Category Archives: Government

Husband illegally profits $1.8 million from wife’s M&A deal

Tyler Loudon, a Houston resident, has pleaded guilty to insider trading. He made $1.8 million in illegal profits from the purchase and sale of stock market shares.



Loudon’s wife was an associate manager in M&A working for BP. While working from home in December 2022, Loudon learned that BP was negotiating a deal to buy TravelCenters of America, a US publicly-traded company. Loudon purchased a series of options for TravelCenters in December, January and February, without telling his wife.

BP announced the $1.3 billion deal in mid-February 2023. Loudon promptly exercised the options, netting a profit of $1,763,522.

Loudon finally confessed to his wife in April 2023. She immediately notified BP what had happened.

As part of the plea agreement, Loudon has agreed to forfeit the profits. At his sentencing hearing, scheduled for May 17, he faces up to five years in prison and a possible maximum $250,000 fine.

Loudon’s wife no longer works for BP. She joined another Houston-area company in 2023.

https://www.justice.gov/usao-sdtx/pr/insider-trading-husband-illegally-profits-17m-after-using-wifes-private-company

Target Hospitality promotes from within for CFO

Target Hospitality, based in The Woodlands, has promoted Jason Vlacich to be its CFO. He replaces Eric Kalamaras, effective immediately. The company said it will approve terms in connection with Mr Kalamaras’ departure at a later date.



Mr. Vlacich joined the company in October 2018 as its Chief Accounting Officer. He started his career with PricewaterhouseCoopers. Mr. Vlacich will receive a base salary of $410,000.

The business originally provided rental modular accommodation to the US fields. It still does that, but almost 75% of its revenue and 90% of its profits comes from government contracts. The biggest is providing housing for unaccompanied minors at a Children’s Center in Pecos in west Texas. Target’s contract is with Endeavors, a non-profit organization. In turn, Endeavors has received a $580 million contract from the US government.

Target has a long history of operating government contracts. It provided logistical services at the 1996 Olympics in Atlanta and operated a cruise ship to support relief efforts in the aftermath of Hurricane Katrina in 2005.

Target was taken public by a SPAC in March 2019 and now has a market cap of $939 million.  Mr. Kalamaras joined as CFO in September 2019.

It is unclear why the company is stating that severance will be agreed later as the employment contract that Mr. Kalamaras signed is very clear. The contract, amended in January 2022, states that Mr. Kalamaras will receive 1x the sum of annual base salary ($427,450)  plus target bonus ($427,450). In addition, he will receive a pro-rated bonus for 2024 (plus his 2023 bonus that, presumably, has not yet been paid).

SEC filing – 8-K – Target Hospitality CFO change

KBR to pay $12 million to settle inflated billing allegations in Iraq

KBR has agreed to pay the US government $12 million to settle allegations of inflated billing and kickbacks during 2002-2003 regarding its work supporting the war in Iraq.

At the time, KBR was owned by Halliburton, with the split not occurring until 2007.

The lawsuit concerned the Logistics Civil Augmentation Program (LOGCAP) that KBR was awarded in 2001 to provide logistical support to the US military in the Middle East.



Three separate KBR employees rigged bidding processes for subcontract work involving trucks and trailers to two different Kuwaiti companies. In return, the employees received kickbacks from those companies. In addition, the third employee extended two contracts for an additional six months, even though the equipment had been returned to the subcontractor.

The settlement amount is actually $13,677,621 and includes $4,253,174 in restitution for over-billing. KBR will have to pay cash of $12 million within 10 days. The other $1.677 million has already been settled by credits that KBR previously provided.

Officially, the settlement agreement is neither an admission of liability by KBR nor a concession by the United States that its claims are not well founded. However, KBR self-reported these violations to the government.

In 2021, following more than seven years of litigation, the U.S. District Court for the Southern District of Texas granted partial summary judgment to the United States on several of its False Claims Act and Anti-Kickback Act claims. This settlement resolves these allegations and other pending claims and issues, for which trial had been scheduled to commence on May 23.

