Global Credit Union VP Randy Teall Sentenced for Loan Fraud

According to an announcement by the U.S. Attorney’s Office, the former vice president of the Global Credit Union in Coeur d’Alene, Idaho has been sentenced to 12 months and one day in prison for bank fraud.

Randy Gard Teall, 67, of Post Falls, Idaho, pleaded guilty to charges of bank fraud on Global Credit UnionSeptember 15, 2015. He was sentenced in the U.S. District Court to 12 months and one day in federal prison by U.S. District Judge Edward J. Lodge.

According to the plea agreement, Teall used his position as vice president of the credit union to approve more than $300,000 in loans without approval from the board. While serving as a union executive, he used false promises and statements to obtain loans from the Global Credit Union.

In one particular instance, Teall made false statements about the creditworthiness of three borrowers and a business. Teall concealed the fact that he was a business partner and landlord of one of the borrowers who obtained loan approvals in a real estate deal, according to court documents.

From 2007 to 2009, Teall approved loans to these borrowers and business that defrauded the credit union. He was also convicted on charges of making false statements on a loan application while being employed at U.S. bank in 1997.

Until his conviction, Teall served as the vice president of Idaho operations for the $394 million Global Credit Union based in Spokane, Washington.

Apart from the one year and a day prison sentence, Teall was also sentenced to serve five years of supervised release by Judge Edward J. Lodge.

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Paul Watterson Sentenced 15 Months for Mortgage Fraud

A New Jersey property manager has been sentenced to 15 months in prison for his role in a multi-million dollar mortgage fraud scheme that involved the use of straw buyers and phony documents in defrauding several financial institutions, U.S. Attorney Paul J. Fishman announced.

Paul Watterson, 55, of Mountainside, NJ pleaded guilty to a one count charge of Paul J. Fishmanconspiracy to commit money laundering at the Camden federal high court before being sentenced to 15 months imprisonment by Judge Jerome B. Simandle.

According to court documents and statements, Watterson and his conspirators used straw buyers to purchase over-developed condominiums in the Wildwood and Wildwood Crest areas of New Jersey. The straw buyers had good credit scores but were not earning enough to qualify for mortgage loans on those properties. Watterson prepared fraudulent loan application documents containing false information about the buyers’ income, employment, assets and the intended use of the properties. He did all this to convince the lenders to approve the loans.

Along with his conspirators, Watterson created fraudulent loan applications on behalf of the buyers, including supporting documents, which were submitted to mortgage brokers who also knew that the documents were false. Upon approval of the loans and release of the proceeds, Watterson’s conspirators took part of the money before sending the remaining part of the funds by wire transfers or check deposits into the various accounts that they controlled. This was then distributed among those who partook in the loan scheme, including Watterson, who received $273,600 from five different mortgage loan transactions.

Apart from the 15 months’ sentence, Watterson will serve three years of supervised release as ordered by Judge Simandle.

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Robert Bobb Pays $1.5m Settlement in SBA Lawsuit

A co-founder of Chicago-based venture capital company, Cardinal Growth, has agreed to pay $1.5 million to the federal government as settlement for an SBA lawsuit against the troubled firm.

Robert J. Bobb Jr., 68, was a former federal prosecutor who went on to co-found Cardinal Robert RobbGrowth, a company in which former Mayor Richard M. Daley’s son was also involved, to secure contracts for several City Hall projects, before it was seized by the federal government four years ago for failure to repay a $21.4 million loan borrowed from taxpayers.

In agreeing to pay the $1.5 million settlement, Bobb is avoiding a legal suit by the U.S. Small Business Administration, and he has agreed to assist federal regulators in their bid to recover more of the taxpayers’ funds that he borrowed to invest in various companies.

According to an SBA report filed in federal court, regulators have been able to collect over $6.6 million from liquidating Cardinal Growth investments.

Bobb testified in court that his former partner, Joseph McInerney, 48, of River Forest, was the person in charge of  the company’s daily operation. Regulators are now hoping to collect some money from McInerney who was a close friend of the former mayor’s son, Patrick Daley. So far, McInerney has yet to respond to the SBA’s demands for the return of his “unpaid (financial) commitments” at the company.

