Financial and Investment Fraud

October 25th, 2017

California announced a $220 million multistate settlement with Deutsche Bank for fraudulent conduct involving the manipulation of the London Interbank Offered Rate (LIBOR). LIBOR is the rate at which banks lend money to one another. It is a key financial tool that determines interest rates for many financing mechanisms, including government and corporate bonds. Deutsche Bank colluded with other banks to skew borrowing rates in its favor, illegally profiting on contracts with municipalities linked to LIBOR. This unlawful strategy resulted in a sharp increase in profits for Deutsche Bank at the expense of government entities and non-profit organizations in California and throughout the country. CA, NJ

September 29, 2017

Texas secured an Assurance of Voluntary Compliance (AVC) with LowerMyBills, a lead generation company that misled consumers toward Credit Alliance Group (CAG), which falsely advertised its accreditation and debt management process. This AVC secured $2 million in restitution for eligible consumers. The attorney general’s office sued CAG in 2013 for defrauding customers out of millions of dollars entrusted to settle their debts, and for providing debt management services unauthorized by the Texas Office of Consumer Credit Commissioner, actions that cost hundreds of consumers thousands of dollars in losses. CAG claimed it would eliminate 20 to 60 percent of a consumer’s outstanding debt within three years. However, customers were charged up-front fees as high as 35 percent of the debt they owed, and CAG was found depositing customer payments into its own operating account. The attorney general’s office brought action against both LowerMyBills and CAG under the Texas Deceptive Trade Practices and Consumer Protection Act. TX

September 18, 2017

Two men have been indicted by a federal grand jury in San Francisco on charges related to an investment fund scheme. G. Steven Burrill is charged with wire fraud, investment adviser fraud, and tax evasion in connection with an alleged scheme to siphon money from an investment fund. Marc Howard Berger is charged with aiding and assisting in the preparation of tax returns in which Burrill failed to report income he received from the scheme. According to the 34-count indictment, Burrill was the owner and CEO of Burrill & Company (B&C) and a number of related entities. Through the entities, Burrill allegedly managed investment funds, including Burrill Life Sciences Capital Fund III, L.P. (the "Fund"), an investment fund focused on the life sciences industry. The Fund was comprised of total committed capital of approximately $283 million, most of which, according to the indictment, was committed by limited partners. The indictment alleges that Burrill induced limited partners to contribute capital to the Fund with false and misleading letters. In addition, the indictment alleges Burrill caused the Fund to transfer millions of dollars in management fees to companies he controlled; the money was in excess of the management fees that were due and allowable under the agreements that governed the Fund. DOJ

August 16, 2017

New York announced a $6.5 million settlement with the owners and operators of the Manhattan Club, a timeshare building in Midtown Manhattan, over the sponsor’s repeated false promises to potential and current share owners. The settlement is the largest in recent history for the Attorney General's Real Estate Finance Bureau. Under the terms of the settlement, the operators of the Manhattan Club, at 200 West 56th Street, acknowledge that they repeatedly misled shareowners about the club’s reservation process, their ability to sell back their shares, and the details of the club’s state-approved offering plan. NY

July 27, 2017

The largest debt collection law firm in Massachusetts and its two owners have agreed to pay $1 million in restitution and significantly change their practices after Massachusetts took action against them for widespread consumer abuses impacting thousands of Massachusetts consumers. A consent judgment – entered against Lustig, Glaser & Wilson, P.C. (Lustig) and its two principals, Ronald E. Lustig and Kenneth C. Wilson – resolves allegations they routinely sued consumers for debts they did not owe or debts that were inaccurate, and consistently violated state law and abused the court system in their pursuit of debts. MA

April 26, 2017

A High Point, North Carolina businessman, who provided financial services to professional athletes, was sentenced to 65 months in prison for wire fraud and filing a false 2011 tax return. According to the documents filed with the court, Michael Rowan, 46, operated Capital Management Wealth Advisors Inc. (CMG) and APS Management LLC (APS), along with his business partner. Through CMG and APS, Rowan provided financial and investment services to professional athletes, including National Football League (NFL) players. Rowan, through CMG and APS, contacted prospective NFL players in college to offer them financial and wealth management services, including bill payment, investment services and financial guidance. Once players were drafted by the NFL, Rowan agreed to provide his services to them for an annual fee of between $15,000 and $50,000. Rowan directed his clients to sign an agreement that allowed Rowan to access their bank accounts. Rowan represented that he would only make transactions that his clients authorized and that were for their benefit. However, Rowan misused his access and transferred more than $2.9 million into accounts he controlled for his own personal benefit and without his clients’ knowledge or consent. For 2009 through 2013, Rowan failed to report more than $1.4 million of the embezzled funds on his federal tax returns, causing a loss to the Internal Revenue Service (IRS) of more than $479,000. DOJ

April 24, 2017

New York announced that nine individuals have been variously charged with money laundering, mortgage fraud, grand larceny, conspiracy, and other charges related to their participation in a scheme to defraud mortgage lenders that spanned two New York City boroughs and resulted in over $1 million in ill-gotten mortgage loans. According to the indictment, from 2012 to 2015, defendants Defreitas, McKayle, Mackey, and Persaud allegedly engaged in a scheme to defraud mortgage lenders and steal mortgage proceeds. In the course of the scheme, the defendants allegedly used sham corporations to acquire title to four properties in Brooklyn and Queens, and then conspired with defendants Downes, Harmon, Whyte, Gregoire, and Blackwood-Sambury to obtain mortgages to “buy” the properties in manufactured resales. The defendants are alleged to have concealed the fact that the buyers couldn’t afford the homes by submitting fraudulent mortgage applications showing grossly inflated incomes from fake jobs, bank accounts with fabricated balances and other false information. NY

April 12, 2017

Peter Novajosky and Kathy Novajosky, doing business as P&K Realty, agreed to pay roughly $35,000 to settle charges of violating the False Claims Act by making false statements to obtain federal funds through the United States Department of Housing and Urban Development (HUD) housing assistance program.  According to the government, the Novajoskys applied for HUD funding without disclosing the tenant to which the requested funding related was their daughter. DOJ (MDPA)