Last year, the US government obtained a $51 million judgment against KBR concerning a larger overpayment that KBR made to one of the Kuwaiti subcontractors under a separate subcontract in the Iraq Theater.

https://www.justice.gov/opa/pr/kbr-defendants-agree-settle-kickback-and-false-claims-allegations

 

Houston resident indicted in Texas fake paper tag scheme

Another Houston resident has been indicted in the Texas fake paper tag scheme that’s cost the state nearly $100 million dollars. Daniel Rocky Christine-Tani was arrested in Sugar Land and will appear in court on June 2, 2022.

Co-conspirators Leidy Areli Hernandez Lopez, Houston, Emmanuel Padilla Reyes, Houston and Octavian Ocasio from New York were charged in May 2021. The new indictment adds more charges against Reyes, aka Christian Hernandez Bonilla, who remains at large.



I wrote about the scheme in my blog post from May 2021 that highlighted the virtually non-existent controls in the system.

Internal controls lacking

Car dealers in Texas must obtain a GDN (general distinguishing number) license to buy or sell vehicles. The license application portal is online and a license can easily be acquired using fake ID documents, such as a driver license from any state. Once a dealer obtains a GDN license, they can access the online eTag portal of the TX Department of Motor Vehicles to create temporary tags.

However, there were a couple of gaping holes in the system. Firstly, a GDN holder can set up other users on their account who can create and issue temporary tags. Secondly, there are no checks on the vehicle, buyer or vehicle identification number (VIN) entered into the portal.

In that way, the co-conspirators issued 700,000 fake paper plates in a matter of months in 2020. Fake plates were sold for between $125 and $150 each, although more recently plates can be bought for less than $100.

New state law being to have an effect

The Texas Department of Motor Vehicles is a relatively new department, only created in 2009. It only began investigating title fraud in 2014 when it hired its first fraud inspector.  A 2019 report by the Texas Legislature stated that the department had no fraud reporting tools.

The state passed a bill that became law in September 2021 to improve controls over paper plates. For example, the law requires all new  dealer applicants to be fingerprinted in order to obtain a GDN. That has not yet been enacted.

The law also allowed the DMV to deny or revoke a dealer’s access to the eTag portal if there was fraudulent activity. Prior to the law passing, the DMW was specifically prohibited by statute from denying a dealer access to the database.

Limits have also been put in place on the number of tags that a dealer can issue. They appear to be having an effect.

At the February DMV board meeting it was reported that 17 independent dealers were part of an organized criminal group that issued 1.2 million buyer tags in 2021 or 25,000 a week. In 2022, these numbers dropped to a few hundred a week.

However, the criminal group is now moving onto creating tampered documents without using the eTag portal.

If convicted, each defendant faces up to 20 years in prison and a possible $250,000 maximum fine.

https://www.justice.gov/usao-sdtx/pr/another-indicted-nationwide-fraudulent-car-buyer-paper-tag-scheme

Houston woman charged for her role in issuing 580,000 fake Texas paper tags

Leidy Areli Hernandez Lopez has been charged in relation to a scheme that issued over 580,000 fake vehicle paper tags.

Also charged are Octavian Ocasio of New York and Emmanuel Padilla Reyes aka Christian Hernandez Bonilla, city unknown. Both men are fugitives and warrants remain outstanding for their arrests.



A quick google search shows that, in February 2016, Ocasio was accused of offering fake New York inspection stickers. It’s not clear whether he was found guilty in that case.

A federal grand jury returned a 15-count indictment on May 20. The fraud mostly operated in 2020 though one count relates to July 2019. The fake tags were generally sold for between $150 and $175 each.

Most residents of Texas are aware that there has been a large problem with fake temporary dealer tags. There have been plenty of stories in recent years on local news and in newspapers. Police in Harris County have estimated that half of the paper tags on Texas roads are fake.

Fake tags are often used by drivers who don’t have insurance or are driving a car that wouldn’t pass inspection.

GDN license – no controls!

In the case of the defendants, it appears that Lopez was acting as a used car dealer. Dealers in Texas must obtain a GDN (general distinguishing number) license to buy or sell vehicles. Once a dealer obtains a GDN license, they can access the online eTag portal of the TX Department of Motor Vehicles to create temporary tags.