Bobb and his ex-wife Patricia Bobb were friends of Mayor Daley, who in 1998 appointed Patricia Bobb to serve as an attorney to the police board. In 2010, Bobb and McInerney founded Cardinal Growth, a company that sourced for funds from private investors to help support struggling businesses. Investors included Bruce Rauner, who is now the governor of Illinois and loans from the Small Business Administration. The SBA had certified Cardinal Growth as a “small business investment company,” which means they could borrow $2 from taxpayers for every dollar they raised from private investors. Cardinal Growth secured loans from the SBA totalling $51 million.

They invested in several businesses, most notably being, Municipal Sewer Services, a company that handled cleaning and sewer inspection contracts at the City Hall. The former mayor’s son Patrick Daley, and the mayor’s nephew Robert G. Vanecko, invested about $65,000 in the company, but their names were not disclosed as investors in official company documents.

For over four years, the SBA has spent more than $3 million in hiring accountants and lawyers to recoup the money loaned to Cardinal Growth. More than 70 subpoenas were issued, while the government amassed more than 5 million pages of documents.

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Juan Martinez, Wife and Bank Officer Arrested for Loan Fraud

A couple in Weslaco, TX and a banking officer, have all been arrested in connection with their roles in a forgery and bank loan scheme.

Juan Antonio Martinez, 41, and his wife Alejandra Reyes Martinez, 37, were working at Juan Martineztheir tax preparation business located at 300 block of East Expressway 83 in Pharr., TX, when operatives from the Weslaco Police Department and the U.S. Marshall Fugitive Task Force moved in to make the arrest.

According to documents presented in court, Juan Antonio Martinez allegedly forged the signature of a McAllen resident in December 2011, which he then used to secure a $25,000 loan from the Weslaco-based BBVA Compass Bank.

Due to the fraudulent loan scheme, the McAllen man’s credit was negatively impacted and the U.S. Small Business Administration referred him to the U.S. Department of Treasury as a delinquent borrower, the court documents alleged.

Benito Sanchez, 40, was also arrested on forgery charges in relation to the case. Sanchez served as a banking officer at BBVA Compass Bank and an SBA lender involved in commercial real estate, business line loans and equipment finance. Capt. Raul Vallejo, of the Weslaco Police Department, said Sanchez was allegedly involved in the scheme with the Martinezes, but the role he played was not made known at the time.

Vallejo also stated that Alejandra Reyes Martinez was allegedly in charge of handling the loan documents for the business.

“Forgery and attempting to pass a forgery are considered the same thing, and she’s implicated in passing or executing the documents,” Vallejo said. “It was a scheme between three parties. They know each other from previous encounters and it was facilitated between those three parties.”

The couple now face a maximum sentence of 10 years in prison and up to $10,000 in fines. Municipal Court Judge Samuel Sanchez set Benito Sanchez’s bond at $15,000.

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Justin and Penny Johnson Sentenced for SBA Loan Fraud

A Wellsville couple has been sentenced to prison for their role in fraudulently obtaining loans from the Small Business Administration, according to an announcement by U.S. Attorney Barry Grissom.

Justin Johnson, 40, of Wellsville, Kansas, was sentenced to six months of house arrest SBAfollowed by three years of supervised release, he was also ordered to pay $53,000 in restitution, Grissom said. His wife, Penny Johnson, 39, was also sentenced to three years on probation and she will also pay $53,000 in restitution.

Justin Johnson owned and operated several construction–related businesses that included J-Right, Midland Concrete in Scranton, A-Vision Landscape, Stucco Masters, Kingdom Homes and the Lenexa-based Timberview Construction. Penny Johnson served as the bookkeeper of her husband’s businesses.

The couple had submitted a guilty plea to one count each of making false statements to the Small Business Administration and one count each of money laundering.

According to their plea agreement, the Johnsons admitted that they obtained loans through the SBA Express loan program which was supposed to be used for the purchase of equipment. But instead, the loan proceeds were used to repay construction loans owed by Johnson’s businesses and also used for personal purposes.

In February 2014, the couple were both charged with one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering as the owners of Timberview Construction in Lenexa, according to a release by the FBI.

And as alleged in the federal indictment at the time, the Johnsons diverted proceeds of SBA secured loans, using them for purposes other than that stated in their loan agreements. They were also accused of transferring some of the proceeds into bank accounts that they controlled.

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Nakeisha Hall and Conspirators Indicted for Defrauding Banks

A federal grand jury has indicted an IRS employee and two other conspirators for their role in a fraudulent tax returns scheme that was carried out from the IRS office in Birmingham, Alabama.

