Category Archives: Financial Services

Houston tax preparer found guilty of fraud

Winfred Fields, a west Houston tax preparer, has been found guilty of 15 counts of fraud and tax violations. This follows a two-week jury trial.



Fields operated tax and book-keeping businesses from an office on Richmond Avenue in the Westchase area of Houston. They operated under the business names of Fields Enterprises, Your Tax Professionals and The Tax Boss.

Fields falsely claimed that offshore oil workers from the UK, Spain and New Zealand, who were working on vessels on the Outer Continental Shelf of the USA, were exempt from US tax. He charged a fee of $2,500 for each crew member’s first return and a $1,000 fee for each return thereafter. Fields required direct receipt of the funds so that he could negotiate the checks and take his fee off the top.

Fields agreed to provide the remainder of the refund proceeds to the foreign clients. He did that for a while, but ultimately stopped forwarding any money to the workers.

The jury heard that Fields fraudulently obtained $3.1 million in tax refunds from the IRS. He kept approximately $1.3 million for himself.

Up to 20 years in prison

Sentencing is set for May 2020. At that time, Fields faces up to 20 years for one count of conspiracy to commit mail and one count of wire fraud. For the other 13 tax fraud convictions, he also faces up to three years in federal prison. He may also be ordered to pay restitution to his victims and up to $250,000 in fines.

Not the first time Fields has been in trouble

This isn’t the first time that Fields has been in trouble with the authorities. Back in 2008, he settled charges with the Securities and Exchange Commission (SEC) over his role in a ‘Pump and Dump’ scheme involving Aimsi Technologies, a Tennessee-based company. Fields was required to pay disgorgement of $350,000 and prejudgment interest of $64,000.

In December 2006, Fields settled with the SEC over his role in a different ‘Pump and Dump’ scheme involving a company called OSF Inc. He was barred from serving as an officer or director of a public company for five years.

 

https://www.justice.gov/usao-sdtx/pr/jury-convicts-tax-preparer-fraud-and-tax-violations

SEC bars two Houston brokers involved in Ponzi scheme

The Securities and Exchange Commission (SEC) has barred Donald Mackenzie and Robert Davis from being associated with any registered financial broker. The case arose out of the collapse, in December 2017, of the Woodbridge Group of Florida in a $1.3 billion Ponzi scheme. Approximately 8,400 retail (mostly elderly) investors lost money.



Mackenzie owned Old Security Financial Group in Spring. Robert ‘Lute’ Davis was a Vice-President at the company. Old Security acted as an unregistered broker by selling securities of Woodbridge.

Mackenzie and Davis are two of 20 brokers around the country charged by the SEC as marketing the investments as ‘safe’ and ‘secure’. In fact, money from new investors was used to repay earlier ones.

The SEC alleges that Mackenzie and Davis sold investors two types of securities;

  • 12 to 18 month promissory notes bearing 5-8% interest that Woodbridge described as First Position Commercial Mortgages
  • 7 different private placement fund offerings with five-year terms.

Ads were placed in Texas Monthly and on KPRC AM 950 in Houston.

$2 million commissions

Between May 2014 and July 2015 Mackenzie and Davis received sales commissions of between 1-4% on the first type and 5% on the second type. However Woodbridge deliberately mischaracterized them as marketing bonuses. Mackenzie and Davis allegedly received $2 million in commissions earned as a result of raising $41 million through the sale of Woodbridge securities.

For now, without admitting or denying the findings of the SEC, Mackenzie and Davis have agreed to be barred from association with any broker, dealer or investment adviser. Also, they cannot participate in any offering of a penny stock.

The case is still ongoing in the District Court for the Central District of California. Mackenzie and Davis, if found guilty, may have to pay back the commissions as well as penalties.

Woodbridge CEO sentenced to 25 years

In October 2019, Robert Shapiro, the former CEO of Woodbridge, was sentenced to 25 years in prison. He pleaded guilty to tax evasion and running a $1.3 billion fraud. He admitted to taking between $25 million and $95 million of investors’ money. Shapiro used it to buy real estate in the Los Angeles area, global travel, jewelry and diamonds.

The SEC has settled with some of the other brokers involved in the scheme.

Run-ins with the regulators

Mackenzie and Old Security has had a number of run-ins over the years with courts and regulators.

  • 2001 – Old Security is sued by the SEC for commissions received for the sale of unregistered securities in Alpha Telecom. He was ordered to pay $79,000 in 2005.
  • 2005 – Sued for receiving commissions received for the sale of unregistered securities in Mobile Billboards. In 2008 a court in Atlanta ordered Mackenzie to pay $153,000.
  • 2012 – Texas Commissioner of Insurance ordered Mackenzie to pay a penalty of $20,000 for selling life insurance without a license.
  • 2016 – Mackenzie and Davis were fined $100,000 by the Texas State Securities Board for selling the Woodbridge securities in Texas even though they were not registered.

