Articles Posted in Fraud, Embezzlement & White Collar Crimes

One form of criminal prosecution that has been on the rise throughout the state of Michigan has to do with the famed “Blue Sky Laws” which has consistently presented issues in the white collar sect of criminal prosecution. While the laws were put into place to protect investors, the application of the laws have led to a tremendous amount of confusion. The leader in criminal defense in the State of Michigan is Scott Grabel of Grabel and Associates. One of the ways that Grabel has earned his reputation is through the defense of “White Collar” crimes. Grabel, along with other leaders in the field provided insight on the matter. Let’s build an understanding of the law and then explore the practical application of the statutes in place. to-sign-a-contract-2-1221951-m

To begin, there are federal requirements to the law. Securities are subject to state registration requirements under state securities laws. In our state we have several registration exemptions for offerings to a limited number of investors which makes the filing of foreign LLC’s in the state of Michigan a dangerous proposition. In some cases, Michigan exemption provisions are preempted by federal law but in many other cases they are not. When asked about the laws, Scott Grabel provided insight on the manner. Grabel was quoted as saying, “There is a danger to the Commerce Clause when we look at the issue of Blue Sky Laws globally. Generically speaking, all securities sold in a particular state must either be registered there or be exempt from registration; and all broker-dealers and their representatives must be registered there or be exempt from registration. The origination of the law causes a great deal of confusion for investors. People seem to think that Justice Joseph McKenna created the term in the famous Hall case but that’s not actually factual (Hall v. Geiger-Jones Co., 214 U.S. 539, [1917]). Without knowing how the term was created makes it almost impossible to see the evolution of the law. When our firm started to defense people charged with a violation of the law, we studied the origins and created case studies from there. The work put in on the front end of the litigation has helped us achieve a great amount of success for our clients.”

Matthew McManus, a partner at Ann Arbor Legal in Ann Arbor, Michigan weighed in on the civil litigation aspect. McManus stated, “Whenever our firm deals with foreign investors, we have a series of questions that have to be addressed, the first being how many investors does the company plan to have. There are a number of limitations that far too often get overlooked. If your client-intake is flawed, your entire representation can lead to harm for your client and a malpractice claim. Diligence is crucial in this regard.”

In 2012, Paul Seewald, who at the time was a congressional aide and district director forpaul seewald ex-U.S. Congressman Thaddeus McCotter, was charged with nine counts of falsely signing nominating petitions after he and other members of the congressman’s campaign were accused of trying to get McCotter’s name on the ballot in his reelection efforts by submitting bogus petition information.

The nine counts were misdemeanors, however Seewald was also charged with a single count of conspiring to commit a legal act in an illegal manner, which is a felony. Seewald was the subject of a criminal investigation after it was alleged that he signed a petition as a circulator, although court documents reveal the petition was not circulated.

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Recently, the owner of Simmco Data Systems, a company that was one of the first to use RFID for timing of track marathons, pleaded guilty to filing a false tax return. According to a press release issued by U.S. Attorney Barbara L. McQuade and IRS Criminal Investigation Special Agent in Charge Jarod J. Koopman, 51-year-old David Simms pleaded guilty to charges after admitting that he did not report the full profits generated by his business on his 2011 Individual Tax Return. iStock_000001299669_Large-2-300x199

Simms reportedly runs Simmco Data Systems from his Bloomfield Hills home, and while he did report some of the profits generated by his business for 2011, he failed to report the full $622,000 the company made that year, resulting in reporting of less taxes than the more than $230,000 he actually owed. He did this knowingly, according to the release.

According to Koopman, Simms’ goal was to reduce the amount of tax owed by omitting a portion of his income. Koopman said that individuals who purposely fail to report and pay their fair share of taxes will be investigated and prosecuted to the fullest extent of the law.

Recently, United States Attorney Patrick A. Miles, Jr. announced in a Department of Justice press release that Gregory Claxton, a resident of Kentwood, pleaded guilty to evading the payment of federal income taxes to the IRS for the years 2006 through 2012. According to the release, Claxton willfully evaded paying nearly $149,000 in taxes by placing property and money in the names of other individuals. He will now be required to pay more than $200,000 in restitution to the IRS, which includes interest along with $250,000 in fines; he also faces up to five years in prison. iStock_000001299669_Large-2-300x199

Until 2000, Claxton was a certified public accountant according to court records. He was operating a tax preparation business for clients at the time he was investigated and found to be evading payment of taxes. Claxton transferred the deed of his home to a trust in his wife’s name, and also deposited money from his business into his wife’s bank accounts in order to make it appear he did not have the money to pay the taxes owed. Claxton met with the IRS to discuss the outstanding tax debt, and admitted transferring the deed of his house just two days earlier.

Those involved in the investigation include Jarod J. Koopman, Special Agent in Charge, IRS – Criminal Investigation and other IRS special agents. Assistant U.S. Attorney Sally J. Berens prosecuted the case.

In 2014, former Los Angeles city councilman Richard Alarcon and his wife, Flora, were convicted on richard-alarconcharges of perjury and voting fraud.  According to news reports, the couple lived in Sun Valley, but claimed they lived in Panorama City so that Alarcon could represent the district.  The Alarcons appealed the conviction, and were successful.

According to an article at the Los Angeles Times, a panel of justices with the 2nd District Court of Appeals found the trial judge in the case had issued improper instructions to the jury.  Superior Court Judge George Lomeli instructed the jury in the case, however the appeals court justices ruled that “we cannot conclude that the instructional error was harmless beyond a reasonable doubt.”
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On Wednesday November 4 it was announced by U.S. Attorney Patrick A. Miles, Jr. that 40-year-old Yashica Toshian Tucker of Grand Rapids had been sentenced to one year and one day in federal prison after filing a false tax return with the IRS (U.S. Government). Special Agent in Charge Jarod J. Koopman of the IRS – Criminal Investigation joined in the announcement.

