Dec 12th 2012
New Jersey Man Sentenced to 54 Months in Prison for $500 Billion Scheme - Thousands of Victims Worldwide
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A CPA and purported outside auditor for Provident Capital Indemnity Ltd. (PCI) was sentenced November 31 in Richmond, Virginia, to fifty-four months in prison for his role in an approximately $500 billion fraud scheme that affected more than 3,500 victims throughout the United States and abroad.
Jorge Luis Castillo, fifty-seven, a resident of New Jersey, was sentenced by US District Judge John A. Gibney in the Eastern District of Virginia. In addition to his prison term, Castillo was sentenced to three years of supervised release and ordered to pay $43,582,699 in forfeiture.
Castillo pleaded guilty on November 21, 2011, to one count of conspiring to commit mail and wire fraud. Castillo was a PCI employee prior to becoming PCI's "outside auditor."
According to court records, PCI was an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica. PCI sold financial guarantee bonds to companies selling life settlements, or securities backed by life settlements, to investors. PCI marketed these bonds to its clients as a way to alleviate the risk of insured beneficiaries living beyond their life expectancy. PCI's clients, in turn, typically explained to their investors that the financial guarantee bonds ensured that the investors would receive their expected return on investment irrespective of whether the insured on the underlying life settlement lived beyond his or her life expectancy.
Castillo admitted that he conspired with Minor Vargas Calvo, sixty-one, the president and majority owner of PCI, to prepare audited financial statements that falsely claimed that PCI had entered into reinsurance contracts with major reinsurance companies. These claims, which were supported by a letter from Castillo stating that he conducted an audit of PCI's financial records, were used to assure PCI's clients that the reinsurance companies were backstopping the majority of the risk that PCI had insured through its financial guarantee bonds.
Castillo further admitted that he never performed an audit of PCI's financial statements and that, in fact, he personally created the statements he claimed to be independently auditing. He also admitted that he and others at PCI knew that the company never actually entered into reinsurance contracts with any major companies. Castillo also admitted that he and other conspirators provided the false financial statements and fraudulent independent auditors' report to Dun & Bradstreet (D&B), which D&B relied on in compiling its commercial reports on PCI and issuing its 5A rating of PCI's financial strength.
From 2004 through 2010, PCI sold at least $485 million of bonds to life settlement investment companies located in various countries, including the United States, the Netherlands, Germany, Canada, and elsewhere. PCI's clients, in turn, sold investment offerings backed by PCI's bonds to thousands of investors around the world. Purchasers of PCI's bonds were allegedly required to make up-front payments of 6 to 11 percent of the underlying settlement as "premium" payments to PCI before the company would issue the bonds. Court records state that Castillo received approximately $84,000 from his work as the purported outside auditor of PCI from 2004 through 2010.
Vargas, a citizen and resident of Costa Rica, was convicted on April 30, 2012, of one count of conspiracy to commit mail and wire fraud, three counts of mail fraud, three counts of wire fraud, and three counts of money laundering. On October 23, 2012, he was sentenced to sixty years in prison. PCI pleaded guilty on April 18, 2012, to conspiring to commit mail and wire fraud, and was sentenced on September 6, 2012, to one year of probation.
Waterbury Police Detective Arrested in Tax Investigation
Forty-one-year-old Robert Liquindoli, a Waterbury, Connecticut, police detective, was arrested on federal charges that he obstructed an investigation into his personal taxes and lied to agents from the IRS.
The indictment alleges that from December 2011 through February 2012, Liquindoli obstructed the IRS by obtaining false documents that he intended to present to the IRS in support of deductions he claimed on his tax returns in 2007 and 2008. The indictment further alleges that during three separate interviews with special agents with IRS-Criminal Investigation, Liquindoli falsely told agents that he possessed original and legitimate documents to support the deductions on his tax returns and denied that he had attempted to obtain false documents to support those deductions.
He appeared in federal court in Hartford on December 7 and was released on $200,000 bond.
If convicted of obstructing the IRS, Liquindoli faces a maximum term of imprisonment of three years and a fine of up to $5,000. If convicted of making false statements, Liquindoli faces a maximum term of imprisonment of five years and a fine of up to $250,000 on each count.
Liquindoli has worked for the Waterbury police since 2000 and has been placed on administrative leave. Police chief Michael Gugliotti said he has never been the subject of disciplinary action. Gugliotti said the department has opened its own internal investigation.
Federal Court Permanently Bars Baton Rouge Tax Service from Preparing Returns
A federal court has permanently barred Larry Carnell Dixon Sr., a Louisiana tax return preparer, and his business, Dixon's Tax Service, LLC, from preparing federal tax returns for others, the Justice Department announced. The civil injunction order, to which Dixon and Dixon's Tax Service LLC, consented without admitting the allegations against them, was signed by Judge James Brady of the US District Court for the Middle District of Louisiana.
The government-amended complaint alleged that Dixon and the preparers at Dixon's Tax Service, which has offices in Baton Rouge and Gonzales, Louisiana, prepared returns for customers that reported false deductions which generated higher refunds and/or the Earned Income Tax Credit (EITC), a refundable credit that can generate a refund exceeding the amount of income tax paid by an individual taxpayer.
