Tag Archives: Fraud

Energy broker pleads guilty to insider trading scheme

Mathew Webb, of Tiki Island (near Galveston) has pleaded guilty for his role in an insider trading and kickback scheme. Back in February, I wrote about energy trader John Ed James who pleaded guilty for his role in the same scheme.

Webb paid kickbacks to James and co-conspirator Marcus Schultz (who pleaded guilty in July 2020) using commission fees paid by Schultz’s employer, Shell.

Instead of trading futures contracts openly and competitively, Schultz disclosed to James and Webb material non-public information that he would be willing to accept on behalf of Shell. Webb would arrange offsetting trades with James and another unnamed co-conspirator. The group would net the difference between the price of these trades and the price that would have been obtained in arms-length transactions. Illicit gains totaling $966,403 were split among the group. Webb received $585,000.

The scheme ran from 2013 to 2016.

In June 2019, the National Futures Association suspended Webb through January 2022 and fined his company $200,000. They found that Webb “failed to uphold high standards of commercial honor and just and equitable principles of trade.”

The hearing panel also found that the company failed to maintain adequate and complete records. The panel had heard evidence that three years’ worth of telephone recordings were missing due to a malfunction. Mary Webb, the wife of Mathew, was the Associated Person for the business (someone who is meant to ensure the business follows the rules of the regulatory bodies).

Webb is scheduled to be sentenced in September. Schultz and James also awaiting sentencing.

https://www.justice.gov/opa/pr/former-energy-broker-pleads-guilty-insider-trading-and-kickback-scheme

 

IT consulting company admits to H-1B visa fraud

Cloudgen LLC has pleaded guilty to commit H-1B visa fraud.

The company is an IT consulting firm that has its US headquarters in west Houston. However, many of its employees are based in Hyderabad, India.



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Between March 2013 and December 2020, the company admitted to recruiting IT workers from India under H-1B visas. An H-1B visa is used to hire foreign workers to fill specialized jobs in the US where resident workers cannot be found. In that time, the company applied for 94 visas.

In Cloudgen’s case, the company submitted forged contracts stating 3rd parties had jobs available for individual Indian nationals. Having then obtained H-1B visas, the company would bring over the Indian nationals to the US, and start looking for other work for them.

Once Cloudgen found work for them, the company would switch the visas to the new employer. Cloudgen took a percentage of the worker’s salary as their fees. It earned approximately $493,516.28 in profits during the course of the conspiracy.

Sentencing is set for September 16. At that time, the company could have to pay up to $500,000 or the greater of twice the gross gain or twice the gross loss as well as a maximum five years of probation.

https://www.justice.gov/usao-sdtx/pr/houston-consulting-company-admits-h-1b-visa-fraud-conspiracy

 

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

 

 

Cameroon man sentenced to wire fraud conspiracy

Frankline Bate Okpu, a Cameroon man illegally residing in Houston, has been sentenced to 36 months in prison for his role in stealing $726,000 from a South Korean company.

Okpu managed a team of eight. Seven have previously pleaded guilty. One man, a Cameron native and formerly residing in Dallas, is a fugitive at large.



The South Korean company involved was Daesang Corporation, a leading producer of consumer foods and food additives. Also involved was JY Globalfoods Company (JY), a Korean trading company that acts as a bridge for international companies looking for Korean products or introduces foreign products to the Korean market.

Fake website

Okpu set up a fraudulent entity and fake website called Trinity Food Inc. This was a knock-off of a legitimate business called Trinity Foods Inc, based in San Diego.

Daesang wanted to import chicken and pork products into Korea to meet the demands from the Korean Moon festival holiday, held each year in the fall.  In June 2017, JY found the fake Trinity Food online and started communicating with ‘Juliet Vaquez”, “Ray Morgan” and “Albert”, purportedly employees of Trinity Food. In fact, these were false names created by the conspirators.

JY brokered the purchase of foodstuffs for Daesang and the conspirators sent two proforma invoices to Daesang for $128,250 and $598,400. In September 2017, Daesang paid the amounts into a Bank of America account in Houston in the name of Trinity Food, prior to the supposed shipment.

