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Tag: IRS Criminal Investigation Unit

  • Man From Colorado Town Of Fairplay Ran ‘Gold Coin’ Fraud Scheme, Prosecutors Say

    ponziblotterJames P. Burg, formerly of Fairplay, Colo., ripped off his customers for gold coins and, in at least one instance, “used one customer’s payment for coins to refund funds to another customer,” federal prosecutors said.

    The scam fetched more than $2.4 million and operated through three websites, prosecutors said.

    Burg, 61, became the subject of an investigation carried out by the FBI, the IRS and the U.S. Postal Inspection Service, the office of U.S. Attorney John Walsh of the District of Colorado said.

    He has been charged with six counts of wire fraud, four counts of money laundering, four counts of willful failure to file tax returns and nine counts of mail fraud.

    “The U.S. Postal Inspection Service has no shortage of investment investigations and this is another example of greed overcoming honest business practices,” said Adam Behnen, inspector in charge of the U.S. Postal Inspection Service.

    From a statement by prosecutors (italics added):

    As part of the scheme, Burg represented that he was the chief executive officer of a company known as Superior Discount Coins (SDC) and that SDC was in the business of selling coins. Burg also conducted business using a company known as Gold Run Investments (GRI) and represented that GRI was in the business of selling coins. At times, Burg operated GRI using the alias “Tim Burke.” Burg advertised and solicited customers through radio advertisements and over the Internet using websites he controlled, including; www.superiordiscountcoins.com, www.yourcoinbroker.com, and www.goldruninvestments.net.

    Burg misrepresented and promised customers that if they ordered coins from SDC or GRI and paid him for those coins, he would deliver the coins to them or to accounts designated by them. He sent and caused to be sent to customers that ordered coins from SDC or GRI invoices stating amounts of money owed for the coins and, in some cases, providing information about a bank account to which the customers should transfer their money to purchase the coins.

    The money Burg received from customers was not used to purchase coins for such customers, but instead he converted the money to his own use and benefit. Burg refused to refund money to customers in several instances where the customers requested a return of their money after he failed to deliver coins as originally promised. To prevent the scheme’s detection, Burg sometimes filled customers’ orders for coins only after such customers threatened to take legal action or report him to law enforcement authorities. Burg used one customer’s payment for coins to refund funds to another customer.

    “Fraud schemes are often described as a house of cards and will eventually fall apart exposing the individuals responsible,” said Stephen Boyd, special agent in charge, IRS-Criminal Investigation, Denver Field Office

    See 9News.com report from 2011:

  • FEDS: Florida Attorney Conspired With Ponzi Schemer Scott Rothstein To Run Electioneering, Check-Kiting And Tax Scams And Prop Up Cash-Gushing Law Firm

    Fort Lauderdale lawyer Steven N. Lippman conspired with now-disbarred attorney, convicted racketeer and Ponzi schemer Scott Rothstein to prop up the Rothstein, Rosenfeldt and Adler (RRA) law firm through electioneering, check-kiting and tax scams, federal prosecutors charged yesterday.

    A 70-attorney firm that employed about 150 staff members, RRA collapsed in the wake of Rothstein’s epic Ponzi caper, which operated from the disgraced firm and was exposed in 2009. The Miami region’s top federal prosecutor yesterday described the scheme as “mind-boggling.”

    “The breadth, scope, and sheer complexity of Rothstein’s $1.2 billion Ponzi scheme is mind-boggling,” said U.S. Attorney Wifredo A. Ferrer. “Its success depended, in no small part, on the complicity of his colleagues and associates, like Steven Lippman. Lippman, an attorney, is now the ninth person to face criminal charges in connection with this scheme. As this investigation continues, I am sure that more will follow.”

    Lippman, 49, of Plantation, now has been charged criminally with conspiracy to violate the Federal Election Campaign Act, to defraud a financial institution and to defraud the United States.

    The Alleged Electioneering Scam

    It was the desire of Rothstein and others to “dramatically increase the stature and political power of RRA on the federal, state, and local level by making substantial political contributions to political candidates,” prosecutors said.

    In line with that, Rothstein enlisted Lippman and others to donate to the 2008 U.S. Presidential campaign of Sen. John McCain “by agreeing that RRA unlawfully would provide them with the funds to make the political contributions,” prosecutors said.

    In one instance, prosecutors said, Lippman made a $67,800 contribution to McCain-Palin Victory 2008 — and received $77,500 back from RRA.

    Then- Alaska Gov. Sarah Palin was McCain’s Vice Presidential running mate on the Republican ticket in 2008. Neither she nor McCain has been accused of wrongdoing.