SEC Litigation – Mackenzie.pdf

SEC Litigation – Davis.pdf

CFO of Houston-area bank dies unexpectedly

Jeff Powell, the CFO of Spirit of Texas Bancshares, has died unexpectedly. He was 62 years old.

Mr Powell had been the CFO since July 2017 and helped guide the company through its Initial Public Offering in May 2018. The company has its head office in Conroe, TX. It operates 23 full-service branches in the Houston, Dallas/Fort Worth and College Station metropolitan areas and has a market capitalization of $414 million.

Allison Johnson, currently the Chief Accounting Officer, has been appointed the interim CFO. She joined the bank from Florida Community Bank in 2016. She started her career at PricewaterhouseCoopers.

SEC filing – Spirit of Texas – CFO passes away

Houston man indicted in $1.3 million Regions Bank fraud

Julius Joachim Ohumole, aged 34, has been indicted in a $1.3 million fraud involving Regions Bank. He is charged with one count of conspiracy, four counts of bank fraud and two counts of aggravated identity theft.



In early December 2018, Mr Ohumole, using false information, opened a bank account in the name of Mars Construction at a Regions Bank branch in Houston.  An unknown co-conspirator accompanied Mr Ohumole to the bank and presented a false driver’s license as a means of identification to be added as a co-signor to the newly-opened bank account. The co-conspirator also provided an actual social security number of a real account customer at Regions.

4 withdrawals, $1.3 million

Somehow Mr Ohumole was able to gain access to the account of the real customer at Regions. On January 4, $274,000 was transferred from the real Regions account to the Mars Construction account. Four days later, another $200,000 was transferred.

In late January 2019, Mr Ohumole repeated the con with another newly-created account in the name of JMW Holt Constructions and a different real Regions customer. This time $815,000 was transferred in two separate transactions, six days apart.

The monies were then wired to an account in New York and then to an account overseas.

Each count of conspiracy and bank fraud carries a possible sentence of up to 30 years in federal prison. The aggravated identify theft charge carries up to two years, upon conviction. Each conviction also carries a possible $1 million maximum fine.

Regions Alabama employee guilty

In writing this story I came across another case involving Regions. Back in March 2019, a Regions Bank employee in Alabama pleaded guilty to accessing records of four wealthy customers without authorization. He passed on the information to outside co-conspirators who impersonated bank customers to make large withdrawals. The total losses were $300,000. These cases took place between February 2017 and March 2018 and are apparently unrelated to Ohumole.

https://www.justice.gov/usao-sdtx/pr/local-man-indicted-1-million-identity-theft-scheme

Former Wells Fargo employee admits $63k embezzlement

Natasha Hudgeons, a 33-year old Brenham resident and a former Wells Fargo employee has pleaded guilty to a $63k embezzlement.

From December 2014 through March 2019, she embezzled $63,500 while employed as a teller. She took the money in $500 to $1,000 increments. She concealed the theft by putting falsified entries into the bank’s books and records and “selling” back and forth between the cashbox and coin machine cash lines. Both were considered “single control” cash lines, meaning tellers could conduct transactions on that account line without a second person.

She was arrested in September and waived her right to be indicted. She will be sentenced on January 9, 2020. Ms Hudgeons faces up to 30 years in federal prison and a possible $1 million maximum fine.

https://www.justice.gov/usao-sdtx/pr/former-employee-admits-guilt-63k-bank-embezzlement-scheme

SEC charges Humble man with misleading investors over sports marketing scheme

The SEC has charged Christopher Rabalais of Humble, TX, with misleading investors in the the unregistered offer and sale of securities.

Rabalais set up a fantasy stock market, AllSportsMarket (ASM), for sports teams. Players buy and sell ‘stock’ in teams and get paid dividends when the team wins. His stated goal was for ASM to become a regulated exchange and the platform for the offer of sports trading instruments to the investing public.



Unregistered shares

Between July 2014 and April 2019, Rabalais publicly offered and sold at least 4,800 unregistered share certificates in the holding company of ASM to investors in the US, Canada, Europe and Australia. Rabalais would send solicitation emails that described the shares as ‘gifts issued in exchange for donations of money (usually $250). In practice, the SEC alleges these transactions constituted sales of unregistered securities.

At least $1.4 million raised

Rabalais planned to register the shares with the SEC but never took any steps to do so. Between July 2014 and March 2019, PayPal accounts controlled by Rabalais received $1.3 million. He also received another $122,000 through a US bank account he controlled and $27,000 through a Google Pay account.

Rabalais told investors that their shares could not be transferred until registration with the SEC had occurred.

The SEC is seeking a permanent injunction against Rabalais against selling unregistered securities. It is also seeking disgorgement of all ill-gotten gains.

