Financial Institution Fraud

May 6, 2016

Liberty Reserve founder Arthur Budovsky was sentenced to 20 years imprisonment and to pay a $500,000 fine for running a massive money laundering enterprise through his company's virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity.  According to the indictment, Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system” and allowed people all over the world to send and receive payments using virtual currency.  But Liberty Reserve grew into a financial hub for cybercriminals around the world, trafficking the criminal proceeds of Ponzi schemes, credit card trafficking, stolen identity information and computer hacking.  DOJ

April 15, 2016

New Jersey-based Freedom Mortgage Corporation agreed to pay $113 million to resolve allegations it violated the False Claims Act by knowingly originating and underwriting single family mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements for the FHA insurance program.  DOJ

April 11, 2016

Goldman Sachs agreed to pay $5.06 billion to settle charges relating to alleged misconduct in the sale of its residential mortgage-backed securities or what the government described as "serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail."  Whistleblower Insider

April 29, 2016

Accounting firm Santos, Postal & Co. P.C. and one of its partners, Joseph Scolaro, will pay collectively about $59,000 to settle charges that they conducted deficient surprise custody examinations of SFX Financial Advisory Management Enterprises and did not adequately consider fraud risk factors.  Santos Postal was hired to conduct surprise examinations of client assets at investment advisor SFX Financial.  The SEC charged that Santos Postal performed inadequately as SFX’s president secretly stole money from accounts belonging to professional athletes.  SEC

March 30, 2016

Chung Yu Yeung (aka Louis Yeung), former vice president of Eastern Tools and Equipment Inc., a California wholesale equipment company that sold portable generators to retailers across the country, pleaded guilty to fraud charges in connection with a bank fraud scheme.  Yeung admitted that he and his co-conspirators defrauded Pasadena-based East West Bank in connection with a line of credit for Eastern Tools by misrepresenting to the bank Eastern Tools’ accounts receivable and its financial statements.  Eastern Tools ultimately defaulted causing more than $9 million in losses to the bank.  DOJ

March 28, 2016

California announced a $8,500,000 settlement with Wells Fargo Bank over privacy violations that included recording consumers’ phone calls without timely telling consumers they were being recorded, as required by California law. As part of the settlement, which is in the form of a stipulated judgment, Wells Fargo will pay civil penalties totaling $7,616,000 and will reimburse the prosecutors’ investigative costs of $384,000. In addition, Wells Fargo will contribute $500,000 to two statewide organizations dedicated to advancing consumer protection and privacy rights. CA

March 23, 2016

Gilbert G. Lundstrom, the former CEO of TierOne Bank -- a $3 billion publicly-traded commercial bank formerly headquartered in Lincoln, Nebraska -- was sentenced to 132 months in prison and to pay a $1.2 million fine for orchestrating a scheme to defraud TierOne’s shareholders and to mislead regulators by concealing more than $100 million in losses on loans and declining real estate.  DOJ

February 25, 2016

Gary Patton Hall Jr., former president and CEO of Georgia-based Tifton Banking Company, was sentenced to 84 months in prison and to pay $3,931,018 in restitution for his role in a conspiracy to commit bank fraud.  Hall admitted he engaged in a scheme to mislead the bank and its loan committee about loans TBC made to local individuals and businesses.  Hall hid past-due loans from the Federal Deposit Insurance Corporation (FDIC) and the TBC loan committee, which resulted in the bank continuing to approve and renew delinquent loans and loans for which the collateral was lacking.  Several of the borrowers eventually defaulted on the loans, resulting in millions of dollars in losses to TBC and others.  In November 2010, the Georgia Department of Banking and Finance closed TBC because of its poor financial condition.  DOJ

February 24, 2016

New York, together with 21 other states, announced multimillion dollar settlements with Natixis Funding Corp. and Societe Generale for fraudulent and anticompetitive conduct in municipal bond derivative transactions with state and local government entities and nonprofits across the country. Natixis and Societe Generale will pay $29,950,000 and $26,750,000 respectively as part of a coordinated 22-state and private class settlement. Pursuant to the settlements, $53,865,000 will be paid into a Settlement Fund and largely applied to restitution for municipalities, counties, government agencies, school districts and nonprofits that the states allege were harmed when they entered into municipal derivatives contracts with Natixis or Societe Generale. NY, NJ, FL