Money transferred to other accounts

That money was then withdrawn by the conspirators and was deposited into other bank accounts in Houston (at Regions Bank and First Convenience Bank). Some of the money was cashed through cashier’s checks in Los Angeles, Miami and Maryland.

Daesang never received the product they paid for and sought help from the US authorities.

After serving time, Okpu will be subject to 36 months supervised release and will have to pay restitution of $350,939.21. Sentencing has not yet occurred for the others that pled guilty.

https://www.justice.gov/usao-sdtx/pr/cameroon-man-sentenced-wire-fraud-conspiracy

 

 

 

SEC charges Katy investment advisor with $3.7 million fraud

The Securities and Exchange Commission (SEC) has charged Knight Nguyen Investments (KNI) and three individuals with obtaining funds from retail investments in five fraudulent securities offerings.



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Knight Nguyen was based in Katy, Texas. Majority owner Chris Knight Lopez was also charged, along with his brother Jayson (based in Florida) and Forrest Jones.  Chris Lopez formed KNI in 2015, even though he had no experience as a securities professional. Jones was hired in February 2017.

The Scheme

Between March 2016 and September 2018, the SEC alleges that Chris Lopez and Jones raised $3.7 million from approximately 70 clients.  They largely targeted older and unsophisticated individuals who were trying to preserve or grow their retirement savings. Lopez and Jones promised that they would invest in safe and secure investments. Instead they invested the funds in five high-risk investments. Four of them were associated with or controlled by the Lopez brothers. Of course, this was not disclosed to the clients.

The SEC alleges that Chris Lopez and Jones fabricated documents and bank statements to purportedly show that some of the investments had millions of dollars in assets or cash. The SEC also alleges that they registered documents with the SEC that overstated the amount of regulatory assets under management.

Liberian gold and diamonds

A lawsuit filed in Oregon in 2016 appears to have triggered the SEC’s interest. A Portland doctor invested $2.4 million in a scheme to import gold and diamonds from a mine in Liberia. The doctor never got his gold and he lost his money. He sued his investment advisor, based in Salem and also KNI. KNI apparently sold the promissory notes issued by the purported mine.  In the current complaint, the SEC states that KNI stole that money.

Separate investigation into Jones

In June 2020, the SEC opened a separate investigation against Forrest Jones. A customer claimed damages of $350,000, alleging that Jones made unsuitable investment recommendations and misrepresentations.  At the time, in 2018, Jones worked at Fortune Financial Services in Montgomery. The investigation remains open.

https://www.sec.gov/litigation/litreleases/2021/lr25089.htm

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.



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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

Houston-area woman gets 25 years in healthcare fraud scheme

Brenda Rodriguez, 58, of Richmond has been ordered to prison for 25 years. She was convicted of conspiracy and aiding and abetting healthcare fraud following a three-day trial in January 2019.



Rodriguez owned and operated the QC Medical Clinic in Richmond. She paid doctors to approve patients for home health care regardless of whether it was medically necessary. Rodriguez then sold those approvals to various corrupt home health care providers. These providers then billed Medicare for services that were either unnecessary or never provided.

Ultimately, the providers billed Medicare for over $11 million as a result of patients Rodriguez provided.

Three others have pleaded guilty in this case. However, one of them,  John Ramirez, M.D was sentenced to 25 years following his conviction for his role in a $25 million medicare fraud at a different clinic in SW Houston.

Nenna Iro and Magdalene Akharamen, owners of Houston area home-health agencies, each pleaded guilty to conspiracy to commit healthcare fraud in purchasing Plans of Care and other signed medical documents from QC Medical.  Iro was sentenced to seven years, while Akharamen got three years.

 

Houston oil and gas investor admits to fraud

Chris Bentley, who founded Bellatorum Resources in 2016, has shut the business and admitted to fraud. Based in Spring, TX, Bentley raised about $31 million from 150 wealthy individuals to buy mineral rights in Texas shale fields.



Unusually, he sent an email on April 9 to the investors admitting to acquiring ‘bad’ and ‘non-arms length’ deals, overspending on corporate overheads and failing to hire professionals to advise him. He has turned himself into authorities, though he has not been charged with anything yet.