Past legal troubles

Not mentioned in the SEC complaint is that, back in 2008, Rabalais and ASM were sued by Seth Leon of California who alleged fraud, deceit and false advertising. Leon had invested $31,000 and through a series of trades, eventually accumulated $400,000 in a previous incarnation of ASM. When he attempted to withdraw his funds, he discovered that most of his money was gone.  Leon won a default judgement for $379,026 and the California court stated that ‘on its face, it seems to be a clear Ponzi scheme’.

Rabalais filed for personal bankruptcy in 2011 in Texas and attempted to discharge the default judgement. The 5th Circuit Court of Appeals held that he couldn’t because the money had been obtained by false pretenses. Rabalais tried to take the case to the Supreme Court, but they declined to hear it.

SEC complaint – Rabalais

 

Former Houston bank employee pleads guilty to embezzlement

Adriana Granados, aka Adriana Canas, 38, pleaded guilty to one count of embezzlement from her former employer, BBVA Compass Bank.

According to the plea agreement, Granados was employed as an executive assistant in the bank’s Corporate Development Department. She was responsible for submitting expenses account statements for corporate credit cards issued to her and other employees for business expenses incurred for the bank.



Without the bank’s knowledge, she used her corporate credit card for personal expenses. The original indictment filed in April 2019, alleged that the fraud was in excess of $150,000. Granados submitted false receipts and statements to conceal the personal purchases.

She worked at the bank between June 2012 and December 2015.

Sentencing has been set for Oct. 16, 2019. At that time, Granados faces up to 30 years in federal prison and a possible $1 million maximum fine.

https://www.justice.gov/usao-sdtx/pr/former-bank-employee-admits-role-embezzlement-scam

Houston bank hires new CFO

Prosperity Bank (market cap $4.5 billion) has appointed Asylbek Osmonov as its new CFO, replacing David Hollaway, who announced back in March that he planned to retire. Mr Hollaway had been the CFO for 27 years. He intends to remain with the bank for another two years.

Mr Osmonov had been the interim CFO and has been the Bank’s Chief Accounting Officer since September 2013. Prior to that he was a senior manager at Deloitte.

Mr Osmonov will receive a base salary of $300,000.



This week Prosperity agreed to buy Plano-based LegacyTexas Financial Group for $2.1 billion. 85% of the acquisition price will be stock, 15% cash. This will create the second largest Texas-headquartered bank by deposits (Cullen/Frost is first). The acquisition will also add 42 branch locations in 19 cities, mainly around the Dallas/Fort Worth metroplex, giving the combined group 288 branches in total.

The deal is expected to close in Q4 2019.

SEC filing

Customer of Houston-based Bank victim of $2.6m phishing scam

An unnamed customer of Houston-based Prosperity Bank has fallen victim to a phishing scam that has cost it $2.6 million as a result of a fraudulent ACH payment.

The issue came to light in an unusual lawsuit that Prosperity Bank filed against JP Morgan Chase last week in Harris County.

According to the lawsuit, a customer of Prosperity Bank revised the ACH instructions for payments to one of its vendors based on a phishing email. As a result, Prosperity initiated an ACH in the amount of $2,582,762.13 to an account at Chase that did not belong to the intended beneficiary. It’s not clear when the ACH was initiated but Prosperity was informed of the fraudulent ACH instructions on April 11, 2019.



Prosperity sued Chase on April 12, 2019 and obtained a temporary injunction in order to freeze the account at Chase so that the funds could not be withdrawn or transferred to another account.

It’s not clear at this stage whether the funds are still in the Chase account or are long gone.

According to the Association for Financial Professionals 2019 Payments Fraud & Control Survey, 80% of businesses reported fraud from Business Email Compromise in 2018. For 44% of the emails that fraudsters send, they are trying to impersonate vendors requesting payment.

Prosperity v Chase lawsuit

Former Finance Employees of Credit Union charged with $1 million embezzlement

Susanna Guajardo of Pearland has been charged with embezzlement and making false entries in the books of a local credit union. She was indicted on five counts in the Southern District of Texas.

Ms Guajardo was the VP of Accounting at Space City Credit Union. The credit union is based in the East end of Houston and was originally chartered as the Stewart & Stevenson Credit Union in 1965. It has 8,000 members and $78 million in assets.

The indictment alleges that Ms Guajardo embezzled $1.155 million between 2010 and July 2017. On the false accounting, the indictment alleges

    • July 23, 2010   Falsified account reconciliation
    • Mar 10, 2016  Falsified general ledger history
    • Sep 12, 2016   Falsified account reconciliation

Another former employee, Grace Garza was also charged last month with embezzling the $1.1 million with Ms Guajardo. Ms Garza was also charged with embezzling $110,000 between 2013 and 2016. She was employed as the Senior Teller and was even Employee of the Year in 2014!

There are no clues in the indictment on how the alleged fraud was discovered.

If convicted of any of the charges, each faces up to 30 years in federal prison and a possible $1 million fine.

https://www.justice.gov/usao-sdtx/pr/two-former-local-credit-union-employees-charged-million-dollar-embezzlement-scam