    But Rothstein, through RRA, was interested in elevating his profile and improving his influence with politicians and political campaigns, prosecutors said.

    The RRA check Lippman received “was fraudulently backdated to reflect that it was issued six days prior to the date of the actual contribution and the memo section of the check stated ‘bonus,” prosecutors said.

    Various donations to GOP causes were “bundled” through the RRA firm — and Rothstein emerged a delegate to the 2008 Republican National Convention. Rothstein, in the midst of operating a colossal Ponzi caper, also was appointed to Florida’s 4th District Judicial Nominating Committee, which has sway “as to which persons should be nominated to be state appellate judges,” prosecutors charged.

    The Alleged Check-Kiting Scam

    With the RRA facing financial pressures in 2006, prosecutors said, Rothstein enlisted Lippman into a check-kiting scheme that involved an account at Lippman’s former law firm. The account at the former firm remained opened because the firm was still winding down its business when Lippman joined RRA in 2005.

    Over time, prosecutors charged, Lippman issued checks from the former firm totaling more than $10.3 million. Those checks — “many” of which were written with insufficient funds in the account — were deposited into RRA accounts.

    Rothstein and Lippman played the “float” on the checks to prop up the RRA firm and to “unlawfully obtain beneficial financing for RRA” by making it appear as though RRA had higher bank balances.

    As was the case with the political donations, Lippman came out ahead by playing ball with Rothstein in the check-kiting scheme, according to the charging document. Although checks from the former Lippman firm routed through RRA totaled more then $10.3 million, Lippman deposited checks from RRA accounts totaling more than $10.6 million into the account of the former firm.

    The Alleged Tax Scam

    Lippman, prosecutors said, “defrauded the IRS by failing to report as income certain expense reimbursements and other reportable income he received from RRA.

    The tax scam, prosecutors said, featured an agreement between Rothstein and Lippman that “Lippman would be paid a base salary and be given an expense account for which he would be fraudulently reimbursed for personal expenditures disguised as deductible business expenses”

    Through the conspiracy, prosecutors charged, Lippman and RRA sought to “avoid paying additional federal income and employment taxes.”

    “In addition,” prosecutors charged, “Lippman was paid from both the operating account and the payroll account of RRA, but would only receive an IRS Form W-2 reflecting the moneys paid to him through the payroll account. Lippman would not report to the Internal Revenue Service the moneys paid to him by RRA for expenses.”

    “The charges against Steven Lippman show our resolve to unravel all the schemes in this complex financial fraud perpetrated by convicted Ponzi schemer Scott Rothstein and his co-conspirators,” said John V. Gillies, special agent in charge of the FBI’s Miami Office.

    The probe in ongoing, Gillies said.

    “It is disappointing that the number of people who chose wrong over right and participated with Rothstein in this massive fraud is at nine and rising,” he said.

    The investigative efforts of the IRS are being led by José A. Gonzalez, special agent in charge of the IRS-Criminal Investigation Unit in Miami.

  • BULLETIN: Stewart David Nozette, American Scientist Who Sold Out His Country For The Price Of A Used Car, Sentenced To 13 Years In Federal Prison

    BULLETIN: Stewart David Nozette, the Maryland man with a PhD from the Massachusetts Institute of Technology and a “Top Secret” security clearance, has been sentenced to 13 years in federal prison on charges of tax fraud and attempted espionage.

    The espionage case was brought by the FBI after Nozette — believing he’d been recruited by Israel’s Mossad to spy on the United States — accepted $10,000 left by the FBI in an undercover sting.  In effect, Nozette sold out his country for the price of a used car and the expectation that more cash would be forthcoming.

    Nozette already was under investigation for tax evasion and financial fraud against the United States when he was arrested in the 2009 sting.

    “Stewart Nozette’s greed exceeded his loyalty to our country” said U.S. Attorney Ronald C. Machen Jr. of the District of Columbia. “He wasted his talent and ruined his reputation by agreeing to sell national secrets to someone he believed was a foreign agent.  His time in prison will provide him ample opportunity to reflect on his decision to betray the United States.”

    The case was notable for reasons other than Nozette’s bid to sell out his country. Indeed, elements of the case were prosecuted by Machen’s office — an office familiar to readers of the PP Blog because it brought the AdSurfDaily Ponzi scheme case (under then-U.S. Attorney Jeffrey A. Taylor) in 2008 and supervised the return in 2011 and 2012 of more than $59 million (under Machen) to defrauded ASD investors.

    Michael K. Atkinson, the assistant U.S. Attorney who led the Nozette tax and fraud prosecutions, once was assigned to the ASD case.

