Government Enforcement Actions

April 4, 2016

The SEC announced charges against four individuals for fraud against victims including seniors solicited through free dinners at a Tampa, Florida restaurant.  The SEC alleges that Philadelphia residents Joseph Andrew Paul and John D. Ellis, Jr. lied about the track record of their advisory firm, including by creating fraudulent marketing materials with performance numbers cut-and-pasted from another firm’s website.  Paul and Ellis recruited Donald Ellison and James Quay to use these materials and solicit potential victims with promises of lofty returns.  The SEC alleges that much of the money was never invested, but rather split between the four men.  SEC

March 31, 2016

Commercial vehicle manufacturer Navistar International Corp. will pay $7.5 million to settle charges that it misled investors about its development of an advanced technology truck engine that could be certified to meet U.S. standards.  Separately, the SEC has filed charges in federal court in the Northern District of Illinois against Navistar’s former CEO Daniel Ustian.  The SEC alleges that Navistar and Ustian failed to fully disclose the difficulties Navistar was having gaining EPA certification that its truck engine, designed using “exhaust-gas-recirculation” technology, met stricter Clean Air Act standards which took effect in 2010.  SEC

March 30, 2016

Biotech venture capitalist G. Steven Burrill and his firm, Burrill Capital Management, will pay $5.785 million to settle charges that Burrill siphoned money from the Burrill Life Sciences Capital Fund III under the guise of “advanced” management fees to fund his lavish lifestyle.  The SEC’s order also found Burrill Capital Management’s Chief Legal Officer and Controller to have played integral roles in Burrill’s scheme.  They will pay $275,000 combined to settle the SEC’s charges.  SEC

May 2, 2016

At the FTC’s request, a federal court has found BlueHippo Funding LLC, BlueHippo Capital LLC and BlueHippo’s CEO Joseph Rensin in contempt for operating a deceptive computer financing scheme in violation of a federal court order that the defendants agreed to in 2008. The court also entered judgment against Rensin for $13.4 million, the harm consumers suffered as a result of the scheme. FTC

April 29, 2016

Michigan announced that a judge has ordered Shawn Dicken, of Bay City, to pay $663, 531.48 in restitution for her role in an extensive multi-county Ponzi scheme. Dicken was convicted in 2014 after an Attorney General investigation and sentenced to 140 months to 20 years in prison. Beginning in 2011, Dicken was employed as the lead salesperson for The Diversified Group Advisory Firm LLC, an investment company. During her tenure with Diversified, Dicken misrepresented the investments she marketed to investors, saying investments offered by Diversified were without risk, completely liquid, featuring a guaranteed rate of return of between 9.5% and 10.44%. Dicken failed to disclose the risks associated with the actual investment in question – a highly leveraged real estate investment that could result in the loss of all of the investors’ money. Many investors, including senior citizens, risked their life savings. Dicken swindled investors out of more than two million dollars and investigation revealed she took an eight percent commission, pocketing approximately $160,000 for herself. MI

April 28, 2016

Two men who conspired to file more than 1,200 false tax returns using stolen identities were sentenced to prison. Ernest James Simmons Jr., 29, of Phenix City, Alabama, was sentenced to 24 months and 15 days in prison followed by five months of home detention and Calvin J. Perry, 28, of Atlanta, Georgia, was sentenced to 32 months in prison. Simons and Perry each pleaded guilty in December 2015 to one count of conspiracy to defraud the government with respect to filing false income tax refund claims and one count of aggravated identity theft. According to court documents and evidence presented at the sentencing hearing, between 2010 and 2012, Simmons and Perry conspired with Perry’s mother, Pamela Ann Smith, to run a large-scale stolen identity refund fraud scheme from Smith’s tax return preparation business, Jaycal Tax Service, in Phenix City. Simmons was directly connected to false returns claiming more than $700,000 in fraudulent refunds and Perry was directly connected to false returns claiming over $1 million in fraudulent refunds. DOJ

April 27, 2016

New York announced settlements with six ticket brokers that, collectively, illegally resold hundreds of thousands of tickets in New York State since 2011, including on popular ticket resale platforms like StubHub and Vivid Seats. The companies – TicketToad.com, Inc. of New Jersey, Charm City Entertainment LLC of Florida, Just In Time Tickets, Inc. of New York, A2Z Tix LLC of New York, Flying Falco Entertainment, Inc. (d/b/a Avery Tickets) of California, and All Events Utah, LLC of Utah – each illegally sold tickets to events in New York over the last several years without first obtaining the required license. TicketToad, A2Z, Just In Time, Flying Falco Entertainment and All Events Utah also violated New York’s ticket laws by using illegal software (known as ticket “Bots”) to purchase large numbers of tickets on websites such as Ticketmaster.com before the tickets could be obtained by consumers. The settlements require that the companies and their principals maintain proper ticket reseller licenses, abstain from using Bots, and pay penalties for having operated illegally. The settlements require the six companies to pay a combined total of $2,760,000 in disgorged profits and penalties to the State. NY

April 27, 2016

New Jersey announced that 10 alleged members and associates of the New York-based Genovese organized crime family were indicted on charges including first-degree racketeering for allegedly reaping millions of dollars in New Jersey through illegal loansharking, unlicensed check cashing, gambling and money laundering, including laundering of drug proceeds. Another defendant was charged in connection with the laundering of drug money, and the wives of three of the defendants were charged with tax fraud, bringing the total defendants to 14. The charges stem from “Operation Fistful,” a joint investigation by the New Jersey Division of Criminal Justice and the Waterfront Commission of New York Harbor, conducted with assistance from the New York and Queens County District Attorneys’ Offices and other law enforcement agencies. NJ

April 27, 2016

Michigan and 34 other states reached an agreement in principle to settle allegations against Wyeth, a subsidiary of Pfizer, Inc. The settlement will resolve allegations that Wyeth knowingly underpaid rebates owed under the Medicaid Drug Rebate Program for the sales, Protonix Oral and Protonix IV between 2001 and 2006. Both are drugs that are used to treat conditions such as acid reflux. Under the settlement Wyeth agreed to pay $784.6 million to the United States and the States. Over $371 million of this amount will go to the Medicaid Program. The settlement stems from two whistleblower lawsuits which were filed in the United States District Court for the District of Massachusetts. The United States, 35 states (including Michigan) and the District of Columbia intervened in the lawsuits. NY, NJ, MI, WA

April 25, 2016

The CFPB ordered debt collection law firm Pressler & Pressler, LLP, principal partners Sheldon H. Pressler and Gerard J. Felt, and New Century Financial Services, Inc., a debt buyer, to stop churning out unfair and deceptive debt collection lawsuits based on flimsy or nonexistent evidence.  The orders also require the firm and the named partners to pay $1 million, and New Century to pay $1.5 million to the Bureau’s Civil Penalty Fund.  CFPB