Articles Posted in White Collar Criminal Defense

OpioidsThe opioid crisis continues to worsen throughout the entire county, but in certain states more than others because the drug has become more accessible.  To makes matters worse, insurance companies are taking advantage of this situation by overcharging for the drug treatment needed by those who suffer from all types of drug addictions. One of the rehab capitals of the United States is Palm Beach County, Florida.  The state of Florida has a billion-dollar drug treatment industry that, according to an NBC investigation, is overwhelmed by clients who continue to overdose and increase in insurance fraud.

According to the National Institute of Drug Abuse, opioids are a class of drugs that include the illegal drug heroin, synthetic opioids such as fentanyl, and pain relievers available legally by prescription, such as oxycodone (OxyContin®), hydrocodone (Vicodin®), codeine, morphine, and many others. The reason why people are abusing the use of the drug is because not only does it relieve pain but it produces euphoria that many become dependent on. Overdoses on opioids have continued to severely increase since 2007, especially because the drug is now being mixed with other drugs to produce other addictive effects.  Family members of the drug abusers rely on drug treatment centers to save their loved ones but the outcome is the complete opposite.

Dave Aronberg, Palm Beach County’s top prosecutor and State Attorney, stated to the NBC News investigator that the entire drug treatment industry has been corrupted by the accessibility of easy money.  Mr. Aronberg also explains that, the actors of this industry have taken advantage of well-intended federal law, and a lack of any good law at the state level, to profit off people at the lowest stages of their lives.

The law he refers to is the Affordable Care Act, which along with the federal Mental Health Parity Act passed in 2008, was meant to ensure people suffering from addiction could get the care they needed. People saw this as an opportunity to make a lot of money and have taken advantage of desperate people, who are usually young or dependent on their families. These scammers have also made it difficult for genuine and ethical centers to prosper because people are losing faith in the credibility of these centers.

According to the investigation done by NBC News, within a few months of a drug abuser reaching the drug treatment centers, they would call their family members stating that they had transferred to another sober home. Bills from the insurance companies kept arriving to their homes with treatment worth thousands of dollars. The bills included from medical treatments, lab tests, chiropractic therapy, and counseling.  When they family members of these victims called the treatment centers to figure out why the bills were so high, the person on the other end of the phone would hang up. The insurance bills detailed charges of $5,000.00 for things like a urine test or $1,800.00 for one counseling session. One of the victims bills reached $1.2 million for only 15 months of treatment, even though they were bounced among nine different facilities.

Governor Rick Scott, officially declared Florida’s opioid crisis a state of emergency in May of 2017. Also, legislators recently passed a bill that would increase penalties for brokering. They believe this will give prosecutors sharper tools to crack down on what a grand jury last December found was rampant brokering and fraud across the insurance industry.

Earlier this month, The International Consortium of Investigative Journalists (ICIJ), published reports on their ongoing investigation into the 2.6 terabytes of data leaked from Mossack Fonseca, a Panamanian international law firm.  The ICIJ, a global network of over 190 journalists from more than 65 countries, came in contact with the leaked data through a German newspaper, Süddeutsche Zeitung, who iSource: www.worldpropertyjournal.comn turn received the data early last year from an anonymous source.  The leak was far too big for the German newspaper to handle on its own and enlisted the ICIJ to aid in the investigation of the leaked documents.

What is so important about The Panama Papers?  The leak, in what is now considered the biggest data leak in history, was dubbed the “Panama Papers” and applies to the 11.5 million documents with detailed information on more than 214,000 offshore companies listed in the firm’s files.

Offshore companies are entities incorporated in offshore jurisdictions, usually in places with: 1) Little to no local taxation; 2) Stable banking centers; and 3) Strict banking secrecy laws.  The offshore companies are then used to establish offshore bank accounts, and although they are not illegal, the accounts are used by non-residents to move wealth without any disclosure to the nation of origin, the source of the money, or the business or transactional history whereby the funds came under the control of individuals seeking a “tax haven” for the money acquired.  The main issue with these dealings is that the obscure and secretive nature of these accounts easily lends itself to illegal activities, such as money laundering and tax avoidance.

For the past few decades, Panama’s offshore financial center has been catering to an “A list” of bank clients that are now under the microscope for being tied to the offshore accounts in some form or fashion.  The leaked documents name real people and their names, including names of shareholders, directors, depositors and owners of interest in funds stowed away beyond the purview of policing agencies and bank regulators…..until now..