However, there are a couple of gaping holes in the system. Firstly, a GDN holder can set up other users on their account who can create and issue temporary tags. Secondly, there are no checks on the vehicle, buyer or vehicle identification number (VIN) entered into the portal.

The defendants advertised the sale of Texas paper tags on Facebook and Instagram to buyers from all over the US.

If convicted each defendant faces up to 20 years in prison and a potential $250,000 maximum fine.

TX Dept of Motor Vehicles

The body that oversees title registration is the Texas Department of Motor Vehicles. It was only created in 2009. In 2017 it issued 8.6 million vehicle titles.

According to a report by the Texas Legislature issued in 2019,  the department only began investigating title fraud in 2014 with the hire of ONE fraud inspector. For 2018-2019, the department was authorized to hire 13 additional investigators.

The department is also hampered by weak IT systems. For example, the same report stated that the department has no fraud reporting tools. Part of the problem is that most of the day-to-day title transactions are carried out by the 254 county tax assessor-collector offices. In turn these offices often sub-contract out such services to private companies.

https://www.justice.gov/usao-sdtx/pr/three-charged-nationwide-scheme-sell-hundreds-thousands-fraudulent-texas-paper-tags

 

 

Houston woman guilty of disaster fraud

Latoya Romar, from SE Houston, has pleaded guilty to defrauding FEMA (Federal Emergency Management Agency) by falsely claiming a storm damaged her residence.



;

The 2015 Memorial Day storms dumped up to 10 inches of rain over 12 hours. Seven people died as a result of the storms and a federal disaster was declared for Harris County.

Romar submitted forged documents to FEMA, who paid out $7,124 in response to her claim.

A quick google search on Romar turned up a 2009 conviction in Harris County for forgery. In 2007, Romar was employed by Texas State Bank in the Galleria area. On her application form, Romar had stated that she had never been arrested. In fact, the background check revealed that she had three convictions for forgery, with her last sentence being two years in state jail. She was terminated by the bank in January 2008, the same day the background check results were received.

The following month, in February 2008, she deposited a forged check for $1,000 into her Texas State bank account and then withdrew the money at an ATM. As a result, she was sentenced to six months in jail in 2009.

Sentencing in the latest case is set for August 16. At that time, Romar faces up to 30 years in federal prison and a $250,000 maximum possible fine.

https://www.justice.gov/usao-sdtx/pr/local-woman-guilty-disaster-fraud

Two Houston men charged with $317 million mask fraud

Two Houston men have been charged with trying to fraudulently sell 50 million masks for $317 million to a foreign government. Paschal Eleanya, 46 and Arael Doolittle, 55 are now in custody.

[UPDATE 02-16-22 Doolitte sent to prison for 54 months for the N95 mask scam (Australia was the foreign country) and 54 months for the oil and gas fraud. He pleaded guilty to the mask scam and was convicted in the Chevron fraud.]

 

Last month, in a separate case, Doolittle was charged with defrauding investors out of $1.2 million by pretending to have deals with Chevron.



Pascal Eleanya is a supply chain and operations executive who has worked for DuPont, Baker Hughes and Huntsman Corporation.

Both are charged for their role in a scheme to sell 50 million 3M model 1860 N95 respirator masks they did not actually possess to a foreign government. They negotiated a sales price of $317 million. This was five times the public list price that 3M had set.

Based on their representations, the foreign government allegedly wired the funds to complete the purchase. However, authorities disrupted the transaction before it could be completed.

If convicted, both Doolittle and Eleanya face up to five years in prison for conspiracy and up to 20 years in prison for each of the two counts of wire fraud. Each of these charges also carry a possible $250,000 maximum fine.

The Secret Service conducted the investigation.

https://www.justice.gov/usao-sdtx/pr/two-houston-men-charged-attempting-fraudulently-sell-50-million-masks

 

Six Houston-area men charged in $16 million PPP loan fraud

Six Houston-area men have been charged with fraudulently obtaining more than $16 million in Paycheck Protection Program (PPP) Loans. A seventh individual from Illinois was also charged.

The indictment alleges that the defendants filed at least 80 fraudulent PPP applications, seeking nearly $30 million in PPP loan funds. Ultimately about $16 million was funded.