    Nozette “betrayed his country and the trust that was placed in him by attempting to sell some of America’s most closely-guarded secrets for profit,” said Assistant Attorney General Lisa Monaco.

    Monaco is from the Justice Department’s National Security division. She joined Machen in making the announcement about Nozette’s sentence, along with Principal Deputy Assistant Attorney General John A. DiCicco of the Tax Division.

    Also joining in the the announcement were James W. McJunkin, assistant director in charge of the FBI’s Washington Field Office; Paul K. Martin, inspector general for the National Aeronautics and Space Administration (NASA OIG); Eric Hylton, acting special agent in charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI); and John Wagner, special agent in charge of the Washington, D.C., Office of the Naval Criminal Investigative Service (NCIS).

    “Federal agents take an oath to protect our nation ‘against all enemies, foreign and domestic,” said Wagner.  “That would include ‘insider threats’ like Stewart Nozette.”

    Nozette, 54, parlayed his impressive academic credentials and MIT doctorate in planetary science into a career in which he conducted business with the U.S. government. He worked at the White House, for example, on the National Space Council through the Executive Office of the President of the United States.

    Prosecutors said he also worked as a physicist for the U.S. Department of Energy’s Lawrence Livermore National Laboratory, and also had access to the U.S. Naval Research Laboratory (NRL) in Washington, D.C., the Defense Advanced Research Projects Agency (DARPA) in Arlington, Va., and NASA’s Goddard Space Flight Center in Greenbelt, Md.

    “We are particularly proud that NASA OIG’s fraud investigation of Nozette, which began in 2006, served as the catalyst for further investigation and today’s outcome,” said Martin, NASA’s inspector general.

    The indictment did not allege that the government of Israel or anyone acting on its behalf committed any offense under U.S. laws in this case, prosecutors said.

  • Senior Who Swindled Seniors In $18 Million Ponzi Scheme Sentenced To 108 Months In Federal Prison; Case Sends Message To ‘Con Artists,’ Top Federal Prosecutor Says

    Louis J. Borstelmann, a California senior citizen who swindled “elderly and retired” investors in Oregon and elsewhere in an $18 million Ponzi scheme, has been sentenced in Oregon to 108 months in federal prison, prosecutors said.

    Borstelmann is 69. Most of his victims resided in the area of Florence, Ore., although others hailed from Hawaii, Montana and Texas, the office of U.S. Attorney Dwight C. Holton of the District or Oregon said.

    “Borstelmann wreaked havoc on his victims — mostly older folks — stealing their retirement funds, their homes, even the nest eggs they’d set aside for their grandkids’ education,” said Holton. “We can’t get all the money back, but at least we can achieve some measure of justice — and let other con artists know that we will hold them accountable and send them to prison.”

    Not only did the victims suffer financial abuse, they also suffered emotional abuse, the region’s top IRS investigator said.

    “Hopefully, this prosecution provides them with some peace of mind in knowing that their suffering did not fall on deaf ears,” said Marcus Williams, special agent in charge of IRS Criminal Investigation for the Pacific Northwest.

    He was backed by a top FBI agent.

    “Borstelmann stole more than money from these vulnerable victims — he stole their hopes for the future,” said Alan J. Peters, acting special agent in charge of the FBI in Oregon. “These families worked their whole lives to be able to put their kids through college and have a safe, comfortable retirement. Now that is gone.”

    Borstelmann  ran a real-estate Ponzi through a California company known as Sunburst Associates Inc., prosecutors said.

  • 9News.com (KUSA/Denver) Reports That Marlyn Hinders, Fugitive In $80 Million Genesis Fund Ponzi Scheme, Has Been Arrested

    Marlyn D. “Milt” Hinders, a Colorado fugitive charged six years ago in the $80 million Genesis Fund Forex Ponzi scheme, has been arrested in Houston, 9News.com (KUSA) is reporting.

    Hinders is 72. He was indicted in May 2005. A federal grand jury that had been impaneled in the Central District of California in 2003 accused him of being “one of the leading promoters and a manager of the Genesis Fund.”

    The Genesis Fund scheme traces its roots at least to 1994 and presaged highly complex international Forex, HYIP and autosurf fraud investigations to come. The Genesis Fund fraud caper started in the United States, but then whisked itself offshore to Costa Rica and other countries when U.S. law enforcement began to close in, first by issuing subpoenas and later by convening a grand jury when evidence disappeared.

    One of the figures in the case was a “co-conspirator lawyer from Costa Rica,” according to the indictment. Another was California attorney Victor Preston, who pleaded guilty in 2009 to defrauding the United States.