The Panama Papers name 140 prominent politicians from more than 50 countries, including the former Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson.  Gunnlaugsson, who became the first “victim” of the scandal, resigned earlier this month for failing to disclose offshore accounts he co-owned with his wife.

The law firm founders, maintain their firm did nothing illegal and issued a detailed statement in response to the scandal on their website. Finely attired in two thousand dollar suits, the attorneys from Panama walked out of a press interview when a Swedish reporter asked an uncomfortable question which our well suited Panamanian lawyer decried as “totally inappropriate.”  More creativity would be appreciated by the thousands of victims of the thefts and diversions of public money and illicit transactions funded into the trust account transactions emerging from the “Panama Papers” scandal.  More than a scandal it is a horror-show reminder that continued, and will continue, until international bankers see that their true interests are in stopping money laundering rather than pandering to bad actors.  But don’t hold your breath: I will keep breathing and writing, so standby!

Most U.S. taxpayers do not run afoul of the Internal Revenue Service’s Criminal Investigation Division.   Known as the CID, it has special agents who work either with other criminal prosecution agencies, in or with inter-agency task forces, or are assigned on a case by case basis to a U.S. Attorney office.  Understand that the Internal Revenue Service does not commonly begin a taxpayer collection action with a Criminal Investigation Division special agent.  The most common I.R.S. taxpayer recovery begins with a telephone call to the target.  The caller is an I.R.S. collection agent, not a C.I.D. agent.



If your first contact from the I.R.S. is a C.I.D. agent call you know that the ultimate outcome is most likely a criminal prosecution.  It is best to retain a criminal defense attorney if you are called by a C.I.D. special agent.  All customary investigations begin with a request for production.  The request is either by letter or by verbal communication from an I.R.S. agent.  Compliance is not voluntary but is mandatory so do not disregard an IRS request for production of records.  You can negotiate the time and delay factor but you cannot fail to comply.  Additionally, be very aware that your response must include all records requested.  Any selective response by you, or any omission of records is an open door to a criminal prosecution.  When we look over our law office records of criminal prosecutions for tax evasion it is common that the prosecutor includes several counts of obstruction of justice for failure to provide complete tax records.  If the first contact  you have with an IRS agent is a subpoena then you can conclude for certain that you are the subject of a criminal investigation.  Anyone whose first contact from the IRS is from a CID special agent would be well advised to retain a criminal defense lawyer at the outset.  The investigatory phase can last as long as six months.  As the subject of an IRS review you are entitled to be represented by an attorney, but it is not always needed.  Most if not all IRS inquiries resolve with an agreed resolution requiring payment of back taxes, fines and interest.  Very few IRS contacts resolve with a criminal prosecution.

You must keep in mind that IRS compliance actions are entirely paper based and records based.  An inculpatory statement  (admission of guilt) is rarely a part of an IRS criminal prosecution so be candid and open in your conversation with counsel and, if so advised, with the IRS agent.  Unlike most other criminal prosecutions, the government does not have to establish beyond a reasonable doubt the elements of the crime of tax evasion.  The standard is willfulness and intent; and your tax filings are almost always sufficient to establish all the legal elements the government must prove up in a tax evasion prosecution.

This week the Security and Exchange Commission (SEC) announced that E.S. Financial Services, a Miami based brokerage firm, settled what could have been a major criminal case with an agreed $ 1 million penalty payment to settle the charges and possibly avoid criminal prosecution.

The SEC issued a press release which suggested that the E.S. Financial, now known as Brickell Global Markets, Inc., committed acts that substantially violate anti-money laundering statutes and related rules.  The agreed allegations are that the brokerage firm allowed non-U.S. individuals to sell and buy securities without revealing the people who are the beneficial owners.

The SEC’s continued investigation led to their issuance of an order, which instituted a settled administrative proceeding, in lieu of a criminal indictment.  And while no fraud occurred in this case, the SEC investigation concluded that there were significant “holes” or shortcomings in the framework and implementation of the firm’s customer identification program (CIP), which required brokers to, “…at a minimum…, implement reasonable procedures to verify the identity of any person seeking to open an account.”

