Government Enforcement Actions

June 8, 2016

Two Memphis, Tennessee, area residents were sentenced to prison for conspiring to defraud the United States and aiding and assisting in the preparation of false tax returns, announced the Justice Department’s Tax Division. Jeremy Blanchard, 35, and Erik Pittman, 35, both of Memphis, were sentenced to serve 70 and 33 months in prison, respectively, to be followed by three years and one year of supervised release, respectively. According to court documents, Blanchard and Pittman were partners in a return preparation business, Mo Money Taxes, which operated three locations in the Richmond, Virginia, area. Blanchard, Pittman and others prepared numerous false tax returns for their customers for the 2011 tax year. Blanchard and Pittman admitted that they created and inflated fictitious and fraudulent tax credits, including the Earned Income Credit and the American Opportunity Credit, to claim tax refunds that customers were not entitled to receive. DOJ

June 7, 2016

The CFTC announced it has filed charges against Jeffrey Slemmer of Acton, Massachusetts, Christian Dorrian of Boynton Beach, Florida, and Adam Roth of Boca Raton, Florida, and their Florida companies Slemmer Enterprises LLC, Dorrian Enterprises, LLC, and Roth Investment Group LLC for engaging in a $2.7 million precious metals and rare diamonds fraud scheme.  CFTC

June 6, 2016

The CFPB took action against payment processer Intercept Corporation and two of its executives, Bryan Smith and Craig Dresser, for allegedly enabling unauthorized and other illegal withdrawals from consumer accounts by their clients.  The complaint alleges Intercept, Smith, and Dresser processed payments for clients without adequately investigating, monitoring, or responding to red flags that indicated some clients were breaking the law or deceiving customers.  CFPB

June 6, 2016

Michigan filed 33 felony charges against Scott Rookus, 45 of Jenison, for his role in running an alleged Ponzi scheme between 2010 and 2015. Between 2010 and 2013 Rookus allegedly solicited and obtained investments of approximately $1.5 million for his holdings company, New Haven Holdings. His customers many of whom were senior citizens, were allegedly told that earnings from their investments would come from the profits of Rookus’ enterprises, when in fact the money he took resulted in an alleged Ponzi-scheme from which he was the primary beneficiary. To cover his tracks, Rookus allegedly issued fraudulent returns to some investors using money from newer investors. He allegedly used the investor funds to pay personal expenses such as his children’s private school education and to pay of tax liens against him. The alleged scheme was uncovered after Rookus filed for personal bankruptcy in March 2015 and his investors found out that they had lost everything they invested. MI

June 6, 2016

New York announced a settlement with 165 West 91st Street Holdings, LLC, a Manhattan developer, for the loss of two rent-controlled apartments in an Upper West Side building while it was being converted into a condominium, as a result of prohibited agreements to buy-out tenancy rights. The settlement requires the developer to pay a $540,000 penalty, $490,000 of which will go to the New York City Affordable Housing Fund created by the Attorney General’s office in order to compensate for lost affordable housing. The Martin Act, New York’s blue sky law, protects apartment purchasers and tenants in buildings that are converted to coops or condominiums. Tenants get an exclusive right to buy their units and, in most cases, cannot be evicted purely because the building is being converted. NY

June 3, 2016

The SEC charged Rhode Islanders Michael J. Maciocio and David P. Hobson with insider trading in the securities of deal targets being pursued by the pharmaceutical company where Maciocio worked.  The SEC alleges that Maciocio obtained confidential clinical and business data about pharmaceutical firms being considered by his company for potential acquisitions and business relationships, and that he used this nonpublic information to trade in their stocks.  Maciocio made approximately $116,000 in illegal profits based on this trading activity.  The SEC also alleges that Maciocio illegally tipped his childhood friend, Hobson, a stockbroker who utilized the nonpublic information to realize at least $187,000 in illicit trading profits for himself and $145,000 for his customers.  SEC

June 2, 2016

The SEC charged New York City-based trader Haena Park with defrauding investors out of millions of dollars by misrepresenting her investment track record, the profitability of her investments, and her use of investor funds.  The SEC alleges that Park touted her supposedly profitable futures and foreign exchange trading strategy when soliciting friends, family, former Harvard classmates, and individuals with connections to them.  She pooled investor finds and incurred heavy trading losses month after month in the futures and forex markets, yet repeatedly told investors that their investments were profitable and sent them monthly account statements showing fictitious profits.  She raised at least $14 million from more than 30 investors since 2012, and has suffered more than $16 million in trading losses during that time.  SEC

June 2, 2016

The SEC announced fraud charges and an asset freeze against Charles C. Liu, his wife Xin “Lisa” Wang, and their companies Pacific Proton Therapy Regional Center, Pacific Proton EB-5 Fund, and Beverly Proton Center LLC.  The SEC’s complaint alleges that Liu and Wang raised $27 million for a proton therapy cancer treatment center in Southern California from 50 investors in China through the EB-5 immigrant investor program.  They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign investors an opportunity for future U.S. residency.  But presently there is no construction at the proposed site after more than 18 months of collecting investments.  Meanwhile, Liu has transferred $11 million in investor funds to three firms in China and diverted another $7 million to his and his wife’s personal accounts.  SEC

June 2, 2016

North Carolina-based investment adviser Richard W. Davis, Jr. has agreed to settle charges of defrauding investors by secretly steering portions of real estate-related investments into deals with companies he owned or operated.  The SEC further alleges that Davis made false and misleading statements to investors before and after they made their investments, failed to inform investors of their losses as his companies failed to pay the loans, and improperly received at least $1.5 million from bank accounts which commingled investor funds when he was only entitled to less than $150,000 in management fees.  Davis has agreed to a settlement subject to court approval with disgorgement plus interest and penalties to be determined by the court at a later date.  SEC

June 1, 2016

Wall Street-based brokerage firm Albert Friend & Company (AF&Co) will pay $300,000 to settle charges it failed to sufficiently evaluate or monitor customers’ trading for suspicious activity.  Specifically, an SEC investigation found that AF&CO failed to file Suspicious Activity Reports with bank regulators for more than five years despite red flags tied to its customers high-volume liquidations of low-priced securities.  SEC