According to the indictment, Nakeisha Hall conspired with Jimmie Goodman and Abdulla Internal Revenue ServiceColeman, in stealing personal identify information from the Internal Revenue Service to create fraudulent tax returns and collecting the stolen refunds.

From 2008 to 2011, Hall collected names, birth dates and social security numbers of individuals through unauthorized access to IRS computers. She then used this information to prepare fraudulent income tax returns which were then submitted electronically to the IRS.

Hall then requested that the IRS pay the refunds onto debit cards and mailed to drop addresses that she controlled. These drop addresses were provided by Goodman, Coleman and other co-conspirators who also collected the refund cards from the mail.

The cards were then activated by Hall, Goodman, Coleman and other co-conspirators by using stolen identity information and making cash withdrawals at ATMs or for making card purchases.

And whenever U.S. Treasury checks were needed to complete the transactions, Hall and her co-conspirators used fraudulent endorsements to obtain the funds. In all, over $1 million in false claims were obtained from the scheme, according to federal prosecutors.

The indictment also states that Hall, Goodman, Coleman, and others conspired to defraud the IRS and other financial institutions, most notably Bancorp Bank.

In a statement, Special Agent in Charge Karl A. Stiften said: “Individuals who commit refund fraud and identity theft of this magnitude and with this degree of dishonesty and deceit deserve to be punished to the fullest extent of the law”.

The three face a mandatory two year term for aggravated identity theft, and a maximum of 30 years and $1 million for the conspiracy charges.

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Fraud Charges against Charles S. Bailey & 10 Others

The Securities and Exchange Commission has announced that 11 former executives and board members of Superior Bank will face fraud charges for their roles in an elaborate scheme to conceal the bank’s failing financial condition during the financial crisis.

The executives and board members are alleged to have used straw buyers, bogus Securities and Exchange Commission (SEC)appraisals and insider deals to conceal losses made by bad loan losses. They also approved inappropriate extensions on overdue loans in order to avoid impairment and the need to report the inappropriate increase in allowances for loan and lease losses (ALLL) in its financial accounting.

In 2009, the net earnings of Superior Bank was overstated by 99% and this continued in 2010, as it was falsely inflated by 50%. All this led to the bank’s eventual failure in 2011.

Out of the 11 accused bank officials, nine have agreed to settle, neither admitting nor denying the SEC charges, but are each permanently barred from serving as officers or directors in a public company. They include: Charles S. Bailey, former CEO and chairman of the bank’s holding company Superior Bancorp, must pay a $250,000 penalty; James A. White, former CFO of Superior Bancorp, must pay a $200,000 penalty; Dewayne S. Maddox, former market executive at Superior Bank, must pay a $200,000 penalty; and William H. Caughran, former general counsel of Superior Bank and Superior Bancorp, must pay a $150,000 penalty.

The other two officials, Kenneth D. Pomeroy, former president of Superior Bank’s central Florida region; and William C. McKinnon, former senior vice president and commercial loan officer, are contesting the SEC charges.

“Accurate and fair reporting of loan impairment is of paramount importance for financial institutions during periods of severe financial stress,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division. “Superior’s senior-most officers and certain directors allegedly engaged in a widespread and egregious accounting fraud by concealing significant losses from loan impairments.”

The charges have been filed at the federal district court in Tallahassee, with the SEC’s continuing investigation being supervised by Aaron W. Lipson and William P. Hicks, while the litigation is led by Robert K. Gordon and Robert F. Schroeder of the Atlanta office.

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Broker Michael P. O’Donnell Sentenced for Bank Fraud

By Ogozi John

The U.S. District court in Boston has sentenced a mortgage broker to three years in prison for his role in 20 fraudulent loan transactions that defrauded lenders of more than $3.7 million.

Michael P. O’Donnell, 54, of Middleton, MA owner of AMEX Home Mortgage, was Scales of Justicesentenced to three years in prison with two years of supervised release, and was also ordered to pay a fine of $150,000 by U.S. District Judge Douglas P. Woodlock.

From 2004 to 2007, O’Donnell used his mortgage company to submit false loan applications in order to obtain mortgage loans for borrowers who were in need of funds to purchase or refinance real estate.

Purportedly acting on behalf of the borrowers, O’Donnell submitted fraudulent loan applications that contained falsified income statements, employment status and asset information. He even went further to pay closing funds which were required from the borrowers as part of their loan obligation, and he was later reimbursed.