According to the SEC’s order, E.S. Financial maintained a brokerage account for a bank from Central America that was trading for its own benefit.  It went on to say that 13 non-United States entities, involving 23 non-U.S. citizens, were the beneficial owners of the securities involved and that more than $23 million of securities transactions were involved in the allegations.  These actions were in violation of Section 17(a) of the Securities Exchange Act of 1934. Specifically:

  • Rule 17a-3, which requires exchange members, brokers, and dealers to make and keep certain all books and records relating to its business.
  • Rule 17a-4, which requires exchange members, brokers, and dealers to preserve such required records for a prescribed period of time.
  • Rule 17a-8, which requires every broker to comply with the reporting, record keeping, and record retention requirements in regulations implemented under the Bank Secrecy Act, including the requirements in the CIP rule applicable to broker-dealers.

The anti-money laundering statutes require that non-U.S. citizens who buy, sell or beneficially own securities in the U.S. must reveal and verify their names.  This applies to any individual who is the beneficial owner or ultimate person who will own the securities.

The SEC identified that in examining the books and records of the firm, there was a failure to provide and produce the records identifying the foreign customers the firm was soliciting and or providing financial advice.

Under the SEC rules cited above, financial institutions must maintain records which adequately identify their customers.  To ensure that money launderings statutes are followed, FINRA published the Know Your Customer Rule (FINRA Rule 2090), which requires regulated brokerage firms to know with whom they are dealing.   The “Know Your Customer” Rule imposed upon financial institutions is intended to eliminate or reduce money laundering.

As part of the agreed settlement, E.S. Financial Services agreed and confirmed to the SEC that a complete review of their internal policies, practices and procedures over the next two years would be undertaken, which is in addition to the $1 million fine they agreed to pay.

A fund manager in Sarasota, Florida was charged with defrauding investors of $3.8 million. The fund manager, Gaeton Della Penna, faces federal criminal charges in the Middle District of Florida for defrauding investors. Criminal charges, filed in federal court, are in addition to the SEC charges. SEC%20logo.jpg

The allegations are that he raised $3.8 million from his “clients” to trade securities and to invest in some small companies of which he personally approved. In fact, the SEC alleges that over $1.1 million was diverted to pay his mortgage on a 10,000 square-foot home. 
The SEC alleged that he also paid an inflated income salary to his girlfriend who lived with him. The SEC and FINRA issued statements urging private investors to be very mindful of whom they are dealing with.

FINRA, on its website, has a complaint compiler called Broker Check. On Broker Check, complaints filed against stockbrokers can be reviewed. These charges range with white-collar crimes that include wire fraud, money laundering, and front running and inappropriate risk investments for clients.

In the charges filed against the Sarasota Florida private fund manager, the allegations include theft, as well as money laundering and wire fraud. The investment manager paid fake returns to current investors and raised funds fraudulently by promising high returns. He issued investors statements on a regular basis. Investors were solicited at his church, which he used to find clients. His fund, which operated from 2008 to 2013 was promising a 5% return on the investment funds, plus 80% of profits generated from his mix of stock purchases and private company investments. Also named in the SEC press release and complaint was Gaeton Capital Advisors LLC, listed as a relief defendant. A relief defendant is customarily named for the purpose of recovering any investor funds that may remain in its possession. The SEC identified the scheme as a Ponzi type scheme where money from recent investors was paid to previous investors. The SEC, in beginning its civil action, is seeking to recover the investments for the victims. At this time, it is uncertain if any funds can be collected and returned to the victims. In the criminal action filed in federal court, the U.S. Attorney’s office will seek both a prison term and a restitution order to aid in the recovery of the losses to the victims. The SEC regional office in Miami, Florida was also involved in the investigation of this case. The SEC’s investigation was conducted with the U.S. Attorneys Office and the FBI and Department of Treasury. All these government agencies were involved in both the initial civil action by the SEC and will be involved in the criminal prosecutions in US District Court.

White-collar crime covers a lot of legal territory; from security fraud, wire-fraud, money laundering to tax evasion. In this situation the second largest bank in Switzerland, Credit Suisse, has been indicated (charged) and has been adjudicated guilty of a felony. Historically, the United States and the New York State’s Attorney General, have balked at indicting banks. The Securities and Exchange Commission, the Justice Department, and State and Federal banking regulators can either elect civil process or criminal process to rein-in bankers. When the criminal process results in a conviction it can be a death sentence for a banking institution.