The amended complaint alleged that Dixon and the preparers at Dixon's Tax Service fabricated and inflated business expense deductions reported on many of their taxpayers' Schedule Cs (Forms 1040) for existing and fictional businesses. By allegedly fabricating and inflating these deductions, Dixon and Dixon's Tax Service reduced a client's taxable income, which resulted in a reduced tax liability and possibly a higher refund. In addition, Dixon and his preparers have allegedly repeatedly prepared returns that claim the EITC for customers who did not qualify for it. The complaint alleges that Dixon's alleged misconduct may have cost the United States as much as $39 million.
Las Vegas-Based CPA, His Wife, and "Highly Specialized Paralegal" Allegedly Promote Tax-Fraud Scheme
The United States has sued a Las Vegas-based CPA and two others to stop an alleged tax fraud scheme, the Justice Department announced. Named as defendants in the civil injunction suit were CPA Wayne Reeves; Reeves' wife, Diane Vaoga; and their alleged co-promoter, James Stoll. The government complaint was filed last month in Las Vegas with the US District Court for the District of Nevada. Announcement of the court filing was delayed until Reeves was served with court papers this week.
The government complaint alleges that Reeves, Vaoga, and Stoll, acting through various entities, sell a sham trust scheme that improperly reduces or eliminates customers' reported federal income taxes. According to the government complaint, Reeves, Vaoga, and Stoll maintain offices in Las Vegas and Wyoming and promote their scheme to customers throughout the United States. The suit also seeks to bar the defendants from preparing federal income tax returns and to require them to turn over their customer lists to the government.
According to the government complaint, Reeves, touting his experience as a CPA, solicits customers to participate in the defendants' illegal income/asset sheltering scheme. According to the complaint Stoll refers to himself as a "highly specialized paralegal" and creates the trusts, corporations, and limited-liability partnerships needed to further the scheme. Vaoga allegedly serves as an officer of one of the entities at issue. The government alleges that the defendants' scheme "enables participants to illegally shelter income and to hide assets from the IRS through a series of bogus entities designed to disrupt and interfere with IRS tax assessment and collection efforts."
Florida CPA Sentenced for Role in Foreclosure Scheme - Many Victims Lost Their Homes
Barrington Coombs, fifty-eight, of Weston, Florida, was sentenced to serve a year and a day in prison for his role in a foreclosure rescue scheme that victimized desperate homeowners on the brink of losing their homes, the Justice Department announced.
Coombs was convicted of one count of conspiracy to commit mail and wire fraud and one count of wire fraud, following a two week jury trial in July 2012.
According to the indictment and evidence presented at trial, two of Coombs' accomplices, Lisa Wright and Cathy Saffer, operated Foreclosure Solution Specialists (FSS) from 2006 to 2009. FSS targeted homeowners facing foreclosure, advertising that it could assist those homeowners in remaining in their homes. When contacted by distressed homeowners seeking assistance, FSS misrepresented to those homeowners that their homes would be sold to investors.
According to the indictment and evidence presented at trial, FSS also claimed that customers could remain in their homes after the sales and promised them an opportunity to repurchase the homes at a later date. Rather than selling the homes to legitimate investors, FSS designed sham sales to straw purchasers whom they paid to participate in the scheme.
According to the indictment and evidence presented at trial, FSS paid Coombs to write a fraudulent letter that vouched for the false information on various loan applications. Lenders relied on Coombs' fraudulent letter in deciding to fund the loans.
Coombs is the last member of the scheme to be sentenced. In November 2012, the two individuals who operated FSS were sentenced. Lisa Wright was sentenced to a sixty-six-month term of imprisonment, while Cathy Saffer received a sentence of sixty months.
Mortgage transactions completed by FSS drew equity out of the homes, which FSS' principals pocketed for their own purposes. After doing so, FSS allowed the loans to go into foreclosure. Homeowners ultimately lost all of the equity in their homes, and most of the victims were forced to move out of their homes.
Four Houstonians Charged in a Bank Fraud Conspiracy Involving Stolen Mail and Identity Theft
A federal grand jury has returned an indictment charging Dana Sue Hales (forty-one), Lindsay Ann Grice (twenty-six), Jason Craig White (thirty-two), and Joseph Scott Ryder (forty-four), all of Houston, with conspiracy to commit bank fraud, bank fraud, and possessing stolen mail. Hales and Grice were also charged with aggravated identity theft, while White and Ryder were also charged with illegally possessing a firearm after having been convicted of a felony offense.
All are expected to appear before a US magistrate judge in the near future. With the exception of Hales, all are currently in state custody.
According to the indictment, the defendants were able to acquire banking information and checks by burglary, theft, and other means, and then use the stolen banking information to create fraudulent identification documents. The defendants used the fraudulent identification information and stolen banking information to open bank accounts into which the stolen, forged checks would be deposited, including a United States Treasury check for more than $7,000. In addition to the conspiracy count, the defendants are charged with possessing stolen mail on three occasions during 2012 and ten separate counts of bank fraud.
The indictment also alleges Hales and Grice used stolen identity information on several occasions while engaging in the fraudulent scheme.
All face up to thirty years in federal prison as well as a $1 million fine upon conviction of the conspiracy and bank fraud charges, while possession of stolen mail carries a possible punishment of up to five years imprisonment and a potential $250,000 fine. A conviction for aggravated identity theft carries a two-year sentence which must be imposed consecutively to any underlying felony offense in which the stolen identity information was used. White and Ryder further face another ten years in prison and a $250,000 fine if convicted of being a felon in possession of a firearm.
SOURCE: US Department of Justice