Category Archives: Financial Services

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

[UPDATE SEPT 2020 : In August 2020, Ms Granados was sent to prison for 27 months. She also got an additional 3 months in a separate case related to false statements in immigration documents]

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

SEC charges Richmond IT professional with Insider Trading

The SEC has charged Hamed Ettu, an IT professional living in Richmond, TX, with insider trading. Mr Ettu was a family friend of Damilare Sonoiki, a junior analyst at Goldman Sachs investment bank.

The US Attorney’s Office for the Eastern District of Pennsylvania has also filed criminal charges against Mr Ettu.

Back in August, the SEC charged Mr Sonoiki in a separate insider trading case with passing stock tips on 4 companies to NFL footballer, Mychal Kendricks who allegedly made $1.2 million from the investments in 2014. Mr Kendricks pleaded guilty in September and will be sentenced in January 2019.

Mr Kendricks was a 2nd round draft pick of the Philadelphia Eagles in 2012 and signed a new contract with the Eagles in 2015 that included $16 million guaranteed. At the time of his arrest he was playing for the Cleveland Browns. He was then cut by the Browns, signed by Seattle Seahawks, played one game and was then suspended by the NFL.

Mr Ettu’s gains were considerably smaller. He is alleged to have made $93,000 from the stock tips (two of the four that Mr Kendricks benefited from). Mr Sonoiki and Mr Ettu communicated in text messages in the Yoruba language.

Mr Sonoiki and Mr Ettu were family friends and the two had a history of joint business ventures including a house they owned together. In return for the stock tips, Mr Ettu allegedly forgave $30,000 which was Mr Sonoiki’s share of the repairs and maintenance.

Mr Ettu is a network analyst and according to LinkedIn has worked at Apache Corporation.

If found guilty in the criminal case, Mr Ettu could face 5 years in prison and a $250,000 fine. Mr Kendricks was facing a maximum sentence of 25 years but he is likely to receive a sentence of around 3 years.

https://www.sec.gov/news/press-release/2018-251

Houston man charged in $10m Ponzi scheme

Bill Hightower, 60, of Bellaire, has been indicted on 13 counts for running a Ponzi scheme. He has been charged with wire fraud, mail fraud and money laundering. The lawsuit was filed in the Southern District of Texas.

Mr Hightower is the President of Hightower Capital Group, which he founded in 2010. Prior to founding this company he worked for UBS Financial Services between 2007 and 2013 and Legacy Asset Securities between 2013 and 2015.

He allegedly took money from clients between 2013 and 2018 and made false promises as to their investments. He allegedly told investors their money was being invested in various projects such as restaurants, movies, insurance contracts, among other things.

According to the allegations Hightower used investor funds to pay earlier investors in a Ponzi scheme, pay himself and fund his lifestyle.

Hightower also didn’t tell his clients that the Financial Industry Regulatory Authority (FINRA) had barred him for acting as a broker in October 2015. Hightower had refused to fully respond to a FINRA request for documents and information in connection with allegations that Hightower improperly steered customers to an unapproved private securities investment. This occurred while Hightower was employed at UBS.

In August three Harris County residents filed an inventor action in the divorce proceedings pending between Mr Hightower and his wife. According to the complaint filed, in early July 2018 Hightower defaulted on payments due on one of the annuities that he purportedly bought for his investors. His wife filed for divorce 11 days later, listing real estate properties. The intervenors contend they were purchased with the funds provided by one of the investors, a 78-year-old widow.

3 other civil lawsuits were also filed in Harris County in September against Hightower. All by elderly investors. Two had similar allegations to those noted above. One couple, though, alleged that Hightower liquidated legitimate investments without their knowledge and consent and bought stock in Hightower Capital Group instead.

Records also show that Hightower and his wife filed for bankruptcy in 2005 after a failed business venture.

If convicted, he faces up to 20 years in federal prison for each count as well as monetary fines.

https://www.justice.gov/usao-sdtx/pr/bellaire-man-charged-ponzi-scheme

Houston loses another public company as bank is taken over

Two Texas community banks are merging with Veritex Holdings, based in Dallas, taking over Green Bank (based near the River Oaks area), in all-stock transaction worth $1 billion. After the expected closing in Q1 2019, the combined bank will have its headquarters in Dallas.

Malcolm Holland, the Chairman & CEO of Veritex will be the Chairman & CEO of the combined group. The CFO will be Terry Earley, the current CFO of Green.

Veritex has 22 branches (21 in the Dallas-Fort Worth metro area, 1 in Houston). Green also has 22 branches (11 Houston metro area, 8 Dallas, 1 in Austin and 1 in the Yum! Brands headquarters in Louisville, KY).

Green Bank was formed in 2006 by CEO Manny Mehos. He had previously founded Coastal Bancorp before selling it to Hibernia Bank for $230 million in 2004. Green went public in August 2014. Mr Mehos will be joining the board of the combined company.

https://globenewswire.com/news-release/2018/07/24/1541060/0/en/Veritex-Holdings-Inc-Announces-Merger-with-Green-Bancorp-Inc-Creating-a-Premier-Texas-Community-Banking-Franchise.html