For the three-year period in which the scheme lasted, O’Donnell carried out 20 fraudulent loan transactions in which he secured more than $3.7 million in financing, which earned him about $150,000 but caused losses of almost $1.5 million to lenders. Most of the properties involved in the scheme went into foreclosure, and were located in Haverhill, Salem, Swampscott, Salisbury, Bradford and other towns in the North Shore area of Boston.

O’Donnell collaborated with a tax accountant who provided false letters, tax documents and verbal verifications of employment to lenders from which O’Donnell was soliciting for loans on behalf of his clients.

O’Donnell also obstructed justice by destroying his computer hard-drive in an attempt to conceal the fraud.

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Sam Zharka Sentenced to 37 Months for Fraud

By Ogozi John

Former strip club owner and magazine publisher, Selim “Sam” Zherka, has been sentenced to 37 months in prison for charges of making false witness to a bank and filing materially false tax returns.

Zherka, 48, of Somers, NY., who pleaded guilty to the charges in September 2014, has Selim  Zherkabeen held in custody since then since his bail application was denied. While handing him the sentence, U.S. District Court Judge Cathy  Seibel described Mr. Zherka as a man with two different personalities; that of a gangster, and that of an upstanding citizen.

Zherka will serve an additional three years of supervised release after he leaves prison. He was also ordered to pay a fine of $1.5 million, apart from the $5.23 million that he agreed to forfeit as part of his plea deal, and he will also have to pay another $1.2 million in back taxes, interest and penalties to New York, Connecticut, Massachusetts and the federal government.

Prosecutors had pushed for a tougher sentence on Zherka, who faced a maximum of five years in prison. His attorney asked for a lesser sentence of 20 months, citing the difficult conditions he had already been subjected to while being detained at the Metropolitan Correctional Center in Manhattan.

Seibel decided on a sentence that satisfies the strong arguments given by both sides.

“He is clearly a hard working man,” she said of Zherka, who had the support of about two dozen family members and friends in the crowded courtroom.

Zherka apologized and said he was embarrassed, and also asked Seibel to consider his good deeds, too.

Many people had written letters to Seibel pointing to Zharka’s generosity, including helping his parents and siblings to move from the former Yugoslavia to the United States.

“It’s an American success story,” she said, while also deriding him for not conducting his business honestly but choosing to get involved in a “breathtaking string of lies.”

Starting in December 2005, Zharka and four of his partners, all of whom had also pleaded guilty to fraud charges, engaged in a scheme to fraudulently obtain $63.5 million in loans from Sovereign Bank, now Santander,  to be used for the purchase or refinancing  apartment complexes in Tennessee.

Zharka also filed fraudulent tax returns that overstated depreciation expenses and understated his capital gains, thereby reducing his tax liabilities.

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Zulfiker Esmail and Wife Guilty in Premier Bank Fraud

By Ogozi John

A Wilmette-based couple that served as former executives at the now-defunct Premier Bank have been found guilty by a DuPage County Circuit Court jury for defrauding another local bank of $8.1 million in loans.

Zulfikar Esmail, 72, and Shamim Esmail, 67, both of Wilmette, Ill., engaged in a scheme Zulfikar and Shamim Esmailthat involved the use of false information to fraudulently obtain loans from the First Midwest Bank in Itasca, Illinois.

Zulfikar Esmail, who served as chairman of Premier Bank, was convicted on felony counts of loan fraud and financial institution fraud, and was found not guilty on a separate count of financial institution fraud, according to a spokesperson for Illinois Attorney General Lisa Madigan, whose office prosecuted the case.

Shamim Esmail, who served as the senior vice president of the bank, was found guilty of financial institution fraud.

The felony charges carry a maximum sentence that ranges from four to 15 years.

And it doesn’t end here, the couple have another legal battle to face at the Cook County Circuit Court, where they have been indicted on charges of defrauding the Treasury Department’s bailout fund. the trial date for this case is yet to be fixed.

In 2009, Premier bank obtained $6.8 million from the taxpayer’s funded Troubled Asset Relief Program, and barely three years later in 2012, the bank failed and was taken over by the International Bank of Chicago, leading to huge losses in taxpayer’s investments.

The prosecution was made possible by collaborations between the Illinois Attorney General’s Office, the special inspector general for the TARP program and the Federal Deposit Insurance Corp.’s Office of Inspector General.

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