Virginia men were named in a five-count indictment alleging wire and bank fraud, securities counterfeiting and conspiracy in connection with a 'bust-out' scheme victimizing a closely held Virginia corporation. The alleged perpetrators posed as legitimate buyers of the business offering to purchase the concern for $1.7 million, but tendering only $32,000 as a down payment. In the next few days, before the balance came due, the buyers began liquidating and transferring the company's assets, taking $125,000 before the previous owner realized something was amiss. According to the FBI, the same trio is responsible for millions of dollars in fraud in similar schemes across the country. (Case No. 06-00027, E.D. Va.).

Freight Company Guilty of Bid Fraud

A freight forwarding company has agreed to plead guilty and pay a criminal fine of over $1 million for its role in two bid-rigging conspiracies, according to the DOJ. Charges filed in the case allege that the company conspired with both domestic and foreign freight forwarders involved in a Department of Defense program to ship the household goods of DOD personnel between the U.S. and overseas locations. The alleged conspiracies involved both agreements not to compete on certain routes, and agreements to set rates at certain levels. (Case No. 06-00057, E.D. Va.).

ARKANSAS

Owner of E-mail Advertiser Receives 8 Years for Data Theft

The owner of a Florida corporation that distributes advertisements by e-mail was sentenced to 8 years in federal prison after an Arkansas jury found him guilty of 120 counts of unauthorized access to a protected computer and other charges, according to the DOJ. He reportedly stole over a billion records containing names, e-mail addresses, phone numbers and other personal information by using sophisticated decryption software to access databases belonging to a company that serves as a repository of customer information for other companies. (Case No. 04-00175, E.D. Ark.).

CALIFORNIA

Wireless Company Employee Guilty of Fraudulently Selling PINs

A former employee of a major wireless services provider pled guilty in federal court to two counts of fraud. The former customer services representative admitted that he gained unauthorized access to prepaid cellular personal identification numbers (PINs), which are designed to allow customers to add minutes to their prepaid cellular telephones, and that he sold the PINs to retailers across the country. The PINs had a face value of over $21 million. (Case No. 04-00308, E.D. Ca.).

President of Investment Company Sentenced on
Fraud Charges

The president and sole shareholder of a California-based investment company was sentenced to 3 years and 10 months in prison in connection with charges stemming from what was described by federal prosecutors as one of the largest fraud schemes in the Southern District of California. The scheme involved funneling investors' funds from the defendant's company to an affiliated company, purportedly for use in originating mortgage loans. Despite his awareness that his company was in default and unable to make good on its promises, the defendant concealed the company's problems and continued to solicit at least $20 million from investors. (Case No. 03-275, S.D. Ca.).

CONNECTICUT

Hedge Fund COO Gets Probation for Aiding and Abetting False SEC Statements

The former Chief Operating Officer of an investment company that advises and manages hedge funds pled guilty to aiding and abetting the filing of false SEC statements and was sentenced to a year of probation and ordered to pay a $10,000 fine, according to the U.S. Attorney for the District of Connecticut. In his position at the company, the defendant shared responsibility for making filings with the SEC, including making required disclosures of securities holdings. He admitted that he and others filed SEC statements for the company that understated the company's holdings in certain stocks. According to the DOJ, the defendant had previously agreed to disgorge $110,000 and pay a $65,000 fine to settle related civil allegations by the SEC. (Case No. 05-00263, D. Conn.)

GEORGIA

CEO of Biotechnology Company Receives over 6 Years for Securities Fraud

The former President and CEO of a publicly-held Georgia-based biotechnology company was sentenced to 6 years and 6 months in prison following his conviction on charges of securities fraud and perjury, according to the U.S. Attorney for the Northern District of Georgia. He was accused of a 'pump and dump' scheme in which he issued press releases falsely suggesting the FBI was interested in procuring the firm's products to combat anthrax in the wake of the anthrax mailings. The releases led to a short-lived but dramatic increase in the company's stock price, during which the defendant sold his own shares in the company. (Case No. 04-00508, N.D. Ga.).

Bank VP Indicted for Insider Trading

A former Vice President of an Atlanta area bank was indicted on 34 counts of securities fraud through insider trading, according the DOJ. The insider trading charges stem from his alleged trading on insider information about an upcoming merger between the company that owns the bank and another company. (Case No. 06-00091, N.D. Ga.).

VIRGINIA

Three Virginians Indicted in 'Bust-Out' Scheme

Three Virginia men were named in a five-count indictment alleging wire and bank fraud, securities counterfeiting and conspiracy in connection with a 'bust-out' scheme victimizing a closely held Virginia corporation. The alleged perpetrators posed as legitimate buyers of the business offering to purchase the concern for $1.7 million, but tendering only $32,000 as a down payment. In the next few days, before the balance came due, the buyers began liquidating and transferring the company's assets, taking $125,000 before the previous owner realized something was amiss. According to the FBI, the same trio is responsible for millions of dollars in fraud in similar schemes across the country. (Case No. 06-00027, E.D. Va.).

Freight Company Guilty of Bid Fraud

A freight forwarding company has agreed to plead guilty and pay a criminal fine of over $1 million for its role in two bid-rigging conspiracies, according to the DOJ. Charges filed in the case allege that the company conspired with both domestic and foreign freight forwarders involved in a Department of Defense program to ship the household goods of DOD personnel between the U.S. and overseas locations. The alleged conspiracies involved both agreements not to compete on certain routes, and agreements to set rates at certain levels. (Case No. 06-00057, E.D. Va.).