Close up of a hand signing a check.  Please note that the signature is fictitious.

Close up of a hand signing a check. Please note that the signature is fictitious.

Tucker pleaded guilty in August to one of 10 counts against her involving the filing of fraudulent tax returns on behalf of others. This activity occurred beginning in January of 2011 and continued until February of 2013, according to news reports. The total of the false tax returns filed with the IRS was $71,606 according to an indictment filed in U.S. District Court in Grand Rapids. Tucker was charged in April of this year.

Recently, two Detroit residents who are partners in a Detroit-area tax preparation business pleaded guilty to charges of conspiracy to defraud the U.S. and the IRS, according to a press release issued by IRS Criminal Investigation Special Agent in Charge Jarod J. Koopman, and United States Attorney Barbara L. McQuade.

200px-IRSThe two residents, Ingrid Thompson and Toranio Ingram, were equal partners in the ownership of Special T Tax in Detroit, each receiving approximately half of the income the business generated.  According to the release, Ingram and Thompson generated more than $1.4 million in revenue over the course of 10 years beginning in 2001.  The two co-owners failed to report this income to the IRS by providing the bank with a fake social security number when opening the business account, and doing the same when registering the business with the Michigan Dept. of Labor.  The two also failed to file a U.S. Return of Partnership Income (Form 1065).  Because they concealed this information and did not report the income, Thompson and Ingram understated their personal income tax liability by $420,703.

Court records indicate Ingram was involved in numerous fraudulent schemes with co-conspirators including with HUD (U.S. Housing and Urban Development) in which he submitted over 100 false claims for UFMIP (Upfront Mortgage Insurance Premiums) refunds to be deposited into bank accounts after stealing others’ personal identification information.  This is just one example of the many schemes Ingram was involved in.

Approximately one week ago, it was announced in a press release by U.S. Attorney Barbara L. McQuade that a Grosse Pointe Woods woman had been sentenced for filing false tax returns with the IRS. Jarod J. Koopman, Special Agent in Charge of the IRS Criminal Investigation Division joined McQuade in the announcement.

According to the announcement, Janet Gentile pleaded guilty to filing false tax returns in September of last year. She was sentenced by U.S. District Court Judge Robert H. Cleland to 21 months in federal prison, along with restitution to be paid to the Internal Revenue Service in the amount of $219,123. 24259101_s

Between 2008 and 2012, Gentile embezzled more than $739,000 from her employer, Sagres Partners LP. The press release revealed that while employed as manager of the business management consulting firm in Grosse Pointe, she stole money from the firm’s owner, writing checks from the owner’s personal checking account and forging the owner’s signature. Gentile would make the checks out to “cash,” and write in the memo line that the checks were for petty cash. Essentially, Gentile was embezzling from the company, depositing the “petty cash” checks into her own account, and using the money to shop on QVC, the Home Shopping Network, and other shopping venues. She was charged with filing false tax returns due to the fact that she did not report the income on her federal tax returns, resulting in an understated federal income tax liability. Had Gentile properly reported the stolen funds as income, she would have owed the IRS $219,123 on the income.

Recently, it was announced by U.S. Attorney Barbara L. McQuade and Special Agent in Charge Jarod J. Koopman of the IRS – Criminal Investigation unit that former Troy, Michigan resident Irvin Flemming had been convicted of structuring financial transactions by a federal jury. Flemming was involved in a drug trafficking organization orchestrated by Carlos Powell, an organization which was investigated over a period of several years. money-series-3-906662-m

According to the press release, Flemming’s role in the drug operation was to make financial transactions in a way that would prevent law enforcement from detecting the true source of the funds and Powell’s illegal drug activities.

The investigation, which was conducted by agents and officers from various organizations and county, city, and state law enforcement agencies including the DEA, Homeland Security, Michigan State Police, officers from Detroit, Plymouth, Warren, Redford, Northville, and others, led to the discovery that Flemming was structuring, or causing to be structured, nearly $240,000 in cash that belonged to Powell in September and October of 2010. Flemming was structuring deposits into bank accounts he controlled, depositing amounts of $10,000 or less with each deposit so that the banks/financial institutions would not report the transactions. Financial institutions are required under law to file a report regarding deposits of more than $10,000.

On Monday, March 23, 64-year-old Kutub Mesiwala of Bloomfield Hills pleaded guilty to conspiracy to commit health care fraud, according to a recent news article at Mlive.com. Mesiwala was allegedly involved in a scheme in which he exploited Medicare by referring patients to a home health agency located in Detroit who paid him kickbacks, according to the U.S. Attorney’s office. stethoscope-1-1080174-m

Mesiwala and owner of Advance Home Health Care Services Amer Ehsan were both involved in the scheme in which Medicare was billed for services to patients that were either never provided to those patients, or unnecessary. In all, the referrals by Mesiwala to the Advance Home Health Care Service resulted in billings paid to the home health care agency in an amount exceeding $770,000. Investigators also found that other agencies had received more than $118,000 from the fraudulent Medicare billings.

In July of last year, Amer Ehsan pleaded guilty to charges of conspiracy to commit fraud after collecting more than $3.5 million in Medicare billings. He is scheduled for sentencing on June 16. Mesiwala is scheduled to be sentenced October 5.

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