    INTERPOL and authorities in Costa Rica assisted in rounding up at least three Genesis Fund defendants who’d ducked out of the United States. Five others were arrested in the United States, prosecutors said.

    Hinders, who allegedly moved to Mexico in 2004 after subpoenas were issued and the grand jury was impaneled, was caught in Houston after a “tip” last month, KUSA reported. It is believed Hinders is the last of the nine defendants in the case to be rounded up.

    Like the now-defunct AdViewGlobal autosurf, the now-defunct Genesis Fund purported to be an offshore “association” outside the reach of U.S. law enforcement, according to records.

    Investigators followed the Genesis Fund paper trail “from the Caribbean to Hong Kong to Costa Rica and numerous other offshore locations,” according to a statement last year.

    When the Genesis Fund Ponzi scheme collapsed, its operators “and their co-conspirators lulled the investors into believing that their investments would be recovered through a new investment plan,” the grand jury charged in an 83-count indictment.

    It is common for investment fraud schemes to suspend payouts and then claim a new program will emerge to replace a failed one.

    “Upon learning of the grand jury investigation, the defendants and their co-conspirators conspired to and did endeavor to obstruct the investigation by restructuring the Genesis Fund as a group of nominee offshore corporations,” the grand jury charged.

    “This signals the new era of solving global financial fraud — the veil of offshore secrecy has been lifted and the IRS will do what is necessary to expand international cooperation to obtain financial evidence,” Victor S O. Song, chief of the IRS Criminal Investigation Unit, said last year.

    Read earlier story on the Genesis Fund.

    Read the Genesis Fund indictment.

  • ANOTHER FALSE LIENS CASE: Man Who Asserted ‘Diplomatic Immunity’ Claimed Utah Officials Owed Him $53 TRILLION, Feds Say; Harvey Douglas Goff Charged In 14-Count Indictment After Probe By Joint Terrorism Task Force, IRS

    Harvey Douglas Goff. SOURCE: Weber County (Utah) Sheriff's Office.

    EDITOR’S NOTE: Longtime readers will recall that some members of Florida-based AdSurfDaily engaged in a hectoring campaign against public officials after the U.S. Secret Service seized tens of millions of dollars in the ASD Ponzi case in August 2008. Such actions can lead to serious criminal consequences, as the story below illustrates.

    It has happened again — this time in Utah, this time involving claims for the spectacular sum of more than $53 TRILLION.

    Harvey Douglas Goff, 53, of Ogden, was indicted last month on charges he placed fraudulent liens against Utah public officials after asserting “diplomatic immunity” during a traffic stop last year.

    Goff filed bogus liens against 77 parcels in Weber County “[i]n an apparent effort to create an appearance of indebtedness” to him on the part of officials representing the state of Utah, Weber County, Ogden City and the Ogden Police Department, federal prosecutors said.

    He has been charged in a 14-count indictment with obstruction of justice, impeding internal revenue laws, filing fictitious obligations, attempted mail fraud and using the mail in furtherance of a scheme and artifice to defraud.

    In November 2010, prosecutors said, Goff “mailed” documents styled “Notice of International Commercial Claim Within the Admiralty ab initio Administrative Remedy of Harvey Douglas Goff, Jr., Creditor Secured Party,” prosecutors said. “The documents claimed the agencies contracted to pay more than $53 trillion in damages to Goff. The documents purported to be part of a ‘self-help administrative process’ and asserted that the recipients had 10 days to respond before a ‘default’ resulted.”

    The case in part traces its roots to encounters Goff had with law enforcement during traffic stops, including one in which he asserted “diplomatic immunity,” prosecutors said, charging that Goff also impeded tax laws and filed “false and frivolous documents” involving a judge in an IRS case.

    Goff challenged the jurisdiction of a state-court judge in pro se pleadings, but the court denied his arguments. When Goff failed to appear for a pretrial conference in December 2010, a bench warrant was issued, prosecutors said.

    After Goff was arrested on May 12, he refused to stand before U.S. Magistrate Judge Judge Samuel Alba, which led to an “intervention” by the U.S. Marshals Service, prosecutors said.

    Among other things, Goff refused the appointment of counsel, would not state his name or acknowledge his identity and “claimed he had been kidnapped from his home even though the Court made findings in his presence that federal agents had served a duly authorized search warrant,” prosecutors said.

    Goff was ordered to undergo a mental-health examination, prosecutors said. He potentially faces decades in prison if convicted on all counts.

    The two “fictitious obligation” counts alone carry penalties of up to 25 years in prison, prosecutors said.