Bentley is a former Marine, who became a landman (someone who negotiates to acquire oil and gas or mineral leases) in 2014. Only two years later, he started his own investment fund. In all, he raised eight funds. For the last fund, Bentley aimed to raise $100 million. He admitted that he was trying to raise funds to pay distributions on his earlier funds. Instead he only raised a couple of million. Much of that money was spent on expenses.

It’s not clear whether Bentley used the funds to enrich himself. However, it appears that all the $31 million raised has been lost.

https://finance.yahoo.com/news/exclusive-texas-energy-fund-shuts-102813500.html

 

Autism service provider agrees to pay $2.7 million to resolve fraud allegations

Dr. Domonique Randall, the former owner of The Shape of Behavior (“The Shape”), a Texas-based provider of therapy services for children with autism, has agreed to pay $2.7 million to resolve allegations the company submitted improper claims to TRICARE. TRICARE is the health care program for uniformed service members, retirees, and their families.



Dr. Randall lives in Spring, TX. Humana, TRICARE’s managed care support contractor, uncovered alleged improper claims. The settlement resolves allegations that nine separate TSOB locations submitted claims to TRICARE that

  • misrepresented the identity of the actual rendering providers
  • medical records could not substantiate
  • individual providers billed excessive hours on individual dates of service.

The claims resolved by the settlement are allegations only and there has been no determination of liability.

Blue Sprig Pediatrics, also based in Houston, acquired The Shape in October 2018. At that time, The Shape had 22 clinics in four states, including 19 in Texas.

 

https://www.justice.gov/usao-sdtx/pr/former-children-s-autism-service-provider-pays-over-27-million-resolve-health-care

Houston Pharmacy owner and Accountant charged with $134 million fraud

Mohamed Mokbel and Fathy Elsafty have been charged with conspiracy to commit healthcare fraud. Mr. Mokbel is the owner of several Houston area pharmacies, while Elsafty is his accountant.



Mr. Mokbel was the CEO of 4M Pharmaceuticals, the parent company for several retail pharmacies that operated in Houston, Fort Worth, Florida and elsewhere. He also allegedly had ownership in the subsidiary pharmacies. Mr. Elsafty served as 4M’s accountant and tax preparer.

The indictment alleges that 4M functioned as an outbound telemarketing call center that solicited Medicare, Medicaid and commercial insurance patients nationwide. Call center employees would offer patients medically unnecessary diabetic supplies and topical creams. In many instance, 4M would bill the patient’s insurance plan, even if the patient had refused the solicitations.

4M would also target doctors by sending fax requests for prescriptions that patients often did not authorize. Some prescription requests were sent for dead patients.

The scheme ran from December 2013 to March 2020. 4M collectively received over $134 million in payments from Medicare and others.

The funds were allegedly used, in part, to pay for Mokbel’s $1.5 million residence in the Galleria area, $15 million in gambling and casino expenses and purchases and payments for a Ferrari and a Bentley. Mokbel also transferred and controlled over $6 million in health care fraud proceeds in certificate of deposit accounts at banks, according to the allegations.

Mokbel and ElSafty are charged with one count of a conspiracy to commit healthcare fraud, three counts of healthcare fraud and four counts of money laundering. All carry a possible prison sentence of 10 years in prison and a $250,000 maximum fine. The use of telemarketing to target people over 55 as a means to commit healthcare fraud carries an additional penalty of 10 years.

Previous trial and acquittal

In 1999 Mr. Mokbel was charged, with others, with money laundering and conspiracy in relation to a case where individual cans of infant formula had been purchased and then repackaged into trays for resale to wholesalers.

It was alleged at trial that some of the cans had been stolen. A jury convicted the defendants. However, an appeals court overturned the verdict because the evidence supporting the stolen goods charge was insufficient to meet the $5,000 minimum value threshold that applies to interstate transportation of stolen goods. Mr. Mokbel was cleared of all charges.

 

https://www.justice.gov/usao-sdtx/pr/pharmacy-owner-and-accountant-indicted-134m-health-care-fraud-scheme