What’s important about this headline is that a felony charge was used instead of a gentleman’s agreement pursued under the alternative civil regulatory process. A felony conviction for any bank raises the very real risk of having to close their business. To avoid that very real possibility, Credit Suisse agreed to what are historically important concessions. CreditSuisse.png In return the United States banking authorities have waived, or declined to use, their power to suspend Credit Suisse from conducting investment and banking business within the United States. Swiss banking laws do not permit any bank to reveal the identity of its depositors. Several years ago, U.S. Federal criminal authorities pursuing tax avoidance charges against U.S. citizens, demanded and received assurances from Swiss government officials that the names of U.S. citizens would be revealed. The Swiss never completed the understanding. Banking regulators in New York and the Justice Department and the office of United States Attorney General, in Washington D.C have imposed, and will share, a $2.6 billion fine imposed on Credit Suisse. The big Swiss Bank and its parent company, have pled guilty to one count of conspiracy to aid in tax invasion, a felony.

What is important is that this large bank is now a convicted felon. What is going on here? Federal prosecutors as well as the Federal Reserve and New York State banking regulators are going after top tier tax evasion programs conducted through and by banks in Switzerland. Now, banks in Switzerland have agreed to reveal their offshore banking operations. The agreement does not require the Swiss bank to reveal the false names used in creating trusts holding taxable deposits from US citizens. They will, however (and this is a major thing) have to keep those records within the United States. We expect that indictments and subpoenas will be issued in New York to open those files, reveal names, and begin prosecutions in state and federal courts. What comes next is a long anticipated series of indictments coming out of federal courts in New York and Florida. Within six months Credit Suisse will turn over to their United States operations, the true identities of depositors using offshore Swiss bank offices. Next will come government attempts to get to those lists and begin prosecutions for tax evasion.

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Yvette Scott-Patterson will be charged with mortgage fraud in the purchasing of more than 30 properties by use of fraudulent home loans. The US Attorney’s Office for the Southern District of Florida has said Scott-Patterson will be facing six years in prison, a $110,000 fine and deportation after her sentence. Prosecutors say that she and others in her group used false documentation in order to secure loans. Some of the fake papers were forged bank statements, false or stolen drivers licenses and phony employment verification letters. It is estimated that nearly $10 million in fraud was conducted by Scott-Patterson and her criminal colleagues. She fled the country in 2006 and was arrested 2 years later by the local Fugitve Apprehension Team resulting in her extradition back to the US. Nine individuals, including her husband Delroy Patterson, were charged and have plead guilty. Scott-Patterson’s formal charges were one count of conspiracy to commit mail fraud, wire fraud and aggravated identity theft, as well as another count of aggravated identity theft in association with the scheme.

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Mike Ohana, 39, Ryan Dosen, 30, and Paula Ramos, 52, were among nine people involved in a complex mortgage fraud scheme skyrocketing into the millions of dollars of theft. The group allegedly defrauded $3 million from two banks by use of fraudulent loans. Authorities stated that Ramos verified the loan applications on two properties in Miami in a fraudulent fashion. Washington Mutual was the bank defrauded by Go Expert Mortgage, the group owned by Ramos. Fraud occurred when Ramos vouched for the applications as true. Dosen was the attorney that worked as a title attorney for the deal.

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Taylor, Bean & Whitaker halted all mortgage loan funding today in result of a federal investigation. Federal authorities had called the company to close loans which were insured by the Federal Housing Administration. In addition to the FHA suspending the firm, Ginnie Mae cut off Taylor, Bean & Whitaker from its mortgage-backed securities program. Mortgage fraud is running rampant in large-level organizations in today’s business age and its affecting consumers directly. The lender based out of Ocala did not submit a mandatory report which led to the investigation and eventual shutdown.

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Gideon Rechnitz currently faces two lawsuits of mortgage fraud in Sarasota County, including one by 71-year-old Yolanda Rodriguez. She claims that in 2006 Rechnitz improperly evicted her and her deaf brother from their home, which he acknowledged in a deposition was worth far more than the $150,000 Rodriguez owed on her mortgage. Rechnitz said in the fall that his foreclosure rescue business had slowed considerably in 2008 because it was harder to find people like Rodriguez with substantial equity. But as home­owners who got 100 percent financing now struggle to renegotiate their mortgage terms, state records show he recently started a new company called Loan Modification Enterprises.

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