    An investigation by the FBI’s Joint Terrorism Task Force and the IRS continues, prosecutors said.

  • BULLETIN: ‘Genesis Fund’ Operator John S. Lipton Gets 70 Months In Prison; ‘Offshore’ Forex Scheme Presaged Frauds, Lengthy Global Probes To Come

    UPDATED 2:18 P.M. EDT (U.S.A.) John S. Lipton, an alleged founding member and principal manager of the Genesis Fund Forex Ponzi scheme, has been sentenced to 70 months in federal prison for conspiracy to defraud the United States and tax evasion.

    The Genesis Fund scheme traces its roots at least to 1994 and presaged Forex, HYIP, and autosurf  fraud investigations to come. Indictments were handed up more than five years ago — in May 2005 — and the United States worked with the government of Costa Rica to arrest and extradite some of the defendants.

    Prosecutors said the offshore arrests were coordinated by State Department’s Bureau of Diplomatic Security at the U.S. Embassy in San Jose, Costa Rica, which worked with the IRS attache in Mexico City, the Costa Rican Judicial Police and Interpol.

    Lipton’s prosecution — and the guilty pleas of some codefendants and continuing litigation against others — lay to waste various theories on HYIP Ponzi boards that the U.S. government is powerless to act against offshore schemes and that purveyors of “private” investment opportunities cannot be prosecuted. Part of the scheme featured instructions to participants  “to create nominee offshore corporations and bank accounts to receive distributions from the fund,” prosecutors said.

    Nine people were indicted in the scheme, including Richard B. Leonard. Leonard, who was 71 when arrested in 2005 along with Lipton in Costa Rica, was described as a “promoter” and early investor in the scheme.

    Leonard has pleaded guility to his role in the scheme, as has Teresa R. Vogt, who was 51 when indicted. Vogt was an “administrator” for the scheme and worked out of her California home, prosecutors said.

    Prosecutors said the scheme started in the United States before morphing into an offshore fraud. Genesis Fund allegedly gathered more than $80 million.

    “[T]o obscure the operations of the fund and to limit scrutiny of its operations by investors and the government, the defendants caused the Genesis Fund to maintain no financial statements or other statements of operation,” prosecutors said.

    In April 2000, “Genesis Fund’s administrative operations were relocated from Anaheim, Calif., to Costa Rica,” prosecutors said. “At about the same time, paper records were moved to Costa Rica and electronic data on computers was destroyed.”

    Genesis Fund purported to have “no reporting obligations to the IRS,” prosecutors said. “Bank accounts in the names of trusts and offshore bank accounts were allegedly used to receive distributions from the Genesis Fund that were not reported to the IRS.”

    Prosecutors said “Lipton admitted that he used, and conspired with others to use, foreign trusts, corporations, and bank accounts, to receive distributions from the Genesis Fund and did not report these distributions to the IRS.

    He also “admitted that he directed the transfer of approximately 19 boxes of Genesis Fund documents to Costa Rica, rather than turn them over in response to a grand jury subpoena,” prosecutors said.

    It is common for HYIP and autosurf fraud schemes to claim the ventures are “offshore” and therefore “safe” from prosecution. Some purported HYIP “experts” have repeatedly urged domestic operators to move schemes offshore for the presumptive safety blanket such schemes enjoy.

    Genesis Fund promised investors a return of 4 percent per month, prosecutors said.

    As part of his sentence, Lipton was ordered to pay the IRS nearly $3 million in restitution.

    Trials for four defendants who pleaded not guilty are set for next year. Investigators said they followed the money trail all over the world. Separate trials for the Ponzi aspect of the case also are set for next year.

    “The Genesis fund, [which] operated as a Ponzi scheme, led IRS agents on a financial trail from the Caribbean to Hong Kong to Costa Rica and numerous other offshore locations around the world,” Victor S O. Song, chief of the IRS Criminal Investigation Unit, said in April.

    “This signals the new era of solving global financial fraud — the veil of offshore secrecy has been lifted and the IRS will do what is necessary to expand international cooperation to obtain financial evidence,” Song said.

    Genesis ceased paying investors in June 2002, just weeks after claiming the fund was worth $1.3 billion. Investors then “were allegedly lulled into believing that their investments would be recovered through a new investment plan,” prosecutors said.

    It is common for investment fraud schemes to suspend payouts and then claim a new program will emerge to replace a failed one.

    In August 2009, Victor Preston, another defendant in the case, pleaded guilty. Preston, 64 at the time of the indictment in 2005, is an attorney.

    Read more on the indictments in the Genesis Fund case.