Amir Aqeel, 52 was the ringleader. He would create the loan applications for shelf or inactive companies, working with the other defendants who owned many of them. Other companies were owned by unnamed and not charged individuals.  For some of the loans, Aqeel would keep 33%, with the business owner getting the rest.

Unlike other PPP fraudsters, the defendants went further by writing purported paychecks to fake employees. Many of these were the defendants or their relatives. Aqeel’s 86-year-old mother (not charged) received checks from at least six different companies that received fraudulent PPP loans.

Over 1,100 fake paychecks, totaling over $3 million, were cashed at Almeda Discount Store in SE Houston, owned by one of the defendants.

With some of the proceeds, it is alleged that Aqeel bought a 2013 Lamborghini Gallardo Spyder and a 6,000 sq ft, $1 million house in Champion Forest.

https://www.justice.gov/opa/pr/seven-charged-connection-covid-relief-fraud-scheme-involving-more-80-fraudulent-loan

Houston woman charged with $1.9 million PPP loan fraud

[UPDATE 12-08-21 – Ms. Kasali was found guilty by a jury on two counts. She is scheduled to be sentenced in February 2022. She faces up to 30 years in prison.]

Lola Shalewa Barbara Kasali, 22, of Houston, has been charged with fraudulently obtaining more than $1.9 million in Paycheck Protection Program (PPP) loans.

The complaint alleges that Kasali submitted at least two fraudulent PPP loan applications. One for an entity called Lola’s Level and the other in the name of Charm Hair Extensions. Kasali allegedly received more than $1.9 million in PPP loan funds following the approval of the Lola’s Level application.



The charges allege that after receiving the funds, Kasali transferred the money into four additional bank accounts. Authorities were later able to seize the funds, according to the charges.

The loan applications allegedly asserted both Charm Hair Extensions and Lola’s Level had numerous employees and significant payroll expenses. According to the charges, however, neither entity has employees nor pays wages consistent with the amounts claimed in the loan applications.

According to the PPP loan database of loans over $150,000 that is published by the Small Business Administration, there is one loan approved for Lola’s Level but none for Charm Hair Extensions.

The bank that approved the Lola’s Level loan was Radius Bank of Boston. That bank was also involved in partially funding the PPP loans of a Houston man now charged with buying a Lamborghini with his funds.

https://www.justice.gov/opa/pr/texas-woman-charged-fraudulently-obtaining-nearly-2-million-covid-relief-funds

Houston man sentenced to 54 months for IRS Tax Fraud Scheme

Oluwole Odunowo has been sentenced to 54 months in federal prison for his role in a nationwide conspiracy to commit mail fraud and aggravated identity theft. In May 2020, he pleaded guilty before a court in Oregon.



The IRS began investigating in May 2013, when a woman in Medford, Oregon notified the IRS that false federal and state tax returns were filed electronically. The IRS found that co-conspirators amassed a large supply of stolen U.S. taxpayer identities; obtained IRS filing PINs using victim identities; acquired prepaid debit cards in victims’ names; used fictitious email addresses; filed fraudulent tax returns and wired refund proceeds to Nigeria.

The scheme ran between 2012 and 2015 and netted co-conspirators more than $11.6 million in fraudulent tax returns. Odunowo used 700 stolen identities and filed fraudulent returns seeking over $1.5 million in refund payments. He received refunds totaling $403,000.

According to the Medford Mail Tribune, the scheme began when a Vietnamese hacker got into the databases of CICS Employment Services of Lincoln City, Oregon. He sold 91,732 identities to the ringleader, Emmanuel Kazeem of Maryland. Mr Kazeem was sentenced to 12 years in 2018. Kazeem’s younger brother, Michael, who lived in Georgia, got 7 years in November 2017. Three other Nigerians living in Georgia have also been sent to prison, along with a Wisconsin man, Curtis Pethley.

Because of security breaches tied to Kazeem’s ring, the IRS disabled its “Get Transcript” program in 2015. It was relaunched the following year, with additional security features.

https://www.justice.gov/usao-or/pr/sixth-nigerian-co-conspirator-sentenced-federal-prison-nationwide-identity-theft-and-irs